UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                               ---------------------

                                    FORM 10-K


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

          For the fiscal  year ended  August 31,  1998.  OR  TRANSITION  REPORT
          PURSUANT  TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE  ACT OF
          1934.

           For the transition period from_________to__________

                             Commission File No. 0-7578

                           ELECTRO-CATHETER CORPORATION
                           ----------------------------
             (Exact name of the Registrant as specified in Charter)

      New Jersey                                              22-1733406
      ----------                                              ----------
(State or other jurisdiction                        (I.R.S. Employer ID Number)
  of Incorporation or organization)

2100 Felver Court, Rahway, New Jersey                           07065
-------------------------------------                           -----
(Address of Principal Executive Offices)                     (Zip Code)

Registrant's Telephone Number, including Area Code: 732-382-5600

           SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT
                                  Common Stock
                            $.10 par value per share

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 such shorter period that the Registrant was required
to file such reports),  and (2) has been subject to such filing requirements for
at least the past 90 days.

                Yes    X                                  No

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best  of  the  Registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. [ ]

State the aggregate market value of the voting stock held by  non-affiliates  of
the Registrant. The aggregate market value shall be computed by reference to the
price at which the stock was sold,  or the  average  bid and ask  prices of such
stock, as of a specified date within 60 days prior to the date of filing.

The aggregate  market value of the  Registrant's  common stock,  $.10 par value,
held by non-affiliates as of November 30, 1998 is $1,684,830.

As of November 30, 1998, the number of shares  outstanding  of the  Registrant's
common stock was 6,390,389 shares, $.10 par value.

<PAGE>

                                     PART I

FORWARD LOOKING INFORMATION
---------------------------

Electro-Catheter  Corporation  ("Electro" or the  "Company")  desires to provide
investors  with  meaningful  and useful  information.  As a result,  this Report
contains  certain  statements  which  describe the Company's  belief  concerning
future  business  conditions  and the outlook for the Company based on currently
available  information.   Many  of  the  statements, other  than  statements  of
historical  facts, included  in  this  report  are  forward-looking  statements,
including,  without  limitation,  those regarding the Company's future financial
position,  business strategy,  budgets, projected costs and plans and objectives
of  management  for  future  operations.  Wherever  possible,  the  Company  has
identified these "forward-looking"  statements (as defined in Section 21E of the
Securities  Exchange  Act of 1934) by words such as  "anticipates,"  "believes,"
"estimates,"   "expects,"  and  similar   expressions.   These   forward-looking
statements  are  subject  to risks  and  uncertainties  which  could  cause  the
Company's actual results, performance and achievements to differ materially from
those  expressed  in,  or  implied  by,  these   statements.   These  risks  and
uncertainties  include,  but are not limited to, the  following:  the  financial
strength of the industry,  demand for the Company's  products,  the  competitive
pricing  environment  within the industry and the Company's  ability to develop,
market  and sell new  products.  The  Company  assumes no  obligation  to update
publicly any forward-looking statements, whether as a result of new information,
future events or otherwise.

ITEM 1.           BUSINESS
-------           --------

General
-------

Electro-Catheter  Corporation is engaged in the business of design, development,
manufacture,  marketing  and  sale  of  products  utilized  in  connection  with
illnesses  of the heart and  circulatory  system and make use of  catheters  and
related  products.  The  Company  was  incorporated  in New Jersey in 1961.  The
Company has targeted  electrophysiology as its focal area for future growth, but
intends to maintain and develop  products for the emergency  care,  invasive and
non-invasive  cardiology  and  invasive  radiology  markets.  The  Company  also
continues   to  explore   opportunities   to  expand  its   Original   Equipment
Manufacturing ("OEM") business and contract research and development business to
capitalize  on  its  catheter   technology   expertise  and  its   manufacturing
capabilities.  Electro produces a wide range of catheter products intended to be
utilized by doctors and other trained hospital  personnel for diagnostic as well
as therapeutic purposes.

The Company markets its cardiovascular  catheters and other catheters worldwide.
Export sales were  approximately  $1,559,000 in fiscal year 1998,  $1,828,000 in
fiscal year 1997, and $2,324,000 in fiscal year 1996, representing approximately
29%, 27% and 32% of net revenues in such fiscal years, respectively.

Merger
------

The Company  entered into an Agreement  and Plan of  Reorganization  dated as of
January 20, 1998,  with Cardiac Control  Systems,  Inc. ("Cardiac"  or "CCS"), a
Delaware  corporation located in Palm Coast,  Florida, to effect a merger of the
two  companies  targeted  toward  the  development  and  marketing  of  advanced
specialty   electrophysiology   products.   The  structure  of  the  transaction
contemplates the merger of a newly-created,  wholly-owned subsidiary of CCS into
and  with  the  Company  as a  result  of  which  the  Company  shall  become  a
wholly-owned  subsidiary of CCS and the  stockholders of the Company will become
stockholders of Catheter Technology Group, Inc. ("CTG"), a Delaware  corporation
and  parent  holding  company  of CCS,  formed  as part  of a  restructuring  in
connection with the merger.  By virtue of the merger,  each outstanding share of
common stock, $.10 par value, of the Company will be converted into the right to
receive  one-fifth of a share of common stock $.10 par value of CTG. Pursuant to
the  restructuring,  CTG will succeed to all rights and  obligations  of CCS and
stockholders  of  CCS  will  become   stockholders  of  CTG.   Pursuant  to  the
restructuring,  it is  intended  that CCS will  undergo a 1 for 5 reverse  stock
split  reducing  the number of shares of common  stock,  $.10 par value,  of CCS
outstanding to approximately 529,748 shares. By virtue of the merger, subsequent
to the reverse stock split,  each  outstanding  share of common stock,  $.10 par
value, of the Company will be converted into the right to receive one-fifth of a
share of CTG Common Stock, effectively equal to an even exchange of shares prior
to such reverse stock split. Upon consummation of the merger, CTG plans to issue
stock in a public offering. It is expected that the merger will be accounted for
using the  purchase  method of  accounting  as a  reverse  acquisition  with the
Company deemed to be the accounting  acquiror as its  stockholders  will receive
the largest  portion of the voting rights in CTG.  Accordingly,  the Company has
deferred costs  associated  with the merger.  If the merger is not  consummated,
such costs will be recognized as expense in that period.

Consummation  of the merger is subject to a number of conditions,  many of which
have already been met. Among  conditions  remaining to be satisfied are: (i) the
securing of a minimum of $4.0  million in  financing in addition to any existing
debt  obligations  of both  Cardiac  and  Electro;  and (ii) the  receipt of all
required regulatory approvals by the two companies.  The stockholders of each of
Electro and Cardiac  approved the merger at the respective  Special  Meetings of
such Stockholders held on November 16, 1998.

The merger is scheduled  to be  completed on or about the end of December  1998,
although there is no assurance the merger will be completed by then, or at all.

Products
--------

The Company produces a wide range of catheter  products  intended to be utilized
by doctors and other trained  hospital  personnel for diagnostic and therapeutic
purposes.  Catheters are hollow tubes that can be passed through veins, arteries
and other anatomical passageways.  The Company considers the market within which
it sells its present and proposed products as a single industry segment.

In over thirty-seven  years of business,  Electro has sold well over two million
catheters.  The current selling prices for the products  marketed by the Company
typically range from thirty-five to five hundred dollars.

Electrophysiology  Catheters.  The field of cardiac  electrophysiology ("EP") is
one  of  the  most  rapidly  growing  areas  of  medical   technology.   Cardiac
electrophysiology  is the study of the electrical  system of the heart.  Cardiac
electrophysiologists are concerned with electrical disorders in the heart, their
etiology,  diagnosis  and  treatment.  The  medical  problems  on which  cardiac
electrophysiologists  focus are conduction  problems of the heart, which include
tachyarrhythmic episodes which can lead to sudden cardiac death. The development
of transcatheter  diagnosis of the heart's  conduction  system and transcatheter
correction of certain  conduction  dysfunctions have increasingly  attracted the
attention of cardiologists.

The Company's line of diagnostic EP catheters is comprised of three  categories:
the Detector,  the  Investigator  and the Cloverleaf,  and each category has its
unique  characteristics  requested by physicians that desire different  handling
features. In addition, Electro has a Genesis line of steerable EP catheters that
provides the  physicians  with a more  sophisticated  mapping tool for difficult
diagnostic procedures. These catheters are available in many curve and electrode






                                        2

<PAGE>



configurations.

The Company markets its Circuit  Breaker  steerable  catheters with  temperature
control  for  catheter  ablation  for  international  distribution  only.  These
catheters are compatible  with most  radiofrequency  generators.  Due to certain
development issues, clinical trials scheduled for 1998 were delayed. The Company
plans to begin clinical  trials in the U.S. in 1999 in order to seek approval to
market these catheters domestically.

Monitoring and Pacing Catheters.  The Company's line of monitoring catheters are
made  of  flexible  radiopaque  materials  which  are  visible  in  use  through
fluoroscopy.  The  catheters  have  a  variety  of  tips,  shapes  and  internal
configurations  and can be manipulated by an experienced  physician  through the
anatomy  to  the  desired   location.   Through  the  use  of  these  catheters,
electrophysiological  data,  pressure and flow readings and blood samples may be
obtained.  In addition,  the Company's catheters may be utilized as conduits for
the  injection  of  radiopaque   materials   into  the   bloodstream  to  permit
fluoroscopic observation of abnormalities in the vasculature.

Monitoring  catheters are marketed under the following  names:  Baltherm(R) Flow
Directed   Balloon   Catheters,   Pacewedge(R)   Balloon  Guided  Catheters  and
Balwedge(R) Catheters.

The Company's  pacing  catheters are  fabricated  from a number of materials and
frequently  consist of an  electrode-bearing  tube.  The tube is guided into the
body and the electrode is delivered through the venous system to the heart where
it is then used for pacing.  This  procedure  involves the delivery to the heart
muscle,  from a source  outside  the body,  of an  electrical  stimulus  causing
contractions like the natural heartbeat. Such pacing is necessary where there is
a  conduction  blockage  in the  heart  causing  the  heart to beat at a slow or
irregular rate.

One of the pacing  catheters  manufactured  by the Company is the  Balectrode(R)
Bipolar Pacing Probe. With this product,  both the amount of manipulation of the
catheter  required to cause the  stimulating  electrode to be  positioned in the
proper location within the heart and the time required from the  commencement of
the procedure until it is completed,  are substantially  reduced over what would
result if a non-balloon catheter were used as the delivery system.

The  pacing  products  usually  are  sold in kits  containing  the  catheter,  a
placement  needle,  connectors  and various other  devices.  These kits are sold
under  various  names,  including  the  following:  Balectrode(R)  Flow-Directed
Temporary Pacing Kit, Silicore(R) Semi-Floating Pacing Kit and Multipace.

Multi-Purpose  Catheters.  Multi-Purpose  catheters have features or uses which,
under certain circumstances,  result in the combination of pacing and monitoring
functions. Further, the Company manufactures certain electrode-bearing catheters
used to make  electrical  measurements  within the heart and provide  electrical
stimulation for both therapeutic and diagnostic purposes.

Drainage Catheters. Although the Company's principal activities have been in the
cardiovascular  area, it currently is manufacturing and marketing the Elecath(R)
One Step(TM) Fluid Drainage System which is used for draining fluid  collections
from various locations in the body. This system consists of a catheter, composed
of  a  unique  formulation  developed  by  the  Company,  mounted  on  a  simple
penetration apparatus.  In the opinion of the Company's management,  the product
may be useful to a broad range of physicians,  in addition to radiologists,  and
the use thereof may result in more complete and safer drainage.







                                        3

<PAGE>



Sales, Marketing and Distribution Methods
-----------------------------------------

The Company markets, sells and distributes its products domestically through its
own sales force.  At November 30, 1998, the Company  employed 2 salespersons  in
the field and a home office  staff of marketing  and sales  support of 3 people.
The Company also employs an International  Marketing  Manager based in Europe on
an  independent  contractor  basis.  The  principal  customers for the Company's
products are hospitals whose purchasing decisions are determined on the basis of
assessment of the products by the physicians. No one customer accounted for more
than ten percent of the Company's  net revenues for fiscal years 1998,  1997 and
1996.   International   markets  are  serviced  by  a  network  of   independent
distributors.  Electro  also  sells  its  products  to OEM  customers,  performs
contract  research  and  development  work for  third  parties  and  engages  in
licensing of its technology to third parties.

While  export sales have  contributed  significantly  to Electro's  net sales in
fiscal  years  1998,  1997  and  1996,  Electro  has  not  effected  substantial
penetration of the domestic  electrophysiology market which is attributable,  in
part,  to its lack of an  FDA-approved  ablation  catheter.  Electro's  focus on
engineering  efforts in contract  research and  development and its OEM business
has also  contributed  to lower  domestic  sales  together with lower demand for
older products in pacing and monitoring.

Advertising of the Company's  products consists primarily of displays at medical
conventions and meetings,  advertisements  in medical  journals and direct mail.
The Company also  cooperates in the  publication of technical  papers written by
medical authorities in areas relating to the Company's products.

Product Warranties
------------------

Electro's catheters are covered by a limited warranty,  the duration of which is
tied to product expiration dates. Generally,  however, the warranties extend for
five years.  All warranties  provide for replacement  with a comparable  Electro
product or issuance of a credit at Electro's discretion. Product returns are not
material to Electro's results of operations.

Certain Patents, Trademarks and Licenses
----------------------------------------

Electro's policy is to protect its proprietary position by, among other methods,
filing  United  States and select  foreign  patent  applications  to protect the
technology  that is important to the  development  of the business.  Pursuant to
provisions adopted under the General Agreement on Tariffs and Trade,  patents in
force on June 8, 1995,  are  entitled to a patent term of the longer of 17 years
from issuance or 20 years from the earliest  filing date of the patent.  Electro
currently  holds six  patents in the U.S.  (one of which is owned  jointly  with
another party) and has one application  pending. The last to expire of Electro's
patents  will remain in effect  until 2015.  Electro has also  obtained  certain
patents in its principal  overseas markets.  The following are Electro's current
material patents:
<TABLE>

<CAPTION>
United States Patents                                Description                             Date of Issue
---------------------                                -----------                             -------------

<S>                                                  <C>                                       <C>    
4,699,157                                            Pacing Catheter and                       10/13/87
                                                       Method for Making
                                                       Same

4,790,825                                            Closed Chest Cannulation                  12/13/88
                                                       Method and Device for
                                                       Atrial Major Artery

5,190,050                                            Tip Deflectable                            3/2/93
                                                       Steerable Catheter

5,358,479                                            Multiform Twistable Tip                   10/25/94
                                                       Deflectable Catheter

5,571,085                                            Steerable Open Lumen                      11/5/96
                                                       Catheter

5,718,701*                                           Ablation Electrode                         2/17/98

---------------
*owned jointly with another party
</TABLE>

Although Electro holds such patents, it believes that its business as a whole is
not materially dependent upon patent protection.  However, Electro will continue
to seek  such  patents  as it  deems  advisable  to  protect  its  research  and
development efforts and to market its products.  Electro believes that it is not
infringing on any other party's patent.  However, there can be no assurance that
current  and  potential  competitors  will not apply for  patents or  additional
proprietary rights relating to materials or processes used by Electro.

Electro  develops  new  products as a result of its own analysis of the needs of
the market which it serves and as a result of needs  perceived by physicians and
researchers  who work with Electro on the design and  development of the devices
and systems needed by them. In certain  instances,  Electro pays the cooperating
physician or  researchers  a royalty  based upon the  revenues  derived from the
sales of the product to others.

Electro  also  relies  upon  technical  know-how  and  continuing  technological
innovation  to develop and maintain its position in the market and believes that
the  success of its  operations  will  depend  largely  upon such  know-how  and
innovation.  Electro requires  employees and consultants to execute  appropriate
confidentiality  agreements  and  assignments  of inventions in connection  with
their employment or consulting arrangement with Electro.







                                        6

<PAGE>



There can be no assurance that trade secrets will be  established,  that secrecy
obligations will be honored or that competition will not  independently  develop
superior or similar technology.

Research and Development
------------------------

The Company's  research and development  activities are devoted primarily to the
design and development of new products and  enhancements  to existing  products.
For the three years ended August 31, 1998, the Company incurred aggregate direct
expenses of  approximately  $2,419,000 for research and development  activities,
including  new  product  development,   of  which  approximately   $527,000  was
attributable to fiscal year 1998, $882,000 to fiscal year 1997 and $1,010,000 to
fiscal year 1996.  All of such  activities  were  sponsored by the Company.  The
major  portion of such  expenses was related to salaries  and other  expenses of
personnel  employed on a regular  basis in  research  and  development  efforts.
During  fiscal  years  1997  and  1996,  the  Company  performed   research  and
development and pre-production  planning for an unrelated medical device company
for which services the Company  recognized  $544,293 and $155,707 in revenues in
such years, respectively.  The costs associated with these revenues are shown in
cost of sales  and,  as such,  are not  included  in  research  and  development
expenses. In May 1997, the  agreement-in-principle  to perform contract research
and  development  work for the medical device  company,  which work commenced in
June 1996, was terminated at the request of the other company.  The terms of the
agreement-in-principle called for the other company to pay Electro a monthly fee
of $150,000 for a period of one year. A definitive agreement was never executed.
Electro received $600,000 for the work it had performed prior to termination and
an additional  $100,000  termination  fee. As a result of the  termination,  the
Company's revenues were adversely affected.

Production and Sources of Supply
--------------------------------

The Company  manufactures its products in a 25,000 square foot facility which it
owns and  another  10,000  square  foot  facility  which it leases.  The Company
believes that these  facilities have  sufficient  capacity to meet the Company's
anticipated  catheter needs for several years. The manufacturing of catheters is
a complex process and each catheter is assembled and tested. The Company designs
its  catheters  and  manufactures  a portion of the tubing,  balloons,  and many
components with tooling and  formulations  developed by it or especially for it.
The Company maintains  facilities to manufacture tubing and balloons and for the
production of catheters in the unique configurations  required for their use. In
addition, where more convenient or when the level of sophistication warrants it,
the Company uses outside suppliers for certain components.  The Company utilizes
the services of outside contractors for the performance of sterilization.

Although most of the components and processes necessary for Electro's production
activities  are  available  from more than one vendor,  certain  components  and
processes are  manufactured or provided by single vendors,  some involving molds
owned by the  Company.  Significant  components  for which  Electro has only one
source include tubing for  catheters,  connector pins used in pacing  catheters,
latex used in balloons,  needles and certain packaging.  The Company attempts to
maintain an adequate  supply of the  components on hand in order to minimize any
supply  interruption  from single  source  vendors to allow  sufficient  time to
locate and qualify a new vendor or to find a substitute for a single source.  As
such,  there can be no  assurance  that the  Company's  ability  to  manufacture
certain products will not be materially affected by single source vendors.








                                        7

<PAGE>

Insurance
---------

Electro  maintains  comprehensive  general liability  insurance  coverage in the
amount  of  $5,000,000  and  products   liability  coverage  in  the  amount  of
$2,000,000.  Electro  believes that such coverages are adequate and  reasonable;
however,  no assurance can be given that the products liability coverage will be
sufficient to protect  Electro's  assets against claims by users of its products
or that Electro  will be able to maintain  such  coverage (or obtain  additional
coverage) in the future at reasonable premium rates or at all, in which case its
assets  will be at risk in the  event  of  successful  claims  by  users  of its
products. Furthermore, Electro's liability coverage may not cover costs incurred
by Electro  under its product  warranties  (see "Product  Warranties")  or costs
incurred by Electro in the event of a product recall.

Electro  has no pending,  threatened  or actual  claims as of this date,  nor is
Electro aware of any current  circumstances that might give rise to such claims.
However,  Electro  could be exposed to possible  claims for  personal  injury or
death resulting from the sale or subsequent  malfunction of allegedly  defective
products.

Employees
---------

At November  30,  1998,  the Company had 68  full-time  employees.  Of the total
employees,  46 were engaged in manufacturing  and quality control,  9 in general
administration  and  executive  activities,  8 in  engineering  and research and
development,  and 5 in sales and  marketing.  The  Company is not a party to any
collective  bargaining  agreement and considers its relations with its employees
to be good.

Government Regulation
---------------------

     Federal  Regulations.  The products developed by the Company come under the
     ---------------------jurisdiction of the Food and Drug Administration  (the
"FDA") of the United States Department of Health and Human Services,  as well as
other  Federal,  state and local  agencies  and similar  health  authorities  in
foreign  countries.  The  regulations  promulgated  by such agencies  govern the
introduction of new medical devices and modifications to approved  devices,  the
observances of certain standards with respect to the manufacture and labeling of
such devices,  the maintenance of certain records and the reporting of potential
product defects.

The Federal Food, Drug and Cosmetics Act, as amended (the "FDA Act"),  regulates
manufacturers of medical  devices.   The  Company's products are medical devices
within the meaning of such Act. An  amendment to the FDA Act  providing  for the
classification of medical devices and the establishment of standards relating to
their safety and  effectiveness,  scientific  review of certain  devices and the
registration of  manufacturers  and others has been in effect since 1976 and has
been  supplemented  by the  Safe  Medical  Devices  Act  of  1991.  Under  these
provisions,  a manufacturer  must obtain  approval from the FDA of a new medical
device before it can be marketed,  which approval process requires,  in the case
of certain  classes of medical  devices,  that the safety and  efficacy  of such
devices be demonstrated by the manufacturer to the FDA through the conduct of an
FDA-approved clinical evaluation program. Under certain circumstances,  the cost
of obtaining such approval may be high and the process  lengthy and no assurance
can be given that approval  will be obtained.  Although the Company has received
FDA approval to market its principal existing products, or is exempt from formal
approval   requirements  as  provided  by  law  for  those  devices  already  in
distribution  before May 28, 1976,  there can be no  assurance  that the Company
will receive the requisite approvals to market additional products. Furthermore,
any substitution by the Company of its current sources for certain raw materials
utilized in its production  processes  will, if such  substitution  results in a
change in the composition of the material, be subject to FDA approval, and there
can be no assurance that such approvals will be obtained.






                                        8

<PAGE>





Since the devices  developed by the Company are  intended  for "human  use",  as
defined by the FDA, the Company and such devices are subject to FDA  regulations
which, among other things, allow for the conduct of routine detailed inspections
of device  manufacturing  establishments  and require adherence to "current good
manufacturing  practices"  ("cGMP") in the  manufacture of medical devices which
include testing, quality control, design and documentation requirements.

In  addition,  certain  other  classes  of  medical  devices  must  comply  with
industry-wide   performance  standards  with  respect  to  safety  and  efficacy
promulgated by the FDA. The FDA has not yet developed industry-wide  performance
standards with respect to the safety and efficacy of those products manufactured
by the  Company  which  will be  subject  to such  standards. When, and if, such
standards are adopted, the Company will be required to submit data demonstrating
compliance with the standards  (during which period the Company may be permitted
to continue to market products which have been previously approved by the FDA).

In recent  years,  the FDA has pursued a more  rigorous  enforcement  program to
ensure that regulated businesses,  like the Company, comply with applicable laws
and regulations. Noncompliance with applicable requirements can result in fines,
penalties,  recall of products,  suspension  of  production  or the inability to
obtain  premarket  clearance or approval for new  products.  The Company  cannot
predict the extent or impact of future  Federal,  State or local  legislation or
regulation.

In February 1997,  the FDA conducted an inspection and audit of the Company.  At
the conclusion of the audit,  the FDA issued a number of observations  regarding
violations of cGMP. On March 11, 1997, the FDA issued a Warning Letter (the "FDA
Warning  Letter")  to the  Company  requesting  that  prompt  action be taken to
correct the violations.

The areas of noncompliance  include Electro's methods of investigation of device
complaints,  methods  of  validation  of  device  sterilization,   environmental
monitoring  procedures,  methods of validation of extrusion  processes which are
used in the  manufacture  of certain of Electro's  catheters  and other  quality
assurance and record keeping requirements. Electro has communicated with the FDA
its intentions to remedy the noncompliance, has established a plan and timetable
to effectuate such  remediation and has diligently  worked to take the necessary
corrective actions; Electro's actions have included the establishment of certain
validation  protocols,  revisions to Electro's Quality System and Quality System
Manual, the implementation of a program for environmental  testing, the purchase
of equipment for extrusion  process  validation and the  institution of file and
record  keeping  protocols.  A  subsequent  FDA  inspection  in  September  1997
indicated  that,  while  substantial  progress had been made, not all corrective
actions had been  completed.  Electro is  continuing  in its efforts to complete
such actions and it is our  intention to inform the FDA,  before the end of 1998
that  such  actions  have  been  completed  and that the  Company  is ready  for
reinspection.  There can be no  assurance  that  Electro  will be ready for such
reinspection  before  the end of 1998  nor  that  Electro  will  pass  any  such
reinspection when it occurs. While Electro is currently under no restrictions by
the FDA regarding the manufacture or sale of its products,  Electro is unable to
precisely  determine the short-term  economic impact of instituting the required
corrective  actions  and  there can be no  assurance  that the FDA will not take
further  action,   including  seizure  of  products,   injunction  and/or  civil
penalties,  if the  necessary  corrective  actions are not completed on a timely
basis.  While Electro is unable to precisely estimate whether and to what extent
adverse economic impact may result from instituting the corrective actions,  the
voluntary  discontinuation of manufacturing of certain products and the delay in
the sale of other products has adversely  affected  sales by an estimated  10%.





                                        9

<PAGE>



Until all  corrective  actions  required  under the FDA Warning Letter have been
taken, the FDA will not consider new products for approval.  However,  Electro's
insufficient  financing for research and  development  efforts over the last few
years have limited its ability to produce new products and, consequently, no FDA
approvals  are  currently  sought.  We believe that it will have  completed  the
corrective  actions  by the time a  product  for  which  FDA  approval  would be
required is produced.

     Foreign  Regulations.  Many countries in which Electro markets its products
     -------------------- regulate the manufacture, marketing and use of medical
devices.  Electro intends to pursue product approval or registration  procedures
for its new products in countries  where it is  marketing  existing  products as
well as for new and existing products in additional  countries where it believes
there is a market for its products. The international  registration and approval
process  is  normally   accomplished  in  coordination  with  its  international
distributors.  Continued  sale of certain of  Electro's  products  in the member
nations of the European Economic Community ("EEC") after June 14, 1998, required
receipt of the CE Mark  certification  from the  International  Organization  of
Standardization ("ISO"). Since CE Mark certification was not received by Electro
by June 14,  1998,  Electro  has  suffered  a loss of sales in the EEC.  Several
months ago,  Electro and Cardiac  submitted an  application  requesting  CE Mark
certification  for Cardiac to sell  Electro's  steerable  line of catheters,  as
manufacturer,  with Electro acting as vendor to Cardiac in such regard.  CE Mark
certification  was  granted  on  October  26,  1998,  and  issued in the name of
Cardiac.   Cardiac  and  Electro   anticipate   having   product  with  CE  Mark
certification  available  for  shipment in early 1999.  Electro and Cardiac have
also  recently  submitted  applications  for CE Mark  certification  for many of
Electro's  additional products.  However, there can be no assurance that CE Mark
certification for the additional  products will be obtained or that the pre-June
1998 sales levels will be recaptured.

Export sales of devices that have not received FDA marketing clearance generally
are  subject to export  permit  requirements.  In order to obtain such a permit,
Electro  must  provide  the FDA  with  documentation  from  the  medical  device
regulatory  authority of the country in which the purchaser is located,  stating
that the sale of the device is not in violation of the country's  medical device
laws. In April 1996, new legislation was enacted to permit the export of devices
not approved in the U.S.,  if the product  complies with the laws of the country
and as long as the products are approved by any of the industrialized  countries
specified in the export reform legislation.  Electro has received such clearance
for its Circuit Breaker steerable catheter with temperature control for ablation
and is currently  distributing it outside the U.S.;  sales of Electro's  Circuit
Breaker steerable  catheter for the fiscal years ended August 31, 1998, 1997 and
1996 were approximately $81,000, $87,000 and $180,000, respectively.

The Company is also subject to various Federal,  state and local laws pertaining
to such  matters as safe  working  conditions,  environmental  protection,  fire
hazard  control  and  other  regulations.  The  Company  is  not  aware  of  any
such regulations with which it is not in compliance.

Backlog
-------

Electro  does not operate  with  significant  backlog.  The  majority of product
shipments in a quarter relate to orders received in that quarter.  The Company's
actual product shipments depend on its production capacity, manufacturing yields
and  component  availability,  among other  factors.  At November 30, 1998,  the
Company  had  a  backlog  of  orders  for  its  products  which   aggregated  to
approximately  $275,000,  as compared to approximately  $772,000 at November 30,
1997.  The  prior  year's  total  included  orders  totaling  $308,000  from two
hospitals which had placed an annual order but now order on a monthly basis.






                                       10

<PAGE>



Competition in the Industry
---------------------------

The medical technology industry is a highly competitive field,  characterized by
rapid technological advances, and the Company competes with many other companies
on current  products  and  products  in the  development  stages.  Many of these
competitors have significantly greater financial, marketing, sales, distribution
and technical resources than the Company.  Rapid  technological  advances by the
Company's  competitors  could at any time  require  that the Company  redesign a
portion of its product  line.  Accordingly,  there can be no assurance as to the
success of the Company's products in competition with such companies.

The Company's older products  compete  primarily with those of larger  companies
that have greater resources and better  distribution  capabilities.  The current
principal basis of competition in these markets is price. The Company's  limited
resources  make it less  capable  than larger  competitors  to offer  aggressive
pricing to meet competition.  In addition,  certain customers purchase catheters
in blanket  contracts  which include  products  offered by the Company's  larger
competitors but not by the Company.  For these reasons, the Company has not been
able to  compete  effectively  during  recent  years in the  market  for  non-EP
products.

The  electrophysiology  market is also highly  competitive  and  competition  is
expected to increase.  These  competitors  currently include USCI, a division of
C.R. Bard, Inc.;  Mansfield and EP Technologies,  divisions of Boston Scientific
Corporation;  CardioRhythm,  Inc., a division of Medtronic, Inc.; Cordis-Webster
Laboratories,  a division of Johnson & Johnson,  Inc.  and Daig  Corporation,  a
division of St. Jude Medical,  Inc. These companies are more capable of offering
a broader  range of  products  to the  cardiologist.  The  Company's  ability to
compete  effectively in the future could be dependent upon  broadening its range
of products  and/or forging an alliance with another  company which would effect
greater product diversity. The Company's electrophysiology products compete with
other   treatments,    including   prescription   drugs,   implantable   cardiac
defibrillators and open heart surgery.

The Company's catheter ablation product is not yet approved for marketing in the
U.S., but some  competitors  have developed  products,  specifically  for use in
catheter  ablation,  which are approved in the U.S.  Due to certain  development
issues,  clinical trials  scheduled for 1998 were delayed.  The Company plans to
begin its  clinical  trials for  ablation  in 1999 in order to seek  approval to
market these catheters  domestically.  The costs to perform such clinical trials
are  estimated  at  $150,000  which  Electro  anticipates  would be funded  from
financing  obtained  in  connection  with the merger.  The  primary  competitive
factors relative to other catheter ablation products are technical  superiority,
financial resources, the timing of regulatory approval,  commercial introduction
and quality.  The Company's  competitive position also depends on its ability to
attract and retain qualified personnel,  develop effective  proprietary products
and  implement  production  and marketing  plans.  The Company hopes that it can
effectively compete in this market.


Item 2.           Properties
-------           ----------

The Company's principal manufacturing facility and executive offices are located
at 2100 Felver  Court,  Rahway,  New Jersey,  in premises  which it purchased in
1976. This property  secures part of the  indebtedness to The T Partnership (see
Note 7 of the Notes to the  Financial  Statements).  The  Company  also leases a
10,000 square foot  facility  located in Avenel,  New Jersey.  The lease for the
Avenel facility is on a  month-to-month  basis.  These two premises are suitable
for all of the Company's  current and  foreseeable  production,  development and
administrative functions.






                                       11

<PAGE>



Item 3.           Legal Proceedings
-------           -----------------

The Company is  currently a party to certain  litigation  incident to the normal
conduct of its business.  In March 1997, a female  employee of Electro,  holding
the position of field sales  representative,  filed a complaint  against Electro
with the Equal  Employment  Opportunity  Commission  (the  "EEOC")  alleging sex
discrimination.  In  October  1997,  subsequent  to  Electro's  response  to the
allegations  and to the EEOC's  investigation  thereof,  the EEOC  dismissed the
complaint  upon a finding that no violation had occurred.  In February 1998, the
employee filed a lawsuit  against the Company making the same  allegations as in
her EEOC  complaint.  In light of the  foregoing  and  based  upon  management's
discussions  with its  counsel  on this  matter,  management  believes  that the
allegations  are groundless and that the final outcome of such  litigation  will
not have a material adverse effect on Electro's financial position.








                                       12

<PAGE>



Item 4.           Submission of Matters to a Vote of Security Holders
-------           ---------------------------------------------------

         (a) A Special  Meeting of  Stockholders  was held on November  16, 1998
(the "Special Meeting").

         (b) Not applicable  because the meeting did not involve the election of
directors.

         (c) At the Special Meeting,  the Company's  Stockholders voted in favor
of the approval and adoption of the Agreement and Plan of  Reorganization  dated
as of January 20, 1998,  as amended,  and in favor of  authorizing  the Board of
Directors  to  adjourn  the  Special  Meeting  to further  solicit  proxies,  if
necessary. The vote was as follows:
<TABLE>

<CAPTION>
                                                                                                                Broker
                                               For               Against                 Abstain               Non-votes

<S>                                         <C>                     <C>                   <C>                  <C>    
Proposal to Approve                         3,851,025               83,972                 5,605                111,074
and adopt the Agreement
and Plan of Reorganization

Proposal to Authorize Board
of Directors to Adjourn                     3,982,667               28,034                10,975
</TABLE>

         (d)    Not applicable







                                       13

<PAGE>



                                     PART II

Item 5.         Market for the Company's Common Stock and Related
-------         -------------------------------------------------
                Security Holder Matters
                -----------------------

The  Company's  common  stock has been listed  historically  on The NASDAQ Stock
Market  ("NASDAQ")  and traded in the  over-the-counter  market under the symbol
"ECTH".  However,  on March 3, 1997, the Company was advised by The NASDAQ Stock
Market that the  Company's  common stock  listing  would be deleted  because the
Company was not in compliance  with  NASDAQ's bid price or, in the  alternative,
book value  requirements.  The  delisting  was effected on August 27, 1997.  The
Company is currently  listed on the NASD OTC Bulletin Board Service which allows
market  makers to enter  quotes  and trade  securities  that do not meet  NASDAQ
qualification requirements.  The table below shows for the periods indicated the
closing figures of the Company's stock, for each of the fiscal quarters.

<TABLE>

                                           FISCAL 1998                                   FISCAL 1997
                                           -----------                                   -----------
<CAPTION>

Quarter                         High                       Low                    High                Low
<S>                             <C>                        <C>                  <C>                   <C>    

  1                             47/64                      1/2                  1 13/16               47/64
  2                              1/2                       3/8                  1 3/8                 13/16
  3                              9/16                      3/8                  1 1/16                11/16
  4                              1/2                       3/8                  15/16                  5/16
</TABLE>

         Through November 30, 1998, the end of the first  quarter of fiscal year
1999, the high and low prices during the quarter were 3/8 and 5/32 respectively.

         On November 30, 1998, the number of shareholders of record was 693.

         No cash dividends have been declared by the Registrant  during the last
five fiscal years nor does the Company plan to pay dividends in the near future.

Item 6.           Selected Financial Data
-------           -----------------------

         The selected  financial data set forth below have been derived from the
Company's financial  statements referred to under "Item 14. Exhibits,  Financial
Statement Schedules,  and Reports on Form 8-K" of this Annual Report on Form 10-
K, and previously published historical financial statements not included in this
Annual Report on Form 10-K.  The selected  financial data set forth below should
be read in  connection  with "Item 7.  Management's  Discussion  and Analysis of
Financial  Condition  and Results of  Operations"  and the  Company's  financial
statements, including the notes thereto, referred to herein.
<TABLE>

                                                                       YEAR ENDED AUGUST 31,

<CAPTION>
                                                 1998                1997                   1996               1995            1994
                                                 ----                ----                   ----               ----           -----
                                                     (in thousands, except per share data)

<S>                                             <C>                <C>                     <C>             <C>             <C>    
Net revenues...........                         $5,347             $ 6,648                 $ 7,362         $ 7,263         $ 7,248
Net loss............                            (1,077)             (1,355)                   (892)         (1,136)         (1,372)
Working capital.....                               285                 958                   2,025            2,505          2,362
Total assets........                             3,183               3,373                   3,893            4,382          4,270
Long term liabilities......                      2,444               1,969                   1,485            1,200            638
Loss per share......                            ($0.17)             ($0.21)                 ($0.14)          ($0.18)        ($0.24)

Dividends on common stock                          none               none                   none              none           none

Weighted average number
of shares of common
stock and common stock
equivalents outstanding                           6,388             6,380                 6,354              6,027           5,711


</TABLE>

ITEM 7.             MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 
-------             ------------------------------------------------- 
                    CONDITION AND RESULTS OF OPERATIONS
                    -----------------------------------


Results of Operations
---------------------

Year Ended August 31, 1998 Compared to Year Ended August 31, 1997

General.  The  following  is  management's  discussion  and  analysis of certain
-------  significant  factors which have affected Electro's  financial condition
and  results of  operations  during the  periods  included  in the  accompanying
financial statements.

Statements  contained  in and  preceding  management's  discussion  and analysis
include  various  forward-looking  information  that is based on data  currently
available to management and management's  beliefs and assumptions.  When used in
this report,  the words  "anticipates,"  "estimates,"  "believes,"  "plans," and
similar expressions are intended to identify forward-looking statements, but are
not the exclusive  means of identifying  such  statements.  Such  statements are
subject  to risks and  uncertainties,  and  Electro's  actual  results  may vary
materially  from those  anticipated,  estimated or projected  due to a number of
factors,   including,   without  limitation,  the  competitive  environment  for
Electro's  products  and  services,  and other  factors set forth in reports and
other  documents  filed by Electro with the Securities  and Exchange  Commission
from time to time.

Merger. Electro entered into an Agreement and Plan of Reorganization dated as of
------  January 20, 1998 with  Cardiac,  to effect a merger of the two companies
targeted   toward  the   development   and   marketing  of  advanced   specialty
electrophysiology   products.   Currently,  the  structure  of  the  transaction
contemplates the merger of a newly-created,  wholly-owned  subsidiary of Cardiac
into and with Electro as a result of which Electro  shall become a  wholly-owned
subsidiary of Cardiac and the  stockholders of Electro will become  stockholders
of CTG, a Delaware  corporation  and parent  holding  company of Cardiac,  to be
formed as part of a restructuring  in connection  with the merger.  By virtue of
the  merger,  each  outstanding   share  of  common  stock  of  Electro  will be
converted into the right to receive one-fifth of a share of common stock of CTG.
Pursuant to the restructuring, CTG will succeed to all rights and obligations of
Cardiac and will become the successor  issuer of Cardiac such that  stockholders
of Cardiac will become stockholders of CTG. Pursuant to the restructuring, it is
intended  that Cardiac will undergo a 1 for 5 reverse  stock split  reducing the
number of shares of common stock of Cardiac outstanding to approximately 529,748
shares.  By virtue of the merger,  subsequent to the reverse  stock split,  each
outstanding share of common stock of Electro will be converted into the right to
receive  one-fifth of a share of CTG common stock,  effectively equal to an even
exchange of shares prior to such reverse stock split.

Upon closing  of  the  transaction,  $1,000,000  of    Electro's  senior debt is
intended  to be  redeemed  by:  (a) the  issuance  by the  surviving  subsidiary
corporation in the merger (the  "Surviving  Subsidiary") to The T Partnership of
an aggregate of 1,000 shares of Series A 9% preferred  stock,  no par value (the
"Series A Preferred Stock") of the Surviving Subsidiary, which shares shall have
a liquidation value equal to, and shall be issued in redemption of, $1.0 million
of the  indebtedness and shall be convertible into shares of CTG common stock at
a conversion  price equal to 120% of the price per share of the CTG common stock
used as the basis for the  consideration  given  (whether  in the form of issued
stock, if any, or warrants,  provided the exercise price of the warrant reflects
the current market value of the CTG common stock,  or otherwise) in exchange for
any capital raised in satisfaction  of the financing  contingency to the merger;
(b) the delivery to The T Partnership  of a CTG 9% conditional  promissory  note
pursuant to which CTG is obligated to pay  only those amounts  which are due but
not paid to the holders of the Series A  Preferred Stock or   in  the  event  of






                                       14

<PAGE>



certain other non-monetary defaults such as bankruptcy,  liquidation,  a sale of
substantially all assets, a change of ownership of the Surviving Subsidiary,  or
a default in the herein below mentioned secured  promissory note (any payment or
conversion  of the  Series A  Preferred  Stock  shall be deemed a payment on the
conditional note, and any principal or interest payments on the conditional note
shall be deemed  redemptions  and payments  under the Series A Preferred  Stock,
with the result  being that Cardiac  shall not be  obligated  to make  aggregate
payments with respect to both the Series A Preferred Stock and conditional note,
in  excess  of $1.0  million  plus  interest);  and (c)  the  delivery  to The T
Partnership of a secured  promissory note made by CTG in an amount not to exceed
$1.3 million  (which  amount shall be the  approximate  remaining  amount of the
Company's  secured  indebtedness  to The T  Partnership  exclusive of the amount
redeemed under (a) above), bearing interest at the rate of 12% per annum payable
quarterly,  the  principal  amount of which shall be due and payable three years
from the date of  execution of such note (the terms of the security for the note
have yet to be agreed  upon).  As a result of the issuance of Series A Preferred
Stock, The T Partnership  shall be entitled to receive  dividends.  In addition,
pursuant  to the  terms of the  Merger  Agreement,  The T  Partnership  shall be
entitled to reimbursement for cash advances provided to Electro in the amount of
$200,000,  or any greater amount as may be agreed to by Electro and Cardiac,  in
writing,  which may have been extended by The T Partnership  between May 1, 1998
and the completion of the merger for the purpose of operating capital.

Consummation  of the merger is subject to a number of conditions,  many of which
have already been met. Among  conditions  remaining to be satisfied are: (i) the
securing of a minimum of $4.0  million in  financing in addition to any existing
debt  obligations  of both  Cardiac  and  Electro;  and (ii) the  receipt of all
required regulatory approvals by the two companies.  The stockholders of each of
Electro and Cardiac  approved the merger at the respective  Special  Meetings of
such stockholders held on November 16, 1998.

Cardiac  develops,  manufactures  and sells a broad line of implantable  cardiac
pacemakers,  pacemaker  leads and  related  products  which  Electro  management
believes are complementary to its own product lines. Electro 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 yield positive operating results in the future.

Sales. Net revenues declined $1,301,396 (19.6%) for the fiscal year ended August
----- 31, 1998 as compared to the prior fiscal year.  Product revenues  declined
$751,390  (12.8%) for the fiscal  year ended  August 31, 1998 as compared to the
fiscal year ended August 31, 1997.  Contract  research and development  declined
$544,293  (100%) for the year.  Licensing fees and royalty income also decreased
$22,670  (20.7%) for the same period.  For the fiscal year ended August 31, 1998
sales to an OEM  customer  increased  $16,957  (14.0%) as compared to the fiscal
year ended August 31, 1997.

Domestic sales decreased $462,741 (11.5%) for the twelve months ended August 31,
1998 as compared to the same period in the prior fiscal year.  This  decrease is
primarily  due to Electro  not  having an  approved  electrophysiology  ablation
catheter,  lack of new  products,  a continued  decline in demand for  Electro's
older products in pacing and  monitoring,  backorders,  as well as the impact of
not replacing sales  representatives who have left Electro.  International sales
decreased  $268,651  (14.7%) in fiscal  year 1998 as  compared to the same prior
period.  The decline in  international  sales is  attributed  to the lack of new
products,  lower  demand  for  Electro's   electrophysiology  products,  product
redesign   problems  and  lower  prices  due  to  competition   and  backorders.
Additionally,  sales in the  fourth  quarter  were  negatively  affected  by the
inability to obtain the CE Mark. Since Electro has not yet obtained the CE  Mark





                                       15

<PAGE>



certification  and is now unable to sell  certain of its products in the nations
of the EEC (which accounted for approximately 14%, 17% and 21% of total revenues
for fiscal years 1998, 1997 and 1996,  respectively),  international  sales have
been  adversely  affected in Europe.  Several  months  ago,  Electro and Cardiac
submitted an application  requesting CE Mark  certification  for Cardiac to sell
Electro's steerable line of catheters,  as manufacturer,  with Electro acting as
vendor to Cardiac in such regard.  CE Mark  certification was granted on October
26,  1998,  and issued in the name of Cardiac.  Cardiac  and Electro  anticipate
having product with CE Mark certification  available for shipment in early 1999.
Electro  and  Cardiac  have also  recently  submitted  applications  for CE Mark
certification for many of Electro's additional products.  However,  there can be
no assurances  that CE Mark  certification  for the additional  products will be
obtained or that the pre-June  1998 sales levels will be  recaptured.  Electro's
lack of financing has severely hampered its ability to introduce new products to
market and  correct the  redesign  issues in order to  maintain  previous  sales
levels.

Gross Profit.  Gross profit dollars  decreased  $868,833  (33.3%) for the fiscal
-------------  year ended  August 31,  1998 as compared to the fiscal year ended
August 31, 1997. This decrease is primarily  attributed to decreased  production
levels  related to the lower sales volume in addition to  write-offs  of certain
inventories  which were  scrapped  for  sterilization  samples,  evaluation  and
testing  failures and the increased cost associated with regulatory  compliance.
The lower volume continues to negatively impact gross profit.

Selling,   General   and   Administrative   Expenses.   Selling,   general   and
----------------------------------------------------   administrative   expenses
decreased $409,659 (17.2%) for the fiscal year ended August 31, 1998 as compared
to the previous fiscal year. The decrease  primarily reflects lower domestic and
international  selling expenses  substantially  attributable to the departure of
field  sales  personnel  that  have  not  yet  been  replaced  and  cutbacks  in
international activities.

Engineering,   Research  and  Development  Expenses.  Research  and  development
---------------------------------------------------- expenses decreased $354,721
(40.2%)  for the twelve  months  ended  August 31,  1998 as compared to the same
period in the prior  fiscal  year.  This  decrease  reflects  the lower level of
research and development  efforts.  The decrease is primarily  attributed to the
decreased  personnel  and lower  material,  supply,  consulting  and  recruiting
expenses.  In the prior fiscal year, costs associated with billable research and
development activities were charged to cost of revenues.

Other  Income  and  Expenses.  Interest  expense  increased  as a result  of the
----------------------------  increased  borrowings  from The T Partnership  and
interest on capitalized lease obligations relative to equipment.

Fiscal year 1997  included  expenses in  connection  with an age  discrimination
litigation  against  Electro.  All costs  associated  with this  litigation were
recorded in the financial statements for the fiscal year ended August 31, 1997.
No costs were recorded in fiscal year 1998.

Year Ended August 31, 1997 Compared to Year Ended August 31, 1996

Results of Operations
---------------------

Sales.  Net revenues  declined  $713,998 (9.7%) for the fiscal year ended August
----- 31, 1997 as compared to the fiscal  year ended  August 31,  1996.  Product
revenues  declined  $1,148,149  (16.4%) for the year in addition to a decline in
revenues from an OEM customer of $64,133.  These declines were partially  offset
by an increase in contract research and development revenues of $388,586,  which
included the $100,000 termination fee described previously and $109,698 received
from licensing certain of the Company's technology.







                                       16

<PAGE>



Direct  domestic  sales  decreased  $678,405  (14.4%)  for the fiscal year ended
August 31, 1997 as compared to the prior fiscal year. This decrease is primarily
due to the Company not having an approved  electrophysiology  ablation catheter,
lack of new  products as the Company had focused its  attention  on the contract
research and development and OEM business, a continued decline in demand for the
Company's  older products in pacing and monitoring,  backorders,  as well as the
impact  of not  replacing  sales  representatives  who have  left  the  Company.
International  revenues decreased $496,254 (21.4%) for 1997 as compared to 1996.
The decline in international  revenues is attributed to the insufficiency of new
products as the Company had focused its  attention on the contract  research and
development and OEM business,  lower demand for the Company's  electrophysiology
products,  product  redesign  requirements,  lower prices due to competition and
backorders.

Gross Profits.  Gross profit dollars  decreased  $675,982 (20.6%) for the fiscal
-------------  year ended  August 31, 1997 as  compared to the prior year.  This
decrease is primarily  attributed to decreased  production levels related to the
lower  sales  volume  as well  as the  write-off  of  certain  inventories.  The
decreased  production  levels  caused the cost of goods sold of the catheters to
increase due to less efficient  labor  utilization and a greater amount of fixed
overhead  allocated to each catheter  produced.  The gross profit percentage for
the year ended August 31, 1997 was 39.2% as compared to 44.6% for the year ended
August 31, 1996. The lower volume continues to adversely impact gross profit.

Selling,   General   and   Administrative   Expenses.   Selling,   general   and
----------------------------------------------------   administrative   expenses
decreased  $570,864  (19.3%) for the current year as compared to the prior year.
This decrease  primarily  reflects lower domestic marketing and selling expenses
of  $641,690  (32.5%)  primarily  attributed  to the  departure  of field  sales
personnel that have not yet been replaced. This decrease was partially offset by
an increase in the provision for bad debt which resulted from non-payments by an
international distributor experiencing cash flow problems.

Engineering,   Research  and  Development  Expenses.  Research  and  development
---------------------------------------------------  expenses decreased $128,345
(12.7%) for the year ended  August 31,  1997 as compared to the prior year.  The
decrease  is  primarily  attributed  to the  transfer  of  expenses  to costs of
revenues  associated  with  billable  research  and  development  activities  in
addition to lower material  purchases and consulting  fees. These decreases were
partially offset by higher expenses for new personnel.

Other Income and Expenses.  Interest expense increased  primarily as a result of
-------------------------  the increased  borrowings from The T Partnership (see
Note 7 of the Financial Statements included in response to Item 14) and interest
associated with capitalized leases for equipment.

Litigation  expense  for  fiscal  year  1997  represents  the  jury  award  to a
terminated  employee as a result of an age discrimination suit and the Company's
legal  costs  from  September  1996 to defend  this  action  (see Note 15 of the
Financial Statements included in response to Item 14).

The net loss for the fiscal year ended August 31, 1997 was  $1,354,942  or $0.21
per share as  compared to a net loss of $892,940 or $0.14 per share for the year
ended August 31, 1996.





Liquidity and Capital Resources
-------------------------------

At August 31, 1998,  working  capital  decreased  $673,007 to $285,167  from the
fiscal year ended August 31, 1997.  The current ratio was 1.1 to 1 at August 31,
1998 as  compared  to 1.6 to 1 at August 31,  1997.  Net cash used in  operating
activities was $377,173 for the fiscal year ended August 31, 1998 as compared to






                                       17

<PAGE>



$37,025  for the  fiscal  year ended  August 31,  1997.  This  increase  in cash
required for  operations  is primarily  attributed  to the increase in Electro's
operating  loss for the fiscal year and an increase  in deferred  merger  costs.
Electro was able to satisfy its cash  requirements  with  borrowings  from The T
Partnership,  cost saving  measures  (especially in the sales and marketing area
where  departed  sales  personnel  have  not  been  replaced)  cash on hand  and
extension of its accounts payable.

In April 1998,  rather than await a decision  of its appeal,  Electro  settled a
certain  age-discrimination  lawsuit  to which it was a party  and  under  which
judgment,  at the trial  level,  had been  entered  against  it in the amount of
approximately  $330,990.  Under the key terms of the Settlement  Agreement,  the
matter was settled for the sum of $305,000 payable as follows: (i) by a lump sum
payment of  $65,000  within  five  business  days of the date of the  Settlement
Agreement  and (ii) the balance,  bearing  interest at the rate of 6% per annum,
payable in monthly  installments of $10,000,  plus interest,  commencing July 1,
1998. The Settlement  Agreement  provides that a default in any monthly  payment
which remains  unpaid for a period of ten days allows the plaintiff to declare a
default  and  accelerate  the  payment of the entire  outstanding  balance  with
interest. Electro has made the payments due to date on a timely basis.

The rate of  interest on the debt to The T  Partnership  is 12% per annum on any
outstanding balance and is payable monthly.  As of August 31, 1998, Electro owes
The T Partnership  $293,764 for monthly  interest  payments  dating back to July
1997. Electro has sent the required interest payments to The T Partnership.  The
T  Partnership  has chosen not to tender  such  checks for  payment.  Therefore,
Electro has considered the interest  payments  unpaid at August 31, 1998 and has
reflected  the amount as a liability on the  accompanying  1998  balance  sheet.
Interest payments under this agreement continue to be required monthly, however,
The T Partnership has agreed that the failure to make such monthly payments will
not constitute an event of default, as defined in the agreement,  and has agreed
not to request acceleration of payment for the fiscal 1998 interest payments or,
further,  for any fiscal 1999 interest  payments.  Monthly principal payments of
$25,000  scheduled  to begin on  September  1, 1996  have,  pursuant  to several
waivers, with the latest received in October 1998, been deferred to September 1,
1999. The loan is secured by Electro's property,  building, accounts receivable,
inventories  and machinery and equipment.  Electro is to prepay the  outstanding
balance  in the  event  Electro  is merged  into or  consolidated  with  another
corporation or Electro sells all or substantially all of its assets,  unless The
T Partnership and Electro agree  otherwise.  The Merger  Agreement  contemplates
that  the  total  indebtedness  outstanding  and due to The T  Partnership  plus
interest accrued thereon (totaling approximately $2.5 million) shall be redeemed
at the merger effective time by: (a) the issuance by the Surviving Subsidiary to
The T Partnership of an aggregate of 1,000 shares of Series A Preferred Stock of
the Surviving Subsidiary,  which shares shall have a liquidation value equal to,
and shall be issued in redemption of, $1.0 million of the indebtedness and shall
be convertible  into shares of the new combined  company's common stock; (b) the
delivery to The T  Partnership  of the new  combined  company's  9%  conditional
promissory note in the amount of $1.0 million pursuant to which the new combined
company is obligated to pay only those amounts which are due but not paid to the
holders  of the  Series A  Preferred  Stock,  or in the event of  certain  other
non-monetary  defaults;  and (c) the delivery to The T Partnership  of a secured
promissory note made by the new combined company in an amount not to exceed $1.3
million  (which amount shall be the  approximate  remaining  amount of Electro's
secured indebtedness to The T Partnership exclusive of the amount redeemed under
(a) above), bearing interest at the rate of 12% per annum payable quarterly, the
principal  amount of which shall be due and payable three years from the date of
execution  of such note (the terms of the  security  for the note have yet to be
agreed  upon).  As a result of the issuance of Series A Preferred  Stock,  The T
Partnership shall be entitled to receive dividends. In addition, pursuant to the







                                       18

<PAGE>



terms  of  the  Merger  Agreement,  The  T  Partnership  shall  be  entitled  to
reimbursement  for cash advances  provided to Electro in the amount of $200,000,
or any greater  amount as may be agreed to by Electro and  Cardiac,  in writing,
which may have been  extended by The T  Partnership  between May 1, 1998 and the
completion of the merger for the purpose of operating capital.

Under  the  provisions  of the  agreement  with The T  Partnership,  Electro  is
obligated to comply with  certain  covenants,  to be tested on a monthly  basis.
Non-compliance  by Electro shall allow The T Partnership  to declare an Event of
Default and accelerate repayment of indebtedness. As of August 31, 1998, Electro
was not in compliance with certain  covenants.  However,  in October 1998, The T
Partnership  agreed not to exercise  its right to  accelerate  the  repayment of
indebtedness  through September 1, 1999 as a result of  non-compliance  with the
aforementioned covenants and agreed to defer the principal and interest payments
due in the 1998 and 1999 fiscal years.  The T  Partnership  has also agreed to a
modification  to  one  of the  financial  covenants.  Electro  is  currently  in
compliance with such revised covenant.

The report of Electro's  independent  auditors on Electro's financial statements
includes an explanatory  paragraph which states that Electro's  recurring losses
from  operations,  its net capital  deficiency and limited working capital raise
substantial  doubt about Electro's  ability to continue as a going concern.  The
financial  statements  and  financial  statement  schedules  do not  include any
adjustments  that might result from the outcome of this  uncertainty.  Electro's
ability to  continue  with its plans is  contingent  upon its  ability to obtain
sufficient  cash flow from  operations or to obtain  additional  financing  from
external sources. Electro has had difficulty in paying its obligations and, as a
result has delayed payments to vendors and certain others providing  services to
Electro,  such as legal  expenses.  Electro  continues to evaluate its plans and
adopt certain cost-saving measures,  where appropriate.  The contemplated merger
is contingent  upon both companies  raising  sufficient  capital to support each
company's product development efforts. The Board of Directors believes that this
merger  can  offer  advantages  to both  companies  by,  among  other  benefits,
providing economies of scale and elimination of redundancies. However, there can
be no  assurance  that the  merger  will occur or that  Electro  will be able to
generate  the  funding  required.  Further,  there  can  be  no  assurance  that
consummation of the merger will yield positive operating results in the future.

Operating Trends and Uncertainties
----------------------------------

Sales. The ability of Electro to attain profitable  operations is dependent upon
----- expansion of sales volume,  both  domestically  and  internationally,  and
continued  development  of new and advanced  products.  Many  countries in which
Electro  markets its products  regulate the  manufacture,  marketing  and use of
medical  devices.  Electro  intends to pursue product  approval or  registration
procedures in countries  where it is marketing its products.  The  international
registration   process  and  approval   process  is  normally   accomplished  in
coordination  with its  international  distributors.  In order  for  Electro  to
continue to sell its products in the nations of the EEC, Electro was required to
obtain the CE Mark  certification,from  ISO.  Since Electro has not yet obtained
the CE Mark  certification  and is now unable to sell certain of its products in
the Nations of the EEC (which  accounted for  approximately  14%, 17% and 21% of
total   revenues   for  fiscal  years  1998,   1997  and  1996,   respectively),
international sales have been adversely affected in Europe.  Several months ago,
Electro and Cardiac  submitted an application  requesting CE Mark  certification
for Cardiac to sell Electro's steerable line of catheters, as manufacturer, with







                                       19

<PAGE>



Electro acting as vendor to Cardiac in such regard.  CE Mark  certification  was
granted on October  26,  1998,  and issued in the name of  Cardiac.  Cardiac and
Electro  anticipate  having  product with CE Mark  certification  available  for
shipment  in early  1999.  Electro  and  Cardiac  have also  recently  submitted
applications  for  CE  Mark  certification  for  many  of  Electro's  additional
products. However, there can be no assurances that CE Mark certification for the
additional products will be obtained or that the pre-June 1998 sales levels will
be recaptured.


FDA Warning Letter.  Electro's  products are classified as medical devices under
------------------ the FDA Act and, as such, are subject to extensive regulatory
compliance  requirements.  In February 1997, the FDA conducted an inspection and
audit of Electro's  facilities and practices as a result of which the FDA issued
the  FDA  Warning  Letter  regarding   noncompliance  by  Electro  with  certain
regulations  regarding  cGMP in the  manufacture  of its products.  The areas of
noncompliance  include Electro's methods of investigation of device  complaints,
methods  of  validation  of  device  sterilization,   environmental   monitoring
procedures,  methods of validation of extrusion  processes which are used in the
manufacture  of certain of Electro's  catheters and other quality  assurance and
record  keeping  requirements.   Electro  has  communicated  with  the  FDA  its
intentions to remedy the noncompliance,  has established a plan and timetable to
effectuate  such  remediation  and has  diligently  worked to take the necessary
corrective actions. Electro's actions have included the establishment of certain
validation  protocols,  revisions  of   Electro's  Quality  System  and  Quality
System Manual,  the implementation of a program for environmental  testing,  the
purchase of equipment for extrusion  process  validation and the  institution of
file and record  keeping  protocols.  A subsequent  FDA  inspection in September
1997  indicated   that  while  substantial  progress  had  been  made,  not  all
corrective  actions had been completed.  Electro is continuing in its efforts to
complete  such  actions and it is  Electro's  intention  to inform the FDA on or
about  the end of 1998  that it has  completed  such  actions  and is ready  for
reinspection. There can be no assurance, however, that Electro will be ready for
such  reinspection  on or about the end of 1998 nor that  Electro  will pass any
such  reinspection  when  it  occurs.   While  Electro  is  currently  under  no
restrictions  by the FDA  regarding  the  manufacture  or sale of its  products,
Electro is unable to  determine  precisely  the  short-term  economic  impact of
instituting the required  corrective  actions and there can be no assurance that
the FDA will not take further action, including seizure of products,  injunction
and/or civil penalties, if the necessary corrective actions are not completed on
a timely basis.  Until all  corrective  actions  required  under the FDA Warning
Letter have been taken,  the FDA will not consider  new  products for  approval.
However,  Electro's  insufficient financing for research and development efforts
over the last few years have  limited its ability to produce new  products  and,
consequently, no FDA approvals are currently sought.

Year 2000  Issue.  Many  currently  installed  computer  systems use a two-digit
----------------  suffix to identify year  references  with an assumed prefix of
"19". This limits those systems to recognizing dates between 1900 and 1999. As a
result,  in a little more than a year,  computer systems and/or software used by
many companies in a very wide variety of applications will experience  operating
difficulties  unless  they  are  modified  or  upgraded  to  adequately  process
information  involving,  related to or dependent upon the century change. If not
corrected, systems and/or applications could fail or create erroneous results at
or  in  connection  with  applications  after  December  31,  1999.  Significant
uncertainty  exists  concerning  the scope and magnitude of problems  associated
with the century change.

Electro has  established  a project team to address Year 2000 risks.  Electro is
currently  assessing  the  impact  of Year  2000  on its  computer  systems  and
financial applications although a plan has not been implemented. Electro is also
assessing the potential  overall  impact of the impending  century change on its
business, results of operations and financial position.






                                       20

<PAGE>



Electro has reviewed its information and operational  systems and  manufacturing
processes in order to identify those products,  services or systems that are not
Year  2000  compliant.  As a  result  of its  initial  assessment,  Electro  has
determined that it will be required to modify or replace certain information and
operational systems so they will be Year 2000 compliant. These modifications and
replacements  are being,  and will  continue  to be,  made in  conjunction  with
Electro's  overall  systems  initiatives.  The  total  cost of these  Year  2000
compliance  activities is not anticipated to be material to Electro's  financial
position or its results of operations. Electro expects to complete its Year 2000
project during 1999.  Based on available  information,  Electro does not believe
any material exposure to significant business  interruption exist as a result of
Year 2000  compliance  issues.  Accordingly,  Electro has not adopted any formal
contingency plan in the event its Year 2000 project is not completed in a timely
manner.  These costs and the timing in which  Electro plans to complete its Year
2000   modification  and  testing  processes  are  based  on  management's  best
estimates.  However, there can be no assurance that Electro will timely identify
and remediate all significant Year 2000 problems, that remedial efforts will not
involve  significant  time and expense,  or that such  problems  will not have a
material  adverse  effect  on  Electro's  business,  results  of  operations  or
financial position.

Electro also faces risk to the extent that  suppliers of products,  services and
systems purchased by Electro and others with whom Electro transacts  business on
a  worldwide  basis do not  comply  with Year 2000  requirements.  Electro  will
initiate  written  communications  with  significant  suppliers and customers to
determine  the extent to which  Electro is  vulnerable  to these third  parties'
failure to  remediate  their own Year 2000  issues.  In the event any such third
parties cannot provide Electro with products,  services or systems that meet the
Year 2000  requirements  on a timely  basis,  or in the event  Year 2000  issues
prevent such third parties from timely delivery of products or services required
by  Electro,  Electro's  results of  operations  could be  materially  adversely
affected.  To the  extent  Year 2000  issues  cause  significant  delays  in, or
cancellation of, decisions to purchase Electro's products or services, Electro's
business,  results of  operations  and  financial  position  could be materially
adversely  affected.  Due  to  the  general  uncertainty,  both  internally  and
externally,  inherent  in the Year 2000  problem  resulting,  in part,  from the
uncertainty  of  its  Year  2000  readiness  of  third  parties,  suppliers  and
customers,  the Company is unable to accurately predict at this time whether the
consequences  of Year 2000 failures will have a material impact on the Company's
results of operations, liquidity or financial condition.

The discussion of Electro's efforts, and management's expectations,  relating to
Year 2000  compliance  are  forward-looking  statements.  Electro's  ability  to
achieve  Year 2000  compliance  and the level of  incremental  costs  associated
therewith,  could be adversely impacted by, among other things, the availability
and cost of  programming  and  testing  resources,  vendors'  ability  to modify
proprietary  software,  and  unanticipated  problems  identified  in the ongoing
compliance review.


Inflation and Changing Prices
-----------------------------

Inflation did not have a material impact on the results of Electro's  operations
for the three years ended August 31, 1998. Because of the implementation of cost
containment by the hospitals 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.  Electro's  pricing  structure may not
reflect inflation rates, due to constraints of competition market conditions and
Medicare regulations







                                       21

<PAGE>




Recent Accounting Pronouncements
--------------------------------

Statement of Financial  Accounting  Standards NO. 133, Accounting for Derivative
Instruments and Hedging  Activities was issued in June 1998 and is effective for
all fiscal quarters  beginning  after June 15, 1999. This statement  establishes
accounting  and  reporting  standards  for  derivative  instruments  and hedging
activities.  Electro  does not  expect its  implementation  will have a material
effect on Electro's financial statements.

Item 8.             Financial Statements and Supplementary Data
-------             -------------------------------------------

         Response to this Item is  contained  in "Item 14 - Exhibits,  Financial
Statement  Schedules and Reports on Form 8-K", which information is incorporated
herein by reference.

Item 9.             Changes in and Disagreements with Accountants on Accounting
-------             -----------------------------------------------------------
                    and Financial Disclosure
                    -------------------------                    
                   

         Not applicable.






                                       22

<PAGE>



                                    PART III


Item 10.            Directors and Executive Officers of the Company
--------            -----------------------------------------------

         The  following  table sets forth  certain  information  concerning  the
Company's directors and executive officers:

Name, Age, as of November 30,
1998 and Positions and
Offices Held with                          Business Experience During Past 5
   the Company                              Years and Principal Occupation
   -----------                              ------------------------------

Abraham H. Nechemie                Business Consultant. Formerly a partner
Age 74; Director since             in Wiss & Company, a certified public
1992(1)                            accounting firm. Retired from the firm
                                   in 1985.

Ervin Schoenblum                   Acting  President and Chief Operating Officer
Age 58; Director since             since December 1993. Management Consultant
1992                               for over five years.  Advisor to the Company
                                   since February 1989.

Lee W. Affonso, Age 49;            Vice President of the Company since July 1992
Vice President                     except for the period from September 1993 to
                                   December 1993 when he served as Senior Sales
                                   Specialist.

Robert W. Kokowitz                 Vice President of the Company since July 
Age 43; Vice President             1992.

Joseph P. Macaluso                 Chief Financial Officer since May 1987.
Age 46; Treasurer and
Chief Financial Officer

Nicholas G. Accisano               Vice President of the Company since September
Age 45; Vice President             1997.  Director of New Product Development 
                                   for over the past five years.

Arlene C. Bell                     Secretary since May 1987. Executive Assistant
Age 53; Secretary                  to the Chairman since 1981, and to the Acting
                                   President since March 1, 1994.
----------------------
(1)Member of audit committee.

         The Company's  directors'  terms will expire when their  successors are
elected  and  qualify  at the  annual  meeting of  shareholders.  The  Company's
officers  serve for a period of one year and until their  successors are elected
by the Board of Directors.

Section 16(a) Beneficial Ownership Reporting Compliance

         Section  16(a) of the  Securities  Exchange  Act of 1934  requires  the
Company's officers and directors, and persons who own more than ten percent of a
registered  class of  the  Company's  equity  securities,  to  file  reports  of
ownership and changes in ownership with the  Securities and Exchange  Commission
("SEC").  Officers,  directors  and greater  than ten percent  shareholders  are
required by SEC  regulation  to furnish  the Company  with copies of all Section
16(a) forms they file.

         





                                       23

<PAGE>



         Based  solely  upon the  Company's  review of the  copies of such forms
received by it, pursuant to Section 16(a) and to written  representations of its
incumbent  directors,  officers  and  beneficial  owners of more than 10% of the
Company's common stock,  the Company believes that,  during the period September
1, 1997 to August 31, 1998 all filing  requirements  applicable to its officers,
directors  and  owners  of more  then 10% of the  Company's  common  stock  were
complied with.



Item 11.            Executive Compensation
--------            ----------------------

      COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS

      The following table sets forth all compensation earned by, awarded or paid
to the Company's  officers (whose total  compensation  for the fiscal year ended
August 31, 1998 exceeded  $100,000) for services  rendered in all  capacities to
the Company during each of the fiscal years ended August 31, 1998, 1997 and 1996
<TABLE>

                                                Summary Compensation Table

<CAPTION>
                                                                Long-Term
                                                                   Awards
                                                Annual          Securities
                                            Compensation        Underlying               Other
Name and                                        Salary            Options(1)           Compensation
Principal  Position        Year                                      #
<S>                        <C>               <C>                      <C>          <C>          
Ervin Schoenblum           1998              $ 105,000                -            $         -
Acting President           1997                105,000                -                      -
                           1996                102,000                -                      -


Lee W.  Affonso            1998              $ 102,000                -            $         -
Vice President             1997                105,000                -                      -
                           1996                112,000                -                      -

Joseph P. Macaluso(2)      1998              $  80,000                -                 17,000
Treasurer & Chief          1997                 83,000                -                 19,000
  Financial Officer        1996                 83,000                -                 19,000

</TABLE>

------------
(1) The  table  reflects  the  number of  options  granted  under the  Company's
Incentive Stock Option Plan. (2) Other  compensation  represents  commissions on
international sales.


      Stock options are also granted to officers and are determined by the Board
of Directors based upon the  individual's  contribution  to the Company.  During
fiscal year 1998, no options were granted to the named executive officers.







                                       24

<PAGE>



Aggregate Option Exercises and Year-End Option Table

         The following table provides information on option exercises during the
fiscal year 1998 by the named executive  officers and the value of each of their
respective unexercised options at August 31, 1998.
<TABLE>


                                      AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                                                 AND FY-END OPTION VALUES

(A)                        (B)                (C)                  (D)                 (E)
                                                                Number of            Value of
                                                               Unexercised         Unexercised
                                                                 Options           In-the-Money
                                                                FY-End (#)           Options
                                                                                   FY-End ($) (1)

<CAPTION>

                    Shares Acquired          Value             Exercisable/        Exercisable/
Name                on Exercise (#)       Realized ($)         Unexercisable       Unexercisable
-----               ---------------       ------------         --------------      -------------

<S>                           <C>                 <C>            <C>                  <C>    
Ervin Schoenblum              -                   -              64,000/16,000        -0-/-0-
Lee W. Affonso                -                   -              29,200/ 7,300        -0-/-0-
Joseph P. Macaluso            -                   -              29,200/ 7,300        -0-/-0-

</TABLE>

------------
(1) Calculated on the basis of fair market value of the underlying securities at
August 31, 1998 less the exercise price

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
-----------------------------------------------------------

On  October  11,  1993,  the  Company  entered  into  an  agreement  with  The T
Partnership, a related party, to borrow up to $1,000,000.  Ervin Schoenblum, the
Company's Acting President and a Director, and Abraham Nechemie, also a Director
of the Company, are members of The T Partnership.  On August 31, 1995, after the
Company  had drawn  down all of the  $1,000,000,  the  Company  entered  into an
agreement  with The T  Partnership  to borrow an additional  $500,000  ("Lending
Agreement").  In January  1996,  the Company and The T  Partnership  agreed to a
restructuring  of  its  financing  agreement.  The  T  Partnership  advanced  an
additional  $200,000 to the Company and agreed to defer interest  payments for a
period  of  three  months  (interest  payments  were  added  to the  outstanding
principal  on The T  Partnership  indebtedness)  and in April 1997,  the Company
borrowed an additional  $100,000 from The T Partnership under the same terms and
conditions as its previous borrowing. The Company repaid $100,000 in fiscal year
1997. In September 1997, another $100,000 was advanced under this agreement.  In
December  1997,  January  1998,  May 1998 and in July 1998 the Company  borrowed
additional  amounts  from  The T  Partnership,  in each  case in the  amount  of
$100,000,  under promissory notes due in September 1999. The total  indebtedness
due to The T Partnership at August 31, 1998 was $2,247,125.

The rate of interest on the debt is 12% per annum on any outstanding balance and
is payable  monthly.  As of August 31, 1998,  the Company owes The T Partnership
$293,764 for monthly interest payments dating back to July 1997. The Company has
sent the required interest payments to The T Partnership.  The T Partnership has
chosen not to tender  such  checks  for  payment.  Therefore,  the  Company  has
considered the interest payments unpaid at August 31, 1998 and has reflected the
amount as a liability on the accompanying  1998 balance sheet. The T Partnership
has waived the debt agreement provision for monthly interest payments to be made
until  September 1, 1999 and has agreed not to request  acceleration  of payment
for the fiscal year 1998 interest payments or, further, for any fiscal year 1999
interest  payments.  Monthly principal payments of $25,000 scheduled to begin on
September 1, 1996 have, pursuant to several waivers, with the latest received in
October  1998,  been  deferred to September 1, 1999.  The loan is secured by the
Company's property, building, accounts receivable, inventories and machinery and
equipment.  The  Company is to prepay the  outstanding  balance in the event the
Company is merged into or consolidated with  another  corporation or the Company






                                       25

<PAGE>



sells all or  substantially  all of its  assets,  unless The T  Partnership  and
Company  agree  otherwise.  Pursuant to the terms of the  Agreement  and Plan of
Reorganization  with CCS, the  total  indebtedness  outstanding and due to The T
Partnership plus interest accrued thereon (totaling  approximately $2.5 million)
shall be  redeemed  at the merger  effective  time by: (a) the  issuance  by the
Surviving  Subsidiary  to The T  Partnership  of an aggregate of 1,000 shares of
Series A Preferred Stock of the Surviving Subsidiary,  which shares shall have a
liquidation  value equal to, and shall be issued in redemption  of, $1.0 million
of the  indebtedness  and shall be convertible  into shares of CTG Common Stock;
(b) the delivery to The T Partnership of a CTG 9% conditional promissory note in
the amount of $1.0 million  pursuant to which CTG is obligated to pay only those
amounts  which are due but not paid to the  holders  of the  Series A  Preferred
Stock,  or in the event of  certain  other  non-monetary  defaults;  and (c) the
delivery to The T  Partnership  of a secured  promissory  note made by CTG in an
amount  not to  exceed  $1.3  million  (which  amount  shall be the  approximate
remaining  amount of the  Company's  secured  indebtedness  to The T Partnership
exclusive of the amount redeemed under (a) above),  bearing interest at the rate
of 12% per annum payable  quarterly,  the principal amount of which shall be due
and payable  three years from the date of  execution  of such note (the terms of
the  security  for the note  have yet to be  agreed  upon).  As a result  of the
issuance of Series A Preferred  Stock,  The T  Partnership  shall be entitled to
receive dividends.  In addition,  pursuant to the terms of the Merger Agreement,
The T Partnership  shall be entitled to reimbursement for cash advances provided
to the Company in the amount of $200,000, or any greater amount as may be agreed
to by the Company and CCS,  in  writing,  which may have been  extended by The T
Partnership between May 1, 1998 and the completion of the merger for the purpose
of operating capital.

Under the  provisions of the agreement  with The T  Partnership,  the Company is
obligated to comply with  certain  covenants,  to be tested on a monthly  basis.
Non-compliance  by the Company shall allow The T Partnership to declare an Event
of Default and accelerate repayment of indebtedness.  As of August 31, 1998, the
Company was not in compliance with certain covenants.  However, in October 1998,
The T Partnership  agreed not to exercise its right to accelerate  the repayment
of indebtedness through September 1, 1999 as a result of non-compliance with the
aforementioned covenants and agreed to defer the principal and interest payments
due in the 1998 and 1999 fiscal years.  The T  Partnership  has also agreed to a
modification  to one of the  financial  covenants.  The Company is  currently in
compliance with such revised covenant.

Under the provisions of the original  agreement,  The T Partnership  was granted
warrants  which  permit The T  Partnership  to  purchase  166,667  shares of the
Company's  common stock at a price of $3.25 per share. The August 1995 agreement
provides  that The T  Partnership  surrender  its  warrants and be granted a new
warrant to purchase  500,000 shares of the Company's  common stock at a price of
$0.9875  per  share in  exchange  for the  surrendered  warrant.  No  additional
warrants  were  issued as a result of  subsequent  borrowings.  A value has been
allocated to the warrants  based upon their  estimated  fair market value at the
date of the agreement. Such amount ($50,000) is amortized as additional interest
expense over the term of the indebtedness.  The unamortized  balance is shown in
"other assets" in the  accompanying  1998 and 1997 balance sheets.  The warrants
are immediately exercisable and expire on August 1, 2001. As of August 31, 1998,
these warrants remain outstanding.







                                       26

<PAGE>



ITEM 12.             SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
--------             ----------------------------------------
                     OWNERS AND MANAGEMENT
                     ---------------------

Certain Beneficial Owners
-------------------------

         A. Set forth below is  information  concerning  persons  (including any
"group" as that term is used in Section 13(d)(3) of the Securities  Exchange Act
of 1934) known to the Company to own more than 5% of the common stock of Electro
as of November 30, 1998.
<TABLE>

<CAPTION>
Name and Address of                                          Amount and Nature of                            Percentage
Beneficial Owner                                             Beneficial Ownership                            of Class(1)
----------------                                             --------------------                            -----------
<S>                                                                <C>                                          <C>    

The T Partnership, L.L.P.                                          2,464,844(3)                                 35.3%
c/o Wiss & Co.
354 Eisenhower Pkwy.
Livingston, NJ 07039(2)

         Fred S. Lafer                                             2,464,844                                    35.3%
         c/o The Taub Foundation
         300 Frank W. Burr Blvd.
         Teaneck, NJ 07666

         Abraham H. Nechemie                                       2,469,844(4)                                 35.4%
         Wiss & Co.
         354 Eisenhower Pkwy.
         Livingston, NJ 07039

         Ervin Schoenblum                                          2,544,844(5)                                 36.1%
         c/o Electro Catheter Corp.
         2100 Felver Court
         Rahway, NJ 07065

         Stephen D. Shapiro                                        2,464,844                                    35.3%
         20 Old Post Road
         E. Setauket, NY 11733

         Henry Taub                                                2,464,844                                    35.3%
         c/o The Taub Foundation
         300 Frank W. Burr Blvd.
         Teaneck, NJ 07666

Bruce Paul                                                           658,400                                    10.3%
1 Hampton Road
Purchase, NY 10577

----------------------------
</TABLE>

(1)      The  common  stock  deemed  to be owned  which is not  outstanding  but
         subject to warrants and currently  exercisable  options is deemed to be
         outstanding  for the  purpose  of  determining  the  percentage  of all
         outstanding   common  stock   owned.   The  same  shares  may  be  held
         beneficially by more than one owner  resulting in the total  percentage
         being greater than 100%.

(2)      The T Partnership, L.L.P. is a New Jersey limited liability partnership
         (formerly  The  T  Partnership,   a  New  Jersey  general  partnership)
         consisting of Fred Lafer (10% equity interest), Abraham H. Nechemie (5%
         equity  interest),  Ervin Schoenblum (5% equity  interest),  Stephen D.
         Shapiro (10% equity interest) and Henry Taub (70% equity interest). The
         T Partnership  disclaims any  beneficial  ownership of shares  issuable
         upon  currently  exercisable  stock  options  held by  each of  Messrs.
         Nechemie and Schoenblum.






                                       27

<PAGE>



(3)      Includes  83,344 and 500,000  shares  which The T  Partnership  has the
         right to acquire pursuant to outstanding  warrants,  which warrants are
         immediately  exercisable  at prices of $1.425  and  $.9875  per  share,
         respectively.

(4)      Includes   5,000  shares   issuable  upon  the  exercise  of  currently
         exercisable stock options.

(5)      Includes   80,000  shares  issuable  upon  the  exercise  of  currently
         exercisable stock options.


Management
----------

         B. The following  table sets forth the number of shares of common stock
of Electro  beneficially  owned by each  Director of Electro,  each of the named
executive officers named in the Summary Compensation Table set forth above as of
November  30,  1998,  and  the  percentage  of the  outstanding  shares  of such
ownership  represented  at the close of business on November 30, 1998,  together
with  information as to stock ownership of all Directors and Executive  Officers
of Electro as a group as of November 30, 1998.

<TABLE>
<CAPTION>
                                                     Amount and Nature of             Percentage
Name of Beneficial Owner                             Beneficial Ownership             of Class(1)
<S>                                                    <C>                               <C>    
Abraham H. Nechemie                                    2,469,844(2)                      35.4%
Ervin Schoenblum                                       2,544,844(2)                      36.1%
Lee W. Affonso                                            36,500(3)                       0.6%
Joseph P. Macaluso                                        36,500(3)                       0.6%
All executive officers and                             2,709,854(2)(4)                   37.6%
  directors as  group
  (8 persons)


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

(1)      The common stock subject to currently  exercisable options is deemed to
         be  outstanding  for the purpose of  determining  the percentage of all
         outstanding common stock owned.

(2)      Messers.  Nechemie and  Schoenblum  are partners in The T  Partnership,
         which owns  1,881,500  shares of common  stock of  Electro  and has the
         right to acquire  583,344  shares pursuant to  immediately  exercisable
         warrants.  Also included in the table above are  currently  exercisable
         options  for the  purchase  of 5,000 and 80,000  shares held by Messrs.
         Nechemie and Schoenblum, respectively.

(3)      All 36,500 shares are subject to currently exercisable options.

(4)      Includes 229,000 shares subject to currently  exercisable  options held
         by all  executive  officers and directors of Electro  (including  those
         individually named in the table above).

</TABLE>






                                       28

<PAGE>




BOARD COMPENSATION REPORT ON EXECUTIVE COMPENSATION
---------------------------------------------------

The Company has no  compensation  committee  or other  committee of the Board of
Directors  performing similar  functions.  All members of the Board of Directors
review and determine  executive  compensation  for all executive  officers on an
annual basis.  Ervin  Schoenblum,  the Company's Acting  President,  is the only
executive  officer of the Company  also serving on the Board.  Mr.  Schoenblum's
compensation  as Acting  President  was  negotiated  between the parties and was
based  in  part  on the  amount  of  compensation  paid  to him  while  he was a
consultant to the Company and the level of compensation historically paid by the
Company for this position.

The Board of Directors has implemented an executive compensation philosophy that
seeks to relate  executive  compensation  to corporate  performance,  individual
performance  and  creation of  stockholder  value.  Historically,  this has been
achieved through compensation  programs which focus on both short- and long-term
results.

In accordance with the Board of Directors'  executive  compensation  philosophy,
the major component of executive compensation has been base salary. Salaries for
executive   officers  are  based  on  current   individual  and   organizational
performance,  affordability and competitive market trends. Additional incentives
are provided through issuance of incentive stock options.

Board of Directors:                Abraham H. Nechemie
                                   Ervin Schoenblum







                                       29

<PAGE>




PERFORMANCE GRAPH
-----------------

         The following performance graph compares the five-year cumulative total
return on the  Company's  Common  Stock to the S&P 500 Index and the S&P Medical
Products and Supplies  Index  assuming  $100 was invested on August 31, 1993 and
all dividends were reinvested.

             [Graphic presentation omitted in EDGAR filed document]
                                
<TABLE>

                                                            
                                      INDEXED RETURNS                           
                                       Years Ending 

<CAPTION>
                               Base                                       
                              Period                                  
Company / Index                Aug93    Aug94     Aug95     Aug96     Aug97     Aug98
<S>                             <C>    <C>       <C>        <C>       <C>       <C>
                                                
ELECTRO CATHETER CORP           100     50.00     32.48      65.00     27.20     13.76
S&P 500 INDEX                   100    105.47    128.09     152.08    213.90    231.21
HLTH CARE(MED PDS&SUPP)-500     100    116.89    179.95     204.75    293.15    324.75
                                                

</TABLE>


Notwithstanding  anything  set forth in any of the  Company's  previous  filings
under the Securities  Act of 1933 or the  Securities  Exchange Act of 1934 which
might incorporate future filings, the preceding performance graph and the Report
of the  Compensation  Committee  herein  above  provided  shall  not  be  deemed
incorporated by reference into any such filings.








                                       30

<PAGE>




                                     PART IV

Item 14.       Exhibits, Financial Statement Schedules and
--------       -------------------------------------------
                  Reports on Form 8-K
                  -------------------

               (a) The following documents are filed as a part of the Report:

               1.    Financial Statements
                     --------------------

               See:  Index to Financial Statements

               2.    Financial Statement Schedules
                     -----------------------------

               See:  Index to Financial Statements

                     All other  schedules are omitted  because of the absence of
the conditions under which they are required or because the required information
is included in the financial statements and the notes thereto.


               3.    Exhibits
                     --------

        (3)(a)       Registrant's   Certificate  of   Incorporation  as  amended
                     through   April  11,   1978  -  filed  as  an   Exhibit  to
                     Registrant's  Report on Form 10-K for the fiscal year ended
                     August 31, 1981, and incorporated by reference herein as an
                     exhibit hereto.

        (3)(b)       Amendment to  Registrant's  Certificate  of  Incorporation,
                     dated March 20, 1985 - filed as an Exhibit to  Registrant's
                     Report on Form 10-Q for fiscal  quarter ended May 31, 1985,
                     and incorporated by reference herein as an exhibit hereto.

        (3)(c)       Amended  and  Restated  Bylaws  -  filed as an  Exhibit  to
                     Registrant's  Report on Form 10-K for the fiscal year ended
                     August 31, 1989, and incorporated by reference herein as an
                     exhibit hereto.

        (10)(a)      Registrant's 1984 Employee Stock Purchase Plan, filed as an
                     Exhibit to Registrant's  Report on Form 10-Q for the second
                     quarter of fiscal year 1984 ended  February 29,  1984,  and
                     incorporated by reference herein as an exhibit hereto.

        (10)(b)      Registrant's  1987 Incentive  Stock Option Plan filed as an
                     Exhibit  to the  Registrant's  Report  on Form 10-K for the
                     fiscal year ended  August 31,  1987,  and  incorporated  by
                     reference as an exhibit hereto.(2)

        (10)(c)      Registrant's  1990 Incentive  Stock Option Plan filed as an
                     Exhibit  to the  Registrant's  Report  on Form 10-K for the
                     fiscal year ended  August 31,  1990,  and  incorporated  by
                     reference as an exhibit hereto.(2)

        (10)(d)      Registrant's  1992 Incentive  Stock Option Plan filed as an
                     Exhibit  to the  Registrant's  Report  on Form 10-K for the
                     fiscal year ended  August 31,  1992,  and  incorporated  by
                     reference as an exhibit hereto.








                                       31

<PAGE>





        (10)(e)      Agreement dated October 11, 1993 between Registrant and The
                     T Partnership filed as an exhibit to Registrant's Report on
                     Form 10-K for the fiscal year ended  August 31,  1993,  and
                     incorporated by reference as an exhibit hereto.

        (10)(f)      Amendment  dated  November  21, 1994 to  Agreement  between
                     Registrant  and The T  Partnership  filed as an  exhibit to
                     Registrant's  Report on Form 10-K for the fiscal year ended
                     August  31,  1994,  and  incorporated  by  reference  as an
                     exhibit hereto.

        (10)(g)      Lending Agreement dated August 31, 1995 between  Registrant
                     and  The  T   Partnership   filed  as  an  exhibit  to  the
                     Registrant's  Report on Form 10-K for the fiscal year ended
                     August 31, 1995 and incorporated by reference as an exhibit
                     hereto.

        (10)(h)      Composite Modification Agreement between Registrant and The
                     T Partnership  dated January 1, 1996 filed as an exhibit to
                     Registrant's  Report on Form 10-K for the fiscal year ended
                     August  31,  1996,  and  incorporated  by  reference  as an
                     exhibit hereto.

        (10)(i)      Composite Modification Agreement between Registrant and The
                     T  Partnership  dated April 15, 1997 filed as an exhibit to
                     Registrant's  Report on Form 10-K for the fiscal year ended
                     August  31,  1997,  and  incorporated  by  reference  as an
                     exhibit hereto.

        (10)(j)      Composite Modification Agreement between Registrant and The
                     T Partnership  dated September 17, 1997 filed as an exhibit
                     hereto.

        (10)(k)      Promissory Note issued to The T Partnership  dated December
                     17, 1997 and filed as an exhibit hereto.

        (10)(l)      Promissory  Note issued to The T Partnership  dated January
                     26, 1998 and filed as an exhibit hereto.

        (10)(m)      Promissory  Note issued to The T Partnership  dated May 14,
                     1998 and filed as an exhibit hereto.

        (10)(n)      Promissory Note issued to The T Partnership  dated July 30,
                     1998 and filed as an exhibit hereto.

        (10)(o)      Agreement and Plan of Reorganization dated January 20, 1998
                     among  Registrant,  Cardiac Control  Systems,  Inc. and CCS
                     Subsidiary,  Inc.  filed as an exhibit to the  Registrant's
                     Amendment to Annual Report on Form 10-K for the fiscal year
                     ended August 31, 1997 and  incorporated  by reference as an
                     exhibit hereto.

        (10)(p)      First Amendment to the Agreement and Plan of Reorganization
                     dated  May  5,  1998  among  Registrant,   Cardiac  Control
                     Systems, Inc. and CCS Subsidiary,  Inc. filed as an exhibit
                     to the  Registrant's  Amendment to Quarterly Report on Form
                     10-Q for the quarter ended May 31, 1998 and incorporated by
                     reference as an exhibit hereto.

        (10)(q)      Second   Amendment   to   the   Agreement   and   Plan   of
                     Reorganization  dated  August  7,  1998  among  Registrant,
                     Cardiac Control Systems, Inc. and CCS Subsidiary,  Inc. and
                     filed as an exhibit hereto.







                                       32

<PAGE>



        (10)(r)      Third Amendment to the Agreement and Plan of Reorganization
                     dated September 4, 1998 among  Registrant,  Cardiac Control
                     Systems,  Inc.  and CCS  Subsidiary,  Inc.  and filed as an
                     exhibit hereto.

        (21)         Subsidiaries - Electro-Catheter International Corp.

        (23)         Consent of KPMG Peat Marwick LLP filed as an exhibit hereto

        (27)         Financial Data Schedule  which is submitted  electronically
                     to the Securities and Exchange  Commission for  information
                     only and is not filed.

              (b) Reports on Form 8-K :
                  --------------------

                     The  Company  filed a  Current  Report  on Form  8-K  dated
                     October  7,  1997,  which,  under  "Item 5.  Other  Events"
                     thereunder  reported  a verdict in  certain  litigation  in
                     which the Company has been involved.  Also, the Company has
                     filed a Current  Report on Form 8-K dated November 7, 1997,
                     which,  under "Item 5. Other Events"  thereunder,  reported
                     the  execution of a letter of intent with  Cardiac  Control
                     Systems,   Inc.   contemplating   the  merger  of  the  two
                     companies.

        (c)          Exhibits:  Reference  is  made  to  the  list  of  
                      -------- exhibits contained in Item 14(a) 3 above.














                                       33

<PAGE>



                                   SIGNATURES


        Pursuant to the  requirements  of Section 13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this amendment to be signed
on its behalf by the undersigned, thereunto duly authorized.


                                                ELECTRO-CATHETER CORPORATION


Dated: December 4, 1998                 By:   s/Ervin Schoenblum
       ----------------                       ------------------
                                              Ervin Schoenblum
                                              Acting President


         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this  report has been signed by the  following  persons on behalf of the Company
and the capacities and on the dates indicated:



Dated: December 4, 1998                 /s/Ervin Schoenblum
       -----------------                -------------------
                                        Ervin Schoenblum, Acting President
                                         & Director



Dated: December 4, 1998                 /s/Joseph P. Macaluso
       -----------------                ---------------------
                                        Joseph P. Macaluso
                                        Principal Accounting Officer



Dated: December 4, 1998                 /s/Abraham H. Nechemie
       -----------------                ----------------------
                                        Abraham H. Nechemie, Director







                                       34

<PAGE>


                          ELECTRO-CATHETER CORPORATION

                          Index to Financial Statements





                                                                      Page

Independent Auditors' Report                                           F-1
Financial Statements:
     Balance  Sheets - August 31, 1998 and 1997                        F-2
Statements  of Operations -
     Years ended August 31, 1998,
       1997 and 1996                                                   F-3
     Statements of Stockholders' Deficiency/Equity -
       Years ended August 31, 1998,  1997 and 1996                     F-4  
     Statements of Cash Flows
     Years ended August 31, 1998, 1997 and 1996                        F-5
     Notes to Financial Statements                                     F-6

Financial Statement Schedule:

II - Valuation and Qualifying Accounts                                F-25


All other schedules are omitted for the reason that they are not required or are
not applicable or the required  information is shown in the financial statements
or notes thereto.



<PAGE>



                          Independent Auditors' Report


The Board of Directors
Electro-Catheter Corporation:

     We have audited the financial statements of Electro-Catheter Corporation as
listed in the accompanying index. In connection with our audits of the financial
statements,  we also have audited the financial  statement schedule as listed in
the  accompanying  index.  These  financial  statements and financial  statement
schedule are the responsibility of the Company's management.  Our responsibility
is to express an opinion on these financial  statements and financial  statement
schedule based on our audits.

     We conducted  our audits in accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

     In our opinion,  the financial statements referred to above present fairly,
in all material respects, the financial position of Electro-Catheter Corporation
at August 31,  1998 and 1997,  and the  results of its  operations  and its cash
flows for each of the years in the  three-year  period  ended August 31, 1998 in
conformity with generally accepted accounting  principles.  Also in our opinion,
the related  financial  statement  schedule,  when considered in relation to the
basic financial  statements taken as a whole,  presents fairly,  in all material
respects, the information set forth therein.

     The accompanying  financial statements have been prepared assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 2 to the
financial statements, the Company has suffered recurring losses from operations,
has a net capital  deficiency and has limited  working  capital  resources which
raise  substantial  doubt  about its  ability to  continue  as a going  concern.
Management's  plans in regard to these matters are also described in Note 2. The
financial  statements  and  financial  statement  schedule  do not  include  any
adjustments that might result from the outcome of this uncertainty.


                                                 KPMG Peat Marwick LLP

Short Hills, New Jersey
October 30, 1998                  F-1


<PAGE>




                                                    ELECTRO-CATHETER CORPORATION

                                                           Balance Sheets

                                                      August 31, 1998 and 1997

<TABLE>

<CAPTION>
                                                                                 1998                                1997
                                                                              ----------                           -------


                       Assets
<S>                                                                          <C>                                <C>
Current assets:

     Cash and cash equivalents                                               $   168,762                             98,127
     Accounts receivable, less
        allowance for doubtful
        accounts of $213,589 in 1998
        and $152,070 in 1997                                                     723,753                            988,859
     Inventories                                                               1,253,456                          1,242,367
     Prepaid expenses and other current assets                                    68,538                            168,781
                                                                               ---------                          ---------

           Total current assets                                                2,214,509                          2,498,134


Property, plant and equipment, net                                               653,452                            777,663
Deferred merger costs                                                            234,253                                  -
Other assets, net                                                                 80,733                             97,275
                                                                               ---------                           --------

           Total assets                                                       $3,182,947                          3,373,072
                                                                               =========                          =========


        Liabilities and Stockholders' Deficiency

Current liabilities:
    Current installments of capitalized
           lease obligations                                                      73,279                             50,734
    Accounts payable - trade                                                     774,200                            566,816
    Accrued expenses                                                             341,646                            461,118
    Accrued merger costs                                                         181,319                                  -
Accrued interest due to The T Partnership, a
           related party                                                         293,764                             17,472
    Accrued litigation expenses                                                  265,134                            443,820
                                                                                 -------                            -------

           Total current liabilities                                           1,929,342                          1,539,960

Subordinated debentures and promissory note
    due to The T Partnership, a related party                                  2,247,125                          1,747,125

Capitalized lease obligation,
 excluding current installments                                                  196,614                            222,277
                                                                               ---------                          ---------

           Total liabilities                                                   4,373,081                          3,509,362
                                                                                                                  ---------

Stockholders' deficiency:
     Common stock $.10 par value.
        Authorized 20,000,000 shares;
        issued 6,390,389 in 1998 and
        6,383,611 in 1997                                                        639,039                            638,361
     Additional paid-in capital                                               10,704,803                         10,682,008
     Accumulated deficit                                                     (12,533,976)                       (11,456,659)
                                                                             -----------                        -----------
           Total stockholders' deficiency                                     (1,190,134)                          (136,290)
                                                                              ----------                        -----------
     Commitments and contingencies                                                                                       
                                                                              
           Total liabilities and
              stockholders' deficiency                                       $ 3,182,947                          3,373,072
                                                                              ==========                          =========
</TABLE>
See accompanying notes to financial statements.

                                                                 F-2





<PAGE>

<TABLE>




                                                    ELECTRO-CATHETER CORPORATION

                                                      Statements of Operations

                                             Years ended August 31, 1998, 1997 and 1996


<CAPTION>
                                                                   1998                     1997                    1996
                                                                   ----                     ----                    ----
<S>                                                            <C>                      <C>                       <C>
Net revenues, including research
  and development revenue of $0 in
   1998, $544,293 in 1997 and
   $155,707 in 1996                                            $5,347,042               6,648,438                 7,362,436
Cost of goods sold                                              3,608,923               4,041,486                 4,079,502
                                                                ---------               ---------                  ---------

Gross profit                                                    1,738,119               2,606,952                 3,282,934


Operating expenses:
  Selling, general and
    administrative                                              1,974,468              2,384,127                  2,954,991
  Research and development                                        527,007                881,728                  1,010,073
                                                                ---------              ---------                  ---------


     Operating loss                                              (763,356)              (658,903)                  (682,130)


Other income (expense):
  Interest income                                                      -                      -                         86
  Interest expense                                              (313,961)              (249,384)                  (210,896)
  Litigation expenses                                                  -               (446,655)                         -
                                                                 --------               --------                   --------    

                  Net loss                                    $(1,077,317)            (1,354,942)                  (892,940)
                                                               ==========             ==========                   ========


Net loss per basic and
     diluted common share                                    $    (0.17)                 (0.21)                      (0.14)
                                                                   ====                   ====                       =====











</TABLE>

See accompanying notes to financial statements.

                                                                  F-3


<PAGE>

<TABLE>


                                                         ELECTRO-CATHETER CORPORATION

                                                 Statements of Stockholders' Deficiency/Equity

                                                  Years ended August 31, 1998, 1997 and 1996

<CAPTION>
                                                               Additional                                Total
                                               Common            paid-in          Accumulated        stockholders'
                                                stock            capital           deficit         deficiency/equity



<S>                                          <C>                <C>            <C>                    <C>

Balances at August 31, 1995                  $   633,630        10,615,298      (9,208,777)           2,040,151

Stock options exercised                            2,350            18,213               -               20,563

Employee stock plan                                  287               779               -                1,066

Common stock issued for services rendered          1,104            10,631               -               11,735

Amortization of deferred compensation
   expense on stock options                            -            34,395               -               34,395

Net loss                                               -                 -        (892,940)            (892,940)
                                            ------------     -------------        --------             --------

Balances at August 31, 1996                      637,371        10,679,316     (10,101,717)           1,214,970


Employee stock plan                                  990             2,692               -                3,682

Net loss                                               -                 -      (1,354,942)          (1,354,942)         
                                              ----------        ----------      ----------           ----------  
Balances at August 31, 1997                  $   638,361        10,682,008     (11,456,659)            (136,290)

Employee stock plan                                  678             1,483               -                2,161

Amortization of deferred compensation
  expense on stock options                             -            21,312               -               21,312

Net loss                                               -                 -      (1,077,317)          (1,077,317)
                                               ----------       ----------      ----------           ----------

Balances at August 31, 1998                  $   639,039        10,704,803     (12,533,976)          (1,190,134)
                                                ========        ==========     ===========           ===========


See accompanying notes to financial statements.
</TABLE>
                                                                      F-4


<PAGE>
<TABLE>


                                                     ELECTRO-CATHETER CORPORATION

                                                       Statements of Cash Flows

                                              Years ended August 31, 1998, 1997 and 1996

<CAPTION>
                                                                               1998                1997                1996
                                                                               ----                ----                ----
<S>                                                                        <C>                 <C>                  <C>

Cash flows from operating activities:

Net loss                                                                   $ (1,077,317)       (1,354,942)          (892,940)

Reconciliation of net loss to net cash used in operating activities:

     Depreciation and amortization                                              126,295           145,614            130,524

     Amortization of deferred charges                                             8,333             8,333              8,333

     Changes in assets and liabilities:
       Decrease in accounts
          receivable, net                                                       265,106            27,342            190,087
       (Increase)decrease in inventories                                        (11,089)          619,812            230,900
       Decrease (increase) in prepaid
          expenses and other current assets                                     100,243          (104,437)           (21,314)
       Decrease in other assets, net                                              8,209            17,799              4,207
       Decrease (increase) in deferred
                  revenues                                                            -          (144,293)           144,293
       Increase in deferred merger costs                                        (52,934)                -                  -
       Increase (decrease) in accounts
          payable and accrued expenses                                          255,981           747,747           (340,700)


Net cash used in
  operating activities                                                         (377,173)          (37,025)          (546,610)
                                                                               --------            ------            -------

Cash flows used in investing activities -
Purchases of property, plant
 and equipment                                                                   (2,085)         (115,292)           (34,167)
                                                                                 ------           -------            -------
Cash flows from financing activities:
   Net proceeds from issuance of subordinated
      debentures, promissory notes and warrants                                 500,000           100,000            547,125
   Proceeds from exercise of
      stock options                                                                   -                 -             20,563
   Proceeds from employee stock
      purchase plan                                                               2,161             3,682              1,066

      Repayment of debt                                                         (52,268)         (128,521)           (17,079)
                                                                                -------           -------            -------
      Net cash provided by (used in)
         financing activities                                                   449,893           (24,839)           551,675
                                                                                -------            ------           --------

      Net increase (decrease) in cash and
         cash equivalents                                                        70,635          (177,156)           (29,102)
      Cash and cash equivalents
         at beginning of year                                                    98,127           275,283            304,385
                                                                               --------           -------            -------

      Cash and cash equivalents
         at end of year                                                    $    168,762            98,127            275,283
                                                                              =========            ======          =========

      Interest paid                                                        $    308,962           241,049            199,724

      Property, plant & equipment acquired
         under capitalized lease obligations                               $     49,150           256,287             49,268
</TABLE>

See accompanying notes to financial statements.
                                                                   F-5


<PAGE>



                          ELECTRO-CATHETER CORPORATION

                          Notes to Financial Statements

                         August 31, 1998, 1997 and 1996

(1)      Summary of Significant Accounting Policies

         (a)      Nature of Business
                  ------------------

                  Electro-Catheter  Corporation ("Company") has been in business
                     for over 37  years.  The  Company  develops,  manufactures,
                     markets,  and sells products for hospitals and  physicians.
                     These  products are diagnostic  and  therapeutic  catheters
                     which are  utilized in  connection  with  illnesses  of the
                     heart and  circulatory  system.  The Company  has  targeted
                     electrophysiology  as its focal area for future growth, but
                     intends to maintain  and  develop  products  for  emergency
                     care, cardiac surgery, invasive and non-invasive cardiology
                     and invasive radiology.

         (b)      Revenue Recognition
                  -------------------

                  Revenues  are   recognized   at  the  time  of  shipment   and
                     provisions,  when appropriate,  are made where the right to
                     return   exists.   Revenue  under  service   contracts  are
                     accounted for as the services are performed.

         (c)      Cash and Cash Equivalents
                  -------------------------

                  For purposes of the  statements  of cash  flows,  the  Company
                     considers all highly liquid  investments  purchased with an
                     original  maturity  of  three  months  or  less  to be cash
                     equivalents.  Cash  equivalents  are  carried at cost which
                     approximates market value.

         (d)      Concentrations of Credit Risk
                  -----------------------------

                  Financial instruments that potentially  subject the Company to
                     concentrations  of credit risk  consist  primarily of trade
                     accounts   receivable.   The  Company's  customer  base  is
                     primarily   comprised   of   hospitals   in  the  U.S.  and
                     distributors  outside the U.S. As of August 31,  1998,  the
                     Company  believes it has no  significant  concentration  of
                     credit risk with its accounts receivable.

         (e)      Inventory Valuation
                  -------------------

                  Inventories  are  stated  at  the  lower  of  cost  (first-in,
                     first-out method) or market.

                                                           (Continued)
                                       F-6

<PAGE>


                          ELECTRO-CATHETER CORPORATION
                    Notes to Financial Statements, Continued





(1)      Summary of Significant Accounting Policies, cont.
         -------------------------------------------------

         (f)      Patents and Trademarks
                  ----------------------

                  Patents and  trademarks are recorded at cost and are amortized
                     on a  straight-line  basis over their  useful  lives.  Such
                     costs,  net of  accumulated  amortization,  are included in
                     other assets, net in the accompanying balance sheets.

         (g)      Property, Plant and Equipment
                  -----------------------------

                  Property,  plant and  equipment is carried at cost.  Plant and
                     equipment is  depreciated  using the  straight-line  method
                     over the estimated useful lives of the assets.

                  Repairs and  maintenance  costs are charged to  operations  as
                     incurred.

                  Betterments  are  capitalized.   Leasehold   improvements  are
                     amortized  over the term of the lease or the useful life of
                     the asset, whichever is shorter.

                  When assets are retired or  otherwise  disposed,  the cost and
                     related  accumulated  depreciation  are  removed  from  the
                     related  accounts,  and  any  resulting  gain  or  loss  is
                     recognized in operations for the period.

         (h)      Research and Development
                  ------------------------

                  Research and  development  costs are  charged to expense  when
                     incurred.

         (i)      Accounting for Income Taxes
                  ---------------------------

                  Deferred tax assets and  liabilities  are determined  based on
                     differences  between the financial  reporting and tax bases
                     of  assets  and  liabilities  and are  measured  using  the
                     enacted tax rates and laws that will be in effect when such
                     differences  are expected to reverse.  The  measurement  of
                     deferred  tax  assets  is  reduced,  if  necessary,   by  a
                     valuation  allowance  for any tax  benefits  which  are not
                     expected to be realized.  The effect on deferred tax assets
                     and  liabilities  of a change in tax rates is recognized in
                     the period in which such tax rate changes are enacted.


                                                           (Continued)
                                       F-7

<PAGE>


                          ELECTRO-CATHETER CORPORATION
                    Notes to Financial Statements, Continued





(1)      Summary of Significant Accounting Policies, cont.
         -------------------------------------------------

         (j)      Use of Estimates
                  ----------------

                  The preparation  of financial  statements  in conformity  with
                    generally accepted accounting principles requires management
                    to make  estimates and  assumptions  that affect the amounts
                    reported in the financial statements and accompanying notes.
                    Actual results could differ from those estimates.

         (k)      Stock-Based Compensation
                  ------------------------

                  Prior to  September  1, 1996,  the Company  accounted  for its
                    stock  option  plan in  accordance  with the  provisions  of
                    Accounting   Principles   Board  ("APB")   Opinion  No.  25,
                    "Accounting  for Stock  Issued to  Employees,"  and  related
                    interpretations.  As  such,  compensation  expense  would be
                    recorded  on the date of grant  only if the  current  market
                    price of the underlying  stock exceeded the exercise  price.
                    On  September  1, 1996,  the Company  adopted  SFAS No. 123,
                    "Accounting  for  Stock-Based  Compensation,"  which permits
                    entities to recognize as expense over the vesting period the
                    fair value of all  stock-based  awards on the date of grant.
                    Alternatively, SFAS No. 123 also allows entities to continue
                    to apply the  provisions  of APB  Opinion No. 25 and provide
                    pro  forma  net  income  and pro  forma  earnings  per share
                    disclosures  for employee  stock option  grants made in 1995
                    and future years as if the  fair-value  based method defined
                    in SFAS No. 123 had been applied. The Company has elected to
                    continue to apply the  provisions  of APB Opinion No. 25 and
                    provide the pro forma disclosure provisions of SFAS No. 123.

         (l)      Loss Per Share
                  --------------

                  Basic and  dilutive  loss per share is computed in  accordance
                    with  SFAS No.  128  using the  weighted  average  number of
                    shares  outstanding  during each year.  Shares issuable upon
                    exercise  of  outstanding   stock   options,   warrants  and
                    conversion of debentures are not included in the computation
                    of  diluted  loss per  share  because  the  result  of their
                    inclusion would be anti-dilutive (see notes 7 and 10).


                                                           (Continued)
                                       F-8

<PAGE>


                          ELECTRO-CATHETER CORPORATION
                    Notes to Financial Statements, Continued





(1)      Summary of Significant Accounting Policies, cont.
         -------------------------------------------------

                  The weighted  average number of shares of common stock used in
                    the   computation  of  loss  per  share  was   approximately
                    6,388,000 in 1998, 6,380,000 in 1997 and 6,354,000 in 1996.

         (m)      Long-Lived Assets To Be Disposed Of
                  -----------------------------------

                  In accordance   with  SFAS  No.  121,   the  Company   reviews
                    long-lived assets for impairment  whenever events or changes
                    in  business  circumstances  occur  that  indicate  that the
                    carrying  amount of the assets may not be  recoverable.  The
                    Company  assesses the  recoverability  of long-lived  assets
                    held and to be used based on  undiscounted  cash flows,  and
                    measures  the  impairment,  if any,  using  discounted  cash
                    flows.  Adoption of SFAS No. 121 in fiscal year 1997 did not
                    have  any  impact  on  the  Company's   financial  position,
                    operating results or cash flows.

         (n)      Financial Instruments
                  ---------------------

                  The carrying  amounts of cash and cash  equivalents  and other
                    current assets,  current  liabilities and subordinated  debt
                    approximate  fair value due to the  short-term  maturity  of
                    these instruments.

(2)      Liquidity
         ---------

         The  accompanying  financial  statements  have been prepared on a going
           concern basis which  contemplates  the  continuation  of  operations,
           realization of assets and  liquidation of liabilities in the ordinary
           course of business.  The Company  incurred net losses of  $1,077,317,
           $1,354,942 and $892,940 for the years ended August 31, 1998, 1997 and
           1996, respectively, and at August 31, 1998 had an accumulated deficit
           of $12,533,976.  The net losses incurred by the Company have consumed
           working capital and weakened the Company's  financial  position.  The
           Company's  ability to  continue in  business  is  dependent  upon its
           success  in  generating  sufficient  cash  flow  from  operations  or
           obtaining additional financing.  The Company continues to re-evaluate
           its plans and adopt certain cost reduction measures. The contemplated
           merger between the Company and Cardiac Control Systems,  Inc. ("CCS")
           is  contingent  upon  raising  sufficient  capital  to  support  each
           Company's product development efforts (see note 16).


                                                           (Continued)
                                       F-9

<PAGE>


                          ELECTRO-CATHETER CORPORATION
                    Notes to Financial Statements, Continued





(2)      Liquidity, cont.
         ----------------

           However,  there can be no assurance that the merger will occur or the
           Company will be able to generate the funding required.

(3)      Inventories
         -----------

         Inventories consisted of the following:
<TABLE>

<CAPTION>
                                                      1998                    1997
                                                      ----                    ----

                 <S>                             <C>                      <C>    
                 Finished goods                  $    398,503               481,660
                 Work-in-process                      611,300               490,621
                 Materials and supplies               243,653               270,086
                                                      -------               -------


                                                 $  1,253,456             1,242,367
                                                    =========             =========
</TABLE>

(4)      Property, Plant and Equipment

         Property, plant and equipment consisted of the following:
<TABLE>

<CAPTION>
                                                                              1998                  1997
                                                                              ----                  ----
                 <S>                                              <C>                           <C>    

                 Land                                             $         38,400                 38,400
                 Building                                                  153,597                153,597
                 Building improvements                                     993,168                993,168
                 Equipment                                               2,252,701              2,307,607
                 Office furniture and equipment                            534,232                534,232
                 Leasehold improvements                                    340,382                340,382
                 Sales equipment and
                     diagnostic computers                                  589,348                587,348
                 Capitalized leases                                        360,545                305,555
                                                                           -------                -------

                                                                         5,262,373              5,260,289
                 Less accumulated depreciation and amortization          4,608,921              4,482,626
                                                                         ---------              ---------

                 Net property, plant
                      and equipment                                   $    653,452                777,663
                                                                         =========              =========



</TABLE>


                                                           (Continued)
                                      F-10

<PAGE>


                          ELECTRO-CATHETER CORPORATION
                    Notes to Financial Statements, Continued





(5)      Accrued Expenses
         ----------------

         The components of accrued expenses consisted of the following:
<TABLE>

<CAPTION>
                                                    1998                   1997
                                                    ----                   ----
           <S>                                  <C>                      <C>                    
           Accrued salaries, wages and
                 payroll taxes                  $ 194,087                287,933

           Other expenses                         147,559                173,185
                                                  -------                -------

                                                $ 341,646                461,118
                                                 ========                =======
</TABLE>

(6)      Deferred Revenues
         -----------------


         In June 1996, the  Company  received  an advance  of  $300,000  from an
           unrelated   company  to  perform   research   and   development   and
           pre-production  planning for it. For services performed,  the Company
           recognized  $155,707 in revenues in 1996 and such amount was reported
           in net  revenues  in  the  statement  of  operations.  The  remaining
           $144,293 was recorded as deferred  revenues in the 1996 balance sheet
           and was recognized as revenue in fiscal year 1997.

(7)      Subordinated Debentures Due to The T Partnership
         ------------------------------------------------

         On  October 11, 1993, the Company  entered into an agreement with The T
             Partnership,  a related party,  to borrow up to  $1,000,000.  Ervin
             Schoenblum,  the Company's  Acting  President  and a Director,  and
             Abraham  Nechemie,  also a Director of the Company,  are members of
             The T Partnership.  On August 31, 1995, after the Company had drawn
             down all of the  $1,000,000,  the Company entered into an agreement
             with The T Partnership to borrow an additional  $500,000  ("Lending
             Agreement").  In January  1996,  the Company and The T  Partnership
             agreed  to a  restructuring  of  its  financing  agreement.  The  T
             Partnership  advanced  an  additional  $200,000  to the Company and
             agreed to defer  interest  payments  for a period  of three  months
             (interest payments were added to the outstanding principal on The T
             Partnership  indebtedness)  and in April 1997, the Company borrowed
             an additional  $100,000 from The T Partnership under the same terms
             and  conditions  as its  previous  borrowing.  The  Company  repaid
             $100,000 in fiscal year 1997. In September 1997,  another  $100,000
             was advanced under this agreement.  In December 1997, January 1998,
             May 1998 and in July 1998 the Company borrowed  additional  amounts



                                                           (Continued)
                                      F-11

<PAGE>


                          ELECTRO-CATHETER CORPORATION
                    Notes to Financial Statements, Continued





(7) Subordinated Debentures Due to The T Partnership, cont.
    -------------------------------------------------------

           from The T Partnership, in each case in the amount of $100,000, under
           promissory notes due in September 1999. The total indebtedness due to
           The T Partnership at August 31, 1998 was $2,247,125.

         The rate of  interest  on the debt is 12% per annum on any  outstanding
           balance and is payable  monthly.  As of August 31, 1998,  the Company
           owes The T Partnership  $293,764 for monthly interest payments dating
           back to July  1997.  The  Company  has  sent  the  required  interest
           payments to The T  Partnership.  The T Partnership  has chosen not to
           tender such checks for payment. Therefore, the Company has considered
           the interest payments unpaid at August 31, 1998 and has reflected the
           amount  as a  liability  on  the  accompanying  1998  balance  sheet.
           Interest  payments  under  this  agreement  continue  to be  required
           monthly,  however,  The T Partnership  has agreed that the failure to
           make such monthly  payments will not  constitute an event of default,
           as  defined  in  the  agreement,   and  has  agreed  not  to  request
           acceleration of payment of this outstanding debt for the fiscal years
           1997 and 1998 interest payments or, further, for any fiscal year 1999
           interest  payments.  Principal payments of $25,000 scheduled to begin
           on  September  1, 1996 have,  pursuant to several  waivers,  with the
           latest  received in October 1998, been deferred to September 1, 1999.
           The loan is secured by the  Company's  property,  building,  accounts
           receivable,  inventories and machinery and equipment.  The Company is
           to prepay the outstanding  balance in the event the Company is merged
           into or  consolidated  with another  corporation or the Company sells
           all or substantially all of its assets,  unless The T Partnership and
           Company agree otherwise.  The CCS merger agreement  contemplates that
           the total indebtedness  outstanding and due to The T Partnership plus
           interest accrued thereon (totaling  approximately $2.5 million) shall
           be redeemed at the merger  effective time by: (a) the issuance by the
           surviving  subsidiary  corporation  in  the  merger  (the  "Surviving
           Subsidiary")  to The T Partnership of an aggregate of 1,000 shares of
           Series A 9%  preferred  stock,  no par value (the "Series A Preferred
           Stock")  of the  surviving  subsidiary,  which  shares  shall  have a
           liquidation  value  equal to, and shall be issued in  redemption  of,
           $1.0 million of the indebtedness and shall be convertible into shares
           of the new combined company's Common Stock; (b) the delivery to The T
           Partnership of the new combined  company's 9% conditional  promissory
           note in the amount of $1.0 million pursuant to which the new combined
           company is obligated to pay only those  amounts which are due but not
           paid to the holders of the Series A Preferred  Stock, or in the event
           of certain other non-monetary defaults; and (c) the delivery to The T
           Partnership of a secured promissory  note  made by  the new  combined

                                                           (Continued)
                                      F-12

<PAGE>


                          ELECTRO-CATHETER CORPORATION
                    Notes to Financial Statements, Continued





(7) Subordinated Debentures Due to The T Partnership, cont.
    -------------------------------------------------------

           company in an amount not to exceed $1.3 million  (which  amount shall
           be the approximately  remaining amount of Electro-Catheter's  secured
           indebtedness  to The T Partnership  exclusive of the amount  redeemed
           under  (a)  above),  bearing  interest  at the rate of 12% per  annum
           payable  quarterly,  the  principal  amount of which shall be due and
           payable  three  years  from the date of  execution  of such note (the
           terms of the security for the note have yet to be agreed upon).  As a
           result of the issuance of Series A Preferred Stock, The T Partnership
           shall be entitled to receive dividends. In addition,  pursuant to the
           terms of the Merger Agreement, The T Partnership shall be entitled to
           reimbursement for cash advances provided to the Company in the amount
           of $200,000, or any greater amount as may be agreed to by the Company
           and  CCS,  in  writing,  which  may  have  been  extended  by  The  T
           Partnership  between May 1, 1998 and the completion of the merger for
           the purpose of operating capital.

         Under the  provisions  of the  agreement  with The T  Partnership,  the
           Company is obligated to comply with certain  covenants,  to be tested
           on a monthly basis.  Non-compliance  by the Company shall allow The T
           Partnership to declare an Event of Default and  accelerate  repayment
           of  indebtedness.  As of August  31,  1998,  the  Company  was not in
           compliance with certain  covenants.  However,  in October 1998, The T
           Partnership  agreed  not to  exercise  its  right to  accelerate  the
           repayment of  indebtedness  through  September 1, 1999 as a result of
           non-compliance with the aforementioned  covenants and agreed to defer
           the principal  and interest  payments due in the 1998 and 1999 fiscal
           years.  The T Partnership has also agreed to a modification to one of
           the financial covenants.  The Company is currently in compliance with
           such revised covenant.

         Under the provisions of the original  agreement,  The T Partnership was
           granted  warrants which permit The T Partnership to purchase  166,667
           shares of the  Company's  common stock at a price of $3.25 per share.
           The August 1995 agreement  provides that The T Partnership  surrender
           its warrants and be granted a new warrant to purchase  500,000 shares
           of the  Company's  common  stock at a price of  $0.9875  per share in
           exchange for the  surrendered  warrant.  No additional  warrants were
           issued  as a  result  of  subsequent  borrowings.  A value  has  been
           allocated  to the  warrants  based upon their  estimated  fair market
           value  at the  date  of  the  agreement.  Such  amount  ($50,000)  is
           


                                                           (Continued)
                                      F-13

<PAGE>


                          ELECTRO-CATHETER CORPORATION
                    Notes to Financial Statements, Continued





(7) Subordinated Debentures Due to The T Partnership, cont.
    ------------------------------------------------------


           amortized  as  additional  interest  expense  over  the  term  of the
           indebtedness. The unamortized balance is shown in other assets in the
           accompanying   1998  and  1997  balance  sheets.   The  warrants  are
           immediately  exercisable  and expire on August 1, 2001.  As of August
           31, 1998 these warrants remain outstanding.

(8)      Capitalized Lease Obligations
         -----------------------------

         The Company has entered into lease  commitments for equipment that meet
           the   requirements  for   capitalization.   The  equipment  has  been
           capitalized  and  shown  in  property,  plant  and  equipment  in the
           accompanying balance sheets (see Note 4). The related obligations are
           also recorded in the  accompanying  balance sheets and are based upon
           the present value of the future  minimum lease payments with interest
           rates of 13.7% to 17.1%.  The net book  value of  equipment  acquired
           under  capitalized  lease  obligations  was  $265,863  and  $264,867,
           respectively, at August 31, 1998 and 1997.

         The annual  maturities  for  capitalized  lease  obligations as well as
           subordinated  debentures due to The T Partnership  for the five years
           subsequent to August 31, 1998, are as follows:

                            1999                                  $    73,279
                            2000                                      377,227
                            2001                                      377,729
                            2002                                      338,501
                            2003                                      303,157
                            thereafter                              1,047,125
                                                                    =========

(9)      Other Debt
         ----------

         The Company has borrowed $131,297 against the cash surrender value of a
           life  insurance  policy of the  former  Chairman  of the Board of the
           Company.  Interest on the loan is 6%. The loan plus accrued  interest
           of $29,903 is recorded as a reduction in the policy's cash  surrender
           value, which is included in other assets in the accompanying  balance
           sheets.



                                                           (Continued)
                                      F-14

<PAGE>


                          ELECTRO-CATHETER CORPORATION
                    Notes to Financial Statements, Continued





(10)     Stock Options
         -------------

         On May 20, 1987, the Company's stockholders approved the 1987 Incentive
           Stock  Option Plan (the "1987  Plan").  Under the 1987 Plan,  225,000
           shares of authorized  but unissued  shares of common stock,  $.10 par
           value,  of the  Company  were set aside to provide an  incentive  for
           officers  and  other  key  employees  to  render  services  and  make
           contributions to the Company. Options may be granted at not less than
           their fair market value at the date of grant and are  exercisable  at
           such  time  provided  by  the  grants  during  the  five-year  period
           beginning on the date of grant.

         On May 23, 1990, the Company's stockholders approved the 1990 Incentive
           Stock Option Plan (the "1990  Plan").  The terms of the 1990 Plan are
           substantially  the same as the terms of the 1987 Plan.  The 1990 Plan
           provides for the  reservation  of 225,000  shares of common stock for
           issuance thereunder.

         On July  15, 1992,  the  Company's   stockholders   approved  the  1992
           Incentive Stock Option Plan (the "1992 Plan").  The terms of the 1992
           Plan are  substantially  the  same as the  terms of the 1987 and 1990
           Plans. The 1992 Plan likewise provides for the reservation of 225,000
           shares of common stock for issuance thereunder.

         On April 1, 1992, the Board of Directors adopted the 1992 Non-Qualified
           Stock  Option  Plan  pursuant to which  options to  purchase  200,000
           shares of common stock may be granted to directors,  officers and key
           employees.  Options may be granted at a price determined by the Board
           of  Directors,  but not less than 80% of the fair market value at the
           date of grant.  Options are  exercisable at such time provided by the
           grants,  but each option granted shall  terminate no longer than five
           years after the date of grant.

         In July  1994,  the Company  extended  the  expiration  date of certain
           outstanding  options  held by two members of its Board of  Directors.
           The extension,  relating to a total of 44,500 shares of the Company's
           common stock,  affected options having an exercise price per share of
           $.875 at the date of grant and a fair market value of $1.25 per share
           at the date of  extension.  The  difference  between the price at the
           date of grant and the fair market value at the date of extension has


                                                           (Continued)
                                      F-15

<PAGE>


                          ELECTRO-CATHETER CORPORATION
                    Notes to Financial Statements, Continued





(10)     Stock Options, cont.
         --------------------

           been recorded as compensation expense and is being amortized over the
           extension period.

         In October 1994, the Board of Directors  voted in favor of offering all
           employees,  officers and directors holding options at a price greater
           than $1.00 per share the  opportunity to have those options  replaced
           by stock options at a price of $1.00 per share, representing the fair
           market value at that time.  Accordingly,  options to purchase 384,300
           shares  were  terminated  and an equal  number  of new  options  were
           issued,  which is  reflected in the table  below.  In  addition,  the
           Company also granted  25,000 stock  options to the  Company's  Acting
           President at $1.00 per share.

          A summary of all stock option activity follows:

<TABLE>
<CAPTION>
                                                     Number             Option
                                                       of                Price
                                                     Shares            Per share              Total
<S>                                                  <C>         <C>                        <C>    
Year ended August 31, 1996:
         Granted                                     12,900      $    .81  -  .88            10,794
         Exercised                                   23,500               .88                20,563
         Canceled or expired                        129,700           .81  - 5.00           330,231
Outstanding at August 31, 1996                      350,000           .81  - 2.75           358,761
                                                    =======            ==========           =======

Year ended August 31, 1997:
         Granted                                     23,500       $   .81  - 1.13            21,643
         Cancelled or expired                        22,300           .81  - 1.50            20,113
Outstanding at August 31, 1997                      351,200           .81  - 2.75           353,791
                                                    =======            ==========           =======

Year ended August 31, 1998:
         Cancelled or expired                        67,800       $   .81  - 2.25            67,261
Outstanding at August 31, 1998                      283,400           .88  - 2.75           286,530
                                                    =======            ==========           =======

</TABLE>

      Options to acquire  235,420  shares of common  stock were  exercisable  at
           August 31, 1998.

         The per share  weighted-average  fair  value of stock  options  granted
           during 1997 and 1996 was $.59 and $.55, respectively,  on the date of
           grant using the Black Scholes option-pricing model with the following
           weighted-average  assumptions:   expected  dividend  yield  of  0.0%,
           risk-free  interest  rate  of 5%,  volatility  factor  of 73%  and an
           expected life of 5 years.  No options were granted  during 1998.  The
           Company  applies  APB  Opinion  No.  25 in  accounting  for its stock
           options and, accordingly, no compensation expense has been recognized
         

                                                           (Continued)
                                      F-16

<PAGE>


                          ELECTRO-CATHETER CORPORATION
                    Notes to Financial Statements, Continued





(10)     Stock Options, cont.
         --------------------

           for its stock  options in the financial  statements.  Had the Company
           determined  compensation  cost based on the fair market  value at the
           grant date for its stock  options  under SFAS No. 123, the  Company's
           net income  would not have been  materially  affected.  The pro forma
           amounts are indicated below:

<TABLE>

<CAPTION>
                                                        1998          1997          1996
                                                      --------     ---------      -------

<S>                                                <C>            <C>           <C>        
           Net loss - as reported                  $ (1,077,317)  $(1,354,942)  $ (892,940)
           Net loss - pro forma                      (1,081,509)   (1,357,590)    (893,624)

           Loss per share - as reported              $    (0.17)   $    (0.21)  $    (0.14)
           Loss per share - pro forma                     (0.17)        (0.21)       (0.14)
</TABLE>

         In accordance  with SFAS No. 123, pro forma net loss and loss per share
           data reflect only options granted in 1996 and subsequent years.

         Therefore,  the full  impact of  calculating  compensation  expense for
           stock  options  under SFAS No. 123 is not  reflected in the pro forma
           amounts  presented  above  since  compensation  expense  for  options
           granted prior to September 1, 1995 was not considered.

(11)  Employee Stock Purchase Plan
      ----------------------------

         The Company has an Employee  Stock  Purchase  Plan (the  "Plan")  which
           provides  for the  issuance  of a  maximum  of  75,000  shares of the
           Company's  common stock which were made  available for sale under the
           Plan's first offering.

         After the  first  offering,  subsequent  offerings  were  made upon the
           recommendation of the committee  administering the Plan. Common stock
           can be purchased through  employee-authorized  payroll  deductions at
           the  lower of 85% of the fair  market  value of the  common  stock on
           either  the  first or last day of  trading  of the stock  during  the
           calendar  year.  It is the  intention  of the  Company  that the Plan
           qualify under Section 423 of the Internal Revenue Code. The Company's
           Board of  Directors  authorized  extension  of the Plan to January 1,
           1998.  During 1998, 1997 and 1996,  6,778,  9,900,  and 2,866 shares,
           respectively, were purchased under the Plan.


                                                           (Continued)
                                      F-17

<PAGE>


                          ELECTRO-CATHETER CORPORATION
                    Notes to Financial Statements, Continued





(12) Preferred Stock, Common Stock and Paid-in Capital
     --------------------------------------------------

         The Company is authorized to issue up to 1,000,000  shares of preferred
           stock. As of August 31, 1998, no preferred shares have been issued.

         In March  1995,  The T  Partnership  purchased  571,500  shares of  the
           Company's  restricted  common  stock,  $.10 par  value,  in a private
           placement  at $.875 per share for  gross  proceeds  of  approximately
           $500,000. In connection with this private placement, the Company also
           issued to The T  Partnership  a purchase  warrant to purchase  83,344
           shares of the Company's  common stock at an exercise  price of $1.425
           per share.  This  warrant will expire five years from the date of the
           agreement.  Ervin  Schoenblum,  the Company's  Acting President and a
           director,  and Abraham H.  Nechemie,  also a member of the  Company's
           Board of Directors, are members of The T Partnership.

(13) Income Taxes
     ------------

         A valuation  allowance is provided when it is more likely than not that
           some  portion or all of the deferred tax assets will not be realized.
           The valuation allowance for deferred tax assets as of August 31, 1998
           was  $3,426,000 as compared to $3,197,000 at August 31, 1997. The net
           change in the total valuation allowance for the year ended August 31,
           1998 was an  increase  of  $229,000  as  compared  to an  increase of
           $142,000 at August 31, 1997.

         At August 31, 1998 and 1997, the tax effects of  temporary  differences
           that  give  rise  to  the   deferred  tax  assets  and  deferred  tax
           liabilities are as follows:


                                                                    (Continued)
                                      F-18

<PAGE>


                          ELECTRO-CATHETER CORPORATION
                    Notes to Financial Statements, Continued





(13) Income Taxes, cont.
     -------------------
<TABLE>

        Deferred tax assets:                                                             1998            1997
                                                                                         ----            ----
<CAPTION>

                       <S>                                                          <C>               <C>    
               
                       Inventories                                                  $   99,000            93,000
                       Accounts receivable, due to
                           allowance for doubtful accounts                              49,000            23,000
                       Contribution carryover                                           25,000            25,000
                       Compensated absences                                             31,000            31,000
                       Federal and state net
                           operating loss carryforwards                              2,653,000         2,390,000
                       Research and development
                           and investment tax credit
                           carryforwards                                               635,000           635,000
                                                                                       -------         ---------
                       Total gross deferred
                           tax assets                                                3,492,000         3,197,000
                       Less valuation allowance                                      3,426,000         3,137,000
                                                                                     ---------         ---------

                        Net deferred tax assets                                         66,000            60,000

        Deferred tax liabilities:

                       Excess of tax over financial
                           statement depreciation                                      (66,000)          (60,000)
                                                                                       -------           -------


                       Net deferred tax                                            $      -0-                -0-
                                                                                        =======            ======= 
                                                                                      
</TABLE>
                                                                               
        At August 31, 1998, the Company had available federal net operating loss
           carryforwards,  research and  development  and  investment tax credit
           carryforwards that expire as follows:


                                                                  (Continued)
                                      F-19

<PAGE>


                          ELECTRO-CATHETER CORPORATION
                    Notes to Financial Statements, Continued





(13) Income Taxes, cont.
     ------------------
<TABLE>

<CAPTION>
                                               Net                  Research
                                            operating                 and                Invest-
                                               loss                 develop-              ment
                      Expiration              carry-                  ment                tax
                         date                forwards               credits              credits
                         -----               --------              --------              -------
                          <S>            <C>                        <C>                   <C>                        
                          1999           $         -                 25,000                    -
                          2000                     -                275,000               35,000
                          2001             4,417,000                246,000               43,000
                          2002             2,063,000                      -                    -
                          2003               690,000                      -                    -
                          2004               268,000                      -                    -
                          2005                46,000                      -                    -
                          2006               223,000                      -                    -
                          2007               454,000                      -                    -
                          2008               854,000                 11,000                    -
                          2009             1,368,000                      -                    -
                          2010             1,178,000                      -                    -
                          2011               589,000                      -                    -
                          2012             1,435,000                      -                    -
                          2013             1,385,000                      -                    -
                                           ---------                 -------              ------
                        Total             14,970,000                557,000               78,000
                                          ==========                =======               ======
</TABLE>

(14) Segment Data
     ------------

         The  Company  operates  in one  business  segment.  Export  sales  were
           $1,559,386 in 1998,  $1,828,000 in 1997 and  $2,324,000 in 1996.  The
           major areas of export sales are as follows:

           Region                    1998           1997            1996
           ------                    ----           ----            ----

           Asia                 $   401,447     $  448,507      $  459,947
           Europe                   926,026      1,201,036       1,592,469
           South America             95,094         76,744         127,151
           Other                    100,819        101,750         144,724
                                    =======        =======         =======

(15) Commitments and Contingencies
     -----------------------------

(a)        The  Company  has  agreements  to  lease  equipment  for  use  in the
           operations  of the  business  under  operating  leases.  The  Company
           incurred rental expenses of approximately  $108,000 in 1998, $105,000
           in 1997 and $116,000 in 1996.


                                                                 (Continued)
                                      F-20

<PAGE>


                          ELECTRO-CATHETER CORPORATION
                    Notes to Financial Statements, Continued





(15) Commitments and Contingencies, cont.
     ------------------------------------

         The  following  is a schedule of future  minimum  rental  payments  for
          operating leases which expire through 2001:


                                1999                  $   9,166
                                2000                      5,016
                                2001                      2,090
                                                         -------
                                                      $  16,272

(b)      In September 1997, a  Superior  Court  jury  in Middlesex  County,  New
           Jersey found the Company liable for age  discrimination in connection
           with its  termination  of an employee in April 1994. The jury awarded
           the terminated  employee  $283,000 plus  attorney's fees and expenses
           and  prejudgment  interest in the  combined  amount of  approximately
           $47,990.  The Company also incurred  legal costs from  September 1996
           through September 1997 in the amount of approximately  $115,665.  All
           of the aforementioned costs were recorded in the financial statements
           for the year ended  August 31, 1997.  The Company  filed an appeal of
           the judgment.

         On April 8, 1998, the Company entered into a Settlement  Agreement with
           the plaintiff.  Under the key terms of the Settlement Agreement,  the
           matter has been  settled for the sum of $305,000  payable as follows:
           (i) by a lump sum payment of $65,000 within five business days of the
           date of the  Settlement  Agreement  and  (ii)  the  balance,  bearing
           interest at the rate of 6% per annum, payable in monthly installments
           of $10,000,  plus interest,  commencing  July 1, 1998. The Settlement
           Agreement  provides  that a  default  in any  monthly  payment  which
           remains  unpaid  for a period of ten days  allows  the  plaintiff  to
           declare  a  default  and   accelerate   the  payment  of  the  entire
           outstanding balance with interest.  The Company has made the payments
           due to date on a timely basis.

(c)      The  Company   is  also  involved  in  certain  claims  and  litigation
           arising in the normal course of business.  Management believes, based
           on the opinion of counsel  representing  the Company in such matters,
           that  the  outcome  of such  claims  and  litigation  will not have a
           material  effect on the Company's  financial  position and results of
           operations.

(d)      The Company's  products are classified as  medical  devices  under  the
           FDA Act and, as such, are subject to extensive regulatory  compliance
           requirements. In February 1997, the FDA  conducted  an inspection and


                                                             (Continued)
                                      F-21

<PAGE>


                          ELECTRO-CATHETER CORPORATION
                    Notes to Financial Statements, Continued





(15) Commitments and Contingencies, cont.
     -----------------------------------

           audit of the Company's  facilities and practices as a result of which
           the FDA issued a Warning Letter (the "FDA Warning Letter")  regarding
           noncompliance   by   Electro-Catheter    Corporation   with   certain
           regulations  regarding current good manufacturing  practices ("cGMP")
           in the  manufacture  of its  products.  The  areas  of  noncompliance
           include  Electro-Catheter  Corporation's  methods of investigation of
           device  complaints,  methods of validation  of device  sterilization,
           environmental   monitoring  procedures,   methods  of  validation  of
           extrusion  processes  which are used in the manufacture of certain of
           Electro-Catheter  Corporation's catheters and other quality assurance
           and record keeping  requirements.  Electro-Catheter  Corporation  has
           communicated with the FDA its intentions to remedy the noncompliance,
           has established a plan and timetable to effectuate  such  remediation
           and has diligently worked to take the necessary  corrective  actions.
           Electro-Catheter    Corporation's    actions   have    included   the
           establishment  of  certain  validation  protocols,  revisions  of the
           Company's   Quality   System   and   Quality   System   Manual,   the
           implementation of a program for environmental  testing,  the purchase
           of equipment for extrusion process  validation and the institution of
           file and record  keeping  protocols.  A subsequent  FDA inspection in
           September  1997 indicated  that while  substantial  progress had been
           made, not all corrective  actions had been completed.  The Company is
           continuing  in its  efforts to  complete  such  actions and it is the
           Company's  intention to inform the FDA before the end of 1998 that it
           has completed such actions and is ready for  reinspection.  There can
           be no  assurance,  however,  that the Company  will be ready for such
           reinspection  before the end of 1998 nor that the  Company  will pass
           any such reinspection when it occurs.  While the Company is currently
           under no restrictions by the FDA regarding the manufacture or sale of
           its  products,  the  Company  is unable to  determine  precisely  the
           short-term  economic  impact of instituting  the required  corrective
           actions  and  there  can be no  assurance  that the FDA will not take
           further  action,  including  seizure of products,  injunction  and/or
           civil  penalties,   if  the  necessary  corrective  actions  are  not
           completed on a timely basis.  Until all corrective  actions  required
           under  the FDA  Warning  Letter  have  been  taken,  the FDA will not
           consider  new  products  for   approval.   However,   the   Company's
           insufficient  financing for research and development efforts over the
           last few years have limited its ability to produce new products  and,
           consequently, no FDA approvals are currently sought.



                                                               (Continued)
                                      F-22

<PAGE>


                          ELECTRO-CATHETER CORPORATION
                    Notes to Financial Statements, Continued





(15) Commitments and Contingencies, cont.
     ------------------------------------

(e)      Beginning  in  June 1998, international sales  were  adversely affected
           in Europe (approximately 21% and 17% of total revenues for the fiscal
           years 1996 and 1997,  respectively)  as the  Company  was not able to
           obtain the CE Mark  certification  on its products on a timely basis,
           in order to continue to sell into this  market.  Several  months ago,
           the Company  and CCS  submitted  an  application  requesting  CE Mark
           certification  for  CCS to  sell  the  Company's  steerable  line  of
           catheters, as manufacturer,  with the Company acting as vendor to CCS
           in such regard.  The CE Mark certification was granted on October 26,
           1998,  issued in the name of CCS.  Upon the merger,  the CE Mark will
           belong  to CTG (see  note  16).  CCS and the  Company  plan on having
           product  with the CE Mark  available  for  shipment  in  early  1999.
           Applications  for the CE Mark for  many  additional  products  of the
           Company  have  been  submitted  recently.  However,  there  can be no
           assurance  that  the CE Mark  for  the  additional  products  will be
           obtained,  that  the  merger  between  CCS  and the  Company  will be
           consummated   or  that  the  pre-June   1998  sales  levels  will  be
           recaptured.

(16) The Proposed Merger
     -------------------

         On January 20, 1998, the Company  entered into an Agreement and Plan of
           Reorganization  with  Cardiac  Control  Systems,   Inc.,  a  Delaware
           corporation located in Palm Coast, Florida, to effect a merger of the
           two  companies  targeted  toward the  development  and  marketing  of
           advanced specialty electrophysiology products.

         Currently, the structure of the transaction  contemplates the merger of
           a  newly-created,  wholly-owned  subsidiary  of CCS into and with the
           Company as a result of which the Company shall become a  wholly-owned
           subsidiary  of CCS and the  stockholders  of the Company  will become
           stockholders of Catheter  Technology Group, Inc. ("CTG"),  a Delaware
           corporation  and parent holding  company of CCS,  formed as part of a
           restructuring in connection with the merger. By virtue of the merger,
           each  outstanding  share of  common  stock,  $.10 par  value,  of the
           Company  will be converted  into the right to receive  one-fifth of a
           share  of  common  stock  $.10  par  value  of CTG.  Pursuant  to the
           restructuring,  CTG will succeed to all rights and obligations of CCS
           and will become the successor issuer of CCS such that stockholders of
           CCS will become  stockholders of CTG. Pursuant to the  restructuring,
           it is intended  that CCS will  undergo a 1 for 5 reverse  stock split
           reducing the number of shares of common stock, $.10 par value, of CCS
           outstanding to approximately 529,748 shares. By virtue of the merger,
           subsequent  to the reverse  stock split,  each  outstanding  share of
           common stock, $.10 par value, of the Company will  be converted  into

                                                                  (Continued)
                                      F-23

<PAGE>


                          ELECTRO-CATHETER CORPORATION
                    Notes to Financial Statements, Continued





(16) The Proposed Merger cont.
     ------------------------

             
           the  right  to  receive  one-fifth  of a share of CTG  Common  Stock,
           effectively equal to an even exchange of shares prior to such reverse
           stock  split.  Upon  consummation  of the merger,  CTG plans to issue
           stock in a public  offering.  The merger will be accounted  for using
           the purchase method of accounting.  In accordance with the provisions
           of Staff Accounting  Bulletin No. 97, the Company is deemed to be the
           accounting  acquiror  as its  stockholders  will  receive the largest
           portion of the voting  rights in CTG.  Accordingly,  the  Company has
           deferred  costs  associated  with the  merger.  If the  merger is not
           consummated, such costs will be recognized as expense in that period.

         Consummation  of the merger is  subject,  among other  things,  to: (i)
           raising sufficient capital to support the product development efforts
           of both  companies;  (ii)  declaration  of the  effectiveness  of the
           registration   statement  filed  with  the  Securities  and  Exchange
           Commission in connection  with the merger;  (iii) the approval of the
           merger and the transactions  contemplated thereby by the stockholders
           of Electro-Catheter  Corporation and CCS; and (iv) the receipt of all
           required regulatory approvals by the two companies.

         The merger is scheduled to be completed on or about the end of December
           1998, although there is no assurance the merger will be completed.






                                                                  (Continued)
                                      F-24

<PAGE>


                          ELECTRO-CATHETER CORPORATION
                    Notes to Financial Statements, Continued













<TABLE>


                                                                                                           Schedule II

                          ELECTRO-CATHETER CORPORATION

                        Valuation and Qualifying Accounts

                   Years Ended August 31, 1998, 1997 and 1996

<CAPTION>
                                                                          Addition
                                                       Balance             charged
                                                     at begin-             to cost                             Balance
                                                       ing of                and              Write-           at end
                  Description                           year              expenses            offs             of year

<S>                                                  <C>                   <C>              <C>                <C>    

1998 Allowance for doubtful accounts                 $ 152,070              71,228            9,709            213,589
                                                       =======              ======            =====            =======

1997 Allowance for doubtful accounts                 $  15,000             142,848            5,778            152,070
                                                        ======             =======            =====            =======

1996 Allowance for doubtful accounts                 $  76,796              39,383          101,179             15,000
                                                        ======              ======          =======             ======

</TABLE>
                                    
                                      F-25

<PAGE>
                                                          Exhibit (10)(j)


                     THIRD COMPOSITE MODIFICATION AGREEMENT


         THIS THIRD COMPOSITE MODIFICATION  ("Modification  Agreement") dated as
of  September  17,  1997  between  ELECTRO-CATHETER  CORPORATION,  a New  Jersey
corporation  with  offices  at 2100  Felver  Court,  Rahway,  New  Jersey  07065
("Borrower")  and THE T PARTNERSHIP,  a New Jersey  partnership with offices c/o
Wiss & Co., 354 Eisenhower Parkway, Livingston, New Jersey 07039 ("Lender"),

                                   WITNESSETH:

         WHEREAS,  the Borrower and the Lender entered into a Lending  Agreement
(as amended  "Lending  Agreement")  dated  August 31,  1995,  whereby the Lender
loaned to the Borrower  the sum of One Million Five Hundred  Thousand and 00/100
Dollars ($1,500,000.00); and

         WHEREAS,  to  evidence  such  indebtedness  the  Borrower  issued a 12%
Debenture  (as amended  "Debenture")  to the Lender dated  August 31, 1995;  and
WHEREAS,  the Borrower  and the Lender  entered  into a Security  Agreement  (as
amended "Security Agreement") dated as of August 31, 1995, to secure the due and
punctual  payment and  performance of all  obligations of the Borrower under the
Loan Documents (as such term is defined in the Lending Agreement); and

         WHEREAS,  the  obligations of the Borrower under the Loan Documents are
further  secured by a Mortgage (as amended  "Mortgage")  dated October 31, 1995,
which Mortgage is a first lien mortgage on Borrower's  real property  located in
the City of Rahway,  County of Union,  State of New Jersey,  commonly  known and
designated as 2100 Felver Court; and

         WHEREAS,   the  Borrower  and  the  Lender  entered  into  a  Composite
Modification Agreement and Amendment to Mortgage dated as of January 1, 1996 and
a  Second  Composite  Modification  Agreement  dated as of  April  15,  1997 and
Borrower  issued an Amended and Restated  Debenture  dated January 1, 1996 and a
Second Amended and Restated Debenture dated April 15, 1997 evidencing additional
borrowings  by Borrower  from Lender with  aggregate  borrowings  equivalent  to
$1,850,000 ("Loan"); and

         WHEREAS,  the  Borrower  and the Lender  have agreed to modify the Loan
Documents on certain terms and conditions as hereinafter provided.

         NOW, THEREFORE, the parties hereto do hereby agree as follows:

         1.  LOAN.  The Lender has advanced an additional One Hundred
Thousand Dollars ($100,000.00) to Borrower.

         2.  MODIFICATION  OF LOAN  DOCUMENTS.  The Loan  Documents  are  hereby
modified and amended as follows:

                  (a) Principal  Amount of Loan.  All  references to the sum One
Million Eight Hundred Fifty Thousand and 00/100 Dollars  ($1,850,000.00)  in the
Loan Documents and Mortgage shall be deleted in its entirety and  substituted in
its place and stead  shall be the sum of all  advances  up to One  Million  Nine
Hundred Fifty Thousand and 00/100 Dollars ($1,950,000.00).

                  (b) Additional Composite Modifications. References in any Loan
Document  to the  Debenture,  Mortgage or Lending  Agreement  shall be deemed to
refer to respectively the Third Amended and Restated Debenture,  the Mortgage as
modified  by the Third  Amendment  to  Mortgage  and the  Lending  Agreement  as
modified  by the First  Composite,  Second  Composite  and this Third  Composite
Modification Agreement.

         3.  CONTINUED  VALIDITY  OF  ORIGINAL  LOAN  DOCUMENTATION.  Except  as
otherwise  provided herein,  the Loan Documents shall continue in full force and
effect, in accordance with their respective terms, and the parties hereto hereby
expressly  ratify,  confirm and  reaffirm all of their  respective  liabilities,
obligations,  duties  and  responsibilities  under  and  pursuant  to  the  Loan
Documents, as modified by this Modification Agreement,  and Borrower agrees that
the same shall constitute valid and binding agreements of Borrower,  enforceable
in accordance with their respective terms.

         4. MODIFICATION  AGREEMENT CONTROLS. In the event of a conflict between
the  terms  and  conditions  of this  Modification  Agreement  and the terms and
conditions of the Loan Documents,  the terms and conditions of this Modification
Agreement shall control.

         5. NO NOVATION.  This  Modification  Agreement  does not  represent new
indebtedness  (except to the extent of the Current New Advances) and does not in
any way represent  satisfaction of the indebtedness.  It is the intention of the
parties hereto that this Modification  Agreement shall not constitute a novation
and  shall  in no way  adversely  affect  or  impair  the lien  priority  of the
Mortgage, the Security Agreement or any other instrument securing the Loan.

         6.   ADDITIONAL   DELIVERIES.   Borrower   is   delivering   to  Lender
simultaneously  herewith a substitute  Third Amended and Restated  Debenture and
Third Amendment to Mortgage.  The T Partnership  shall return to Borrower within
45 days of the  date of this  Modification  Agreement  the  Second  Amended  and
Restated Debenture.

     IN WITNESS WHEREOF,  the parties have executed this Modification  Agreement
as of the date first above written.

                                                 ELECTRO-CATHETER CORPORATION


                                                 By:___________________________
                                                     Ervin Schoenblum,
                                                      Acting President


                                                 THE T PARTNERSHIP



                                                By:____________________________
                                                       Abraham H. Nechemie,
                                                       Partner



<PAGE>



                                                                Exhibit (10)(k)

                          ELECTRO-CATHETER CORPORATION
                                 PROMISSORY NOTE


$100,000                                                 as of December 17, 1997


         FOR  VALUE  RECEIVED,   ELECTRO-CATHETER   CORPORATION,  a  New  Jersey
corporation  ("Maker")  promises  to pay to the  order of The T  Partnership,  a
partnership  organized under the laws of the State of New Jersey, its successors
and assigns (the "Holder"), in lawful money of the United States of America, the
principal sum of One Hundred Thousand Dollars ($100,000), together with interest
thereon, upon the following terms.

         The  principal  sum  evidenced  hereby shall bear interest at the fixed
rate  (the  "Rate")  of  twelve  percent  (12%)  per  annum.  Interest  shall be
calculated  on a 360-day  year for the  actual  number of days  elapsed  in each
calendar year.

         Accrued interest shall be payable monthly on or before the first day of
each calendar month. The entire  outstanding  balance of principal,  and accrued
and unpaid  interest  thereon,  shall be due and payable,  on the earlier of (i)
September 1, 1999,  (ii) the  occurrence of an Event of Default (as  hereinafter
defined) and  acceleration of the due date hereunder,  or (iii) the closing on a
transaction  whereby Maker sells  substantially all of its assets, or whereby by
merger,  stock sale or other  transaction,  the ownership  composition  of Maker
changes  by over  25% at  which  time  Maker  shall  pay to  Holder  the  entire
outstanding principal balance due hereunder together with all accrued and unpaid
interest thereon and all other unpaid fees, expenses, and other sums.

         All sums  payable  to  Holder  hereunder  shall be paid in  immediately
available funds at the offices of Holder,  c/o Fred Lafer,  The Taub Foundation,
300 Frank W. Burr Blvd., Teaneck, New Jersey 07666, or elsewhere as Holder shall
designate.

         Maker may prepay this Note in full at any time without fee or penalty.

         This Note is secured by and  entitled to the benefits of, inter alia, a
Security  Agreement  between  Maker and Holder dated as of August 31,  1995,  as
amended,  it being the intent of the parties that this Note  constitutes a "Loan
Document" under the "Loan Agreement",  as such terms are defined in the Security
Agreement.

         "Event of Default", wherever used in this Note, means any one
of the following events:






<PAGE>


                                                                                

                  (a)  default in the  payment of any  installment  of  interest
under this Note and  continuance  of such  default for a period of fifteen  (15)
days; or
                  (b) failure to pay the principal  when due and  continuance of
such default for a period of fifteen (15) days; or

                  (c) a default under any document  evidencing  indebtedness due
from Maker to Holder.

         Upon demand,  after an Event of Default,  the entire unpaid  balance of
the principal debt, and all other  liabilities,  indebtedness and obligations of
Maker to Holder  (however  acquired or evidenced)  together with unpaid interest
thereon,  and all costs of collection  (including  reasonable  attorney's fees),
shall at the option of the Holder and without notice become  immediately due and
payable.  Payment of the foregoing  sums may be recovered in whole or in part at
any time by one or more of the  remedies  provided  to  Holder  in this  Note or
otherwise  available  under  applicable law, and in such case Holder may recover
all costs of suit and reasonable attorneys' fees for collection.  After an Event
of Default, all amounts due hereunder shall bear interest at a rate equal to the
Rate plus two percentage points.

         Maker hereby waives presentment for payment,  demand,  protest,  and of
dishonor and  non-payment  of this Note, and consents that Holder may extend the
time of  payment  or  otherwise  modify  the terms of payment of any part or the
whole of the debt  evidenced by this Note,  and such consent  shall not alter or
diminish the liability of any person hereunder.

         The remedies of this Note providing for the  enforcement of the payment
of the principal sum hereby secured, together with interest thereon, and for the
performance of the covenants,  conditions,  and  agreements,  matters and things
herein and therein  contained,  are cumulative and concurrent and may be pursued
singly or successively, or together, at the sole discretion of Holder and may be
exercised as often as occasion  therefore  shall occur.  The waiver by Holder or
failure to enforce  any  covenant  or  condition  of this Note or to declare any
default thereunder or hereunder, shall not operate as a waiver of any subsequent
default  or  affect  the right of Holder  to  exercise  any right or remedy  not
expressly waived in writing.

         This Note  shall  bind  Maker and  Maker's  respective  successors  and
assigns,  and the benefit  hereof shall inure to Holder and its  successors  and
assigns.  The word "Holder" whenever  occurring herein shall be deemed and taken
to include each successive holder hereof or any interest herein.
                                                                            
         The parties intend that this Note shall be governed by and construed in
accordance with the law of the State of New Jersey.
   




<PAGE>


         MAKER CONSENTS TO THE  NONEXCLUSIVE  JURISDICTION  OF THE UNITED STATES
DISTRICT  COURT FOR NEW JERSEY OR ANY NEW JERSEY STATE COURT FOR PURPOSES OF ALL
LEGAL  PROCEEDINGS  ARISING OUT OF OR RELATING TO THIS NOTE.  MAKER  IRREVOCABLY
WAIVES,  TO THE FULLEST EXTENT  PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH  PROCEEDING  BROUGHT IN
SUCH  COURT AND ANY CLAIM THAT ANY SUCH  PROCEEDING  BROUGHT IN SUCH A COURT HAS
BEEN  BROUGHT  IN  AN  INCONVENIENT  FORUM.  ALL  PARTIES  HEREBY  MUTUALLY  AND
RECIPROCALLY WAIVE ANY RIGHT TO A JURY TRIAL IN ANY PROCEEDING HEREON OR RELATED
HERETO.

         IN WITNESS WHEREOF,  Maker has caused the due execution  hereof,  as of
the date and year first above written.


ATTEST:                                     ELECTRO-CATHETER CORPORATION


_______________________                     By:_____________________________
Arlene Bell, Secretary                    Name: Ervin Schoenblum
                                         Title: Acting President






<PAGE>


                                                          Exhibit (10)(l)

                          ELECTRO-CATHETER CORPORATION
                                 PROMISSORY NOTE


$100,000                                                as of January 26, 1998


         FOR  VALUE  RECEIVED,   ELECTRO-CATHETER   CORPORATION,  a  New  Jersey
corporation  ("Maker"),  promises  to pay to the order of The T  Partnership,  a
partnership  organized under the laws of the State of New Jersey, its successors
and assigns (the "Holder"), in lawful money of the United States of America, the
principal sum of One Hundred Thousand Dollars ($100,000), together with interest
thereon, upon the following terms.

         The  principal  sum  evidenced  hereby shall bear interest at the fixed
rate  (the  "Rate")  of  twelve  percent  (12%)  per  annum.  Interest  shall be
calculated  on a 360-day  year for the  actual  number of days  elapsed  in each
calendar year.

         Accrued interest shall be payable monthly on or before the first day of
each calendar month. The entire  outstanding  balance of principal,  and accrued
and unpaid interest thereon, shall be due and payable, on the earlier of (i) the
date six months from the date of this Note,  (ii) the  occurrence of an Event of
Default (as hereinafter defined) and acceleration of the due date hereunder,  or
(iii) the closing on a transaction  whereby Maker sells substantially all of its
assets,  or whereby by merger,  stock sale or other  transaction,  the ownership
composition of Maker changes by over 25% at which time Maker shall pay to Holder
the entire outstanding principal balance due hereunder together with all accrued
and unpaid interest thereon and all other unpaid fees, expenses, and other sums.

         All sums  payable  to  Holder  hereunder  shall be paid in  immediately
available funds at the offices of Holder,  c/o Fred Lafer,  The Taub Foundation,
300 Frank W. Burr Blvd., Teaneck, New Jersey 07666, or elsewhere as Holder shall
designate.

         Maker may prepay this Note in full at any time without fee or penalty.
















<PAGE>

       
         This Note is secured by and  entitled to the benefits of, inter alia, a
Security  Agreement  between  Maker and Holder dated as of August 31,  1995,  as
amended,  it being the intent of the parties that this Note  constitutes a "Loan
Document" under the "Loan Agreement",  as such terms are defined in the Security
Agreement.

         "Event of Default",  wherever  used in this Note,  means any one of the
following events:

                  (a)  default in the  payment of any  installment  of  interest
under this Note and  continuance  of such  default for a period of fifteen  (15)
days; or

                  (b) failure to pay the principal  when due and  continuance of
such default for a period of fifteen (15) days; or

                  (c) a default under any document  evidencing  indebtedness due
from Maker to Holder.

         Upon demand,  after an Event of Default,  the entire unpaid  balance of
the principal debt, and all other  liabilities,  indebtedness and obligations of
Maker to Holder  (however  acquired or evidenced)  together with unpaid interest
thereon,  and all costs of collection  (including  reasonable  attorney's fees),
shall at the option of the Holder and without notice become  immediately due and
payable.  Payment of the foregoing  sums may be recovered in whole or in part at
any time by one or more of the  remedies  provided  to  Holder  in this  Note or
otherwise  available  under  applicable law, and in such case Holder may recover
all costs of suit and reasonable attorneys' fees for collection.  After an Event
of Default, all amounts due hereunder shall bear interest at a rate equal to the
Rate plus two percentage points.

         Maker hereby waives presentment for payment,  demand,  protest,  and of
dishonor and  non-payment  of this Note, and consents that Holder may extend the
time of  payment  or  otherwise  modify  the terms of payment of any part or the
whole of the debt  evidenced by this Note,  and such consent  shall not alter or
diminish the liability of any person hereunder.

         The remedies of this Note providing for the  enforcement of the payment
of the principal sum hereby secured, together with interest thereon, and for the
performance of the covenants,  conditions,  and  agreements,  matters and things
herein and therein  contained,  are cumulative and concurrent and may be pursued
singly or successively, or together, at the sole discretion of Holder and may be
exercised as often as occasion  therefore  shall occur.  The waiver by Holder or
failure to enforce  any  covenant  or  condition  of this Note or to declare any
default thereunder or hereunder, shall not operate as a waiver of any subsequent
default  or  affect  the right of Holder  to  exercise  any right or remedy  not
expressly waived in writing.

         This Note  shall  bind  Maker and  Maker's  respective  successors  and
assigns,  and the benefit  hereof shall inure to Holder and its  successors  and
assigns.  The word "Holder" whenever  occurring herein shall be deemed and taken
to include each successive holder hereof or any interest herein.

         The parties intend that this Note shall be governed by and construed in
accordance with the law of the State of New Jersey.

         MAKER CONSENTS TO THE  NONEXCLUSIVE  JURISDICTION  OF THE UNITED STATES
DISTRICT  COURT FOR NEW JERSEY OR ANY NEW JERSEY STATE COURT FOR PURPOSES OF ALL
LEGAL  PROCEEDINGS  ARISING OUT OF OR RELATING TO THIS NOTE.  MAKER  IRREVOCABLY
WAIVES,  TO THE FULLEST EXTENT  PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH  PROCEEDING  BROUGHT IN
SUCH  COURT AND ANY CLAIM THAT ANY SUCH  PROCEEDING  BROUGHT IN SUCH A COURT HAS
BEEN  BROUGHT  IN  AN  INCONVENIENT  FORUM.  ALL  PARTIES  HEREBY  MUTUALLY  AND
RECIPROCALLY WAIVE ANY RIGHT TO A JURY TRIAL IN ANY PROCEEDING HEREON OR RELATED
HERETO.

         IN WITNESS WHEREOF,  Maker has caused the due execution  hereof,  as of
the date and year first above written.


ATTEST:                                     ELECTRO-CATHETER CORPORATION


_______________________                     By: _____________________________
Arlene Bell, Secretary                    Name:  Ervin Schoenblum
                                         Title:  Acting President









<PAGE>

                                                              Exhibit (10)(m)

                          ELECTRO-CATHETER CORPORATION
                                 PROMISSORY NOTE


$100,000                                                 as of May 14, 1998


         FOR  VALUE  RECEIVED,   ELECTRO-CATHETER   CORPORATION,  a  New  Jersey
corporation  ("Maker")  promises  to pay to the  order of The T  Partnership,  a
partnership  organized under the laws of the State of New Jersey, its successors
and assigns (the "Holder"), in lawful money of the United States of America, the
principal sum of One Hundred Thousand Dollars ($100,000), together with interest
thereon, upon the following terms.

         The  principal  sum  evidenced  hereby shall bear interest at the fixed
rate  (the  "Rate")  of  twelve  percent  (12%)  per  annum.  Interest  shall be
calculated  on a 360-day  year for the  actual  number of days  elapsed  in each
calendar year.

         Accrued interest shall be payable monthly on or before the first day of
each calendar month. The entire  outstanding  balance of principal,  and accrued
and unpaid  interest  thereon,  shall be due and payable,  on the earlier of (i)
September 1, 1999,  (ii) the  occurrence of an Event of Default (as  hereinafter
defined) and  acceleration of the due date hereunder,  or (iii) the closing on a
transaction  whereby Maker sells  substantially all of its assets, or whereby by
merger,  stock sale or other  transaction,  the ownership  composition  of Maker
changes  by over  25% at  which  time  Maker  shall  pay to  Holder  the  entire
outstanding principal balance due hereunder together with all accrued and unpaid
interest thereon and all other unpaid fees, expenses, and other sums.

         All sums  payable  to  Holder  hereunder  shall be paid in  immediately
available funds at the offices of Holder,  c/o Fred Lafer,  The Taub Foundation,
300 Frank W. Burr Blvd., Teaneck, New Jersey 07666, or elsewhere as Holder shall
designate.

         Maker may prepay this Note in full at any time without fee or penalty.

         This Note is secured by and  entitled to the benefits of, inter alia, a
Security  Agreement  between  Maker and Holder dated as of August 31,  1995,  as
amended,  it being the intent of the parties that this Note  constitutes a "Loan
Document" under the "Loan Agreement",  as such terms are defined in the Security
Agreement.

         "Event of Default", wherever used in this Note, means any one
of the following events:






<PAGE>


                                                                                
                  (a)  default in the  payment of any  installment  of  interest
under this Note and  continuance  of such  default for a period of fifteen  (15)
days; or

                  (b) failure to pay the principal  when due and  continuance of
such default for a period of fifteen (15) days; or

                  (c) a default under any document  evidencing  indebtedness due
from Maker to Holder.

         Upon demand,  after an Event of Default,  the entire unpaid  balance of
the principal debt, and all other  liabilities,  indebtedness and obligations of
Maker to Holder  (however  acquired or evidenced)  together with unpaid interest
thereon,  and all costs of collection  (including  reasonable  attorney's fees),
shall at the option of the Holder and without notice become  immediately due and
payable.  Payment of the foregoing  sums may be recovered in whole or in part at
any time by one or more of the  remedies  provided  to  Holder  in this  Note or
otherwise  available  under  applicable law, and in such case Holder may recover
all costs of suit and reasonable attorneys' fees for collection.  After an Event
of Default, all amounts due hereunder shall bear interest at a rate equal to the
Rate plus two percentage points.

         Maker hereby waives presentment for payment,  demand,  protest,  and of
dishonor and  non-payment  of this Note, and consents that Holder may extend the
time of  payment  or  otherwise  modify  the terms of payment of any part or the
whole of the debt  evidenced by this Note,  and such consent  shall not alter or
diminish the liability of any person hereunder.

         The remedies of this Note providing for the  enforcement of the payment
of the principal sum hereby secured, together with interest thereon, and for the
performance of the covenants,  conditions,  and  agreements,  matters and things
herein and therein  contained,  are cumulative and concurrent and may be pursued
singly or successively, or together, at the sole discretion of Holder and may be
exercised as often as occasion  therefore  shall occur.  The waiver by Holder or
failure to enforce  any  covenant  or  condition  of this Note or to declare any
default thereunder or hereunder, shall not operate as a waiver of any subsequent
default  or  affect  the right of Holder  to  exercise  any right or remedy  not
expressly waived in writing.

         This Note  shall  bind  Maker and  Maker's  respective  successors  and
assigns,  and the benefit  hereof shall inure to Holder and its  successors  and
assigns.  The word "Holder" whenever  occurring herein shall be deemed and taken
to include each successive holder hereof or any interest herein.






<PAGE>



         The parties intend that this Note shall be governed by and construed in
accordance with the law of the State of New Jersey.

         MAKER CONSENTS TO THE  NONEXCLUSIVE  JURISDICTION  OF THE UNITED STATES
DISTRICT  COURT FOR NEW JERSEY OR ANY NEW JERSEY STATE COURT FOR PURPOSES OF ALL
LEGAL  PROCEEDINGS  ARISING OUT OF OR RELATING TO THIS NOTE.  MAKER  IRREVOCABLY
WAIVES,  TO THE FULLEST EXTENT  PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH  PROCEEDING  BROUGHT IN
SUCH  COURT AND ANY CLAIM THAT ANY SUCH  PROCEEDING  BROUGHT IN SUCH A COURT HAS
BEEN  BROUGHT  IN  AN  INCONVENIENT  FORUM.  ALL  PARTIES  HEREBY  MUTUALLY  AND
RECIPROCALLY WAIVE ANY RIGHT TO A JURY TRIAL IN ANY PROCEEDING HEREON OR RELATED
HERETO.

         IN WITNESS WHEREOF,  Maker has caused the due execution  hereof,  as of
the date and year first above written.


ATTEST:                                     ELECTRO-CATHETER CORPORATION


_______________________                     By:_____________________________
Arlene Bell, Secretary                    Name:  Ervin Schoenblum
                                         Title:  Acting President






<PAGE>


                                                          Exhibit (10)(n)

                          ELECTRO-CATHETER CORPORATION
                                 PROMISSORY NOTE


$100,000                                                   as of July 30, 1998


         FOR  VALUE  RECEIVED,   ELECTRO-CATHETER   CORPORATION,  a  New  Jersey
corporation  ("Maker")  promises  to pay to the  order of The T  Partnership,  a
partnership  organized under the laws of the State of New Jersey, its successors
and assigns (the "Holder"), in lawful money of the United States of America, the
principal sum of One Hundred Thousand Dollars ($100,000), together with interest
thereon, upon the following terms.

         The  principal  sum  evidenced  hereby shall bear interest at the fixed
rate  (the  "Rate")  of  twelve  percent  (12%)  per  annum.  Interest  shall be
calculated  on a 360-day  year for the  actual  number of days  elapsed  in each
calendar year.

         Accrued interest shall be payable monthly on or before the first day of
each calendar month. The entire  outstanding  balance of principal,  and accrued
and unpaid  interest  thereon,  shall be due and payable,  on the earlier of (i)
September 1, 1999,  (ii) the  occurrence of an Event of Default (as  hereinafter
defined) and  acceleration of the due date hereunder,  or (iii) the closing on a
transaction  whereby Maker sells  substantially all of its assets, or whereby by
merger,  stock sale or other  transaction,  the ownership  composition  of Maker
changes  by over  25% at  which  time  Maker  shall  pay to  Holder  the  entire
outstanding principal balance due hereunder together with all accrued and unpaid
interest thereon and all other unpaid fees, expenses, and other sums.

         All sums  payable  to  Holder  hereunder  shall be paid in  immediately
available funds at the offices of Holder,  c/o Fred Lafer,  The Taub Foundation,
300 Frank W. Burr Blvd., Teaneck, New Jersey 07666, or elsewhere as Holder shall
designate.

         Maker may prepay this Note in full at any time without fee or penalty.

         This Note is secured by and  entitled to the benefits of, inter alia, a
Security  Agreement  between  Maker and Holder dated as of August 31,  1995,  as
amended,  it being the intent of the parties that this Note  constitutes a "Loan
Document" under the "Loan Agreement",  as such terms are defined in the Security
Agreement.

         "Event of Default", wherever used in this Note, means any one
of the following events:






<PAGE>


                                                          

                  (a)  default in the  payment of any  installment  of  interest
under this Note and  continuance  of such  default for a period of fifteen  (15)
days; or

                  (b) failure to pay the principal  when due and  continuance of
such default for a period of fifteen (15) days; or

                  (c) a default under any document  evidencing  indebtedness due
from Maker to Holder.

         Upon demand,  after an Event of Default,  the entire unpaid  balance of
the principal debt, and all other  liabilities,  indebtedness and obligations of
Maker to Holder  (however  acquired or evidenced)  together with unpaid interest
thereon,  and all costs of collection  (including  reasonable  attorney's fees),
shall at the option of the Holder and without notice become  immediately due and
payable.  Payment of the foregoing  sums may be recovered in whole or in part at
any time by one or more of the  remedies  provided  to  Holder  in this  Note or
otherwise  available  under  applicable law, and in such case Holder may recover
all costs of suit and reasonable attorneys' fees for collection.  After an Event
of Default, all amounts due hereunder shall bear interest at a rate equal to the
Rate plus two percentage points.

         Maker hereby waives presentment for payment,  demand,  protest,  and of
dishonor and  non-payment  of this Note, and consents that Holder may extend the
time of  payment  or  otherwise  modify  the terms of payment of any part or the
whole of the debt  evidenced by this Note,  and such consent  shall not alter or
diminish the liability of any person hereunder.

         The remedies of this Note providing for the  enforcement of the payment
of the principal sum hereby secured, together with interest thereon, and for the
performance of the covenants,  conditions,  and  agreements,  matters and things
herein and therein  contained,  are cumulative and concurrent and may be pursued
singly or successively, or together, at the sole discretion of Holder and may be
exercised as often as occasion  therefore  shall occur.  The waiver by Holder or
failure to enforce  any  covenant  or  condition  of this Note or to declare any
default thereunder or hereunder, shall not operate as a waiver of any subsequent
default  or  affect  the right of Holder  to  exercise  any right or remedy  not
expressly waived in writing.

         This Note  shall  bind  Maker and  Maker's  respective  successors  and
assigns,  and the benefit  hereof shall inure to Holder and its  successors  and
assigns.  The word "Holder" whenever  occurring herein shall be deemed and taken
to include each successive holder hereof or any interest herein.






<PAGE>


                                                          

         The parties intend that this Note shall be governed by and construed in
accordance with the law of the State of New Jersey.

         MAKER CONSENTS TO THE  NONEXCLUSIVE  JURISDICTION  OF THE UNITED STATES
DISTRICT  COURT FOR NEW JERSEY OR ANY NEW JERSEY STATE COURT FOR PURPOSES OF ALL
LEGAL  PROCEEDINGS  ARISING OUT OF OR RELATING TO THIS NOTE.  MAKER  IRREVOCABLY
WAIVES,  TO THE FULLEST EXTENT  PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH  PROCEEDING  BROUGHT IN
SUCH  COURT AND ANY CLAIM THAT ANY SUCH  PROCEEDING  BROUGHT IN SUCH A COURT HAS
BEEN  BROUGHT  IN  AN  INCONVENIENT  FORUM.  ALL  PARTIES  HEREBY  MUTUALLY  AND
RECIPROCALLY WAIVE ANY RIGHT TO A JURY TRIAL IN ANY PROCEEDING HEREON OR RELATED
HERETO.

         IN WITNESS WHEREOF,  Maker has caused the due execution  hereof,  as of
the date and year first above written.


ATTEST:                                     ELECTRO-CATHETER CORPORATION


_______________________                     By:_____________________________
Arlene Bell, Secretary                    Name:  Ervin Schoenblum
                                         Title:  Acting President






<PAGE>


                                                            Exhibit (10)(q)

            SECOND AMENDMENT TO AGREEMENT AND PLAN OF REORGANIZATION



         THIS  SECOND   AMENDMENT  TO  AGREEMENT  AND  PLAN  OF   REORGANIZATION
("Agreement")  is entered into as of this 7th day of August,  1998, by and among
CARDIAC  CONTROL  SYSTEMS,   INC.,  a  Delaware  corporation   ("Parent"),   CCS
SUBSIDIARY, INC., a New Jersey corporation and wholly-owned subsidiary of Parent
("Acquisition Sub"), and ELECTRO-CATHETER  CORPORATION, a New Jersey corporation
('Company").

                                R E C I T A L S:
                                ----------------

         WHEREAS,  Parent,  Acquisition  Sub and the Company  entered  into that
certain  Agreement and Plan of  Reorganization  dated as of January 20, 1998, as
amended by a First Amendment to Agreement and Plan of  Reorganization  dated May
5, 1998 (the "First  Amendment")(collectively,  the "Reorganization  Agreement";
terms used herein and as otherwise defined shall have the meanings given to them
in the Reorganization Agreement); and

         WHEREAS, the parties have made certain  determinations  relative to the
structuring   and  financing  of  the   transactions   contemplated   under  the
Reorganization Agreement; and

         WHEREAS,   the  parties  believe  it  to  be  advisable  to  amend  the
Reorganization Agreement in order to clarify and correct certain aspects thereof
to reflect such determinations.

         NOW,  THEREFORE,  for  the  reasons  set  forth  hereinbelow,   and  in
consideration  of the  mutual  promises  contained  herein  and  other  good and
valuable  consideration,   the  receipt  and  sufficiency  of  which  is  hereby
acknowledged,  the parties hereby agree to amend the Reorganization Agreement as
follows:

         1. The fifth,  sixth,  seventh and eighth paragraphs of the recitals of
the First  Amendment  shall be deleted in their  entirety and replaced  with the
following:

                  WHEREAS,  prior to the  Effective  Time of the Merger,  Parent
         will effectuate a reverse stock split at a 1 for 5 ratio; and

         2. Section 1.6 shall be deleted in its  entirety and replaced  with the
following:











<PAGE>




                  TAX-FREE REORGANIZATION.  For Federal income tax purposes, the
                  ----------------------- parties  intend  that  the  Merger  be
         treated as a tax-free  reorganization  within  the  meaning  of Section
         368(a) of the Internal Revenue Code of 1986, as amended (the "Code").

         3. Subsection 2.1(c) shall be deleted in its entirety and replaced with
the following:

                  Subject to Section  2.2,  each share of Company  Common  Stock
         issued and outstanding  immediately  prior to the Effective Time (other
         than  shares  cancelled  pursuant  to Section  2.1(b))  shall be deemed
         cancelled and converted  into and shall  represent the right to receive
         one-fifth  of a share  of  Holdings  Common  Stock in  accordance  with
         Section  2.2.  For  convenience  of  reference,  the shares of Holdings
         Common Stock to be issued upon the exchange and  conversion  of Company
         Common  Stock in  accordance  with this  Section  2.1(c) are  sometimes
         hereinafter collectively referred to as the "Merger Shares".

         4. The first  sentence of Section 2.3 shall be deleted in its  entirety
and replaced with the following:

                  At the Effective Time, each of the Company's then  outstanding
         Company Warrants, Company Options and conversion rights (whether or not
         exercisable at the Effective  Time) by virtue of the Merger and without
         any further action on the part of any holder thereof,  shall be assumed
         by Holdings  and  automatically  converted,  on the same terms,  into a
         warrant,  option or conversion  right to purchase a number of shares of
         Holdings  Common  Stock  (to be  registered  shares to the  extent  the
         option,  warrant or conversion right holder is, by terms of the Company
         option  plan,  warrant or  conversion  right in effect,  entitled  upon
         exercise  of the  option,  warrant  or  conversion  right,  to  receive
         registered  stock)  determined by  multiplying  the number of shares of
         Company Common Stock covered by such Company Warrants,  Company Options
         and  conversion  rights  immediately  prior  to the  Effective  Time by
         one-fifth  (1/5th)  (rounded up to the nearest whole number of shares),
         at an exercise  price per share of Holdings  Common  Stock equal to the
         exercise price in effect under such Company  Warrants,  Company Options
         or conversion rights immediately prior to the Effective Time divided by
         one-fifth (1/5th) (rounded up to the nearest cent).





<PAGE>


         
         5. The first  sentence of Section 4.3 shall be deleted in its  entirety
and replaced with the following:

                  The authorized  capital stock of Parent consists of 30,000,000
         shares of common stock,  $.10 par value,  of Parent (the "Parent Common
         Stock"),  of which 2,648,739  shares are outstanding as of November 30,
         1997.

         6. Section 7.1 shall be deleted in its  entirety and replaced  with the
following:

                  STOCKHOLDER  APPROVAL.  At least two-thirds (2/3) of the votes
                  ---------------------cast by holders of the outstanding 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 and adopted the Agreement and the Merger.
         The  affirmative  vote of the  holders of a  majority  of the shares of
         Parent  Common  Stock  present  in person or  represented  by proxy and
         entitled  to vote at a special  meeting of the  stockholders  of Parent
         shall have:  (i)  approved a reverse  stock split of the Parent  Common
         Stock at a 1 for 5 ratio  (the  "Reverse  Split");  (ii)  approved  the
         reorganization   of  Parent  into  a  holding  company  structure  (the
         "Restructuring");  and (iii) approved and adopted the Agreement and the
         Merger.

         7. Section 7.6 shall be deleted in its  entirety and replaced  with the
following:

         [INTENTIONALLY LEFT BLANK]

         8. Section 7.7 shall be deleted in its  entirety and replaced  with the
following:

                  FINANCING.  A minimum of $4,000,000 in financing,  in addition
                  ---------to any debt obligation of both Parent and the Company
         existing as of January 20, 1998,  on terms  acceptable  to  both Parent
         and the Company shall have been secured.

         9. Section 7.8 shall be deleted in its  entirety and replaced  with the
following:

                  HOLDING COMPANY REORGANIZATION.  Parent shall have effectuated
                  ------------------------------  the Restructuring  pursuant to
         Section 251(g) of the General Corporation Law of the State of  Delaware
         and approved and adopted an Agreement of  Merger  substantially  in the
         form of Exhibit 7.8  attached  hereto, whereby Parent shall have formed
         a direct, wholly-owned  Delaware  subsidiary,  which  shall  also  have
         formed a direct,  wholly-owned  Delaware  subsidiary ("Holdings  Merger
         Sub") which will have merged  with and into  Parent so that Parent will
         have become a direct, wholly-owned subsidiary of Holdings.

         10. Section 7.9 shall be inserted and shall read as follows:

                  REVERSE SPLIT.  The Parent shall have  effectuated the Reverse
                 -------------Split whereby each stockholder shall have received
         one share of Parent Common Stock for every five shares of Parent Common
         Stock  held   by   such   stockholder   prior to the Reverse Split.  No
         fractional shares of Parent Common Stock will be issued in  the Reverse
         Split.  In lieu of any such fractional shares, an Exchange Agent shall,
         on behalf of all holders of such fractional  shares, aggregate all such
         fractional shares and sell the resulting shares of Parent Common  Stock
         for the account of such holders who  thereafter  shall be  entitled  to
         receive, on a pro rata basis,  the proceeds of  the sale of such shares
         of Parent Common Stock, without interest thereon.

         11. Section 8.10 shall be inserted and shall read as follows:

                  PARENT  INDEBTEDNESS.  Provisions  shall  have  been  made for
                  -------------------- payment  at   Closing  of    indebtedness
         of Parent due to GTH  for all outstanding   reasonable  attorneys' fees
         and  expenses  incurred  in connection with its prior representation of
         Parent,  together  with  all  reasonable  attorneys'  fees and expenses
         incurred in connection with its representation of Parent   relative  to
         the  Reverse Split, the Restructuring, and the Merger.

         12.  Section 9.6 shall be deleted in its entirety and replaced with the
following:

                  TAX  OPINION.  The Company  shall have  received an opinion in
                  -------------form and substance satisfactory to the Company or
         SSSG, counsel for the Company,  to the effect  that the Merger  will be
         treated  for  Federal income tax purposes as  a  reorganization  within
         the meaning of Section 368(a) of the Code and that Holdings, Parent and
         the Company will  each  be a  party  to that reorganization  within the
         meaning of Section 368(b) of the Code. In connection with such opinion,
         counsel  shall  be  entitled  to  rely  upon certain representations of
         Parent,  Holdings,  Acquisition  Sub  and   the  Company  and   certain
         stockholders of the Company.

         13. Section 9.13 shall be deleted in its entirety and replaced with the
following:

                  COMPANY  INDEBTEDNESS.  Provisions  shall  have  been made for
                  ----------------------  payment  at  Closing  of  indebtedness
         of the Company: (a) which is due at Closing to SSSG for all outstanding
         reasonable  attorneys'  fees and  expenses  incurred in connection with
         its prior representation of the Company, together  with all  reasonable
         attorneys'  fees   and   expenses  incurred  in   connection  with  its
         representation of the Company relative to the Merger; and (b) which may
         be incurred  subsequent to May 1, 1998 in an amount of $200,000, or any
         greater  amount as agreed to by the Company and Parent in writing,  for
         the  purpose of operating capital pending completion of the Merger, and
         owed to The T Partnership.

         14. The date set forth in  Sections  11.1(b)(i)  and  11.1(c)  shall be
changed from August 14, 1998 to October 31, 1998.

         15. Section 12.8 shall be deleted in its entirety and replaced with the
following:

                  AMENDMENT,  MODIFICATION AND WAIVER.  This Agreement shall not
                  -----------------------------------  be altered  or  otherwise
         amended  except  pursuant to an  instrument in writing signed by Parent
         and the Company;  provided,  however, that any party to this  Agreement
         may  waive any  obligation  owed  to it by  any  other party under this
         Agreement.  Notwithstanding  the foregoing,  no material  provision  of
         this  Agreement  may be  altered or otherwise amended, nor may material
         obligations of either  party be waived after this  Agreement  has  been
         approved and  adopted  by  the  respective stockholders  of  Parent and
         the Company, without the further approval of  such stockholders of such
         alteration,  amendment or waiver.  Any waiver by  any  party  hereto of
         a breach of any  provision  of this  Agreement shall  not operate or be
         construed as a waiver of any subsequent breach.

         16.  Notwithstanding  any provision in the Reorganization  Agreement to
the  contrary,  each of Parent and the  Company  may take such  actions as shall
allow  each of them to  secure  interim  financing  in an  amount  not to exceed
$900,000 to be used for operating capital pending completion of the transactions
contemplated under the Reorganization Agreement;  provided, however, that, prior
to  consummating  such  financing  arrangement,  the material  terms thereof are
disclosed to the other party.  No action on the part of either party in securing
financing contemplated by this Agreement and in accordance herewith shall result
in a breach of the  Reorganization  Agreement or  constitute  default under such
Reorganization  Agreement and each party hereby  consents to such actions by the
other  party.  Parent  and the  Company  shall  cause  each of their  respective
Disclosure  Schedules to be amended to reflect any such interim  financing  that
they may obtain in accordance with this Agreement.

         17. Section 4.12(c) of the Parent Disclosure  Schedule shall be amended
to reflect execution of a supply agreement entered into with Angeion Corporation
which is effective as of September 17, 1997.

         18. All Exhibits and the Glossary to the Reorganization Agreement shall
be amended to reflect the amendments to the  Reorganization  Agreement set forth
herein.

         19. Except to the extent  amended  hereby,  all terms,  provisions  and
conditions  of the  Reorganization  Agreement  shall  continue in full force and
effect  and shall  remain  enforceable  and  binding  in  accordance  with their
respective terms.

         IN WITNESS  WHEREOF,  each of the parties hereto has caused this Second
Amendment to Agreement and Plan of  Reorganization  to be executed on its behalf
as of the day and year first above written.

                                          CARDIAC CONTROL SYSTEMS, INC.


                                          By:________________________________
                                             Alan J. Rabin, President


                                          CCS SUBSIDIARY, INC.


                                          By:________________________________
                                             Alan J. Rabin, President


                                          ELECTRO-CATHETER CORPORATION


                                          By:________________________________
                                             Ervin Schoenblum, Acting President








<PAGE>


                                                               Exhibit (10)(r)

             THIRD AMENDMENT TO AGREEMENT AND PLAN OF REORGANIZATION



         THIS  THIRD   AMENDMENT  TO  AGREEMENT   AND  PLAN  OF   REORGANIZATION
("Agreement")  is entered into as of this 23rd day of  September,  1998, by and
among CARDIAC CONTROL  SYSTEMS,  INC., a Delaware  corporation  ("Parent"),  CCS
SUBSIDIARY, INC., a New Jersey corporation and wholly-owned subsidiary of Parent
("Acquisition Sub"), and ELECTRO-CATHETER  CORPORATION, a New Jersey corporation
('Company").

                                R E C I T A L S:
                                ----------------

         WHEREAS,  Parent,  Acquisition  Sub and the Company  entered  into that
certain  Agreement and Plan of  Reorganization  dated as of 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 "Reorganization Agreement"; terms used herein
and  as  otherwise  defined  shall  have  the  meanings  given  to  them  in the
Reorganization Agreement); and

         WHEREAS, the parties have made certain  determinations  relative to the
structuring   and  financing  of  the   transactions   contemplated   under  the
Reorganization Agreement; and

         WHEREAS,   the  parties  believe  it  to  be  advisable  to  amend  the
Reorganization Agreement in order to clarify and correct certain aspects thereof
to reflect such determinations.

         NOW,  THEREFORE,  for  the  reasons  set  forth  hereinbelow,   and  in
consideration  of the  mutual  promises  contained  herein  and  other  good and
valuable  consideration,   the  receipt  and  sufficiency  of  which  is  hereby
acknowledged,  the parties hereby agree to amend the Reorganization Agreement as
follows:

         1. Section 7.1 shall be deleted in its  entirety and replaced  with the
following:

                  STOCKHOLDER  APPROVAL.  At least two-thirds (2/3) of the votes
                  ---------------------cast by holders of the outstanding 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 and adopted the Agreement  and the  Merger.
         The  affirmative  vote of the holders of a  majority of the outstanding
         shares of Parent Common Stock entitled  to  vote  at a special  meeting
         of the stockholders of Parent shall have: (i) approved a reverse  stock
         split  of  the  Parent  Common Stock at a 1 for 5 ratio  (the  "Reverse
         Split");  (ii)  approved  and adopted  an Agreement of  Merger and Plan
         of Reorganization (the "Restructuring Merger  Agreement") among Parent,
         Holdings and a to be organized  indirect,  wholly-owned  subsidiary  of
         Parent ("Holdings Merger Sub)  providing  for  the  merger of  Holdings
         Merger Sub with and into Parent (the "Restructuring Merger"); and (iii)
         ratified,  approved and adopted the Agreement and the Merger.

         2. Section 7.8 shall be deleted in its  entirety and replaced  with the
following:

                  HOLDING COMPANY REORGANIZATION. Parent and Holdings Merger Sub
                  ------------------------------ shall  have  executed  and done
         all things possible to cause a Certificate of  Merger to be filed  with
         the  Secretary  of   State  of  the  State  of  Delaware,  whereby  the
         Restructuring Merger shall be effectuated,  at  the same  time  as  the
         Effective Time.

         3. The first three words of Section 9.4 shall be changed  from  "Parent
and Acquisition Sub" to "The Company".

         4. In the second line of Section 11.1, the following  language shall be
inserted  between  the  words  "by" and  "Parent":  "the  respective  boards  of
directors and stockholders of".

         5. In the third line of Section 11.1,  the following  language shall be
inserted after the word "Agreement": "and the Merger".

         6. Section 11.1(b)(i) shall be deleted in its entirety.

         7. Section 11.3 shall be inserted and read as follows:

                  AUTOMATIC TERMINATION.  This Agreement shall be terminated and
                  ---------------------  the merger  abandoned,  notwithstanding
         the approval by the respective boards of directors  and stockholders of
         Parent, Acquisition Sub and the  Company  of  this  Agreement  and  the
         Merger,  in the  event  that  the conditions set forth in  Article  VII
         hereof shall not have been met by January 31, 1999.







<PAGE>


                                                                                
         8.       The date set forth in Section 11.1(c) shall be changed
from October 31, 1998 to January 31, 1999.

         9. The  appropriate  sections  of Article IV and the Parent  Disclosure
Schedule shall be amended to reflect execution of a promissory note and issuance
of a warrant to GTH,  execution of a promissory  note in favor of Mirand,  Inc.,
execution  of a  promissory  note and  issuance  of a warrant  to  International
Holdings,  Inc., and an amendment to the Coast Business Credit loan and security
agreement and issuance of a warrant in conjunction therewith.

         10. The appropriate  sections of Article III and the Company Disclosure
Schedule  shall  be  amended  to  reflect  additional   borrowings  from  the  T
Partnership and recent litigation matters, respectively.

         11. All Exhibits and the Glossary to the Reorganization Agreement shall
be amended to reflect the amendments to the  Reorganization  Agreement set forth
herein.

         12. Except to the extent  amended  hereby,  all terms,  provisions  and
conditions  of the  Reorganization  Agreement  shall  continue in full force and
effect  and shall  remain  enforceable  and  binding  in  accordance  with their
respective terms.

         IN WITNESS  WHEREOF,  each of the parties  hereto has caused this Third
Amendment to Agreement and Plan of  Reorganization  to be executed on its behalf
as of the day and year first above written.

                                         CARDIAC CONTROL SYSTEMS, INC.


                                         By:________________________________
                                             Alan J. Rabin, President


                                         CCS SUBSIDIARY, INC.


                                         By:________________________________
                                             Alan J. Rabin, President


                                         ELECTRO-CATHETER CORPORATION


                                          By:________________________________
                                              Ervin Schoenblum, Acting
                                                                 President



<PAGE>



                                                        Exhibit 23













                          Independent Auditors' Consent


The Board of Directors
Electro-Catheter Corporation:



     We consent to  incorporation  by  reference in the  Registration  Statement
(No.33-56016)  on Form S-8 of  Electro-Catheter  Corporation of our report dated
October 30, 1998 relating to the balance sheets of Electro-Catheter  Corporation
as of August  31,  1998 and 1997,  and the  related  statements  of  operations,
stockholders'  deficiency/equity  and cash flows and related financial statement
schedule for each of the years in the  three-year  period ended August 31, 1998,
which  report  appears  in the  August 31,  1998  annual  report on Form 10-K of
Electro-Catheter  Corporation.  Our report dated  October 30, 1998,  contains an
explanatory paragraph that states that the Company has suffered recurring losses
from  operations,  has a net capital  deficiency and has limited working capital
resources,  which  raise  substantial  doubt  about its ability to continue as a
going concern.  The financial statements and financial statement schedule do not
include any adjustments that might result from the outcome of that uncertainty.

                                                    KPMG Peat Marwick LLP


Short Hills, New Jersey
November 30, 1998