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:     June 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 August 7, 1998.


PART I. -- FINANCIAL INFORMATION
Item 1.  Financial Statements
            EP MEDSYSTEMS, INC. AND SUBSIDIARIES
                 CONSOLIDATED BALANCE SHEETS
                              
                                             June 30,    December 31,
                                             1998            1997
                                          (unaudited)
ASSETS                                    -----------    ------------
Current assets:
   Cash and cash equivalents           $    3,988,661  $      752,068
   Short-term investments                   1,258,073       2,120,084
   Accounts receivable, net                 1,863,860       1,229,921
   Inventories                              1,301,884       1,512,528
   Prepaid expenses and other assets          184,866         217,526
                                            ---------       ---------
          Total current assets              8,597,344       5,832,127
                                            ---------       ---------
Investment in EchoCath, Inc.                1,400,000       1,400,000
Property and equipment, net                   840,301         757,295
Intangible assets, net                        574,056         569,705
Other assets                                   30,314          58,439
                                           -----------      ---------
          Total assets                 $   11,442,015  $    8,617,566
                                           ==========       =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:                                                 
   Accounts payable                    $      517,316  $      670,206
   Payables due to related parties             75,708         127,859
   Accrued expenses                           642,323         850,507
   Deferred revenue                           103,438          34,313
   Customer deposits                           72,752         108,012
                                            ---------       ---------
          Total liabilities            $    1,411,537  $    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                    (11,411,769)     (9,923,945)
                                         ------------     -----------
          Total shareholders' equity       10,030,478       6,826,669
                                         ------------     -----------
Total liabilities and shareholders'equity $ 11,442,015  $    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
                                              June 30,        June 30,
                                                1998            1997
                                              ----------      ----------
Product sales                             $    1,731,672  $      409,914
Cost of products sold                            902,663         368,584
                                              ----------      ----------
          Gross profit                           829,009          41,330
                                                                        
Operating costs and expenses:                                           
   Sales and marketing expenses                  842,786         784,670
   General and administrative expenses           416,726         434,932
   Research and development expenses             328,191         594,187
                                               ---------     -----------
          Loss from operations                  (758,694)     (1,772,459)
                                                                  
Interest income, net                              66,254          76,582
                                               ---------     -----------
          Net loss                        $    (692,440)  $  (1,695,877)
                                               =========     ===========
Basic loss per share                      $        (.07)  $        (.22)
                                               =========     ===========
Diluted loss per share                    $        (.07)  $        (.22)
                                               =========     ===========
Weighted average shares outstanding used                                
to compute basic and diluted loss per share    9,634,807       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 Six Months Ended
                                               June 30,        June 30,
                                                 1998            1997
                                               ---------      ----------
Product sales                             $    3,186,281  $    1,285,637
Cost of products sold                          1,789,469         891,408
                                               ---------       ---------
          Gross Profit                         1,396,812         394,229
                                               ---------       ---------
Operating costs and expenses:                                           
   Sales and marketing expenses                1,542,572       1,476,026
   General and administrative expenses           764,992         793,962
   Research and development expenses             677,541         937,640
                                             -----------     -----------
          Loss from operations               (1,588,293)     (2,813,399)
                                                                  
Interest income, net                             100,469         222,346
                                             -----------     -----------
          Net loss                        $  (1,487,824)  $  (2,591,053)
                                             ===========     ===========
Basic loss per share                      $        (.17)  $        (.34)
                                                   =====           =====
Diluted loss per share                    $        (.17)  $        (.34)
                                                   =====           =====
Weighted average shares outstanding used                                
to compute basic and diluted loss per share    8,622,983       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 Six Months Ended
                                                     June 30,        June 30,
                                                       1998            1997
                                                     -----------    -----------
Cash flows from operating activities:                                          
Net loss                                         $ (1,487,824)  $  (2,591,053)
Adjustments to reconcile net loss to net
cash used in operating activities:
   Depreciation and amortization                      140,543         121,931
   Changes in assets and liabilities:
   (Increase) decrease in accounts receivable        (633,939)         80,730
   Decrease (increase) in inventories                 210,644        (863,790)
   (Decrease) increase in prepaid and other assets     32,660        (153,191)
   Decrease (increase) in other assets                 28,125         (56,695)
   (Decrease) increase in payables due to
      related parties                                 (52,151)         40,286
   (Decrease) Increase in accounts payable           (152,890)        453,795
   Decrease in accrued expenses, deferred
     revenue and customer deposits                   (174,319)       (143,233)
                                                   -----------     -----------
Net cash used in operating activities           $  (2,089,151)  $  (3,111,220)
                                                   -----------     -----------

Cash flows from investing activities:                                     
   Investment in EchoCath, Inc.                        --          (1,400,000)
   Maturities of held to maturity investments          --             487,096
   Sale or maturity of available for sale securities  862,011          79,866
   Patent costs                                       (36,852)         --
   Capital expenditures, net of disposals            (191,048)        (508,618)
                                                    ----------      ----------
Net cash provided by (used in) investing activities $ 634,111     $ (1,341,656)
                                                                            
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 (decrease) in cash and cash equivalents          3,236,593     (4,452,876)
Cash and cash equivalents, beginning of period         752,068      5,491,857
                                                     ---------      ---------
Cash and cash equivalents, end of period           $ 3,988,661  $   1,038,981
                                                     =========      =========
                                                            
                              
   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.  Diluted earnings per share exclude the impact  of
common  stock equivalents as their inclusion would be  anti-
dilutive.   As required by SFAS 128, the net loss per  share
for  the  three and six months ended June 30, 1997 has  been
restated to comply with this standard.

3.  Inventories
Inventories consist of the following:
                                June 30,      December 31,
                                  1998             1997
                             -----------     -------------
     Raw materials           $   262,449      $   249,018
     Work in process              16,500           12,925
     Finished goods            1,022,935        1,250,585
                             -----------     ------------
                             $ 1,301,884      $ 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 June 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 payments  totaling
$700,000,  in  four  installments,  as  certain  development
milestones  and initial sales are achieved on  the  EchoMark
and  EchoEye technologies.  Terms of the license call for  a
two  percent  (2%)  royalty on net sales, including  minimum
royalties beginning in 1999 and continuing for the  life  of
the  applicable  patents  and  continuations  thereof.   The
Company  may elect to not make minimum royalty payments  and
in  such case, EchoCath may render the license non-exclusive
or  cancel  the  license and return the  $700,000  milestone
payments.   As  of  June 30, 1998, no  milestones  had  been
achieved  and no milestone payments were accrued or  payable
to EchoCath.

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 licensing 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 the common stock
on  June 30, 1998 was $2.25 per share.  The Company does not
anticipate  converting its shares into common stock  in  the
near future.

During  September,  1997,  the  Company  became  aware  that
EchoCath was having been having cash flow difficulties.   On
October  7,  1997,  the  Company  filed  a  lawsuit  against
EchoCath  in  the  United  States  District  Court  for  the
District  of  New Jersey alleging, among other things,  that
EchoCath made fraudulent misrepresentations and omissions in
connection  with the sale of $1.4 million of  its  preferred
stock  to  the  Company.  (See Part II  --  Item  1.   Legal
Proceedings).

On  October 30, 1997, EchoCath announced that it had entered
into  a  license and development agreement which included  a
$1,000,000  investment by the licensee  in  Class  A  common
stock  of  EchoCath  and an $800,000 prepayment  of  license
fees.   The  agreement provided EchoCath with $1,800,000  of
new  working capital and may provide an opportunity to  earn
additional  royalty  or  licensing  income.   During   1998,
EchoCath may have earned an additional $250,000 of licensing
income under the agreement.

EchoCath  has  limited cash reserves and  is  attempting  to
raise  additional  funds  through  the  issuance  of  stock,
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.

The  EchoCath  preferred stock is not a registered  security
traded on a public exchange and therefore its fair value  is
not  readily  determinable.   Accordingly,  the  shares  are
stated  at historical cost.  As of June 30, 1998, management
has  evaluated the investment in order to determine  whether
there has been an other than temporary impairment and  as  a
result of this review, management believes that there is  no
such  impairment  at  this time.  However,  management  will
continue to evaluate the investment and may determine in the
future  that it is probable that the Company will be  unable
to  realize  all  amounts due according to  the  contractual
terms  of  the  security.   In  the  event  that  management
determines  that  an  other  than temporary  impairment  has
occurred,  the  cost basis of the preferred  stock  will  be
written down to fair value.

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 on April 29, 1998 covering all of  the
Shares.   On  July 6, 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 $1,011, $1,549, $624 and  $1,248
for  the three and six months ended June 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;  the
forward  looking statements contained in the second,  third,
fifth, sixth, seventh, eighth and ninth paragraphs under the
discussion of the Results of Operations for the three months
ended June 30, 1998 as compared to 1997; the forward looking
statements contained in the fifth and sixth paragraphs under
the  discussion  of the Results of Operations  for  the  six
months  ended  June 30, 1998 as compared to  1997;  and  the
forward   looking  statements  in  the  last  paragraph   of
"Liquidity and Capital Resources."

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
and  filing  for approval for the ALERT System by  the  U.S.
Food  and  Drug  Administration ("FDA")  for  at  least  six
months.   Approval to sell the ALERT System  in  the  United
States  may  take several years, if approved  at  all.   The
Company  has  received approval from its  notified  body  to
label the ALERT System with a CE Mark.  This designation 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 treatments
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 six 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 $11.4  million  at
June 30, 1998.

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

Revenue  from product sales increased $1,321,758  (or  322%)
from  $409,914 to $1,731,672 in the three months ended  June
30,  1998 as compared to the comparable period in 1997.  The
increase  in revenue in the second 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, and initial sales  of
the ALERT System in Europe.  Sales during the second quarter
of 1997 were lower than expected due, in part, to a delay in
the release of several product upgrades to the EP WorkMate.

The  level  of  sales for fiscal 1998 and fiscal  1999  will
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.
However,  the ALERT System has been introduced for  sale  in
Europe.   The Company cannot accurately determine the  sales
level  of  the ALERT System for the second half of  1998  or
1999  at  this  time nor when it will be  available  in  the
United  States.   However,  the Company  expects  the  ALERT
System to contribute a greater proportion of revenues in the
second half of 1998 and beyond.

Cost  of  products sold increased $534,079  (or  145%)  from
$368,584  to  $902,663 due to increased sales in  the  three
months  ended  June 30, 1998 as compared to  the  comparable
period in 1997.  Gross profit on product sales for the three
months  ended  June  30,  1998 was $829,009  (or  48%  as  a
percentage  of product sales), as compared with $41,330  (or
10%  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.  For the three months ended June 30,  1998,
the  increase  in  gross  profit  was  partially  offset  by
increased labor and manufacturing overhead expenses  at  the
Company's  catheter manufacturing operation as  the  Company
increased  its manufacturing activities in order  to  supply
ALERT  Catheters  for sale in Europe  and  for  use  in  the
clinical trials.  The Company expects to improve its overall
gross  profit  percentage as sales of the ALERT  System  and
other  catheters  increase which may  offset  the  increased
fixed  costs  associated  with  the  catheter  manufacturing
operation.  The gross profit on product sales for the  three
months  ended  June 30, 1997 was adversely impacted  by  low
level of sales during the period.

Sales and marketing expenses increased $58,116 (or 7%)  from
$784,670  to  $842,786  and decreased  as  a  percentage  of
revenue  from  product sales from 191% to 49% in  the  three
months  ended  June 30, 1998 as compared to  the  comparable
period in 1997.  The year to year variance is partly due  to
the  low  level of sales in the three months ended June  30,
1997.   The  Company sells its products through  a  domestic
direct  sales  force, which currently includes ten  domestic
sales  and  marketing  professionals,  five  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.   The  international distribution  network  is
currently   supported  by  three  international  sales   and
marketing  professionals, two international  field  clinical
engineers and administrative support personnel.  The Company
also  incurs  significant expenses for  travel,  trade  show
related   expenses  and  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 second  half  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 decreased $18,206  (or
4%)  from $434,932 to $416,726 and decreased as a percentage
of  sales revenue from 106% to 24% in the three months ended
June  30, 1998 as compared to the comparable period in 1997.
The year to year variance is partly due to the low level  of
sales  during  the three months ended June  30,  1997.   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  $265,996  (or
45%)  from  $594,187 to $328,191 in the three  months  ended
June  30, 1998 as compared to the comparable period in 1997.
During  the  three months ended June 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.  Research  and
development  expenses for the three months  ended  June  30,
1997   included   significant  expenses   related   to   the
development  of the ALERT System, preparation of  regulatory
submissions  for the ALERT System and expenses of  obtaining
CE Mark approval at ProCath.  These particular expenses were
not  recurring  in  the  comparable period  of  1998,  which
contributed  to  the  decline in  research  and  development
expenses.

Interest  expense was $1,011 during the three  months  ended
June  30,  1998.   The  Company does  not  expect  to  incur
material interest expense during 1998.

Interest income decreased from $77,206 to $67,264 during the
three  months  ended  June  30,  1998  as  compared  to  the
comparable  period in 1997.  The decrease  was  due  to  the
utilization of the proceeds of the Company's  initial public
offering.

The  net  loss  for  three months ended June  30,  1998  was
$692,440 as compared to a net loss of $1,695,877 during  the
comparable period in 1997.  The basic and diluted  loss  per
share for the three months ended June 30, 1998 was $.07  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 $.22 in 1997.  The decrease  in  net
loss was caused by the factors discussed above.


RESULTS OF OPERATIONS
Six months ended June 30, 1998 compared to six months ended
June 30, 1997

Revenue  from product sales increased $1,900,644  (or  148%)
from  $1,285,637 to $3,186,281 in the six months ended  June
30,  1998 as compared to the comparable period in 1997.  The
increase  in revenue in the second quarter of 1998  resulted
primarily  from  increased sales of the EP  WorkMate,  which
represented  a  substantial percentage of  product  revenues
during  the six month period in 1998, and initial  sales  of
the ALERT System in Europe.  Sales during the second quarter
of 1997 were lower than expected due, in part, to a delay in
the release of several product upgrades to the EP WorkMate.

Cost  of  products sold increased $898,061  (or  101%)  from
$891,408  to $1,789,469 due to increased sales  in  the  six
months  ended  June 30, 1998 as compared to  the  comparable
period  in 1997.  Gross profit on product sales for the  six
months  ended  June 30, 1998 was $1,396,812  (or  44%  as  a
percentage of product sales), as compared with $394,229  (or
31%  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 $66,546 (or 5%)  from
$1,476,026  to  $1,542,572 and decreased as a percentage  of
revenue  from  product sales from 115% to  48%  in  the  six
months  ended  June 30, 1998 as compared to  the  comparable
period  in 1997.  The year to year variance in the ratio  of
sales  and marketing expense to product sales is partly  due
to the low level of sales during 1997.

General  and  administrative expenses decreased $28,970  (or
4%)  from $793,962 to $764,992 and decreased as a percentage
of  revenue from product sales from 62% to 24% in the  three
months  ended  June 30, 1998 as compared to  the  comparable
period  in 1997.  The year to year variance in the ratio  of
general  and  administrative expense  to  product  sales  is
partly due to low level of sales during 1997.

Research  and  development expenses decreased  $260,099  (or
28%)  from $937,640 to $677,541 in the six months ended June
30,  1998 as compared to the comparable period in 1997.  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.

Interest expense was $1,549 during the six months ended June
30,  1998.   The  Company does not expect to incur  material
interest expense during 1998.

Interest  income decreased from $222,346 to $100,469  during
the  six  months  ended June 30, 1998  as  compared  to  the
comparable  period in 1997.  The decrease  was  due  to  the
utilization  of  the  proceeds  of  the  Company's    public
offering.

The  net  loss  for  six  months ended  June  30,  1998  was
$1,487,824  as  compared to a net loss of $2,591,053  during
the  comparable period in 1997.  The basic and diluted  loss
per  share for the six months ended June 30, 1998  was  $.17
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 $.34 in 1997.  The decrease  in  net
loss was caused by the factors discussed above.

Liquidity and Capital Resources

Since  inception, the Company's expenses have  exceeded  its
revenues,   resulting   in   an   accumulated   deficit   of
approximately $11.4 million at June 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  six  months
ended June 30, 1998 was $2,089,151 as compared to $3,111,220
for the six months ended June 30, 1997.  The net use of cash
in  operations during the six months ended June 30, 1998 was
due  primarily  to the Company's $1,487,824  net  loss  from
operations.  Accounts receivable, net, increased by $633,939
in  1998 from $1,229,921 to $1,863,860 due to higher  second
quarter 1998 sales.  Inventories decreased by $210,644  from
$1,512,528 to $1,301,884 due to increased 1998 sales and the
initial  sale  of components of the ALERT System  which  had
been  in  inventory at December 31, 1997.  Prepaid  expenses
and other current assets includes product brochures, prepaid
trade  show  fees  and prepaid insurance.  Accounts  payable
decreased  by  $152,890 from $670,276 to  $517,316,  accrued
expenses  payable  decreased by $208,184  from  $850,507  to
$642,323 and amounts payable to related parties decreased by
$52,151 from $127,859 to $75,708.  These reductions were due
to  the  timing  of  purchases and payments  for  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 $700,000, in four installments, as certain
development milestones and initial sales are achieved on the
EchoMark and EchoEye technologies.  As of June 30, 1998,  no
development  milestones had been met and  no  payments  were
due.   The  EchoCath license provides for a royalty  on  net
sales, including minimum royalties of $120,000 beginning  in
1999  and increasing to $400,000 in 2005 and thereafter  for
the  life of the applicable patents and continuations.   The
Company may elect not to make minimum royalty payments  and,
in  such case, EchoCath has the option to render the license
non-exclusive or cancel the license and return any milestone
payments to the Company.

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 $191,048 during
the  six  months ended June 30, 1998 as compared to $508,618
in  the  six  month  period ended June  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.

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.   The Company is negotiating for a lease  with  an
option to purchase 2,500 square feet of additional space  at
the  catheter  facility.   The Company  does  not  have  any
material capital commitments at this time.

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 June 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.

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 June 30, 1998, the Company's accumulated deficit  was
approximately   $11.4  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 five  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  calendar  year  1998.   At  the
conclusion of the clinical trials, the Company plans to file
for  FDA  approval to market the ALERT System in the  United
States.  Receipt of FDA approval to sell the ALERT System in
the  United States may take several years, if it is received
at all.

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

Dependence on EP WorkMate.
In  late 1995, the Company began commercial sales of the  EP
WorkMate,    a   computerized   monitoring   and    analysis
electrophysiology workstation.  Although the Company sells a
broad range of products, it believes its ability to increase
revenues   over   the   next  several  years   will   depend
significantly   on  acceptance  of  the   EP   WorkMate   by
electrophysiologists.  The EP WorkMate  accounted  for  more
than 50% of the Company's revenues from product sales during
the  six  months  ended June 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 the FDA under the Federal Food, Drug,  and
Cosmetic  Act  ("FFDCA").  The FDA has broad  discretion  in
enforcing  the  FFDCA,  and  noncompliance  with  applicable
requirements   can  result  in  fines,  injunctions,   civil
penalties,  recall or seizure of products, total or  partial
suspension   of  production,  failure  to  grant   premarket
clearance  or  premarket approval for devices  and  criminal
prosecution.

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

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

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

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

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

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

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

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

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

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

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

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

The  FDA  Export  Reform and Enhancement  Act  of  1996  has
relaxed the exportation requirements governing devices under
certain circumstances.  Pursuant to this 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.
During 1996, the Company began to assemble a domestic direct
sales  and marketing force to sell and promote the Company's
products in the U.S. market.  Previously, the Company relied
on  third-party  distributors for all sales efforts.   There
can  be  no  assurance  that the Company  will  be  able  to
continue  to  attract  and  retain  qualified  and   capable
individuals  who  can  successfully  promote  the  Company's
products.

The  Company  is in the process of expanding  its  marketing
internationally  and  will continue to rely  on  third-party
distributors  in  foreign  markets.   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, EP-
3  Clinical Stimulator and the TeleTrace III Receiver.   All
components   are  manufactured  in  conformance   with   the
Company's  specifications.  Any interruption in  the  supply
from  its suppliers would have a material adverse effect  on
the   Company's  ability  to  deliver  its  products   until
acceptable  arrangements  can  be  made  with  a   qualified
alternative  source of supply.  There can  be  no  assurance
that  the  Company  would  be able to  reach  an  acceptable
arrangement  with  an  alternative  source  of   supply   at
acceptable  prices and adequate quality levels on  a  timely
basis.   If  the  Company were unable  to  do  so,  such  an
interruption  would have a material adverse  effect  on  the
Company's  business,  results of  operations  and  financial
condition.

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  August  7, 1998, the Company's seven  directors  and
executive  officers and their affiliates beneficially  owned
an   aggregate  of  approximately  17.8%  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 August 7, 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
On  October  7,  1997, the Company filed a  lawsuit  against
EchoCath  in  the  United  States  District  Court  for  the
District  of  New Jersey alleging, among other things,  that
EchoCath made fraudulent misrepresentations and omissions in
connection  with  the  prior  sale  of  $1,400,000  of   its
preferred stock to the Company.

EchoCath  has filed an answer to the complaint, denying  the
allegations and asserting a counterclaim against the Company
seeking its costs and expenses in the action.  EchoCath also
filed a motion to dismiss the complaint.  In December, 1997,
EP  MedSystems filed an amended complaint and EchoCath filed
an   answer  thereto  again  denying  the  allegations   and
asserting a counterclaim seeking reimbursement of its  costs
and expenses in the action.  EchoCath also filed a motion to
dismiss  the amended complaint.  As of August 7,  1998,  the
Court  has  not issued a ruling on any of the motions.   The
Company  believes that EchoCath's counterclaim  and  request
for  reimbursement  of  its costs and  expenses  is  without
merit.   As a result, the Company has not accrued  for  such
costs  and  expenses at June 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  on
April 29, 1998 covering all of the Shares.  On July 6, 1998,
the  Registration  Statement was declared effective  by  the
Securities and Exchange Commission.


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
           The Company filed a Report on Form 8-K on  April 14, 1998



                         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)
                         
August 7, 1998      By:  /s/  David A. Jenkins
                         ---------------------
                              David A. Jenkins
                         President and Chief Executive Officer
                         
August 7, 1998      By:  /s/  James J. Caruso
                         --------------------
                              James J. Caruso
                         Vice President and Chief Financial Officer
                         (Principal Financial and Accounting Officer)



                    EXHIBIT INDEX

Exhibit                                              Method of
Number          Description of Exhibit               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).