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:     March 31, 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 small business issuer 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, Mt. Arlington, New Jersey      07856
(Address of principal executive offices)          (Zip Code)

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

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

State  the  number  of shares outstanding  of  each  of  the
issuer's  classes  of  common  equity,  as  of  the   latest
practicable  date:   Common Stock, no par  value,  9,849,917
shares outstanding at May 12, 1998.

Transitional Small Business Disclosure Format

Yes       No  X


PART I. -- FINANCIAL INFORMATION
Item 1.  Financial Statements
            EP MEDSYSTEMS, INC. AND SUBSIDIARIES
                 CONSOLIDATED BALANCE SHEETS
                                           March 31,      December 31,
ASSETS                                        1998            1997
Current assets:                           (unaudited)
   Cash and cash equivalents           $      441,716  $      752,068
   Short-term investments                   1,360,147       2,120,084
   Accounts receivable, net                 1,359,410       1,229,921
   Inventories                              1,413,566       1,512,528
   Prepaid expenses and other assets          220,401         217,526
                                            ---------       ---------
          Total current assets              4,795,240       5,832,127
Investment in EchoCath, Inc.                1,400,000       1,400,000
Property and equipment, net                   764,646         757,295
Intangible assets, net                        574,732         569,705
Other assets                                   58,144          58,439
                                            ---------       ---------
          Total assets                 $    7,592,762  $    8,617,566
                                            =========       =========

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:                                                 
   Accounts payable                    $      675,988  $      670,206
   Payables due to related parties            146,428         127,859
   Accrued expenses                           633,981         850,507
   Deferred revenue                            31,750          34,313
   Customer deposits                           73,332         108,012
                                            ---------       ---------
          Total liabilities                 1,561,479       1,790,897

Commitments and contingencies                                        
Shareholders' equity (deficit):                                      
   Preferred Stock, no par value,                              
     5,000,000 shares authorized,
     no shares issued and outstanding          --              --
   Common stock, $.001 stated value,                           
     25,000,000 shares authorized,                                   
     7,599,917 shares issued and                                     
     outstanding                                7,600           7,600
   Additional paid-in capital              16,743,014      16,743,014
   Accumulated deficit                   (10,719,331)     (9,923,945)
                                         ------------     -----------
          Total shareholders' equity        6,031,283       6,826,669
                                         ------------     -----------
Total liabilities and shareholders'eqiuty $ 7,592,762  $    8,617,566
                                         ===========      ===========
                              
                              
                              
    The accompanying notes are an integral part of these statements.
                              

            EP MEDSYSTEMS, INC. AND SUBSIDIARIES
            CONSOLIDATED STATEMENTS OF OPERATIONS
                         (unaudited)
                              
                              
                                     For the Three Months Ended
                                     March 31,        March 31,
                                        1998            1997
                                     ----------       ---------              
Product sales                      $  1,454,609  $      875,723
                                                               
Operating costs and expenses:                                  
Cost of products sold                   886,806         522,824
Sales and marketing expenses            699,786         691,356
General and administrative expenses     348,267         359,029
Research and development expenses       349,351         343,453
                                      ---------     -----------
       Loss from operations           (829,601)     (1,040,939)
                                                               
Interest income, net                     34,215         145,764
                                      ---------     -----------
          Net loss                 $  (795,386)  $    (895,175)
                                      =========     ===========
                                                               
Basic loss per share                    $ (.10)         $ (.12)
                                        =======         =======
                                                               
Diluted loss per share                  $ (.10)         $ (.12)
                                        =======         =======
Weighted average shares outstanding
used to compute basic and diluted 
loss per  share                       7,599,917       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 Three Months Ended
                                                March 31,      March 31,
                                                   1998           1997
CASH FLOWS FROM OPERATING ACTIVITIES:         ------------     -----------
Net loss                                      $  (795,386)  $    (895,175)
Adjustments to reconcile net loss to                                      
net cash (used in)operating activities:                                   

  Depreciation and amortization                     67,028          34,111
  Changes in assets and liabilities:                                      
  Increase in accounts receivable                (129,488)        (72,695)
  Decrease (increase) in inventories                98,962       (152,055)
  (Increase) decrease in prepaid and other assets (35,381)          28,383
  Decrease (increase) in other assets               32,801         (9,758)
  Increase in payables due to related party         18,569          76,536
  Increase in accounts payable                       5,782         171,298
  Decrease in accrued expenses,                                           
  deferred revenue and customer deposits         (253,769)       (118,303)
                                                 ---------       ---------
NET CASH USED IN OPERATING ACTIVITIES         $  (990,882)  $    (937,658)
                                                 ---------       ---------
CASH FLOWS FROM INVESTING ACTIVITIES:                                     
  Investment in EchoCath, Inc.                      --         (1,400,000)
  Maturities of held to maturity investments        --             493,068
  Proceeds from sale of available for sale
     securities                                    759,937          79,866
  Patent costs                                    (20,541)         --
  Capital expenditures, net of disposals          (58,866)       (439,435)
                                                  --------     -----------
NET CASH PROVIDED BY (USED IN)INVESTING ACTIVITIES 680,530  $  (1,266,501)
                                                  --------     -----------
CASH FLOWS FROM FINANCING ACTIVITIES:                               
NET CASH PROVIDED BY FINANCING ACTIVITIES     $     --      $      --
                                                  ---------    -----------
NET (DECREASE) IN CASH AND CASH EQUIVALENTS      (310,352)     (2,204,159)
Cash and cash equiv beginning of period            752,068       5,491,857
                                                 ----------    -----------
Cash and cash equivalents, end of period      $    441,716  $    3,287,698
                                                 ==========    ===========
                             
                              
    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 months ended March 31, 1997 has been restated
to comply with this standard.

3.  Inventories
Inventories consist of the following:
                             March 31,     December 31,
                              1998           1997
                            ---------       ---------
     Raw materials          $ 196,301       $ 249,018
     Work in process           14,725          12,925
     Finished goods         1,202,540       1,250,585
                           ----------      ----------
                           $1,413,566      $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 March 31, 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 can make the license non-exclusive or
cancel   the  license  and  return  the  $700,000  milestone
payments.   As  of  March 31, 1998, no milestones  had  been
achieved  and no milestone payments were accrued or  payable
to  EchoCath.  The Company also purchased 280,000 shares  of
5.4% cumulative convertible preferred stock of EchoCath  for
$1,400,000 in cash.

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

During  September,  1997,  the  Company  became  aware  that
EchoCath  may  have been having cash flow  difficulties  and
that EchoCath could have faced delisting of its common stock
from  the  NASDAQ  Small Cap Stock  Market  if  it  did  not
maintain net equity in  excess of $1,000,000.  On October 7,
1997,  the Company filed a lawsuit against EchoCath  in  the
United  States District Court for the District of New Jersey
alleging,  among other things, that EchoCath made fraudulent
misrepresentations and omissions in connection with the sale
of $1.4 million of its preferred stock to the Company.  (See
Part 2 -- 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 Company was informed that this investment allowed
EchoCath  to meet the requirements for continued listing  on
the  NASDAQ  Small  Cap  Stock Market  at  such  time.   The
agreement  also  provided EchoCath with  $1,800,000  of  new
working  capital  and  may provide an  opportunity  to  earn
additional royalty or licensing income.  The Company  cannot
determine  whether this cash infusion will be sufficient  to
meet  EchoCath's  long term cash needs or  whether  EchoCath
will recognize additional revenue or attain profitability.

The  EchoCath  preferred stock is not a registered  security
traded on a public exchange and therefore its fair value  is
not  readily  determinable.   Accordingly,  the  shares  are
stated  at  historical cost.  Management has  evaluated  the
investment for permanent impairment and as a result of  this
review,  management  believes that  there  is  no  permanent
impairment at this time.  However, management will  continue
to  evaluate the investment and may determine in the  future
that  a  permanent  impairment has occurred  and  that  such
impairment  should  be  recorded.  The  preferred  stock  is
convertible,  at the option of the Company, into  shares  of
EchoCath  common stock at a conversion price  of  $6.00  per
share  through  1999  and $6.50 per share  thereafter.   The
market price for the common stock on May 11, 1998 was  $3.25
per  share.  The Company does not anticipate converting  its
shares in the near future.

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

Cash  paid  for  interest was $538 and $624  for  the  three
months ended March 31, 1998 and 1997, respectively.

7.  Subsequent Event
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 $400,000.   The  Company
intends to use the net proceeds from the sale of the  Shares
for working capital purposes.

The  Company  granted to 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.


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" 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  fourth
paragraph of "Overview" related to milestones for 1998;  the
forward  looking statements contained in the second,  third,
sixth  and  seventh paragraphs under the discussion  of  the
Results  of Operations for the three months ended March  31,
1998  as  compared to 1997; the statements regarding  future
capital  expenditures in the fourth paragraph of  "Liquidity
and   Capital   Resources"  and  the  Company's   statements
regarding  anticipated  results of  operations  and  capital
resources   and  requirements  in  the  last  paragraph   of
"Liquidity and Capital Resources."

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  and  diagnostic
electrophysiology catheters, temporary pacing catheters  and
related disposable supplies.

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

The  Company expects 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  $10.7  million at March 31, 1998.  The Company  believes
that  it  will  have sufficient capital  to  carry  out  its
proposed  business  objectives for  at  least  the  next  12
months.

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,
conclusion  of  the  ALERT clinical trials,  initial  market
acceptance   of  the  ALERT  System  in  Europe,   increased
manufacturing   efficiency  and  lower   production   costs,
introduction  of  several new products and  improvements  to
existing  products  and  ongoing  research  and  development
activities.  The Company believes that attainment  of  these
goals  is  important  to achieving the Company's  long  term
objectives.

RESULTS OF OPERATIONS
Three months ended March 31, 1998 compared to three months
ended March 31, 1997

Revenue from product sales increased $578,886 (or 66%)  from
$875,723  to $1,454,609 in the three months ended March  31,
1998  as  compared to the comparable period  in  1997.   The
increase  in  product  sales in the first  quarter  of  1998
resulted  primarily from increased sales of the EP WorkMate,
which  represented 45% of product revenues during the  three
month  period in 1998, and initial sales of the ALERT System
in  Europe.   Sales  of the EP WorkMate represented  56%  of
revenue  from  product sales during the three  month  period
ended March 31, 1997.

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

Cost  of  products  sold increased $363,982  (or  70%)  from
$522,824  to $886,806 due to increased sales.  Gross  profit
on  product sales for the three months ended March 31,  1998
was  $567,803 (or 39% as a percentage of product sales),  as
compared  with $352,899 (or 40% 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 due to higher sales of the EP WorkMate.
For  the three months ended March 31, 1998, the increase  in
gross profit was offset by increased labor and manufacturing
overhead  expenses at ProCath as the Company  increased  its
manufacturing  activities  in  anticipation   of   increased
revenue related to the ALERT System.  The Company expects to
improve its overall gross profit percentage as sales of  the
ALERT System.

Sales  and marketing expenses increased $8,430 (or 1%)  from
$691,356  to  $699,786  and decreased  as  a  percentage  of
revenue  from  product sales from 79% to 48%.  Beginning  in
September, 1996, the Company began hiring a domestic  direct
sales  force, including several salaried sales and marketing
managers  and personnel.  The effort also involved increased
base commissions for direct sales representatives, increased
travel   and  convention  related  expenses  and   increased
promotion expenses related to existing products. The Company
has  also expended substantial funds in an effort to improve
its network of international independent distributors.

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

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

General  and  administrative expenses decreased $10,762  (or
3%)  from $359,029 to $348,267 and decreased as a percentage
of revenue from product sales from 41% to 24%.  The decrease
of  general  and administrative expense as a  percentage  of
product  sales  was  due to increased  sales.   The  Company
expects  general and administrative expense 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  at  such  time  as
sufficient  incremental sales are generated  to  cover  such
costs.   The  Company  cannot  determine  when  or  if  such
incremental sales will be achieved.

Research and development expenses increased $5,898  (or  2%)
from  $343,453 to $349,351 and decreased as a percentage  of
revenue  from  product sales from 39% to  24%.   The  dollar
increase  was primarily due to continuing expenses  incurred
in  connection with the ALERT System and development work on
existing  products, including the EP WorkMate.  The  Company
also  realized research and development expenses related  to
its new cardiac ultrasound imaging product line, several new
catheter  products  and the  hiring of  additional  in-house
engineering  and technical support personnel.   The  Company
expects  that expenses related to the ALERT System  will  be
significant  throughout  1998,  when  clinical  trials   are
expected to be ongoing.  The Company also expects that other
research  and  development  expenses  will  increase  as  it
continues  attempts  to  develop new  products  as  well  as
ongoing   improvements  to  existing  products   and   other
development projects which may arise.

Interest  expense  was $538 during the  three  months  ended
March  31,  1998.   The  Company does not  expect  to  incur
material interest expense in 1998.

Interest  income decreased from $146,388 to  $34,753  during
the  three months ended March 31, 1998. The decrease was due
to  the  utilization of the proceeds of the Company's  June,
1996  initial  public  offering.  The funds  raised  in  the
Company's April, 1998 private placement will be invested and
will generate additional interest during 1998.

The  net  loss  for three months ended March  31,  1998  was
$795,386  as compared to a net loss of $895,175  during  the
comparable period in 1997.  The basic and diluted  loss  per
share for the three months ended March 31, 1998 was $.10 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 $.12 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  $10.7
million  at  March 31, 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 (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 $400,000.

Net  cash used in operating activities for the three  months
ended  March  31, 1998 was $990,882 as compared to  $937,658
for  the three months ended March 31, 1997.  The net use  of
cash  in  operations during 1998 was due  primarily  to  the
Company's  $795,386  net  loss  from  operations.   Accounts
receivable,  net,  increased  by  $129,488  in   1998   from
$1,229,921  to $1,359,410 due to higher first  quarter  1998
sales.  Inventories decreased by $98,962 from $1,512,528  to
$1,413,566  due  to  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
new  product brochures, prepaid trade show fees and  prepaid
insurance.  Accounts payable and accrued expenses  decreased
by  $210,744  from  $1,520,713  to  $1,309,969  and  amounts
payable  to  a  related  party  increased  by  $18,569  from
$127,859 to $146,428.

During  February, 1997, the Company licensed the  rights  to
several   ultrasound   technologies  from   EchoCath,   Inc.
("EchoCath") for use in the field of electrophysiology.  The
license  includes  all rights to the EchoMark,  EchoEye  and
ColorMark   technologies   for   use   in   the   field   of
electrophysiology.   The agreement with EchoCath  calls  for
the  Company  to  make payments totaling $700,000,  in  four
installments, as certain development milestones and  initial
sales   are   achieved   on  the   EchoMark    and   EchoEye
technologies.    As  of  March  31,  1998,  no   development
milestones  had  been  met and no payments  were  due.   The
EchoCath  license  provides for  a  royalty  on  net  sales,
including  minimum royalties of $120,000 beginning  in  1999
and  increasing to $400,000 in 2005 and thereafter  for  the
life  of  the  applicable  patents and  continuations.   The
Company may elect not to make minimum royalty payments  and,
in  such  case, EchoCath has the option to make the  license
non-exclusive or cancel the license and return the  $700,000
milestone payments to the Company.

The  Company  also purchased 280,000 shares of  newly-issued
EchoCath Series B Cumulative Convertible Preferred Stock for
$1,400,000 in cash.  The Company's $1,400,000 investment was
intended   to   fund  continuing  development  of   EchoCath
products,  including  the EchoMark and  EchoEye  technology.
Upon successful completion of its development projects,  the
Company   may  introduce  ultrasound  technology  into   its
electrophysiology catheter line although  there  can  be  no
assurance  that  the  Company will  be  successful  in  this
effort.  (See Part 2 -- Item 1.  Legal Proceedings)

Capital expenditures, net of disposals, were $58,866  during
the  three  months  ended  March 31,  1998  as  compared  to
$439,435  in  the three month period ended March  31,  1997.
During  February, 1997, ProCath 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 ProCath's manufacturing operations, provide
for  additional warehousing, shipping and quality  assurance
activities   and   relocation  of  ProCath's  administrative
offices. The Company is negotiating for a new lease with  an
option  to  purchase 2,500 square feet of additional  leased
space  at  ProCath.  The Company does not have any  material
capital commitments at this time.

The  Company  had no financing activities during  the  three
months ended March 31, 1998 and 1997, respectively.

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 March 31, 1998, the Company's accumulated deficit was
approximately   $10.7  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.  These can be no assurance that
the   clinical  trials  will  demonstrate  the  safety   and
effectiveness of the ALERT System, or that the Company  will
obtain  FDA approval on a timely basis or at all.   Further,
if granted, FDA approval may include significant limitations
on  the  indicated uses for which the product may be labeled
or   marketed.   Assuming  the  ALERT  System  receives  FDA
approval,  commercial success will depend on  acceptance  by
physicians as a desirable treatment for atrial fibrillation.
Such   acceptance  will  depend  on,  among  other   things,
substantial, favorable clinical experience, advantages  over
alternative  treatments,  including cost-effectiveness,  and
favorable reimbursement policies of third party payors  such
as  insurance  companies, Medicare  and  other  governmental
programs.   There can be no assurance that the ALERT  System
will  achieve such market acceptance.  The Company's ability
to  sell  the  ALERT System at prices necessary  to  achieve
profits  and the profitability of the system will depend  in
part  on  the  Company's ability to manufacture  the  system
efficiently  in  commercial quantities.  At this  time,  the
Company  has only manufactured the components of  the  ALERT
System  in  limited quantities.  There can be  no  assurance
that  the  Company will be able to develop the manufacturing
processes  and  capabilities necessary to  attain  efficient
manufacturing.  The Company will also be dependent  on  sub-
contractors  for  certain  key  components  of   the   ALERT
Companion.   Failure  to  obtain FDA  approval  for,  market
acceptance  of,   efficient  manufacturing processes  and/or
reliable sub-contractors for the ALERT System would  have  a
material  adverse effect on the Company's business,  results
of operations and financial condition.

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

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

Dependence on EP WorkMate.
In  late 1995, the Company began commercial sales of the  EP
WorkMate,    a   computerized   monitoring   and    analysis
electrophysiology workstation.  Although the Company sells a
broad range of products, it believes its ability to increase
revenues   over   the   next  several  years   will   depend
significantly   on  acceptance  of  the   EP   WorkMate   by
electrophysiologists.    The  EP  WorkMate   accounted   for
approximately  45%  of the Company's revenues  from  product
sales  in  the  three months ended March 31,  1998,  59%  of
revenues  from product sales in the year ended December  31,
1997 and is expected to account for a significant portion of
calendar 1998 revenue.  The EP WorkMate has a list price  of
approximately  $129,000  with an  integrated  EP-3  Clinical
Stimulator and, as a result, each sale of an EP WorkMate can
represent a relatively large percentage of the Company's net
sales  in  a particular quarter.  There can be no  assurance
that  the  EP WorkMate will continue to be accepted  by  the
electrophysiology market or that sales will be  substantial.
Each  sale of an EP WorkMate may take a relatively long time
to  complete due in part to the high selling price  relative
to  other  types of equipment and to the budgetary processes
of hospitals to which the Company markets the EP WorkMate.

Government Regulation.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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  A.
Jenkins,  C.  Bryan  Byrd and Joseph C. Griffin,  III.   The
Company's  continued  growth  and  long  term  success  will
depend, in part, on its ability to attract and retain highly-
qualified  personnel.  There can be no  assurance  that  the
Company  will be able to attract and retain such  personnel.
The  Company competes for such personnel with other  medical
device   companies,   academic   institutions   and    other
organizations.  The loss of any key personnel, the inability
to hire or retain qualified personnel or the failure of such
personnel  to  function effectively as  a  management  group
could  have  a  material  adverse effect  on  the  Company's
business, results of operations and financial condition.

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

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

Concentration of  Ownership.
As  of  May  11,  1998,  the Company's seven  directors  and
executive  officers and their affiliates beneficially  owned
an   aggregate  of  approximately  18.0%  of  the  Company's
outstanding Common Stock, including unexercised vested stock
options.  Additionally, the six institutional investors  who
purchased shares in the Company's private placement on April
9,  1998  own  an aggregate of approximately  22.8%  of  the
Company's outstanding Common Stock as of May 11, 1998. As  a
result,  these  shareholders, acting  together,  could  have
significant influence over all matters requiring approval by
the  shareholders of the Company.  This level  of  ownership
could  have an affect on a change in control of the  Company
and  may  adversely affect the voting and  other  rights  of
other holders of Common Stock.


PART II.   OTHER INFORMATION

Item 1.  Legal Proceedings.

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

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

EchoCath  has filed an answer to the complaint, denying  the
allegations and asserting a counterclaim against the Company
seeking its costs and expenses in the action.  EchoCath also
filed a motion to dismiss the complaint.  In December, 1997,
EP  MedSystems filed an amended complaint and EchoCath filed
an   answer  thereto  again  denying  the  allegations   and
asserting a counterclaim seeking reimbursement of its  costs
and expenses in the action.  EchoCath also filed a motion to
dismiss  the  amended complaint.  As of May  11,  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 March 31, 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 and Use of Proceeds.
In  accordance  with Rule 463 under the  Securities  Act  of
1933,  as  amended, the following represents  a  summary  of
certain  information regarding the Company's initial  public
offering  and  the  Company's  use  of  proceeds  from  such
offering to date.
Effective date of the company's           
registration statement                             June 21, 1996
                                          
Commission file number                             333-3642
                                          
Date the offering commenced                        June 21, 1996
                                          
Name of managing underwriter                 Pacific Growth Equities, Inc.
                                          
Class of securities registered                     Common Stock
                                          
Number of shares registered and sold                2,500,000
                                                             
Aggregate price of offering amount                           
registered and sold                               $13,750,000
Underwriter's discounts and commissions               962,500
Finder's fees                                               0
Expenses paid to or for underwriters                   50,000
Other offering expenses (1)                           951,500
   Total expenses                                   1,964,000
Net offering proceeds                             $11,786,000
                                                
Use of net offering proceeds:                                
Purchase of plant and equipment                  $    857,000
Investment in EchoCath, Inc.                        1,400,000
Product development (2)                             3,308,000
Sales, marketing and administration (2)             6,632,000
Repayment of indebtedness                             271,000
Change in working capital (3)                     (3,516,000)
                                                   $1,802,000
                                                             
Cash and cash equivalents at March 31, 1998           442,000
Marketable securities at March 31, 1998             1,360,000
                                                   $1,802,000
                                                             
(1)  Does not include any direct or indirect payments to
directors or officers of the issuer or their associates; to
persons owning ten (10) percent or more of any class of
equity securities of the issuer; or to affiliates of the issuer.

(2)  This amount represents a reasonable estimate.

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


Item 6.   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 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)
                         
Date: May 12, 1998     By:  /s/  David A. Jenkins
                                 David A. Jenkins
                            President and Chief Executive Officer
                            
Date: May 12, 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 same number filed
                  with the Company's Form SB-2 Registration Statement
                  (Registration No. 333-3642).