U.S. SECURITIES AND EXCHANGE COMMISSION
                   WASHINGTON, D.C. 20549
                         FORM 10-KSB
     (Mark one)
 X   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
     SECURITIES EXCHANGE ACT OF 1934
     FOR THE FISCAL YEAR ENDED: December 31, 1997

     TRANSITION REPORT UNDER  SECTION 13 OR 15(d) OF THE
     SECURITIES EXCHANGE ACT OF 1934
     FOR THE TRANSITION PERIOD FROM             TO

              Commission file number   0-28260

                          EP MedSystems, Inc.
 (Name of small business issuer as specified in its charter)

          New Jersey                         22-3212190
(State or other jurisdiction of incorporation)
(IRS Employer Identification No.)

100 Stierli Court, Mount Arlington, NJ        07856
(Address of principal executive offices)    (Zip code)

Issuer's telephone number:  (973) 398-2800

Securities  registered under Section 12(b) of  the  Exchange Act:  None

Securities  registered under Section 12(g) of  the  Exchange Act:
Common  Stock, no par value, $.001  stated  value  per share

Check  whether  the  issuer:   (1)  has  filed  all  reports
required  to be filed by Section 13 or 15(d) of the Exchange
Act  during  the past 12 months (or for such shorter  period
that the registrant was required to file such reports),  and
(2)  has  been subject to such filing requirements  for  the
past 90 days.
                         X      Yes            No

Check  if  there  is no disclosure of delinquent  filers  in
response to Item 405 of Regulation S-B contained herein, and
no  disclosure  will  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-KSB or any amendment to this Form 10-KSB. [ X ]

The  issuer  had revenues of $4,013,782 for the fiscal  year
ended December 31, 1997.

The  aggregate  market  value of  the  issuer's  outstanding
voting stock held by non-affiliates on March 19, 1998, based
on  the closing sale price of its common stock on the Nasdaq
National  Market  on  such date, was  approximately  $  11.4
million.

As  of  March  19,  1998,  there were outstanding  7,599,917
shares  of  the  registrant's Common Stock,  no  par  value,
stated value $.001 per share.

Transitional Small Business Disclosure Format (check one)
     Yes       X      No

Forward Looking Statements
In  addition  to  historical information, this  Form  10-KSB
contains forward-looking statements relating to such matters
as   anticipated  financial  and  operational   performance,
business  prospects, technological developments, results  of
clinical  trials,  new  products, research  and  development
activities  and  similar  matters.  The  Private  Securities
Litigation  Reform Act of 1995 provides a  safe  harbor  for
forward-looking   statements.  EP  MedSystems,   Inc.   (the
"Company") notes that a variety of factors could  cause  the
Company's actual results and experience to differ materially
from the anticipated results or other expectations expressed
in  the  Company's forward-looking statements. When used  in
this   Form   10-KSB,  the  words  or  phrases   "believes,"
"anticipates,"  "expects," "intends," "will likely  result,"
"estimates," "projects" or similar expressions are  intended
to identify such forward-looking statements, but are not the
exclusive means of identifying such statements. Such forward-
looking  statements  are only predictions,  and  the  actual
events  or  results may differ materially from  the  results
discussed  in  the forward-looking statements. Factors  that
could  cause or contribute to such differences include,  but
are  not limited to, those matters discussed herein  in  the
sections  entitled "Item 1 - Business,"   "Item  3  -  Legal
Proceedings"  and  "Item  7  - Management's  Discussion  and
Analysis  of  Financial Condition and Results of Operations"
particularly the subsection of such Item 7 entitled "Factors
That May Impact Future Operations."

The  Company  cautions  readers  to  review  the  cautionary
statements  set  forth in this report and in  the  Company's
other   reports  filed  with  the  Securities  and  Exchange
Commission and cautions that other factors may prove  to  be
important in affecting the Company's business and results of
operations.   Readers  are  cautioned  not  to  place  undue
reliance  on  these forward-looking statements, which  speak
only  as  of the date of this report. The Company undertakes
no  obligation  to  publicly  revise  these  forward-looking
statements  to  reflect events or circumstances  that  arise
after the date of this report.

Trademarks and Tradenames
ProCath,   ALERT,  ALERT  System  and  ALERT  Catheter   are
registered  trademarks of the Company. EP MedSystems,  ALERT
Companion,   EP  WorkMate,  EP-2,  EP-3  and  PaceBase   are
trademarks  of  the  Company.  This  Form  10-KSB   includes
tradenames  and  trademarks  of  companies  other  than  the
Company.  EchoEye,  EchoMark  and  ColorMark  are,  to   the
Company's knowledge, trademarks of EchoCath, Inc.



                           PART I

Item 1.  Description of Business
EP  MedSystems,  Inc. designs, manufactures  and  markets  a
broad-based    line   of   products    for    the    cardiac
electrophysiology   ("EP")  market  for   the   purpose   of
diagnosing,  monitoring,  managing  and  treating  irregular
heartbeats known as arrhythmias. This product line  includes
the  EP  WorkMate,  a computerized monitoring  and  analysis
workstation  (the  "EP  WorkMate"),  the  EP-3  computerized
electrophysiology stimulator (the "EP-3 Stimulator" or  "EP-
3")  and  the PaceBase/TeleTrace III receiver, an integrated
ECG  monitoring device and computerized transmission  system
for automation of pacemaker and arrhythmia follow-up testing
and data archiving. The Company's product line also includes
diagnostic  electrophysiology  catheters,  temporary  pacing
catheters and related disposable supplies.

The  Company  has identified the diagnosis and treatment  of
atrial  fibrillation  as a primary  focus  for  its  ongoing
development  efforts.  Atrial  fibrillation  is   the   most
prevalent  type  of  abnormal  heart  rhythm,  estimated  to
afflict  over 2,000,000 people in the United States with  an
estimated  160,000 new cases developing each year.  Although
not  immediately  life threatening, atrial fibrillation  has
been linked to a significantly increased risk of stroke. The
American Heart Association estimates that 15% of all strokes
in   the   United  States  occur  in  people   with   atrial
fibrillation, with published reports that stroke is twice as
likely to be fatal in patients with atrial fibrillation.  In
patients over the age of 65, atrial fibrillation is reported
to quadruple the risk of stroke. In this regard, the Company
has  developed  a new product for internal cardioversion  of
atrial  fibrillation known as the ALERT System  (the  "ALERT
System"),  which  uses  a  patented  electrode  catheter  to
deliver  measured, variable, low energy electrical  impulses
directly  to  the  inside of the heart in order  to  convert
atrial fibrillation to a normal heart rhythm.

The Company was incorporated in New Jersey in January, 1993.
The  Company's principal offices are located at 100  Stierli
Court,  Mount Arlington, NJ 07856, and its telephone  number
is  973-398-2800.  Unless  the context  requires  otherwise,
references  to the Company include EP MedSystems,  Inc.  and
its    wholly   owned   subsidiaries   ProCath   Corporation
("ProCath") and EP MedSystems UK Ltd. ("EP MedSystems UK").

Background

The Heart and its Function
The  heart,  whose  function is to pump  blood  through  the
body's  circulatory system, is divided into  four  chambers,
two  upper chambers, the atria, and two lower chambers,  the
ventricles. At rest, a healthy heart typically beats between
50  and  100 times per minute. Each normal heartbeat is  the
result  of  electrical  impulses generated  at  the  heart's
natural  pacemaker,  the sinoatrial ("SA")  node,  which  is
located  near  the  top  of  the  right  atrium.  With  each
heartbeat, an electrical impulse travels down and across the
atria,  causing them to contract. This contraction  in  turn
sends blood into the ventricles, the heart's primary pumping
chambers.  The  electrical impulse then passes  through  the
atrioventricular ("AV") node, located between the atria  and
the  ventricles. After a brief delay, the impulse  continues
down the bundle branches and back up and across the Purkinje
fibers  within the ventricles. The ventricles then contract,
pumping blood throughout the body's circulatory system. When
the  normal electrical rhythm of the heart is disturbed, its
pumping  activity  can  be  adversely  affected  and   life-
threatening complications can result. Such abnormal episodes
are known as arrhythmias.

Atrial Fibrillation
Atrial fibrillation, a form of arrhythmia, is a disorganized
quivering  of  the upper chambers of the heart that  results
from  aberrant conduction of electrical signals  within  the
atria.   This   quivering  leads  to  an   ineffective   and
uncoordinated  pumping  of the heart,  which  often  reduces
cardiac  output by up to 30% and causes impaired blood  flow
to the brain. In some patients, atrial fibrillation can lead
to  an uncontrolled ventricular heart rate, precipitating  a
life-threatening  situation. Although patients  with  atrial
fibrillation can be asymptomatic, most suffer from shortness
of  breath,  palpitations, dizziness, fainting,  or  reduced
tolerance  to  exercise and the activities of daily  living.
Atrial fibrillation is a significant cause of mortality  and
morbidity,  particularly  from thromboembolism  and  stroke.
Each  year  approximately 75,000 strokes  in  the  U.S.  are
related to atrial fibrillation with published reports of  up
to   70%   of  such  patients  dying  or  suffering   severe
neurological deficit.

The  Company believes that more than 2,000,000 Americans are
currently   afflicted  with  atrial  fibrillation   and   an
estimated  160,000 new cases develop each  year.  Generally,
atrial   fibrillation  is  related  to  underlying   cardiac
disease, including congestive heart failure, coronary artery
disease,  hypertension and rheumatic heart disease,  but  it
may  also  occur  in patients with otherwise normal  hearts.
Atrial  fibrillation is most commonly found in the  elderly.
It  affects up to 5% of the population in the U.S. over  the
age  of  60.  It  is the leading cause of arrhythmia-related
hospitalizations  and,  in  1994,  comprised   the   primary
diagnosis  for approximately 300,000 hospitalized  patients,
more  than all other types of arrhythmia combined. In  1993,
more  than  1.2  million patients who were hospitalized  for
other  reasons  were  found to have, or to  have  developed,
atrial fibrillation during their hospitalization.

Atrial  fibrillation also develops in the  period  following
open  heart surgery in which the atria can suffer  temporary
trauma.  Although usually a temporary phenomenon encountered
in  the days following surgery, atrial fibrillation in  open
heart  surgery  patients  is often  dangerous  and  requires
immediate  intervention.  The  Company  believes  that  over
450,000 open heart procedures are performed annually in  the
United  States.  The Company estimates that  up  to  30%  of
patients  undergoing  open  heart  surgery  develop   atrial
fibrillation  in the post-operative period.  These  patients
are  either treated with external cardioversion or, in order
to  avoid  the  additional trauma associated  with  external
cardioversion, are left untreated. Patients who undergo open
heart  surgery typically have temporary pacing wires affixed
to the outside of the heart near the end of the procedure in
order  to  regulate their heartbeat post-operatively.  These
wires are threaded from the heart through the chest wall and
outside  the  body, where they can remain for  several  days
until pulled from their sewn-in position on the heart.  Also
during  open heart surgery, a SwanGanz catheter is typically
placed  in  the pulmonary artery to monitor blood  pressure.
This  catheter  can also remain in place  for  several  days
during the post-operative period.

The underlying causes of atrial fibrillation are complex and
the  progression  of  the  disease varies  from  patient  to
patient. In patients with underlying cardiac disease, atrial
fibrillation may initially occur paroxysmally, wherein short
periods of atrial fibrillation are interspersed with  normal
heart   rhythm.  Paroxysmal  atrial  fibrillation  generally
converts back to normal heart rhythm spontaneously, but many
patients  require  treatment  with  drugs  and  high  energy
external  cardioversion  to control  their  heart  rate  and
associated  symptoms.  Although  some  patients  may   never
progress   beyond   paroxysmal  atrial   fibrillation,   the
condition  often  precedes  the development  of  chronic  or
persistent   atrial   fibrillation.  In  persistent   atrial
fibrillation, patients do not convert to normal heart rhythm
spontaneously,  but require cardioversion  to  terminate  an
episode  and additional drug therapy thereafter to  maintain
normal  heart  rhythm.  Persistent atrial  fibrillation  can
progress  to  permanent atrial fibrillation, a condition  in
which  the  arrhythmia cannot be converted using traditional
external  cardioversion  or  drug  therapy.  Patients   with
permanent atrial fibrillation are generally given  drugs  to
control  the  heart rate or therapeutic cardiac ablation  is
performed  to  destroy  the  AV  node  and  a  pacemaker  is
implanted  to  provide  ventricular  rate  control.  Neither
treatment,   however,   addresses  the   underlying   atrial
fibrillation problem.

Although  treatment  of  atrial  fibrillation  varies   from
patient to patient, the treatment goals remain constant: (1)
restore  and  maintain normal heart rhythm, (2) control  the
ventricular  heart  rate  and (3) prevent  stroke.  External
cardioversion  and  drugs are used to restore  normal  heart
rhythm;  antiarrhythmic drugs are used  to  maintain  normal
heart rhythm; anticoagulants (blood thinning drugs) are used
to  reduce  the risk of stroke; and drugs, AV node  ablation
accompanied by pacemaker implantation and open heart surgery
are  used  to  control the ventricular rate. None  of  these
therapies is universally effective and each presents certain
risks and side effects to the patient.

Restoration  of  normal heart rhythm, or  cardioversion,  is
generally attempted by means of antiarrhythmic drug  therapy
or  high  energy external cardioversion. A variety of  drugs
may  be  employed, but none are universally  successful  and
antiarrhythmic agents generally have been shown to  increase
the  risk  of  life threatening ventricular arrhythmias.  In
addition,  these  drugs  can  have  serious  side   effects,
including  liver  failure,  thyroid  dysfunction,  pulmonary
fibrosis  (thickening  of  the  lungs),  dizziness,  nausea,
difficulty  urinating and diarrhea. Numerous studies  report
variable  success  with  pharmacologic  cardioversion,  with
higher success rates reported in patients with recent  onset
atrial fibrillation of less than 48 hours duration.

High  energy  external cardioversion is more effective  than
pharmacologic cardioversion and is a mainstay of  first-line
therapy    for   atrial   fibrillation.   During    external
cardioversion,  between one and four high energy  electrical
shocks of up to 360 joules each are applied across the chest
wall  by means of an external defibrillator. Because of  the
severe   pain   involved,   patients   undergoing   external
cardioversion   are  given  general  anesthesia   or   heavy
sedation.  This  generally requires patient  hospitalization
and  the  presence  of  an  anesthesiologist.  In  addition,
patients experiencing atrial fibrillation for longer than 48
hours  are  routinely given anticoagulant drugs for  two  to
three weeks before external cardioversion to reduce the risk
of    embolic   strokes.   Patients   undergoing    external
cardioversion frequently report residual neuromuscular pain.
Serious  side effects, while infrequent, include  damage  to
heart  tissue,  spinal  fracture,  thrombus  formation   and
stroke.

Patients    who    have   undergone   successful    external
cardioversion  are  frequently  placed  on   a   course   of
antiarrhythmic drug therapy to maintain normal heart rhythm.
While   external  cardioversion  is  highly   effective   in
terminating atrial fibrillation, without antiarrhythmic drug
therapy,  a  majority  of patients  revert  back  to  atrial
fibrillation within one year of external cardioversion. With
antiarrhythmic  drug  therapy, the  percentage  of  patients
reverting  to  atrial fibrillation decreases.  The  greatest
percentage of recurrences occur within the first six months.
Despite  these  recurrence rates and  the  trauma  and  cost
associated  with  high energy external  cardioversion,  this
treatment  method  remains  a commonly  employed  first-line
therapy  and  atrial  fibrillation  patients  often  require
multiple external cardioversions.

Products
The  Company develops, markets, sells and services  a  broad
based, integrated line of electrophysiology products used to
monitor,  analyze,  diagnose and treat cardiac  arrhythmias.
The Company's products can be separated by function into the
following categories described below.

The ALERT System
The  Company  has developed the ALERT System to  be  a  more
effective  and  less traumatic method of  converting  atrial
fibrillation  to  normal  heart  rhythm.  The  ALERT  System
represents a new approach to electrical cardioversion  known
as  low  energy internal cardioversion, in which  up  to  15
joules  of electrical energy are delivered directly  to  the
inside of the heart. The ALERT System comprises a single-use
proprietary  electrode catheter with two separate  electrode
arrays  (the "ALERT Catheter") and an external energy source
(the "ALERT Companion").

The  Company  believes  low  energy  internal  cardioversion
provides  numerous  potential advantages  over  high  energy
external  cardioversion and drug conversion  therapies.  The
Company believes the ALERT System will prove more effective,
less painful and less traumatic than external cardioversion.
It  does not require the use of general anesthesia,  can  be
performed  on an outpatient basis and involves the  delivery
of  much  lower levels of energy to the patient. The Company
also  believes  the ALERT System will prove  more  effective
than  drug  conversion therapy without the risk  of  harmful
side effects associated with such therapy.

The  Company believes that atrial fibrillation occurs in  up
to  30%  of  patients  during the open heart  surgery  post-
operative  period.  According to published  reports,  atrial
fibrillation  occurring  during  the  post-operative   heart
surgery  recovery  period  can  contribute  to  an  extended
hospital  stay of up to 3 to 5 days, thereby increasing  the
overall  cost  of  such  surgery  by  as  much  as  $20,000.
Consequently,   an   effective,   low-trauma   cardioversion
technique   that   can  be  deployed  rapidly   could   have
applications  for open heart surgery patients.  The  Company
believes  that  due to the significantly  lower  amounts  of
energy   required  to  convert  atrial  fibrillation   using
internal  cardioversion,  the  ALERT  System  could   be   a
particularly appropriate cardioversion alternative for these
patients.  In  addition, the ALERT System  may  be  used  to
provide temporary pacing to the atria and ventricles and  to
monitor   blood  pressure  in  the  left  pulmonary  artery,
replacing   both  temporary  pacing  wires   and   Swan-Ganz
catheters,  and  reducing the risk of  infection  from  such
devices. The Company believes the ALERT System's integration
of   these   features   into  a  single  catheter   provides
significant  advantages over existing treatment methods  for
patients who have undergone open heart surgery.

The  ALERT Catheter is inserted percutaneously into a  vein,
often  in  the  arm,  advanced  to  the  heart  under  X-ray
fluoroscopy and positioned with one defibrillation electrode
array  in  the  left pulmonary artery and the other  in  the
right  atrium. Energy is then delivered in small  increments
between  the  two  electrode arrays from an external  energy
source. During this procedure the patient is mildly sedated,
but  conscious.  The  ALERT System can  also  simultaneously
provide  temporary  pacing capabilities and  blood  pressure
monitoring   in  the  left  pulmonary  artery   during   the
procedure.  The Company believes that internal cardioversion
using  the  ALERT  System  will provide  the  following  key
benefits:

     -    Less trauma, discomfort and risk to patients than high
          energy external cardioversion.
     -    Higher success rate in converting patients with chronic
          atrial fibrillation to normal heart rhythm than with high
          energy external cardioversion (based on initial clinical
          experience).
     -    Elimination of harmful side effects associated with
          drug therapies.
     -    Can be used on an outpatient basis; general anesthesia
          is not required.
     -    Lower overall cost per procedure than high energy
          external cardioversion.
     -    Greater applicability for converting atrial
          fibrillation occurring in the days immediately following
          open heart surgery.
     -    Combination of temporary pacing and blood pressure
          monitoring features with cardioversion in a single multi-
          purpose catheter.

The  ALERT System is based on technology invented by Eckhard
Alt,  MD,  a  member  of the Company's  Scientific  Advisory
Board.  The  Company  has licensed the  exclusive  worldwide
right  to use the ALERT technology in the ALERT System  from
Dr. Alt. Three patents have been issued in the United States
on the ALERT System. The Company and Dr. Alt have also filed
additional  patent  applications and continuations  for  the
ALERT  Catheter and the ALERT Companion in the United States
and   internationally.  See  "--  Patents  and  Intellectual
Property."

Clinical Trials
The  Company  believes the ALERT System is a medical  device
which will require pre-market approval ("PMA") from the U.S.
Food  and Drug Administration ("FDA") prior to marketing  in
the  United  States. The Company submitted a clinical  study
protocol  to  the  FDA  as part of  an  application  for  an
Investigational  Device  Exemption  ("IDE").  The  FDA   has
approved  the IDE application for the ALERT System  and  the
Company  is  conducting  human  clinical  trials  at   three
hospitals  in  the  United States: Duke  University  Medical
Center,  the Medical Center of the University of Alabama  at
Birmingham  and Allegheny University of the Health  Sciences
in  Philadelphia,  PA.  The Company intends  to  expand  the
trials  to  include  additional leading atrial  fibrillation
research centers during 1998.

The  Company  hopes that the results of the  ALERT  clinical
trials will demonstrate the safety and efficacy of the ALERT
System  for internal catheter based cardioversion of  atrial
fibrillation.  The  Company believes such  results  will  be
critical  to  obtaining  approval for the ALERT System  from
the  FDA  for sale in the United States. The Company expects
to complete the patient studies and file for FDA approval to
sell  the ALERT System in the United States within the  next
nine  to  twelve months. Approval for the ALERT  System  may
take  several  years  if approved at all.  The  Company  has
received approval from its notified body to label the  ALERT
System  with a CE Mark. This designation allowed the Company
to  initiate  sales  of  the ALERT System  in  the  European
Community in the fourth quarter of 1997. See " -- Government
Regulation."

EP Laboratory Workstations and Stimulators (EP WorkMate, EP-
3 Stimulator)
The    Company's    EP    WorkMate   is    a    computerized
electrophysiology  workstation that monitors,  displays  and
stores  cardiac  electrical activity  and  arrhythmia  data.
Electrophysiology workstations are dedicated data management
systems  designed  specifically for use in electrophysiology
procedures  to  view and record procedural data,  facilitate
data  analysis  and  generate  customized  reports.  The  EP
WorkMate  offers, among other features, up to  120  recorded
channels  of  cardiac  electrical data,  real-time  analysis
including  graphical and quantitative display of such  data,
superior  ease  of  use  and  a  single  keyboard  for   all
operations.  The EP WorkMate consists of a Pentium  PC  with
integral   proprietary   software,  a   proprietary   signal
conditioning  unit,  dual  21-inch,  high  resolution  color
monitors, an optical disk or tape drive for data storage,  a
custom  keyboard, catheter and stimulator junction  box  and
laser  printer. The EP WorkMate is typically  sold  with  an
integrated  EP-3 Stimulator. In addition, each  EP  WorkMate
has  an internal modem to provide a direct link between  the
purchaser  and  the  Company,  facilitating  field  software
support.  The  EP WorkMate is differentiated from  competing
products  by  (i)  its seamless integration  with  the  EP-3
Stimulator, (ii) its capacity to receive and display  up  to
120  channels  of  cardiac electrical  data  simultaneously,
(iii) its ability to process and simultaneously display both
real-time and historical electrophysiology activity and (iv)
its  simple,  user-friendly software based on a menu-driven,
point-and-click interface.

The  Company's EP-3 Stimulator is a computerized  electrical
signal  generator and processor used to stimulate the  heart
with  electrical  impulses  in order  to  locate  electrical
disturbances or arrhythmias. The Company believes  the  EP-3
is   currently   the   only  computerized  electrophysiology
clinical  stimulator being marketed in the U.S. It  features
automatic synchronization and rate controls as well  as  the
same user interface as the EP WorkMate. The EP-3 can be sold
as  a stand-alone electrophysiology stimulator or integrated
with the EP WorkMate. If an EP-3 is added as a component  to
the  EP WorkMate, both products can be easily operated  from
the  EP  WorkMate's keyboard or mouse. The Company  believes
the  EP WorkMate, when integrated with the EP-3, offers  the
most    advanced   computer   tools   available    to    the
electrophysiology market.

Catheter Products
The  Company  presently markets a full  line  of  diagnostic
electrophysiology catheters for stimulation and  sensing  of
electrical  signals  during electrophysiology  studies.  The
Company's   diagnostic  catheters  are  distinguished   from
competing products by their availability in various  degrees
of  flexibility and curve shape for maximum customization to
each  procedure being performed. The Company offers numerous
electrode/curve  configurations of  catheters.  The  Company
also  offers  diagnostic  catheters  with  user-formed   tip
shaping, allowing a physician to change the curve on the tip
of  a catheter before or during a procedure to conform to  a
patient's  anatomy.  Temporary pacing catheters  incorporate
both   pacing  and  sensing  electrodes  and  are  used   to
temporarily  regulate pacing of the heart, including  during
the  period  while  a  patient  awaits  permanent  pacemaker
implant. These catheters are available in a number of  sizes
with  different curve shapes. The Company offers a temporary
pacing  catheter with a balloon tip that allows guidance  of
the  catheter  without X-ray fluoroscopy. The  Company  also
offers  disposable introducer kits that are used to  aid  in
the  insertion  of  catheters  or  pacemaker  leads  into  a
patient's   venous  system.  The  kits  include  a   plastic
introducer, guidewire, needle and syringe.

TeleTrace/PaceBase System
Patients who have undergone pacemaker or implantable cardiac
defibrillator ("ICD") implantations are regularly  monitored
to  assess  the  condition of the implanted  device  or  the
status  of  an  arrhythmia.  The  Company's  TeleTrace   III
Receiver  ("TeleTrace")  is  an  integrated  ECG  monitoring
device  and  computerized transmission system for automation
of  pacemaker  and  arrhythmia follow-up  testing  and  ECGs
either  in  a  physician's office  or  over  the  telephone.
TeleTrace enables an ECG to be taken over the telephone  for
real time or subsequent review.

The  Company's PaceBase database software stores information
generated by the TeleTrace, enabling the user to analyze and
archive   a  patient's  pacemaker  or  arrhythmia  activity,
thereby  eliminating manual recordkeeping.  PaceBase  stores
pacemaker and ICD histories and also provides an interactive
database of all parameters and specifications for pacemakers
and  ICDs manufactured in the U.S. during the last 15 years.
PaceBase   also  stores  certain  patient  data,   including
pertinent   implant   data,  current  programmed   settings,
elective  replacement indicators and  special  notes  to  be
displayed  on-screen during patient follow-up  sessions.  In
addition,  PaceBase allows customized settings for  multiple
physicians and generates customized insurance and  physician
reports based on patient follow-up sessions.

Patents and Intellectual Property
The Company's success and ability to compete depends in part
upon  its  ability  to  obtain  patent  protection  for  its
existing  products and those under development. The  Company
has  filed  for  patents  on its important  inventions,  has
acquired patents and has entered into license agreements  to
obtain rights under selected patents of third parties as  to
technology  it  considers important  to  its  business.  The
Company intends to file additional patents in the future  in
order  to  continue its efforts to establish,  preserve  and
enforce protection for its proprietary technology and  other
intellectual  property. The Company's intellectual  property
consist of the following:

     - An exclusive worldwide license under three issued U.S.
       patents, an exclusive license under one patent application
       pending in the European Patent Office and additional filed
       or licensed patent applications and continuations for the
       ALERT System. The license agreement provides for the Company
       to pay royalties equal to 5% of net sales of all products
       covered by the licensed technology until expiration of the
       last licensed patent.

     - A semi-exclusive license under an issued U.S. patent
       for technology to conduct temporary ventricular
      defibrillation. The license agreement provides for the
      Company to pay royalties up to a maximum of 5% of net sales
      of all products covered by the licensed technology until
      expiration of the licensed patent, with lifetime royalties
      limited to a maximum of $1,000,000.

     -A non-exclusive license under an issued U.S. patent for
      synchronization of a defibrillation shock delivered using
      the ALERT Companion. The license agreement provides for the
      Company to pay royalties equal to the greater of $200 per
      unit or 2% of net sales of the ALERT Companion.

     Exclusive licenses under nine issued U.S. patents and
      four foreign filings as to certain ultrasound technologies
     in an attempt to develop ultrasound guided electrophysiology
     products within the field of use. The field of use of the
     license covers cardiac electrophysiology except for
     pacemaker leads and permanently implanted defibrillation
     devices. The license agreement calls for a royalty on net
     sales of all products covered by the licensed technology,
     including minimum royalties beginning in 1999 and continuing
     for the life of the applicable patents and continuations
     thereof.

    A patent covering the application of conductive
     adhesive bands for catheter electrodes. The license
     agreement provides for the Company to pay royalties of 1% of
     net sales of all products covered by the licensed technology
     until expiration of the licensed patent, with lifetime
     royalties limited to a maximum of $1,000,000.

     Six patent applications in the United States for new
     catheter products, manufacturing methods or other advanced
     catheter technologies.

     The Company is in the process of preparing patent
     applications for five new products or improvements to
     existing products.

During   February,   1997,  the  Company  licensed   certain
technologies  from EchoCath in order to attempt  to  develop
products  which  allow visualization of the heart's  anatomy
and  visualization of catheters inside the heart through the
use  of  ultrasound  imaging. The agreement  calls  for  the
Company   to  make  payments  totaling  $700,000,  in   four
installments, as certain development milestones and  initial
sales  are  achieved.  As of March 19,  1998,  none  of  the
development  milestones  have been  achieved.  Further,  the
Company   cannot   determine  if  any  of  the   development
milestones  will  be met. Terms of the license  call  for  a
royalty  on net sales, including minimum royalties beginning
in  1999  and  continuing  for the life  of  the  applicable
patents   and   continuations  thereof.  The  Company   also
purchased  280,000  shares of newly issued  5.4%  cumulative
convertible  preferred stock of EchoCath for  $1,400,000  in
cash. (See Item 3. "Legal Proceedings.")

The  Company  intends to rely on a combination  of  patents,
trade  secrets,  copyrights and trademarks  to  protect  its
intellectual  property rights. No assurance  can  be  given,
however,  that  competitors will not  independently  develop
substantially equivalent proprietary technology, or that the
Company  can  meaningfully protect its rights in  unpatented
proprietary technology.

There  can be no assurance that any of the Company's  patent
applications  or  applications as to which it  has  acquired
licenses  will  issue  as patents, or that  if  patents  are
issued  that  they will be of sufficient scope and  strength
to provide meaningful protection of the Company's technology
or  any  commercial advantage to the Company, or  that  such
patents  will not be challenged, invalidated or circumvented
in  the future. Moreover, there can be no assurance that the
Company's   competitors,  many  of  which  have  substantial
resources and have made substantial investments in competing
technologies, do not presently have or will not seek patents
that  will  prevent, limit or interfere with  the  Company's
ability to make, use or sell its products either in the U.S.
or in other countries.

The  Company has not received any notices alleging,  and  is
not aware of, any infringement by the Company of any patents
or intellectual property of others. However, there can be no
assurance  that current and potential competitors and  other
third parties have not filed or in the future will not  file
applications  for patents, or have not received  or  in  the
future will not receive, patents or other proprietary rights
relating to devices, apparatus, materials or processes  used
or proposed to be used by the Company.

The  market  for  medical  devices  for  the  treatment   of
cardiovascular  disease has been characterized  by  frequent
litigation regarding patent and other intellectual  property
rights. In the event that claims of infringement of a  third
party's  rights  are made and upheld, the Company  could  be
prevented   from   exploiting  the   technology   or   other
intellectual  property involved, or  could  be  required  to
obtain   licenses  from  the  owners  of  such  intellectual
property.  Alternatively, the Company  could  be  forced  to
redesign  its  products or processes to avoid  infringement.
There  can  be  no  assurance that such  licenses  would  be
available or, if available, would be on terms acceptable  to
the  Company or that the Company would be successful in  any
attempt  to  redesign  its products or  processes  to  avoid
infringement. Litigation may be necessary to defend  against
claims  of  infringement, to enforce patents issued  to  the
Company  or  to  protect trade secrets and could  result  in
substantial  cost  to,  and  diversion  of  effort  by,  the
Company.

Research and Development
The  electrophysiology  market  is  characterized  by  rapid
technological change, new product introductions and evolving
industry   standards.   To  compete  effectively   in   this
environment,   the   Company  engages  in   the   continuous
development of products by (i) engaging in internal research
and  development  or  contracting  with  third  parties  for
specific  research and development projects, (ii)  licensing
new  technology  and (iii) acquiring products  incorporating
technology that could not otherwise be developed as  quickly
using internal resources.

The  Company's  expenditures for  research  and  development
(which includes expenditures for clinical trials, regulatory
affairs  and  engineering) totaled approximately $2,262,169,
$856,191  and  $320,311 in the twelve month  periods  ending
December 31, 1997, 1996 and 1995, respectively. During 1997,
the  Company's  principal research and  development  project
involved   the  ALERT  System,  including  engineering   and
development  of the ALERT Companion, qualification  for  ISO
9001  and  approval to label the ALERT System  with  the  CE
Mark, design of the clinical trial protocol, preparation  of
submissions to the FDA and initiation of clinical trials  of
the ALERT System.

The  Company also realized research and development expenses
related  to efforts to place a flexible metallic coating  on
its  electrophysiology  catheters,  preliminary  efforts  to
develop ultrasound guided products, hiring of additional in-
house  engineering  and  technical  support  personnel   and
increased  development work on existing products,  including
the    EP    WorkMate   and   electrophysiology   catheters.
Additionally,  other  research and development  efforts  are
ongoing  to develop new products, enhance existing  products
and lower production costs.

During   February,   1997,  the  Company  licensed   certain
technologies  from EchoCath in order to attempt  to  develop
products  which  allow visualization of the heart's  anatomy
and  visualization of catheters inside the heart through the
use  of   ultrasound  imaging. The  Company  is  engaged  in
ongoing   development   of   a  number   of   catheter-based
electrophysiology  products and employs  software  engineers
who are continuously involved in software development of new
products or improvements to existing products. There can  be
no   assurance  that  such  development  efforts   will   be
successful or that if products are developed that regulatory
approval to sell any such products will be obtained.

The  Company  expects  that expenses related  to  the  ALERT
System will be significant during 1998, when clinical trials
are  expected  to be ongoing. The Company also expects  that
other research and development expenses will increase as  it
continues   attempts  to  develop  new  products,  including
ultrasound guided products and several new catheter products
as  well  as  ongoing improvements to existing products  and
other development projects which may arise.

Sales and Marketing

Domestic
Historically,  the  Company  has  relied  on   third   party
distributors  for  all  of its sales  activities.  Following
completion of its initial public offering, the Company began
efforts to build a direct sales and marketing force to  sell
all  of  its products in the domestic market. This  included
the  hiring of a National Sales Manager, five Regional Sales
Managers,  a  Director  of Marketing  and  several  clinical
engineers  and administrative support personnel.  Also,  the
Company  terminated  its  relationships  with  all  of   its
domestic distributors. The Company believes that the  change
from a distributor-based sales force to a direct sales force
had  a  temporary  adverse effect on sales of  its  products
during  the second half of 1996 and the first half of  1997.
However, the Company also believes its domestic direct sales
force  has  the potential to generate greater sales  in  the
future  than  the Company had been experiencing through  the
use   of   independent  distributors.  The  Company   cannot
determine when or if that level of sales will be achieved.

International
The  Company  utilizes  distributors to  sell  its  products
overseas  and  is  in the process of adding distributors  in
several  countries not previously represented. In 1997,  the
Company formed a U.S. subsidiary, with a branch office based
in  the United Kingdom, to improve distributor relationships
and  to  assist in the introduction of the ALERT System  for
sale  in Europe. The UK office is currently staffed  with  a
Sales Manager, International Marketing Manager, two clinical
engineers  and  one  administrative  employee.  The  Company
expects  to  expend considerable resources and effort  as  a
result  of  the introduction of the ALERT System in  Europe.
Examples of the types of expenditures are physician training
and  education,  promotional material, sample  products  and
increased direct sales expenses, among others. During  July,
1997,  the  Company initiated sales through a  new  Japanese
distributor  and has taken steps to improve its distribution
network throughout the Asian markets.

No   assurance  can  be  given  that  the  Company  or   its
distributors can successfully introduce the ALERT System  or
the Company's other products in Europe or elsewhere on terms
acceptable  to the Company, or at all. Future foreign  sales
will  be  subject to certain risks, including exchange  rate
fluctuations,  local medical reimbursement  issues,  duties,
tariffs   and   taxes,   import   restrictions   and   other
regulations.

Manufacturing

Catheter Products
Substantially  all  of the Company's catheter  products  are
manufactured at ProCath's  facility located in  Berlin,  New
Jersey. Each catheter is assembled and tested by the Company
prior  to  sterilization. The Berlin facilities and  quality
assurance  procedures  are  subject  to  Good  Manufacturing
Practices  ("GMP") regulations promulgated by the  FDA.  Raw
material  vendors  are  required to submit  certificates  of
compliance  to  the  Company's specifications.  In  January,
1997,   Procath  received  ISO-9001  Certification  of   its
manufacturing  facility. ProCath has received approval  from
its European notified body to apply the CE Mark to the ALERT
product line and to its other catheter products, a necessity
for  the  continued sales of the Company's products  in  the
European  Community.  During  1997,  ProCath  expanded   its
catheter manufacturing facilities and has hired and  trained
additional  personnel. ProCath has no experience  in  large-
scale  manufacturing and there can be no assurance that  the
Company  will  be  successful in manufacturing  products  in
significant  volume.  The  Company  believes  that  it   has
sufficient  capacity  to satisfy its catheter  manufacturing
needs for at least the next twelve months.

Hardware and Software Products
The Company assembles its computer systems (the EP WorkMate,
EP-3  and  TeleTrace) at its Mount Arlington  facility.  The
ALERT  Companion is assembled at ProCath. Software  products
are  generally  developed  by the Company's  engineers.  The
Company  relies  on outside sources for the  manufacture  of
critical components of the ALERT Companion, EP WorkMate, EP-
3  Clinical  Stimulator and the TeleTrace III Receiver.  All
custom  components are manufactured in conformity  with  the
Company's  specifications and the manufacturers' facilities,
activities  and quality assurance procedures are subject  to
GMP  regulations. Any interruption in the supply from  these
suppliers  would  have  a material  adverse  effect  on  the
Company's  ability to deliver its products until  acceptable
arrangements can be made with a qualified alternative source
of  supply which, as a result, could have a material adverse
effect  on  the Company's business, financial condition  and
results of operations. The Company also incorporates several
off  the shelf components in its systems. Examples of  these
items  are  computers, high resolution  monitors  and  laser
printers  which are typically available from more  than  one
vendor.  The parts are inspected and tested upon receipt  as
well  as  when the components are assembled into a  complete
system prior to shipment.

Government Regulation

United States
In the United States, the development, testing, manufacture,
labeling,  marketing, promotion and sale of medical  devices
are  regulated by the FDA under the Federal Food, Drug,  and
Cosmetic  Act  ("FFDCA"). The FDA has  broad  discretion  in
enforcing  the  FFDCA,  and  noncompliance  with  applicable
requirements   can  result  in  fines,  injunctions,   civil
penalties,  recall or seizure of products, total or  partial
suspension   of  production,  failure  to  grant   premarket
clearance  or  premarket approval for devices  and  criminal
prosecution.

Medical  devices are classified into one of  three  classes,
Class  I,  II or III, on the basis of the controls necessary
to reasonably ensure their safety and effectiveness. Class I
devices  require  general controls such as proper  labeling,
premarket  notification  and  adherence  to  GMP.  Class  II
devices  require  the  use  of  special  controls  such   as
performance    standards,   post-market   surveillance    by
regulatory  bodies, patient registries and  FDA  guidelines.
Class  III  devices  must  generally  receive  a  pre-market
approval ("PMA") from the FDA prior to being marketed in the
U.S. in order to ensure their safety and effectiveness.

Before a new device can be introduced into the market in the
U.S.,  the  manufacturer generally must  obtain  either  FDA
clearance  of a premarket notification filing under  Section
510(k)  of the FFDCA (a "510(k) submission") or FDA approval
of  a  PMA application. A 510(k) submission will be  granted
clearance  by  the  FDA  if  the submitted  data  and  other
information   establishes  that  the  proposed   device   is
"substantially  equivalent" to a  predicate  device  legally
marketed in the U.S. A predicate device is a device that was
legally  marketed in the U.S. prior to May  28,  1976  or  a
device marketed since that date that has been determined  by
the  FDA to be substantially equivalent pursuant to a 510(k)
application and for which a PMA is not required. Substantial
equivalence means that the device has the same intended  use
and  is  as safe and effective as a legally marketed  device
and  does  not  raise questions of safety and  effectiveness
that  are  different than those associated with the  legally
marketed  device. The FDA has recently been  requiring  more
data  and information to demonstrate substantial equivalence
than  in the past. It generally takes between 3 to 12 months
from  the  date  of  submission to obtain  510(k)  premarket
clearance,   but   may  take  longer  depending   upon   the
circumstances.  The  FDA  may determine  that  the  proposed
device  is  not substantially equivalent, or that additional
data    is   needed   before   a   substantial   equivalence
determination can be made. A "not substantially  equivalent"
determination, or a request for additional data, could delay
the  market introduction of new products that fall into this
category and could have a materially adverse effect  on  the
Company's  business,  financial  condition  and  results  of
operations. There can be no assurance that the Company  will
obtain  510(k)  premarket clearance within  the  above  time
frames, if at all, for any of the devices for which  it  may
file a 510(k) submission in the future.

A  510(k)  submission is also required when the manufacturer
makes  a change or modification to a legally marketed device
that  could significantly affect the safety or effectiveness
of the device, or where there is a change or modification in
the  intended  use  of  the  device.  When  any  change   or
modification  is made in a device or its intended  use,  the
manufacturer  is expected to make the initial  determination
as  to whether the change or modification is of a kind  that
would  necessitate a filing of a new 510(k) submission.  The
FDA's  regulations provide only limited guidance for  making
this determination.

A  PMA application must be filed as to a proposed device  if
the  device  is not substantially equivalent  to  a  legally
marketed device or if it is a Class III device for which the
FDA  has called for PMAs. The PMA procedure involves a  more
rigorous, complex and lengthy review process by the FDA than
the  510(k) premarket clearance procedure. A PMA application
must  be supported by extensive data, including pre-clinical
and  clinical  trial  data  to demonstrate  the  safety  and
efficacy of the device. If human clinical trials of a device
are  undertaken,  and  the  device presents  a  "significant
risk,"  the  manufacturer or the distributor of  the  device
must  obtain  FDA  approval of an IDE application  prior  to
commencing human clinical trials in the U.S.

The  IDE  application must be supported by  data,  typically
including  the results of animal and laboratory testing.  If
the  IDE application is approved, human clinical trials  may
begin  at a specific number of investigational sites with  a
maximum specific number of patients, as approved by the FDA.
Sponsors  of  clinical trials are permitted  to  charge  for
those  devices  distributed  in  the  course  of  the  study
provided such compensation does not exceed recovery  of  the
costs of manufacture, research, development and handling.

Upon receipt of a PMA application, the FDA makes a threshold
determination as to whether the application is  sufficiently
complete  to  permit  a  substantive  review.  If  the   FDA
determines   that   the  PMA  application  is   sufficiently
complete, it will "file" the application. Otherwise, the FDA
will  request that the sponsor submit additional information
within  180  days.  Depending on the nature  and  amount  of
information requested by the FDA, the PMA review process may
be  substantially  delayed  by  such  a  request.  Once  the
submission  is  filed, the FDA begins a review  of  the  PMA
application.  An  FDA review of a PMA application  generally
takes  between  one and three years from the  date  the  PMA
application is filed, but may take significantly longer. The
review  time  is  often significantly extended  if  the  FDA
requests  more  information or clarification of  information
already  provided  in  the  submission.  During  the  review
period,  an  FDA advisory committee, typically  a  panel  of
clinicians,  will likely be convened to review and  evaluate
the application and provide recommendations to the FDA as to
whether  the  PMA should be approved. In addition,  the  FDA
will inspect the manufacturing facility where the unapproved
product  is to be made to ensure compliance with  the  FDA's
GMP requirements prior to issuance of a PMA.

The PMA process can be expensive and a number of devices for
which  PMAs  have been sought by other companies have  never
been  approved for marketing. There can be no assurance that
the  Company  will  be  able to obtain necessary  regulatory
approvals or clearances on a timely basis or at all.  Delays
in receipt of or failure to receive such approvals, the loss
of  previously received approvals, or failure to comply with
existing  or  future regulatory requirements  would  have  a
material adverse effect on the Company's business, financial
condition and results of operations.

The  Company  believes the ALERT System may be a  Class  III
medical  device  which will require FDA  approval  prior  to
marketing  in  the United States. The Company  received  FDA
approval  to begin clinical trials under its IDE filing  and
has  commenced human clinical trials of the ALERT System  at
three  hospitals  in  the  United  States:  Duke  University
Medical  Center,  the Medical Center of  the  University  of
Alabama at Birmingham and Allegheny University of the Health
Sciences in Philadelphia, PA. The Company intends to  expand
the trials to include additional leading atrial fibrillation
research  centers  during  1998 to  obtain  data  needed  to
support its application. There can be no assurance that  the
clinical   trials   will   demonstrate   the   safety    and
effectiveness  of the ALERT System, or that  a  subsequently
filed application will be accepted by the FDA for filing  or
approved.

Following  FDA  clearance  or  approval  of  a  device   for
commercial  distribution,  the primary  form  of  government
regulation  of medical devices is the FDA's GMP  regulations
for  medical devices. These regulations, administered by the
FDA,  set  forth requirements to be observed in the  design,
manufacture,  packaging, labeling  and  storage  of  medical
products  for  human  use,  including  implementation  of  a
quality assurance program. These regulations require,  among
other things, that manufacturing be controlled by the use of
written  procedures and the ability to produce devices  that
meet  specifications be validated by extensive testing. They
also require inspection and testing of the products produced
and  investigation when devices fail to meet specifications.
Failure  to  adhere  to  GMP requirements  would  cause  the
products produced to be considered in violation of the FFDCA
and   subject  to  enforcement  action.  The  FDA   monitors
compliance    with   these   requirements    by    requiring
manufacturers to register their manufacturing facilities and
list  their  products  with  the  FDA,  and  subjecting  the
facilities to periodic FDA inspections. If an FDA  inspector
observes   conditions  that  might  be  violative   of   GMP
procedures,  the manufacturer must correct those  conditions
or explain them satisfactorily, or face potential regulatory
action  that  might include physical removal of the  product
from   the   market.  The  FDA's  Medical  Device  Reporting
regulations   also   require  that   the   Company   provide
information  to the FDA on the occurrence of any  deaths  or
serious  injuries alleged to have been associated  with  the
use  of  the  Company's products, as well as on any  product
malfunction that would likely cause or contribute to a death
or  serious injury if the malfunction were to recur. FDA law
and regulations also prohibit a device from being labeled or
promoted for unapproved or uncleared indications. If the FDA
believes  that a company is not in compliance  with  any  of
these regulations, it can institute proceedings to detain or
seize  products, issue a recall, seek injunctive  relief  or
assess  civil and criminal penalties against such a company.
Failure  on  the part of the Company or by its suppliers  of
critical components to comply with GMP could have a material
adverse   effect   on  the  Company's  business,   financial
condition and results of operations.

International
Sales of medical devices outside of the U.S. are subject  to
foreign  regulatory  requirements  that  vary  widely   from
country to country. The time required to obtain approval  by
a  foreign  country  may  be longer  or  shorter  than  that
required for FDA approval, and the requirements may  differ.
Many  foreign  countries generally permit studies  involving
humans   for   medical  devices  earlier  in   the   product
development  cycle  than is permitted by regulation  in  the
U.S.  Other countries, such as Japan, have standards similar
to  those  of  the FDA. There can be no assurance  that  the
Company  will obtain regulatory approvals in such  countries
or  that it will not be required to incur significant  costs
in   obtaining   or   maintaining  its  foreign   regulatory
approvals. Delays in the receipt of approvals to market  the
Company's  products or failure to maintain  these  approvals
could  have  a  material  adverse impact  on  the  Company's
business, financial condition or results of operations.

Foreign  countries  also  often have  extensive  regulations
regarding safety, manufacturing processes and quality  which
differ  from those in the United States and must be  met  in
order to continue sale of a product within the country.  The
European  Economic Community has instituted the  requirement
that  all  medical  products sold into  the  European  Union
comply  with  the Medical Device Directive (the "MDD").  The
MDD  requires that all such products be labeled with the  CE
Mark,  an  international  symbol  of  adherence  to  quality
assurance standards. The Company has received approval  from
its notified body to label its products, including the ALERT
System  with  the  CE  Mark. This  designation  allowed  the
Company  to initiate sales of the ALERT System in  countries
that are members of the European Union and the European Free
Trade  Association.  There  can be  no  assurance  that  the
Company  will  be  successful in  maintaining  its  CE  Mark
certification.

In addition to the import requirements of foreign countries,
a  company  must  also comply with U.S. laws  governing  the
export  of  FDA  regulated products. Devices with  a  510(k)
clearance or a PMA generally may be exported without further
FDA  authorization, provided certain conditions are  met.  A
Class  III device without a PMA may be exported to a foreign
country  for  commercial marketing  if  the  exporting  firm
obtains  an FDA export permit and the following requirements
are  satisfied:  (i) the device meets the specifications  of
the  foreign  purchaser; (ii) the device is not in  conflict
with  the  laws of the country to which it is  intended  for
export; (iii) the device is labeled that it is intended  for
export;  (iv) the device is not sold or offered for sale  in
domestic  commerce;  and  (v) the FDA  determines  that  the
exportation  of  the device is not contrary  to  the  public
health  and has the approval of the country to which  it  is
intended for export.

The  FDA  Export  Reform and Enhancement  Act  of  1996  has
relaxed the exportation requirements governing devices under
certain  circumstances. Pursuant to this new law,  a  device
that  has  not  obtained FDA clearance or  approval  may  be
exported   to   any  country  in  the  world   without   FDA
authorization if the product complies with the laws of  that
country and has valid marketing authorization in one of  the
following  countries: Australia, Canada, Israel, Japan,  New
Zealand, Switzerland, South Africa, the European Union or  a
country in the European economic area. The FDA is authorized
to  add  countries to this list in the future.  Among  other
restrictions,  a device may only be exported under  the  new
law  if  it is not adulterated, meets the specifications  of
the  foreign  manufacturer, complies with the  laws  of  the
importing country, is labeled for export, is manufactured in
substantial  compliance with GMP regulations  or  recognized
international standards and is not sold in the U.S.

Other
The  Company is also subject to numerous federal, state  and
local   laws  relating  to  such  matters  as  safe  working
conditions,     manufacturing    practices,    environmental
protection, fire hazard control and disposal of hazardous or
potentially hazardous substances. There can be no  assurance
that  it will not be required to incur significant costs  to
comply with such laws and regulations in the future or  that
such laws and regulations will not have a materially adverse
effect upon the Company's ability to do business.

Competition
The  medical  device market, particularly  in  the  area  of
cardiac  electrophysiology  products, is highly competitive.
Many   of   the   Company's  competitors  have   access   to
significantly greater financial and other resources than the
Company. Further, the medical device market is characterized
by  rapid product development and technological change.  The
present  or future products of the Company could be rendered
obsolete or uneconomic by technological advances by  one  or
more  of the Company's present or future competitors  or  by
other  therapies. The Company's future success  will  depend
upon its ability to remain competitive with other developers
of  such medical devices and therapies. The Company believes
that its existing products compete primarily on the basis of
features,  effectiveness, quality, ease and  convenience  of
use, customer service and cost-effectiveness.

The  Company's  primary competitors  in  the  production  of
catheters and disposable accessories are C.R. Bard Inc.,  EP
Technologies,  Inc.  (a  subsidiary  of  Boston   Scientific
Corporation),  Medtronic, Inc., Cordis-Webster Laboratories,
Inc.  (a  subsidiary of Johnson & Johnson,  Inc.)  and  Daig
Corporation (a subsidiary of St. Jude Medical, Inc.). In the
computerized  EP workstation and EP stimulator  market,  the
Company's  main  competitors are Prucka  Engineering,  Inc.,
Quinton Instruments (a subsidiary of American Home Products,
Inc.),   C.R.  Bard Inc. and Fischer Imaging. The  Company's
TeleTrace/PaceBase  products  compete  with  PaceArt.  Other
companies   vying   for   market  share   in   the   cardiac
electrophysiology  field include Witt Biomedical,  Marquette
Electronics and Siemens Medical Systems.

The  ALERT System is a new technology that must compete with
established and emerging treatments for atrial fibrillation.
These   include   pharmaceuticals,  high   energy   external
cardioversion, atrioventricular node ablation combined  with
pacemaker  implantation  and open-heart  surgical  ablation.
Although  no devices are currently being marketed  to  treat
atrial  fibrillation  using internal cardioversion,  several
companies  are  developing  permanently  implantable  atrial
defibrillators that deliver energy through leads attached to
the  heart  that could be marketed for treatment  of  atrial
fibrillation. The Company also believes some competitors and
research  organizations are researching other approaches  to
treating atrial fibrillation, including endocardial ablation
and  preventative pacing techniques. Many of  the  Company's
competitors have substantially greater financial  and  other
resources, larger research and development staffs, and  more
experience  and  capabilities  in  conducting  research  and
development,  testing  products  in  clinical   trials   and
manufacturing, marketing and distributing products than  the
Company. Competitors may develop new technologies and  bring
products to market in the U.S. before the Company introduces
the  ALERT System and may introduce products that  are  more
effective  than  the ALERT System. In addition,  competitive
products  may be manufactured and marketed more successfully
than  the  ALERT System. The Company's business will  depend
upon its ability to remain competitive with other developers
of such medical devices and therapies.

Third-Party Reimbursement
In  the U.S., the Company's products are marketed to medical
institutions  and physicians that then bill  various  third-
party  payors,  such  as  government  programs,  principally
Medicare and Medicaid, and private insurance plans, for  the
healthcare  services provided to their patients. Third-party
payors  are increasingly challenging the prices charged  for
medical  products and services, and substantial  uncertainty
exists  as  to third-party reimbursement for investigational
and  newly  approved products. Government agencies,  private
insurers and other payors generally reimburse hospitals  for
medical  treatment at a fixed rate per patient or  based  on
the  procedures  performed. The fixed rate reimbursement  is
unrelated  to the specific devices used in treatment.  If  a
procedure is not covered, payors may deny reimbursement.  In
addition,  some  payors  may  deny  reimbursement  if   they
determine  that  the  device  used  in  the  treatment   was
unnecessary, inappropriate or not cost-effective, or  if  it
was  experimental or was used for a non-approved indication,
even  if  it  has FDA approval. Because the  amount  of  the
reimbursement is fixed, to the extent a physician uses  more
expensive  devices, the amount of potential profit  relating
to  the  procedure is reduced. Accordingly,  hospitals  must
determine  that  the  clinical benefits  of  more  expensive
equipment justify the additional cost. The U.S. Health  Care
Financing  Administration has entered  into  an  interagency
agreement with the FDA pursuant to which the FDA will  place
all  devices  with approved IDEs into one of two categories,
"Category  A"  or  "Category  B."  Category  A  devices  are
innovative devices that are believed to be in Class III (the
class  of medical devices subject to the most stringent  FDA
review)  and are of a type as to which initial questions  of
safety and effectiveness have not been resolved and the  FDA
is unsure whether the device type can be safe and effective.
They  will  not  be  eligible  for  Medicare  reimbursement.
Category B devices include Class III devices of a type as to
which underlying questions of safety and effectiveness  have
been  resolved or that is known to be capable of being  safe
and  effective because other devices of that type have  been
approved.  Category B devices will be eligible for  Medicare
reimbursement  if  the devices are furnished  in  accordance
with  the  FDA-approved protocols governing clinical  trials
and  all  other Medicare coverage requirements are met.  The
Company believes the ALERT System may be a Class III device.
There  can  be  no assurance that the ALERT System  will  be
placed   in  Category  B  and  thus  eligible  for  Medicare
reimbursement  during  clinical  trials.  There  can  be  no
assurance that reimbursement will be or remain available for
the  Company's products, or for the ALERT System  if  it  is
approved,  or  even  if  reimbursement  is  available,  that
payors' reimbursement policies will not adversely affect the
Company's  ability  to  sell its products  on  a  profitable
basis.

Product Liability and Insurance
The  manufacture and sale of the Company's products involves
the risk of product liability claims. The Company's products
are  highly  complex  and some are,  or  will  be,  used  in
relatively  new  medical procedures and in situations  where
there  is  a potential risk of serious injury, adverse  side
effects  or death. Misuse or reuse of catheters may increase
the  risk of product liability claims. The Company currently
maintains  product liability insurance with coverage  limits
of $5,000,000 per occurrence and $5,000,000 in the aggregate
per  year;  however,  there can be no  assurance  that  this
coverage  will be adequate. Such insurance is expensive  and
may not be available in the future on acceptable terms if at
all. A successful claim against or settlement by the Company
in  excess  of  its  insurance  coverage  or  the  Company's
inability to maintain insurance in the future could  have  a
material  adverse effect on the Company's business,  results
of operations and financial condition.

Employees
As   of  March  19,  1998,  the  Company  had  60  full-time
employees,  of  whom 21 are dedicated to  manufacturing  and
quality   assurance,  12  are  engaged  in  management   and
administration, 17 are engaged in sales and marketing and 10
are  engaged  in  research  and  development  and  technical
service.  The  Company believes its employee  relations  are
satisfactory.

Item 2.  Description of Property
The Company currently leases approximately 7,600 square feet
of   office  and  manufacturing  space  located   in   Mount
Arlington,  New  Jersey  through October,  2002.  The  Mount
Arlington  facility  contains  administrative,  engineering,
sales  and marketing and assembly operations and warehousing
for certain of the Company's hardware products. ProCath owns
approximately  7,500  square feet of  space  and  leases  an
additional 2,500 square feet of space in Berlin, New  Jersey
on a month to month basis. The Company is negotiating for  a
new  lease with an option to purchase the 2,500 square  feet
of  leased  space  at ProCath. The Berlin facility  contains
catheter     manufacturing    operations,    administration,
engineering  and  catheter  research  and  development   and
warehouse space. EP MedSystems UK leases 945 square feet  of
office  and  storage space in London through January,  2000.
The  Company believes that its facilities are sufficient  to
meet its expected needs for at least the next twelve months.

Item 3.  Legal Proceedings

EchoCath
During  September,  1997,  the  Company  became  aware  that
EchoCath  may  have been having cash flow  difficulties  and
that EchoCath could have faced delisting of its common stock
from  the  NASDAQ  Small Cap Stock  Market  if  it  did  not
maintain  net equity in excess of $1,000,000. On October  7,
1997,  the Company filed a lawsuit against EchoCath  in  the
United  States District Court for the District of New Jersey
alleging,  among other things, that EchoCath made fraudulent
misrepresentations and omissions in connection with the sale
of $1,400,000 of its preferred stock to the Company.

On  October 30, 1997, EchoCath announced that it had entered
into  a  license and development agreement which included  a
$1,000,000  investment  by  the  licensee  and  an  $800,000
prepayment  of  license fees. The Company was informed  that
this  investment  allowed EchoCath to meet the  requirements
for  continued listing on the NASDAQ Small Cap Stock  Market
at  such  time.  The agreement also provides  EchoCath  with
$1,800,000  of  new  working  capital  and  may  provide  an
opportunity to earn additional royalty or licensing  income.
The Company cannot determine whether this cash infusion will
be  sufficient  to meet EchoCath's long term cash  needs  or
whether EchoCath will recognize additional revenue or attain
profitability.

EchoCath  has filed an answer to the complaint, denying  the
allegations and asserting a counterclaim against the Company
seeking its costs and expenses in the action.  EchoCath also
filed  a motion to dismiss the complaint. In December, 1997,
EP MedSystems filed an amended complaint and  EchoCath filed
an   answer  thereto  again  denying  the  allegations   and
asserting a counterclaim seeking reimbursement of its  costs
and expenses in the action. EchoCath also filed a motion  to
dismiss  the  amended complaint. As of March 19,  1998,  the
Court  has  not issued a ruling on any of the  motions.  The
Company  believes that EchoCath's counterclaim  and  request
for  reimbursement  of  its costs and  expenses  is  without
merit.  As  a result, the Company has not accrued  for  such
costs  and expenses at December 31, 1997. In the opinion  of
management, the ultimate resolution of the counterclaim will
not   have  a  material  adverse  impact  of  the  Company's
financial  condition or results of operations.  The  Company
cannot  determine the outcome of the EchoCath litigation  at
this time.

Former Employee
On December 31, 1997, the Company received a letter from the
attorney  for David Pound, a former employee of the Company.
In  the  letter, the attorney alleges that Mr.  Pound  could
assert claims against the Company for Breach of Contract  by
Termination without Sufficient Cause, Breach of Contract  in
Addition  to Wrongful Termination and Breach of the  Implied
Covenant of Good Faith and Fair Dealing. In the letter,  Mr.
Pound's  attorney requests a cash settlement of  $55,000  in
order  to  forego the opportunity for a substantial recovery
through  litigation.  The  Company  refused  the  attorney's
request  for  a  cash settlement and intends  to  vigorously
defend  itself in the event that Mr. Pound files a  lawsuit.
As of March 19, 1998, the Company has not been notified that
a  lawsuit  has  been filed. The Company believes  that  the
threatened claim is without merit and ultimate resolution of
the  claim  will not have a material adverse impact  of  the
Company's financial condition or results of operations.


Item 4.  Submission of Matters to a Vote of Security Holders
On  October 30, 1997, the Company held its Annual Meeting of
Shareholders  for  the  year ended December  31,  1996.  The
matters voted upon by the security holders were:

(1)  To elect five directors of the Company to serve until the
     next Annual Meeting of Shareholders or until their respective
     successors shall have been duly elected and qualified:

     For the election of Directors      For      Against   Abstain
           David A. Jenkins          5,600,176      0       6,000
           David W. Mortara, Ph.D.   5,600,176      0       6,000
           Lestor J. Swenson         5,600,176      0       6,000
           Jon A. Tietbohl           5,600,176      0       6,000
           Anthony J. Varrichio      5,600,176      0       6,000

(2)  To approve an amendment to the 1995 Long Term Incentive Plan
     to increase the number of shares which may be issued
     thereunder from 400,000 to 700,000:
                                        For      Against   Abstain
     For the amendment to the Plan   4,886,026   503,850    6,000


(3)  To ratify the selection of Arthur Andersen LLP,independent
     public accountants, as auditors for the Company for the fiscal
     year ending December 31, 1997:

                                        For      Against   Abstain
     For the ratification of auditors 5,600,176      0       6,000


                           PART II

Item 5.  Market for Common Equity and Related Stockholder Matters

The  Company's  Common Stock has been traded on  the  Nasdaq
National  Market under the trading symbol "EPMD"  since  the
Company  completed  its initial public  offering  of  Common
Stock  on  June 21, 1996. Prior to that date, there  was  no
public market for the Company's Common Stock.

The following table sets forth the high and low closing sale
prices  for  the  Company's Common Stock since  its  initial
public offering based on transaction data as reported by the
Nasdaq National Market.

         For the year ended
          December 31, 1997           High           Low
     First quarter                   $5.00          $3.00
     Second quarter                  $4.50          $2.75
     Third quarter                   $3.50          $2.63
     Fourth quarter                  $2.88          $0.94


         For the year ended
          December 31, 1996           High           Low
     Second quarter
     (commencing June 21, 1996)      $6.00          $5.50
     Third quarter                   $6.00          $4.00
     Fourth quarter                  $5.50          $3.25

As of March 19, 1998, there were approximately 90 registered
holders of record of the Company's Common Stock. This number
excludes individual stockholders holding stock under nominee
security position listings. Because many of such shares  are
held  by  brokers  and  other  institutions  on  behalf   of
stockholders,  the Company is unable to estimate  the  total
number  of stockholders represented by these record holders,
but it believes that the amount is in excess of 400.

Dividend Policy
The  Company has not paid any dividends on its Common  Stock
and  does  not  expect  to pay any  such  dividends  in  the
foreseeable future. The payment of dividends, if any, in the
future  will  be  within  the discretion  of  the  Board  of
Directors  and will depend upon the Company's  earnings,  if
any,  its  capital requirements and financial condition  and
other relevant factors.


Use of Proceeds from Initial Public Offering
In  accordance  with Rule 463 under the  Securities  Act  of
1933,  as  amended, the following represents  a  summary  of
certain  information regarding the Company's initial  public
offering  and  the  Company's  use  of  proceeds  from  such
offering to date.

Effective date of the company's
registration statement                          June 21, 1996

Commission file number                          333-3642

Date the offering commenced                     June 21, 1996

Name of managing underwriter                    Pacific Growth Equities, Inc.

Class of securities registered                  Common Stock

Number of shares registered and sold                2,500,000

Aggregate price of offering amount
registered and sold                               $13,750,000
                                                  -----------
   Underwriter's discounts and commissions            962,500
   Finder's fees
   Expenses paid to or for underwriters                50,000
   Other offering expenses (1)                        951,500
      Total expenses                                1,964,000
                                                  -----------
Net offering proceeds                             $11,786,000
                                                  -----------
Use of net offering proceeds:
   Purchase of plant and equipment               $    798,000
   Investment in EchoCath, Inc.                     1,400,000
   Product development (2)                          2,959,000
   Sales, marketing and administration (2)          5,584,000
   Repayment of indebtedness                          271,000
   Change in working capital (3)                  (2,098,000)
                                                  -----------
                                                  $ 2,872,000
                                                  -----------

Cash and cash equivalents December 31, 1997        $  752,000
Marketable securities at December 31, 1997          2,120,000
                                                   ----------
                                                   $2,872,000
                                                   ----------

(1)  Does not include any direct or indirect payments to
     directors or officers of the issuer or their associates; to
     persons owning ten (10) percent or more of any class of
     equity securities of the issuer; or to affiliates of the
     issuer.

(2)  This amount represents a reasonable estimate.

(3)  This amount represents a reasonable estimate and
     includes working capital generated from product sales since
     the offering.

Item  6.   Management's Discussion and Analysis of Financial
Condition and Results of Operations

The  following  Management's  Discussion  and  Analysis   of
Financial  Condition  and  Results  of  Operations  contains
forward-looking  statements based upon current  expectations
that  involve risks and uncertainties. The Company's  actual
results  could  differ materially from those anticipated  in
these  forward-looking statements as  a  result  of  certain
factors,  that  include, but are not limited to,  the  risks
discussed  in  the  following  section  as  well  as   those
discussed  in the section entitled "Factors That May  Impact
Future   Operations."   These   forward-looking   statements
include, but are not limited to, the statement in the second
paragraph   of  "Overview"  relating  to  clinical   trials,
anticipated filing and approval time periods for FDA  market
clearance  and  approval for sale of the ALERT  System;  the
statements  in the third paragraph of "Overview" related  to
the  Company's  anticipated results of  operations,  capital
requirements,  development efforts of new products  and  the
filing  of  additional patents; the statements in the  fifth
paragraph of "Overview" related to milestones for 1998;  the
statements under "Results of Operations - General"  relating
to  the  belief  that the Company's direct sales  force  may
generate   greater  sales  than  its  previous  network   of
independent  distributors;  the forward  looking  statements
contained  in  the  second, fourth, fifth,  sixth,  seventh,
tenth, eleventh, and twelfth paragraphs under the discussion
of  the Results of Operations for 1997 as compared to  1996;
the  statements regarding future capital expenditures in the
fourth  paragraph of "Liquidity and Capital  Resources"  and
the  Company's statements regarding anticipated  results  of
operations  and  capital resources and requirements  in  the
last paragraph of "Liquidity and Capital Resources."

OVERVIEW
The   Company  was  formed  in  January,  1993  to  develop,
manufacture,  market  and sell a line of  products  for  the
cardiac  electrophysiology market used to diagnose,  monitor
and  treat irregular heartbeats known as arrhythmias.  Since
inception, the Company has acquired technology and marketing
rights,  has developed new products and has begun  marketing
various   electrophysiology  products,  including   the   EP
WorkMate    electrophysiology    workstation,    the    EP-3
computerized  electrophysiology  stimulator  and  diagnostic
electrophysiology catheters, temporary pacing catheters  and
related disposable supplies.

The  Company  has also developed a new product for  internal
cardioversion  of  atrial fibrillation known  as  the  ALERT
System,  which  uses  a  proprietary electrode  catheter  to
deliver  measured, variable, low energy electrical  impulses
directly  to  the  inside of the heart in order  to  convert
atrial  fibrillation  to a normal heart  rhythm.  The  ALERT
System is not approved for sale in the United States, but is
currently  undergoing clinical trials. At the earliest,  the
Company does not anticipate filing for FDA approval for  the
ALERT  System for at least six months. Approval to sell  the
ALERT System in the United States may take several years, if
approved at all. The Company has received approval from  its
notified body to label the ALERT System with a CE Mark. This
designation  allowed the Company to initiate  sales  of  the
ALERT System in the European Community.

The  Company expects its operating losses to continue in the
near  future as it will continue to expend substantial funds
for research and development, clinical trials in support  of
regulatory  approvals, increased manufacturing capacity  and
expansion of sales and marketing activities. The amount  and
timing of future losses will be dependent upon, among  other
things,  increased sales of the Company's existing products,
the  results  of  clinical trials, regulatory  approval  and
market  acceptance  of the ALERT System  and  developmental,
regulatory   and  market  success  of  new  products   under
development  as well as the Company's ability to  establish,
preserve  and  enforce intellectual property rights  to  its
products.  To  date, the Company's products  have  generated
limited  revenue and the Company has an accumulated  deficit
of  $9.9  million at December 31, 1997. The Company believes
that  it  will  have sufficient capital  to  carry  out  its
proposed  business  objectives for  at  least  the  next  12
months. However, the Company is currently evaluating several
financing  and  strategic alternatives to help  achieve  its
long term objectives.

During  1997,  the Company accomplished several  significant
milestones including:

       The  Company  achieved a 73% increase  in  revenues,
     largely  due to continued market acceptance of  the  EP
     WorkMate computerized electrophysiology workstation.

       The Company qualified for ISO 9001 certification and
     received approval to label its products with the CE Mark,
     permitting the introduction of the ALERT System for sale in
     Europe.

      The Company expanded its clean room and manufacturing
     operations, including the hiring and training of additional
     personnel in order to increase its manufacturing capacity to
     support the introduction of the ALERT product line.

      The Company commenced clinical trials at three leading
     research hospitals in the United States for the ALERT System
     and  expects to add several leading atrial fibrillation
     research centers to the clinical trials during 1998.

        The  Company  established  a  sales  and  marketing
     infrastructure, including a domestic direct sales force, a
     domestic and international clinical engineering staff and a
     UK based office established to improve distributor relations
     and assist in the market release of the ALERT System in
     Europe.

       The  Company initiated sales through a new  Japanese
     distributor and has taken steps to improve its distribution
     network throughout the Asian markets.

      The Company continued development efforts for a number
     of new products, including an ultrasound product line, a
     number of new catheter products and improvements to existing
     products, including upgrades to the EP WorkMate. The Company
     now owns or licenses fourteen issued patents and has ten
     patent application on file. The Company is in the process of
     preparing patent applications for five new products  or
     improvements to existing products.

For  the  next year, the Company has set a number of  goals,
including  continued  expansion of its sales  and  marketing
efforts  aimed  at  achieving increased  sales  of  existing
products,  conclusion of the ALERT clinical trials,  initial
market  acceptance of the ALERT System in Europe,  increased
manufacturing   efficiency  and  lower   production   costs,
introduction  of  several new products and  improvements  to
existing  products  and  ongoing  research  and  development
activities.  The Company believes that attainment  of  these
goals  is  important  to achieving the Company's  long  term
objectives.

Results of Operations
General
Historically,  the  Company  has  relied  on   third   party
distributors  for  all  of its sales  activities.  Following
completion of its initial public offering, the Company began
efforts to build a direct sales and marketing force to  sell
all of its products in the domestic market and to strengthen
its  international distribution network. This  included  the
hiring  of  a  National Sales Manager, five  Regional  Sales
Managers,  a  Director  of Marketing  and  several  clinical
engineers  and administrative support personnel.  Also,  the
Company  terminated  its  relationships  with  all  of   its
domestic distributors. The Company believes that the  change
from a distributor-based sales force to a direct sales force
had  a  temporary  adverse effect on sales of  its  products
during  the second half of 1996 and the first half of  1997.
However, the Company also believes its domestic direct sales
force  has  the potential to generate greater sales  in  the
future  than  the Company had been experiencing through  the
use  of  independent  distributors. It is  likely  that  the
Company  will  incur additional losses as a  result  of  the
increased  fixed costs associated with a direct sales  force
until   such  time  as  sufficient  incremental  sales   are
generated  to cover such costs. The Company cannot determine
when or if that level of sales will be achieved.

The  Company is continuing to utilize distributors  to  sell
its  products  overseas  and is in  the  process  of  adding
distributors    in   several   countries   not    previously
represented. In 1997, the Company formed a U.S.  subsidiary,
with  a  branch  based  in the United  Kingdom,  to  improve
distributor  relationships and customer service  in  Europe.
During July, 1997, the Company initiated sales through a new
Japanese  distributor  and is taking steps  to  improve  its
distribution network throughout the Asian markets.

Year Ended December 31, 1997 Compared to Year Ended December
31, 1996
Product   sales   increased  $1,582,823  (or   76.6%)   from
$2,065,959  in 1996 to $3,648,782 in 1997. The  increase  in
sales   for  the  year  ended  December  31,  1997  resulted
primarily  from  increased sales of the EP  WorkMate,  which
represented  59% of total product sales during  the  period.
Shipments of the EP WorkMate incorporating several  improved
features  began  during  the third quarter  of  1997,  which
contributed  to  the increased level of sales.  The  Company
believes   that   the   EP  WorkMate   is   now   the   most
technologically  advanced and easy to use  electrophysiology
workstation on the market. During 1997, the Company recorded
revenue from a research support grant of $365,000 which  may
not be recurring in future periods. During 1996, the Company
recorded  revenue  of  $250,000 from a catheter  development
project for a third party, which also may not be recurring.

The level of sales for fiscal 1998 will depend materially on
sales  of  the EP WorkMate and the ability of the  Company's
direct  sales force and network of international independent
distributors to effectively market and sell the EP  WorkMate
and  the Company's other existing products. The ALERT System
is  currently undergoing clinical trials and is not approved
for sale in the United States. However, the ALERT System has
been  introduced  for  sale in Europe.  The  Company  cannot
accurately determine the sales level of the ALERT System for
1998  at  this  time nor when it will be  available  in  the
United  States.   The Company expects the  ALERT  System  to
contribute  a  greater proportion of revenues  in  1998  and
beyond.

Cost  of products sold increased $1,022,966 (or 88.0%)  from
$1,161,948 to $2,184,914 in 1997. Excluding revenue  from  a
research  support grant, gross profit on product  sales  for
1997  was  $1,463,868 (or 40.1% as a percentage  of  product
sales),  as compared with $904,011 (or 43.8% as a percentage
of  product  sales)  for  1996.   The  Company  realized  an
increase in gross profit on product sales during 1997 due to
higher  sales of the EP WorkMate which has yielded a  higher
gross  margin  than other product lines. This  increase  was
offset   by  increased  labor  and  manufacturing   overhead
expenses  at  ProCath  incurred as the Company  prepares  to
commence manufacturing of the ALERT System. During 1996, the
Company  realized high gross margins on the sale of  certain
disposable products which were not recurring in 1997.

Sales  and  marketing  expenses  increased  $2,171,111   (or
283.9%)  from  764,765 to $2,935,876 and as a percentage  of
total revenues from 33.0% to 73.1%. The hiring of a domestic
direct  sales  force, including several salaried  sales  and
marketing  managers and personnel caused the  increase.  The
effort  also involved increased base commissions for  direct
sales  representatives,  increased travel  and  lodging  and
convention related expenses and increased promotion expenses
related  to existing products. The Company believes  that  a
domestic  direct sales force will generate higher  sales  in
the future than the Company would have generated through the
use  of  a  network  of  domestic independent  distributors.
During  1997, the Company also expended substantial  efforts
to   improve   its  network  of  international   independent
distributors.

The  Company  has introduced the ALERT System  for  European
sales.  The  Company expects to incur substantial additional
sales and marketing expenses as a result of the introduction
of  the  ALERT System for sale outside of the United  States
and,   if   the   clinical  trials  progress  according   to
expectations,  for the eventual introduction  of  the  ALERT
System for sale in the United States. Examples of the  types
of  expenditures would be physician training and  education,
promotional material, sample products and expansion  of  the
sales force, among others.

Sales  and  marketing  expenses for  1998  are  expected  to
increase,  but  not by as much as the increase  realized  in
1997 as compared to 1996. It is likely that the Company will
incur  additional losses as a result of the increased  fixed
costs  associated  with  direct sales  until  such  time  as
sufficient  incremental sales are generated  to  cover  such
costs. The Company cannot determine when or if that level of
sales will be achieved.

General  and administrative expenses increased $581,640  (or
46.9%)  from  $1,240,457 to $1,822,097 but  decreased  as  a
percentage of total revenues from 53.6% to 45.4%. The dollar
increase  was due to the hiring of additional administrative
personnel,  increased  occupancy  costs,  product  liability
insurance expense and costs associated with operating  as  a
publicly  traded  company,  such as  printing,  mailing  and
professional  fees,  etc. The Company  expects  general  and
administrative expense to increase in future periods due  to
anticipated future growth. It is anticipated, however,  that
these  expenses  will  decline  as  a  percentage  of  total
revenues  at such time as sufficient incremental  sales  are
generated  to cover such costs. The Company cannot determine
when or if such incremental sales will be achieved.

Research  and development expenses increased $1,405,978  (or
164.2%)  from $856,191 to $2,262,169 and as a percentage  of
total  revenues  from  37.0%  to  56.4%.  During  1997,  the
Company's   principal   research  and  development   project
involved   the  ALERT  System,  including  engineering   and
development  of the ALERT Companion, qualification  for  ISO
9001  certification and approval to label the  ALERT  System
with  the  CE  Mark, design of the clinical trial  protocol,
preparation  of  submissions to the FDA  and  initiation  of
clinical trials of the ALERT System.

The  Company also realized research and development expenses
related  to efforts to place a flexible metallic coating  on
its  electrophysiology  catheters,  preliminary  development
efforts  of ultrasound guided products, hiring of additional
in-house  engineering  and technical support  personnel  and
increased  development work on existing products,  including
EP  WorkMate.  Additionally, other research and  development
efforts are ongoing to develop new products, enhance product
quality and lower production costs.

The  Company expects that research and development  expenses
related to the ALERT System will be significant during 1998,
when clinical trials are expected to be ongoing. The Company
also  expects  that other research and development  expenses
will  increase  as  it  continues attempts  to  develop  new
products,   including  ultrasound  guided  electrophysiology
products  and  several  new catheter  products  as  well  as
ongoing   improvements  to  existing  products   and   other
development projects which may arise.

The  Company incurred interest expense of $2,436 during 1997
as  compared to $44,779 in 1996. The decrease was due to the
Company's  repayment  of  $1,137,500  face  amount  of  1995
Debentures  in June, 1996 and the repayment of  the  $96,350
balance plus accrued interest payable on a note incurred  in
connection with the acquisition of ProCath. The Company does
not expect to incur material interest expense in 1997.

Interest  income  during 1997 was $330,053 due  to  interest
earned  on  the  proceeds of the June, 1996  initial  public
offering. Interest income in 1996 was $338,335. The  Company
expects  to continue earning interest on its excess cash  in
future  periods,  but  the amount of  interest  income  will
decrease as proceeds are utilized in the Company's business.

The  net loss for twelve months ended December 31, 1997  was
$4,863,657  as  compared to a net loss of $1,570,578  during
1996.  The  basic and diluted loss per share for the  twelve
months  ended  December  31, 1997  was  $.64  per  share  as
compared  to a basic and diluted loss per share (as restated
to  comply  with the provisions of SFAS 128 -  Earnings  Per
Share)  of $.26 in 1996. The increase in net loss was caused
by the factors discussed above.

Year Ended December 31, 1996 Compared to Year Ended December
31, 1995
Product sales increased $64,822 (or 3.2%) from $2,001,137 in
1995  to  $2,065,959  in  1996. Sales  of  the  EP  WorkMate
increased by approximately $330,000 as the product began  to
gain  market acceptance after its introduction in late 1995.
Sales  of the Company's catheter line also increased  during
1996  while sales of stand-alone EP-3 Stimulators  declined,
partially  due  to  the fact that EP-3  Stimulators  are  an
integrated component of the EP WorkMate. As discussed  above
under   "Results  of  Operations  -  General,"  the  Company
believes  that  the  change from a  network  of  independent
distributors  to a newly hired domestic direct  sales  force
had  a  temporary adverse impact on sales of  the  Company's
products  in  the third and fourth quarters of 1996.  During
1996,  the Company recorded $250,000 in catheter development
revenue   related  to  a  Product  Development  and   Supply
Agreement, which may not be recurring in future periods. The
agreement  covers  a  new  temporary  atrial  defibrillation
catheter ("TADCATH") being manufactured for InControl,  Inc.
by the Company.

During  1996, the Company discontinued the sale of its  line
of  arrhythmia  monitors. Sales of arrhythmia monitors  were
approximately  $12,000  and  $198,000  in  the  years  ended
December 31, 1996 and 1995, respectively.

Cost  of  products  sold decreased $95,520  (or  7.6%)  from
$1,257,468  to  $1,161,948. Excluding  catheter  development
revenues, gross profit for 1996 was $904,011 (or 43.8% as  a
percentage of product sales), as compared with $743,669  (or
37.2%)   for  1995.  This  increase  in  gross  profit   was
principally  due  to  higher  sales,  higher  gross  margins
realized  on  the  EP  WorkMate which represented  a  larger
proportion of sales in 1996 than in 1995 and the decline  in
sales  of  MemoryTrace arrhythmia monitors which produced  a
low gross margin in 1995.

Sales  and marketing expenses increased $287,556 (or  60.3%)
from  $477,209  to  $764,765 and as a  percentage  of  total
revenues from 23.8% to 33.0%. Beginning in September,  1996,
the  Company  began  hiring a domestic direct  sales  force,
including several salaried sales and marketing managers  and
personnel.   The   effort  also  involved   increased   base
commissions  for  direct  sales  representatives,  increased
travel  and  lodging  and convention  related  expenses  and
increased promotion expenses related to existing products.

General  and administrative expenses increased $311,329  (or
41.1%)  from  $757,635  to $1,068,964  and  increased  as  a
percentage of total revenues from 37.9% to 46.2%. The dollar
increase  was due to the hiring of additional administrative
personnel,  increased  occupancy  costs,  increased  use  of
professional services, including accounting fees  and  legal
fees  associated with several patent filings, and  increased
product  liability  and  directors  and  officers  insurance
expense.

Research  and  development expenses increased  $535,880  (or
167.3%)  from  $320,311 to $856,191 and as a  percentage  of
total  revenue from 16.0% to 37.0%. The increase was due  to
significant  expenses  associated  with  the  ALERT  System,
including engineering development associated with the  ALERT
Catheter  and  the ALERT Companion hardware, design  of  the
clinical  trial  protocol  and preparation  of  the  Pre-IDE
filing with the FDA. The Company also realized increases  in
research  and development expenses related to the  licensing
and  development of technology for placement of  a  flexible
metallic coating on its electrophysiology catheters,  hiring
of  additional  in-house engineering and  technical  support
personnel   and  increased  development  work  on   existing
products, including the EP WorkMate.

Upon  repayment of the 1995 Debentures, the Company recorded
a write-off of $49,232 representing the unamortized discount
on the 1995 Debentures related to the 1995 Warrants.

Interest expense decreased $6,114 (or 12.0%) from $50,893 to
$44,779  and as a percentage of total revenue from  2.5%  to
1.9%.  The  decrease was due to the Company's  repayment  of
$1,137,500 face amount of 1995 Debentures in June, 1996  and
the   repayment of the $96,350 balance plus accrued interest
payable   on  a  note  incurred  in  connection   with   the
acquisition of ProCath.

Interest  income  during 1996 was $338,335 due  to  interest
earned  on  the  proceeds of the June, 1996  initial  public
offering. Interest income was insignificant in 1995.

The  Company  incurred  a net loss  $1,570,578  in  1996  as
compared  with $1,482,650 in 1995. The increase  of  $87,928
(or  5.9%)  in net loss was caused by the factors  discussed
above.  The basic and diluted loss per share for the  twelve
months  ended December 31, 1996 was $.26 per share based  on
6,131,749 shares outstanding (as restated to comply with the
provisions of SFAS 128 - Earnings Per Share) as compared  to
a  basic  and diluted loss per share (as restated to  comply
with  the  provisions of SFAS 128 - Earnings Per  Share)  of
$.35  in  1995. The increase in net loss was caused  by  the
factors discussed above.

Liquidity and Capital Resources
Since  inception, the Company's expenses have  exceeded  its
revenues,  resulting  in  an  accumulated  deficit  of  $9.9
million  at December 31, 1997. Until June, 1996, the Company
had  financed its operations through the sale of its  Common
Stock in private placements, the issuance of debentures (the
"1995  Debentures"), a shared bank line of credit  with  Hi-
Tronics  Designs,  Inc.  ("HDI"),  extended  payment   terms
granted  by  HDI for products manufactured for the  Company,
and the issuance of notes in connection with the acquisition
of  products  from  HDI.  On  June  21,  1996,  the  Company
completed its initial public offering of 2,500,000 shares of
Common  Stock  at a purchase price of $5.50 per  share,  for
aggregate  net  proceeds of approximately $11,786,000  after
deducting offering expenses.

Net  cash  used in operating activities for the  year  ended
December  31, 1997 was $5,266,424 as compared to  $1,885,543
for the year ended December 31, 1996. The net use of cash in
operations  during 1997 was due primarily to  the  Company's
$4,863,657  net  loss from operations. Accounts  receivable,
net,  increased  by  $558,418  in  1997  from  $671,503   to
$1,229,921   due  to  increased  sales  levels.  Inventories
increased  by $885,821, from $626,707 to $1,512,528  largely
due  to  the  purchase of components  to  build  the   ALERT
Companion.  Accounts  payable  increased  by  $431,442  from
$238,764  to  $670,206 due to increased operating  activity.
Accrued expenses payable increased by $411,720 from $438,787
to  $850,507  largely  due to accruals for  clinical  costs,
outside  development and regulatory expenses for  the  ALERT
System.  Amounts  payable to  related parties  increased  by
$42,824  from  $85,035 to $127,859 due  to  several  product
purchases  near  year end. Payments to related  parties  are
made on terms similar to those of other suppliers.

Capital expenditures, net of disposals, were $721,911 during
1997  as compared to $97,337 in 1996. During February, 1997,
the  Company  purchased 7,500 square feet of  manufacturing,
administrative and warehouse space, including  2,500  square
feet  of  space that was leased by ProCath, for  a  purchase
price of approximately $417,000, including transaction costs
and  improvements to prepare the space for its intended use.
The   purchase  provides  for  expansion  of  the   existing
manufacturing  operations, additional warehousing,  shipping
and quality assurance activities and relocation of ProCath's
administrative  offices. ProCath leases an additional  2,500
square  feet of space in Berlin, New Jersey on  a  month  to
month basis. The Company is negotiating for a new lease with
an  option to purchase the 2,500 square feet of leased space
at ProCath.

During 1997, the Company purchased two new exhibition booths
for  use at domestic and international industry trade shows.
As  of the date of this Annual Report, the Company does  not
have    any   other   material   commitments   for   capital
expenditures.  However,  the  Company  expects  to  purchase
capital  equipment  and  to  expand  its  manufacturing  and
assembly  capabilities as it continues to grow. The  Company
leases  office  and manufacturing space and  certain  office
equipment  under operating leases. The aggregate  commitment
for  minimum  rentals  under these leases  is  approximately
$109,000 for 1998.

During  February, 1997, the Company licensed the  rights  to
several   ultrasound   technologies  from   EchoCath,   Inc.
("EchoCath") for use in the field of electrophysiology.  The
license  includes  all rights to the EchoMark,  EchoEye  and
ColorMark   technologies   for   use   in   the   field   of
electrophysiology. The agreement with EchoCath calls for the
Company   to  make  payments  totaling  $700,000,  in   four
installments, as certain development milestones and  initial
sales   are   achieved   on  the   EchoMark    and   EchoEye
technologies.   As  of  March  19,  1998,   no   development
milestones  had  been  met and no  payments  were  due.  The
EchoCath  license  provides for  a  royalty  on  net  sales,
including  minimum royalties of $120,000 beginning  in  1999
and  increasing to $400,000 in 2005 and thereafter  for  the
life  of  the  applicable  patents  and  continuations.  The
Company may elect not to make minimum royalty payments  and,
in  such  case, EchoCath has the option to make the  license
non-exclusive or cancel the license and return the  $700,000
milestone payments to the Company.

The  Company  also purchased 280,000 shares of  newly-issued
EchoCath Series B Cumulative Convertible Preferred Stock for
$1,400,000 in cash. The Company's $1,400,000 investment  was
intended   to   fund  continuing  development  of   EchoCath
products,  including  the EchoMark and  EchoEye  technology.
Upon successful completion of its development projects,  the
Company   may  introduce  ultrasound  technology  into   its
electrophysiology catheter line although  there  can  be  no
assurance  that  the  Company will  be  successful  in  this
effort. (See Item 3. Legal Proceedings)

The  Company  had no financing activities during  1997.  Net
cash  provided  by financing activities was $12,243,424  for
the  year ended December 31, 1996 and included approximately
$11,786,000 of net proceeds of the Company's initial  public
offering and $500,000 from the private sale of Common  Stock
prior  to  the  initial public offering.  During  1996,  the
Company  repaid the remaining $92,050 principal plus accrued
interest due thereon on a note issued in connection with its
November, 1993 acquisition of the net assets of ProCath. The
Company  borrowed and subsequently repaid  a  $50,000  short
term note payable to HDI.

During June, 1996, the holders of $1,025,000 face amount  of
1995 Debentures elected to exercise their warrants issued in
connection  with  the 1995 Debentures ("1995  Warrants")  to
purchase  512,500 shares of Common Stock at $2.00 per  share
through  the  forgiveness  of amounts  due  under  the  1995
Debentures.  On  June  30,  1996,  the  Company  repaid  the
remaining outstanding 1995 Debentures in the face amount  of
$112,500  in cash. Subsequent to the repayment, the  holders
of  the  remaining 1995 Warrants exercised their  option  to
purchase  56,250 shares of Common Stock at $2.00 per  share.
Upon  repayment of the 1995 Debentures, the Company recorded
a  write-off of $49,232, representing the unamortized  value
placed  on the 1995 Warrants issued in connection  with  the
1995 Debentures.

The  Company expects its operating losses to continue in the
near  future as it will continue to expend substantial funds
for research and development, clinical trials in support  of
regulatory  approvals, increased manufacturing capacity  and
expansion of sales and marketing activities. The amount  and
timing of future losses will be dependent upon, among  other
things,  increased sales of the Company's existing products,
clinical approval and market acceptance of the ALERT  System
and  developmental,  regulatory and market  success  of  new
products  under development. There can be no assurance  that
any of the Company's development projects will be successful
or that if development is successful, that the products will
generate any sales.

Based  upon  its current plans and projections, the  Company
believes  that  its  existing  capital  resources  will   be
sufficient  to  meet its anticipated capital needs  for  the
next  twelve  months.   However, the  Company  is  currently
evaluating  several financing and strategic alternatives  to
help  achieve  its long term objectives. While  the  Company
believes  that additional financing is available, there  can
be no assurance that such additional funds will be available
on  terms acceptable to the Company, or at all. Furthermore,
any   additional  equity  financing  may  be   dilutive   to
stockholders, and debt financing may be costly  and  involve
restrictive covenants. The inability of the Company to raise
capital when needed could have a material adverse effect  on
the  Company's business, financial condition and results  of
operations.

Year 2000
The  Company has assessed the impact that the Year 2000 will
have  on  its computer systems, including both hardware  and
software  utilized  by the Company in  its  operations.  The
Company has not identified any date related deficiencies  as
a  result of this assessment. The computer systems and other
products  sold  by  the  Company  have  been  engineered  to
function  without  date  related problems.  Based  upon  the
current   status  of  the  Company's  Year  2000  compliance
program, the Company believes that future costs relating  to
the  Year 2000 issue will not have a material adverse impact
on the Company's business, financial condition or results of
operations.

Recent Issued Accounting Standards
Effective for the year ended December 31, 1997, the  Company
adopted Statement of Financial Accounting Standards No.  128
("SFAS 128"), "Earnings Per Share." The adoption of SFAS 128
requires  the presentation of Basic earnings per  share  and
Diluted  earnings  per share. Basic earnings  per  share  is
computed based on weighted average shares outstanding during
the year. Diluted earnings per share is based on the average
number of common shares outstanding during the year plus the
common  stock  equivalents  related  to  outstanding   stock
options and warrants. Diluted earnings per share exclude the
impact   of  common  stock  equivalents,  for  all   periods
presented,  as  their inclusion would be  anti-dilutive.  As
required by SFAS 128, prior year net loss per share has been
restated  to  comply  with  its  provisions.  Prior  to  the
adoption  of SFAS 128 the Company's reported loss per  share
were $.23 and $.26 for the years ended December 31, 1996 and
1995 respectively.

In  June  1997,  the  Financial Accounting  Standards  Board
issued  Statement of Financial Accounting Standards No.  130
("SFAS 130"), "Reporting Comprehensive Income" and Statement
of  Financial  Accounting Standards No.  131  ("SFAS  131"),
"Disclosures  about  Segments of an Enterprise  and  Related
Information."  SFAS 130 establishes standards for  reporting
comprehensive   income  and  its  components.  Comprehensive
income  reflects  certain items not  currently  reported  in
measuring  net income such as changes in value of available-
for-sale   securities   and  foreign  currency   translation
adjustments.  SFAS 131 establishes standards  for  reporting
financial   and   descriptive   information   regarding   an
enterprise's operating segments. Both SFAS 130 and SFAS  131
are  effective for fiscal years beginning after December 15,
1997.   These   standards   increase   financial   reporting
disclosures  and  will  have  no  impact  on  the  Company's
financial position or results of operations.

Factors That May Impact Future Operations

History of Losses; Future of Profitability Uncertain;
The  Company  commenced operations in 1993 and has  incurred
substantial  operating losses in each year since  inception.
As  of  December 31, 1997, the Company's accumulated deficit
was  approximately  $9.9  million.  While  the  Company   is
generating   revenues  from  product  sales,   the   Company
anticipates  that  losses  could  continue.  The   Company's
ability   to   generate  significant  revenues  or   achieve
profitable  operations is dependent on, in large  part,  its
ability  to  raise sufficient funds to meet its future  cash
requirements;  the  results of the  ALERT  clinical  trials;
market  acceptance of existing products,  including  the  EP
WorkMate and the ALERT System; the ability of the Company to
increase  its  catheter manufacturing capabilities,  improve
efficiency,  control  manufacturing  costs  and  ensure  the
timely  delivery of its products; the successful development
of  new products; the ability to obtain regulatory approvals
and  reimbursement  of new products on a timely  basis;  the
ability to compete successfully in the future with companies
which  have  greater  resources than the  Company;  and  the
ability  to  establish,  preserve and  enforce  intellectual
property rights. There can be no assurance that the  Company
will  generate significant revenues or attain profitability.
See  "Management's  Discussion  and  Analysis  of  Financial
Condition and Results of Operations," "Business - The  ALERT
System,"  "-  Research and Development,"  "-  Manufacturing"
and  "- Government Regulation."

Need to Raise Additional Capital
Based  upon  its current plans and projections, the  Company
believes  that  its  existing  capital  resources  will   be
sufficient  to  meet its anticipated capital needs  for  the
next  twelve  months.  However,  the  Company  is  currently
evaluating  several financing and strategic alternatives  to
help  achieve  its long term objectives. While  the  Company
believes  that additional financing is available, there  can
be no assurance that such additional funds will be available
on  terms acceptable to the Company, or at all. Furthermore,
any   additional  equity  financing  may  be   dilutive   to
stockholders, and debt financing may be costly  and  involve
restrictive covenants. The inability of the Company to raise
capital when needed could have a material adverse effect  on
the  Company's business, financial condition and results  of
operations.  See  "Management's Discussion and  Analysis  of
Financial Condition and Results of Operations,"

Dependence on the ALERT System.
Although  the  Company currently markets a  broad  range  of
products, it believes its greatest potential for substantial
long-term  growth will depend on the success  of  the  ALERT
System,  a  new product the Company has developed  to  treat
atrial  fibrillation. The ALERT System has not been approved
by  the  FDA  and is not currently available for  commercial
sale  in  the  United States. Before the Company  may  begin
marketing  the ALERT System in the U.S., it must obtain  FDA
approval  based  on,  among other  things,  the  results  of
clinical   trials   that   demonstrate   the   safety    and
effectiveness of the device. These can be no assurance  that
the   clinical  trials  will  demonstrate  the  safety   and
effectiveness of the ALERT System, or that the Company  will
obtain FDA approval on a timely basis or at all. Further, if
granted, FDA approval may include significant limitations on
the  indicated uses for which the product may be labeled  or
marketed.  Assuming the ALERT System receives FDA  approval,
commercial  success will depend on acceptance by  physicians
as  a  desirable  treatment  for atrial  fibrillation.  Such
acceptance  will depend on, among other things, substantial,
favorable  clinical experience, advantages over  alternative
treatments,  including  cost-effectiveness,  and   favorable
reimbursement  policies  of  third  party  payors  such   as
insurance   companies,  Medicare  and   other   governmental
programs.  There can be no assurance that the  ALERT  System
will  achieve such market acceptance. The Company's  ability
to  sell  the  ALERT System at prices necessary  to  achieve
profits  and the profitability of the system will depend  in
part  on  the  Company's ability to manufacture  the  system
efficiently  in  commercial quantities. At  this  time,  the
Company  has only manufactured the components of  the  ALERT
System in limited quantities. There can be no assurance that
the  Company  will  be  able  to develop  the  manufacturing
processes  and  capabilities necessary to  attain  efficient
manufacturing.  The Company will also be dependent  on  sub-
contractors  for  certain  key  components  of   the   ALERT
Companion.  Failure  to  obtain  FDA  approval  for,  market
acceptance  of,   efficient  manufacturing processes  and/or
reliable sub-contractors for the ALERT System would  have  a
material  adverse effect on the Company's business,  results
of  operations and financial condition. See "Business -  The
ALERT  System,"   "-Marketing  and  Distribution,"  and   "-
Government Regulation."

ALERT Clinical Trials
The Company has commenced human clinical trials of the ALERT
System  at  three  hospitals  in  the  United  States:  Duke
University  Medical  Center,  the  Medical  Center  of   the
University of Alabama at Birmingham and Allegheny University
of  the  Health  Sciences in Philadelphia, PA.  The  Company
intends  to expand the trials to include additional  leading
atrial  fibrillation research centers during 1998.  Clinical
data  is  needed  in  order to demonstrate  the  safety  and
efficacy of the ALERT System under applicable FDA regulatory
guidelines.  The Company anticipates that the  ALERT  System
clinical  trials will be completed during mid calendar  year
1998.  At the conclusion of the clinical trials, the Company
plans  to file  for FDA approval to market the ALERT  System
in  the  United States. Receipt of FDA approval to sell  the
ALERT System in the United States may take several years, if
it is received at all.

There  can be no assurance that the ALERT System will  prove
to be safe and effective in clinical trials under applicable
United States or international regulatory guidelines or that
additional modifications to the Company's products will  not
be  necessary. In addition, the clinical trials may identify
significant  technical  or other obstacles  to  be  overcome
prior  to  obtaining necessary regulatory  or  reimbursement
approvals. If the ALERT System does not prove to be safe and
effective  in clinical trials or if the Company is otherwise
unable  to  commercialize  the  product  successfully,   the
Company's  business,  financial  condition  and  results  of
operations could be materially adversely affected.

Dependence on EP WorkMate.
In  late 1995, the Company began commercial sales of the  EP
WorkMate,    a   computerized   monitoring   and    analysis
electrophysiology workstation. Although the Company sells  a
broad range of products, it believes its ability to increase
revenues   over   the   next  several  years   will   depend
significantly   on  acceptance  of  the   EP   WorkMate   by
electrophysiologists.   The  EP   WorkMate   accounted   for
approximately  59%  of the Company's revenues  from  product
sales in the year ended December 31, 1997 and is expected to
account  for a significant portion of 1998 revenue.  The  EP
WorkMate has a list price of approximately $129,000 with  an
integrated  EP-3 Clinical Stimulator and, as a result,  each
sale  of  an  EP  WorkMate can represent a relatively  large
percentage  of  the  Company's net  sales  in  a  particular
quarter. There can be no assurance that the EP WorkMate will
continue  to be accepted by the electrophysiology market  or
that  sales will be substantial. Each sale of an EP WorkMate
may  take a relatively long time to complete due in part  to
the  high selling price relative to other types of equipment
and  to  the budgetary processes of hospitals to  which  the
Company   markets   the  EP  WorkMate.   See   "Management's
Discussion  and Analysis of Financial Condition and  Results
of Operations,"  "Business - Products" and "- Competition."

Government Regulation.
The  Company's business, financial condition and results  of
operations  are  subject to various risks and  uncertainties
arising   from   domestic   and   international   laws   and
regulations,  including, without limitation, risks  relating
to  its  ability  to  sell the ALERT System  in  the  United
States, compliance with GMP regulations and compliance  with
the   requirements  of  the  CE  Mark  and   other   foreign
regulations in order to continue product sales on a  country
by   country   basis.  For  a  discussion   of   risks   and
uncertainties see Item 1 "Business - Government Regulation."

Necessity of Product Development and Improvement.
The   markets   for   medical   devices   in   general   and
electrophysiology  products in particular are  characterized
by  rapid  technological change. The  Company's  ability  to
compete  in these markets will depend in part on its ability
to  develop new products, improvements to existing  products
and  processes  for  cost-effective  manufacturing  of  such
products   on   a  timely  basis.  Many  of  the   Company's
development efforts will be based on new technologies or new
applications of existing technologies. As a result, research
and  development  for any potential new product  or  product
refinement  may take longer and require greater expenditures
than expected, and may ultimately prove unsuccessful. In the
event  that  the  Company is successful in  its  development
efforts,  the commercial acceptance of any new product  will
depend  on  the  medical  community's  acceptance  of   such
product.  There can be no assurance that the Company will be
able  to develop new products or to refine existing products
that  will be commercially accepted. The Company's inability
to   successfully   develop  new  products,   to   introduce
improvements to existing products, to prove the  safety  and
efficacy  of  new products or to gain market  acceptance  of
such  products could have a material adverse impact  on  the
business,  financial condition or results of  operations  of
the  Company. See "Business - ALERT System," "- Research and
Development," "Government Regulation," and "-Manufacturing."

Potential Fluctuations in Operating Results.
Several  factors  may  have a significant  impact  upon  the
Company's revenues, expenses and results of operations  from
quarter  to  quarter  and year to year,  including  but  not
limited  to a long sales cycle for the EP WorkMate, hospital
budgetary   processes  with  respect  to  capital  equipment
purchases,  the  success of the ALERT clinical  trials,  the
success  of new product development efforts, the  timing  of
new product introductions by the Company or its competitors,
development of other treatments for atrial fibrillation  and
other heart rhythm disorders, changes in government or third-
party  reimbursement policies, foreign currency fluctuations
to   the   extent  the  Company  has  developed  significant
international sales, the ability to obtain products to  meet
customer  demand and increases or fluctuations in sales  and
marketing,  administrative, manufacturing and  research  and
development  costs.  Consequently,  quarterly   results   of
operations  should  be expected to fluctuate  significantly.
See  "Management's  Discussion  and  Analysis  of  Financial
Condition and Results of Operations."

Potential Lack of Proprietary Protection.
The Company's success and ability to compete will depend  in
part  upon its ability to protect its proprietary technology
and  other intellectual property. The Company seeks  patents
on  its  important inventions, has acquired patents and  has
entered  into  license  agreements to  obtain  rights  under
selected  patents  of  third parties  as  to  technology  it
considers important to its business.

There  can be no assurance that any of the Company's  patent
applications  or  applications as to which it  has  acquired
licenses  will  issue  as patents, or that  if  patents  are
issued  on the Company's applications or on applications  as
to  which the Company has acquired licenses, they will be of
sufficient   scope   and  strength  to  provide   meaningful
protection  of  the Company's technology or  any  commercial
advantage to the Company, or that such patents will  not  be
challenged,  invalidated  or  circumvented  in  the  future.
Moreover,  there  can  be no assurance  that  the  Company's
competitors,  many of which have substantial  resources  and
have made substantial investments in competing technologies,
do  not  presently have or will not seek patents  that  will
prevent,  limit or interfere with the Company's  ability  to
make,  use  or sell its products either in the  U.S.  or  in
other countries.

The  Company  intends to rely on a combination  of  patents,
trade  secrets,  copyrights and trademarks  to  protect  its
intellectual  property rights. No assurance  can  be  given,
however,  that  competitors will not  independently  develop
substantially equivalent proprietary technology, or that the
Company  can  meaningfully protect its rights in  unpatented
proprietary technology.

The  Company has not received any notices alleging,  and  is
not aware of, any infringement by the Company of any patents
or intellectual property of others. However, there can be no
assurance  that current and potential competitors and  other
third parties have not filed or in the future will not  file
applications  for patents, or have not received  or  in  the
future will not receive, patents or other proprietary rights
relating to devices, apparatus, materials or processes  used
or proposed to be used by the Company.

The Company's software (which is an integrated component  in
its  EP  WorkMate  and  EP-3  Clinical  Stimulator)  is  not
patented  and  existing copyright laws  offer  only  limited
practical  protection. There can be no  assurance  that  any
legal  protection which may be sought and precautions  which
may  be  taken  by the Company will be adequate  to  prevent
misappropriation  of  the  Company's  software   and   trade
secrets.

The  medical  device industry is characterized  by  frequent
litigation regarding patent and other intellectual  property
rights.  While the Company does not believe it is infringing
any  patents or other intellectual property rights of others
and  has  received no notice of infringement, it is possible
that claims in the future may adversely affect the Company's
ability to market certain products. Any such claims, with or
without  merit,  could be time-consuming, result  in  costly
litigation   and  diversion  of  technical  and   management
personnel,  cause shipment delays or require the Company  to
develop  alternative technology or to enter into royalty  or
licensing   agreements.  Although  patent  and  intellectual
property disputes in the medical device area have often been
settled  through  licensing or similar  arrangements,  costs
associated  with  such arrangements may be  substantial  and
could  include ongoing royalties. There can be no  assurance
that, if required, necessary licenses would be available  to
the  Company  on satisfactory terms or at all, or  that  the
Company  could redesign its products or processes  to  avoid
alleged  infringement. Accordingly, an adverse determination
in  a  judicial or administrative proceeding or  failure  to
obtain  necessary  licenses could prevent the  Company  from
manufacturing and selling its products, which would  have  a
material  adverse effect on the Company's business,  results
of  operations  and financial condition. Conversely,  costly
and  time-consuming litigation may be necessary  to  enforce
the Company's rights under patents, to protect trade secrets
or  know-how  owned  by  the Company  or  to  determine  the
enforceability, scope and validity of the proprietary rights
of   others.   See  "Business  -  Patents  and  Intellectual
Property"  and  " - Competition."

Royalty Payment Obligations
The  Company  has  entered into several  license  agreements
which  provide for the Company to pay royalties  based  upon
net  sales  of products covered by the licensed  technology,
including, in some cases, minimum annual royalties.  In  the
event  that  the  Company does not pay such  royalties,  the
Company  may  lose its rights under the license  agreements.
The  loss  of  certain of the Company's technology  licenses
could  have  a  material  adverse impact  on  the  business,
financial  condition  and  results  of  operations  of   the
Company.


Significant Competition.
The  medical  device market, particularly  in  the  area  of
electrophysiology  products,  is  highly  competitive.   The
Company  competes with many companies, many  of  which  have
access  to  significantly greater financial,  marketing  and
other  resources  than  the Company.  Further,  the  medical
device  market is characterized by rapid product development
and technological change. The present or future products  of
the  Company  could be rendered obsolete  or  uneconomic  by
technological  advances  by one or  more  of  the  Company's
present  or  future  competitors or by other  therapies.  In
particular, the ALERT System is a new technology  that  must
compete  with established treatments for atrial fibrillation
as  well  as with new treatments currently under development
by other companies. The Company's future success will depend
upon its ability to remain competitive with other developers
of  such  medical  devices and therapies.  See  "Business  -
Competition."

Limitations on Third Party Reimbursement.
The Company's products are generally purchased by physicians
or  hospitals.  In  the U.S., third-party  payors  are  then
billed  for  the  healthcare services provided  to  patients
using   those  products.  These  payors  include   Medicare,
Medicaid   and   private  insurers.  Similar   reimbursement
arrangements  exist  in several European  countries.  Third-
party  payors  may  deny  or  limit  reimbursement  for  the
Company's existing products and future products such as  the
ALERT    System.   Third-party   payors   are   increasingly
challenging  the  prices charged for  medical  products  and
services  and  are  putting pressure  on  medical  equipment
suppliers   to   reduce  prices.  Furthermore,   substantial
uncertainty  exists  as  to  third-party  reimbursement  for
investigational and newly approved products. The U.S. Health
Care  Financing  Authority has entered into  an  interagency
agreement with the FDA pursuant to which the FDA places  all
IDEs it approves into one of two categories, "Category A" or
"Category B." Category A devices are innovative devices that
are  believed  to  be  in Class III (the  class  of  medical
devices subject to the most stringent FDA review) and are of
a   type  as  to  which  initial  questions  of  safety  and
effectiveness have not been resolved and the FDA  is  unsure
whether the device type can be safe and effective. They will
not  be  eligible  for  Medicare reimbursement.  Category  B
devices  include  Class III devices of a type  as  to  which
underlying questions of safety and effectiveness  have  been
resolved  or that is known to be capable of being  safe  and
effective  because  other devices of  that  type  have  been
approved.  Category B devices will be eligible for  Medicare
reimbursement  if  the devices are furnished  in  accordance
with  the  FDA-approved protocols governing clinical  trials
and  all  other Medicare coverage requirements are met.  The
Company believes the ALERT System may be a Class III device.
There  can  be  no assurance that the ALERT System  will  be
categorized  as  a Category B device and thus  eligible  for
Medicare reimbursement during clinical trials. There can  be
no  assurance that reimbursement will be or remain available
for the Company's products, or for the ALERT System if it is
approved for marketing in the U.S., or even if reimbursement
is  available, that payors' reimbursement policies will  not
adversely affect the Company's ability to sell its  products
on  a  profitable  basis.  Mounting  concerns  about  rising
healthcare  costs  may cause more restrictive  coverage  and
reimbursement  policies  to be implemented  in  the  future.
Changes   in  government  and  private  third-party  payors'
policies  toward reimbursement for procedures employing  the
Company's products in the U.S. or other countries could have
a material adverse effect on the Company's ability to market
its products. See "Business - Third Party Reimbursement."

Ability to Manage Sales Growth.
During 1996, the Company began to assemble a domestic direct
sales  and marketing force to sell and promote the Company's
products in the U.S. market. Previously, the Company  relied
on third-party distributors for all sales efforts. There can
be no assurance that the Company will be able to continue to
attract and retain qualified and capable individuals who can
successfully promote the Company's products.

The  Company  is in the process of expanding  its  marketing
internationally  and  will continue to rely  on  third-party
distributors  in foreign markets. During 1997,  the  Company
formed  a U.S. subsidiary, with a branch based in the United
Kingdom,  to  increase sales in the UK, improve  distributor
relationships  and customer service and  to  assist  in  the
introduction of the ALERT System in Europe. The Company  has
initiated sales through a new Japanese distributor  and  has
taken  steps to improve its distribution network  throughout
the  Asian markets. The Company operates pursuant to written
or  oral agreements with third party distributors which  are
often  terminable by distributors. There can be no assurance
that  distributors will actively and effectively market  the
Company's  products  or that the Company  will  be  able  to
replace  any existing distributors on advantageous terms  if
any  of  its present relationships are terminated.  Further,
there  can be no assurance that the Company will be able  to
make  arrangements  with  new  distributors  to  access  new
international markets. See "Business - Sales and Marketing."

Healthcare Reform.
The  healthcare  industry is subject to changing  political,
economic  and  regulatory influences  that  may  affect  the
procurement  practices  and  the  operation  of   healthcare
facilities.  During the past several years,  the  healthcare
industry  has  been subject to an increase  in  governmental
regulation of, among other things, reimbursement  rates  and
certain  capital  expenditures.  Certain  legislators   have
introduced legislation or have announced proposals to reform
certain  aspects  of the U.S. healthcare  system,  including
proposals  that  may  increase governmental  involvement  in
healthcare, lower reimbursement rates for both treatment and
capital costs incurred by hospitals, or otherwise change the
operating   environment   for   the   Company's   customers.
Significant  changes  in  healthcare  systems  may  have   a
substantial  impact  on  the manner  in  which  the  Company
conducts  its  business and could have  a  material  adverse
effect  on  the Company's business, financial condition  and
ability  to market the Company's products. Changes resulting
from  healthcare  reform proposals or the enactment  thereof
may   influence  customer  purchases  and  the   amount   of
reimbursement  available  from  governmental  agencies   and
private  third-party payors for diagnostic  and  therapeutic
procedures conducted with the Company's products,  or  could
impose limitations on prices that customers will be able  to
pay, or the Company may charge, for its products.




Dependence on Key Personnel; Need to Recruit Additional Key
Management Personnel.
The  Company  is  dependent upon a  limited  number  of  key
management  and technical personnel, particularly  David  A.
Jenkins,  C.  Bryan  Byrd and Joseph C.  Griffin,  III.  The
Company's  continued  growth  and  long  term  success  will
depend, in part, on its ability to attract and retain highly-
qualified  personnel.  There can be no  assurance  that  the
Company  will be able to attract and retain such  personnel.
The  Company competes for such personnel with other  medical
device   companies,   academic   institutions   and    other
organizations. The loss of any key personnel, the  inability
to hire or retain qualified personnel or the failure of such
personnel  to  function effectively as  a  management  group
could  have  a  material  adverse effect  on  the  Company's
business, results of operations and financial condition. See
"Item  9  -  Directors,  Executive Officers,  Promoters  and
Control  Persons;  Compliance  with  Section  16(a)  of  the
Exchange Act."

Product Liability and Insurance.
The  manufacture and sale of the Company's products involves
the risk of product liability claims. The Company's products
are  highly  complex  and some are,  or  will  be,  used  in
relatively  new  medical procedures and in situations  where
there  is  a potential risk of serious injury, adverse  side
effects  or death. Misuse or reuse of catheters may increase
the  risk of product liability claims. The Company currently
maintains  product liability insurance with coverage  limits
of $5,000,000 per occurrence and $5,000,000 in the aggregate
per  year;  however,  there can be no  assurance  that  this
coverage  will be adequate. Such insurance is expensive  and
may not be available in the future on acceptable terms if at
all. A successful claim against or settlement by the Company
in  excess  of  its  insurance  coverage  or  the  Company's
inability to maintain insurance in the future could  have  a
material  adverse effect on the Company's business,  results
of operations and financial condition.

Limited Manufacturing Experience; Dependence on Suppliers
To  date,  the Company's manufacturing activities have  been
limited. The Company must manufacture, or contract  for  the
manufacturing  of,  products  in  commercial  quantities  in
compliance  with regulatory requirements and  at  acceptable
costs. The Company currently manufactures substantially  all
of  its  catheter  products, including the  ALERT  Catheter.
There  can be no assurance that the Company will be able  to
manufacture  catheters  or  other products  with  sufficient
processes and in quantities necessary to achieve and sustain
profitability.  In addition, the Company  has  expanded  its
catheter  manufacturing facilities  and  hired  and  trained
additional personnel. The Company has no experience in large-
scale  manufacturing and there can be no assurance that  the
Company   will  be  successful  in  manufacturing   catheter
products in significant volume.

The Company relies on outside sources for the manufacture of
critical components of the ALERT Companion, EP WorkMate, EP-
3  Clinical  Stimulator and the TeleTrace III Receiver.  All
components   are  manufactured  in  conformance   with   the
Company's  specifications. Any interruption  in  the  supply
from  its suppliers would have a material adverse effect  on
the   Company's  ability  to  deliver  its  products   until
acceptable  arrangements  can  be  made  with  a   qualified
alternative source of supply. There can be no assurance that
the Company would be able to reach an acceptable arrangement
with  an  alternative source of supply at acceptable  prices
and  adequate  quality  levels on a  timely  basis.  If  the
Company  were  unable to do so, such an  interruption  would
have  a  material adverse effect on the Company's  business,
results of operations and financial condition. See "Business
--  Manufacturing"  and "Certain Relationships  and  Related
Transactions."

Risks Associated With International Operations.
During 1997, the Company established a branch office in  the
United Kingdom in order to increase sales in the UK, improve
international distributor service and relations and  to  aid
in  the introduction of the ALERT System for sale in Europe.
Approximately  35%  of the Company's revenues  from  product
sales  for  1997  were derived from sales  of  its  products
outside  the U.S. Since international revenues are  expected
to  continue to represent a significant percentage of  total
revenues,  the Company expects to continue to  increase  its
operations  outside  of  the United  States.  As  such,  the
Company  will  continue  to be subject  to  fluctuations  in
currency   exchange  rates  and  other  risks   of   foreign
operations, including tariff regulations and export  license
requirements, unexpected changes in regulatory requirements,
longer  periods to collect accounts receivable,  potentially
inadequate protection of intellectual property rights, local
taxes, restrictions on repatriation of earnings and economic
and  political  instability. There can be no assurance  that
such factors will not have a material adverse effect on  the
Company's ability to maintain and expand profitable  foreign
sales  and, consequently, on the Company's business, results
of operations and financial condition.

Possible Volatility of Stock Price.
The  market  price of shares of the Company's Common  Stock,
like  that of the common stock of many medical products high
technology companies, has, in the past, been, and is  likely
in  the  future  to  continue to be,  highly  volatile.  The
Company believes that factors such as quarterly fluctuations
in  financial  results, announcements  of  new  developments
relating  to cardiac care diagnosis and treatment  therapies
and developments in third-party reimbursement policy and  in
the   medical  device  industry  could  contribute  to   the
volatility of the price of its Common Stock, causing  it  to
fluctuate  significantly. These factors, as well as  general
economic  conditions, such as recessions  or  high  interest
rates,  or  other  events unrelated to the  Company  or  its
products,  may  adversely affect the  market  price  of  the
Common  Stock.  See  "Market for Common Equity  and  Related
Stockholder Matters."

Transactions With Affiliates and Potential Conflicts.
Anthony  Varrichio,  a  director  and  shareholder  of   the
Company,  is  an officer, director and shareholder  of  HDI.
Medtronic,  Inc.  ("Medtronic")  is  a  shareholder  of  the
Company  and  HDI,  and Lester Swenson, a  director  of  the
Company, is an officer of Medtronic. HDI has sold rights  to
various  products  to  the Company,  performs  research  and
development   services   for  the  Company   and   currently
manufactures certain of the Company's non-catheter products.
While  the Company believes its arrangements with  HDI  have
been, and will continue to be, on terms no less favorable to
the  Company than it could obtain from third parties,  there
can  be  no  assurance  that  all arrangements  between  the
Company and HDI will be as favorable to the Company as  they
would be in the absence of its relationships with affiliates
of    HDI.    See   "Certain   Relationships   and   Related
Transactions."

The Company purchases certain components for the EP WorkMate
and  ALERT Companion from Mortara Instrument, Inc. ("Mortara
Instrument").   Dr.  David  W.  Mortara,  a   director   and
shareholder   of  the  Company,  is  also  a  Director   and
shareholder   of  Mortara  Instrument.  While  the   Company
believes its arrangements with Mortara Instrument have been,
and  will continue to be, on terms no less favorable to  the
Company  than it could obtain from third parties, there  can
be  no  assurance that all arrangements between the  Company
and  Mortara Instrument will be as favorable to the  Company
as  they  would be in the absence of its relationships  with
affiliates of Mortara Instrument. See "Certain Relationships
and Related Transactions."

Concentration of  Ownership.
As  of  March  19,  1998, the Company's  six  directors  and
executive  officers and their affiliates beneficially  owned
an   aggregate  of  approximately  22.3%  of  the  Company's
outstanding Common Stock, including unexercised vested stock
options.  As a result, these shareholders, acting  together,
could  have significant influence over all matters requiring
approval  by the shareholders of the Company. This level  of
ownership  could  have an effect in delaying,  deferring  or
preventing  a  change  in control of  the  Company  and  may
adversely  affect  the  voting and  other  rights  of  other
holders  of Common Stock. See "Security Ownership of Certain
Beneficial Owners and Management."

Item 7.  Financial Statements

The information in response to this item is set forth in the
Consolidated Financial Statements beginning on page F-1 of
this report on Form 10-KSB.

Item 8.  Changes in and Disagreements With Accountants on
Accounting
       and Financial Disclosure

       Not applicable.



                          PART III

Item  9.   Directors,  Executive  Officers,  Promoters   and
Control  Persons;  Compliance with Section  16  (a)  of  the
Exchange Act

The following table sets forth certain information regarding
the  directors, executive officers and certain key employees
of the Company as of March 19, 1998:

NAME                           AGE    POSITION

David A. Jenkins (3)           40     Chairman of the Board,President
                                      and Chief Executive Officer
James J. Caruso                37     Chief Financial Officer,
                                      Treasurer and Secretary
C. Bryan Byrd                  38     Vice President of Engineering
Joseph C. Griffin, III         38     President, ProCath Corporation
David W. Mortara,Ph.D. (1)(2)  56     Director
Lester J. Swenson (2)          58     Director
Anthony J. Varrichio (3)       51     Director


(1) Member of the Compensation Committee of the  Board  of Directors.
(2) Member of the Audit Committee of the Board of Directors.
(3) Member of the Plan Committee of the Board of Directors.

Directors  and officers of the Company are elected  annually
and  hold  offices until their successors  are  elected  and
qualified   or  until  their  earlier  removal,   death   or
resignation.  Set  forth below is a  brief  summary  of  the
recent  business experience and background of each  director
and executive officer of the Company.

David A. Jenkins is the co-founder and Chairman of the Board
of  Directors, President and Chief Executive Officer of  the
Company.  Mr. Jenkins served as the President and a Director
of  the  Company from 1993 to 1995. From 1988 to  1993,  Mr.
Jenkins  served  as  the Chief Executive  Officer  and  then
Chairman  of  the Board of Directors of Arrhythmia  Research
Technology,  Inc., a publicly held company involved  in  the
sale and distribution of electrophysiology products.

James  J.  Caruso is the Chief Financial Officer,  Treasurer
and Secretary of the Company. Mr. Caruso served from 1989 to
1995 as Vice President and Chief Financial Officer of Micron
Medical   Products,  Inc.,  a  wholly-owned  subsidiary   of
Arrhythmia  Research  Technology,  Inc.  Prior  to   joining
Micron,  Mr. Caruso was employed for five years by  Deloitte
& Touche (formerly Touche Ross & Co.) and also by Ladenburg,
Thalmann & Co., an investment banking firm. Mr. Caruso is  a
Certified Public Accountant.

C.  Bryan Byrd is the Vice President of Engineering  of  the
Company.  Mr.  Byrd  joined the Company  in  April  1993  to
oversee software development for new products. From 1989  to
1993,   he   co-founded  and  served  as  the  Director   of
Engineering  for BioPhysical Interface Corp.  where  he  was
responsible for developing automated computerized monitoring
equipment  for pacemaker and open heart operating rooms  and
follow-up  clinics. Before that, he was a software  engineer
for  Medtronic,  where he developed the ValveBase,  PaceBase
and  TeleTrace  software modules, and before that  with  Mt.
Sinai  Medical  Center  in  Miami  Beach,  Florida.  He  has
developed databases for all aspects of cardiac surgery.

Joseph  C.  Griffin, III has been the President  of  ProCath
since   its   inception   in  1993.  Mr.   Griffin   founded
Professional   Catheter  Corporation,  the  predecessor   to
ProCath,  in  1990  and served as its  President  until  the
Company  acquired  its business in 1993.  Before  that,  Mr.
Griffin  was  Manager of Research and Development  at  Oscor
Medical  Corporation, a manufacturer of  implantable  pacing
leads,  and Director, Research and Development and Technical
Services at Nova Medical Specialties, Inc., a division of B.
Braun  of  America.  Mr.  Griffin has  more  than  18  years
experience  in  the  design,  development,  regulation   and
manufacture of cardiac catheters and has served as a  member
of  the  Health Industry Manufacturers Association Pacemaker
Task  Force,  the  Electrode Catheter  Task  Force  and  the
Society of Manufacturing Engineers.

David  W.  Mortara, Ph.D. has served as a  Director  of  the
Company  since November, 1995. Dr. Mortara founded  and  has
served  as  the  Chairman  and Chief  Executive  Officer  of
Mortara   Instrument,  a  privately-held  manufacturer   and
supplier of electrocardiography equipment, since 1982. Prior
to   founding  Mortara  Instrument,  Dr.  Mortara  was  Vice
President, Engineering at Marquette Electronics, Inc. He has
authored   numerous   scientific  publications   on   signal
processing for electrocardiography and currently  serves  as
co-chair of AAMI's ECG Standards Committee.

Lestor  J.  Swenson has served as a Director of the  Company
since  November,  1995.  Mr.  Swenson  has  served  as  Vice
President, Finance and Business Systems of Medtronic, Inc. a
leading  manufacturer  and supplier  of  arrhythmia  control
products  including  pacemakers, implantable  defibrillators
and catheter ablation systems, since 1985. At Medtronic, Mr.
Swenson  previously  held a variety of  positions  including
Assistant  Corporate  Controller,  European  Controller  and
International Controller.

Anthony J. Varrichio has served as a Director of the Company
since inception and served as the Chairman of the Board  and
Treasurer of the Company from 1993 to 1995. Since 1987,  Mr.
Varrichio has served as the President and a director of HDI,
a  privately held engineering, consulting and medical device
manufacturing  corporation. Prior to  co-founding  HDI,  Mr.
Varrichio served as Vice President of Electro-Biology, Inc.,
a manufacturer of electronic bone growth stimulator devices.
Prior thereto, Mr. Varrichio was the Director of Engineering
at   the   Advanced   Technology  Laboratory   division   of
Intermedics, Inc.

Committees of the Board of Directors

Audit Committee.
The Company has an Audit Committee of the Board of Directors
at  least a majority of whom must be "independent directors"
(as  defined  in  the bylaws of the National Association  of
Securities   Dealers,   Inc.),   to   make   recommendations
concerning the engagement of independent public accountants,
review with the independent public accountants the plans and
results   of  the  audit  engagement,  approve  professional
services  provided  by the independent  public  accountants,
review   the   independence  of   the   independent   public
accountants, consider the range of audit and non-audit  fees
and review the adequacy of the Company's internal accounting
controls. Currently, Messrs. Mortara and Swenson are members
of  the  Audit Committee. The Audit Committee met  one  time
during 1997.

Compensation Committee.
The  Company  has a Compensation Committee of the  Board  of
Directors consisting of disinterested outside directors  who
may  not  receive options under the 1995 Long Term Incentive
Plan,  to determine compensation for the Company's executive
officers  and  to  administer the 1995 Long  Term  Incentive
Plan.  Currently,  Mr. Mortara is the  sole  member  of  the
Compensation Committee.

Plan Committee.
The  Company has a Plan Committee of the Board of  Directors
to  administer the Company's 1995 Director Option Plan, none
of whom are eligible to participate in such Plan. Currently,
Messrs.  Jenkins  and  Varrichio are  members  of  the  Plan
Committee.

Compliance with Reporting Requirements
Under  the  securities  laws  of  the  United  States,   the
Company's  directors,  executive officers  and  any  persons
holding more than ten percent of the Company's Common  Stock
are  required  to  report their ownership of  the  Company's
Common  Stock  and  any  changes in that  ownership  to  the
Securities  and Exchange Commission and the Nasdaq  National
Market  Surveillance Department. Based solely on its  review
of the forms received by it from such persons for their 1997
transactions,   the  Company  believes   that   all   filing
requirements  applicable  to such  officers,  directors  and
greater  than  ten percent beneficial holders were  complied
with in a timely manner.

Item 10.  Executive Compensation

The  following summary compensation table sets forth certain
information concerning compensation paid or accrued  to  the
Chief  Executive  Officer  of the Company  and  former  Vice
President  of  Sales  (the "Named Executive  Officers")  for
services  rendered  in all capacities for  the  years  ended
December 31, 1997, 1996 and 1995. No other executive officer
of  the  Company  was  paid a salary and  bonus  aggregating
greater than $100,000 during such time periods.


 Summary Compensation Table                                 Long  Term
                                                           Compensation
                                                           -------------
                                   Annual Compensation        Securities
                                     Salary     Bonus         Underlying
Name and Principal Position Year      ($)        ($)           Options
                            ----    --------    ------       ----- -------
David A. Jenkins            1997    $145,000        $0             0
Chairman, President and     1996    $127,500      $250             0
Chief Executive Officer     1995    $110,000    $5,250         166,000 (1)


Robert W. Evans (2)         1997    $108,750        $0             0
Vice President of Sales     1996     $42,292        $0         125,000 (3)
and Marketing               1995          $0        $0             0

-------------------------
  1) The Company granted Mr. Jenkins a non-qualified stock
     option to purchase 96,000 shares of Common Stock at an
     exercise price of $2.20 per share. Options to purchase
     30,000 shares became exercisable on the grant date and
     options to purchase 1,000 shares become exercisable each
     month thereafter. The term of such option is five years. The
     Company granted Mr. Jenkins an incentive stock option to
     purchase 70,000 shares of Common Stock pursuant to the
     Company's 1995 Long Term Incentive Plan at an exercise price
     of $2.20 per share. Options to purchase 45,000 shares became
     exercisable upon completion of the Company's initial public
     offering and options to purchase 25,000 shares became
     exercisable on the first anniversary of such date. The term
     of such option is ten years.

  2) Mr. Evans' employment with the Company terminated on September 10, 1997.

  3) On September 17, 1996, the Company granted Mr. Evans an
     incentive stock option to purchase 90,000 shares of common
     stock pursuant to the 1995 Long Term Incentive Plan and a
     non-qualified stock option to purchase 35,000 shares of
     Common Stock at an exercise price of $5.50 per share.
     Options to purchase 25,000 shares became exercisable on the
     grant date and options to purchase 2,083 shares became
     exercisable each month thereafter. Upon the termination of
     Mr. Evans employment, the options expired unexercised.

Stock Options
No  stock  options  were  granted  to  the  Named  Executive
Officers during the fiscal year ended December 31, 1997.

Option Exercises and Holdings
The   following  table  provides  certain  information  with
respect  to  the  Named  Executive Officers  concerning  the
exercise  of  stock  options during the  fiscal  year  ended
December 31, 1997 and the value of unexercised stock options
held as of December 31, 1997.
<TABLE>
<S>                      <C>         <C>        <C>             <C>              <C>           <C>
Aggregated Option Exercises in 1997 and Year End Option Values

                                                      Number of Shares
                            Shares                 Underlying Unexercised           Value of Unexercised
                           Acquired     Value             Options at               In the Money Options at
                         on Exercise  Realized      December 31, 1997              December 31, 1997 ($) (1)
   Name                      (#)         ($)     Exercisable    Unexercisable    Exercisable   Unexercisable
----------------         ----------   --------   -----------    -------------    -----------   -------------
David A. Jenkins              0          0         127,000        39,000                $0             $0
Chairman, President
and Chief Executive
Officer

Robert W. Evans               0          0            0              0                  $0             $0
Vice President of Sales
and Marketing

</TABLE>

(1) Amounts calculated by subtracting the exercise price  of
the  options from the market value of the underlying  Common
Stock  using  the closing sale price on the Nasdaq  National
Market of $1.75 per share on December 31, 1997.

Compensation Plans and Other Arrangements

1995 Long Term Incentive Plan
The  Company's  1995  Long Term Incentive  Plan  (the  "1995
Incentive  Plan") was adopted by the Board of Directors  and
shareholders  in November, 1995. On October  30,  1997,  the
Shareholders approved an amendment increasing the number  of
shares available under the Plan from 400,000 to 700,000.  At
December  31, 1997, options to purchase 352,500 shares  were
outstanding at exercise prices ranging from $2.00  to  $4.75
per  share. The 1995 Incentive Plan provides for  grants  of
"incentive"  and "non-qualified" stock options to  employees
of  the Company. The 1995 Incentive Plan is administered  by
the  Compensation Committee, which determines the  optionees
and the terms of the options granted, including the exercise
price,  number  of  shares subject to the  options  and  the
exercisability  thereof.  The  1995  Incentive   Plan   will
terminate on November 30, 2005, unless earlier terminated by
the Board of Directors.

The  exercise price of incentive stock options granted under
the  1995 Incentive Plan must be equal to at least the  fair
market  value of the Common Stock on the date of grant,  and
the  term  of  such options may not exceed ten  years.  With
respect  to  any  optionee who owns stock representing  more
than 10% of the voting power of all classes of the Company's
outstanding  capital  stock,  the  exercise  price  of   any
incentive stock option must be equal to at least 110% of the
fair  market value of the Common Stock on the date of grant,
and  the  term of the option may not exceed five years.  The
aggregate  fair market value of Common Stock (determined  as
of  the  date  of the option grant) for which  an  incentive
stock  option  may for the first time become exercisable  in
any calendar year may not exceed $100,000.

1995 Director Option Plan
The  Company's 1995 Director Option Plan was adopted by  the
Board of Directors and the shareholders in November, 1995. A
total  of 360,000 shares of Common Stock of the Company  are
available  for issuance under the 1995 Director Option  Plan
and  options to purchase 288,000 shares were outstanding  as
of December 31, 1997. The 1995 Director Option Plan provides
for  grants  of "director options" to eligible directors  of
the  Company and for grants of "advisor options" to eligible
members  of the Scientific Advisory Board. Director  options
and  advisor options become exercisable at the rate of 1,000
shares  per month, commencing with the first month following
the  date  of  grant for so long as the optionee  remains  a
director  or advisor, as the case may be. The 1995  Director
Option  Plan  is administered by the Plan Committee  of  the
Company, which determines the optionees and the terms of the
options granted, including the exercise price and the number
of  shares subject to the options. The 1995 Director  Option
Plan  will  terminate on November 30, 2005,  unless  earlier
terminated by the Board of Directors.

Compensation of Directors
During  1997, no directors of the Company received  cash  or
other compensation for services on the Board of Directors or
any  committee thereof. In the past, the Company has  issued
independent  Directors  options to purchase  shares  of  the
Company's  Common Stock under the 1995 Director Option  Plan
upon  their  election  or appointment to  the  Board.  These
options  vest at a rate of 1,000 shares per month of service
on  the  Board.  The  directors  are  reimbursed  for  their
reasonable travel expenses incurred in performance of  their
duties as directors.

Employment Agreements
On  August  31, 1995, the Company entered into an Employment
Agreement Addendum with Mr. David A. Jenkins which  extended
the  term  of  his  employment through March  1,  1999.  The
addendum  provides for base compensation of  $145,000,  plus
five  percent  of the Company's consolidated  income  before
taxes.  Mr.  Jenkins' Employment Agreement may be terminated
at  any  time  for  cause.  It  contains  a  non-competition
provision  extending  for  two years  after  termination  of
employment  for cause and, in the Company's discretion,  one
year  after termination of employment for any other  reason,
provided  that  if Mr. Jenkins is terminated without  cause,
the Company is obligated to continue to pay him compensation
during such discretionary period.

Item  11.   Security Ownership of Certain Beneficial  Owners
and Management
The following table sets forth certain information regarding
beneficial  ownership of Common Stock of the Company  as  of
March 19, 1998 by (i) each of the Company's directors,  (ii)
the  Named  Executive  Officers,  (iii)  all  directors  and
executive officers as a group and (iv) each person known  to
the  Company to beneficially own more than five  percent  of
the  Company's Common Stock. Except as otherwise  indicated,
the  persons  named  in  the  table  have  sole  voting  and
investment  power  with respect to all  shares  beneficially
owned, subject to community property laws, where applicable.

Name and Address           Number of  Shares      Percentage of Class
of Beneficial Owner        Beneficially Owned    Beneficially Owned (1)
--------------------       ------------------    ----------------------
David A. Jenkins (2)           1,003,000                 13.0%
c/o EP MedSystems, Inc.
100 Stierli Court
Mount Arlington, NJ

Medtronic, Inc. (3)              610,000                  8.0%
7000 Central Avenue NE
Minneapolis, MN 55432

Anthony Varrichio (4)            534,000                  7.0%
1 Hemlock Lane
Flanders, NJ 07836

Edwin K. Hunter (5)              504,500                  6.6%
1807 Lake Street
Lake Charles, LA 70602

Oppenheimer Funds, Inc.          500,000                  6.6%
Two World Trade Center
New York, NY 10048

David W. Mortara,(6)              81,000                  1.0%
7865 North 86th Street
Milwaukee, WI 53224

Lester J. Swenson (3)             31,000                     *
7000 Central Avenue NE
Minneapolis, MN 55432

Robert W. Evans (7)                    0                     *
c/o EP MedSystems, Inc.
100 Stierli Court
Mount Arlington, NJ

All executive officers
and directors as a
group (six persons)            1,766,000                 22.3%

*   Represents beneficial ownership of less than one percent
of the Common Stock.

(1)       Applicable  percentage ownership as of  March  19,
    1998  is  based  upon 7,599,917 shares of  Common  Stock
    outstanding  together  with the applicable  options  for
    such stockholder. Beneficial ownership is determined  in
    accordance with Rule 13d-3(d) of the Securities Exchange
    Act  of  1934,  as amended. Under Rule 13d-3(d),  shares
    issuable  within  60 days upon exercise  of  outstanding
    options,   warrants,  rights  or  conversion  privileges
    ("Purchase  Rights")  are  deemed  outstanding  for  the
    purpose  of calculating the number and percentage  owned
    by  the  holder of such Purchase Rights, but not  deemed
    outstanding   for   the  purpose  of   calculating   the
    percentage   owned  by  any  other  person.  "Beneficial
    ownership"  under Rule 13d-3 includes  all  shares  over
    which  a person has sole or shared dispositive or voting
    power.

(2)       Includes 133,000 shares issuable upon exercise  of
    options.  Also  includes  160,000  shares  held  by  Mr.
    Jenkins  as trustee for the Dalin Class Trust.  Excludes
    45,000  shares  held by Mr. Jenkins'  wife,  and  20,000
    shares  held by Mr. Jenkins' wife as custodian  for  his
    children.

(3) Includes   31,000  shares  issuable  upon  exercise   of
    options  granted to Mr. Swenson for which Medtronic  has
    claimed beneficial ownership.

(4) Includes   63,000  shares  issuable  upon  exercise   of
    options.

(5) Includes 152,500 shares held by two trusts of which  Mr.
    Hunter  is  the  trustee and 150,000 shares  held  by  a
    private  foundation  over whose assets  Mr.  Hunter  has
    shared voting and investment power.

(6) Includes   31,000  shares  issuable  upon  exercise   of
    options.

(7) Mr.  Evans'  employment with the Company  terminated  on
    September 10, 1997.

Item 12.  Certain Relationships and Related Transactions

Hi-Tronics Designs, Inc.
HDI  was  one  of  the Company's two founding  shareholders.
HDI's   shareholders  are  Anthony  J.  Varrichio,   William
Winstrom  and  Medtronic. Mr. Varrichio is the President,  a
director  and  the  largest  shareholder  of  HDI,  and  Mr.
Winstrom is an officer and director of HDI.

Mr.  Varrichio has been a director of the Company since  the
Company's  inception  and  was  Chairman  of  the  Board  of
Directors and Treasurer of the Company until November, 1995.
Mr.  Winstrom was a director of the Company until  November,
1995.  Lester Swenson, an officer of Medtronic, has  been  a
director of the Company since November, 1995. Mr. Varrichio,
Mr.  Winstrom and Medtronic acquired shares of the Company's
Common  Stock from HDI. As of March 19, 1998, Mr.  Varrichio
owned  beneficially 7.0% of the Company's Common Stock,  Mr.
Winstrom owned beneficially 4.9% and Medtronic owned 7.6%

Beginning   in  1993,  the  Company  engaged  HDI   as   the
manufacturer  of  the  EP-2 and EP-3  Clinical  Stimulators.
During  April,  1996,  the Company  entered  into  a  Master
Manufacturing  Agreement with HDI (the "Master Manufacturing
Agreement")   which  provides  that  HDI  will   manufacture
components for the EP WorkMate, the EP-3, the TeleTrace  III
Receiver,  and all subsequent versions of such products  for
the  Company  on an exclusive basis in accordance  with  GMP
regulations  and all other applicable laws and  regulations.
The  Master Manufacturing Agreement has a term of five years
commencing  on  March  31, 1996 and,  unless  terminated  by
either  party  upon  at least 90 days written  notice,  will
automatically  renew for successive terms of one  year.  The
Company  purchased  products from HDI aggregating  $506,000,
$392,000  and  $424,000  during  the  twelve  months   ended
December 31, 1997, 1996 and 1995, respectively.

The  Company determined that continued sale and  service  of
arrhythmia  monitors did not represent a good strategic  fit
with  the  Company's existing products and  planned  product
line,  including  the ALERT System. Therefore,  the  Company
discontinued  sale  of the MemoryTrace  line  of  arrhythmia
monitors.  In 1997, the Company sold its line of  arrhythmia
monitors  including an arrhythmia monitor under  development
to  HDI  in  return  for 60,000 shares of  common  stock  in
Neomedics,  Inc., a newly created company  involved  in  the
design and manufacture of implantable medical devices, which
is  an affiliate of HDI. Sales of arrhythmia monitors by the
Company were approximately $12,000 and $198,000 in the years
ended  December 31, 1996 and 1995, respectively.  Since  the
value assigned to the arrhythmia monitor technology had been
fully  amortized, the Company did not record a gain or  loss
on  the sale. The Neomedics common stock is not a registered
security traded on a public exchange and therefore its  fair
value is not readily determinable. At December 31, 1997, the
Company valued the shares of Neomedics stock at zero.
HDI completed development of the TeleTrace III-S Receiver in
1997  for  an  aggregate consideration of 19,000  shares  of
common stock of the Company, issued in 1995, and $30,000  in
cash  paid in 1997. HDI is the manufacturer of the TeleTrace
III-S Receiver.

On December 29, 1997, the Company granted HDI a nonexclusive
license  to  sell the TeleTrace receiver in connection  with
the sale of arrhythmia monitors. The agreement calls for the
payment of a royalty of $300 per unit sold by HDI.

The Company believes that each of the preceding transactions
with  HDI were entered into on terms and at prices  no  less
favorable  than  the  Company could have  received  from  an
unaffiliated party.

Mortara Instrument, Inc.
The Company purchases certain components for the EP WorkMate
and  ALERT Companion from Mortara Instrument. Dr.  David  W.
Mortara,  a director of the Company, is also a Director  and
shareholder of Mortara Instrument. The approximate value  of
products  purchased  from Mortara Instrument  was  $573,000,
$15,000,  and $12,000, in 1997, 1996 and 1995, respectively.
The  Company  believes  that each of the  transactions  with
Mortara Instrument were entered into on terms and at  prices
no  less favorable than the Company could have received from
an unaffiliated party.

Acquisition of Note Receivable
In   September,  1995,  at  a  time  when  the  Company  was
considering  establishing a catheter manufacturing  facility
based  in  the United Kingdom, the Company acquired  a  note
receivable  in  the  amount  of  $100,000  from  FalFab  LLC
("FalFab"). Edwin K. Hunter, who beneficially owned  504,500
shares of Common Stock of the Company as of March 19,  1998,
was  also  a  shareholder  of FalFab.  The  note  receivable
accrued interest at 8% per annum and was due and payable  on
July  15,  1996. The Company loaned an additional $7,500  to
Falfab  during the second quarter of 1996. Upon maturity  of
the  note receivable, Falfab was unable to repay amounts due
the   Company   and   was  liquidated  by   its   creditors.
Accordingly,  the  Company  reflected  a  write-off  of  the
$107,500 note receivable in 1996.
Item 13.  Exhibits and Reports on Form 8-K.

          (a) Exhibits
               3.1   Amended  and  Restated  Certificate  of
               Incorporation (1)

               3.2  Bylaws, as amended (1)

               10.6  Employment Agreement dated as of  March
               1,  1993   between EP Medical, Inc. and David
               A. Jenkins, as      amended (1)

               10.7   Employment  Agreement  dated   as   of
               November  6,  1993    between EP  Acquisition
               Corp. and Joseph C. Griffin, III (1)

               10.8 1995 Director Option Plan (1)

               10.10      License  Agreement  dated  as   of
               November,  1,  1995 between      EP  Medical,
               Inc. and Dr. Eckhard Alt, as amended  (1)

               10.11      Consulting Agreement dated  as  of
               February 1, 1996    between EP Medical,  Inc.
               and Raman Mitra  (1)

               10.12      License  Agreement  dated  as   of
               November,  1,  1995 between      EP  Medical,
               Inc. and Sanjeev Saksena (1)

               10.14      Investment Agreement  dated  April
               22,  1994  among  EP   Medical,  Inc.,  David
               Jenkins,    Anthony    Varrichio,     William
               Winstrom  and  American Medical  Electronics,
               Inc. (1)

               10.15      Letter  Agreement dated  December,
               15,  1995  between EP      Medical, Inc.  and
               Rudiger Dahle  (1)

               10.16      Investment Agreement dated January
               16,  1996  among EP   Medical, Inc.,  Rudiger
               Dahle,   Anthony   Varrichio   and    William
               Winstrom (1)

               10.22       Master  Manufacturing   Agreement
               dated   April   16,   1996       between   EP
               MedSystems and Hi-Tronics Designs, Inc. (1)

               10.25      Exclusive  Rights Agreement  dated
                    May  26, 1996 between EP MedSystems  and
                    Spire Corporation (1)

               10.26      Letter  Agreement dated April  12,
                    1996 between EP MedSystems, Inc. and Hi-
                    Tronics  Designs, Inc. relating  to  the
                    TeleTrace IV Receiver (1)

               10.27      Consulting Agreement dated  as  of
                    May 24, 1996 between EP MedSystems, Inc.
                    and  Elliott Young and Associates  Inc.,
                    as amended and restated. (1)

               10.28     Stock Option Agreement dated August
               31,  1995 between    EP MedSystems, Inc.  and
               Tracey Young, as amended (1)

               10.29     Registration Rights Agreement dated
               as  of  May  24, 1996  between EP MedSystems,
               Inc. and Tracey Young (1)

               10.30      Exclusive License Agreement  dated
               February  27,  1997   between EP  MedSystems,
               Inc. and EchoCath, Inc. (2)

               10.31        Subscription   Agreement   dated
               February  27,  1997   between EchoCath,  Inc.
               and EP MedSystems, Inc. (2)

               10.32      Amended  1995 Long Term  Incentive
               Plan (3)

               10.33     Agreement of Lease dated August 25,
               1997  between  EP      MedSystems,  Inc.  and
               Provident  Mutual Life Insurance     Company,
               as landlord

               11     Statement  regarding  Calculation   of
               Shares  Used in      Computing Net  Loss  per
               Share

               21   List of Subsidiaries

               27   Financial Data Schedule (4)

               27.1 Restated Financial Data Schedule (4)


          1.Incorporated by reference to the exhibit of the same
            number previously filed with the Commission in connection
            with the Company's Registration Statement on Form SB-2 and
            Pre-Effective Amendments No. 1 and 2 thereto.
          2.Incorporated by reference to the exhibit of the same
            number previously filed with the Commission on Form 10-KSB
            for the year ended December 31, 1996.
          3.Incorporated by reference to Exhibit A previously filed
            with the Commission in the Company's Proxy Statement for the
            Annual Meeting of Shareholders held on October 30, 1997.
          4.EDGAR Filing only.

(b)  Reports on Form 8-K

           No  reports on Form 8-K were filed by the Company
during 1997.

            EP MEDSYSTEMS, INC. AND SUBSIDIARIES
         INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

1.  FINANCIAL STATEMENTS                               Page

     Report of Independent Public Accountants            F-2

     Consolidated Balance Sheets as of December
     31, 1997 and 1996                                   F-3

     Consolidated Statements of Operations for the
     years ended December 31, 1997, 1996 and 1995        F-4

     Consolidated Statements of Changes in
     Shareholders' Equity (Deficit) for the years
     ended December 31, 1997, 1996 and 1995              F-5

     Consolidated Statements of Cash Flows for the
     years ended December 31, 1997, 1996 and 1995        F-6

     Notes to Consolidated Financial Statements          F-7




                             F-1


          REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To EP MedSystems, Inc.:

We have audited the accompanying consolidated balance sheets
of  EP  MedSystems,  Inc.  (a New  Jersey  corporation)  and
subsidiaries  as  of December 31, 1997  and  1996,  and  the
related  consolidated statements of operations,  changes  in
shareholders' equity (deficit) and cash flows  for  each  of
the three years in the period ended December 31, 1997. These
consolidated financial statements are the responsibility  of
the  Company's management. Our responsibility is to  express
an  opinion on these consolidated 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  EP  MedSystems, Inc. and  subsidiaries  as  of
December  31,  1997  and  1996, and  the  results  of  their
operations and their cash flows for each of the three  years
in  the  period ended December 31, 1997, in conformity  with
generally accepted accounting principles.


                                        ARTHUR ANDERSEN LLP
New York, New York
March 11, 1998



                             F-2
            EP MEDSYSTEMS, INC. AND SUBSIDIARIES
                 CONSOLIDATED BALANCE SHEETS
                                                  December 31,
                 ASSETS                        1997           1996
                                            -----------    -------------
Current assets:
   Cash and cash equivalents                $   752,068    $ 5,491,857
   Short-term investments                     2,120,084      1,794,553
   Accounts receivable, net of
     allowances for doubtful accounts of
     $74,112 and $82,709, respectively        1,229,921        671,503
   Inventories                                1,512,528        626,707
   Prepaid expenses and other assets            217,526        185,761
                                              ---------      ---------
          Total current assets                5,832,127      8,770,381
Long-term investments                           --           3,001,222
Investment in EchoCath                        1,400,000        --
Property and equipment, net                     757,295        181,385
Intangible assets, net                          569,705        615,861
Other assets                                     58,439         31,000
                                              ---------    -----------
          Total assets                      $ 8,617,566    $12,599,849
                                            ===========    ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Accounts payable                         $   670,206    $   238,764
   Payables due to related parties              127,859         85,035
   Accrued expenses                             850,507        438,787
   Deferred revenue                              34,313         42,938
   Customer deposits                            108,012        103,999
                                              ---------        -------
          Total current liabilities           1,790,897        909,523
                                              ---------        -------
Commitments and contingencies
Shareholders' equity:
  Preferred Stock, no par value,
     5,000,000 shares authorized, no
     shares issued and outstanding              --             --
  Common stock, $.001 stated value,
     25,000,000 shares authorized,
     7,599,917 issued and outstanding             7,600          7,600
  Additional paid-in capital                 16,743,014     16,743,014
  Accumulated deficit                       (9,923,945)    (5,060,288)
                                            -----------    -----------
     Total shareholders' equity               6,826,669     11,690,326
                                            -----------    -----------
Total liabilities and shareholders'        $ 8,617,566     $12,599,849
                                           ===========     ===========

 The accompanying notes are an integral part of these statements.

                             F-3

           EP MEDSYSTEMS, INC. AND SUBSIDIARIES
            CONSOLIDATED STATEMENTS OF OPERATIONS


                                     For the years ended December 31,
                                    1997           1996           1995
                                 -----------    -----------    -----------
Product sales                    $ 3,648,782    $ 2,065,959    $ 2,001,137
Other revenue                        365,000        250,000        --
                                   ---------      ---------      ---------
          Total revenues           4,013,782      2,315,959      2,001,137

Operating costs and expenses:
Cost of products sold              2,184,914      1,161,948      1,257,468
Sales and marketing expenses       2,935,876        764,765        477,209
General and administrative         1,822,097      1,240,457        927,906
expenses
Research and development           2,262,169        856,191        320,311
expenses
Acquired research and                --             --             450,000
development
Write-off of other assets            --             107,500        --
                                 -----------    -----------    -----------
     Loss from operations        (5,191,274)    (1,814,902)    (1,431,757)

Interest expense                     (2,436)       (44,779)       (50,893)
Interest income                      330,053        338,335        --
Write-off of unamortized
discount of 1995 Debentures          --            (49,232)        --
                                 -----------    -----------    -----------
          Net loss              $(4,863,657)   $(1,570,578)   $(1,482,650)
                                ============   ============   ============
Basic loss per share                $ (.64)      $ (.26)           $ (.35)
                                    =======      =======           =======
Diluted loss per share              $ (.64)      $ (.26)           $(.35)
                                    =======      =======           =======
Weighted average shares
outstanding used to compute
basic and diluted loss per share    7,599,917    6,131,749      4,282,242
                                    =========    =========      =========

Supplementary loss per share                     $ (.24)           $ (.32)
                                                 =======           =======




    The accompanying notes are an integral part of these statements.

                             F-4

            EP MEDSYSTEMS, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                          (DEFICIT)

    For the Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<S>                            <C>        <C>      <C>            <C>            <C>
                                                      Additional
                                Common Stock           Paid-in     Accumulated
                                Shares      Amount     Capital        Deficit           Total
                               ---------  --------  ------------  -------------  -------------
Balance, January 1, 1995       4,258,500  $  4,259  $  2,644,479  $ (2,007,060)  $     641,678
Issuance of common stock to
   HDI for research and
   development expenses           69,000        69       137,931        --             138,000
Issuance of common stock for
   consulting services            14,500        14        28,986        --              29,000
Value of debenture warrants       --          --          54,702        --              54,702
Stock options issued in
connection with ALERT
licensing agreement               --          --         420,000        --             420,000
Common stock issued in
connection with patent
licensing agreement               10,000        10        19,990        --              20,000
Net loss                          --          --          --        (1,482,650)    (1,482,650)
Balance, December 31, 1995     4,352,000  $  4,352  $  3,306,088  $ (3,489,710)  $   (179,270)
Issuance of common stock         166,667       167       499,833        --             500,000
Issuance of common stock
upon exercise of options          12,500        12        16,654        --              16,666
Issuance of common stock
upon initial public offering   2,500,000     2,500    11,783,508        --          11,786,008
Issuance of common stock
upon exercise of Warrants        568,750       569     1,136,931        --           1,137,500
Net loss                              --        --        --        (1,570,578)    (1,570,578)
Balance, December 31, 1996     7,599,917     7,600    16,743,014    (5,060,288)     11,690,326
Net loss                          --          --          --        (4,863,657)    (4,863,657)
                               ---------  --------  ------------  -------------  -------------
Balance, December 31, 1997     7,599,917  $  7,600  $ 16,743,014  $ (9,923,945)  $   6,826,669
                               =========  ========  ============  =============  =============
</TABLE>

    The accompanying notes are an integral part of these  statements.

                             F-5

            EP MEDSYSTEMS, INC. AND SUBSIDIARIES
            CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<S>                                            <C>             <C>             <C>
                                               For the Years Ended December 31,
                                                   1997            1996            1995
Cash flows from operating activities:          ------------    ------------    ------------
Net loss                                       $(4,863,657)    $(1,570,578)    $(1,482,650)
Adjustments to reconcile net income to net
   cash used in operating activities:
Depreciation and amortization                       219,302         171,493         170,271
Acquired research and development                   --              --              440,000
Issuance of stock for consulting services           --              --               29,000
Issuance of stock for research and development      --              --              138,000
Write-off of other assets                           --              107,500         --
Write-off of unamortized discount on Debentures     --               49,232         --
Bad debt expense                                    --                5,017          52,400
Changes in assets and liabilities:
Increase in accounts receivable                   (558,418)       (238,400)       (194,449)
(Increase) decrease in inventories                (885,821)       (157,442)          18,433
Increase in prepaid expenses and other             (31,765)       (132,113)        (48,526)
current assets
Increase in other assets                           (27,439)         (4,163)        (26,837)
Increase (decrease) in due to related parties        42,824       (173,685)         177,988
Increase (decrease) in accounts payable             431,442        (42,354)         131,513
Increase in accrued expenses,
deferred revenue and customer deposits              407,108          99,950         256,941
                                                -----------     -----------       ---------
Net cash used in operating activities           (5,266,424)     (1,885,543)       (337,916)
                                                -----------     -----------       ---------
Cash flows from investing activities:
Purchase of investments                             --         (21,567,497)         --
Proceeds from sale of investments                 1,188,595      16,771,722         --
Maturities of investments                         1,487,096
Investment in EchoCath                          (1,400,000)         --              --
Capital expenditures, net of disposals            (721,911)        (97,337)        (55,754)
Patent costs                                       (27,145)
Loan to FalFab                                      --              (7,500)       (100,000)
                                                  ---------     -----------       ---------
Net cash provided (used) by investing activities    526,635     (4,900,612)       (155,754)
                                                  ---------     -----------       ---------
Cash flows from financing activities:
(Repayments) proceeds from debentures, net          --             (62,500)         687,500
Proceeds from issuance of common
stock, net of offering expenses                     --           12,398,508         --
Proceeds from exercise of stock options             --               16,666         --
Payment of notes payable and other borrowings       --            (109,250)       (179,250)
                                                -----------      ----------       ---------
Net cash provided by financing activities           --           12,243,424         508,250
                                                -----------      ----------       ---------
Net (decrease) increase in cash and cash        (4,739,789)       5,457,269          14,580
equivalents
Cash and cash equivalents, beginning of period    5,491,857          34,588          20,008
                                                  ---------     -----------        --------
Cash and cash equivalents, end of period          $ 752,068     $ 5,491,857        $ 34,588
                                                  =========     ===========        =========

</TABLE>

    The accompanying notes are an integral part of these statements.

                             F-6

            EP MEDSYSTEMS, INC. AND SUBSIDIARIES
         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  Nature of Business
EP  MedSystems,  Inc. (the "Company") designs,  manufactures
and  markets a broad-based line of products for the  cardiac
electrophysiology   ("EP")  market  for   the   purpose   of
diagnosing,  monitoring,  managing  and  treating  irregular
heartbeats known as arrhythmias.

The  Company  faces a number of risks, including significant
operating  losses, the ability to raise sufficient financing
to  meet  its  future  cash  requirements,  the  results  of
clinical trials and market acceptance of existing and future
products.   Additionally,  other  risk   factors   such   as
government   regulation,   uncertainty   of   new    product
development,  significant  competition,  the  loss  of   key
personnel  and  difficulty in establishing,  preserving  and
enforcing  intellectual  property rights  could  impact  the
future results of the Company.

The  Company  is currently evaluating several financing  and
strategic  alternatives  to  help  achieve  its  long   term
objectives.

2.  Summary of Significant Accounting Policies
Principles of Consolidation
The  consolidated financial statements include the  accounts
of   EP   MedSystems,   Inc.  and  its   wholly-owned   U.S.
subsidiaries,   ProCath  Corporation  ("ProCath")   and   EP
MedSystems  UK  Ltd.  ("EP  MedSystems  UK").  All  material
intercompany accounts and transactions have been  eliminated
in consolidation.

Cash and Cash Equivalents
The Company considers all highly liquid investments with  an
original  maturity of three months or less to  be  cash  and
cash equivalents.

Concentrations of Credit Risk
The  Company  is  potentially subject to  concentrations  of
credit  risk with respect to its cash investments and  trade
accounts receivable. The Company invests its excess cash  in
a  diversified portfolio of investment grade corporate bonds
and an institutional money market account.

The  Company's customer base for its products  is  primarily
comprised  of  hospitals,  and distributors  throughout  the
United  States  and  abroad.  On certain  transactions,  the
Company may require payment in advance or an issuance of  an
irrevocable letter of credit. The Company believes that  its
terms   of   sale   provide  adequate   protection   against
significant  credit  risk  with respect  to  trade  accounts
receivable.

                             F-7

The  Company had a note receivable of $107,500 from  Falfab,
L.L.C.,   a   UK-based  angioplasty  catheter   manufacturer
("Falfab"),  which matured on July 15, 1996. Upon  maturity,
Falfab  was unable to repay the amounts due the Company  and
was  liquidated by its creditors. Accordingly,  the  Company
reflected  a  write-off of the $107,500 note  receivable  in
1996.  A  former  shareholder  of  Falfab  is  a  beneficial
shareholder in excess of 5% of the outstanding shares of the
Company's common stock.

Inventories
Inventories  are valued at the lower of cost or market  with
cost being determined on a first-in, first-out basis.

Property and Equipment
Property  and  equipment  are  recorded  at  cost  and   are
depreciated  on  a  straight-line basis over  the  estimated
useful  lives  of  the assets ranging from  three  to  seven
years.  Leasehold improvements are amortized on a  straight-
line  basis over the shorter of their estimated useful lives
or  the  term  of  the lease. Expenditures for  repairs  and
maintenance  are  expensed as incurred.  Management  reviews
these  assets for impairment whenever events or  changes  in
circumstances  indicate  that the carrying  amounts  of  the
assets  might not be recoverable. The Company has determined
that,  as  of  December 31, 1997, no property and  equipment
have been impaired.

Intangible Assets
Intangible assets are being amortized over a period  ranging
from  two  to  fifteen years with catheter technology  being
amortized  on  a  straight-line basis  over  fifteen  years.
Registration  and legal fees associated with patent  filings
are  capitalized and amortized over three years.  Management
reviews  these  assets  for impairment  whenever  events  or
changes  in circumstances indicate that the carrying amounts
of  the  assets  might not be recoverable. The  Company  has
determined  that,  as  of December 31, 1997,  no  intangible
assets have been impaired.

Translation of Foreign Currency
The  Company's  foreign  operation  is  translated  to  U.S.
dollars   using  current  exchange  rates  with  translation
adjustments accumulated in stockholders' equity. At December
31, 1997, translation adjustments were not material.

Revenue Recognition
The  Company  recognizes  product revenue  on  the  date  of
shipment.  Payments  received  in  advance  of  shipment  of
product  are  deferred  until  such  products  are  shipped.
Revenues related to warranty contracts are recognized  on  a
straight-line basis over the warranty period.  Royalties  on
product revenues are included in cost of sales.

Research and Development
Research  and development costs, which include clinical  and
regulatory costs, are expensed as incurred.
                             F-8

Net Loss Per Common Share
Effective for the year ended December 31, 1997, the  Company
adopted Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("SFAS 128"). The adoption of SFAS  128
requires  the presentation of Basic earnings per  share  and
Diluted  earnings  per share. Basic earnings  per  share  is
computed  based  on the weighted average  number  of  common
shares  outstanding  during the year. Diluted  earnings  per
share  is  based  on the weighted average number  of  common
shares  outstanding during the year plus  the  common  stock
equivalents   related  to  outstanding  stock  options   and
warrants.  Diluted earnings per share exclude the impact  of
common  stock equivalents as their inclusion would be  anti-
dilutive.  As required by SFAS 128, 1996 and 1995  net  loss
per  share  amounts have been restated to comply  with  this
standard.  Prior to the adoption of SFAS 128  the  Company's
reported  loss  per share were $.23 and $.26 for  the  years
ended December 31, 1996 and 1995 respectively.

Supplementary Net Loss Per Common Share
Supplementary  net loss per common share is computed  as  if
all of the 1995 Debentures (See Note 12) had been repaid  at
the  beginning  of the period or the date  of  issuance,  if
later,  and  assuming that (i) 222,385  common  shares  were
issued  to  pay  the 1995 Debentures and  (ii)  $33,875  and
$24,286  of interest expense was eliminated for the  periods
ending December 31, 1996 and 1995, respectively, as a result
of  such  payment. As required by SFAS 128,  1996  and  1995
supplementary net loss per share amounts have been  restated
to  comply with this standard. The impact of the adoption of
SFAS   128   was   not   material  to  previously   reported
supplementary net loss per share.

Stock-Based Compensation
The  Company accounts for stock options issued to  employees
and non-employee directors in accordance with the "intrinsic
value"  method  set  forth  in Accounting  Principles  Board
Opinion  No.  25 "Accounting for Stock Issued to  Employees"
("APB  25") with supplemental pro forma disclosures of "fair
value"  as  required  by Statement of  Financial  Accounting
Standards  No. 123 "Accounting for Stock Based Compensation"
("SFAS 123").
The Company accounts for stock options issued to consultants
in  accordance with the "fair value" method as  required  by
SFAS 123.

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.
Although these estimates are based on management's knowledge
of  current  events  and actions it  may  undertake  in  the
future,  the  estimates may ultimately  differ  from  actual
results.

                             F-9



Recently Issued Accounting Standards
In  June  1997,  the  Financial Accounting  Standards  Board
issued Statement of Financial Accounting Standards No.  130,
"Reporting Comprehensive Income" ("SFAS 130") and  Statement
of  Financial  Accounting Standards  No.  131,  "Disclosures
about  Segments  of  an Enterprise and Related  Information"
("SFAS  131"). SFAS 130 establishes standards for  reporting
comprehensive   income  and  its  components.  Comprehensive
income  reflects  certain items not  currently  reported  in
measuring  net income such as changes in value of available-
for-sale   securities   and  foreign  currency   translation
adjustments.  SFAS 131 establishes standards  for  reporting
financial   and   descriptive   information   regarding   an
enterprise's operating segments. Both SFAS 130 and SFAS  131
are  effective for fiscal years beginning after December 15,
1997.   These   standards   increase   financial   reporting
disclosures  and  will  have  no  impact  on  the  Company's
financial position or results of operations.

Reclassification
Certain prior year amounts have been reclassified to conform
with the current year's presentation.

3.  Investment Securities
The  Company  accounts  for  its  investment  securities  in
accordance with Statement of Financial Accounting  Standards
No.  115,  "Accounting for Certain Investments in  Debt  and
Equity Securities" ("SFAS 115"). This Statement requires the
classification  of  debt  and  equity  securities  based  on
whether  the  securities  will  be  held  to  maturity,  are
considered  trading securities, or are available  for  sale.
Classification  within  these  categories  may  require  the
securities  to be reported at their fair market  value  with
unrealized gains and losses included in current earnings  or
reported as a separate component of stockholders' equity.

As of December 31, 1997, all investment securities have been
classified   as  available  for  sale.  The  maturities   of
available for sale investments range from October,  1998  to
September,  2000.  These investments are stated  at  market,
which approximates their amortized cost.

As  of  December  31,  1996,  all short-term  and  long-term
investments,  except  for  $297,828  invested  in  corporate
preferred stock, were classified as held to maturity.  These
investments   were   stated   at   amortized   cost,   which
approximated market, and consisted of U.S. government agency
obligations and corporate bonds. At December 31,  1996,  the
Company  classified  $297,828  invested  in  two  issues  of
corporate  preferred  stock  as available  for  sale.  These
investments were stated at market, which approximates  their
amortized cost.


                            F-10

Short-term and long-term investments held to maturity are as
follows:
                                         December 31,
                                      1997          1996
Available for sale securities:

Corporate bonds                  $  2,120,084     $   --

Corporate preferred stocks             --           297,828
                                 ------------     ---------
                                 $  2,120,084     $ 297,828
                                 ============    ==========


Held to maturity securities:

   Short-term investments:
    U.S.   government   agency  $     --         $  1,496,725
obligations                     ------------     ------------

   Long-term investments:
   Corporate bonds                     --            3,001,222
                                ------------    --------------
                                $     --         $  4,497,947
                                ============    ==============


4.  EchoCath License
During  February, 1997, the Company licensed the  rights  to
several   ultrasound   technologies  from   EchoCath,   Inc.
("EchoCath") for use in the field of electrophysiology.  The
agreement  calls  for the Company to make payments  totaling
$700,000,  in  four  installments,  as  certain  development
milestones  and initial sales are achieved on  the  EchoMark
and  EchoEye  technologies. Terms of the license call for  a
two  percent  (2%)  royalty on net sales, including  minimum
royalties beginning in 1999 and continuing for the  life  of
the   applicable  patents  and  continuations  thereof.  The
Company  may elect to not make minimum royalty payments  and
in such case, EchoCath can make the license non-exclusive or
cancel   the  license  and  return  the  $700,000  milestone
payments.  As of December 31, 1997, no milestones  had  been
achieved  and no milestone payments were accrued or  payable
to  EchoCath. The Company also purchased 280,000  shares  of
5.4% cumulative convertible preferred stock of EchoCath  for
$1,400,000 in cash.

The  minimum  annual  royalties under  the  license  are  as
follows:
          1999                        $120,000
          2000                         160,000
          2001                         200,000
          2002                         280,000
          2003                         320,000
          2004                         360,000
          2005 and thereafter          400,000

During  September,  1997,  the  Company  became  aware  that
EchoCath  may  have been having cash flow  difficulties  and
that EchoCath could have faced delisting of its common


                            F-11

stock  from the NASDAQ Small Cap Stock Market if it did  not
maintain net equity in  excess of $1,000,000. On October  7,
1997,  the Company filed a lawsuit against EchoCath  in  the
United  States District Court for the District of New Jersey
alleging,  among other things, that EchoCath made fraudulent
misrepresentations and omissions in connection with the sale
of  $1.4 million of its preferred stock to the Company. (see
Note 13).

On  October 30, 1997, EchoCath announced that it had entered
into  a  license and development agreement which included  a
$1,000,000  investment by the licensee  in  Class  A  common
stock  of  EchoCath  and an $800,000 prepayment  of  license
fees.  The Company was informed that this investment allowed
EchoCath  to meet the requirements for continued listing  on
the  NASDAQ  Small  Cap  Stock  Market  at  such  time.  The
agreement  also  provides EchoCath with  $1,800,000  of  new
working  capital  and  may provide an  opportunity  to  earn
additional  royalty or licensing income. The Company  cannot
determine  whether this cash infusion will be sufficient  to
meet  EchoCath's  long term cash needs or  whether  EchoCath
will recognize additional revenue or attain profitability.

The  EchoCath  preferred stock is not a registered  security
traded on a public exchange and therefore its fair value  is
not readily determinable. Accordingly, the shares are stated
at  historical cost. Management has evaluated the investment
for  permanent  impairment and as a result of  this  review,
management believes that there is no permanent impairment at
this time. However, management will continue to evaluate the
investment and may determine in the future that a  permanent
impairment has occurred and that such impairment  should  be
recorded. The preferred stock is convertible, at the  option
of  the Company, into shares of EchoCath common stock  at  a
conversion price of $6.00 per share through 1999  and  $6.50
per  share thereafter. The market price for the common stock
on  March 11, 1998 was $2.50 per share. The Company does not
anticipate converting its shares in the near future.

5. Research Support Grant
During  1997, the Company received a research support  grant
in  the  amount  of  $365,000 from a private  foundation  to
support  the  Company's ongoing development of a proprietary
catheter. The proceeds of the grant are not refundable.

In  connection with the grant, the Company has agreed to pay
the  foundation  a  royalty of 5%  of  gross  sales  of  the
developed  catheter until the foundation has  recovered  its
$365,000, as adjusted for inflation; 3% of gross sales until
such  time  as the foundation has recovered four  times  its
$365,000 as adjusted for inflation; and 1% in perpetuity.

                            F-12

6.   Acquisitions of Products and Technology and Related Party Transactions
Hi-Tronics Design, Inc.
General
The  Company's initial shareholders were David  A.  Jenkins,
its current Chairman, President and Chief Executive Officer,
and  Hi-Tronics Designs, Inc. ("HDI"), a corporation engaged
in  the  business of contract engineering and manufacturing.
The Company has purchased rights to certain products and the
next  generation of several products under development  from
HDI. The Company has utilized, and continues to utilize, HDI
to  provide  research and development for various  products.
The  Company  currently utilizes HDI to manufacture  certain
products, including components for the EP WorkMate and  EP-3
Clinical  Stimulator.  The value of  products  and  services
purchased  from  HDI, excluding the purchase of  technology,
was  $506,000,  $392,000, and $424,000, in  1997,  1996  and
1995, respectively.

Arrhythmia Monitors and TeleTrace Receivers
In  July, 1994, the Company acquired from HDI certain rights
to (i) a line of arrhythmia monitors, (ii) the TeleTrace III
Receiver, and (iii) a new arrhythmia monitor to be developed
by  HDI.  In  exchange for the rights to these  assets,  the
Company  agreed to issue HDI 100,000 shares  of  its  common
stock, valued at $200,000, 50,000 on the agreement date  and
50,000  upon  submission to the FDA of  the  new  arrhythmia
monitor.  In 1995, the Company issued the additional  50,000
shares to HDI even though the Company had not submitted data
to  the  FDA for the new arrhythmia monitor. Of the purchase
price,  $100,000  was  allocated  to  technology  rights  in
existing arrhythmia monitors, which was amortized over three
years. The shares issued relating to the arrhythmia monitors
being  developed by HDI were expensed during the year  ended
December  31,  1995, as work performed represented  research
and development costs.

In January, 1995, the Company entered into an agreement with
HDI pursuant to which HDI agreed to continue development  of
the  TeleTrace III-S Receiver in exchange for 10,000  shares
of  common  stock of the Company and $30,000  in  cash  upon
completion  of development. In September, 1995, the  parties
agreed  to  amend the consideration to be 19,000  shares  of
Common  Stock, issued immediately, and $30,000 in cash  upon
completion  of certain development milestones.  The  Company
recorded  a  charge to research and development  expense  of
$38,000 during the year ended December 31, 1995. During  the
year  ended  December 31, 1996, no amounts were  charged  to
research  and  development expense. During  the  year  ended
December  31,  1997, the Company paid the remaining  $30,000
development   fee,  which  was  charged  to   research   and
development expense.

During  1996, the Company discontinued the sale of its  line
of  arrhythmia  monitors. Sales of arrhythmia monitors  were
approximately  $12,000  and  $198,000  in  the  years  ended
December  31,  1996  and 1995, respectively.  In  1997,  the
Company sold its line of

                            F-13

arrhythmia  monitors,  including a  new  arrhythmia  monitor
under development, to HDI in return for the 60,000 shares of
common  stock  in  Neomedics, Inc., a newly created  company
involved  in  the  design  and  manufacture  of  implantable
medical  devices, which is affiliated with  HDI.  Since  the
value assigned to the arrhythmia monitor technology had been
fully  amortized, the Company did not record a gain or  loss
on  the sale. The Neomedics common stock is not a registered
security traded on a public exchange and therefore its  fair
value is not readily determinable. At December 31, 1997, the
Company valued the shares of Neomedics stock at zero.

On December 29, 1997, the Company granted HDI a nonexclusive
license  to  sell the TeleTrace receiver in connection  with
the sale of its arrhythmia monitors. The agreement calls for
the payment of a royalty of $300 per unit sold by HDI.

Mortara Instrument, Inc.
The Company purchases certain components for the EP WorkMate
and  ALERT Companion from Mortara Instrument. Dr.  David  W.
Mortara,  a director of the Company, is also a Director  and
shareholder of Mortara Instrument. The approximate value  of
products  purchased  from Mortara Instrument  was  $573,000,
$15,000, and $12,000, in 1997, 1996 and 1995, respectively.

7.  Acquired Research and Development and License Agreements
Acquired Research and Development
The  Company has entered into numerous transactions  whereby
it   has  acquired  technology.  This  technology  has  been
expensed as acquired research and development as at the date
of   acquisition,  the  technological  feasibility  of   the
acquired  technology  had not yet been established  and  the
technology had no future alternative uses.

License Agreements
 ALERT Catheter
In   November,  1995,  the  Company  acquired  an  exclusive
worldwide  license  to  the  rights  to  certain  technology
developed  by  Dr.  Eckhard  Alt  for  a  Temporary   Atrial
Defibrillation  Catheter and Treatment  Method  (the  "ALERT
Technology"). In consideration of the license,  the  Company
(i)  granted  Dr.  Alt an option to buy  210,000  shares  of
common stock at $.10 per share beginning on May 1, 1996  and
ending  on November, 1, 2000; (ii) granted an option to  buy
an  additional  164,000 common stock options exercisable  at
$2.00  for  a  period  of  five  years,  vesting  upon   the
occurrence of certain events, including issuance of  patents
and  an  FDA pre-marketing approval and (iii) agreed to  pay
royalties  ranging  up to 5% of net sales  of  the  licensed
products  until  the  expiration of  the  licensed  patents.
During  1997,  the  Company  paid  royalties  of  $2,256  in
connection with the

                            F-14

ALERT  license.  In 1995, the Company recorded  $420,000  as
acquired  research and development expense as  technological
feasibility  had not been established at the  license  date.
This  amount represented the fair market value of the option
on the issue date.

Saksena License
In  November,  1995, the Company acquired  a  semi-exclusive
worldwide  license  to  the  rights  to  certain  technology
developed by Dr. Sanjeev Saksena for a Temporary Ventricular
Defibrillation   Catheter   and   Treatment    Method.    In
consideration  of  the  license,  the  Company  granted  Dr.
Saksena  10,000 shares of common stock and $10,000 in  cash.
The  license  agreement  also  calls  for  the  payment   of
royalties  ranging  up to 5% of net sales  of  the  licensed
products until the expiration of the licensed patents up  to
a  maximum  of  $1,000,000. No royalties have been  paid  to
date.  In  1995, the Company recorded acquired research  and
development expense of $30,000, which represented  the  fair
market  value of the Company's common stock on  the  license
date plus the cash payment.

8.  Agreements with InControl
During  1996,  the  Company  recorded  catheter  development
revenue  of  $250,000 related to a Product  Development  and
Supply   Agreement   (the  "Development   Agreement")   with
InControl,  Inc.  ("InControl")  covering  a  new  temporary
atrial defibrillation catheter ("TADCATH").

The  Company  also  entered into non-exclusive  distribution
agreements which allow InControl to sell the ALERT  Catheter
in parts of Europe, Africa and the Middle East and the ALERT
Companion  on a world-wide basis for a period of  two  years
subject to renewal upon mutual agreement of the parties. The
Development  Agreement  expired on June  30,  1997  and  the
distribution  agreements are scheduled to expire  on  August
14, 1998, unless renewed by the parties.

9.  Intangible Assets
Intangible assets consist of the following:
                                                 December 31,
                                             1997            1996
          Catheter technology           $    774,099       $ 774,099
          Other                               29,545           6,900
                                             -------         -------
                                             803,644         780,999
          Less: accumulated amortization    (233,939)       (165,138)
                                        ------------       ---------
                                        $    569,705       $ 615,861
                                        ============       =========


                            F-15

10.  Inventories
Inventories consist of the following:
                                          December 31,
                                      1997            1996
          Raw materials          $    249,018       $ 173,936
          Work in progress             12,925          11,456
          Finished goods            1,265,585         441,315
                                 ------------       ---------
                                 $  1,527,528       $ 626,707
                                 ============       =========


11.  Property and Equipment
Property and equipment consist of the following:
                                                 December 31,
                                             1997            1996
          Land                          $     69,738    $     --
          Buildings and improvements         346,824          --
          Leasehold improvements             119,332         112,670
          Machinery and equipment            543,247         244,559
                                           ---------         -------
                                           1,079,141         357,229
          Less: accumulated depreciation   (321,846)       (175,844)
                                           ---------       ---------
                                        $    757,295    $    181,385
                                        ============    ============

During  February, 1997, the Company purchased  7,500  square
feet  of manufacturing, administrative and warehouse  space,
including 2,500 square feet of space that was leased by  the
Company's  ProCath  subsidiary,  for  a  purchase  price  of
approximately  $417,000,  including  transaction  costs  and
improvements.  The purchase provides for  expansion  of  the
existing  manufacturing operations, additional  warehousing,
shipping and quality assurance activities and relocation  of
ProCath's administrative offices.

12.  Debt
Debentures
Commencing  July,  1995, the Company  issued  $1,137,500  of
debentures (of which $687,500 was received in cash,  $50,000
was  received  for subscription which was paid in  February,
1996  and $400,000 was issued in conversion of accounts  and
other  notes payable into debentures) with interest  payable
quarterly beginning September 30, 1995 at a rate of  6%  per
annum (the "1995 Debentures"). The maturity date of the debt
was  the  earlier  of June 30, 2000 or  30  days  after  the
completion  of  an initial public offering of the  Company's
securities. The holders of the 1995 Debentures also received
warrants  (the "1995 Warrants") to purchase an aggregate  of
568,750  shares of the Company's common stock at  $2.00  per
share exercisable at any time ending on the earlier of  June
30,   2000  or  thirty  days  after  full  payment  of   the
corresponding  1995  Debentures.  In  connection  with   the
issuance  of  the  1995 Debentures, the Company  recorded  a
discount on the debentures

                            F-16

issued  of  $54,702  representing  the  value  of  the  1995
Warrants  issued.  The  discount was being  amortized  on  a
straight-line basis over the life of the 1995 Debentures.

During June, 1996, the holders of $1,025,000 face amount  of
1995  Debentures elected to exercise their 1995 Warrants  to
purchase  512,500 shares of common stock at $2.00 per  share
through  the  forgiveness  of amounts  due  under  the  1995
Debentures.  On  June  30,  1996,  the  Company  repaid  the
remaining outstanding 1995 Debentures in the face amount  of
$112,500  in cash. During the subsequent thirty day  period,
the  holders of the remaining 1995 Warrants exercised  their
option  to purchase 56,250 shares of common stock  at  $2.00
per  share.  Upon  repayment of  the  1995  Debentures,  the
Company  wrote  off  the unamortized discount  on  the  1995
Debentures of $49,232.

Note Payable
In  connection  with the acquisition of the  net  assets  of
ProCath  in  1993,  the  Company  assumed  a  $218,500  note
payable.  The note provided for interest payable  quarterly,
at  the rate of 8% per year. The principal amount was to  be
paid  in full on November 5, 1995. In August, 1995, $109,250
of the outstanding amount was paid and the terms of the note
were  renegotiated  on  the remaining balance  to  quarterly
payments  of  $4,300  commencing on October,  1,  1995.  The
related interest was accrued at an annual rate of 8%  to  be
paid  with  the  final  payment at  maturity.  No  gain  was
recorded upon the modification of debt terms as it  was  not
significant. During September, 1996, the Company repaid  the
remaining  balance of $92,050 plus accrued interest  on  the
note.

13.  Commitments and Contingencies
Operating Leases
The Company currently leases approximately 7,600 square feet
of  office and manufacturing space through October, 2002. In
addition to 7,500 square feet of owned space, ProCath leases
an  additional  2,500 square feet of space  in  Berlin,  New
Jersey  on  a  month  to month basis. ProCath  is  currently
negotiating  for a new lease with an option to purchase  the
2,500  square feet of leased space. EP MedSystems UK  leases
945  square  feet  of office and storage  space  in  London,
England through January, 2000.

The Company also leases certain office equipment for periods
extending  through  December,  2001.  The  future  aggregate
commitment for minimum rentals as of December 31, 1997 is as
follows:

          1998                             $ 108,936
          1999                               106,793
          2000                                99,031
          2001                               102,974
          2002 and thereafter                 71,385



                            F-17


Rent  expense associated with these leases was approximately
$92,585,  $112,643 and $83,661 for the years ended  December
31, 1997, 1996 and 1995, respectively.

Employment Agreements
The  Company  has employment agreements with  two  corporate
officers  and  two employees. The contract of the  President
runs  through  March  1,  1999.  This  contract  includes  a
provision  for  a bonus equal to 5% of consolidated  pre-tax
income.  The contract for the President of ProCath  includes
an  incentive  bonus equal to 5% of the net  income  (before
extraordinary  items) generated by ProCath.  The  agreements
with  the  President  and the President of  ProCath  contain
certain   non-competition  provisions  in   the   event   of
termination of their employment.

The   aggregate  minimum  commitment  for  future  salaries,
excluding bonuses, as of December 31, 1997, is as follows:
          1998                               $ 354,400
          1999                                 125,807
          2000                                 106,722
          2001                                 112,058
          2002 and thereafter                  --


The   Company  has  key  man  life  insurance  policies  for
$1,000,000  covering  its  President,  $1,000,000  for   the
President of ProCath and $500,000 for the Vice President  of
Engineering, for which it is the beneficiary.

Litigation
EchoCath, Inc.
On  October  7,  1997, the Company filed a  lawsuit  against
EchoCath  in  the  United  States  District  Court  for  the
District  of  New Jersey alleging, among other things,  that
EchoCath made fraudulent misrepresentations and omissions in
connection  with  the  sale  of  280,000  shares   of   5.4%
cumulative  convertible preferred stock to the  Company  for
$1,400,000  in February, 1997. The Company cannot  determine
the  outcome of the EchoCath litigation at this  time.  (See
Note 4).

EchoCath  has filed an Answer to the complaint, denying  the
allegations and asserting a counterclaim against the Company
seeking  reimbursement  of its costs  and  expenses  in  the
action.  EchoCath  also  filed  a  motion  to  dismiss   the
complaint. The Company believes that EchoCath's counterclaim
and  request for reimbursement of its costs and expenses  is
without merit. As a result, the Company has not accrued  for
such costs and expenses at December 31, 1997. In the opinion
of  management, the ultimate resolution of the  counterclaim
will  not  have  a material adverse impact on the  Company's
financial condition or results of operations.

                            F-18

14.  Stockholders' Equity
Common Stock
The  Company  is  authorized to issue 25,000,000  shares  of
common stock, no par value, $.001 stated value per share, of
which  a  total  of  7,599,917 shares  were  outstanding  at
December 31, 1997 and 1996.

On  June 21, 1996, the Company completed its initial  public
offering  of 2,500,000 shares of Common Stock at a  purchase
price of $5.50 per share. The net proceeds from the offering
were approximately $11,786,000 net of offering costs.

In  January, 1996, the Company sold an aggregate of  166,667
shares of Common Stock to two investors at a purchase  price
of  $3.00  per  share. The net proceeds from the  sale  were
$500,000.
Preferred Stock
The  Company  is  authorized to issue  5,000,000  shares  of
undesignated  preferred stock, no par value per  share.  The
Board  of  Directors  has the authority to  issue  preferred
stock  in  one or more classes, to fix the number of  shares
constituting  a class and the stated value thereof,  and  to
fix  the terms of any such class, including dividend rights,
dividend  rates,  conversion  or  exchange  rights,   voting
rights, rights and terms of redemption, the redemption price
and  the liquidation preference of such shares or class.  At
December  31,  1997 and 1996, the Company had no  shares  of
preferred stock outstanding.

Stock Options
1995 Long-Term Incentive Plan
During  July,  1997,  the  Board of  Directors  approved  an
amendment  to increase the number of shares of common  stock
issuable under the 1995 Long Term Incentive Plan (the  "1995
Incentive Plan") from 400,000 to 700,000. The amendment  was
approved  by  the  shareholders at  the  Annual  Meeting  of
Shareholders  held on October 30, 1997. A total  of  700,000
shares of Common Stock are available for issuance under  the
1995 Incentive Plan and options for 352,500 shares of Common
Stock,  at  an exercise price of $2.00 to $4.75  per  share,
have  been  granted and are outstanding as of  December  31,
1997.  The  1995  Incentive  Plan  provides  for  grants  of
"incentive"  and "non-qualified" stock options to  employees
of  the Company. Options under this plan have a term  up  to
ten  years and vest over a period as determined by the Board
of  Directors.  The  1995 Incentive Plan will  terminate  on
November 30, 2005, unless earlier terminated by the Board of
Directors.

During  1997, the Company issued options to purchase 232,000
shares  of common stock under the 1995 Incentive Plan.   The
exercise  prices of these options range from $2.00 to  $4.75
per  share. The options granted in 1997 have terms  of  five
years and vest over varying periods.



                            F-19

1995 Director Option Plan
The  Company's 1995 Director Option Plan (the "1995 Director
Plan")  was  adopted  by  the Board  of  Directors  and  the
shareholders in November, 1995. A total of 360,000 shares of
common stock of the Company are available for issuance under
the  1995  Director Plan and options for 288,000  shares  of
common  stock, at an exercise price of $2.00 per share,  are
outstanding as of December 31, 1997. The 1995 Director  Plan
provides   for  grants  of  director  options  to   eligible
directors  of the Company and for grants of advisor  options
to  eligible members of the Scientific Advisory Board of the
Company.  Each  of  the  director options  and  the  advisor
options  are  exercisable at the rate of  1,000  shares  per
month, commencing with the first month following the date of
grant.  The terms of these options range from three to  five
years. The 1995 Director Plan will terminate on November 30,
2005, unless earlier terminated by the Board of Directors.

At December 31, 1997 and 1996, the Company had 1,479,500 and
1,443,500 shares, respectively, of common stock reserved for
stock  options.  All stock options granted by  the  Company,
except  for an option to purchase 210,000 shares  of  Common
Stock  at  $.10  per share granted to Dr. Alt in  connection
with the license of the ALERT technology (the "Alt Option"),
were  granted at exercise prices not less than  the  current
fair  market value of the Company's Common Stock on the date
of  grant,  as determined by the Board of Directors  or  the
fair  market  value on the date of grant for options  issued
after  the  Company's initial public offering. During  1995,
the  Company expensed the difference between the fair market
value  of  the  Alt Option as of the date of grant  and  the
actual exercise price of the Alt Option as acquired research
and development expense.

Information relating to stock options is as follows:
                                               Option           Weighted
                           Number of           Price            Averag
                            Options            Range            Exercise
                                                                 Price
                           -----------        -------------      --------
Outstanding at December       102,500         $1.33 - $2.00      $1.69
31, 1994
     Granted                1,387,000          $.10 - $2.20      $1.72
     Canceled               (118,000)         $1.33 - $2.00      $1.97
Outstanding at December     1,371,500          $.10 - $2.20      $1.70
31, 1995
     Granted                  222,500         $4.75 - $5.50      $4.88
     Exercised               (12,500)                 $1.33      $1.33
     Canceled               (138,000)                 $2.00      $2.00
Outstanding at December     1,443,500          $.10 - $5.50      $2.16
31, 1996
     Granted                  232,000         $2.00 - $4.75      $3.78
     Exercised                 -                 -                 -
     Canceled               (196,000)         $2.00 - $5.50      $5.31
                            ---------         -------------      -----
Outstanding at December     1,479,500          $.10 - $4.75      $2.06
31, 1997                    =========         =============      =====

Exercisable at December       965,699          $.10 - $5.50      $1.73
31, 1997                      =======          ============      =====


                            F-20

The  Company  accounts  for  its  stock  options  issued  to
employees   and   nonemployee  directors  based   upon   the
"intrinsic   value"  method  set  forth  in  APB   25.   Had
compensation costs for the Company's stock option plans been
determined consistent with SFAS 123, the Company's pro-forma
net  loss  and loss per share for 1997 and 1996  would  have
been as follows:
                             1997            1996            1995
Net loss                 ($4,961,077)    $(1,791,372)    $(1,760,223)

Basic loss per share          $ (.65)         $ (.29)         $ (.41)

Diluted loss per share        $ (.65)         $ (.29)         $ (.41)

Because  SFAS  123 has not been applied to  options  granted
prior   to   January   1,  1995,  the  resulting   pro-forma
compensation cost may not be representative of  that  to  be
expected in future periods.

Under SFAS 123, the fair value of each stock option grant is
estimated on the date of grant using the Black-Scholes
option pricing model with the following weighted average
assumptions in 1997 and 1996, respectively:
                                1997        1996        1995

     Risk free interest rate    6.5%         6%          6%
     Expected life            5 years     5 years     4 years
     Expected volatility        50%         50%         50%
     Weighted  average  fair
     value of
     options granted  during   $1.40       $2.60       $1.08
     the year

15.   Major Customers
Revenue  from a Research Support Grant to the Company  by  a
not   for   profit  charitable  foundation   accounted   for
approximately  9%  of  total revenues  for  the  year  ended
December  31,  1997.  Catheter  development  revenues   from
InControl accounted for approximately 11% of total  revenues
for  the  year  ended December 31, 1996. No  other  customer
accounted for in excess of 10% of total revenues during  the
years ended December 31, 1997 and 1996.

16.   Industry Segment and Geographic Information
The   Company   operates  in  a  single  industry   segment,
designing, manufacturing and marketing medical devices.  Its
revenues,  operating profits and assets for the  past  three
years   have  been  attributable  to  this  single  industry
segment.

The  Company began operations outside the United  States  by
establishing a US subsidiary, EP MedSystems UK with a United
Kingdom branch office, in January,
                            F-21

1997.  Of  the $601,000 of identifiable assets in Europe  at
December   31,  1997,  $408,000  were  accounts  receivable.
European  accounts receivable are derived  principally  from
sales in the United Kingdom.

The following table sets forth product sales by geographic
segment:
                                     December 31,
                           1997          1996          1995

United States           $2,356,461    $1,153,193    $1,444,176
Europe/Middle East       1,076,776       625,835       235,563
Asia and Pacific Rim       211,495       275,784       257,834
Other                        4,050        11,147        63,564
                        $3,648,782    $2,065,959    $2,001,137

17.  Employee Benefit Plan
During  1997,  the  Company established an  employee  401(k)
salary  deferral  plan  that  allows  contributions  by  all
eligible   full-time  employees.  Eligible   employees   may
contribute  up  to  15%  of  their respective  compensation,
subject to statutory limitations, and the Company may  match
a  percentage of employee contributions at the discretion of
the   Board   of   Directors.  The  Company  made   matching
contributions  to  eligible  employees  in   the   plan   of
approximately $47,366 for the year ended December 31, 1997.

18.  Income Taxes
As a result of losses incurred during the years, there is no
provision for income taxes in the accompanying financial
statements. The Company has established a full valuation
allowance against its net deferred tax assets as
realizability of such assets is predicated upon the Company
achieving profitability. The tax effects of temporary
differences and carryforwards that give rise to significant
portions of deferred tax assets consist of the following:
                                           December 31,
                                           1997       1996

     Allowance for doubtful accounts    $30,000       $33,000
     Inventory reserves                  59,000        59,000
     Intangible asset amortization        3,000        16,000
     Depreciation                        36,000        24,000
     Accrued liabilities                239,000        23,000
     Net operating loss carryforwards 3,150,000     1,417,000
     Research and development credit     72,000        52,000
                                      ---------     ---------
                                      3,589,000     1,624,000
     Less: Valuation allowance       (3,589,000)   (1,624,000)
                                     ----------    ----------
                                         $--           $--
                                     ==========    ==========
                            F-22

On   December   31,  1997,  the  Company  had  approximately
$7,850,000 of net operating loss carryforwards available  to
offset future income. Due to ownership changes that occurred
during  1995  and  1996, as defined by Section  382  of  the
Internal Revenue Code,
the  Company  is limited to the use of net operating  losses
generated  prior to the changes in ownership  in  each  year
following the changes in ownership.

19.  Supplemental Statement of Cash Flow Information
Supplemental Noncash Investing and Financing Activities
In 1995, the Company issued 1995 Warrants in connection with
its  1995 Debentures offering, which were valued at $54,702.
During  1996, the holders of $1,025,000 face amount of  1995
Debentures  elected  to  exercise  their  1995  Warrants  to
purchase  512,500 shares of common stock at $2.00 per  share
through  the  forgiveness  of amounts  due  under  the  1995
Debentures.  Upon  repayment of  the  1995  Debentures,  the
Company  recorded  a write-off of $49,232, representing  the
unamortized value placed on the 1995 Warrants.

Cash  paid  for  interest was $2,436,  $60,969  and  $26,150
during  the  years ended December 31, 1997, 1996  and  1995,
respectively

                            F-23

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

EP MEDSYSTEMS, INC.

/s/  David A. Jenkins                        March 27, 1998
     David A. Jenkins, Chairman,
     President and Chief Executive Officer


Pursuant to the requirements of the Securities Exchange  Act
of  1934,  as amended, this Report has been signed below  by
the following persons on behalf of the Registrant and in the
capacities and on the dates indicated:

     Signature                               Date
/s/  David A. Jenkins                        March 27, 1998
     David A. Jenkins, Chairman, President
     and Chief Executive Officer
     (Principal Executive Officer)

/s/  James J. Caruso                         March 27, 1998
     James J. Caruso, Chief Financial
     Officer and Secretary (Principal
     Accounting Officer)

/s/  David W. Mortara                        March 27, 1998
     David W. Mortara, Ph.D.
     Director

/s/  Lestor J. Swenson                       March 27, 1998
     Lestor J. Swenson
     Director

/s/  Anthony J. Varrichio                    March 27, 1998
     Anthony J. Varrichio
     Director
                        EXHIBIT INDEX

          Exhibit
          Number    Description
          3.1       Amended and Restated Certificate of
          Incorporation (1)

          3.2       Bylaws, as amended (1)

          10.6      Employment Agreement dated as of March
                    1, 1993 between EP Medical, Inc. and
                    David A. Jenkins, as amended (1)

          10.7      Employment Agreement dated as of
                    November 6, 1993 between EP Acquisition
                    Corp. and Joseph C. Griffin, III (1)

          10.8      1995 Director Option Plan (1)

          10.10     License Agreement dated as of November,
                    1, 1995 between EP Medical, Inc. and Dr.
                    Eckhard Alt, as amended  (1)

          10.11     Consulting Agreement dated as of
                    February 1, 1996 between EP Medical,
                    Inc. and Raman Mitra  (1)

          10.12     License Agreement dated as of November,
                    1, 1995 between EP Medical, Inc. and
                    Sanjeev Saksena (1)

          10.14     Investment Agreement dated April 22,
                    1994 among EP Medical, Inc., David
                    Jenkins, Anthony Varrichio, William
                    Winstrom and American Medical
                    Electronics, Inc. (1)

          10.15     Letter Agreement dated December, 15,
                    1995 between EP Medical, Inc. and
                    Rudiger Dahle  (1)

          10.16     Investment Agreement dated January 16,
                    1996 among EP Medical, Inc., Rudiger
                    Dahle, Anthony Varrichio and William
                    Winstrom (1)

          10.22     Master Manufacturing Agreement dated
                    April 16, 1996 between EP MedSystems and
                    Hi-Tronics Designs, Inc. (1)

          10.25     Exclusive Rights Agreement dated May 26,
                    1996 between EP MedSystems and Spire
                    Corporation (1)

          10.26     Letter Agreement dated April 12, 1996
                    between EP MedSystems, Inc. and Hi-
                    Tronics Designs, Inc. relating to the
                    TeleTrace IV Receiver (1)

          10.27     Consulting Agreement dated as of May 24,
                    1996 between EP MedSystems, Inc. and
                    Elliott Young and Associates Inc., as
                    amended and restated. (1)

          10.28     Stock Option Agreement dated August 31,
                    1995 between EP MedSystems, Inc. and
                    Tracey E. Young, as amended (1)

          10.29     Registration Rights Agreement dated as
                    of May 24, 1996 between EP MedSystems,
                    Inc. and Tracey E. Young (1)

          10.30     Exclusive License Agreement dated
                    February 27, 1997 between EP MedSystems,
                    Inc. and EchoCath, Inc. (2)

          10.31     Subscription Agreement dated February
                    27, 1997 between EchoCath, Inc. and EP
                    MedSystems, Inc. (2)

          10.32     Amended 1995 Long Term Incentive Plan
                    (3)

          10.33     Agreement of Lease dated August 25, 1997
                    between EP MedSystems, Inc. and
                    Provident Mutual Life Insurance Company,
                    as landlord

          21        List of Subsidiaries

          27        Financial Data Schedule (4)

          27.1      Restated Financial Data Schedule (4)

               (1)  Incorporated by reference to the exhibit of the same
                 number previously filed with the Commission in connection
                 with the Company's Registration Statement on Form SB-2 and
                 Pre-Effective Amendments No. 1 and 2 thereto.

               (2)  Incorporated by reference to the exhibit of the same
                 number previously filed with the Commission on Form 10-KSB
                 for the year ended December 31, 1996.

             (3)Incorporation by reference to exhibit A previously
                filed with the Commission in the Company's Proxy Statement
                for the year ended December 31, 1996.

               (4)  EDGAR Filing only.



                                                  EXHIBIT 21



             SUBSIDIARIES OF EP MEDSYSTEMS, INC.


ProCath Corporation
Cooper Run Executive Park
334 D6 Cooper Road
Berlin, NJ 08009
State of Incorporation:    New Jersey
Business Name:        ProCath Corporation

EP MedSystems UK Ltd.
100 Stierli Court, Suite 107
Mount Arlington, NJ 07856
State of Incorporation:    New Jersey
Business Name:        EP MedSystems, Europe Ltd.






                                                EXHIBIT 27.1

EP MedSystems, Inc.
Restated Financial data Schedule

The  Company  has  prepared  this  Restated  Financial  Data
Schedule   in   accordance  with  Statement   of   Financial
Accounting   Standards  No.  128,  "Earnings   Per   Share."
Quarterly Basic Earnings Per Share and Diluted Earnings  per
Share are presented in this Restated Financial Data Schedule
in  place of previously reported Primary Earnings Per  Share
and Fully Diluted Earnings Per Share for all periods shown.

                              Three months ended
                                March 31, 1997
Basic loss per share                $.12

Diluted loss per share              $.12

Weighted average number
of shares outstanding          7,599,917


                               Six months ended
                                June 30, 1997
Basic loss per share                $.34

Diluted loss per share              $.34

Weighted average number
of shares outstanding          7,599,917

                              Nine months ended
                              September 30, 1997
Basic loss per share                $.47

Diluted loss per share              $.47

Weighted average number
of shares outstanding          7,599,917


                               Six months ended
                                June 30, 1996
Basic loss per share                $.06

Diluted loss per share              $.06

Weighted average number
of shares outstanding          4,648,570


                              Nine months ended
                              September 30, 1996
Basic loss per share                $.11

Diluted loss per share              $.11

Weighted average number
of shares outstanding          5,636,982

                                  Year ended
                              December 31, 1996
Basic loss per share                $.26

Diluted loss per share              $.26

Weighted average number
of shares outstanding          6,131,749