UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                    WASHINGTON, DC  20549
                         FORM 10-QSB

(Mark One)
(X)  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
     SECURITIES EXCHANGE ACT OF 1934
     For the quarterly period ended: September 30, 1998

                             OR

 ( ) 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.
   (Exact name of registrant as specified in its charter)

     New Jersey                          22-3212190
(State or other jurisdiction of         (I.R.S. Employer
incorporation or organization)          Identification No.)

100 Stierli Court, Mount Arlington, New Jersey  07856
(Address of principal executive offices)        (Zip Code)

Registrant's telephone number, including area code: (973) 398-2800

Indicate by check mark whether the registrant (1) has  filed
all  reports required to be filed by Section 13 or 15(d)  of
the Securities Exchange Act of 1934 during the preceding  12
months  (or for such shorter period that the registrant  was
required to file such reports), and (2) has been subject  to
such filing requirements for the past 90 days. X Yes   No

Indicate  the number of shares outstanding of  each  of  the
issuer's   classes  of  common  stock,  as  of  the   latest
practicable  date:   Common Stock, no par  value,  9,872,417
shares outstanding at November 2, 1998.


PART I. -- FINANCIAL INFORMATION
Item 1.  Financial Statements

            EP MEDSYSTEMS, INC. AND SUBSIDIARIES
                 CONSOLIDATED BALANCE SHEETS
                              
                                             September 30,     December 31,
                                                  1998            1997
ASSETS                                        (unaudited)
                                             --------------    -------------
Current assets:
  Cash and cash equivalents                  $    2,854,855  $      752,068
  Short-term investments                          1,256,631       2,120,084
  Accounts receivable, net                        1,917,098       1,229,921
  Inventories                                     1,645,026       1,512,528
  Prepaid expenses and other current assets         193,843         217,526
                                                  ---------       ---------
          Total current assets                    7,867,453       5,832,127
                                                  ---------       ---------
Investment in EchoCath, Inc.                             --       1,400,000
Property and equipment, net                         853,715         757,295
Intangible assets, net                              558,000         569,705
Other assets                                         48,601          58,439
                                                  ---------       ---------
          Total assets                       $    9,327,769  $    8,617,566
                                                  =========       =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:                                                       
   Accounts payable                          $      547,156  $      670,206
   Payables due to related parties                  144,775         127,859
   Accrued expenses                                 542,549         850,507
   Deferred revenue                                  56,563          34,313
   Customer deposits                                 54,091         108,012
                                                  ---------       ---------
          Total liabilities                  $    1,345,134  $    1,790,897
                                                  ---------       ---------
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,                                            
    9,872,417 and 7,599,917 shares                                           
    issued and outstanding respectively               9,872           7,600
  Additional paid-in capital                     21,432,375      16,743,014
  Accumulated deficit                          (13,459,612)     (9,923,945)
                                               ------------     -----------
         Total shareholders' equity               7,982,635       6,826,669
                                               ------------     -----------
Total liabilities and shareholders' equity   $    9,327,769  $    8,617,566
                                               ============     ===========
                              
                              
                              
    The accompanying notes are an integral part of these statements.
                              
             EP MEDSYSTEMS, INC. AND SUBSIDIARY
            CONSOLIDATED STATEMENTS OF OPERATIONS
                         (unaudited)
                              
                                            For the Three Months Ended
                                          September 30,    September 30,
                                              1998             1997
                                         --------------    -------------
Product sales                           $     2,038,528  $     1,321,013
Cost of products sold                           868,762          654,010
                                              ---------        ---------
          Gross profit                        1,169,766          667,003
                                                                        
Operating costs and expenses:                                           
 Sales and marketing expenses                 1,036,190          850,563
 General and administrative expenses            410,631          340,035
 Research and development expenses              427,935          520,468
 Write-down of investment in EchoCath         1,400,000               --
                                            -----------      -----------
          Loss from operations              (2,104,990)      (1,044,063)
                                                                        
Interest income, net                             57,148           65,144
                                            -----------      -----------
          Net loss                      $   (2,047,842)  $     (978,919)
                                            ===========      ===========
Basic loss per share                           $  (.21)          $ (.13)
                                               ========          =======
Diluted loss per share                         $  (.21)          $ (.13)
                                                =======          =======
Weighted average shares                                                 
outstanding used to compute                                             
basic and diluted loss per share              9,872,417        7,599,917
                                              =========        =========


The  accompanying  notes  are  an  integral  part  of  these statements.


                              
             EP MEDSYSTEMS, INC. AND SUBSIDIARY
            CONSOLIDATED STATEMENTS OF OPERATIONS
                         (unaudited)
                              
                                            For the Nine Months Ended
                                          September 30,    September 30,
                                              1998             1997
                                         --------------    -------------
Product sales                           $     5,224,809  $     2,606,650
Cost of products sold                         2,658,231        1,545,418
                                              ---------        ---------
          Gross profit                        2,566,578        1,061,232
                                                                        
Operating costs and expenses:                                           
  Sales and marketing expenses                2,547,205        2,326,589
  General and administrative expenses         1,207,182        1,133,998
  Research and development expenses           1,105,474        1,458,109
  Write-down of investment in EchoCath        1,400,000               --
                                            -----------      -----------
          Loss from operations              (3,693,283)      (3,857,464)
                                                                        
Interest income, net                            157,616          287,490
                                            -----------      -----------
          Net loss                      $   (3,535,667)  $   (3,569,974)
                                            ===========      ===========
                                                                        
Basic loss per share                           $  (.39)         $  (.47)
                                               ========         ========
Diluted loss per share                         $  (.39)         $  (.47)
                                               ========         ========
Weighted average shares                                                 
outstanding used to compute                                             
basic and diluted loss per share              9,044,038        7,599,917
                                              =========        =========

The  accompanying  notes  are  an  integral  part  of  these statements.



            EP MEDSYSTEMS, INC. AND SUBSIDIARIES
            CONSOLIDATED STATEMENTS OF CASH FLOWS
                         (unaudited)
                              
                                                   For the Nine Months Ended
                                                 September 30,    September 30,
                                                     1998             1997
Cash flows from operating activities:            -------------    -------------
Net loss                                       $   (3,535,667)      (3,569,974)
Adjustments to reconcile net loss to net                                       
cash used in operating activities:                                             
  Write-down of investment in EchoCath               1,400,000               --
  Depreciation and amortization                        221,160          156,148
  Changes in assets and liabilities:                                           
  (Increase) in accounts receivable                  (687,177)        (750,425)
  (Increase) in inventories                          (132,498)        (867,377)
  Decrease (increase) in prepaid and other assets      23,683         (102,021)
  Decrease (increase) in other assets                    9,838        (102,344)
  Increase in payables due to related parties           16,916           67,191
  (Decrease) increase in accounts payable            (123,050)          325,237
  (Decrease) in accrued expenses, deferred                                     
      revenue and customer deposits                  (339,629)         (71,374)
                                                   -----------      -----------
    Net cash used in operating activities      $   (3,146,424)      (4,914,939)
                                                                               
Cash flows from investing activities:                                          
 Investment in EchoCath, Inc.                               --      (1,400,000)
 Maturities of held to maturity investments                 --        1,487,096
 Sale or maturity of available for sale securities    863,453          830,370
 Patent costs                                         (37,901)         (21,250)
 Capital expenditures, net of disposals              (267,974)        (582,434)
                                                   -----------      -----------
    Net cash provided by investing activities  $       557,578          313,782
                                                                               
Cash flows from financing activities:
   Net proceeds from equity offering                 4,661,708         --
   Proceeds from exercise of stock options              29,925         --
    Net cash provided by financing activities  $     4,691,633         --
                                                     ---------      -----------
Net increase (decrease) in cash and cash equivalents 2,102,787      (4,601,157)
Cash and cash equivalents, beginning of period         752,068        5,491,857
                                                     ---------      -----------
Cash and cash equivalents, end of period       $     2,854,855          890,700
                                                     =========      ===========
                              
    The accompanying notes are an integral part of these statements.


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

Note 1.    Basis of Presentation
The accompanying unaudited consolidated financial statements
have  been  prepared  in accordance with generally  accepted
accounting principles for interim financial information  and
in   accordance  with  the  instructions  to  Form   10-QSB.
Accordingly,  they  do  not include  all  of  the  financial
information  and  footnotes required by  generally  accepted
accounting principles for complete financial statements.  In
the opinion of management, all adjustments (including normal
recurring  adjustments)  considered  necessary  for  a  fair
presentation have been included.

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

The results of operations for the respective interim periods
are not necessarily indicative of the results to be expected
for  the full year.  The accompanying unaudited consolidated
financial statements should be read in conjunction with  the
audited  consolidated  financial statements  and  the  notes
thereto  included in the Company's Form 10-KSB for the  year
ended  December  31,  1997  filed with  the  Securities  and
Exchange Commission.

2.  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.  As required by SFAS 128, the net loss  per  share
for  the three and nine months ended September 30, 1997  has
been  restated  to comply with this standard. The  Company's
computations of Diluted earnings per share for the three and
nine month periods ended September 30, 1998 and 1997 exclude
the  impact  of common stock equivalents as their  inclusion
would be anti-dilutive.

3.  Inventories
Inventories consist of the following:
                           September 30, 1998    December 31, 1997
                           ------------------    -----------------
     Raw materials          $    320,273           $   249,018
     Work in process              14,236                12,925
     Finished goods            1,310,517             1,250,585
                             -----------           -----------
                             $ 1,645,026           $ 1,512,528
                             ===========           ===========

4.  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.

All  investment securities have been classified as available
for  sale.   At  September 30, 1998,  the  Company  holds  a
portfolio made up of corporate bonds with maturities ranging
from  October,  1998 to June, 1999.  These  investments  are
stated at market, which approximates their amortized cost.

5.  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 milestone  payments
of   up  to  $700,000,  in  four  installments,  as  certain
development milestones and initial sales are achieved on the
EchoMark  and  EchoEye technologies.  One of the  milestones
calls for a $400,000  payment payable upon the completion of
a  development program for the EchoEye.  This milestone  was
only payable in the event that the development was completed
by  September  30,  1998.   To the  best  of  the  Company's
knowledge,  the  milestone  has not  been  achieved  and  no
milestone  payments are accrued or payable  to  EchoCath  at
September 30, 1998.

Terms  of  the  license also 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 may render the license non-exclusive or cancel  the
license  and  return any of the $700,000 milestone  payments
which were paid.

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

In  conjunction  with  the license  agreement,  the  Company
purchased  280,000  shares  of 5.4%  cumulative  convertible
preferred  stock of EchoCath for $1,400,000  in  cash.   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  EchoCath's
common stock on September 30, 1998 was $2.188 per share.

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  were
stated  at  historical  cost.  During September,  1997,  the
Company became aware that EchoCath may have been having cash
flow  difficulties.  During October, 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.  During October, 1998,  the
complaint was dismissed by the District Court.  The  Company
is  considering an appeal of the decision.  (See Part II  --
Item 1.  Legal Proceedings).

EchoCath  has  limited cash reserves and  is  attempting  to
raise  additional  funds through the  issuance  of  debt  or
equity,  through  licensing  agreements  or  through   other
strategic  alliances.   Additionally,  EchoCath  could  face
delisting  of  its  common stock from the NASDAQ  Small  Cap
Stock  Market  if  it  does not meet  the  requirements  for
continued  listing.   The Company cannot  determine  whether
EchoCath  will be successful in raising additional funds  or
executing additional licensing agreements in order  to  meet
its  long  term cash needs, whether EchoCath will  recognize
additional  revenue  or  attain  profitability  or   whether
EchoCath will be able to maintain its NASDAQ listing.  As of
September 30, 1998, management evaluated the investment  and
determined  that  there  has been an  other  than  temporary
impairment.  As such, the cost basis of the preferred  stock
has  been  written down to zero representing  the  estimated
fair value of the investment.  The $1,400,000 write-down  of
the  investment was reflected in loss from operations during
the three months ended September 30, 1998.

6.  Common Stock
On  April  9,  1998, the Company sold and  issued  2,250,000
shares  of  its common stock to six institutional  investors
(the  "Investors") at a price of $2.25 per share.  The gross
proceeds  of the offering were $5,062,500, before  deducting
offering  expenses of approximately $403,000.   The  Company
intends to use the net proceeds from the sale of the  Shares
for working capital purposes.

The  Company  granted  the  Investors  certain  registration
rights with respect to the Shares pursuant to a Registration
Rights  Agreement.   The Company filed a shelf  registration
statement  on  Form S-3 covering all of the Shares.   During
July,   1998,   the  registration  statement  was   declared
effective by the Securities and Exchange Commission.
                              
On June 1, 1998, four non-employee holders of non-plan stock
options  to  purchase  22,500 common stock  of  the  Company
exercised their options at $1.33 per share.

7.  Supplemental Statement of Cash Flow Information:
Supplemental Noncash Investing and Financing Activities:

Cash paid for interest was $828, $2,377, $624 and $1,872 for
the three and nine months ended September 30, 1998 and 1997,
respectively.


ITEM  2.   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" relating  to
approval of the Company's ultrasound products and their role
in  the diagnosis and treatment of cardiac arrhythmias;  the
statements in the fourth 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  and
beyond;  the  forward looking statements  contained  in  the
second,  third,  fifth,  sixth, seventh,  eighth  and  tenth
paragraphs under the discussion of the Results of Operations
for the three months ended September 30, 1998 as compared to
1997;  the forward looking statements contained in the fifth
and  seventh paragraphs under the discussion of the  Results
of  Operations for the nine months ended September 30,  1998
as  compared to 1997; the forward looking statements in  the
third,  sixth and last paragraph of "Liquidity  and  Capital
Resources;" and the section titled "Year 2000 Issues."

The  Company  cautions investors and others  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 release the results  of
any  revisions to these forward-looking statements that  may
be made to reflect events or circumstances after the date of
this  report  or  to reflect the occurrence  of  anticipated
events.

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,    diagnostic
electrophysiology    catheters,    internal    cardioversion
catheters  and related disposable supplies.  To date,  these
products have generated nearly all of the Company's revenue.

The  Company  has  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 completing the clinical  trial
for  at  least several months.  Approval to sell  the  ALERT
System in the United States may take one or more  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 has allowed the Company to initiate  sales
of the ALERT System in the European Community.

During  July,  1998, the Company filed for  510(k)  approval
with  the  FDA  for  marketing clearance  for  its  ViewMate
ultrasound    imaging   console   and   U-View   deflectable
intracardiac imaging catheter.  These products are  designed
to  improve  a physician's ability to visualize  inside  the
chambers of the heart, including the internal anatomy of the
heart.   The  Company believes that the ViewMate and  U-View
may  play  an important role as new and effective  treatment
options  are developed for the treatment of complex  cardiac
arrhythmias,   including  ventricular  tachyarrhythmia   and
atrial  fibrillation. The Company's ultrasound products  are
not  approved  for sale and the Company does not  anticipate
receiving  approval to sell the ViewMate or  U-View  for  at
least several months, if approved at all.

The Company expects to continue to incur operating losses 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
activity  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 approximately $13.5  million  at
September 30, 1998.

The  Company has set a number of goals for 1998 and  beyond,
including  continued  expansion of its sales  and  marketing
efforts  aimed  at  achieving increased  sales  of  existing
products,  completion of the ALERT clinical trial, increased
market  acceptance of the ALERT System in Europe,  increased
manufacturing   efficiency  and  lower   production   costs,
regulatory   approval  and  introduction  of   several   new
products,  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
Three months ended September 30, 1998 compared to three
months ended September 30, 1997

Revenue from product sales increased $717,515 (or 54%)  from
$1,321,013 to $2,038,528 in the three months ended September
30,  1998 as compared to the comparable period in 1997.  The
increase  in  revenue in the third quarter of 1998  resulted
primarily  from  increased sales of the EP  WorkMate,  which
represented  a  substantial percentage of  product  revenues
during  the  three month period in 1998.  The  Company  also
realized increased sales of certain of its catheter products
during the period.

The level of sales for the fourth quarter of 1998 and fiscal
1999  will continue to depend materially on sales of the  EP
WorkMate  and  diagnostic catheters and the ability  of  the
Company's  direct  sales force and network of  international
independent distributors to effectively market and sell  the
Company's  existing products.  The ALERT System is currently
undergoing clinical trials and is not approved for  sale  in
the United States.  The ALERT System has been introduced for
sale  in  Europe.   However, the Company  cannot  accurately
determine the sales level of the ALERT System for the fourth
quarter  of  1998 or 1999 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 the fourth quarter of 1998 and beyond.

Cost  of  products  sold increased $214,752  (or  33%)  from
$654,010  to  $868,762 due to increased sales in  the  three
months   ended  September  30,  1998  as  compared  to   the
comparable  period in 1997.  Gross profit on  product  sales
for the three months ended September 30, 1998 was $1,169,766
(or  57% as a percentage of product sales), as compared with
$667,003 (or 50% as a percentage of product sales)  for  the
comparable period in 1997.  The Company realized an increase
in  gross  profit on sales of existing products during  1998
primarily  due to increased sales of the EP WorkMate,  which
currently yields a higher gross margin than certain  of  the
Company's other products.  The Company hopes to improve  its
overall gross profit percentage as sales of the ALERT System
and  other  catheter products increase which may offset  the
fixed   costs   associated  with  maintaining   a   catheter
manufacturing operation.

Sales  and  marketing expenses increased $185,627  (or  22%)
from $850,563 to $1,036,190 and decreased as a percentage of
revenue  from  product sales from 64% to 51%  in  the  three
months   ended  September  30,  1998  as  compared  to   the
comparable  period in 1997. The dollar increase during  1998
was  due  to  expansion  of  the domestic  sales  force  and
international distribution network.  The Company's  domestic
direct sales force currently includes ten domestic sales and
marketing professionals as well as a team of domestic  field
clinical  engineers  and administrative  support  personnel.
The  Company has expended substantial funds in an effort  to
improve    its    network   of   international   independent
distributors   and   has  added  distributors   in   several
territories   not  previously  covered.   The  international
distribution  network is currently supported by  a  team  of
direct   international  sales and  marketing  professionals,
international  field clinical engineers  and  administrative
support  personnel.  The Company incurs significant expenses
for  travel, trade show related expenses, product  promotion
and  physician educational materials in support of its sales
efforts.

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  costs  associated  with  attending  trade  shows,
physician  training  and  education,  promotional  material,
sample products and expansion of the sales force.

While sales and marketing expenses for the fourth quarter of
1998  and  for fiscal 1999 are expected to increase,  it  is
anticipated that these expenses may continue to decline as a
percentage  of revenues in the event that incremental  sales
are  generated.   It is likely that the Company  will  incur
additional  losses as a result of the increased fixed  costs
associated  with  its sales efforts until incremental  sales
are generated.  The Company cannot determine when or if that
level of sales will be achieved.

General  and  administrative expenses increased $70,596  (or
21%) from $340,035 to $410,631 and decreased as a percentage
of  sales revenue from 26% to 20% in the three months  ended
September  30, 1998 as compared to the comparable period  in
1997.   The dollar increase during 1998 was due to increased
personnel,   occupancy   and  other   administrative   costs
necessary to support the increased operations.  The  Company
expects  general and administrative expenses to increase  in
future  periods  due to anticipated future  growth.   It  is
anticipated,  however, that these expenses may  continue  to
decline as a percentage of revenues as incremental sales are
generated.   The Company cannot determine when  or  if  such
incremental sales will be achieved.

Research and development expenses decreased $92,533 (or 18%)
from   $520,468  to  $427,935  in  the  three  months  ended
September  30, 1998 as compared to the comparable period  in
1997.   Research  and development during  the  three  months
ended  September  30,  1997  included  significant  expenses
incurred  in connection with the development and preparation
for  manufacturing  of  the  ALERT  System  which  were  not
recurring  during the corresponding period in 1998.   During
the  three  months  ended September 30,  1998,  the  Company
incurred  research  and development expenses  in  connection
with  ongoing  development  efforts  on  existing  products,
including  the  EP  WorkMate,  costs  associated  with   the
clinical trials for the ALERT System, development costs  and
costs  of  preparing  regulatory  submissions  for  the  new
ultrasound  imaging product line and costs  associated  with
several new products under development.  The Company expects
that  research  and  development  expenses  are  likely   to
increase  in future periods, in part due to ongoing expenses
related  to  the ALERT System clinical trials,  new  product
development activities and regulatory applications aimed  at
gaining approval to sell other new products.

The  results  of  operations  for  the  three  months  ended
September 30, 1998 included a $1,400,000 write-down  of  the
Company's  investment in 280,000 shares  of  EchoCath,  Inc.
preferred stock.

Interest  expense  was $828 during the  three  months  ended
September  30, 1998.  The Company does not expect  to  incur
material interest expense during 1998.

Interest income decreased from $65,768 to $57,976 during the
three  months  ended September 30, 1998 as compared  to  the
comparable  period in 1997.  The decrease  was  due  to  the
utilization of the cash in the operation of the business.

The  net loss for three months ended September 30, 1998  was
$2,047,842 as compared to a net loss of $978,919 during  the
comparable period in 1997.  The basic and diluted  loss  per
share for the three months ended September 30, 1998 was $.21
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  $.13  in  1997.   Excluding   the
$1,400,000 EchoCath write-down, the Company's net  loss  for
the three months ended September 30, 1998 was $647,842 or  a
basic and diluted loss of $.07 per share.  The net loss  was
caused by the factors discussed above.

RESULTS OF OPERATIONS
Nine months ended September 30, 1998 compared to nine months
ended September 30, 1997

Revenue  from product sales increased $2,618,159  (or  100%)
from  $2,606,650  to  $5,224,809 in the  nine  months  ended
September  30, 1998 as compared to the comparable period  in
1997.    The  increase  in  revenue  during  1998   resulted
primarily  from  increased sales of the EP  WorkMate,  which
represented  a  substantial percentage of  product  revenues
during  the nine month period in 1998, initial sales of  the
ALERT  System  in  Europe  and increased  sales  of  certain
catheter products.

Cost  of  products sold increased $1,112,813 (or  72%)  from
$1,545,418 to $2,658,231 due to increased sales in the  nine
months   ended  September  30,  1998  as  compared  to   the
comparable  period in 1997.  Gross profit on  product  sales
for  the nine months ended September 30, 1998 was $2,566,578
(or  49% as a percentage of product sales), as compared with
$1,061,232 (or 41% as a percentage of product sales) for the
comparable period in 1997.  The Company realized an increase
in  gross  profit on sales of existing products during  1998
primarily due to higher sales of the EP WorkMate.

Sales and marketing expenses increased $220,616 (or 9%) from
$2,326,589  to  $2,547,205 and decreased as a percentage  of
revenue  from  product sales from 89% to  49%  in  the  nine
months   ended  September  30,  1998  as  compared  to   the
comparable period in 1997.

General  and  administrative expenses increased $73,184  (or
6%)  from  $1,133,998  to  $1,207,182  and  decreased  as  a
percentage of revenue from product sales from 44% to 23%  in
the  nine months ended September 30, 1998 as compared to the
comparable period in 1997.

Research  and  development expenses decreased  $352,635  (or
24%)  from $1,458,109 to $1,105,474 in the nine months ended
September  30, 1998 as compared to the comparable period  in
1997.  Research and development during the nine months ended
September 30, 1997 included significant expenses incurred in
connection  with the development, regulatory submission  and
preparation for manufacturing of the ALERT System which were
not  recurring  during  the corresponding  period  in  1998.
During the nine months ended September 30, 1998, the Company
incurred  research  and development expenses  in  connection
with  ongoing  development  efforts  on  existing  products,
including  the  EP  WorkMate,  costs  associated  with   the
clinical trials for the ALERT System, development costs  and
costs  of  preparing  regulatory  submissions  for  the  new
ultrasound  imaging product line and costs  associated  with
several new products under development.  The Company expects
that  research  and  development  expenses  are  likely   to
increase  in future periods, in part due to ongoing expenses
related  to  the ALERT System clinical trials,  new  product
development activities and regulatory applications aimed  at
gaining approval to sell other new products.

The   results  of  operations  for  the  nine  months  ended
September 30, 1998 included a $1,400,000 write-down  of  the
Company's  investment in 280,000 shares  of  EchoCath,  Inc.
preferred stock.

Interest  expense  was $2,377 during the nine  months  ended
September  30, 1998.  The Company does not expect  to  incur
material interest expense during 1998.

Interest  income decreased from $289,362 to $159,993  during
the  nine months ended September 30, 1998 as compared to the
comparable  period in 1997.  The decrease  was  due  to  the
utilization of cash to fund the Company's operations.

The  net  loss for nine months ended September 30, 1998  was
$3,535,667  as  compared to a net loss of $3,569,974  during
the  comparable period in 1997.  The basic and diluted  loss
per  share for the nine months ended September 30, 1998  was
$.39  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 $.47 in  1997.   Excluding  the
$1,400,000 EchoCath write-down, the Company's net  loss  for
the nine months ended September 30, 1998 was $2,135,667 or a
basic and diluted loss of $.24 per share.  The 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
approximately $13.5 million at September 30, 1998.  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.  On April  9,
1998,  the Company sold and issued 2,250,000 shares  of  its
common  stock to six institutional investors at a  price  of
$2.25  per  share.  The gross proceeds of the offering  were
$5,062,500,   before   deducting   offering   expenses    of
approximately $403,000.  The Company intends to use the  net
proceeds  from  the sale of the shares for  working  capital
purposes.

Net  cash  used in operating activities for the nine  months
ended  September  30,  1998 was $3,146,424  as  compared  to
$4,914,939  for  the nine months ended September  30,  1997.
The  net  use  of cash in operations during the nine  months
ended  September 30, 1998 was due primarily to the Company's
$3,535,667  net loss from operations.  Accounts  receivable,
net,  increased  by  $687,177 in  1998  from  $1,229,921  to
$1,917,098   due  to  higher  third  quarter   1998   sales.
Inventories   increased  by  $132,498  from  $1,512,528   to
$1,645,026   in  anticipation  of  expected   future   sales
increases.   Prepaid  expenses  and  other  current   assets
includes  product  brochures, prepaid trade  show  fees  and
prepaid  insurance.  Accounts payable decreased by  $123,050
from   $670,206   to  $547,156,  accrued  expenses   payable
decreased by $307,958 from $850,507 to $542,549 and  amounts
payable  to  related  parties  increased  by  $16,916   from
$127,859  to  $144,775.  Reductions in accounts payable  and
accrued expenses payable were due to the timing of purchases
and   payments  for  development  projects  and  goods   and
services.

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  with  EchoCath  calls for  the  Company  to  make
payments  totaling  up  to a maximum of  $700,000,  in  four
installments, as certain development milestones and  initial
sales are achieved on the EchoMark and EchoEye technologies.
One  of the milestones calls for a $400,000  payment payable
upon  the  completion  of  a  development  program  for  the
EchoEye.  This milestone was only payable in the event  that
the development was completed by September 30, 1998.  To the
best  of the Company's knowledge, the milestone has not been
achieved and no milestone payments are accrued or payable to
EchoCath as of September 30, 1998.

The  EchoCath  license also 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 render the license
non-exclusive or cancel the license and return any milestone
payments  to  the Company.  The Company may  also  elect  to
apply  any  accrued  and  unpaid  dividends  earned  on  its
investment  in  EchoCath  preferred  stock  against  minimum
royalties.

In  conjunction  with  the license  agreement,  the  Company
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 Part II  --
Item 1.  Legal Proceedings)

Capital expenditures, net of disposals, were $267,974 during
the  nine  months ended September 30, 1998  as  compared  to
$582,434 in the nine month period ended September 30,  1997.
Capital    equipment   purchases   during   1998    included
demonstration equipment, computer equipment for use  by  the
sales  force,  expansion  of  the  trade  show  booths   and
manufacturing   equipment.    The   Company   is   currently
negotiating to purchase an additional 7,500 square  feet  of
space  at  its catheter facility for approximately $400,000.
The  Company  does  not  have  any  other  material  capital
commitments at this time.

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 under  lease,
for  a  purchase price of approximately $417,000,  including
transaction costs and improvements. The purchase allowed for
the  expansion of catheter manufacturing operations, provide
for  additional warehousing, shipping and quality  assurance
activities and relocation of administrative offices  at  the
facility.

On June 1, 1998, four non-employee holders of non-plan stock
options  exercised their options to purchase  22,500  shares
common  stock of the Company at a price of $1.33 per  share.
The  Company had no financing activities during  the  period
ended September 30, 1997.

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 at least the next twelve months.



Year 2000 Issues

Background.   Some computers, software, and other  equipment
include  programming  code in which calendar  year  data  is
abbreviated to only two digits. As a result of this  design,
some  of  these  systems could fail to operate  or  fail  to
produce correct results if "00" is interpreted to mean 1900,
rather  than  2000.  If not corrected, those programs  could
cause date-related transaction failures.

Internal  Infrastructure.    The  Year  2000  problem  could
affect  computers,  software,  and  other  equipment   used,
operated,  or  maintained by the Company.  The  Company  has
substantially  completed a review of its  internal  computer
programs and systems to ensure that the programs and systems
will  be  Year 2000 compliant.  In addition to our  in-house
efforts,  we  are  asking vendors, major customers,  service
providers and banks whose systems failures potentially could
have  a significant impact on our operations to verify their
Year  2000  readiness.  The Company presently believes  that
its computer systems will be Year 2000 compliant in a timely
manner.  Based on our current plans and efforts to date,  we
do  not  anticipate  that Year 2000  problems  will  have  a
material  effect on our results of operations  or  financial
condition.

Software Sold to Consumers.  The Year 2000 problem can  also
affect  products  sold by the Company, particularly  the  EP
WorkMate  and ALERT Companion.  The Company has performed  a
detailed assessment of its products and, as a result of this
review,  believes that it has substantially  identified  and
resolved  all potential Year 2000 problems with the products
which  it  develops and markets.  However,  management  also
believes  that it is not possible to determine with complete
certainty   that  all  Year  2000  problems  affecting   the
Company's products have been identified or corrected due  to
complexity  of  these  products  and  the  fact  that  these
products interact with other third party vendor products  or
operate  on  computer  systems  which  are  not  under   the
Company's control. Based on our current plans and efforts to
date, we do not anticipate that Year 2000 problems will have
a  material effect on our results of operations or financial
condition.

Suppliers.   The   Company   has  initiated   communications
with   third    party  suppliers  of  the  major  computers,
software,  and  other  equipment sold,  used,  operated,  or
maintained  by  the Company to identify and, to  the  extent
possible, to resolve issues involving the Year 2000 problem.
However,  the  Company has limited or no  control  over  the
actions  of  these third party suppliers.  Thus,  while  the
Company  expects  that  it  will  be  able  to  resolve  any
significant Year 2000 problems with these systems, there can
be  no  assurance that these  suppliers will resolve any  or
all  Year  2000  problems  with  these  systems  before  the
occurrence of a material disruption to the business  of  the
Company  or  any  of its  customers.  Any failure  of  these
third   parties to resolve Year 2000  problems   with  their
systems  in  a  timely manner could have a material  adverse
effect on the Company's  business, financial condition,  and
results of operation.

Conclusion.   Costs specifically associated  with  modifying
software  for Year 2000 compliance are expensed as incurred.
To date, the Company has not spent a material amount on this
project.  Costs to be incurred in the remainder of 1998  and
1999  to  fix  Year  2000 problems are not  expected  to  be
material.  Such costs do not include normal system  upgrades
and  replacements.  The Company does not  expect  the  total
costs  relating to Year 2000 remediation to have a  material
effect on our results of operations or financial condition.

The  total costs that the Company incurs in connection  with
the Year 2000 problems will be influenced by its ability  to
successfully identify Year 2000 systems' flaws,  the  nature
and  amount  of  programming required to  fix  the  affected
programs, the related labor and/or consulting costs for such
remediation, and the ability of third parties with whom  the
Company  has business relationships to successfully  address
their  own  Year 2000 concerns.  These and other  unforeseen
factors  could have a material adverse effect on our results
of operations or financial condition.

Disclaimer.   The discussion of the Company's  efforts,  and
management's expectations, relating to Year 2000  compliance
are forward-looking statements and, as such, are subject  to
uncertainties.  The Company's ability to achieve  Year  2000
compliance  and  the level of incremental  costs  associated
therewith, could be adversely impacted by unanticipated Year
2000  problems.  For example, if the Company is unsuccessful
in  identifying  or  fixing all Year 2000  problems  in  its
operations,  or if the Company is affected by the  inability
of  suppliers or major customers to continue operations  due
to  a  Year  2000  problem,  the results  of  operations  or
financial condition could be materially impacted.
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 September 30, 1998, the Company's accumulated deficit
was  approximately  $13.5 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,  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;  the  ability  to  establish,
preserve and enforce intellectual property rights;  and  its
ability  to  raise sufficient funds to meet its future  cash
requirements.   There can be no assurance that  the  Company
will generate significant revenues or attain profitability.

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.  There 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.

ALERT Clinical Trials
The Company has commenced human clinical trials of the ALERT
System  at seven  hospitals in the United States and intends
to  expand  the trials to include additional leading  atrial
fibrillation research centers.  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 the first  half  of  1999.   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.
The  EP  WorkMate is 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  more
than 50% of the Company's revenues from product sales during
the  nine months ended September 30, 1998 and the year ended
December  31,  1997  and  is  expected  to  account  for   a
significant  portion of fiscal year 1998 and  1999  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.

Government Regulation.
United States
In the United States, the development, testing, manufacture,
labeling,  marketing, promotion and sale of medical  devices
are   regulated   by   numerous  governmental   authorities,
including 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, withdrawal  of  marketing
approvals and criminal prosecution.

In  the  United States, 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  FDC  Act  (a "510(k)  submission")  or  FDA
approval of a PMA application under Section 515 of  the  FDC
Act.   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.  Based
upon  industry  and FDA publications, the  Company  believes
that 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  major  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  accept  the  application  for   filing.
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 accepted for  filing,  the
FDA  begins  a review of the PMA application.   The  Company
believes  that an FDA review of a PMA application  generally
takes  between  one and three years from the  date  the  PMA
application   is   accepted  for  filing,   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.

If the FDA's evaluations of both the PMA application and the
manufacturing  facilities are favorable, the FDA  may  issue
either  an approval letter or an "approvable letter,"  which
usually contains a number of conditions that must be met  in
order to secure final approval of the PMA application.  When
and   if  those  conditions  have  been  fulfilled  to   the
satisfaction  of  the  FDA, the agency  will  issue  a  PMA,
authorizing  commercial marketing of the device for  certain
indications.   If the FDA evaluation of the PMA  application
or  manufacturing facilities is not favorable, the FDA  will
deny  approval  of  the  PMA application  or  issue  a  "not
approvable"   letter.  The  FDA  may  also  determine   that
additional clinical trials are necessary, in which case  the
PMA  may  be  delayed  for  several years  while  additional
clinical  trials are conducted and submitted in an amendment
to the PMA application.

Modifications to a device that is the subject of an approved
PMA,  its  labeling,  or manufacturing process  may  require
approval  by  the  FDA  of  PMA  supplements  or  new  PMAs.
Supplements  to  a PMA often require the submission  of  the
same type of information required for an initial PMA, except
that the supplement is generally limited to that information
needed  to  support  the proposed change  from  the  product
covered  by the original PMA.  Although under the  FDC  Act,
the  FDA is required to complete its review of a PMA or  PMA
supplement   within  180  days,  the  agency  may   take   a
significantly longer period of time to complete its review.

The  Company received FDA approval to begin clinical  trials
for  the  ALERT System under an IDE filing and has commenced
human  clinical trials of the ALERT System at seven  centers
in  the  United States.  The Company intends to  expand  the
trials  to  include  additional leading atrial  fibrillation
research  centers  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.

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.

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.  The Company is subject to
routine   inspection   by  FDA  for  compliance   with   GMP
requirements,   MDR  requirements,  and   other   applicable
regulations.  ProCath was last inspected by the  FDA  during
June,  1998.  EP MedSystems was last inspected  by  the  FDA
during   October,  1996.   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.   FDA  has proposed changes to the GMP  regulations,
including  design  control requirements, which  will  likely
increase  the  cost  of  compliance with  GMP  requirements.
Changes  in  existing  requirements  or  adoption   of   new
requirements  could have a material adverse  effect  on  the
Company's  business,  financial condition,  and  results  of
operation.  There can be no assurance that the Company  will
not   incur  significant  costs  to  comply  with  laws  and
regulations in the future or that laws and regulations  will
not  have  a  material  adverse effect  upon  the  Company's
business, financial condition or results of operation.   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.

  In  summary,  the  process  of obtaining  and  maintaining
required  regulatory approvals can be expensive,  uncertain,
and  lengthy, and there can be no assurance that the Company
will  ever  obtain such approvals and that if such approvals
are  obtained,  there can be no assurance that  the  Company
will  be  able to maintain the approvals.  There can  be  no
assurance that the FDA will act favorably or quickly on  any
of  the  Company's  submissions to the FDA  and  significant
difficulties and costs may be encountered by the Company  in
its  efforts  to  obtain FDA clearance that could  delay  or
preclude the Company from selling its products in the United
States.  Furthermore, there can be no assurance that the FDA
will  not request additional data, require that the  Company
conduct  further clinical studies, causing  the  Company  to
incur substantial cost and delay.  In addition, there can be
no  assurance  that the FDA will not impose strict  labeling
requirements,  onerous  operator  training  requirements  or
other  requirements as a condition of its PMA approval,  any
of  which  could limit the Company's ability to  market  its
systems.  Labeling and promotional activities are subject to
scrutiny  by the FDA and, in certain circumstances,  by  the
Federal  Trade Commission  ("FTC").  FDA enforcement  policy
strictly  prohibits the marketing of FDA cleared or approved
medical  devices for unapproved uses.  Further, if a company
wishes  to  modify a product after FDA approval  of  a  PMA,
including changes in indications or other modifications that
could  affect  safety or efficacy, additional clearances  or
approvals will be required from the FDA.  Failure to receive
or  delays  in  receipt  of  FDA  clearances  or  approvals,
including the need for  additional clinical trials  or  data
as  a  prerequisite  to clearance or approval,  or  any  FDA
conditions that limit the ability of the Company  to  market
its  systems,  could have a material adverse effect  on  the
Company's  business,  financial  condition  and  results  of
operations.

International
In  order  for the Company to market its products in  Europe
and  certain  other foreign jurisdictions, the Company  must
obtain  required  regulatory approvals  and  clearances  and
otherwise comply with extensive regulations regarding safety
and  manufacturing processes and quality. These regulations,
including  the  requirements for approvals or  clearance  to
market  and  the time required for regulatory  review,  vary
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  relaxed
the exportation requirements governing devices under certain
circumstances.  Pursuant to this 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.

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.

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.

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.

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.

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.

Ability to Manage Sales Growth.
The  Company  employs 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.   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.

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
Jenkins,  Bryan  Byrd, Randall Rolston and  Joseph  Griffin.
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.

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  and
the   EP-3   Clinical   Stimulator.   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.

Risks Associated With International Operations.
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.

Transactions With Affiliates and Potential Conflicts.
Anthony  Varrichio,  a  director  and  shareholder  of   the
Company,  is   an  officer,  director  and  shareholder   of
HiTronics  Designs, Inc. ("HDI").  HDI has  sold  rights  to
various  products  to  the Company,  performs  research  and
development   services   for  the  Company   and   currently
manufactures  the  EP-3  Stimulator.   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.

The  Company  purchases certain components for its  products
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.

Concentration of Ownership.
As  of  November 2, 1998, the Company's seven directors  and
executive  officers and their affiliates beneficially  owned
an   aggregate  of  approximately  19.0%  of  the  Company's
outstanding Common Stock, including unexercised vested stock
options.   Additionally,   six institutional  investors  who
purchased shares in the Company's private placement on April
9,  1998  own  an  aggregate  of approximately  23%  of  the
Company's outstanding Common Stock as of November  2,  1998.
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 affect on a change in control of the  Company
and  may  adversely affect the voting and  other  rights  of
other holders of Common Stock.


PART II.   OTHER INFORMATION

Item 1.  Legal Proceedings.

EchoCath
During  October,  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  prior  sale  of  $1,400,000  of   its
preferred stock to the Company.

EchoCath  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.  During October,  1998,  the
complaint was dismissed by the District Court.  The  Company
is  considering  an  appeal  of the  decision.  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  September  30,  1998.   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.

Item 2.  Changes in Securities

On  April  9,  1998, the Company sold and  issued  2,250,000
shares  of  its common stock to six institutional  investors
(the  "Investors") at a price of $2.25 per share.  The gross
proceeds  of the offering were $5,062,500, before  deducting
offering  expenses of approximately $403,000.   The  Company
intends to use the net proceeds from the sale of the  shares
for  working  capital  purposes.  The  Company  granted  the
Investors  certain registration rights with respect  to  the
shares  pursuant  to a Registration Rights  Agreement.   The
Company  filed a shelf registration statement  on  Form  S-3
covering  all  of  the  Shares.   During  July,  1998,   the
Registration  Statement  was  declared  effective   by   the
Securities and Exchange Commission.

On June 1, 1998, four non-employee holders of non-plan stock
options  exercised their options to purchase  22,500  shares
common  stock of the Company at a price of $1.33 per  share.
The  Company had no financing activities during  the  period
ended September 30, 1997.



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

On  October 28, 1998, the Company held its Annual Meeting of
Shareholders.   The  matters  voted  upon  by  the  security
holders were:

(1)  To authorize an amendment of the Company's Amended and
     Restated Certificate of Incorporation providing for
     classification of the Board of Directors into three
     classes of directors with staggered terms of office;
                                                                      Broker
                                       For      Against   Abstain   Non-votes
                                    ---------   -------   -------   ---------
     For the amendment to the Plan  6,898,493      0       6,200    1,706,783
                                                                  
(2)  To elect four (4) directors to the Board of Directors as
     follows:  (a) two directors to serve a three year term,
     one director to serve a two year term and one director
     to serve a one year term, and until their respective
     successors shall be duly elected and qualified;
     
                                                            
     For the election of Directors       For       Withheld    Abstain
                                      ---------    --------    -------
        David A. Jenkins              8,605,476     6,000         0
        David W. Mortara              8,605,476     6,000         0
        John E. Underwood             8,605,476     6,000         0
        Anthony J. Varrichio          8,603,476     8,000         0
                                                            
(3)  To ratify the selection of PricewaterhouseCoopers LLP,
     independent public accountants, as auditors for the
     Company for the fiscal year ending December 31, 1998:
                                                                 
                                          For       Against    Abstain
                                       ---------    -------    -------
     For the ratification of auditors  8,605,476       0        6,000
                                                             


Item 5.  Other Information

The  Company  currently  intends to  hold  its  1999  Annual
Meeting of Shareholders (the "Annual Meeting") during  June,
1999.   Shareholders of the Company are entitled  to  submit
proposals  on  matters  appropriate for  shareholder  action
consistent  with regulations of the Securities and  Exchange
Commission  ("SEC")  and  the Company's  bylaws.   Should  a
shareholder wish to have a proposal considered for inclusion
in  the  Proxy Statement for the Annual Meeting, under  Rule
14a-8  of  the  Securities  Act of  1934,  as  amended  (the
"Exchange  Act"),  such proposal must  be  received  by  the
Company on or before February 1, 1999.

In  connection  with  the  Annual Meeting  and  pursuant  to
recently amended Rule 14a-4 under the Exchange Act,  if  the
shareholder's notice is not received by the Company within a
reasonable  time prior to the date on which proxy  materials
are  mailed to shareholders, the Company (through management
proxy  holders) may exercise discretionary voting  authority
when  the  proposal is raised at the Annual Meeting  without
any reference to the matter in the Proxy Statement.

The  above summary, which sets forth only the procedures  by
which business may be properly brought before and voted upon
at  the  Company's  Annual  Meeting,  is  qualified  in  its
entirety by reference to the Company's bylaws.

All shareholder proposals and notices should be directed  to
James Caruso, Chief Financial Officer of the Company, at  EP
MedSystems,  Inc.,  100 Stierli Court, Mount  Arlington,  NJ
07856.


Item 6.  Exhibits and Reports on Form 8-K

       
  (a)  Exhibits
           The following exhibits will be filed as part of this
           Form 10-QSB:
                         
           Exhibit 3.1   Amended and Restated Certificate
                         of Incorporation (1)

           Exhibit 3.2   Bylaws, as amended (1)

           Exhibit 27    Financial Data Schedule (SEC filing only)
                         
       (1) Previously filed and incorporated by reference to the exhibit
           of the same number filed with the Company's Form SB-2
           Registration Statement (Registration No. 333-3642).
                       
  (b)  Reports on Form 8-K
           None
           



                         SIGNATURES

Pursuant to the requirements of the Securities Exchange Act,
the  Registrant has duly caused this report to be signed  on
its behalf by the undersigned thereunto duly authorized.

                                 EP MEDSYSTEMS, INC.
                                    (Registrant)
                                 
Date: November 6, 1998      By:  /s/  David A. Jenkins
                                 ---------------------
                                      David A. Jenkins
                                 President and Chief Executive Officer
                                 
Date: November 6, 1998      By:  /s/  James J. Caruso
                                 --------------------
                                      James J. Caruso
                                 Vice President and Chief Financial Officer
                                 (Principal Financial and Accounting Officer)






                    EXHIBIT INDEX

Exhibit                                               
Number           Description of Exhibit               Method of Filing
-----------      ----------------------               ----------------
Exhibit 3.1      Amended and Restated Certificate     
                 of Incorporation                     (1)
                                                      
Exhibit 3.2      Bylaws, as amended                   (1)
                                                      
Exhibit 27       Financial Data Schedule              EDGAR
                 (SEC filing only)                    
                                                      
                 (1)Previously filed and incorporated by
                    reference to the exhibit of the same number
                    filed with the Company's Form SB-2 Registration
                    Statement (Registration No. 333-3642).