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, 1997.

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

                             Commission File No. 0-7578

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

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

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 (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 18, 1997 is $2,661,185.


         As of  November  18,  1997,  the  number of shares  outstanding  of the
Registrant's common stock was 6,383,611 shares, $.10 par value.





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                                     PART I

Item 1.           Business

General

           Electro-Catheter  Corporation  ("Company") is engaged in the business
of  developing,   manufacturing   and  marketing   products  for  hospitals  and
physicians.  The  majority of these  products are  utilized in  connection  with
illnesses  of the heart and  circulatory  system and make use of  catheters  and
related devices. 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.

           The  Company  operates  in one  business  segment,  and  markets  its
products  worldwide.   Export  sales  were  approximately  $1,828,000  in  1997,
$2,324,000 in 1996 and $1,964,000 in 1995,  representing  approximately 27%, 32%
and 27% of net sales for the years 1997, 1996 and 1995, respectively.

           On October 23, 1997, the Company entered into a letter of intent with
Cardiac  Control  Systems,  Inc., a Delaware  corporation  ("CCS"),  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. The transaction further contemplates an exchange
of common stock of the two companies,  with two shares of CCS common stock, $.10
par value per share,  to be exchanged  for every three  shares of the  Company's
common stock,  $.10 par value per share. It is intended that upon the closing of
the  transaction,  50% of the  Company's  senior debt would be redeemed  and the
remaining 50% of such debt would be converted to convertible preferred stock.

           Consummation  of the merger is subject,  among other things,  to: (i)
raising  sufficient capital to support the product  development  efforts of both
companies;   (ii)  the  execution  of  a  definitive  agreement  reflecting  the
intentions of the parties; (iii) the approval of the transaction by the Board of
Directors  of  each  company;  (iv)  the  approval  of  the  transaction  by the
shareholders  of  Electro-Catheter  Corporation;  and  (v)  the  receipt  of all
required regulatory approvals by each company.

           CCS  develops,  manufactures  and sells a broad  line of  implantable
cardiac   pacemakers,   pacemaker  leads  and  related  products  which  Company
management  believes are  complementary  to its own product  lines.  The Company
believes  the  merger  may  allow  certain  efficiencies  to  improve  operating
performance  and that the broader  product line may provide for a more effective
marketing and distribution  process.  There can be no assurance,  however,  that
consummation of the merger will yield positive operating results in the future.

Products

           The Company produces a wide range of catheter products intended to be
utilized by doctors and other trained hospital personnel for

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<PAGE>



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.

           The 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.  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 believes that its extensive experience in pacing and
mapping the heart's  conduction  system,  as well as designing and manufacturing
cardiovascular catheters,  places the Company in a position to take advantage of
this developing market. However, there can be no assurance that the Company will
be successful in this endeavor.

           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   Company's   diagnostic   catheters  are  called  the  Detector,
Investigator   and  Cloverleaf  EP  catheters  and  each  line  has  its  unique
characteristics requested by physicians that desire different handling features.
The Genesis line of steerable  catheters  provides  the  physicians  with a more
sophisticated mapping tool for difficult diagnostic procedures.  These catheters
are available in many curve and electrode 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 1997 were delayed. The
Company  plans to begin  clinical  trials  in the U.S.  in 1998 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.


                                        3

<PAGE>



         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 less
than they would be 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 Company's opinion, the product is useful to many
physicians, in addition to radiologists,  and results in more complete and safer
drainage.

Production

         The Company  manufactures its products in a 25,000 square foot facility
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 contracts
out for the performance of sterilization. Although most components and processes
are available  from more than one vendor,  certain  components and processes are
manufactured or provided by single

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<PAGE>



vendors,  some  involving  molds owned by the Company.  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 for time to find a
replacement. There can be no assurance that the Company's ability to manufacture
certain products will not be materially affected by single source vendors.

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,  1997,  the  Company  incurred
aggregate  direct  expenses  of   approximately   $2,824,000  for  research  and
development   activities,   including   new  product   development,   of   which
approximately  $882,000 was attributable to 1997, $1,010,000 to fiscal year 1996
and $932,000 to fiscal year 1995. 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 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  contracted  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-Catheter
Corporation  a monthly fee of $150,000  for a period of one year.  A  definitive
agreement was never executed.  Electro-Catheter  Corporation  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.

Sales and Marketing

         The Company  markets,  sells and distributes its products  domestically
through  its own sales  force.  At  November  18,  1997 the  Company  employed 4
salespersons in the field and a home office staff of marketing and sales support
of 6 people.  The Company also employs an International  Marketing Manager based
in Europe on an independent contractor basis. In previous years, the Company had
one significant distributor in the United States which was responsible for sales
in all or part of thirteen  Eastern  states plus the District of Columbia.  This
distributor  accounted for approximately 11% of net sales for the year 1995. The
Company terminated its arrangement with this distributor on May 31, 1995 and the
Company now markets its products directly in this territory. As such, there were
no sales to this  distributor in 1997 and 1996. 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 1997 and
1996.   International   markets  are  serviced  by  a  network  of   independent
distributors.

         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.

                                        5

<PAGE>




Personnel

         At  November  18,  1997 the Company  had  approximately  104  full-time
employees.  Of the total employees, 74 were engaged in manufacturing and quality
control,  10  in  general   administration  and  executive  activities,   10  in
engineering  and research and  development,  and 10 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.


Backlog

         At  October  31,  1997,  the  Company  had a backlog  of orders for its
products   which   aggregated  to   approximately   $716,000,   as  compared  to
approximately  $389,000 at October 31,  1996.  The  Company  typically  does not
operate  with a  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.


Competition

         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.

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Due to certain  development  issues,  clinical  trials  scheduled  for 1997 were
delayed.  The Company plans to begin its clinical trials for ablation in 1998 in
order to seek  approval  to market  these  catheters  domestically.  The primary
competitive factors 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.

Patents and New Products

         The Company'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.
Although the Company holds patents or has patents  pending related to several of
its  products,  it believes  that its  business as a whole is not or will not be
materially dependent upon patent protection.  However, the Company will continue
to seek  such  patents  as it  deems  advisable  to  protect  its  research  and
development efforts and to market its products.  The Company 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 file  applications or apply for
patents or additional proprietary rights relating to materials or processes used
by the Company.

         The Company  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  the  Company  on the  design  and
development of the devices and systems needed by them. In certain instances, the
Company pays the  cooperating  physician or  researcher a royalty based upon the
revenues derived from the sales of the product to others.

         The  Company  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.  The Company  requires  employees and  consultants  to
execute appropriate  confidentiality agreements and assignments of inventions in
connection with their employment or consulting arrangement with the Company.

         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.

Government Regulation

         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,  regulates
manufacturers of "medical  devices".  The Company's products are medical devices
within the  meaning of such Act. An  amendment  to the  Federal  Food,  Drug and


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Cosmetics  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.

         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
to the Company requesting that prompt action be taken to correct the violations.

         In response to the observations and the Warning Letter, the Company has
provided the FDA with a plan and timetable for instituting  corrective  actions.
The  Company  has been  working  diligently  in its  efforts  to  correct  these
violations.


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         In September  1997,  the FDA  conducted  another audit of the Company's
facilities.   While  the  Company  has  made  progress  towards  correcting  the
violations,  at the  conclusion  of this  audit,  the FDA issued a report  which
included no additional violations of cGMP but listed violations which are in the
process of  correction  by the Company.  At this time,  the Company is unable to
precisely  determine the short-term  adverse  economic  impact which will result
from instituting the corrective actions.

         Many countries in which the Company  markets its products  regulate the
manufacture, marketing and use of medical devices. The Company intends to pursue
product  approval or registration  procedures in countries where it is marketing
its products.  The registration and approval process is normally accomplished in
coordination with its international  distributors.  To date, foreign regulations
have not adversely affected the Company's business.  The Company intends to make
every effort to comply with applicable  foreign  regulations.  By June 1998, the
Company is  required  to have the "CE" Mark on its  products to continue to sell
into  the  European  Union.  The  Company  is  working  towards  obtaining  this
designation  for its  products.  However,  there  can be no  assurance  that the
Company  will be able to  obtain  the "CE"  Mark by that date in order for it to
continue to sell its products without a lapse to the European Union.

         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,  the Company  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 that  country's
medical  device laws. In April 1996, new  legislation  was enacted to permit the
export of devices  unapproved 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. The Company
has received such  clearance  for its Circuit  Breaker  steerable  catheter with
temperature  control for ablation and is currently  distributing  it outside the
U.S.

         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
regulations with which it is not in compliance.

Item 2.         Properties

         The Company's principal manufacturing  facilities and executive offices
are located at 2100 Felver  Court,  Rahway,  New  Jersey,  in premises  which it
purchased in fiscal year 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 premises
are  suitable  for all of the  Company's  current  and  foreseeable  production,
development and administrative functions.

Item 3.         Legal Proceedings

         In September 1997, a jury in Middlesex  County of the Superior Court of
New Jersey found the Company liable for age discrimination when it terminated an
employee in April 1994. The jury awarded the terminated  employee  $283,000.  In
addition to the $283,000, the court awarded the

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<PAGE>



plaintiff  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 in the amount of approximately $115,665 which is also included in
the litigation  expense in the accompanying  1997 Statements of Operations.  The
Company is considering taking an appeal.

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

         (a) The Annual Meeting of  Shareholders  was held on June 12, 1997 (the
"Annual Meeting").

         (b) Not  applicable  because (i) proxies  for the Annual  Meeting  were
solicited pursuant to Regulation 14A under the Securities  Exchange Act of 1934;
(ii) there was no solicitation in opposition to management's  nominees as listed
in the Company's proxy statement; and (iii) all of such nominees were elected.

         (c) At the Annual Meeting, the Company's shareholders voted in favor of
management's nominees for election as directors of the Company as follows:


                                             For                  Against

    Donald W. Muntz*                      5,352,690               52,112
    George M. Pavia, Esq.*                5,372,257               32,445
    Abraham H. Nechemie                   5,372,257               32,445
    Ervin Schoenblum                      5,372,257               32,445

    *Resigned in October 1997.

         (d) Not applicable.



                                       10

<PAGE>





                             PART II

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

         The Company's common stock has  historically  been listed 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 Company is currently  listed on the
NASD OTC Bulletin  Board  Service  which allows 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 quarters.
<TABLE>

                                            FISCAL 1997                                        FISCAL 1996

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

      1                            1 13/16                  47/64                        15/16            7/16

      2                            1 3/8                    13/16                      1 9/16             7/16

      3                            1 1/16                   11/16                      2 7/16           1 1/4
 
      4                             15/16                   5/16                       2 7/8            1 1/16
</TABLE>


         On November 18, 1997, the number of shareholders of record was 740.

         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.


                                       11

<PAGE>




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>

                                       1997               1996              1995             1994            1993
                                       ----               ----              ----             ----            ----
                                                     (in thousands, except per share data)
<S>                                  <C>                 <C>              <C>             <C>              <C>    
Net revenues...........              $6,648              $ 7,362          $ 7,263         $ 7,248          $ 8,155
Net loss............                 (1,355)                (892)          (1,136)         (1,372)             (804)
Working capital.....                    958                2,025            2,505           2,362            2,798
Total assets........                  3,373                3,893            4,382           4,270            4,956
Long term liabilities......           1,969                1,485            1,200             638               32
Loss per share......                 ($0.21)              ($0.14)          ($0.18)         ($0.24)          ($0.14)

Dividends on common stock               none                none             none            none            none

Weighted average number
of shares of common
stock and common stock
equivalents outstand-
ing...............                                   6,380         6,354              6,027            5,711           5,572

</TABLE>

Item 7.             Management's Discussion and Analysis of Financial
                    Condition and Results of Operations

Results of Operations

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

         On October 23, 1997,  the Company  entered into a letter of intent with
Cardiac  Control  Systems,  Inc., a Delaware  corporation  ("CCS"),  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. The transaction further contemplates an exchange
of common stock of the two companies,  with two shares of CCS common stock, $.10
par value per share,  to be exchanged  for every three  shares of the  Company's
common stock,  $.10 par value per share. It is intended that upon the closing of
the  transaction,  50% of the  Company's  senior debt would be redeemed  and the
remaining 50% of such debt would be converted to convertible preferred stock.

         Consummation  of the merger is  subject,  among other  things,  to: (i)
raising  sufficient capital to support the product  development  efforts of both
companies;   (ii)  the  execution  of  a  definitive  agreement  reflecting  the
intentions of the parties; (iii) the approval of the transaction by the Board of
Directors  of  each  company;  (iv)  the  approval  of  the  transaction  by the
shareholders  of  Electro-Catheter  Corporation;  and  (v)  the  receipt  of all
required regulatory approvals by each company.

                                       12

<PAGE>



         CCS  develops,  manufactures  and  sells  a broad  line of  implantable
cardiac   pacemakers,   pacemaker  leads  and  related  products  which  Company
management  believes are  complementary  to its own product  lines.  The Company
believes  the  merger  may  allow  certain  efficiencies  to  improve  operating
performance  and that the broader  product line may provide for a more effective
marketing and distribution  process.  There can be no assurance,  however,  that
consummation of the merger will yield positive operating results in the future.

         During the past  eighteen  months,  the Company has devoted much of its
engineering  efforts to its  contract  research  and  development  customer  and
original  equipment  manufacturing  (OEM) business.  This strategy has adversely
affected product sales, but the Company hopes that this strategy will yield more
positive  results in the  long-term  as the  Company  continues  to  investigate
opportunities  to  capitalize  on  its  catheter  technology  and  manufacturing
capabilities.  In May 1997,  the  agreement-in-principle   to  perform  contract
research and development work for a 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-Catheter
Corporation  a monthly fee of $150,000  for a period of one year.  A  definitive
agreement was never executed. Electro-Catheter Corporation received $600,000 for
the work it had  performed and also  received a $100,000  termination  fee. As a
result of the termination, the Company's revenues were adversely affected in the
short-term.  The Company's  OEM business may partially  offset the lost revenues
from the termination.

         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 above and $109,698 received from
licensing certain of the Company's technology.

         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  profit  dollars  decreased  $675,982  (20.6%) for the 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 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 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

                                       13

<PAGE>



personnel that have not yet been replaced. This decrease was partially offset by
an increase in the provision for bad debts.

         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.

         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 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.


Year Ended August 31, 1996 Compared to Year Ended August 31, 1995
-----------------------------------------------------------------

         During 1996, the Company entered into a joint venture  arrangement with
one of the leading centers for electrophysiology in the U.S. to develop products
for the diagnosis of ventricular tachycardia.  The Company also began to develop
products  in the  therapeutic  area of atrial  fibrillation.  In June 1996,  the
Company  received  an advance of  $300,000  from an  unrelated  party to perform
research and development  and  pre-production  planning.  In September 1996, the
Company reached a verbal  agreement-in-principle to perform further research and
development and production for this company pursuant to which the Company was to
receive a monthly fee of $150,000 for a period of one year for this  effort.  As
noted above this  arrangement was never  formalized and has now been terminated.
In October 1996, the Company  reached a formal  agreement to license  certain of
its technology to another  medical device company that is in a market segment in
which the Company does not participate.

         Net revenues  increased $99,012 (1.4%) for the fiscal year ended August
31, 1996 to  $7,362,436  as compared to the fiscal year ended  August 31,  1995.
Total  domestic  sales  decreased  $416,351  (7.9%)  while  international  sales
increased  $359,656  (18.3%)  for fiscal 1996 as  compared  to fiscal  1995.  In
addition,  the  Company  had  revenues  of  $155,707  in  1996  related  to  the
performance  of research  and  development  activities  for a third  party.  The
decline in domestic  sales is attributed to a decline in sales in several of the
Company's product lines,  especially the Company's steerable catheters,  and the
loss of field sales  personnel that have not yet been replaced.  The increase in
international  sales is  attributed  to an  increase  in sales of the  Company's
traditional and electrophysiology  products,  including sales to distributors in
countries where the Company had not previously been represented.

         Gross  profit  dollars  decreased  $118,899  (3.5%) in  fiscal  1996 as
compared  to the  prior  year.  This  decrease  in gross  profit  is  attributed
primarily to the increased  fourth  quarter  production  costs and write-offs of
certain inventories.  The gross profit percentage for 1996 was 44.6% as compared
to 46.8% for 1995.  Gross profit for 1996 also  included the positive  impact of
selling directly to hospitals in the northeast region

                                       14

<PAGE>



rather than through a distributor,  as previously  accomplished,  which required
discounts.  In December 1995, the Company reduced its  manufacturing  staff as a
result of lower  than  anticipated  demand.  Gross  profit  was also  negatively
affected  as a result of this labor  reduction,  since  overhead  expenses  were
allocated  over a smaller  direct labor pool. In October 1996, the Company again
reduced its workforce.

         Selling,  general and  administrative  expenses  decreased  by $483,820
(14.1%)  for fiscal 1996 as compared to fiscal  1995.  This  decrease  primarily
reflects  lower  domestic  marketing  and  selling  expenses.  This  decrease is
attributed to the departure of some of the Company's sales  representatives  and
the Director of Clinical  Development who have not been replaced.  This decrease
was offset partially by hiring an International Marketing Manager.

         Research and development expense increased by $78,117 (8.4%) for fiscal
1996 as compared to the prior fiscal  year.  The  increase is  attributed  to an
increase in personnel,  consulting  fees and purchases of materials and supplies
for new product development.

         Interest  expense  increased  in fiscal  1996 as a result of  increased
borrowings  from the T  Partnership  (see Note 7 of the  Notes to the  Financial
Statements  included  in  response to "Item 14.  Exhibits,  Financial  Statement
Schedules and Reports on Form 8-K).

         The net loss for  fiscal  year 1996 was  $892,940  or $.14 per share as
compared to a loss of $1,135,890 or $.18 per share for fiscal year 1995.


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

         At August 31, 1997,  working capital  decreased  $1,066,572 to $958,174
from  August 31,  1996.  The  current  ratio was 1.6 to 1 at August 31,  1997 as
compared to 2.7 to 1 at August 31, 1996.  Net cash used in operating  activities
was $37,025  for the fiscal  year ended  August 31, 1997 as compared to $546,610
used in operating  activities  for the prior fiscal year.  This decrease in cash
used in operating activities is primarily a result of the decline in inventories
and the increase in accounts payable and accrued expenses and accrued litigation
costs which has yet to be paid. The Company is considering taking an appeal.

         On October 11, 1993,  the Company  entered into an agreement with the T
Partnership to borrow up to $1,000,000.  Ervin Schoenblum,  the Company's Acting
President and 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 rate of  interest  on the debt is 12% per annum on any  outstanding
balance and is payable monthly. Principal payments of $25,000 scheduled to begin
on September 1, 1996,  have been  deferred to September 1, 1998.  Any  remaining
balance is due on August 1, 2003. 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

                                       15

<PAGE>



another corporation or the Company sells all or substantially all of its assets,
unless the T Partnership and Company agree otherwise.

         Under the  provisions  of the  agreement  with the T  Partnership,  the
Company is obligated to comply with certain financial 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, 1997, the Company was not in compliance with this financial covenant.
However, in November 1997, the T Partnership agreed not to exercise its right to
accelerate the repayment of indebtedness  through  September 1, 1998 as a result
of non-compliance with the aforementioned  financial covenant and the nonpayment
of principal payments in the 1998 fiscal year. The T Partnership has also agreed
to a  modification  to the  financial  covenant.  The  Company is  currently  in
compliance with such covenant.  The total  indebtedness due to the T Partnership
at August 31, 1997 was $1,747,125.

         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  1997 and 1996 balance  sheets.  The
warrants are immediately  exercisable and expire on August 1, 2001. As of August
31, 1997 these warrants remain outstanding.

         In September 1997, the Company borrowed an additional $100,000 from the
T Partnership.

         The  report of the  Company's  independent  auditors  on the  Company's
financial  statements,   included  elsewhere  herein,  includes  an  explanatory
paragraph which states that the Company's  recurring  losses and limited working
capital raise  substantial  doubt about the  Company's  ability to continue as a
going  concern.  The financial  statements do not include any  adjustments  that
might result from the outcome of this uncertainty.  During fiscal year 1997, the
Company was able to satisfy its cash shortfall from  operating  activities  with
the borrowings from the T Partnership, and advances from an unrelated company to
perform  contract  research  and  development,  as well as  cash  on  hand.  The
Company's  ability to continue with its plans is contingent  upon its ability to
obtain sufficient cash flow from operations or to obtain  additional  financing.
The Company has had difficulty in paying its obligations  and, as a result,  has
delayed payments to vendors.  The Company  continues to re-evaluate its plans to
obtain funds.  The  contemplated  merger is contingent  upon the Company and CCS
raising  sufficient  capital  to  support  each  company's  product  development
efforts.  Management  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 the Company will be able to generate the funding required.

         The Company does not plan to pay dividends in the near future.


                                       16

<PAGE>



Recently Issued Accounting Standard

         In February  1997,  the  Financial  Accounting  Standards  Board issued
Statement of Financial  Acounting  Standard No. 128  "Earnings  Per Share" (SFAS
128). SFAS 128 supersedes  Accounting  Principles Board Opinion No. 15, Earnings
Per  Share  and  specifies  the   computation,   presentation   and   disclosure
requirements  for  earnings  per share for entities  with  publicly  held common
stock. SFAS 128 is effective for financial  statements  relating to both interim
and annual  periods  ending after December 15, 1997. The Company does not expect
the adoption of SFAS 128 to have a material impact on the Company.

Inflation

         Inflation  did  not  have  a  material  impact  on the  results  of the
Company's operations during the last three fiscal years.

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.



                                       17

<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 18,
1997 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 73; 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 
Age 57; Director since                  Officer since December 1993.Management
1992                                    Consultant for over five years. Advisor 
                                        to the Company since February 1989.

Lee W. Affonso, Age 48;                 Vice President of the Company since July
Vice President                          1992   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 42; Vice President                  1992.

Joseph P. Macaluso                      Chief Financial Officer since May 1987.
Age 45; Treasurer and
Chief Financial Officer

Susan J. Steiner, Ph.D.                 Vice President  of  the  Company   since
Age 47; Vice President                  September 1997.  Director of Regulatory 
                                        Affairs and Quality Assurance since 
                                        January 1997. Vice President of Regula-
                                        tory  Affairs  at  Biosearch  Medical 
                                        Products, Inc., 1994 to 1997; Visiting
                                        Professor at Rutgers University 1992 to 
                                        1993.

Nicholas G. Accisano                    Vice President  of  the  Company   since
Age 44; Vice President                  September 1997. Director of  New Product
                                        Development  for  over  the  past  five 
                                        years.

Arlene C. Bell                          Secretary  since  May  1987.  Executive 
Age 52; Secretary                       Assistant 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.




                                       18

<PAGE>



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.

         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, 1996 to August 31, 1997 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, 1997 exceeded $100,000) for services rendered in all capacities
to the Company  during each of the fiscal years ended August 31, 1997,  1996 and
1995 

                           Summary Compensation Table
<TABLE>
<CAPTION>
                                                                Long-Term
                                                              Compensation
                                                                   Awards
                                                                   ------

                                                Annual          Securities
                                            Compensation        Underlying               Other
                                            --------------

Name and                                        Salary            Options(1)           Compensation
Principal  Position        Year                                      #
<S>                        <C>               <C>                    <C>               <C>    

Ervin Schoenblum           1997              $ 105,000                   -            $         -
Acting President           1996                102,000                   -                      -
                           1995                 86,000              25,000                      -


Lee W.  Affonso            1997              $ 105,000                   -                      -
Vice President             1996                112,000                   -                      -
                           1995                117,000                   -                      -

Joseph P. Macaluso(2)      1997              $  83,000                   -                 19,000
Treasurer & Chief          1996                 83,000                   -                 19,000
  Financial Officer        1995                 83,000                   -                 18,000
</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  1997,  no  options  were  granted  to the named  executive
officers.


                                       19

<PAGE>



Aggregate Option Exercises and Year-End Option Table

         The following table provides information on option exercises during the
fiscal year 1997 by the named executive  officers and the value of each of their
respective unexercised options at August 31, 1997.
<TABLE>


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

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

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

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

Ervin Schoenblum          -                        -                       48,000/32,000               -0-/-0-
Lee W. Affonso            -                        -                       21,900/14,600               -0-/-0-
Joseph P. Macaluso        -                        -                       21,900/14,600               -0-/-0-

</TABLE>

------------
(1) Calculated on the basis of fair market value of the underlying securities at
August 31, 1997 less the exercise price

Remuneration of Directors

         Each  non-officer  director  is  compensated  $1,000  for each Board of
Directors meeting attended.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

         The Company has no compensation committee or Board Committee performing
similar   functions.   Ervin   Schoenblum,   the  Company's  Acting   President,
participated in  deliberations  of the Company's  Board of Directors  concerning
executive officer compensation.

         On October 11, 1993,  the Company  entered into an agreement with the T
Partnership to borrow up to $1,000,000.  Ervin Schoenblum,  the Company's Acting
President and 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 rate of  interest  on the debt is 12% per annum on any  outstanding
balance and is payable monthly. Principal payments of $25,000 scheduled to begin
on September 1, 1996,  have been  deferred to September 1, 1998.  Any  remaining
balance is due on August 1, 2003. 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.


                                       20

<PAGE>



         Under the  provisions  of the  agreement  with the T  Partnership,  the
Company is obligated to comply with certain financial 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, 1997, the Company was not in compliance with this financial covenant.
However, in November 1997, the T Partnership agreed not to exercise its right to
accelerate the repayment of indebtedness  through  September 1, 1998 as a result
of non-compliance with the aforementioned  financial covenant and the nonpayment
of principal payments in the 1998 fiscal year. The T Partnership has also agreed
to a  modification  to the  financial  covenant.  The  Company is  currently  in
compliance with such covenant.  The total  indebtedness due to the T Partnership
at August 31, 1997 was $1,747,125.


         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  1997 and 1996 balance  sheets.  The
warrants are immediately  exercisable and expire on August 1, 2001. As of August
31, 1997 these warrants remain outstanding.

         In September 1997, the Company borrowed an additional $100,000 from the
T Partnership.

Item 12. Security Ownership of Certain Beneficial Owners and
         Management

         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 the
Company as of November 18, 1997.
<TABLE>
<CAPTION>

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

  T Partnership                    2,464,844 shares(2)           35.4%
  c/o Wiss & Co.
  354 Eisenhower Parkway
  Livingston, NJ 07039


  Bruce Paul                         658,400 shares              10.3%
  1 Hampton Road
  Purchase, NY 10577
</TABLE>

----------------------
(1)The common stock deemed to be owned which is not  outstanding  but subject to
currently  exercisable  options is deemed to be  outstanding  for the purpose of
determining  the percentage of all outstanding  common stock owned.  

(2)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.

                                       21

<PAGE>



         B. The following  table sets forth, as of November 18, 1997, the equity
securities of the Company  beneficially  owned,  directly or indirectly,  by all
Directors  of the Company,  each of the named  executive  officers  named in the
Summary  Compensation  Table  set  forth  in  Item 11 and by the  Directors  and
executive officers of the Company as a group as of November 18, 1997.

<TABLE>
<CAPTION>
Name of Beneficial            Amount and Nature of              Percentage
     Owner                   Beneficial Ownership               of Class(4)

<S>                             <C>                                <C>   

Abraham H. Nechemie             133,242 shares(1)                  2.1%

Ervin Schoenblum                171,242 shares(1)                  2.7%

Lee W. Affonso                   35,300 shares(2)                  0.6%

Joseph P. Macaluso               29,400 shares(2)                  0.5%

All executive officers
 and directors as a group       441,294 shares(3)(1)               6.7%
    (8 persons)

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

(1)Messrs.  Nechemie  and  Schoenblum  each have a 5% equity  interest  in the T
Partnership,  which  owns  1,881,500  shares  of  the  Company's  common  stock.
Accordingly,  Messrs.  Nechemie and Schoenblum each reports beneficial ownership
of 94,075 shares of the Company's  common stock. In addition,  Messrs.  Nechemie
and Schoenblum  each reports  beneficial  ownership of 25,000 warrants that were
issued to the T  Partnership  pursuant to the August 31, 1995 Lending  Agreement
with the Company and beneficial  ownership of 4,167 warrants in connection  with
the March 1995 private placement. Also included in the table above are currently
exercisable  options for 10,000 and 48,000  shares held by Messrs.  Nechemie and
Schoenblum, respectively.

(2)Includes 21,900 shares subject to currently exercisable options.

(3)Includes 145,400 shares subject to currently  exercisable options held by all
executive  officers and directors of the Company  (including those  individually
named in the table above).

(4)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.


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.

                                       22

<PAGE>



      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


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,
1992 and all dividends were reinvested.
<TABLE>


                           TOTAL SHAREHOLDERS RETURN
                          ELECTRO-CATHETER CORPORATION

                          INDEXED \ CUMULATIVE RETURNS

<CAPTION>
                              Base      
                              Period         Return         Return         Return         Return         Return
Company\Index Name            Aug 92         Aug 93         Aug 94         Aug 95         Aug 96         Aug 97
<S>                           <C>            <C>           <C>            <C>            <C>            <C>

ELECTRO-CATHETER CORP.        100            125.00         62.50          40.60          81.25          34.00
S&P 500 INDEX                 100            115.21        121.52         147.58         175.22         246.44
HLTH CARE (MED PDS&SUPP)      100             76.73         89.69         138.08         157.11         224.95  
</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.

Item 13. Certain Relationships and Related Transactions

         The Company has no compensation committee or Board committee performing
similar   functions.   Ervin   Schoenblum,   the  Company's  Acting   President,
participated in  deliberations  of the Company's  Board of Directors  concerning
executive officer compensation.

         On October 11, 1993,  the Company  entered into an agreement with the T
Partnership to borrow up to $1,000,000.  Ervin Schoenblum,  the Company's Acting
President and 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

                                       23

<PAGE>



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 rate of  interest  on the debt is 12% per annum on any  outstanding
balance and is payable monthly. Principal payments of $25,000 scheduled to begin
on September 1, 1996,  have been  deferred to September 1, 1998.  Any  remaining
balance is due on August 1, 2003. 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.

         Under the  provisions  of the  agreement  with the T  Partnership,  the
Company is obligated to comply with certain financial 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, 1997, the Company was not in compliance with this financial covenant.
However, in November 1997, the T Partnership agreed not to exercise its right to
accelerate the repayment of indebtedness  through  September 1, 1998 as a result
of non-compliance with the aforementioned  financial covenant and the nonpayment
of principal payments in the 1998 fiscal year. The T Partnership has also agreed
to a  modification  to the  financial  covenant.  The  Company is  currently  in
compliance with such covenant.  The total  indebtedness due to the T Partnership
at August 31, 1997 was $1,747,125.

         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  1997 and 1996 balance  sheets.  The
warrants are immediately  exercisable and expire on August 1, 2001. As of August
31, 1997 these warrants remain outstanding.

         In September 1997, the Company borrowed an additional $100,000 from the
T Partnership.


                                       24

<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(1)

        (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  By-laws  - 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
                     refer ence 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
                     refer ence 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
                     refer ence as an exhibit hereto.(2)

(1) The  Company's  current,  quarterly  and annual  reports  are filed with the
Securities  and  Exchange  Commission  under  file No.  0-7578.  (2)  Management
contract or compensatory plan or arrangement.

                                       25

<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
                     hereto.

        (10)(j)      Letter of Intent to Merge between Registrant and Cardiac
                     Control Systems, Inc. dated October 23, 1997 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.












                                                        26

<PAGE>













                                   SIGNATURES


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


                                  ELECTRO-CATHETER CORPORATION
                                  (Registrant)



                                  By: /s/Ervin Schoenblum
                                      Ervin Schoenblum
                                      Acting President
Dated: December 15, 1997

         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 15, 1997               /s/Ervin Schoenblum
                                       Ervin Schoenblum, Acting President
                                       & Director


Dated: December 15, 1997               /s/Joseph P. Macaluso
                                       Joseph P. Macaluso
                                       Principal Accounting Officer


Dated: December 15, 1997               /s/Abraham H. Nechemie
                                       Abraham H. Nechemie, Director

                                       27

<PAGE>



                                   Exhibits(1)





        (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  By-laws  - 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.(2)

(1) The  Company's  current,  quarterly  and annual  reports  are filed with the
Securities  and  Exchange  Commission  under  file No.  0-7578.  
(2)  Management contract or compensatory plan or arrangement.












                                       E-1

<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
                    hereto.

        (10)(j)     Letter of Intent to Merge between  Registrant   and  Cardiac
                    Control Systems, Inc. dated  October  23, 1997  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.

















                                       E-2
                             

<PAGE>



                          ELECTRO-CATHETER CORPORATION

                          Index to Financial Statements





                                                                     Page

Independent Auditors' Report                                          F-1
Financial Statements:
     Balance  Sheets - August 31, 1997 and 1996                       F-2 
     Statements of Operations - Years ended August 31, 1997,
          1996 and 1995                                               F-3
     Statements of Stockholders' Deficiency/Equity 
          Years ended August 31, 1997, 1996 and 1995                  F-4
     Statements of Cash Flows - Years ended August 31, 1997,
          1996 and 1995                                               F-5
     Notes to Financial Statements                                    F-6

Financial Statement Schedule:

         II - Valuation and Qualifying Accounts                       F-20


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 have also 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 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, 1997 and 1996,  and the results of its  operations and its cash flows
for  each of the  years  in the  three-year  period  ended  August  31,  1997 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
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  do not
include any adjustments that might result from the outcome of this uncertainty.


                                                  KPMG Peat Marwick LLP

Short Hills, New Jersey
November 12, 1997.
                                       F-1


<PAGE>


<TABLE>


                          ELECTRO-CATHETER CORPORATION

                                 Balance Sheets

                            August 31, 1997 and 1996

<CAPTION>

                                                            1997                           1996
                                                            ----                           ----

<S>                                                <C>                                  <C>   
                       Assets

Current assets:

     Cash and cash equivalents                          $ 98,127                         275,283
     Accounts receivable, less
        allowance for doubtful
        accounts of $152,070 in 1997
        and $15,000 in 1996                              988,859                       1,016,201
     Inventories                                       1,242,367                       1,862,179
     Prepaid expenses and other current assets           168,781                          64,344
                                                         -------                          ------

        Total current assets                           2,498,134                       3,218,007


Property, plant and equipment, net                       777,663                         551,698
Other assets, net                                         97,275                         123,407
                                                          ------                         -------

        Total assets                                  $3,373,072                       3,893,112
                                                      ==========                       =========

        Liabilities and Stockholders' Deficiency/Equity

Current liabilities:
    Current installments of long-term debt                     -                         300,000
    Current installments of capitalized
           lease obligations                              50,734                           7,489
    Accounts payable                                     566,816                         345,888 
    Deferred revenues                                          -                         144,293
    Accrued expenses                                     478,590                         395,591
    Accrued litigation expenses                          443,820                               -
                                                         -------                         -------                           

        Total current liabilities                      1,539,960                       1,193,261                          
                                                      
Subordinated debentures due to
 T Partnership, excluding current portion              1,747,125                       1,447,125
Capitalized lease obligation,
 excluding current installments                          222,277                          37,756
                                                         -------                          ------

        Total liabilities                              3,509,362                       2,678,142
                                                       ---------                       ---------

Stockholders' deficiency/equity:
     Common stock $.10 par value.
        Authorized 20,000,000 shares;
        issued 6,383,611 in 1997 and
        6,373,711 in 1996                                638,361                         637,371
     Additional paid-in capital                       10,682,008                      10,679,316
     Accumulated deficit                             (11,456,659)                    (10,101,717)
                                                     -----------                     ----------- 
       Total stockholders' deficiency/equity            (136,290)                      1,214,970
                                                        --------                       ---------
     Commitments and contingencies                             -                               -
                                                        --------                       ---------
        Total liabilities and
         stockholders' deficiency/equity             $ 3,373,072                       3,893,112
                                                     ===========                       =========
</TABLE>
See accompanying notes to financial statements.
                                                                 F-2







<PAGE>

<TABLE>


                                                    ELECTRO-CATHETER CORPORATION

                                                      Statements of Operations

                                             Years ended August 31, 1997, 1996 and 1995
<CAPTION>


                                                                   1997                   1996                      1995
                                                                   ----                   ----                      ----
<S>                                                            <C>                     <C>                        <C>    >

Net revenues, including research
  and development revenue of $544,293
  in 1997 and $155,707 in 1996                                 $6,648,438              7,362,436                  7,263,424
Cost of goods sold                                              4,041,486              4,079,502                  3,861,591
                                                                ---------              ---------                  ---------
                                                               

Gross profit                                                    2,606,952              3,282,934                  3,401,833


Operating expenses:
  Selling, general and
    administrative                                              2,384,127             2,954,991                    3,438,811
  Research and development                                        881,728             1,010,073                      931,956
                                                                  -------             ---------                      -------


     Operating loss                                              (658,903)             (682,130)                    (968,934)


Other income (expense):
   Interest income                                                      -                    86                        1,102
   Interest expense                                              (249,384)             (210,896)                    (168,058)
   Litigation expenses                                           (446,655)                    -                            -
                                                                 --------              --------                      --------    

      Net loss                                               $ (1,354,942)             (892,940)                  (1,135,890)
                                                             ============              ========                   ========== 


Net loss per common share                                       $  (0.21)                 (0.14)                      (0.18)
                                                                ========                  =====                       ===== 
</TABLE>













See accompanying notes to financial statements.

                                                                  F-3


<PAGE>


<TABLE>

                                                             ELECTRO-CATHETER CORPORATION

                                                      Statements of Stockholders' Deficiency/Equity

                                                  Years ended August 31, 1997, 1996 and 1995

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


Balances at August 31, 1994                               576,232           10,106,647        (8,072,887)         2,609,992

Employee stock plan                                           248                1,988                 -              2,236

Common stock issued under private placement                57,150              442,913                 -            500,063

Proceeds from issuance of stock warrants                        -               63,750                 -             63,750

Net loss                                                        -                    -        (1,135,890)        (1,135,890)
                                                        ---------            ---------        ----------         ---------- 

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)
                                                          =======           ==========       ===========           ======== 
</TABLE>


See accompanying notes to financial statements.
                                                                      F-4


<PAGE>
<TABLE>


                                                     ELECTRO-CATHETER CORPORATION

                                                       Statements of Cash Flows

                                              Years ended August 31, 1997, 1996 and 1995

<CAPTION>
                                                                       1997                    1996                1995
                                                                       ----                    ----                ----
<S>                                                             <C>                        <C>               <C>    
Cash flows from operating activities:

Net loss                                                        $(1,354,942)               (892,940)         (1,135,890)
Reconciliation of net loss to net cash
  used in operating activities:
     Depreciation and amortization                                  145,614                 130,524             137,106
     Amortization of deferred charges                                 8,333                   8,333              61,708
     Changes in assets and liabilities:
       Decrease(increase) in accounts
          receivable, net                                            27,342                 190,087            (141,514)
       Decrease (increase)in inventories                            619,812                 230,900            (289,789)
       (Increase) decrease in prepaid
       expenses and other current assets                           (104,437)                (21,314)             96,749
       Decrease in other assets, net                                 17,799                   4,207               3,527
       Decrease (increase) in deferred
          revenues                                                 (144,293)                144,293                   -
       Increase (decrease) in accounts
          payable and accrued expenses                              747,747                (340,700)            124,128
                                                                    -------                --------             -------

Net cash used in
  operating activities                                         $    (37,025)               (546,610)         (1,143,975)
                                                                   --------                --------          ---------- 

Cash flows used in investing activities -
     Purchases of property, plant
      and equipment                                                (115,292)                (34,167)            (12,143)
                                                                   --------                 -------             ------- 

Cash flows from financing activities:
   Net proceeds from issuance of stock                                    -                       -             500,063
   Net proceeds from issuance of
      subordinated debentures and warrants                          100,000                 547,125             575,000
   Proceeds from exercise of
      stock options                                                       -                  20,563                   -
   Proceeds from employee stock
      purchase plan                                                   3,682                   1,066               2,236
   Proceeds from loan on officer's
      life insurance policy                                               -                       -              25,000
   Repayment of debt                                               (128,521)                (17,079)            (18,184)
                                                                   --------                 -------             ------- 

      Net cash (used in) provided by
        financing activities                                        (24,839)                551,675           1,084,115
                                                                    -------                 -------           ---------

      Net decrease in cash                                         (177,156)                (29,102)            (72,003)
      Cash and cash equivalents
        at beginning of year                                        275,283                 304,385             376,388
                                                                    -------                 -------             -------
      Cash and cash equivalents
         at end of year                                          $   98,127                 275,283             304,385
                                                                 ==========                 =======             =======


      Interest paid                                              $  241,049                 199,724             101,967
      Property, plant & equipment acquired
         under capitalized lease obligations                     $  256,287                  49,268                   -

See accompanying notes to financial statements.


</TABLE>


                                                                   F-5



<PAGE>




                          ELECTRO-CATHETER CORPORATION

                          Notes to Financial Statements

                         August 31, 1997, 1996 and 1995

(1)      Summary of Significant Accounting Policies

         (a)      Nature of Business

                  Electro-Catheter  Corporation ("Company") has been in business
                     for over 36  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,  1997,  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.

         (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.


                                                           (Continued)
                                       F-7

<PAGE>


                          ELECTRO-CATHETER CORPORATION
                    Notes to Financial Statements, Continued




(1)      Summary of Significant Accounting Policies, cont.


         (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

                  Loss per share is computed  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 loss per share  because the result of their
                     inclusion would be anti-dilutive.

                  The weighted  average number of shares of common stock used in
                     the  computation  of  loss  per  share  was   approximately
                     6,380,000 in 1997, 6,354,000 in 1996 and 6,027,000 in 1995.

         (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 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 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 and current  liabilities  approximate  fair
                     value due to the short-term maturity of these instruments.


                                                                 (Continued)
                                       F-8

<PAGE>


                          ELECTRO-CATHETER CORPORATION
                    Notes to Financial Statements, Continued




(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  $1,354,942,
           $892,940 and $1,135,890 for the years ended August 31, 1997, 1996 and
           1995 respectively,  and at August 31, 1997 had an accumulated deficit
           of $11,456,659.  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 Company is
           attempting to increase  sales by examining  and,  where  appropriate,
           modifying its distribution network,  utilizing aggressive pricing and
           introducing new products to market. The Company's ability to continue
           as a going concern is dependent upon the successful implementation of
           the  aforementioned  programs.  There can be no assurances that these
           programs can be successfully implemented. The financial statements do
           not  include  any  adjustments  relating  to the  recoverability  and
           classifications   of  reported   asset  amounts  or  the  amounts  of
           liabilities that might result from the outcome of this uncertainty.

  (3)    Inventories
<TABLE>

         Inventories consisted of the following:
<CAPTION>

                                                                                1997                  1996
                                                                                ----                  ----
                 <S>                                                                             <C>                     
                 Finished goods                                         $    481,660               954,997
                 Work-in-process                                             490,621               490,396
                 Materials and supplies                                      270,086               416,786
                                                                             -------               -------

                                                                        $  1,242,367             1,862,179
                                                                        ============             =========
</TABLE>

                                                                     (Continued)
                                       F-9

<PAGE>


                          ELECTRO-CATHETER CORPORATION
                    Notes to Financial Statements, Continued




(4)      Property, Plant and Equipment

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

<CAPTION>
                                                                              1997                  1996
                                                                              ----                  ----
                 <S>                                              <C>                           <C>    
                 Land                                             $         38,400                 38,400

                 Building                                                  153,597                153,597
                 Building improvements                                     993,168                952,837
                 Equipment                                               2,307,607              2,244,694
                 Office furniture and
                   equipment                                               534,232                519,319
                 Leasehold improvements                                    340,382                340,382
                 Sales equipment and
                     diagnostic computers                                  587,348                589,348
                 Capitalized leases                                        305,555                 49,268
                                                                           -------                 ------

                                                                         5,260,289              4,887,845


                 Less accumulated deprecia-
                     tion and amortization                               4,482,626              4,336,147
                                                                         ---------              ---------


                 Net property, plant
                 and equipment                                        $    777,663                551,698
                                                                      ============                =======
</TABLE>

(5)      Accrued Expenses

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

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

           Accrued salaries, wages and
                 payroll taxes                                           $ 287,933                278,263
           Accrued audit fees                                               52,500                 60,000

           Other expenses                                                  138,157                 57,328
                                                                           -------                 ------

                                                                         $ 478,590                395,591
                                                                         =========                =======
</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 accompanying  1996
           balance sheet and was recognized as revenue in fiscal year 1997.



                                                                 (Continued)
                                      F-10

<PAGE>


                          ELECTRO-CATHETER CORPORATION
                    Notes to Financial Statements, Continued




(7)      Subordinated Debentures Due to T Partnership

         On  October 11, 1993, the Company  entered into an agreement with the T
             Partnership  to  borrow up to  $1,000,000.  Ervin  Schoenblum,  the
             Company's Acting President and 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 rate of  interest  on the debt is 12% per annum on any  outstanding
             balance  and is  payable  monthly.  Principal  payments  of $25,000
             scheduled  to begin on  September  1, 1996 have  been  deferred  to
             September 1, 1998. Any remaining  balance is due on August 1, 2003.
             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.

         Under the  provisions  of the  agreement  with the T  Partnership,  the
             Company is obligated to comply with certain financial 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, 1997, the
             Company  was  not  in  compliance  with  this  financial  covenant.
             However, in November 1997, the T Partnership agreed not to exercise
             its right to  accelerate  the  repayment  of  indebtedness  through
             September  1,  1998  as  a  result  of   non-compliance   with  the
             aforementioned  financial  covenant and the nonpayment of principal
             payments in the 1998 fiscal year. The T Partnership has also agreed
             to a  modification  to  the  financial  covenant.  The  Company  is
             currently in compliance with such covenant.  The total indebtedness
             due to the T Partnership at August 31, 1997 was $1,747,125.

         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

                                                          (Continued)
                                      F-11

<PAGE>


                          ELECTRO-CATHETER CORPORATION
                    Notes to Financial Statements, Continued




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

             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
             1997  and  1996  balance  sheets.   The  warrants  are  immediately
             exercisable  and  expire on August 1, 2001.  As of August 31,  1997
             these warrants remain outstanding.

         In  September  1997, the Company  borrowed an additional  $100,000 from
             the T Partnership.

(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 1997 balance sheet (see Note 3). The related obligations
           are also  recorded in the  accompanying  balance  sheet 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  $264,867  and
           $43,520, repectively for the years ended August 31, 1997 and 1996.


         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, 1997, are as follows:

                    1998                                  $    51,010
                    1999                                      359,186
                    2000                                      367,778
                    2001                                      367,187
                    2002 and thereafter                       874,975

(9)      Other Debt

         The Company has borrowed $125,000 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
           is recorded as a reduction  in the  policy's  cash  surrender  value,
           which is included in other assets in the accompanying balance sheets.

(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.

                                                                  (Continued)
                                      F-12

<PAGE>


                          ELECTRO-CATHETER CORPORATION
                    Notes to Financial Statements, Continued





(10)     Stock Options, cont.

         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.

         OnJuly  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  resulting  compensation  expense  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.


                                                                 (Continued)
                                      F-13

<PAGE>


                          ELECTRO-CATHETER CORPORATION
                    Notes to Financial Statements, Continued




(10)      Stock Options, cont.
<TABLE>

A summary of all stock option activity follows:
<CAPTION>

                                                     Number                  Option
                                                       of                    Price
                                                     Shares                 Per share                Total
                                                     ------                 ---------                -----
<S>                                                 <C>                <C>                          <C>                             
Year ended August 31, 1995:
         Granted                                    405,300            $     .81 - 1.14             407,025
         Cancelled or expired                       395,800                 1.19 - 2.75             791,338
Outstanding at August 31, 1995                      490,300                  .81 - 5.00             698,761
                                                    =======                 ===========             =======

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
                                                    =======                  ===========            =======
</TABLE>

      Options to acquire  216,260  shares of common  stock were  exercisable  at
           August 31, 1997.

         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.  The Company  applies APB Opinion No. 25 in
           accounting for its stock options and,  accordingly,  no  compensation
           expense has been  recognized  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>
                                                                           1997                      1996
                                                                           ----                      ----

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

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

         In accordance  with SFAS No. 123, pro-forma net income and earnings per
           share data reflect only options granted in 1996 and 1997.  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.



                                                                   (Continued)
                                      F-14

<PAGE>


                          ELECTRO-CATHETER CORPORATION
                    Notes to Financial Statements, Continued




(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 1997,  1996 and 1995,  9,900,  2,866 and 2,476  shares,
           respectively, were purchased under the Plan.

(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, 1997, 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
           director,  and Abraham H. Nechemie, the other 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 be realized.  The
           valuation  allowance  for deferred tax assets as of September 1, 1997
           was  $3,197,000 as compared to  $2,983,000 at September 1, 1996.  The
           net change in the total valuation allowance for the year ended August
           31,  1997 was an  increase  of  $142,000 as compared to a decrease of
           $536,000 at August 31, 1996.


                                                                  (Continued)
                                      F-15

<PAGE>


                          ELECTRO-CATHETER CORPORATION
                    Notes to Financial Statements, Continued




(13) Income Taxes, cont.

         At August 31, 1997 and 1996, the tax effects of  temporary  differences
           that  give  rise  to  the   deferred  tax  assets  and  deferred  tax
           liabilities are as follows:
<TABLE>

<CAPTION>
        Deferred tax assets:                                                              1997              1996
                                                                                          ----              ----
                       <S>                                                           <C>               <C>    

                       Inventories                                                    $ 93,000           155,000
                       Accounts receivable,
                           due to allowance for
                           doubtful accounts                                            23,000             3,000
                       Contribution carryover                                           25,000            23,000
                       Compensated absences                                             31,000            30,000

                       Federal and state net
                           operating loss carryforwards                              2,390,000         2,209,000

                       Research and development
                           and investment tax credit
                           carryforwards                                               635,000           635,000
                                                                                       -------           -------

                           Total gross deferred
                                      tax assets                                     3,197,000         3,055,000

                       Less valuation allowance                                      3,137,000         2,983,000
                                                                                     ---------         ---------

                       Net deferred tax assets                                          60,000            72,000

        Deferred tax liabilities:

                       Excess of tax over financial
                       statement depreciation                                          (60,000)          (72,000)
                                                                                       -------           ------- 

                       Net deferred tax                                              $    -0-                -0-
                                                                                      ========            ========        

</TABLE>



                                                               (Continued)
                                      F-16

<PAGE>


                          ELECTRO-CATHETER CORPORATION
                    Notes to Financial Statements, Continued




(13) Income Taxes, cont.


         At August 31, 1997,  the Company had  available  federal net  operating
           loss  carryforwards,  research and  development  and  investment  tax
           credit carryforwards that expire as follows:
<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                   -                -
                                 ---------                ----              ----   
                Total           13,585,000             557,000           78,000
</TABLE>

(14) Segment Data

         The  Company  operates  in one  business  segment.  Export  sales  were
           approximately  $1,828,000 in 1997,  $2,324,000 in 1996 and $1,964,000
           in 1995.  Sales to the only  domestic  distributor  of the  Company's
           products  totalled  approximately  $765,000  in  1995,   representing
           approximately  11% of net sales.  The agreement with this distributor
           was  terminated on May 31, 1995 and, as such,  there were no sales to
           this distributor in 1996 and 1997.

(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  $105,000 in 1997, $116,000
           in 1996 and $148,000 in 1995.

         The  following  is a schedule of future  minimum  rental  payments  for
           operating leases which expire through 1999:


                                1998                  8,294
                                1999                  4,150
                                2000                  4,150
                                                      -----
                                                     16,594
                                                     ======



                                                                  (Continued)
                                      F-17

<PAGE>


                          ELECTRO-CATHETER CORPORATION
                    Notes to Financial Statements, Continued



(15) Commitments and Contingencies, cont.

     (b) The Company is 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,
           except for one claim,  the outcome of such claims and litigation will
           not have a material  effect on the Company's  financial  position and
           results of operations. The one exception is that in September 1997, a
           jury in Middlesex  County of the  Superior  Court of New Jersey found
           the  Company  liable for age  discrimination  when it  terminated  an
           employee in April 1994.  The jury  awarded  the  terminated  employee
           $283,000.  In  addition  to  the  $283,000,  the  court  awarded  the
           plaintiff  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  in  the  amount  of
           approximately  $115,665. The Company is considering taking an appeal,
           but has  accrued  all  related  costs  to  date  in the  accompanying
           financial statements..

     (c) 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 to the Company  requesting that prompt action
           be taken to correct the violations.

         In response to the observations and the Warning Letter, the Company has
           provided the FDA with a plan and timetable for instituting corrective
           actions.  The Company has been working  diligently  in its efforts to
           correct these violations.

         In September  1997, the FDA  conducted  another  audit of the Company's
           facilities.  While the Company has made progress  towards  correcting
           the  violations,  at the  conclusion of this audit,  the FDA issued a
           report which  included no  additional  violations  of cGMP but listed
           violations which are in the process of correction by the Company.  At
           this  time,  the  Company  is  unable  to  precisely   determine  the
           short-term adverse economic impact which will result from instituting
           the corrective actions.

     (d) On  October 23,  1997,  the Company  entered into a letter of intent
           with Cardiac Control Systems,  Inc., a Delaware  corporation ("CCS"),
           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. The transaction further contemplates
           an exchange of common stock of the two companies,  with two shares of
           CCS common stock, $.10 par value per share, to be exchanged for every
           three shares of the Company's common stock, $.10 par value per share.
           It is intended that upon the closing of the  transaction,  50% of the
           Company's senior debt would be redeemed and the remaining 50% of such
           debt would be converted to convertible preferred stock.




                                                               (Continued)
                                      F-18

<PAGE>


                          ELECTRO-CATHETER CORPORATION
                    Notes to Financial Statements, Continued




(15) Commitments and Contingencies, cont.

         Consummation  of the merger is  subject,  among other  things,  to: (i)
           raising sufficient capital to support the product development efforts
           of both  companies;  (ii) the  execution  of a  definitive  agreement
           reflecting the  intentions of the parties;  (iii) the approval of the
           transaction  by the  Board of  Directors  of each  company;  (iv) the
           approval of the transaction by the  shareholders of  Electro-Catheter
           Corporation; and (v) the receipt of all required regulatory approvals
           by each company.

         CCS  develops,  manufactures  and  sells  a broad  line of  implantable
           cardiac  pacemakers,  pacemaker  leads  and  related  products  which
           Company  management  believes  are  complementary  to its own product
           lines. The Company believes the merger may allow certain efficiencies
           to improve  operating  performance  and that the broader product line
           may provide for a more effective marketing and distribution  process.
           There can be no assurance,  however,  that consummation of the merger
           will yield positive operating results in the future.




                                                                (Continued)
                                      F-19

<PAGE>


                          ELECTRO-CATHETER CORPORATION
                    Notes to Financial Statements, Continued













                                                                  Schedule II

                          ELECTRO-CATHETER CORPORATION

                        Valuation and Qualifying Accounts

<TABLE>
<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>    <C>    <C>
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
                                                     ========               ======            =======             ======

1995 Allowance for doubtful accounts                 $ 21,776               55,020                  -             76,796
                                                     ========               ======             ======             ======
</TABLE>





















                       
                                      F-20

<PAGE>
        
                                             Exhibit 10 (i)


                     SECOND COMPOSITE MODIFICATION AGREEMENT

THIS SECOND COMPOSITE MODIFICATION  ("Modification Agreement") dated as of April
15, 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
Borrower  issued  an  Amended  and  Restated  Debenture  dated  January  1, 1996
evidencing   additional  borrowings  by  Borrower  from  Lender  with  aggregate
borrowings equivalent to

                                      - 1 -

<PAGE>



$1,750,000 ("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 ($100,000.000) 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 Seven Hundred Fifty Thousand and 00/100 Dollars  ($1,750,000.00)  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  Eight
Hundred Fifty Thousand
and 00/100 Dollars ($1,850,000.00).
                  (b) Additional Composite Modifications. References in any Loan
Document  to the  Debenture,  Mortgage or Lending  Agreement  shall be deemed to
refer to respectively the Second Amended and Restated Debenture, the Mortgage as
modified by the Second  Amendment  to  Mortgage  and the  Lending  Agreement  as
modified  by  the  First  Composite  and  this  Second  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

                                      - 2 -

<PAGE>


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 Second Amended and Restated  Debenture and
Second Amendment to Mortgage.  The T Partnership shall return to Borrower within
45 days of the date of this  Modification  Agreement  the 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:/s/ Ervin Schoenblum
                           Ervin Schoenblum,
                           Acting President


                          THE T PARTNERSHIP


                          By: /s/Abraham H. Nechemie



                                      - 3 -




<PAGE>

                                              Exhibit 10 (j)



                                                      CARDIAC CONTROL SYSTEMS
                                                      3 Commerce Boulevard
                                                      Palm Coast, Florida
                                                      Telephone: (904) 445-5450
                                                      Fax: (904) 445-7226

                                                  October 23, 1997




Ervin Schoenblum
Acting President
Electro-Catheter Corporation
2100 Felver Court
Rahway, NJ 07065

Dear Erv:

     The purpose of this letter is to set forth the intention of Cardiac Control
Systems,  Inc.,  ("CCS"),  to  enter  into an  agreement  with  Electro-Catheter
Corporation  ("Elecath"),  whereby CCS would merge with Elecath,  subject to the
following terms and conditions:

     1. It is  contemplated  that  this  would  be a  stock  for  stock  merger
        transaction, payable as follows:

     a. Two shares of CCS common stock for every three shares of Elecath  common
        stock,

     b. A cash payment of $1.00 per share for single,  uneven  shares of Elecath
        common stock in lieu of partial payments of CCS common stock.

     c. If the ratio of the bid price of CCS  shares to Elecath  shares  becomes
        greater  than 2.25 or less than 0.75  based on a 10-day  moving  average
        prior to closing, an adjustment of the exchange ratio may be negotiated.

     CCS common  shares trade on the NASDAQ OTC Bulletin  Board.  The thirty day
average  between  the  closing  bid and ask prior to the date of this  Letter of
Intent has been $ 0.82 per  share.  CCS has also  completed  a series of private
institutional financings at prices ranging from $2.80 to $5.00 per common share,
with the most recent  financing  completed June 13, 1997,  whereby warrants were
granted to two parties at exercise prices of $4.00 and $5.00 per common share in
conjunction with a debt financing.

     2. As a result  of the  merger  and in  consideration  for the  transaction
        exchange:

     a. All the issued and outstanding shares of Elecath will be acquired by CCS
        or  canceled  such  that CCS  shall  own 100% of  Elecath  common  stock
        following the merger.

     b. All the  outstanding  options and warrants to purchase shares of Elecath
        common  stock will be converted  into CCS options and warrants  with the
        number of new options or warrants and the exercise  price to be adjusted
        accordingly to reflect the exchange ratio.

                                   Page 1 of 4


<PAGE>



         After the transaction, it is estimated that there will be approximately
         6,875,000  shares of CCS  common  stock  outstanding.  This is based on
         approximately  2,619,000  outstanding  common shares  currently held by
         existing CCS shareholders and approximately 4,256,000 CCS common shares
         to be received by Elecath  shareholders  in exchange for their  Elecath
         common  stock  (this  assumes  that there are  approximately  6,384,000
         Elecath common shares currently outstanding.) This is, of course, prior
         to  any   potential   dilution   related  to  any  funding   activities
         contemplated as part of this transaction.

         In addition, there will be approximately 1,760,700 options and warrants
         outstanding.  This is based on approximately 1,132,000 existing options
         and warrants for CCS common stock (currently at exercise prices ranging
         from  $0.18 to $5.25 per share,  with 74% at $1.00 or more per  share),
         and 628,700 new CCS options or warrants  (exchanged for 943,044 Elecath
         options or warrants on a 2 for 3 basis).

         Upon  consummation  of the  transaction,  there  will be  approximately
         8,635,700  shares  fully  diluted,  with the  former  CCS  shareholders
         holding  3,751,000  shares,  options or warrants and the former Elecath
         shareholders  holding  4,884,700 shares,  options or warrants.  This is
         subject to paragraph 1c not becoming effective.

     3. CCS will redeem for cash one-half of all  indebtedness  outstanding at
        the  time  of  closing  to a  maximum  of  $1.0  million  due  to  the T
        Partnership.  The  remaining  half  would  be  converted  to a 5 year 9%
        convertible  preferred stock,  convertible at the holders' option at the
        greater of $1.00 per common stock or a 20% premium to any equity  raised
        as part of this transaction.

     4. Commencing  with the  execution  of this Letter of Intent,  each company
        shall be permitted  to make a full due  diligence  investigation  of the
        other company and to have full access to all  information  thereto.  The
        Companies have already executed mutual  confidentiality  agreements.  If
        the observations made during the due diligence process by either company
        are substantially  different than it had been previously led to believe,
        that Company may terminate this letter,  without triggering the break-up
        fee  indicated in paragraph 8, however  legal fees incurred to date will
        be split evenly among the two Companies.

     5. In good faith, a formal agreement (the  "Agreement") will be negotiated,
        executed,  and  delivered  by CCS and Elecath  containing  the terms and
        conditions in this letter and  representations,  warranties,  covenants,
        indemnities and conditions  usual and customary in a transaction of this
        kind. The Agreement also will provide,  among other customary covenants,
        for (a) the conduct of the  business of Elecath and CCS in the  ordinary
        course  prior to closing,  in such manner as to maintain  the  business,
        employees  and good will of Elecath  and CCS and as is  consistent  with
        sound business practices;  (b) the provision to each Company of complete
        and on-going  information about the other Company prior to closing;  (c)
        nonpayment of dividends, options or other distributions or repurchase of
        any capital  stock or option of Elecath or CCS or issuance of additional
        debt; (d) the agreement of both Companies' Boards of Directors to submit
        to  shareholders  to approve the merger and (e) the provision  that both
        Companies, to the best of 

                                  Page 2 of 4




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        their  knowledge,  are in full compliance with all regulatory  agencies,
        most  notably the United  States Food and Drug  Administration  (FDA) or
        adequate disclosure by either company as to areas of noncompliance.

     6. At the time of the execution of the Agreement, it is intended that there
        will be delivered to CCS an agreement by the T Partnership and the Board
        of Elecath and to Elecath an  agreement  by the Board of CCS  committing
        such holders to vote in favor of the acquisition.

     7. From  the  date  hereof,  and so long as this  letter  or the  Agreement
        remains in effect,  neither CCS or Elecath or either one's  agents,  nor
        any member of the T Partnership,  shall,  so long as not in violation of
        legal obligations,  solicit or entertain an offer engaging in discussion
        or otherwise  negotiate with, or provide  information to any other party
        with  respect  to the  sale  or  merger  of  their  respective  Company,
        provided,  in the event either company shall engage in such discussions,
        the other Company's  damages shall be limited to the breakup fee, to the
        extent due in paragraph 8.

     8. Except as set forth in paragraphs 4 and 11, each party shall pay its own
        expenses, incidental to negotiations, preparation of agreements, and the
        closing whether or not the purchase  transaction is finally consummated.
        However,  in the event that this  Letter of Intent or the  Agreement  is
        signed and either party does not proceed because of its acceptance of an
        alternative  offer  within six months of a  termination,  then the other
        party will be entitled to a break-up fee of  $225,000,  plus legal fees,
        investment banking and commitment fees incurred to that point. If either
        Company needs to borrow  additional  capital to continue normal business
        operations or finish due diligence prior to closing of the  transaction,
        if approved by both Companies,  this new debt will become the obligation
        of the consolidated Company after the merger.

     9. Closing  of  the  transaction  described  herein  shall  be  subject  to
        customary closing conditions, including the following:

     a. All  required  regulatory  approvals  shall have been  obtained  by each
        Company, and shall contain only such conditions as are not burdensome to
        the other Company.

     b. The Agreement and merger shall have been approved by holders of not less
        than a sufficient  percent of each Conmpany's common stock as is legally
        required for the consummation of the merger.

     c. All of the issued and outstanding  shares of Elecath's  common stock and
        preferred  stock,  as well as common stock  options or  warrants,  shall
        either have been acquired by CCS or canceled.

     d. There shall be no litigation  pending  seeking to enjoin or question the
        validity of the transactions contemplated by the Agreement.

     e. There  shall  not have  occurred  any  material  adverse  change  in the
        business  operations,   financial  condition,   capital  structure,   or
        prospects of Elecath or CCS.

                                   Page 3 of 4




<PAGE>



     f. Approval of the Board of Directors of CCS and Elecath

     10.Any  public  announcements  of the  proposed  merger  or any  subsequent
        termination  thereof  shall  be in a form  which  has been  approved  in
        writing by both CCS and  Elecath,  which in any event shall comply as to
        content and timing of applicable  securities laws. It is understood that
        neither  CCS or Elecath  shall,  within  reason,  prevent the other from
        issuing any applicable public disclosures.

     11.It is  contemplated  that a total of $10.0 million in financing on terms
        acceptable  to both  Companies  is to be  obtained.  Completion  of this
        transaction  is  contingent  on the receipt of a minimum  $7,000,000  in
        financing  on  terms   acceptable  to  both   Companies  (a  minimum  of
        $4,000,000,  if  CCS's  current  senior  lenders  and  debt  instruments
        transition with the consolidated  Companies).  If sufficient  funding is
        not obtained on acceptable terms to close the transaction,  then the two
        Companies  agree to split  evenly  the  legal,  investment  banking  and
        commitment fees incurred to that time.

     12.The parties  hereto  agree that it is their intent that they will pursue
        diligently  the  negotiation  and  preparation  of the Agreement and the
        closing contemplated  therein, and it is the aim of the parties that the
        Agreement  (subject to  shareholder  approval)  will be signed not later
        than  November 21, 1997. If the Agreement is not signed by that date, or
        such other date as may be mutually acceptable to the parties, the Letter
        of Intent shall  thereafter be of no further force and effect except for
        paragraphs 4 and 8 above.

Except with respect to paragraphs 4, 7, 8, and 10 this letter is not intended to
be a binding  contract.  Acceptance of the general  principles  set forth in the
Letter of Intent shall not constitute an agreement to consummate the transaction
described  herein.  Such agreement will be contained only in the Agreement.  Nor
shall this letter constitute an agreement to enter into a definitive  agreement.
This letter is an  expression  of mutual  intent to proceed with a drafting of a
definitive agreement in accordance with the principles stated herein.

If the forgoing  accurately  reflects  your  understanding  and present  intent,
please execute and return to the undersigned a copy of this letter.  This letter
shall not be effective unless  countersigned and delivered to the undersigned on
or before October 24, 1997.


                                    By: /s/ Bart C. Gutekunst
                                        Chairman of the Board


                                    By: /s/ Alan J. Rabin
                                        President and CEO


Agreed to this 24th day of October, l997

By:  /s/ Ervin Schoenblum
    Acting President and COO Elecath

                                   Page 4 of 4


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                                                       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
November  12,  1997   relating  to   the  balance   sheets  of  Electro-Catheter
Corporation  as of August  31,  1997 and 1996,  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, 1997, which report appears in the August 31, 1997 annual report on Form 10-K
of Electro-Catheter Corporation.



                                             KPMG Peat Marwick LLP


Short Hills, New Jersey
December 15, 1997