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

                                   (Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934
               For the quarterly period ended: September 30, 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 issuer's classes of common
equity, as of the latest practicable date:

 Class                                       Outstanding at October 15, 2003
 Common Stock, without par value                       19,235,364 shares

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




<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 September 30, 2003
                          (unaudited) and December 31, 2002                                                    3

                          Consolidated Statements of Operations for three months
                          ended September 30, 2003 and 2002 (unaudited)                                        4

                          Consolidated Statements of Operations for the nine
                          months ended September 30, 2003 and 2002 (unaudited)                                 5

                          Consolidated Statement of Changes in Shareholders' Equity for the nine months
                          ended September 30, 2003 (unaudited)                                                 6

                          Consolidated Statements of Cash Flows for the nine
                          months ended September 30, 2003 and 2002 (unaudited)                                 7

                          Notes to Consolidated Financial Statements (unaudited)                               8

            Item 2.       Management's Discussion and Analysis or Plan of Operation.                           20

            Item 3.       Controls and Procedures.                                                             25

PART II -- OTHER INFORMATION

            Item 1.       Legal Proceedings.                                                                   26

            Item 2.       Changes in Securities.                                                               26

            Item 3.       Defaults Upon Senior Securities.                                                     26

            Item 4.       Submission of Matters to a Vote of Security Holders.                                 26

            Item 5.       Other Information.                                                                   27

            Item 6.       Exhibits and Reports on Form 8-K.                                                    27

            Signatures                                                                                         28

            Exhibit Index                                                                                      29

</TABLE>




                                       2
<PAGE>



                          Part I FINANCIAL INFORMATION
Item 1.  Financial Statements.
<TABLE>
<CAPTION>
<S>                                                             <C>                 <C>                    <C>
                                                 EP MEDSYSTEMS, INC. AND SUBSIDIARIES
                                                      CONSOLIDATED BALANCE SHEETS
                                                                            September 30, 2003         December 31,
ASSETS                                                                          (unaudited)                2002
                                                                            --------------------     -----------------
Current assets:
   Cash and cash equivalents                                             $            4,661,993   $         2,012,809
  Restricted cash                                                                     1,000,000                    --
  Accounts receivable, net of allowances for doubtful
      accounts of $98,600                                                             1,513,671             3,438,980
   Inventories, net of reserves                                                       2,441,445             2,037,100
   Prepaid expenses and other current assets                                            605,822               361,782
   Deferred tax asset, net of valuation allowance                                            --               438,000
                                                                            --------------------     -----------------
                                                                            --------------------     -----------------
          Total current assets                                                       10,222,931             8,288,671

Property, plant and equipment, net                                                    1,901,680             2,250,327
Intangible assets, net                                                                  349,977               358,282
Other assets                                                                            623,613                31,198
                                                                            --------------------     -----------------
          Total assets                                                   $           13,098,201  $         10,928,478
                                                                            ====================     =================

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Promissory note payable                                                $                   --   $           995,585
  Current portion of notes payable                                                    2,200,000                    --
  Accounts payable                                                                    1,221,886             2,586,050
  Accrued expenses                                                                    1,392,863               623,681
  Deferred warranty revenue                                                              83,454               223,245
                                                                            --------------------     -----------------
     Total current liabilities                                                        4,898,203             4,428,561

Accrued interest on long term debt  non-current                                             --               520,162
Deferred warranty revenue  non-current                                                 507,815               326,773
Secured convertible note                                                              4,276,000             3,950,000
                                                                            --------------------     -----------------
          Total liabilities                                                           9,682,018             9,225,496
                                                                            --------------------     -----------------
Commitments and contingencies                                                                --                    --
Shareholders' equity:
  Preferred stock, no par value, 5,000,000 shares
     authorized, 373,779 shares issued and outstanding at
     September 30, 2003 and December 31, 2002, respectively
                                                                                        618,161               618,161
  Common stock, $.001 stated value, 25,000,000 shares authorized,
     19,235,364 and 15,098,736 shares issued and outstanding at
     September 30, 2003 and December 31, 2002, respectively
                                                                                         19,235                15,099
  Additional paid-in capital                                                         40,027,096            32,372,087
  Accumulated other comprehensive (loss) income                                        (85,789)                   613
  Treasury stock                                                                      (100,000)                    --
  Receivable from officer                                                                    --             (100,000)
  Accumulated deficit                                                              (37,062,520)          (31,202,978)
                                                                            --------------------     -----------------
          Total shareholders' equity                                                  3,416,183             1,702,982
                                                                            --------------------     -----------------
          Total liabilities and shareholders' equity                     $           13,098,201  $         10,928,478
                                                                            ====================     =================

                                    The accompanying notes are an integral part of this statement.
</TABLE>


                                       3
<PAGE>

<TABLE>
<CAPTION>

                                                 EP MEDSYSTEMS, INC. AND SUBSIDIARIES
                                                 CONSOLIDATED STATEMENTS OF OPERATIONS
                                                              (unaudited)
<S>                                                                           <C>                          <C>
                                                                                 For the Three Months Ended
                                                                           September 30,            September 30,
                                                                                2003                      2002
                                                                        ---------------------      -------------------
                                                                        ---------------------      -------------------

Net sales                                                            $             2,167,437    $           3,410,645
Cost of products sold                                                              1,088,641                1,968,456
                                                                        ---------------------      -------------------
                                                                        ---------------------      -------------------
   Gross profit                                                                    1,078,796                1,442,189

Operating costs and expenses:
Sales and marketing expenses                                                       1,375,245                1,190,091
General and administrative expenses                                                  726,967                  822,221
Research and development expenses                                                    638,637                  812,778
Offering Costs                                                                            --                1,118,770
                                                                        ---------------------      -------------------
   Loss from operations                                                          (1,662,053)              (2,501,671)

Interest expense, net                                                               (75,585)                 (53,300)
Change in valuation of warrants                                                    (264,000)                       --
                                                                        ---------------------      -------------------
   Net loss                                                          $           (2,001,638)    $         (2,554,971)
                                                                        =====================      ===================
                                                                         ====================      ===================

Basic and diluted loss per share                                     $                 (.11)    $               (.17)
                                                                        =====================      ===================
                                                                        =====================      ===================

Weighted average shares outstanding used
to compute basic and diluted loss per share                                       18,766,433               14,946,545
                                                                        =====================      ===================



                                   The accompanying notes are an integral part of these statements.

</TABLE>



                                       4
<PAGE>

<TABLE>
<CAPTION>


                                                 EP MEDSYSTEMS, INC. AND SUBSIDIARIES
                                                 CONSOLIDATED STATEMENTS OF OPERATIONS
                                                              (unaudited)

<S>                                                                             <C>                          <C>
                                                                                  For the Nine Months Ended
                                                                           September 30,            September 30,
                                                                                2003                      2002
                                                                        ---------------------      -------------------
                                                                        ---------------------      -------------------

Net sales                                                            $             6,796,385    $           9,494,730
Cost of products sold                                                              3,353,355                4,496,381
                                                                        ---------------------      -------------------
                                                                        ---------------------      -------------------
   Gross profit                                                                    3,443,030                4,998,349

Operating costs and expenses:
Sales and marketing expenses                                                       3,981,087                3,383,547
General and administrative expenses                                                1,819,358                1,860,919
Research and development expenses                                                  1,822,699                2,370,690
Offering Costs                                                                            --                1,118,770
Mortgage conversion expense                                                          222,084                       --
                                                                        ---------------------      -------------------
   Loss from operations                                                          (4,402,198)              (3,735,577)

Interest expense, net                                                              (193,344)                (160,446)
Interest expense, debt conversion                                                 (1,000,000)                     --
Change in valuation of warrants                                                   (264,000)                       --
Other income, net                                                                        --                    5,370
                                                                        ---------------------      -------------------
                                                                        ---------------------      -------------------
   Net loss                                                          $           (5,859,542)    $         (3,890,653)
                                                                        =====================      ===================
                                                                         ====================      ===================

Basic and diluted loss per share                                     $                 (.33)    $               (.26)
                                                                        =====================      ===================
                                                                         ====================      ===================

Weighted average shares outstanding used
to compute basic and diluted loss per share                                       17,856,080               14,764,989
                                                                        =====================      ===================


                                   The accompanying notes are an integral part of these statements.

</TABLE>



                                       5
<PAGE>

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


                                                 EP MEDSYSTEMS, INC. AND SUBSIDIARIES
                                       CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
                                             FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003
                                                              (unaudited)


                                                                                Accumulated  Receivable
                                                                                Other        from
                            Common    Common   Preferred Preferred Additional   Comp-        Officer/
                            Stock      Stock   Stock     Stock       Paid-in    rehensive    Treasury      Accumulated
                            Shares    Amount   Shares    Amount      Capital    Income       Stock           Deficit        Total
                         ------------ -------- --------- --------- ------------ ------------ ------------ --------------- ----------

Balance, December 31,
2002                      15,098,736  $15,099   373,779  $618,161  $32,372,087         $613   $(100,000)  $ (31,202,978)  $1,702,982
                          ----------- -------- --------- --------- ------------ ------------ ------------ --------------- ----------

Issuance of common
stock in connection
with joint development
contract, net of
offering costs             1,270,944    1,271        --        --    2,461,194           --           --              --   2,462,465

Issuance of common
stock in private
placement including
conversion of
promissory note, net of
offering costs             2,007,475    2,007        --        --    2,071,155           --           --              --   2,073,162

Conversion of
convertible promissory
bridge notes,
beneficial conversion
feature                          --         --       --        --    1,000,000           --           --              --   1,000,000

Foreign currency
translation                       --       --        --        --           --     (86,402)           --              --    (86,402)


Issuance of common
stock in private
placement, net of                                                                                                            202,500
offering costs               120,000      120        --        --      202,380           --           --              --

Issuance of common
stock in connection
with conversion of
mortgage to equity
including non-cash
mortgage conversion                                                                                                          972,084
costs of $222,084            475,234      475        --        --      971,609           --           --              --

Issuance of common
stock in connection
with Secured                                                                                                                 100,000
Convertible Note              40,000       40        --  --             99,960           --           --              --

Beneficial conversion
feature in connection
with Secured
Convertible Note                  --       --        --        --      486,147           --           --              --     486,147

Issuance of common
stock in connection
with exercise of                                                                                                             362,787
warrants                     222,975      223        --        --      362,564           --           --              --

Net Loss                          --       --        --        --           --           --           --     (5,859,542) (5,859,542)
                          ----------- -------- --------- --------- ------------ ------------ ------------ --------------- ----------
                          19,235,364  $19,235   373,779  $618,161  $40,027,096                             $(37,062,520)
Balance, September 30,
2003                                                                              $(85,789)   $(100,000)                  $3,416,183
                          =========== ======== ========= ========= ============ ============ ============ =============== ==========



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



                                       6
<PAGE>

<TABLE>
<CAPTION>


                                                 EP MEDSYSTEMS, INC. AND SUBSIDIARIES
                                                 CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                              (unaudited)
<S>                                                                                     <C>                  <C>
                                                                                    For the Nine Months Ended
                                                                              September 30,           September 30,
                                                                                  2003                    2002
                                                                            ------------------      ------------------
                                                                            ------------------      ------------------
Cash flows from operating activities:
Net loss                                                               $          (5,859,542)    $        (3,890,653)
Adjustments to reconcile net loss to net cash used in operating
activities:
  Depreciation and amortization                                                       521,260                 511,932
  Interest expense, debt conversion                                                 1,000,000                      --
  Mortgage conversion expense                                                         222,084                      --
  Change in value of warrants and amortization of beneficial
    conversion feature                                                                291,000                      --
  Compensation expense                                                                     --                  42,000
  Write off of deferred offering costs                                                     --               1,042,413
Changes in assets and liabilities:
  Decrease in accounts receivable                                                   1,925,309               1,117,084
  Increase in inventories                                                           (458,550)               (686,758)
  Decrease in prepaid expenses and other assets
                                                                                       73,092                  60,006
  Decrease in deferred tax asset                                                      438,000                 474,688
  (Decrease) increase in accounts payable                                         (1,364,164)               1,374,001
  Increase (decrease) in accrued expenses, deferred revenue, and
    accrued interest                                                                  290,271               (286,374)
                                                                            ------------------      ------------------
                                                                            ------------------      ------------------
          Net cash used in operating activities                        $          (2,921,240)    $          (241,661)
                                                                            ------------------      ------------------
                                                                            ------------------      ------------------

Cash flows from investing activities:
  Capital expenditures                                                              (103,123)               (140,742)
  Patent costs                                                                        (6,980)                 (7,311)
                                                                            ------------------      ------------------
                                                                            ------------------      ------------------
         Net cash used in investing activities                         $            (110,103)    $          (148,053)
                                                                            ------------------      ------------------
                                                                            ------------------      ------------------

Cash flows from financing activities:
   Payments under term notes payable                                              (1,000,000)               (436,111)
   Proceeds from issuance of secured convertible debt                               3,661,600                      --
   Increase in restricted cash                                                    (1,000,000)                      --
   Proceeds from issuance of common stock, net of offering costs
                                                                                    4,105,329                 472,336
                                                                            ------------------      ------------------
                                                                            ------------------      ------------------
      Net cash provided by financing activities                        $            5,766,929  $               36,225
                                                                            ------------------      ------------------
                                                                            ------------------      ------------------

Effect of exchange rate changes                                                      (86,402)                 (9,924)
                                                                            ------------------      ------------------

Net increase  (decrease) in cash and cash equivalents                               2,649,184               (363,413)
Cash and cash equivalents, beginning of period                                      2,012,809               2,343,303
                                                                            ------------------      ------------------
Cash and cash equivalents, end of period                               $            4,661,993    $          1,979,890
                                                                            ==================      ==================
                                                                            -=================      ==================

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



                                       7
<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  generally
accepted  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 EP MedSystems,  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 (the "SEC" or the "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  consist  of  the  following  at
September 30, 2003 and December 31, 2002:
<TABLE>
<CAPTION>
<S>                                                     <C>                          <C>
                                                September 30, 2003            December 31, 2002
                                                --------------------        ----------------------
                                                --------------------        ----------------------
           Raw materials                    $             1,246,584     $               1,267,194
           Work in process                                  490,367                       152,634
           Finished goods                                   842,494                       752,972
           Reserve for obsolescence                       (138,000)                     (135,700)
                                                --------------------    --- ----------------------
                                            $             2,441,445     $               2,037,100
                                                ====================    === ======================

</TABLE>

Note 3. Notes Payable

     The Company has  outstanding a $2.2 million note payable to Medtronic Asset
Management,  Inc.,  an affiliate of  Medtronic,  Inc.  ("Medtronic"),  one of EP
MedSystems' shareholders. 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,  which  was  paid  in  the  third  quarter.  The  note  is
collateralized  by a pledge by David  Jenkins,  the Chairman of the Board of the


                                       8
<PAGE>

Company, of shares of common stock of a privately held corporation owned by him.
Accrued  interest  related to this note of  $664,000  is included on the Balance
Sheet under the caption "Accrued Expenses."

     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 promissory notes was
payable quarterly at 8% per annum and the building collateralized the promissory
notes. The promissory notes were convertible into common stock of the Company at
the option of the holder of the promissory 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 April 2, 2003, the holders of the mortgage notes,  which were secured 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.  In connection  with the  conversion,  the Company reduced the
conversion price from $2.14 per share to $1.25 per share,  which resulted in the
recording of a non-cash  mortgage  conversion  charge of  $222,084.  On June 30,
2003,  the holders of the  mortgage  notes  converted  the final  portion of the
mortgage  notes into 175,234  shares of common  stock at a  conversion  price of
$2.14 as stated in the agreement.

     On December 30, 2002,  the Company  issued  convertible  promissory  bridge
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.  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
in and 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.  The  Company  recorded a
$1,000,000 non-cash charge in connection with the conversion.  The charge is for
interest expense in connection with the conversion of the convertible promissory
bridge  notes as a result of  certain  beneficial  conversion  features  and the
intrinsic value of embedded  conversion  options within the promissory  notes. A
managing  member of the EGS  Entities is also a member of the Board of Directors
of the Company.

     On August 28,  2003,  the Company  issued a Secured  Convertible  Note (the
"Convertible  Note") to Laurus Master Fund,  Ltd.  ("Laurus") and entered into a
related  Security  Agreement with Laurus,  pursuant to which Laurus provided the
Company with a $4,000,000 revolving asset-based credit facility in the form of a
three-year Convertible Note secured by the accounts receivable,  inventory, real
property and other assets of the Company, other than intellectual property.

                                       9
<PAGE>

     At the closing of the transaction,  the Company issued the Convertible Note
to Laurus having a principal  amount of $4,000,000  and received net proceeds of
$2,661,600.  The remaining  $1,000,000 has been funded by Laurus and is expected
to be  available  to the  Company  upon the  fulfillment  of  certain  customary
requirements  associated  with  documenting  Laurus'  security  interest  in the
Company's  real  property and is included on the Balance Sheet under the caption
"Restricted  Cash". The balance of the proceeds was used to pay fees incurred in
connection with this transaction. In addition, the Company paid a portion of the
fees payable to an intermediary, Biscayne Capital Markets, Inc. ("Biscayne"), in
shares  of the  Company's  Common  Stock  having a  market  value on the date of
closing  of  this  transaction  equal  to  $100,000.  The  net  proceeds  of the
Convertible  Note will be used by the Company for working  capital  purposes and
payment of outstanding debt.

     The portion of the  Convertible  Note against which Laurus  advances  funds
based on the Company's  accounts  receivable  bears  interest at the prime rate,
with a floor of 4%, and the balance (the "Advance  Amounts")  bears  interest at
the prime rate plus 2%. One half of Advance  Amounts  outstanding on the date of
closing  (approximately  $1,350,000)  is  required  to be  repaid  on or  before
February 28, 2005. The remaining  balance of the Advance Amounts  outstanding on
the date of the closing is required to be repaid on or before  August 28,  2006.
The Company,  subject to certain rights of  cancellation,  may extend the credit
facility by Laurus,  on a year-by-year  basis,  commencing  August 28, 2006. The
Company may repay in cash,  without  penalty,  up to $500,000 of the Convertible
Note in any one calendar year, plus all Advance Amounts.

     Subject  to  certain  volume  limitations  and other  conditions,  all or a
portion of the  Convertible  Note is  convertible  into the Common  Stock of the
Company at the  Company's  option if the market  price of the  Company's  Common
Stock reaches a level,  for 11 consecutive  trading days, which is above 120% of
$2.55 (the "Fixed Conversion  Price"),  which is a price in excess of the market
price of the Company's  Common Stock on the date of closing.  Subject to certain
volume limitations and other conditions, Laurus has the option to convert all or
a portion of the Convertible  Note into shares of the Company's  Common Stock at
the Fixed Conversion Price.

     Following the  conversion  into the  Company's  Common Stock by the Company
and/or  Laurus of an  aggregate of  $2,000,000  of the  principal  amount of the
Convertible  Note (a "Conversion  Event"),  the Fixed  Conversion  Price will be
adjusted  upward to a price which is 115% of the average of the closing price of
the Company's  Common Stock for the three  trading days prior to the  Conversion
Event. Subject to certain limitations,  including the repayment obligations with
respect  to  Advance  Amounts   described  above,  the  dollar  amounts  of  the
Convertible Note converted may be re-borrowed.

     The  Fixed  Conversion  Price is  subject  to  adjustment,  with  customary
exceptions  and on a  weighted-average  basis,  in connection  with sales of the
Company's  securities below the Fixed  Conversion  Price then in effect,  and is
also subject to adjustment for stock splits,  combinations,  stock dividends and
similar  events.  As part of the  credit  facility  transaction,  Laurus and the
intermediary  also received  warrants to purchase an aggregate of 240,750 shares
of the Company's  Common Stock (the  "Warrants"),  with  exercise  prices set as
follows:  $2.93 per share for the  purchase of up to the first  133,750  shares,
$3.19 per share for the purchase of up to the next 80,250 shares,  and $3.70 per
share for the purchase of up to the final 26,750 shares.  The expiration date of
the warrant is August 28,  2010.  The  exercise  price of the  warrants  and the

                                       10
<PAGE>


number of shares  underlying the warrants are subject to  adjustments  for stock
splits, combinations, stock dividends and similar events.

     The  Company  registered,  under the  Securities  Act of 1933,  as amended,
1,500,000  shares of its  Common  Stock  which may be  received  by Laurus  upon
conversion  of the  Convertible  Note and  exercise  of the  Warrant and will be
required to register the remainder of such shares (approximately 300,000 shares)
on the  date  which is the  earlier  of (i) one year  from  the  closing  of the
transaction or (ii) the date of conversion of a portion of the Convertible Note.

     In  accordance  with the  provisions  of Emerging  Issues Task Force (EITF)
Issue 00-27,  "Application  of EITF Issue No. 98-5  'Accounting  for Convertible
Securities  with  Beneficial  Conversion  Features  of  Contingently  Adjustable
Conversion Ratios', to Certain Convertible  Securities",  the allocated value of
the Convertible Note contained a beneficial  conversion feature calculated based
on the  difference  between  the  effective  conversion  price  of the  proceeds
allocated to the Convertible Notes and the Warrants at the date of issuance. The
amount arising from the beneficial conversion feature aggregated $486,000 and is
being  amortized  as  interest  expense  from  the date of the  issuance  of the
Convertible Note to the mandatory redemption date of August 28, 2006.

     The Company valued the Convertible  Note and the Warrants at issuance.  The
fair value of the Warrants at the time of issue was $407,500. In accordance with
EITF 00-19,  "Accounting for Derivative  Financial  Instruments  Indexed to, and
Potentially  Settled in, a Company's Own Stock," the Company marked the Warrants
to market at September  30, 2003  incurring a non-cash  charge of $264,000.  The
Warrants  will continue to be marked to market until they are exercised or until
amendment  of the  applicable  agreements  pursuant to which the  Warrants  were
issued and the underlying  shares are registered.  The net carrying value of the
Convertible  Note,  after  allocation  of the  fair  value of the  Warrants,  of
$3,435,000 is being accreted to interest expense over the life of the agreement.

Note 4. Shareholder's Equity

Preferred Stock

     Medtronic,  Inc. holds 373,779 of the Company's  Series A preferred  shares
which are convertible into 387,946 shares of common stock of the Company.

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.  Following the  completion of the
development,  which  occurred  in the third  quarter  2003,  EP  MedSystems  has
marketing  rights to the  technology  and will pay royalties to BSC based on the
market value of the  technology  at the time of sale of the  product.  The stock
purchase  agreement  with BSC allowed 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 was 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 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.
These shares were

                                       11
<PAGE>

registered  for  resale on Form S-3 on April 2,  2003.  On April 21,  2003,  the
Company issued 357,398 shares of common stock in exchange for another payment of
$500,000. During the third quarter of 2003, the Company issued 601,631 shares of
common stock in exchange for the final payments totaling $1,500,000.

     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 from the EGS  Entities  into common
stock of the Company and the  securities  issued in that private  placement were
issued 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  and the  Company  recorded a  $1,000,000
non-cash charge in connection  with the  conversion.  The charge is for interest
conversion expense associated with certain  beneficial  conversion  features and
the intrinsic value of embedded  conversion options within the promissory notes.
With  prior  notice  to  the  holders  of  the  warrants,  the  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.  In July of 2003,  the  closing  price
requirement  for  repurchase of the warrants was met,  notice to repurchase  the
warrants was given to the warrant holders by the Company,  and 222,975 shares of
common stock were issued upon exercise of these warrants.

     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  collateralized  that loan.  The market  price of the  Company's
common  stock on the date of such return was $2.08.  The shares are  recorded on
the balance sheet under the caption "Treasury stock."

     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.

Note 5. Sale of State Net Operating Losses

     During the nine months ended  September  30, 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 nine
months ended September 30, 2003 and 2002.

                                       12
<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
nine months ended September 30, 2003 and 2002.

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

                                                 For The Nine Months
                                                  Ended September 30,
                                              2003                  2002
United States                               3,842,000             5,910,000
Europe/Middle East                          1,944,000             1,942,000
Asia and Rest of World                      1,010,000             1,643,000
                                            ---------             ---------
                                            6,796,000             9,495,000
</TABLE>

     Sales of EP  MedSystems'  cardiac  electrophysiology  equipment and related
catheters aggregated approximately $5,972,000 and $824,000 respectively, for the
nine months ended September 30, 2003, and $8,676,000 and $819,000, 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  September 30, 2003 were billed in two
currencies:  $2,072,000 in U.S.  dollars and the equivalent of $95,000 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 $86,000 as of September
30,  2003.  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  for the period.  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
approximately  3,918,589 and  3,054,073 for the nine months ended  September 30,
2003 and 2002,  respectively,  have been  excluded  from the  diluted  per share
calculation.

Note 8. Comprehensive Income

     For the three and nine months ended September 30, 2003 and 2002, components
of  comprehensive  loss  include  net  loss  and  foreign  currency  translation
adjustments.  The comprehensive  losses for the three months ended September 30,
2003 and 2002 were approximately  $1,992,000 and $2,558,000,  respectively.  The
comprehensive losses for the nine months ended September 30, 2003 and 2002, were
approximately $5,946,000 and $3,900,000, respectively.

                                       13
<PAGE>

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,  based upon SFAS No. 148  "Accounting For
Stock-Based   Compensation-Transition   and  Disclosure-an   Amendment  to  FASB
Statement  No.  123",  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.

     The  following  disclosure  complies  with the  adoption  of SFAS No.  123,
amended by SFAS No. 148 and  includes  Proforma  net loss as if fair value based
method of accounting had been used.
<TABLE>
<CAPTION>
<S>                                             <C>                  <C>               <C>                    <C>

                                                For the Nine Months                      For the Three Months
                                                Ended September 30,                       Ended September 30,
                                               2003               2002                  2003              2002

   Net loss, as reported                      $(5,859,542)      $(3,890,653)          $(2,001,638)       $(2,554,971)

Add:  Stock-based employee
compensation expense included in
reported net income
                                                        --                --                    --                 --

Deduct:  Total stock-based
employee compensation expense
determined under fair value based
method for all options
                                                 (350,178)         (266,532)             (134,408)          (108,383)
                                        ------------------- -----------------
                                                                                   ---------------- ------------------

Proforma net loss                            $(6,208,720)      $(4,157,185)          $(2,136,046)       $(2,663,354)
                                        =================== =================      ================ ==================
                                                                                   ================ ==================

Earnings per share:
    Basic and diluted - as
    reported                                        $(.33)            $(.26)                $(.11)             $(.17)
                                        ------------------- -----------------     ----------------- ------------------
    Basic and diluted - pro
    forma                                           $(.35)            $(.28)                $(.11)             $(.18)
                                        ------------------- -----------------     ----------------- ------------------

</TABLE>


                                       14
<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 is 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 was 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.

     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


                                       15
<PAGE>

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.  In the ordinary  course of business,
the  Company   enters  into   agreements   with  third   parties   that  contain
indemnification  obligations  of EP  MedSystems,  and at that time,  the Company
values  these  indemnification  obligations.   Estimated  fair  value  of  these
indemnification  obligations  has  been  considered  to  be  immaterial  to  the
consolidated financial statements.

     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
FIN 46 will have a  material  impact on our  results  of  operations,  financial
position, or cash flows.

     In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative  Instruments  and  Hedging  Activities."  This  standard  amends  and
clarifies  financial  accounting  and  reporting  for  derivative   instruments,
including   certain   derivative   instruments   embedded  in  other   contracts
(collectively  referred to as derivatives) and for hedging activities under FASB
Statement  No.  133,   "Accounting   for  Derivative   Instruments  and  Hedging
Activities."  This standard is effective for contracts  entered into or modified
after  June 30,  2003,  except as stated  below  and for  hedging  relationships
designated  after  June 30,  2003.  In  addition,  except as stated  below,  all
provisions of this Statement should be applied prospectively. SFAS No. 149 could
have a future impact depending on transactions  entered into,  however,  at this
time the  adoption  of SFAS No.  149 had no impact on the  Company's  results of
operations, financial position or cash flows.

     In May  2003,  the  FASB  issued  SFAS No.  150,  "Accounting  for  Certain
Financial Instruments with Characteristics of Both Liabilities and Equity." This
standard  requires  an issuer  to  classify  certain  financial  instruments  as
liabilities.  It also changes the  classification  of certain  common  financial
instruments  from either equity or  presentation  to liabilities and requires an
issuer of those  financial  statements  to  recognize  changes  in fair value or
redemption  amount,  as  applicable,  in  earnings.  SFAS 150 is  effective  for
financial  instruments entered into or modified after May 31, 2003, and with one
exception,  is effective at the beginning of the first interim period  beginning
after  June  15,  2003.  SFAS  150  could  have a  future  impact  depending  on
transactions  entered into,  however,  at this time the adoption SFAS 150 had no
impact on the Company's results of operations, financial position or cash flows.

Note 11. Guarantor Condensed Financial Statements

     In connection with the Convertible Note  transaction,  one of the Company's
subsidiaries (the "Guarantor")  guaranteed the Convertible Note. We believe that
the  non-guarantor  subsidiaries  of the Company are minor and would not provide
any additional information material to investors.  Therefore,  the non-guarantor


                                       16
<PAGE>

subsidiaries of the Company are combined in the presentation below. There are no
significant  restrictions on the ability of the Guarantor to make  distributions
to EP  MedSystems.  The following  tables  represent the results of  operations,
financial  position  and cash  flows of EP  MedSystems,  the  Guarantor  and the
eliminations  necessary  to  arrive  at the  information  for the  Company  on a
consolidated basis.

     General   corporate   expenses  have  been   allocated  to  the  Guarantor.
Additionally,  all of the indebtedness of the Company historically has been, and
continues to be,  carried at the Company  level and therefore is included in the
EP MedSystems' column in the following tables.

<TABLE>
<CAPTION>
                                                          EP MEDSYSTEMS, INC.
                                           Condensed Consolidating Statements of Operations
<S>                                                 <C>                 <C>          <C>                 <C>

                                                              Nine Months Ended September 30, 2003
                                              ----------------------------------------------------------------------
                                              ----------------------------------------------------------------------
                                               EP MedSystems and     Guarantor      Eliminations     Consolidated
                                                 Non-Guarantor
                                                 Subsidiaries
                                              ----------------------------------------------------------------------
                                              ----------------------------------------------------------------------

Sales                                                 $ 5,971,755       $ 824,630                       $ 6,796,385

Cost of products sold                                   2,572,591         780,764                         3,353,355
                                              ------------------------------------                 -----------------
                                              ------------------------------------                 -----------------

          Gross profit                                  3,399,164          43,866                         3,443,030
Operating costs and expenses:

Sales and marketing expenses                            2,931,893       1,049,194                         3,981,087
   General and administrative
       expenses                                         1,285,190         534,168                         1,819,358

   Research and development expenses                    1,317,847         504,852                         1,822,699

   Mortgage conversion expense                            222,084                                           222,084
                                                                                -
                                              ------------------------------------                 -----------------
                                              ------------------------------------                 -----------------

          Loss from operations                        (2,357,850)     (2,044,348)                       (4,402,198)

Interest expense, net                                   (193,344)               -                         (193,344)

Interest expense, debt conversion                     (1,000,000)               -                       (1,000,000)

Change in valuation of warrants                         (264,000)               -                         (264,000)
                                              ------------------------------------                 -----------------
                                              ------------------------------------                 -----------------

      Net loss                                       $(3,815,194)    $(2,044,348)                      $(5,859,542)
                                              ====================================                 =================

</TABLE>



                                       17
<PAGE>

<TABLE>
<CAPTION>


                                                          EP MedSystems, Inc.
                                                 Condensed Consolidating Balance Sheet

<S>                                                <C>                <C>                   <C>              <C>
                                                                          September 30, 2003
                                               -------------------------------------------------------------------------
                                               EP MedSystems and      Guarantor       Eliminations      Consolidated
                                                 Non-Guarantor
                                                 Subsidiaries
                                              --------------------------------------------------------------------------
                                              --------------------------------------------------------------------------
ASSETS
Current assets:

Cash and cash equivalents                             $ 4,644,456           $17,537                -        $ 4,661,993

   Restricted Cash                                      1,000,000                 -                -          1,000,000

   Accounts receivable, net                             1,317,129           196,542                -          1,513,671

   Inventories, net                                     1,379,958         1,061,487                -          2,441,445
   Prepaid expenses and other
     current assets                                       598,532             7,290                -            605,822
                                              --------------------------------------------------------------------------

          Total current assets                          8,940,075         1,282,856                -         10,222,931

Property, plant and equipment, net                        734,332         1,167,348                -          1,901,680

Intangible assets, net                                          -           349,977                -            349,977

Other assets                                              623,613                 -                -            623,613
                                              --------------------------------------------------------------------------

          Total assets                                $10,298,020        $2,800,181                -        $13,098,201
                                              ==========================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:

  Current portion of notes payable                      2,200,000                 -                -          2,200,000

  Accounts payable                                      1,115,519           106,367                -          1,221,886

  Accrued expenses                                      1,368,122            24,741                -          1,392,863

  Deferred warranty revenue                                83,454                 -                -             83,454
                                              --------------------------------------------------------------------------

     Total current liabilities                          4,767,095           131,108                -          4,898,203

Deferred warranty revenue - non current                   507,815                 -                -            507,815

Intercompany balances                                 (2,669,073)        19,321,737     (16,652,664)                  -

Secured convertible note                                4,276,000                 -                -          4,276,000
                                              --------------------------------------------------------------------------

          Total liabilities                             6,881,837        19,452,845     (16,652,664)          9,682,018
                                              --------------------------------------------------------------------------
                                              --------------------------------------------------------------------------

Total shareholders' equity (deficit)                    3,416,183      (16,652,664)       16,652,664          3,416,183
                                              --------------------------------------------------------------------------
Total liabilities and shareholders'
equity                                                $10,298,020        $2,800,181                -        $13,098,201
                                              ==========================================================================
</TABLE>



                                       18
<PAGE>

<TABLE>
<CAPTION>


                                                          EP MEDSYSTEMS, INC.
                                                  CONDENSED CONSOLIDATING STATEMENT OF
                                                              CASH FLOWS
<S>                                                      <C>             <C>              <C>              <C>
                                                              For the Nine Months Ended September 30, 2003
                                                    ------------------------------------------------------------------
                                                    ----------------- --------------- --------------- ----------------
                                                      EP MedSystems      Guarantor     Eliminations     Consolidated
                                                          and
                                                     Non-Guarantor
                                                      Subsidiaries
                                                    ----------------- --------------- --------------- ----------------
                                                    ----------------- --------------- --------------- ----------------
Cash flows from operating activities:
Net loss                                                 (3,815,194)     (2,044,348)             $ -     $(5,859,542)
Adjustments to reconcile net loss to net cash
used in operating activities:
  Depreciation and amortization                              436,188          85,072                          521,260
  Interest expense, debt conversion                        1,000,000               -                        1,000,000
  Mortgage conversion expense                                222,084               -                          222,084
  Change in value of warrants and amortization of
    beneficial conversion feature
                                                             291,000               -                          291,000
Changes in assets and liabilities:
  Accounts receivable                                      1,985,633        (60,324)                        1,925,309
  Inventories                                              (446,726)        (11,824)                        (458,550)
  Prepaid expenses and other assets                           80,382         (7,290)                           73,092
  Deferred tax asset                                         219,000         219,000                          438,000
  Accounts payable                                       (1,335,167)        (28,997)                      (1,364,164)
 Accrued expenses, deferred revenue, and accrued
    interest                                                 311,276          21,005                          290,271
                                                    ----------------- --------------- --------------- ----------------

          Net cash used in operating activities         $(1,051,524)    $(1,869,716)             $ -      (2,921,240)
                                                    ----------------- --------------- --------------- ----------------


Cash flows from investing activities:
  Capital expenditures                                     (103,123)               -                        (103,123)
  Patent costs                                                     -         (6,980)                          (6,980)
                                                    ----------------- --------------- --------------- ----------------

         Net cash used in investing activities            $(103,123)        $(6,980)             $ -       $(110,103)
                                                    ----------------- --------------- --------------- ----------------


Cash flows from financing activities:
   Payments under term notes payable                     (1,000,000)                                      (1,000,000)
   Proceeds from issuance of secured convertible
    debt                                                   3,661,600                                        3,661,600
   Increase in restricted cash                           (1,000,000)                                      (1,000,000)
   Change in intercompany balances                       (1,876,848)       1,876,848                                -
   Proceeds from issuance of common stock, net of
    offering expenses                                      4,105,329               -                        4,105,329
                                                    ----------------- --------------- --------------- ----------------
                                                                                                      ----------------
      Net cash provided by financing activities          $3,890,081      $1,876,848             $ -        5,766,929
                                                                                                      ----------------
                                                    ----------------- --------------- --------------- ----------------

Effect of exchange rate changes                             (86,402)                                         (86,402)
                                                    ----------------- --------------- --------------- ----------------

Net increase in cash and cash equivalents                  2,649,032             152                        2,649,184
Cash and cash equivalents, beginning of period             1,995,424          17,385                        2,012,809
                                                    ---------------    ---------------- -------------  ---------------
Cash and cash equivalents, end of period                  $4,644,456         $17,537             $ -       $4,661,993
                                                          ==========         =======    =============== ==============
                                   The accompanying notes are an integral part of these statements.
</TABLE>



                                       19
<PAGE>


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

Overview.

     EP  MedSystems  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 MedSystems'  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 MedSystems' sales.

     EP  MedSystems'  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 nine months  ended  September  30,  2003,  the  EP-WorkMate(R)  and EP-3(TM)
Stimulator  accounted for  approximately  88% of total sales. EP MedSystems also
markets a line of diagnostic  electrophysiology  catheters for  stimulation  and
sensing  of  electrical   signals  during   electrophysiology   studies,   which
represented approximately 5% of EP MedSystems' total sales revenues for the nine
months ended September 30, 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.  And in September 2003, we received  pre-market  approval to sell
the Alert(R) Companion II in the United States. Sales of the ALERT(R) System and
related  catheters  accounted for approximately 7% of EP MedSystems' total sales
revenues for the nine months ending September 30, 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
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


                                       20
<PAGE>

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.  On October 20, 2003, the Company  received market  clearance to sell
the ViewMate(R) in the U.S.

     EP MedSystems 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,  developmental,  regulatory and market success of new
products under development,  and EP MedSystems'  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, the products will generate any sales.

Nine Months Ended September 30, 2003 and 2002.

     The Company had net sales of $6,796,000 for the nine months ended September
30, 2003 as compared  to  $9,495,000  for the  comparable  period in 2002.  This
$2,699,000  (or 28%) decrease was primarily due to slower than expected sales in
the U.S and lower overall sales in Asia.  Sales in Asia,  which were impacted in
the  second  quarter  by SARS,  have not  returned  to 2002  levels in the third
quarter.  Decreased  sales in Asia have been  offset by sales in Latin  America.
Sales in the U.S.  were down  approximately  $2,068,000  from the same period in
2002. Of that decrease,  $1,249,000 was due to the sale of fluoroscopy  units in
the third quarter of 2002,  which the Company did not sell in 2003 because it no
longer had a contract to sell these units. The balance of the decrease is due to
slower capital spending at hospitals increasing the overall sales cycle.

     Gross  profit on sales for the nine  months  ended  September  30, 2003 was
$3,443,000 as compared with $4,998,000 for the same period in 2002. Gross profit
as a percentage of sales decreased from 53% to 51%,  primarily the result of the
above mentioned  decrease in sales and a higher  percentage of sales outside the
United States where overall margins are lower.

     Sales and marketing  expenses increased $597,000 or (18%) to $3,981,000 for
the nine months  ended  September  30,  2003,  as compared to the same period in
2002.  This  increase  was  primarily  related to an  increase in head count and
marketing costs in connection with the rollout of new products, partially offset
by lower variable selling cost as a result of lower overall sales in 2003.

     General and administrative expenses decreased $42,000 (or 2%) to $1,819,000
for the nine months ended  September  30, 2003 as compared to the same period in
of 2002. This decrease in general and administrative  expenses was primarily due
to a favorable  impact of the  consolidation  of our executive  offices with our
manufacturing facility offset by an increase in business insurance and legal and
accounting services.

     Research and development expenses decreased $548,000 (or 23%) to $1,823,000
for the nine months ended  September  30, 2003 as compared to the same period in


                                       21
<PAGE>

2002. This decrease was primarily due to decreases in professional  fees related
to our latest development  initiatives  around the ALERT(R) System,  ViewMate(R)
ultrasound imaging console and intracardiac  imaging catheters and costs related
to  regulatory  and  submission  requirements.  Both products  received  various
regulatory approvals during 2002 and 2003.

     For the nine months  ended  September  30,  2003,  the  Company  recorded a
non-cash mortgage conversion expense of approximately  $222,000 as a result of a
reduction in the  conversion  price for the shares of our Common Stock  issuable
upon conversion of the mortgage loans.

     Interest  expense  increased  $33,000 to $193,000 for the nine months ended
September 30, 2003 as compared to the same period in 2002.  This increase can be
attributed  to (i) the fact  that,  while the  overall  interest  rate was lower
during  the  period,  the amount of debt  increased  and (ii)  $12,000  from the
amortization of the discount in connection with the Convertible Note.

     For the nine months ended  September  30, 2003,  EP  MedSystems  recorded a
non-cash interest expense,  debt conversion in connection with the conversion of
the $1,000,000  convertible  promissory bridge notes which converted into common
stock of the Company on January 31, 2003.

Three Months Ended September 30, 2003.

     The  Company  had net  sales  of  $2,167,000  for the  three  months  ended
September 30, 2003, as compared to $3,411,000 for the comparable period in 2002.
This  $1,244,000 (or 36 %) decrease was primarily a result of the sale, in 2002,
of approximately  $1,249,000  related to fluoroscopy units, which the Company no
longer had a contract to sell in 2003.

     Gross  profit on sales for the three months  ended  September  30, 2003 was
$1,079,000,  as compared to  $1,442,000  for the same period in 2002.  The gross
profit  as a  percentage  of  sales  increased  from  42% to 50% due to sales of
fluoroscopy  units in  2002,  which  carried  a much  lower  margin  than  other
products.

     Sales and marketing  expenses increased $185,000 (or 16%) to $1,375,000 for
the three months  ended  September  30, 2003,  as compared to the same period in
2002.  Costs as a  percentage  of total sales  increased  from 35% for the third
quarter of 2002 to 63% for the same period in 2003.  This increase was primarily
due to an  increase  in  headcount  in  the EP  MedSystems'  sales  and  service
departments, net of lower variable selling costs as a result of lower sales.

     General and administrative  expenses decreased $95,000 (or 12%) to $727,000
for the three months ended September 30, 2003, as compared to the same period in
2002.  This  decrease  is  attributable  to a number of  factors  including  the
consolidation of our executive office with our manufacturing facility, and lower
legal costs which were included in offering costs in 2002.

     Research and development  expenses  decreased $174,000 (or 21%) to $639,000
for the three months ended September 30, 2003, as compared to the same period in
2002.  This  decrease  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,  which  received
regulatory approval in 2002 and 2003, respectively.

                                       22
<PAGE>

     Interest  expense  increased  $22,000  from the same  quarter in 2002.  The
increase  was  related  to a higher  level  of debt  partially  offset  by lower
interest rates in 2003.

Liquidity and Capital Resources.

     From EP MedSystems' incorporation in January 1993 to December 31, 2002, the
Company accumulated a deficit of approximately $31,203,000.  As of September 30,
2003, the Company's accumulated deficit was approximately $37,063,000.

     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,  developmental,  regulatory  and  market  success  of  new
products under development,  and 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, the products will generate any sales. The
Company has a $2.2 million note outstanding to Medtronic, which is payable, plus
interest,  in April 2004.  Estimated  operating  cash flows through the maturity
date of the note are 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.  The  Company
intends to fund future cash flows through the sale of the Company's products and
by raising additional capital, if necessary.

     In January  2003,  EP MedSystems  received  approximately  $438,000 in cash
related  to  the  sale  of  a  portion  of  its  unused   cumulative  State  NOL
carryforwards.

     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.  This development plan was completed in the third
quarter of 2003.  Following this successful  completion of the development plan,
EP MedSystems  has 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 allowed 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 was 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 at the ten-day  trailing  average  trading
price of $1.60 per share in exchange for $500,000.  These shares were registered
for resale on Form S-3 on April 2,  2003.  In April  2003,  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 $1.39 per share.  The Company
issued 173,732 shares of common stock for a payment of $500,000 in July 2003 and
427,899  shares of common  stock for a payment of  $1,000,000  in August 2003 in
connection with the agreement.

                                       23
<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 promissory notes was
payable quarterly at 8% per annum and the building collateralized the promissory
notes.  The promissory  notes were convertible into common stock of the Company,
at the option of the holder of the promissory  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 April 2, 2003,  the holders of the mortgage  notes which were secured 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 recorded a
non-cash charge of $222,084. On June 30, 2003, the holders of the mortgage notes
converted the final  portion of the mortgage  notes into an aggregate of 176,234
shares  of  common  stock  at a  conversion  price of  $2.14  as  stated  in the
agreements.

     On August 28, 2003, the Company issued a Secured Convertible Note to Laurus
Master Fund, Ltd.  ("Laurus") and entered into a related Security Agreement with
Laurus pursuant to which Laurus provided the Company with a $4,000,000 revolving
asset-based credit facility in the form of a three-year Convertible Note secured
by the accounts  receivable,  inventory,  real  property and other assets of the
Company,  excluding  intellectual property. The Company received net proceeds of
$2,661,000  and  the  remaining  $1,000,000  has  been  funded  by  Laurus  upon
fulfillment  of  certain  customary  requirements  associated  with  documenting
Laurus' security interest in the Company's real property.

     Net cash used in operating  activities  in the nine months ended  September
30,  2003 was  approximately  $2,921,000  as  compared  with a net cash  used of
$242,000  in the same  period in 2002.  The  increase  in our net use of cash in
operations  during  2003  was  primarily  due to a net  loss  of  $5,860,000,  a
$1,364,000  decrease  in  accounts  payable,  partially  offset by a  $1,925,000
decrease in accounts  receivable and the collection of $438,000 from the sale of
State NOL carryforwards  and the non-cash interest expense,  debt conversion and
mortgage conversion expense of $1,222,000.  Payments to related parties are made
on terms  similar  to those of other  suppliers.  Capital  expenditures,  net of
disposals,  were  $103,000 for the nine months  ended  September  30,  2003,  as
compared to $141,000 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  increased  $2,170,000  from  $10,928,000  at  December  31, 2002 to
$13,098,000  at  September  30,  2003.  The  increase  in  assets  was  due to a
$3,649,000  increase in cash and restricted cash from the various financings the
Company  completed  in 2003 net of cash  paid to  Medtronic  and  cash  used for
operating  activities.  In connection  with the  Convertible  Note,  the Company
recorded deferred financing fees of $507,000 and a beneficial conversion feature
of $486,000.  Inventories also increased approximately $400,000 from lower sales
and in inventory held for new products. The increase was offset by a decrease in


                                       24
<PAGE>

accounts receivable. Accounts receivable decreased approximately $1,925,000 as a
result of an increased effort in collections and lower sales for the nine months
ended September 30, 2003, as compared to the same period in 2002.

     Liabilities  increased  $457,000  from  $9,225,000  at December 31, 2002 to
$9,682,000 at September  30, 2003.  The Company  signed a  Convertible  Note for
approximately  $4,000,000 in the third quarter of 2003. In connection  with that
note, the Company recorded the value of the warrants as a liability. The Company
marked  that  liability  to market and  increased  the value by  $264,000.  That
increase  was  offset  by a  decrease  in  accounts  payable  of  $1,364,000  to
$1,222,000  at  September  30,  2003 as the  result  of the use of cash from the
January 2003  private  placement  to pay  accounts  payable,  as well as reduced
purchases,  and lower research and  development  costs.  In connection with that
private placement,  the promissory notes payable to the EGS Entities of $996,000
were  converted  into equity.  In  addition,  since the note payable and accrued
interest due to Medtronic is due in April 2004, it was  reclassified  to current
liabilities.  The Company paid down the note to Medtronic by  $1,000,000  during
the nine months ended September 30, 2003.

     EP MedSystems  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  MedSystems'  estimate of the
likelihood of potential loss. To date, EP MedSystems has experienced only modest
credit losses with respect to its account receivable. To date, EP MedSystems has
experienced  insignificant inventory write-downs,  and the reserve is consistent
with management's expectations.

Item 3.  Controls and Procedures.

     As of the end of the period covered by this report,  the Company  conducted
an evaluation, under the supervision and with the participation of our principal
executive officer and principal  financial officer,  of the effectiveness of the
Company's  disclosure  controls and  procedures  (as defined in Rules 13a-15 and
15d-15 of the Exchange Act). Based on this evaluation,  our principal  executive
officer and principal  financial officer concluded that our disclosure  controls
and procedures are effective to ensure that information required to be disclosed
by the Company in reports  that it files or submits  under the  Exchange  Act is
recorded,  processed,  summarized and reported within the time periods specified
in the Securities and Exchange  Commission  rules and forms.  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.

     There  was no change  in the  Company's  internal  control  over  financial
reporting  during the Company's most recently  completed fiscal quarter that has
materially affected, or is reasonably likely to materially affect, the Company's
internal controls over financial reporting.



                                       25
<PAGE>


                           PART II. OTHER INFORMATION

Item 1.  Legal Proceedings.

         Not Applicable.

Item 2.  Changes in Securities.

(a)  Not applicable.

(b)  Not applicable.

(c)  On April 2, 2003 and June 30, 2003 the Company  issued shares of its common
     stock to Anthony  Varrichio and William  Winstrom in a private  transaction
     pursuant to Rule 506 of Regulation D promulgated  under the  Securities Act
     of 1933.  The shares were issued upon the conversion of mortgage notes held
     by Mr.  Varrichio and Mr.  Winstrom,  the specific terms of the issuance of
     the shares are  incorporated  herein by reference to Part I, Item 1, Note 3
     of this Form 10-QSB.

     In July 2003,  the Company  issued 173,732 shares of common stock to BSC 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. The
     specific terms of the issuance are incorporated herein by reference to Part
     I, Item 1, Note 4 of this Form 10-QSB.

     In August 2003, the Company issued 427,899 shares of common stock to BSC in
     exchange  for the payment of  $1,000,000  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. The
     specific terms of the issuance are incorporated herein by reference to Part
     I, Item 1, Note 4 of this Form 10-QSB.

     On August 28, 2003,  the Company  issued a secured  convertible  note and a
     warrant to purchase  225,000  shares of common stock to Laurus in a private
     transaction  pursuant to Rule 506 of  Regulation  D  promulgated  under the
     Securities Act of 1933. The specific terms of the secured  convertible note
     and warrant are incorporated  herein by reference to Part I, Item 1, Note 3
     of this Form 10-QSB.

     On August 28, 2003,  the Company issued 40,000 shares of common stock and a
     warrant to purchase  15,750 shares of common stock to Biscayne in a private
     transaction  pursuant to Rule 506 of  Regulation  D  promulgated  under the
     Securities  Act of 1933.  The specific  terms of the issuance of the shares
     and warrant are incorporated  herein by reference to Part I, Item 1, Note 3
     of this Form 10-QSB

(d)  Not applicable.

Item 3.  Defaults Upon Senior Securities.

         None.

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

         None.

                                       26
<PAGE>

Item 5.  Other Information.

         None.

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

(a)  Exhibits

     The exhibits are listed in the Exhibit Index beginning on page 30 herein.

(b)  Reports on Form 8-K.

     The  following  reports on form 8-K were filed  during  the  quarter  ended
     September 30, 2003:

     On August 5, 2003,  under Item 9,  Regulation  FD  Disclosure,  attaching a
     press  release  regarding  the  Company's  financial  results  and  certain
     highlights from its second quarter 2003.

     On August 25, 2003,  under Item 9,  Regulation FD  Disclosure,  attaching a
     press release regarding an amendment to the company's March 31, 2003 10-QSB
     to reflect beneficial  conversion  features and embedded conversion options
     within the  convertible  promissory  bridge notes  converted into equity on
     January 31, 2003.

     On September  2, 2003,  under Item 4,  Changes in  Registrant's  Certifying
     Accountant,  regarding the dismissal of PricewaterhouseCoopers  LLP ("PwC")
     as the company's independent accountant by the Audit Committee of the Board
     of  Directors  of EP  MedSystems,  acting on behalf of the  Company and the
     Company's Board of Directors.

     On September  3. 2003,  under Item 4,  Changes in  Registrant's  Certifying
     Accountant,  regarding  the  engagement  of Grant  Thornton  LLP as its new
     independent accountants to audit the Company's financial statements for the
     year ended December 31, 2003.

     On September 12, 2003,  under Item 2, Acquisition or Disposition of Assets,
     attaching a press release  regarding the issuance of a Secured  Convertible
     Note to Laurus  Master Fund,  Ltd.  ("Laurus")  and  execution of a related
     Security  Agreement  with  Laurus,  pursuant to which  Laurus  provided the
     company with a $4,000,000 revolving asset-based credit facility in the form
     of a  three-year  Convertible  Note  secured  by the  accounts  receivable,
     inventory,  real  property  and other  assets of the  Company,  other  than
     intellectual property.




                                       27
<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.
<TABLE>
<CAPTION>
<S>                                                         <C>



                                                    EP MEDSYSTEMS, INC.
                                                    (Registrant)

Date:  November 13, 2003                   By:      /s/  Reinhard Schmidt
                                                    Reinhard Schmidt
                                                    President and Chief Executive Officer and Director
                                                    (Principal Executive Officer)


Date:  November 13, 2003                   By:      /s/ Matthew C. Hill
                                                    Matthew C. Hill
                                                    Chief Financial Officer
                                                    (Principal Financial Officer)


</TABLE>

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<PAGE>

                                  EXHIBIT INDEX

Exhibit Number    Description

          3.1  Amended  and  Restated   Certificate  of   Incorporation   of  EP
               MedSystems,  Inc., filed with the Secretary of State of the State
               of New Jersey on April 8, 1996. (1)

          3.2  Certificate of Amendment to the Amended and Restated  Certificate
               of Incorporation of EP MedSystems, Inc., filed with the Secretary
               of State of the State of New Jersey on November 6, 1998. (11)

          3.3  Certificate of Amendment to the Amended and Restated  Certificate
               of Incorporation of EP MedSystems, Inc., filed with the Secretary
               of State of the State of New Jersey on October 23, 2001. (2)

          3.4  Bylaws, as amended. (1)

          4.1  Form of Common Stock and Warrant Purchase Agreement,  dated as of
               August 31, 1999,  between EP MedSystems and the Purchasers  named
               therein  (including  Exhibit  A:  Form  of  Registration   Rights
               Agreement and Exhibit B: Form of Warrant). (3)

          4.2  Form of  Replacement  Warrant,  dated as of  February  15,  2000,
               between EP MedSystems and the Purchasers named therein (including
               Amendment  to   Registration   Rights   Agreement   and  Form  of
               Replacement Warrant) (4).

          4.3  Form of Amended and Restated  Common  Stock and Warrant  Purchase
               Agreement,  dated as of February 16, 2001,  between EP MedSystems
               and the Purchasers  named therein  (including  Exhibit A: Form of
               Registration  Rights  Agreement  and  Exhibit B: Form of Warrant)
               (5).

          4.4  Registration  Rights Agreement,  dated March 28, 2001, between EP
               MedSystems and the Purchasers named therein (6).

          4.5  Warrant, dated March 28, 2001, issued by EP MedSystems to Cardiac
               Capital, LLC (6).

          4.6  Warrant,  dated March 28, 2001, issued by EP MedSystems to Texada
               Trust (6).

          4.7  Warrant,  dated as of July 20, 2001,  issued by EP  MedSystems to
               Reinhard Schmidt (7).

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

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

                                       29
<PAGE>

          4.10 Stock Purchase Agreement,  dated as of September 5, 2002, between
               EP MedSystems, Inc. and Boston Scientific
                           Corporation. (8)

          4.11 Registration  Rights  Agreement,  dated as of  September 5, 2002,
               between EP MedSystems,  Inc. and Boston  Scientific  Corporation.
               (8)

          4.12 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. (9)

          4.13 Registration  Rights Agreement,  dated as of January 31, 2003, by
               and  between  EP  MedSystems,  Inc.  and  the  Initial  Investors
               referred to therein. (9)

          4.14 Warrant, dated January 31, 2003, issued by EP MedSystems, Inc. to
               Michael R. Hamblett. (9)

          4.15 Warrant, dated January 31, 2003, issued by EP MedSystems, Inc. to
               Heimdall Investments Ltd. (9)

          4.16 Warrant, dated January 31, 2003, issued by EP MedSystems, Inc. to
               EGS Private Healthcare Partnership, L.P. (9)

          4.17 Warrant, dated January 31, 2003, issued by EP MedSystems, Inc. to
               EGS Private Healthcare Counterpart, L.P. (9)

          4.18 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.
               (9)

          4.19 Mortgage  Note,  dated  November  21,  2002,  issued  to  William
               Winstrom,  in the  principal  amount of $375,000,  together  with
               related Mortgage and Security Agreement. (9)

          4.20 Mortgage  Note,  dated  November  21,  2002,  issued  to  Anthony
               Varrichio,  in the  principal  amount of $375,000,  together with
               related Mortgage and Security Agreement. (9)

          4.21 Agreement  between  Anthony  Varrichio and EP  MedSystems,  Inc.,
               dated April 2, 2003,  effecting  conversion  of the Mortgage Note
               into 150,000 shares of EP MedSystems common stock. (13)

          4.22 Agreement between William Winstrom and EP MedSystems, Inc., dated
               April 2, 2003,  effecting  conversion  of the Mortgage  Note into
               150,000 shares of EP MedSystems common stock. (12)

          4.23 Common Stock Purchase  Agreement between EP MedSystems,  Inc. and
               the several purchasers named therein, dated as of April 11, 2003.
               (12)

                                       30
<PAGE>

          4.24 Amendment  No. 1, dated April 11, 2003,  to  Registration  Rights
               Agreement,  dated as of  January  31,  2003,  by and  between  EP
               MedSystems,  Inc. and the Initial Investors  referred to therein.
               (12)

          4.25 Agreement made as of June 27, 2003, by and between EP MedSystems,
               Inc. and Anthony Varrichio. (10)

          4.26 Agreement made as of June 27, 2003, by and between EP MedSystems,
               Inc. and William Winstrom. (10)

          4.27 Notice of EP MedSystems' Right to Repurchase Warrants, dated July
               23, 2003. (10)

          4.28 Secured  Convertible  Note,  dated August 28,  2003,  with Laurus
               Master Fund, Ltd. in the principal amount of $4,000,000, together
               with  related  Registration  Rights  Agreement,   Guaranty,   and
               Security Agreement. (11)

          4.29 Warrant, dated August 28, 2003, issued by EP MedSystems,  Inc. to
               Laurus Masterfund, Ltd. (11)

          4.30 Warrant, dated August 28, 2003, issued by EP MedSystems,  Inc. to
               Biscayne Capital Markets, Inc. (13)

          31.1**  Certification  Pursuant to Rule 13a-14(a) and 15d-14(a)  under
               the Securities Exchange Act of 1934, as amended.

          31.2**  Certification  Pursuant to Rule 13a-14(a) and 15d-14(a)  under
               the Securities Exchange Act of 1934, as amended.

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

          32.2**  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 September 7, 1999, previously filed with the Commission.

(4)  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.

                                       31
<PAGE>

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

(6)  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.

(7)  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.

(8)  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.

(9)  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.

(10) Incorporated by reference from EP MedSystems,  Inc.'s  Quarterly  Report on
     Form 10-QSB for the quarter ended June 30, 2003,  previously filed with the
     Commission.

(11) Incorporated by reference from EP MedSystems, Inc.'s Current Report on Form
     8-K  dated  August  28,  2003,  previously  filed  with the  commission  on
     September 12, 2003.

(12) Incorporated  by  reference  to Amendment  No. 1 to EP  MedSystems,  Inc.'s
     Registration Statement on Form S-3, previously filed with the Commission on
     April 18, 2003.

(13) Incorporated by reference to EP MedSystems,  Inc.'s Registration  Statement
     on Form S-3, File No.  333-110023,  previously filed with the Commission on
     October 28, 2003.