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 period ended: March 31, 2003

( )      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.)

575 Route 73 N. Building D, West Berlin, New Jersey             08091
(Address of principal executive offices)                      (Zip Code)


                                                         (856) 753-8533
                                                    (Issuer's telephone number)

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

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                   PROCEEDINGS DURING THE PRECEDING FIVE YEARS

     Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the  distribution  of
securities under a plan confirmed by a court. ___ Yes ___ No

                   APPLICABLE ONLY TO CORPORATE ISSUERS

     State the number of shares outstanding of each of the issuers classes of
common equity,  as of the latest  practicable date:
Class                                 Outstanding at May 12, 2003
-----                                 ---------------------------
Common Stock, without par value            18,196,074 shares

     Transitional Small Business Disclosure Format (check one):    Yes__ No X

                                       1
<PAGE>


                      EP MEDSYSTEMS, INC. AND SUBSIDIARIES
                                   FORM 10-QSB

                                    CONTENTS
<TABLE>
<CAPTION>
<S>                                                                                                 <C>

PART I -- FINANCIAL INFORMATION                                                                    Page
                                                                                                -----------

           Item 1.      Financial Statements

                        Consolidated Balance Sheets at March 31, 2003
                        (unaudited) and December 31, 2002                                           3

                        Consolidated Statements of Operations for three months
                        ended March 31, 2003 and 2002 (unaudited)                                   4

                        Consolidated Statements of Changes in Shareholders' Equity for the
                        Three Months Ended March 31, 2003                                           5

                        Consolidated Statements of Cash Flows for the three
                        months ended March 31, 2003 and 2002 (unaudited)                            6

                        Notes to Consolidated Financial Statements (unaudited)                      7-14

           Item 2.      Management's Discussion and Analysis or Plan of Operation
                                                                                                    14-18

           Item 3.      Controls and Procedures                                                     18

PART II -- OTHER INFORMATION

           Item 1.      Legal Proceedings                                                           18

           Item 2.      Changes in Securities                                                       18

           Item 3.      Defaults Upon Senior Securities                                             19

           Item 4.      Submission of Matters to a Vote of Security Holders                         19

           Item 5.      Other Information                                                           20

           Item 6.      Exhibits and Reports on Form 8-K                                            20

           Signatures                                                                               21

           Certifications                                                                           22-23

           Exhibit Index                                                                            24

                                       2
<PAGE>
</TABLE>
<TABLE>

<CAPTION>


                                                 EP MEDSYSTEMS, INC. AND SUBSIDIARIES
                                                      CONSOLIDATED BALANCE SHEETS
<S>                                                                                  <C>                    <C>
                                                                                  March 31,            December 31,
                               ASSETS                                               2003                   2002
                                                                                 (unaudited)
                                                                             --------------------    ------------------
Current assets:
   Cash and cash equivalents                                              $            2,861,629  $          2,012,809
   Accounts receivable, net of allowances for doubtful
      accounts of $98,600                                                              2,126,396             3,438,980
   Inventories, net of reserves                                                        2,134,807             2,037,100
   Prepaid expenses and other current assets                                             349,627               361,782
   Deferred tax asset, net of valuation allowance                                             --               438,000
                                                                             --------------------    ------------------
                                                                             --------------------    ------------------
          Total current assets                                                         7,472,459             8,288,671

Property, plant and equipment, net                                                     2,011,715             2,250,327
Intangible assets, net                                                                   358,082               358,282
Other assets                                                                              19,850                31,198
                                                                             --------------------    ------------------
          Total assets                                                    $            9,862,106  $         10,928,478
                                                                             ====================    ==================

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Promissory note payable                                                   $                   --  $            995,585
Current portion of notes payable                                                         500,000                    --
Accounts payable                                                                       1,431,514             2,586,050
Accrued expenses                                                                         525,657               603,370
Deferred warranty revenue and prepaid rent income                                        180,348               223,245
Customer deposits                                                                         28,111                20,311
                                                                             --------------------    ------------------
     Total current liabilities                                                         2,665,630             4,428,561

Accrued interest on long term debt - non-current                                         571,850               520,162
Deferred warranty revenue - non-current                                                  322,867               326,773
Notes payable                                                                          3,450,000             3,950,000
                                                                             --------------------    ------------------
          Total liabilities                                               $            7,010,347  $          9,225,496
                                                                             --------------------    ------------------
Commitments and contingencies                                                                 --                    --
Shareholders' equity:
  Preferred stock, no par value, 5,000,000 shares authorized,
     and 373,779 shares issued and outstanding at March 31,
     2003 and December 31, 2002, respectively
                                                                                         618,161               618,161
  Common stock, $.001 stated value, 25,000,000 shares authorized,
     17,418,126 and 15,098,736 shares issued and outstanding at
     March 31, 2003 and December 31, 2002, respectively
                                                                                          17,418                15,099
  Additional paid-in capital                                                          34,908,988            32,372,700
  Receivables from officer                                                             (100,000)             (100,000)
  Accumulated deficit                                                               (32,592,808)          (31,202,978)
                                                                             --------------------    ------------------
          Total shareholders' equity                                                   2,851,759             1,702,982
                                                                             --------------------    ------------------
          Total liabilities and shareholders' equity                      $            9,862,106  $         10,928,478
                                                                             ====================    ==================

                                   The accompanying notes are an integral part of these statements.
</TABLE>
                                       3
<PAGE>
<TABLE>
<CAPTION>


                                                 EP MEDSYSTEMS, INC. AND SUBSIDIARIES
                                                 CONSOLIDATED STATEMENTS OF OPERATIONS
                                                              (unaudited)
<S>                                                                           <C>                      <C>

                                                                             For the Three Months Ended
                                                                         March 31,                March 31,
                                                                            2003                     2002
                                                                     -------------------      -------------------
                                                                     -------------------      -------------------

Net sales                                                         $           2,290,516    $           2,988,975
Cost of products sold                                                         1,162,101                1,225,189
                                                                     -------------------      -------------------
                                                                     -------------------      -------------------
   Gross profit                                                               1,128,415                1,763,786

Operating costs and expenses:
Sales and marketing expenses                                                  1,317,886                1,108,246
General and administrative expenses                                             543,236                  577,222
Research and development expenses                                               593,258                  725,647
                                                                     -------------------      -------------------
   Loss from operations                                                     (1,325,965)                (647,329)

Interest expense, net                                                          (63,865)                 (54,466)
Other income, net                                                                    -                       176
                                                                     -------------------      -------------------
                                                                     -------------------      -------------------
   Net loss                                                       $         (1,389,830)    $           (701,619)
                                                                     ===================      ===================
                                                                     ===================      ===================

Basic and diluted loss per share                                  $              (0.08)    $              (0.05)
                                                                     ===================      ===================
                                                                     ===================      ===================

Weighted average shares outstanding used
to compute basic and diluted loss per share                                  16,627,667               14,507,402
                                                                     ===================      ===================





                  The accompanying notes are an integral part of these statements.

</TABLE>

                                       4
<PAGE>


<TABLE>
<CAPTION>



                                                 EP MEDSYSTEMS, INC. AND SUBSIDIARIES
                                      CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                                               FOR THE THREE MONTHS ENDED MARCH 31, 2003
<S>                                   <C>           <C>            <C>        <C>           <C>            <C>


                                 Preferred Stock       Common Stock
                              -------------------   --------------------
                              -------------------   --------------------
                                                                            Additional  Receivables   Accumulated
                               Shares    Amount       Shares     Amount     Paid-in        From       Deficit         Total
                                                                            Capital     Officers
                           -----------  ----------- ---------- --------- --------------------------- -------------  -------------

Balance, December 31, 2002   373,779   $ 618,161   15,098,736  $ 15,099   $ 32,272,700  $ (100,000)  $(31,202,978)     $1,702,982
                            --------  ---------   ------------ ---------- ------------ ------------- --------------  -------------

Issuance of common stock in
connection with joint
development contract, net of
offering costs                  --         --      311,915        312        492,181        --           --            492,493

Issuance of common stock in
private placement, net of
offering costs                  --         --     2,007,475      2,007      2,171,155       --           --           2,073,162

Foreign currency translation    --         --        --           --        (27,048)        --           --             (27,048)

Net loss                        --         --        --           --           --           --      (1,389,830)      (1,389,830)
                            ---------  ---------- ------------ --------- ------------  -----------  ------------    -------------
Balance, March  31, 2003    373,779    $ 618,161   17,418,126   $ 17,418  $(100,000)   $ 2,851,759   $34,908,988    $(32,592,808)
                           ========== =========== ============ ============ =========== ============ ==============  =============


                                   The accompanying notes are an integral part of these statements.

</TABLE>
                                       5
<PAGE>
<TABLE>
<CAPTION>


                                                 EP MEDSYSTEMS, INC. AND SUBSIDIARIES
                                                 CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                              (unaudited)
<S>                                                                                   <C>                     <C>
                                                                                     For the Three Months Ended
                                                                                  March 31,               March 31,
                                                                                    2003                    2002
                                                                             --------------------    --------------------
                                                                             --------------------    --------------------
Cash flows from operating activities:
Net loss                                                                  $          (1,389,830)  $            (701,619)
Adjustments to reconcile net loss to net cash
 (used in) provided by operating activities:
  Depreciation and amortization                                                          200,252                 182,654
  Non-cash compensation expense related to employee agreement                                 --                  30,500
Changes in assets and liabilities:
  Decrease in accounts receivable                                                      1,312,584                  59,352
  Increase in inventories                                                               (41,128)               (110,849)
  Decrease in prepaid expenses and other current assets                                   12,155                   8,909
  Decrease in deferred tax asset                                                         438,000                 474,688
  Decrease in other assets                                                                11,348                  10,257
  (Decrease) increase in accounts payable                                            (1,154,536)                 113,821
  Decrease in accrued expenses, deferred
    revenue and customer deposits                                                       (65,028)                (43,060)
                                                                             --------------------    --------------------
          Net cash (used in) provided by operating activities             $            (676,183)  $               24,653
                                                                             --------------------    --------------------
                                                                             --------------------    --------------------

Cash flows from investing activities:
  Capital expenditures                                                                  (12,030)                (58,297)
  Patent costs                                                                           (5,989)                 (7,311)
                                                                             --------------------    --------------------
         Net cash used in investing activities                            $             (18,019)  $             (65,608)
                                                                             --------------------    --------------------
                                                                             --------------------    --------------------

Cash flows from financing activities:
   Net payments under term notes payable                                                      --               (436,111)
   Net  proceeds from issuance of common stock, net of offering costs
                                                                                       1,570,070                      --
                                                                             --------------------    --------------------
                                                                             --------------------    --------------------
         Net cash  provided by (used in) financing activities             $            1,570,070  $            (436,111)
                                                                             --------------------    --------------------
                                                                             --------------------    --------------------

Effect of exchange rate changes                                                         (27,048)                 (8,419)

Net increase (decrease) in cash and cash equivalents                                     848,820               (485,485)
Cash and cash equivalents, beginning of period                                         2,012,809               2,343,303
                                                                             --------------------    --------------------
Cash and cash equivalents, end of period                                  $            2,861,629  $            1,857,818
                                                                             ====================    ====================
                                                                             ====================    ====================


                                   The accompanying notes are an integral part of these statements.

</TABLE>
                                       6
<PAGE>


                      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 in the
United  States 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 in the United States 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  EPMedSystems,  Inc.'s (the  "Company" or "EP  MedSystems")
Annual Report on Form 10-KSB for the year ended December 31, 2002 filed with the
Securities and Exchange Commission ("SEC" or "Commission").

Note 2. Inventories

     Inventories  are  valued  at the lower of cost or  market  with cost  being
determined on a first-in, first-out basis. Inventories at March 31, 2003 consist
of the following:

           Raw materials                    $      1,118,384
           Work in process                           362,110
           Finished goods                            790,013
           Reserve for obsolescence                (135,700)
                                                -------------
                                            $      2,134,807
                                                =============


Note 3. Notes payable

     The Company has  outstanding a $3.2 million note payable to Medtronic Asset
Management,  Inc.,  an  affiliate  of  Medtronic,  Inc.,  one of EP  MedSystems'
shareholders ("Medtronic").  On March 12, 2003, Medtronic agreed to an extension
of the due date of this  Note  from  November  15,  2003 to April  1,  2004.  In
connection with that extension, the Company agreed to increase the interest rate
by 1% to the prime  rate plus 3% per annum and to prepay up to $1 million of the
principal  amount  of the  Note,  contingent  upon  receipt  of  certain  equity
proceeds. Based on the receipt of $500,000 of equity proceeds and application of
those  proceeds  to repay a portion  of the Note,  subsequent  to the end of the
quarter, the Company reclassified the $500,000 repaid portion of the outstanding
principal amount of the Note to current.  The Note is collateralized by a pledge
by David Jenkins,  the Chairman of the Board of the Company, of shares of common
stock of a privately-held corporation owned by him. (See Note 11).

                                       7
<PAGE>

     On November 21, 2002,  the Company  entered into a mortgage on its facility
in West  Berlin,  New Jersey and  received  $750,000  in  exchange  for  issuing
promissory  notes for that  aggregate  amount.  Interest on the Notes is payable
quarterly at 8% per annum and the Notes are collateralized by the building.  The
Notes are  convertible  into common stock of the  Company,  at the option of the
holder of the notes over their three-year term, as follows:

 -   November 21, 2002 through December 31, 2003 convertible at $2.14 per share
 -   January 1, 2004 through December 31, 2004 convertible at $2.50 per share
 -   January 1, 2005 through December 31, 2005 convertible at $3.00 per share

     On December 30, 2002, the Company issued  convertible  promissory notes, in
an aggregate amount of $1,000,000,  to EGS Private  Healthcare  Partnership L.P.
and EGS Private Healthcare  Counterpart L.P. (the "EGS Entities").  The maturity
date of those  promissory  notes was June 30, 2003, and interest  accrued at 10%
per annum, payable upon maturity. In connection with that financing, the Company
issued warrants to the EGS Entities to purchase an aggregate of 50,000 shares of
the common  stock of the  Company at 105% of the  closing  trading  price of its
common  stock on December  30, 2002.  On January 31,  2003,  the Company  issued
common  stock in a private  placement.  In that  private  placement,  the entire
principal  amount of the  promissory  notes  issued to the EGS  Entities and all
accrued and unpaid interest thereon were converted into 819,783 shares of common
stock and warrants to purchase 327,913 shares of the common stock of the Company
on the same terms as the private  placement.  In connection with the conversion,
the  warrants  to  purchase  50,000  shares  of common  stock  issued to the EGS
Entities on December 30, 2002 were  cancelled in accordance  with their terms. A
managing  member of the general  partner of the EGS Entities is also a member of
the general partner of the Board of Directors of the Company.

     EP  MedSystems  entered into a financing  arrangement  with a bank in March
1999,  consisting of a $2,000,000  revolving  line of credit and a $500,000 term
loan,  collateralized by EP MedSystems'  facility in West Berlin, New Jersey and
the machinery,  equipment and inventory  located there.  EP MedSystems  borrowed
approximately   $2,000,000  under  the  revolving  line  of  credit,  which  was
subsequently  repaid with the proceeds of the Medtronic  note payable  discussed
above. The related term loan was repaid in March 2002.

Note 4. Shareholder's Equity

Preferred Stock

     On October  23,  2001,  EP  MedSystems  consummated  the  private  sale and
issuance of newly-designated  Series A convertible preferred stock to Medtronic,
a shareholder and creditor of EP MedSystems,  and Century Medical, Inc. ("CMI"),
its Japanese distributor. An aggregate of 1,259,717 preferred shares were issued
in those  transactions.  On December  31,  2001,  each  preferred  share  became
convertible  into one share of EP MedSystems  common stock, at the option of the
holder.  The  transaction  with CMI involved the sale of the shares of preferred
stock at a price of $2.048 per share,  as well as an amendment to EP MedSystems'
Distribution  Agreement with CMI. The  transaction  with Medtronic  involved the
sale of preferred stock at a price of $1.781 per share.  EP MedSystems  received
aggregate  gross  proceeds  of  $2,400,000  from  those  two  transactions.  The
preferred stock is recorded in shareholders'  equity,  net of issuance costs. In
the first quarter of 2002,  CMI converted all of its 585,938 shares of preferred
stock into an equal  number of shares of EP  MedSystems'  common  stock.  In the
second quarter of 2002,  Medtronic  converted 300,000 of its shares of preferred
stock into an equal number of EP MedSystems' common stock. The remaining 373,779
preferred  shares held by Medtronic  are currently  convertible  into 387,946
shares of common stock of the Company.
                                       8
<PAGE>

Common Stock

     On September 5, 2002, EP MedSystems entered into a stock purchase agreement
and license agreement with Boston Scientific  Corporation  ("BSC:) in connection
with a strategic joint development  project.  The agreement  provides that if EP
MedSystems  abandons the project without cause, an abandonment fee of $1 million
in cash or EP MedSystems stock would be payable to BSC. Following the completion
of the  development,  EP MedSystems will have marketing rights to the technology
and pay royalties to BSC based on the market value of the technology at the time
of sale.  The stock  purchase  agreement  with BSC  allows for the sale of up to
$3,000,000 of common stock based on the achievement by the Company of milestones
in the development of certain cardiac electrophysiology  technology.  The common
stock is sold at the lesser of the ten day trailing  average  trading  price per
share prior to the closing of each  installment  purchase,  and $5.00 per share.
Upon  signing of the  agreement,  EP  MedSystems  received  $500,000 for 210,084
shares  issued to BSC. On February  4, 2003,  the Company  issued to BSC 311,915
shares of common stock in exchange for  $500,000.  These shares were  registered
for resale on Form S-3 on April 2, 2003.  Subsequent  to the end of the quarter,
the Company issued to BSC 357,398 shares of common stock in exchange for another
payment of $500,000. (See Note 11).

     On January 31, 2003, the Company  completed a $2,470,000  private placement
of its  common  stock  to  various  accredited  investors.  The  Company  issued
2,007,475 shares of its common stock for a purchase price of $1.23 per share and
warrants to purchase  802,990  shares of common  stock at an exercise  price per
share  of 110% of the  closing  trading  price on the  date of  closing  of that
transaction,  or  $1.6943.  In  the  private  placement,  the  Company  received
approximately  $1,570,000  in cash,  net of offering  costs.  The balance of the
private placement included the conversion of the entire principal amount of and,
accrued interest on, the promissory notes issued to EGS Entities on December 30,
2002 into the common  stock and  warrants  issued by the Company in that private
placement on the same terms and conditions as those of the other  investors.  In
connection with that conversion,  the 50,000 warrants issued to the EGS Entities
on December 30, 2002 were cancelled  pursuant to their terms.  With prior notice
to the holders of the warrants to purchase 802,990 shares, those warrants may be
repurchased  by the  Company at $.01 per  warrant at any time after the  average
closing price of the Company's common stock, for any twenty consecutive  trading
days, has equaled or exceeded $2.54.

Note 5. Sale of State Net Operating Losses

     During  the three  months  ended  March 31,  2003 and 2002,  EP  MedSystems
received approximately $438,000 and $475,000,  respectively,  from the sale of a
portion of its  cumulative  unused New Jersey State Net  Operating  Loss ("State
NOL") carryforwards for its statutory subsidiaries.  The sales of the cumulative
net operating  losses are a result of a New Jersey State law enacted  January 1,
1999 allowing  emerging  technology and  biotechnology  companies to transfer or
"sell"  their  unused  State  NOL  carryforwards  and New  Jersey  research  and
development  tax  credits to any  profitable  New Jersey  company  qualified  to
purchase  them for cash.  As of December 31, 2002 and 2001,  EP  MedSystems  had
recorded  approximately  $438,000 and  $475,000,  respectively,  in deferred tax
assets  related to these sales.  These  deferred tax assets were  realized  upon
receipt of cash from the sales of these  benefits to third  parties in the three
months ended March 31, 2003 and 2002.
                                       9
<PAGE>

Note 6. Industry Segment and Geographic Information

     EP MedSystems  manages its business  based on one reportable  segment,  the
manufacture and sale of cardiac electrophysiology products. EP MedSystems' chief
operating  decision-makers  use  consolidated  results  to  make  operating  and
strategic decisions.

     The following table sets forth product sales by geographic  segment for the
three months ended March 31, 2003 and 2002.

                                             For The Three Months
                                                Ended March 31,
                                              2003                  2002
United States                               $1,219,000            $1,873,000
Europe/Middle East                             428,000               571,000
Asia and Pacific Rim                           644,000               545,000
                                            $2,291,000            $2,989,000

     Sales of EP  MedSystems'  cardiac  electrophysiology  equipment and related
catheters aggregated approximately $2,008,000 and $282,000 respectively, for the
three months ended March 31, 2003, and  $2,705,000  and $284,000,  respectively,
for the  comparable  period  in  2002.  EP  MedSystems'  long-lived  assets  are
primarily located in the U.S.

     Net sales for the three  months  ended  March 31,  2003 were  billed in two
currencies:  $2,197,000 in U.S.  dollars and the equivalent of $94,000 in Euros.
Management  has  determined  the impact of foreign  currency risk on sales to be
minimal since a majority of sales are billed in U.S. dollars. EP MedSystems does
incur  translation  gains/losses,  which are recorded in  shareholders'  equity.
Cumulative  translation losses amounted to approximately $27,000 as of March 31,
2003. In addition,  EP MedSystems had not entered into any derivative  financial
instruments for hedging or other purposes.

Note 7. Net Loss Per Share

     Basic net loss per share is computed using the  weighted-average  number of
shares of common stock outstanding.  Due to the losses incurred for the quarter,
diluted net loss per share does not differ from basic net loss per share,  since
potential  shares of common stock  issuable upon the exercise of stock  options,
warrants,  convertible  preferred shares, and convertible debt are anti-dilutive
for all periods presented. Accordingly, potential common shares of 4,536,947 and
3,309,073 for the three months ended March 31, 2003 and 2002, respectively, have
been excluded from the diluted per share calculation.
                                       10
<PAGE>

Note 8. Comprehensive income

     For the  three  months  ended  March  31,  2003 and  2002,  EP  MedSystems'
comprehensive   loss   approximated  net  loss,   except  for  foreign  currency
translation  adjustments.  The  comprehensive  losses for the three months ended
March  31,  2003  and  2002,   were   approximately   $1,416,700  and  $710,000,
respectively.

Note 9. Stock Based Compensation

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

     EP MedSystems  records the fair value of stock  issuances to  non-employees
based  on  the  market  price  on the  date  issued.  The  amount  is  expensed,
capitalized  or recorded as a reduction  of paid-in  capital,  depending  on the
purpose for which the stock is issued.  It is EP  MedSystems'  policy to account
for stock options  granted to  non-employees  in accordance with Emerging Issues
Task Force Issue No. 96-18,  "Accounting for Equity  Instruments That Are Issued
to Other Than Employees for Acquiring,  or in Conjunction with Selling, Goods or
Services," and the fair value is measured using the Black-Scholes option pricing
model  under  SFAS No.  123.  EP  MedSystems  has not  issued  stock  options to
non-employees for any of the periods presented.

     Had  compensation   costs  for  EP  MedSystems'  stock  option  plans  been
determined   consistent   with  SFAS  No.  123   "Accounting   for   Stock-Based
Compensation",  EP  MedSystems'  pro forma net loss and loss per share for March
31, 2003 and 2002 would have been as follows:



<TABLE>
<CAPTION>
<S>                                                                 <C>                        <C>


                                                                   2003                       2002

       Net loss, as reported                                      $(1,389,830)             $(701,619)

       Add:  Stock-based employee compensation expense
       included in reported net income, net of related tax
       effects                                                               -                      -

       Deduct:  Total stock-based employee compensation
       expense determined under fair value based method
       for all awards granted since January, 1995, net of
       related tax effects                                           (108,305)               (67,085)
                                                             ------------------     ------------------

       Pro forma net loss                                        $(1,498,135)             $(768,704)
                                                             ==================     ==================

       Earnings per share:
           Basic and diluted - as reported                             $(0.08)                $(0.05)
                                                             ------------------     ------------------
           Basic and diluted - pro forma                               $(0.09)                $(0.05)
                                                             ------------------     ------------------
</TABLE>
                                       11
<PAGE>

Note 10. Recently Issued Accounting Standards

     In August 2001, the FASB issued Statement of Financial Accounting Standards
No. 143 ("SFAS No. 143"),  "Accounting for Asset Retirement  Obligations."  This
standard  requires that  obligations  associated with the retirement of tangible
long-lived  assets  be  recorded  as  liabilities  when  those  obligations  are
incurred,  with the amount of the  liability  initially  measured at fair value.
Upon initially  recognizing a liability for an asset retirement  obligation,  an
entity must  capitalize  the cost by  recognizing  an  increase in the  carrying
amount of the related long-lived asset. Over time, this liability is accreted to
its present value,  and the capitalized cost is depreciated over the useful life
of the related asset. Upon settlement of the liability, an entity either settles
the obligation for its recorded amount or incurs a gain or loss upon settlement.
SFAS No. 143 is  effective  for  financial  statements  issued for fiscal  years
beginning  after June 15, 2002. EP MedSystems  adopted this statement on January
1, 2003.  The  adoption  had no impact on its results of  operations,  financial
position or cash flows.

     On April 30,  2002,  the FASB  issued  Statement  of  Financial  Accounting
Standards No. 145 ("SFAS No. 145"),  "Rescission  of FASB  Statements No. 4, 44,
64,  Amendment  of  FASB  No.  13 and  Technical  Corrections".  This  statement
eliminates the requirement that gains and losses from the extinguishment of debt
be aggregated and classified as an extraordinary item, net of the related income
tax. In addition,  SFAS No.145 requires that capital leases that are modified so
that the  resulting  lease  agreement is  classified  as an  operating  lease be
accounted for in the same manner as sale-lease back transactions. SFAS No.145 is
generally effective for transactions occurring after May 15, 2002. EP MedSystems
adopted  this  standard.  The  adoption  had no  impact  on its  results  of its
operations, financial position or cash flows.

     On July 30,  2002,  the  FASB  issued  Statement  of  Financial  Accounting
Standards No. 146 ("SFAS No. 146"),  "Accounting for Costs  Associated with Exit
or Disposal  Activities."  This  statement  requires that a liability for a cost
associated with an exit or disposal activity be recognized when the liability is
incurred. SFAS No. 146 also establishes that fair value is the objective for the
initial measurement of the liability. SFAS No. 146 will be effective for exit or
disposal  activities  that are initiated  after December 31, 2002. EP MedSystems
adopted  this  standard on January 1, 2003.  The  adoption  had no impact on its
results of its operations, financial position or cash flows.

     In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation  - Transition  and Disclosure -- an amendment of FASB Statement No.
123." This standard  provides  alternate  methods of transition  for a voluntary
change  to  the  fair  value  method  of  accounting  for  stock-based  employee
compensation and requires more prominent  disclosure about the method used. This
statement is effective for fiscal years ending after  December 15, 2002.  For EP
MedSystems,  this means it is effective  for  December  31,  2002.  Currently EP
MedSystems applies the disclosure-only  provisions of SFAS No. 123,  "Accounting
for  Stock-Based  Compensation"  and we do not  expense our stock  options.  The
adoption  of the  disclosure  provisions  of SFAS No.  148 had no  impact  on EP
MedSystems' results of operations, financial position or cash flows.
                                       12
<PAGE>

     In  November  2002,  the FASB issued FASB  Interpretation  No.  ("FIN") 45,
"Guarantor's  Accounting and Disclosure  Requirements for Guarantees,  Including
Indirect  Guarantees of  Indebtedness of Others." FIN 45 requires that an entity
issuing a guarantee  (including those embedded in a purchase or sales agreement)
must recognize, at the inception of the guarantee, a liability equal to the fair
value of the guarantee.  FIN 45 also requires  detailed  information  about each
guarantee or group of guarantees  even if the  likelihood of making a payment is
remote.  The disclosure  requirements of this  interpretation  are effective for
financial statements of periods ending after December 15, 2002, which makes them
effective  for  EP  MedSystems  for  December  31,  2002.  The  recognition  and
measurement  provisions of this  Interpretation  are applicable on a prospective
basis to guarantees  issued or modified  after  December 31, 2002. EP MedSystems
adopted  this  standard  on January 1, 2003.  FIN 45 could have an impact on the
future results of the Company,  depending on guarantees issued; however, at this
time the  adoption  of this  Statement  did not have an impact on our results of
operations, financial position or cash flows.

     In  January  2003,  the FASB  issued  FIN 46,  "Consolidation  of  Variable
Interest Entities -- an Interpretation of Accounting Research Bulletin (ARB) No.
51." FIN 46 requires the primary  beneficiary to consolidate a variable interest
entity ("VIE") if it has a variable  interest that will absorb a majority of the
entity's  expected  losses if they  occur,  receive a majority  of the  entity's
expected residual returns if they occur, or both. FIN 46 applies  immediately to
VIEs created after January 31, 2003,  and to VIEs in which the entity obtains an
interest  after  that date.  For VIEs  acquired  before  February  1, 2003,  the
effective  date for EP MedSystems  is July 1, 2003.  The Company does not expect
this  Statement  will have a  material  impact  on our  results  of  operations,
financial position, or cash flows.

Note 11. Subsequent Events

     On  April  2,  2003,   the  holders  of  the   mortgage   notes  which  are
collateralized  by the  $750,000  mortgage  on EP  MedSystems'  facility in West
Berlin,  converted an  aggregate of $375,000 of the mortgage  notes into 300,000
shares of common stock of EP MedSystems, Inc. In connection with the conversion,
the  Company  reduced  the  conversion  price  from $2.14 per share to $1.25 per
share.  In accordance  with SFAS No. 84,  "Induced  Conversions  of  Convertible
Debt", the Company incurred a non-cash charge of approximately  $222,000,  which
will be recorded in the statement of  operations  for the quarter ended June 30,
2003.

     On April 4, 2003,  the  principal  amount of,  and all  accrued  and unpaid
interest  on, the note  receivable  from a Company  officer  were repaid by that
officer  through  return to treasury of the 50,000 shares of common stock to the
Company which secured that loan. The market price of the Company's  common stock
on the date of such return was $2.08.

     On April 11, 2003, the Company  completed a $210,000  private  placement of
its common stock with various accredited  investors.  The Company issued 120,000
shares of its common stock for a purchase price of $1.75 per share.

     Subsequent to the end of the quarter,  the Company issued 357,398 shares of
common  stock in exchange for the payment of $500,000,  in  accordance  with the
previously disclosed joint development project. (See Note 4).
                                       13
<PAGE>

ITEM 2. Management's Discussion and Analysis or Plan of Operation

Overview

     EP MedSystems ("EP Med") was incorporated in January 1993 and operates in a
single  industry  segment.  We 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 EP Med's inception,  we
have acquired  technology and marketing rights,  have developed new products and
have  begun  marketing  various   electrophysiology   products,   including  the
EP-WorkMate(R)   computerized   electrophysiology   workstation,   the  EP-3(TM)
Stimulator,  diagnostic  electrophysiology  catheters  and the ALERT(R)  System,
including the ALERT(R) Companion and ALERT(R) internal  cardioversion  catheters
and related disposable  supplies.  To date, these products have generated nearly
all of EP Med's sales.

     EP Med's leading diagnostic product is the  EP-WorkMate(R),  a computerized
electrophysiology   workstation  that  monitors,  displays  and  stores  cardiac
electrical activity and arrhythmia data. The EP-WorkMate(R)  offers, among other
features,  display  and  storage of up to 192  intracardiac  signals,  real-time
analysis and integration with our own proprietary systems,  such as the EP-3(TM)
Stimulator,  as  well as with  other  technologies  and  systems.  The  EP-3(TM)
Stimulator  is  a  computerized  signal  generator  and  processor  which,  when
integrated  with  the  EP-WorkMate(R),  is  used to  stimulate  the  heart  with
electrical impulses in order to produce, and thereby locate, an arrhythmia.  For
the  three  months  ended  March  31,  2003,  the  EP-WorkMate(R)  and  EP-3(TM)
Stimulator accounted for approximately 87% of total sales. EP Med also markets a
line of diagnostic  electrophysiology  catheters for  stimulation and sensing of
electrical   signals  during   electrophysiology   studies,   which  represented
approximately  4% of EP Med's total sales  revenues  for the three  months ended
March 31, 2003.

     We have  identified the diagnosis and treatment of atrial  fibrillation,  a
particular  type of arrhythmia,  as a primary focus for our ongoing  development
efforts. Atrial fibrillation is a condition where erratic electrical signals are
present within the atria, the upper chambers of the heart,  causing fibrillation
of the atria,  which  prevents the atria from providing  appropriate  blood flow
output.  In an effort to address this  medical  condition,  we have  developed a
product for internal  cardioversion of atrial fibrillation known as the ALERT(R)
System, which uses a patented electrode catheter to deliver measured, low-energy
bi-phasic  electrical  impulses  directly  to the inside of the heart to convert
atrial  fibrillation to a normal heart rhythm. We have obtained Class III Design
Examination Certification from a European Notified Body allowing us to label the
ALERT(R) System with a CE Mark, an international  symbol of adherence to quality
assurance  standards,  design reviews and hazard  analysis,  which permits us to
sell the  ALERT(R)  System in the  European  Community.  In  November  2002,  we
received  pre-market  approval  from the FDA to sell the ALERT(R)  System in the
United States.  Sales of the ALERT(R) System and related catheters accounted for
approximately  9% of EP Med's total sales  revenues for the three months  ending
March 31, 2003.

     We have also developed the  ViewMate(R)  intracardiac  ultrasound  catheter
system  consisting of ViewMate(R)  ultrasound  imaging console and  Viewflex(TM)
intracardiac imaging catheters. These products offer high-resolution,  real-time
ultrasound  capability  designed to improve a physician's or clinician's ability
                                       14
<PAGE>

to  visualize  the  inside of the  chambers  of the heart.  We believe  that the
ViewMate(R)  ultrasound  system may play an important  diagnostic  role allowing
more  effective  treatment of complex  cardiac  arrhythmias  such as ventricular
tachyarrhythmia and atrial  fibrillation.  We filed for CE Mark authorization in
January  2003 and filed for  510(K)  approval  to sell the  system in the United
States on April 2, 2003. On May 1, 2003, the Company received  approval from the
European  Notified  Body  allowing  the  sale  of the  system  in  the  European
Community.  We do not  anticipate  receiving  approval  to sell the  ViewMate(R)
ultrasound  system in the United  States  until the third  quarter  of 2003,  if
approved at all.

     EP Med has a history of operating losses and we expect to continue to incur
operating losses in the near future as we 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 our existing products, the timing of regulatory
approval and market  acceptance of the ALERT(R)  System and ultrasound  products
and  developmental,   regulatory  and  market  success  of  new  products  under
development  as well as EP Med's  ability to  establish,  preserve  and  enforce
intellectual property rights to its products. There can be no assurance that any
of our  development  projects  will be  successful  or that  if  development  is
successful, that the products will generate any sales.

Three Months Ended March 31, 2003.

     Net sales were  $2,291,000  for the three months  ended March 31, 2003,  as
compared to $2,989,000 for the comparable period in 2002. This $698,000 (or 23%)
decrease is the result of  significantly  lower  sales of WorkMate  units in the
United States due to a number of anticipated sales not closing before the end of
the quarter.

     Net sales for the three  months  ended  March 31,  2003 were  billed in two
currencies:  $2,197,000 in U.S.  dollars and the equivalent of $94,000 in Euros.
Management  has  determined  the impact of foreign  currency risk on sales to be
minimal since a majority of sales are billed in U.S. dollars.  EP Med does incur
translation  gains/losses,  which are recorded in shareholder's equity. EP Med's
translation  loss for the three  months  ended March 31, 2003 was  approximately
$27,000.

     Gross  profit on sales  for the  three  months  ended  March  31,  2003 was
$1,128,000,  as compared to  $1,764,000  for the same period in 2002.  The gross
profit decreased as a percentage of sales from 59% to 49%, due to a geographical
mix. A lower number of  WorkMates(R)  were sold in the United States where there
are higher overall margins.

     Sales and marketing  expenses increased $210,000 (or 18%) to $1,318,000 for
the three months  ended March 31, 2003,  as compared to the same period in 2002.
Costs  increased as a percentage  of total sales to 58% for the first quarter of
2003, as compared to 37% for the same period in 2002.  This was primarily due to
an increase in headcount in the EP MedSystems' Marketing and Service departments
and lower overall costs.

     General and  administrative  expenses decreased $34,000 (or 6%) to $543,000
for the three  months  ended March 31,  2003,  as compared to the same period in
2002.  This was  primarily  due a decrease  in legal fees and the closing of the
Company's  previous  executive  office  building  in North  Jersey  in the third
quarter of 2002.  These cost savings are net of increases in accounting fees and
the cost of business insurances.
                                       15
<PAGE>

     Research and development  expenses  decreased $132,000 (or 18%) to $593,000
for the three  months  ended March 31,  2003,  as compared to the same period in
2002. This was primarily due to a reduction in professional  fees related to the
completion of the  development  projects  around the ALERT(R) System and
ViewMate(R) intracardiac ultrasound catheter system.

     Interest  expense  increased  $9,000 for the three  months  ended March 31,
2003,  as  compared  to the same  period  in 2002.  This was the  result  of the
interest  expense related to the promissory  notes issued in connection with the
mortgage  on our West  Berlin  facility,  which was  entered  into in the fourth
quarter of 2002,  net of a reduction in the prime interest rate and the pay down
of long-term debt in the first quarter of 2002.


Liquidity and Capital Resources.

     Since  EP  Med's   incorporation   in  January  1993,  EP  Med's  financial
performance has resulted in an accumulated deficit of approximately  $31,203,000
at December 31, 2002 and approximately $32,593,000 at March 31, 2003.

     We have a history of operating  losses and the Company  expects to continue
to incur operating  losses in the near future as substantial  funds are expended
for research and development,  increased manufacturing activity and expansion of
sales and  marketing  activities.  The amount and timing of future  losses  will
depend  upon,  among other  things,  volume of sales of existing  products,  the
timing of  regulatory  approval  and market  acceptance  of the ALERT System and
ultrasound  products and  developmental,  regulatory  and market  success of new
products  under  development  as well as EP  MedSystems'  ability to  establish,
preserve and enforce intellectual property rights related to our products. 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 the Company's  current plans and  projections,  it is the
belief of  management  that the Company's  existing  capital  resources  will be
sufficient to meet anticipated  capital needs for  approximately the next twelve
months. The Company has, outstanding to Medtronic,  a $3.2 million note which is
payable,  plus interest,  in April 2004.  Estimated operating cash flows through
the maturity date of the note are not  sufficient to meet this  obligation.  The
Company  intends to seek  refinancing  of that note prior to its maturity  date.
However,  there is no  assurance  that the  Company  will be able to identify or
close a financing  transaction  to generate  proceeds to repay the note, or that
any such transactions will provide sufficient funds to repay the note.

     In October  2001,  EP Med  consummated  the  private  sale and  issuance of
newly-designated   Series  A  convertible   preferred  stock  to  Medtronic,   a
shareholder and creditor of EP Med, and to Century Medical,  Inc.  ("CMI"),  its
Japanese  distributor.  An  aggregate  of  1,259,717  shares  were issued in the
transactions.  The preferred  shares were issued to CMI at a price of $2.048 per
share,  and in  connection  with  that  transaction,  an  amendment  to EP Med's
Distribution Agreement was entered into with CMI, which included an extension of
the original Distribution Agreement. The transaction with Medtronic involved the
sale of the shares of  preferred  stock at a price of $1.781  per share.  EP Med
received aggregate gross proceeds of $2.4 million from those two transactions.
                                       16
<PAGE>

     CMI  converted  all of its shares of Series A  Preferred  Stock into common
stock of EP Med in the first quarter of 2002.  Medtronic  converted  300,000 of
its  shares of Series A  Preferred  Stock into  common  stock of EP Med in April
2002. The converted  stock of both CMI and Medtronic were  registered for resale
by EP Med pursuant to a  registration  statement on Form S-3, which was declared
effective by the SEC in May 2002.

     In January 2003, EP Med received  approximately $438,000 in cash related to
the sale of a portion of its unused  cumulative  New Jersey Net  Operating  Loss
carry forwards.

     On September 5, 2002, EP MedSystems entered into a stock purchase agreement
and license agreement with Boston Scientific  Corporation  ("BSC") in connection
with a strategic joint development project by EP MedSystems and BSC in the field
of cardiac electrophysiology.  It is expected that this development plan will be
completed during 2003.  Should EP MedSystems  abandon the project without cause,
an abandonment fee of $1 million in cash or EP MedSystems stock would be payable
to  BSC.  Following  the  successful  completion  of the  development  plan,  EP
MedSystems  will have marketing  rights to the technology and will pay royalties
to BSC based on the market  value of the  technology  at the time of sale.  This
stock  purchase  agreement  with BSC allows for the sale of up to  $3,000,000 of
common  stock  based  on  milestones  in  the  development  of  certain  cardiac
electrophysiology  technology. The common stock is sold at the lesser of the ten
-day  trailing  average  trading  price per share  prior to the  closing of each
installment purchase,  and $5.00 per share. Upon execution of the agreement,  EP
MedSystems  received $500,000 for 210,084 shares issued at the ten -day trailing
average  trading  price of $2.38 per share.  On  February  4, 2003,  the Company
issued  311,915  shares of common  stock in exchange for $500,000 at the ten-day
trailing average trading price of $1.60 per share.  These shares were registered
for resale on Form S-3 on April 2, 2003.  Subsequent  to the end of the quarter,
the  Company  issued  357,398  shares of common  stock in  exchange  for another
payment of $500,000 at the ten-day  trailing average trading price of $1.399 per
share.

     Net cash used in operating  activities  in the three months ended March 31,
2003 was approximately  $676,000 as compared with a net cash provided of $25,000
in the same period in 2002.  The  increase in our net use of cash in  operations
during  2003 was  primarily  due to the net  loss of  $1,390,000,  a  $1,154,000
decrease in accounts payable, a $1,313,000  decrease in accounts  receivable and
the collection of $438,000 from the sale of state net operating losses. Payments
to  related  parties  are made on  terms  similar  to those of other  suppliers.
Capital expenditures,  net of disposals, were $12,000 for the three months ended
March 31, 2003,  as compared to $58,000 in the same period in 2002. We expect to
purchase  capital  equipment  and  to  expand  our  manufacturing  and  assembly
capabilities  as we  continue to grow,  however,  we  currently  do not have any
commitments for purchases.  We lease office and manufacturing  space and certain
office equipment under operating leases.

     Assets  decreased  $1,066,000  from  $10,928,000  at  December  31, 2002 to
$9,862,000  at March 31,  2003.  The  change  in  assets  was due to a number of
factors Accounts receivable decreased approximately  $1,313,000,  as a result of
an increased  effort in  collections  and lower sales in the quarter ended March
31, 2003, as compared to the same period in 2002.  Cash increased  $849,000 from
December 31, 2002 in connection with the private placement in January 2003.
                                       17
<PAGE>

     Liabilities  decreased  $2,215,000  to  $7,010,000,  and of  that  balance,
accounts  payable  decreased  $1,154,000  to $1,431,000 at March 31, 2003 as the
result  of the use of cash  from  the  January  2003  private  placement  to pay
accounts  payable.  In  connection  with that  private  placement,  the $996,000
principal amount  promissory  notes payable to the EGS Entities,  plus interest,
was converted into equity.  In addition,  $500,000 of long-term notes payable to
Medtronic was reclassified to current as a result of using the $500,000 received
from our receipt of equity proceeds from an existing joint development agreement
subsequent  to the end of the quarter,  to repay a portion of that note pursuant
to an agreement with Medtronic.

     EP Med evaluates  the  collectability  of its  receivables  quarterly.  The
allowance  for bad  debts is based  upon  specific  identification  of  customer
accounts  for  which  collection  is  doubtful  and  EP  Med's  estimate  of the
likelihood of potential loss. To date, EP Med has experienced only modest credit
losses with respect to its accounts receivable.  To date, EP Med has experienced
insignificant  inventory  write-downs,   and  the  reserve  is  consistent  with
management's expectations.

ITEM 3. Controls and Procedures

     Within  90 days  prior  to the  date  of this  report,  we  carried  out an
evaluation of the  effectiveness  of the design and operation of our  disclosure
controls and procedures, under the supervision,  and with the participation,  of
our principal executive officer and principal  financial officer.  Based on this
evaluation,  our principal  executive  officer and principal  financial  officer
concluded  that our  disclosure  controls and procedures are effective to timely
alert them to material  information  required to be included in our periodic SEC
reports.  It should be noted that the design of any system of  controls is based
in part upon certain  assumptions  about the  likelihood of future  events,  and
there can be no assurance  that any design will succeed in achieving  its stated
goals under all potential future conditions, regardless of how remote.

     In  addition,  we reviewed our  internal  controls,  and there have been no
significant  changes in our  internal  controls or in other  factors  that could
significantly  affect  those  controls  subsequent  to the  date of  their  last
evaluation.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

Not Applicable.

ITEM 2. CHANGES IN SECURITIES

         (a) Not applicable.

         (b) Not applicable.

     (c) On January 31,  2003,  the Company  completed a $2.47  million  private
placement of its common stock to various "accredited  investors",  including EGS
Private Healthcare Partnership L.P. and EGS Private Healthcare Counterpart L.P.,
each of which EGS Entities is an affiliate of one member of EP MedSystems' Board
of  Directors,  pursuant  to Rule 506 of  Regulation  D  promulgated  under  the
Securities Act of 1933. The Company issued  2,007,475 shares of its common stock
at a purchase  price of $1.23 per share,  together  with  warrants  to  purchase
802,990  shares of common stock,  with an exercise  price of 110% of the trading
price of EP MedSystems' common stock on the date of closing of that transaction,
or $1.6943.  With prior notice to the holders of the warrants,  the warrants may
be repurchased by the Company for $.01 per warrant at any time after the average
closing price of the Company's common stock, for any twenty consecutive  trading
days, has equaled or exceeded $2.54.
                                       18
<PAGE>

     On February 4, 2003,  the Company  issued 311,915 shares of common stock in
exchange for the payment of $500,000 in accordance  with a previously  disclosed
joint  development  project in a private  transaction to an accredited  investor
pursuant to Rule 506 of Regulation D  promulgated  under the  Securities  Act of
1933.

     On April 2, 2003,  the holders of an  aggregate  of $750,000 of  promissory
notes secured by a mortgage on EP MedSystems' facility in West Berlin, converted
$375,000  of the  mortgage  notes  into  300,000  shares of common  stock.  Such
conversion was a privately negotiated transaction conducted pursuant to Rule 506
of  Regulation D  promulgated  under the  Securities  Act of 1933. To induce the
holders to convert,  EP MedSystems  reduced the previously  agreed to conversion
price from $2.14 per share to $1.25 per share.

     On April 11, 2003, the Company  completed a $210,000  private  placement of
its common  stock with  various  accredited  investors  pursuant  to Rule 506 of
Regulation D promulgated  under the Securities Act of 1933. In that transaction,
the Company  issued  120,000  shares of its common stock for a purchase price of
$1.75 per share.

     Subsequent  to the end of the first  quarter,  the Company  issued  357,398
shares of common  stock in exchange  for the  payment of $500,000 in  accordance
with a previously  disclosed joint development  project in a private transaction
pursuant to Rule 506 of Regulation D  promulgated  under the  Securities  Act of
1933.

         (d) Not applicable.

Item 3. Defaults Upon Senior Securities

None.

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

None.

Item 5. Other Information

On April 28,  2003,  the  Company  issued a press  release  stating  that it had
received notice from Nasdaq confirming Nasdaq's previously  conditional transfer
of, and resulting continued listing of, the Company's common stock on The Nasdaq
SmallCap Market and that the hearing file had been closed. Nasdaq's confirmation
was based on the  Company's  demonstration,  through a filing by the  Company on
Form 8-K on April 14, 2003,  referenced in Item 6 below,  of  compliance  with a
$4 million  stockholders'  equity  condition  required  by  an  April  1,  2003
determination  by Nasdaq.  The rules of the Nasdaq  SmallCap  Market require the
Company to maintain shareholders' equity of at least $2.5 million.

                                       19

<PAGE>

Item 6. Exhibits and Reports on Form 8-K

(a)      Exhibits

     The exhibits are listed in the Exhibit Index appearing at page 24 hereof.

(b)      Reports on Form 8-K.

     January 9, 2003,  under Item 5, the Company  reported notice from NASDAQ of
non-compliance  with  the  $10  million  stockholders'  equity  requirement  for
continued listing on The Nasdaq National Market, and the Company's  intention to
request a hearing with Nasdaq to review its determination.

     January 31, 2003,  under Item 9, Regulation FD Disclosure,  attaching press
release  disclosing  sale of 2,007,475  shares of common stock in an exempt Rule
506 private placement, with proceeds of $2.47 million.

     April 14, 2003, under Item 9, Regulation FD Disclosure,  filing required by
Nasdaq to demonstrate  compliance with Nasdaq's stated $4 million  stockholders'
equity  condition  for continued  listing of the  Company's  Common Stock on The
Nasdaq SmallCap Market. The 8-K furnished historical and pro forma balance sheet
information of the Company,  as at February 28, 2003,  demonstrating  compliance
with the condition.



                                       20
<PAGE>

                                                              SIGNATURES

     In accordance  with the  requirements  of the Exchange Act, the  Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.





                                    EP MEDSYSTEMS, INC.
                                    (Registrant)

Date:  May 15, 2003        By:      /s/  Reinhard Schmidt
                                    Reinhard Schmidt
                                    President and Chief Executive Officer and
                                    Director
                                    (Principal Executive Officer)


Date:  May 15, 2003        By:      /s/ Matthew C. Hill
                                    Matthew C. Hill
                                    Chief Financial Officer
                                    (Principal Financial Officer)

                                       21
<PAGE>



                                                                   Exhibit 99.1

                                  CERTIFICATION

         I, Reinhard Schmidt, President and Chief Executive Officer of
 EP MedSystems, Inc., certify that:

     1. I have reviewed this  quarterly  report on Form 10-QSB of EP MedSystems,
Inc.;

     2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

     3. Based on my knowledge,  the financial  statements,  and other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

     4. The  registrant's  other  certifying  officer and I are  responsible for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others  within those  entities,  particularly  during the
period in which this quarterly report is being prepared;

     b) evaluated the effectiveness of the registrant's  disclosure controls and
procedures  as of a date  within  90  days  prior  to the  filing  date  of this
quarterly report (the "Evaluation Date"); and

     c)  presented  in  this  quarterly   report  our   conclusions   about  the
effectiveness of the disclosure  controls and procedures based on our evaluation
as of the Evaluation Date;

     5. The registrant's other certifying  officers and I have disclosed,  based
on our most  recent  evaluation,  to the  registrant's  auditors  and the  audit
committee of the  registrant's  board or directors  (or persons  performing  the
equivalent function):

     a) all  significant  deficiencies  in the design or  operation  of internal
controls  which  could  adversely  affect  the  registrant's  ability to record,
process,  summarize  and  report  financial  data  and have  identified  for the
registrant's auditors any material weaknesses in internal controls; and

     b) any fraud,  whether or not material,  that involves  management or other
employees who have a significant role in the registrant's internal controls; and

     6. The registrant's other certifying  officers and I have indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: May 15, 2003                     /s/ Reinhard Schmidt
                                       Reinhard Schmidt
                                       President and Chief Executive Officer
                                       (Principal Executive Officer)

                                       23
<PAGE>


                                                                 Exhibit 99.2

                                  CERTIFICATION

     I, Matthew Hill, Chief Financial  Officer of EP MedSystems,  Inc.,  certify
that:

     1. I have reviewed this  quarterly  report on Form 10-QSB of EP MedSystems,
Inc.;

     2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

     3. Based on my knowledge,  the financial  statements,  and other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

     4. The  registrant's  other  certifying  officer and I are  responsible for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others  within those  entities,  particularly  during the
period in which this quarterly report is being prepared;

     b) evaluated the effectiveness of the registrant's  disclosure controls and
procedures  as of a date  within  90  days  prior  to the  filing  date  of this
quarterly report (the "Evaluation Date"); and

     c)  presented  in  this  quarterly   report  our   conclusions   about  the
effectiveness of the disclosure  controls and procedures based on our evaluation
as of the Evaluation Date;

     5. The registrant's other certifying  officers and I have disclosed,  based
on our most  recent  evaluation,  to the  registrant's  auditors  and the  audit
committee of the  registrant's  board or directors  (or persons  performing  the
equivalent function):

     a) all  significant  deficiencies  in the design or  operation  of internal
controls  which  could  adversely  affect  the  registrant's  ability to record,
process,  summarize  and  report  financial  data  and have  identified  for the
registrant's auditors any material weaknesses in internal controls; and

     b) any fraud,  whether or not material,  that involves  management or other
employees who have a significant role in the registrant's internal controls; and

     6. The registrant's other certifying  officers and I have indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: May 15, 2003                           /s/ Matthew C. Hill
                                             Matthew C. Hill
                                             Chief Financial Officer
                                             (Principal Financial Officer)

                                       24
<PAGE>



                                  EXHIBIT INDEX

Exhibit Number    Description

         3.1               Amended and Restated Certificate of Incorporation(1).

         3.2               Certificate of Amendment to the Amended and Restated
                           Certificate of Incorporation (2).

         3.3               Bylaws, as amended (1).

         4.1               Form of Common Stock Purchase Agreement, dated April
                           9, 1998, between EP Med and the Purchasers named
                           therein (3).

         4.2               Form of Registration Rights Agreement, dated April 9,
                           1998, between EP Med and the Purchasers named therein
                           (3).

         4.3               Form of Common Stock and Warrant Purchase Agreement,
                           dated as of August 31, 1999, between EP Med and the
                           Purchasers named therein (including Exhibit A: Form
                           of Registration Rights Agreement and Exhibit B: Form
                           of Warrant) (4).

         4.4               Form of Replacement Warrant, dated as of February 15,
                           2000, between EP Med and the Purchasers (including
                           Amendment to Registration Rights Agreement and Form
                           of Replacement Warrant) (5).

         4.5               Form of Amended and Restated Common Stock and Warrant
                           Purchase Agreement, dated as of February 16, 2001,
                           between EP Med and the Purchasers named therein
                           (including Exhibit A: Form of Registration Rights
                           Agreement and Exhibit B: Form of Warrant) (6).

         4.6               Registration Rights Agreement, dated March 28, 2001,
                           between EP Med and the Purchasers named therein (7).

         4.7               Warrant, dated March 28, 2001, issued by EP Med to
                           Cardiac Capital, LLC (7).

         4.8               Warrant, dated March 28, 2001, issued by EP Med to
                           Texada Trust (7).

         4.9               Warrant, dated as of July 20, 2001, issued by EP Med
                           to Reinhard Schmidt (8).

         4.10              Preferred Stock Purchase Agreement, dated as of
                           October 23, 2001, between EP MedSystems and Century
                           Medical, Inc. (2).

         4.11              Registration Rights Agreement, dated as of October
                           23, 2001, between EP MedSystems and Century Medical,
                           Inc. (2).
                                       25
<PAGE>

         4.12              First Amendment to Distribution Agreement, dated as
                           of October 23, 2001, between EP MedSystems and
                           Century Medical, Inc. (2).

         4.13              Preferred Stock Purchase Agreement, dated as of
                           October 23, 2001, between EP MedSystems and
                           Medtronic, Inc.(2).

         4.14              Registration Rights Agreement, dated as of October
                           23, 2001, between EP MedSystems and Medtronic, Inc.
                           (2).

         4.15              Stock Purchase Agreement, dated as of September 5,
                           2002, between EP MedSystems, Inc. and Boston
                           Scientific Corporation (9).

         4.16              Registration Rights Agreement, dated as of September
                           5, 2002, between EP MedSystems, Inc. and Boston
                           Scientific Corporation (9).

         4.17              Common Stock and Warrant Purchase Agreement, dated
                           as of January 31, 2003, by and between EP MedSystems,
                           Inc. and each of the several purchasers named in
                           Exhibit A thereto.(17)

         4.18              Registration Rights Agreement, dated as of January
                           31, 2003, by and between EP MedSystems, Inc. and the
                           Initial Investors referred to therein.(17)

         4.19              Warrant, dated January 31, 2003, issued by EP
                           MedSystems, Inc. to Michael R. Hamblett.(17)

         4.20              Warrant, dated January 31, 2003, issued by EP
                           MedSystems, Inc. to Heimdall Investments Ltd.(17)

         4.21              Warrant, dated January 31, 2003, issued by EP
                           MedSystems, Inc. to MedCap Partners L.P.(17)

         4.22              Warrant, dated January 31, 2003, issued by EP
                           MedSystems, Inc. to Bonanza Capital Masterfund Ltd.
                           (17)

         4.23              Warrant, dated January 31, 2003, issued by EP
                           MedSystems, Inc. to EGS Private Healthcare
                           Partnership, L.P.(17)

         4.24              Warrant, dated January 31, 2003, issued by EP
                           MedSystems, Inc. to EGS Private Healthcare
                           Counterpart, L.P.(17)

         4.25              Warrant, dated January 31, 2003, issued by EP
                           MedSystems, Inc. to Adams, Harkness & Hill, Inc.(17)

         4.26              Amended and Restated Secured Promissory Note issued
                           to Medtronic International Limited on March 13, 2003,
                           together with First Amendment to Note Purchase
                           Agreement, dated March 13, 2003, between Medtronic
                           International Limited and EP MedSystems, Inc.(17)

                                       26
<PAGE>

         4.27              Mortgage Note, dated November 21, 2002, issued to
                           William Winstrom, in the principal amount of
                           $375,000, together with related Mortgage and
                           Security Agreement.(17)

         4.28              Mortgage Note, dated November 21, 2002, issued to
                           Anthony Varrichio, in the principal amount of
                           $375,000,
                           together with related Mortgage and Security
                           Agreement.(17)

         10.1              License Agreement, dated as of November 1, 1995,
                           between EP Med and Dr. Eckhard Alt, as amended (1).

         10.2              License Agreement, dated as of November 1, 1995,
                           between EP Med and Sanjeev Saksena (1).

         10.3              Exclusive License Agreement, dated February 27,
                           1997 between EP MedSystems and EchoCath, Inc. (10).

         10.4              Settlement Agreement, dated November 6, 2001 between
                           EP MedSystems and EchoCath, Inc. (11).

         10.5              Master Manufacturing Agreement, dated April 16,
                           1996, between EP Med and Hi Tronics Designs, Inc.(1).

         10.6*             Amended and Restated 1995 Long-Term Incentive
                           Plan (12).

         10.7*             Amended and Restated 1995 Director Option Plan (12).

         10.8*             2002 Stock Option Plan (13).

         10.9              Agreement of Lease, dated August 25, 1997, between EP
                           Med and Provident Mutual Life Insurance Company, as
                           landlord (14).

          10.10            Note Purchase Agreement, dated as of November 15,
                           2000, between EP Med and Medtronic Asset Management,
                           Inc.(15).

          10.11            Secured Promissory Note, dated November 15, 2000,
                           issued by EP Med to Medtronic Asset Management, Inc.
                           (15).

          10.12            Stock Pledge Agreement, dated as of November 15,
                           2000, between Medtronic Asset Management, Inc. and
                           David Jenkins (15).

          10.13            Subordination Agreement, dated as of November 15,
                           2000, between Medtronic Asset Management, Inc. and
                           Fleet National Bank (15).

          10.14            Agreement, dated as of March 9, 1998, between ProCath
                           Corporation and Allan Willis (16).

          10.15            License Agreement, dated as of January 21, 1998,
                           between EP Med and Incontrol, Inc. (8).
                                       27
<PAGE>

         10.16             Employment Agreement, dated as of July 20, 2001,
                           between EP Med and Reinhard Schmidt (8).

         10.17             Stock Purchase Agreement dated September 5, 2002
                           between EP Med and Boston Scientific Corporation
                           (without exhibits) (9).

         10.18             Bridge Loan and Security Agreement, dated December
                           30, 2002, between EP MedSystems, Inc. and EGS
                           Healthcare Limited Partnership.(17)

         21.1              Subsidiaries of the Registrant.(17)

         99.1**            Certification Pursuant to 18 U.S.C. Section 1350,
                           as Adopted Pursuant to Section 906 of the
                           Sarbanes-Oxley Act of 2002.

         99.2**            Certification Pursuant to 18 U.S.C. Section 1350,
                           as Adopted Pursuant to Section 906 of the
                           Sarbanes-Oxley Act of 2002.

     ______________________________

     *Denotes management contract or compensatory plan or arrangement.
     **Filed herewith.

     1.  Incorporated  by  reference  from EP  MedSystems,  Inc.'s  Registration
Statement  on  Form  SB-2  and  Pre-Effective  Amendments  No.  1 and 2  thereto
previously  filed with the  Commission on April 18, 1996,  May 28, 1996 and June
13, 1996, respectively.

     2. Incorporated by reference from EP MedSystems, Inc.'s Quarterly Report on
Form 10-QSB for the quarter ended September 30, 2001,  previously filed with the
Commission.

     3.  Incorporated by reference from EP MedSystems,  Inc.'s Current Report on
Form 8-K dated April 15, 1998, previously filed with the Commission.

     4.  Incorporated by reference from EP MedSystems,  Inc.'s Current Report on
Form 8-K, dated September 7, 1999, previously filed with the Commission.

     5.  Incorporated by reference from EP  MedSystems,  Inc.'s Annual Report on
Form 10-KSB for the year ended  December  31,  1999,  previously  filed with the
Commission.

     6.  Incorporated by reference from EP MedSystems,  Inc.'s Current Report on
Form 8-K, dated February 26, 2001, previously filed with the Commission.

     7.  Incorporated by reference from EP  MedSystems,  Inc.'s Annual Report on
Form 10-KSB for the year ended  December  31,  2000,  previously  filed with the
Commission.

     8.  Incorporated by  reference  from  EP  MedSystems,  Inc.'s  Registration
Statement on Form SB-2 and  Pre-Effective  Amendments  No.1 through 4 previously
filed with the Commission on June 26, 2001, August 24, 2001,  September 28, 2001
and October 12, 2001, respectively.
                                       28
<PAGE>

     9. Incorporated by reference form EP MedSystems, Inc.'s Quarterly Report on
Form 10-QSB for the quarter ended September 30, 2002,  previously filed with the
Commission.

     10  Incorporated  by reference from EP MedSystems,  Inc.'s Annual Report on
Form 10-KSB for the year ended  December  31,  1996,  previously  filed with the
Commission.

     11.  Incorporated by reference from EP MedSystems,  Inc.'s Annual Report on
Form 10-KSB/A for the year ended  December 31, 2001,  previously  filed with the
Commission.

     12. Incorporated by reference from EP MedSyems,  Inc.'s Proxy Statement for
the Annual Meeting of Shareholders  held on October 30, 1997,  previously  filed
with the Commission.

     13.  Incorporated  by reference from EP MedSystems,  Inc.'s Proxy Statement
for the Annual Meeting of Shareholders held on August 29, 2002, previously filed
with the Commission.

     14.  Incorporated by reference from EP MedSystems,  Inc.'s Annual Report on
Form 10-KSB/A for the year ended  December 31, 1997,  previously  filed with the
Commission.

     15.  Incorporated by reference form EP MedSystems,  Inc.'s Quarterly Report
on Form 10-QSB for the quarter ended September 30, 2000,  previously  filed with
the Commission.

     16.  Incorporated by reference from EP MedSystems,  Inc.'s Annual Report on
Form 10-KSB/A for the year ended  December 31, 2000,  previously  filed with the
Commission.

     17.  Incorporated by reference from EP MedSystems,  Inc.'s Annual Report on
Form 10-KSB for the year ended  December  31,  2002,  previously  filed with the
Commission.