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 second quarter period ended: September 30, 1996
                         OR
 ( ) TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE
     EXCHANGE ACT
     For the transition period from ________  to  __________

               Commission File Number:   0-28260

                      EP MEDSYSTEMS, INC.
    (Exact name of registrant as specified in its charter)

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

58 Route 46 West, Budd Lake, New Jersey          07828
(Address of principal executive offices)         (Zip Code)

Registrant's telephone number, including area code:
(201)691-6400

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

Indicate  the  number  of shares outstanding  of  each  of  the
issuer's  classes of common stock, as of the latest practicable
date:   Common Stock, no par value 7,599,917 shares outstanding
at November 13, 1996.


          EP MEDSYSTEMS, INC. AND SUBSIDIARY
      INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                                                     
PART I.  --  FINANCIAL INFORMATION                   Page
                                                       
Item 1.  Financial Statements                          
                                                     
Consolidated Balance Sheets at September 30, 1996      3-4
(unaudited) and December 31, 1995
                                                          
Consolidated Statements of Operations for the three      5
months ended September 30, 1995 and 1996(unaudited)
                                                          
Consolidated Statements of Operations for the nine       6
months ended September 30, 1995 and 1996(unaudited)
                                                          
Consolidated Statements of Cash Flows for the nine     7-8
months ended September 30, 1995 and 1996(unaudited)
                                                          
Notes to Consolidated Financial Statements            9-11
                                                          
Item 2.  Management's Discussion and Analysis of     12-19
Financial Condition and Results of Operations
                                                          
PART II.  --  OTHER INFORMATION                           
                                                          
Item 6.  Exhibits and Reports on Form 8-K               20
                                                          
Signatures                                              20
                                                          
Exhibit Index                                           21
                                                          
                                                          
                                                          

PART I - FINANCIAL INFORMATION
Item 1.  Financial Statements      
                                             
                                             
                 EP MEDSYSTEMS, INC.
             CONSOLIDATED BALANCE SHEETS
                                                             
                                       December 31,   September 30,
                                         1995          1996
                                                   (unaudited)
                               
ASSETS                                             
Current assets:                                                
 Cash and cash equivalents                $34,588      $986,706
 Short-term investments                         0     1,960,118
 Accounts receivable, net                 438,120       982,428
 Inventories                              469,265       532,736
 Notes receivable, net                    150,000             0
 Prepaid expense and other                 53,648        78,386
 current assets
      Total current assets              1,145,621     4,540,374
                                                               
Property and equipment, net               148,954       152,055
                                                               
Marketable securities                           0     8,014,913
Intangible assets, net                    722,448       641,383
Other assets                               26,837             0
      Total assets                     $2,043,860   $13,348,725
                                                               
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
Current liabilities:                                           
Current portion of notes payable          $17,200            $0
Accounts payable                          281,118       186,275
Payable due to related party              258,720        72,817
Accrued expenses                          248,397       278,564
Deferred revenue                          145,875        43,063
Customer deposits                          91,502       102,123
      Total current liabilities         1,042,812       682,842
                                                               
Long-term debt                           1180,318             0
      Total liabilities                 2,223,130       682,842
                                                               
Commitments and contingencies                                  
                                                               
Shareholders' (deficit) equity:                                
 Preferred Stock, no par value,            -            -
 5,000,000 shares authorized, no
 shares issued and outstanding
                                                               
 Common Stock, $.001 stated value,                             
 25,000,000 shares authorized,                                 
 4,352,000 and 7,599,917 shares                                
 issued and outstanding                                        
                                            4,352         7,600
 Additional paid-in capital             3,306,088    16,743,014
 Accumulated deficit                  (3,489,710)   (4,084,731)
Total shareholders' (deficit) equity    (179,270)    12,665,883
                                                               
Total liabilities and shareholders'                            
(deficit) equity                       $2,043,860   $13,348,725


The accompanying notes are an integral part of these statements
                               


                 EP MEDSYSTEMS, INC.
        CONSOLIDATED STATEMENTS OF OPERATIONS
                     (unaudited)
                                  
                                    For the Three Months Ended
                                    September 30,  September 30,
                                        1995           1996
Product sales                        $   637,380  $   433,461
Revenue from catheter development              0            0
     Total revenues                      637,380      433,461
                                                             
Operating costs and expenses:                                
  Cost of products sold                  364,563      270,959
  Sales and marketing expenses            94,497      178,372
  General and administrative                                 
  expenses                               216,935      237,537
  Depreciation and amortization           31,146       36,128
  Research and development expenses      174,504      211,537
          Loss from operations         (244,265)    (501,072)
                                                             
Interest expense                        (12,062)      (5,757)
Interest income                                0      173,488
          Net loss                   $ (256,327)  $ (333,341)
                                                             
Net loss per share                   $     (.04)  $     (.04)
                                                             
Weighted average shares outstanding    5,789,654    7,581,167





The accompanying notes are an integral part of these statements
                               

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

                                        For the Nine Months Ended
                                       September 30,  September 30,
                                           1995           1996
Product sales                          $  1,524,002  $  1,758,156
Revenue from catheter development                 0       250,000
     Total revenues                       1,524,002     2,008,156
                                                                 
Operating costs and expenses:                                    
  Cost of products sold                     824,097       936,765
  Sales and marketing expenses              342,694       447,560
  General and administrative                                     
  expenses                                  511,027       724,685
  Depreciation and amortization              94,495       106,336
  Research and development expenses         279,534       370,809
  Write-off of value of 1995 Warrants                            
    on retirement of 1995 Debentures              0        49,232
  Write-off of intangible and other                              
    assets                                        0       107,500
          Loss from operations            (527,845)     (734,731)
                                                                 
Interest expense                           (31,602)      (44,238)
Interest income                               9,018       183,948
          Net loss                     $  (550,429)  $  (595,021)
                                                                 
Net loss per share                     $      (.10)  $      (.09)
                                                                 
Weighted average shares outstanding       5,789,654     6,491,235
                                                                 
                               
The accompanying notes are an integral part of these statements
                               
                               
                               
                 EP MEDSYSTEMS, INC.
     CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
                                 For the Nine Months Ended
                                September 30,  September 30,
                                    1995           1996
Cash flows from operating activities:
 Net loss                          $(550,427)     $(595,021)
 Adjustments to reconcile net income to net
 cash provided (used) by operating activities
 Depreciation and amortization           100,302        124,670
 Write-off of intangible and other             0        107,500
   assets
 Write-off of value of 1995 Warrants                           
   on retirement of 1995 Debentures            0         49,232
 Issuance of stock for research                                
   and development                       138,000              0
 Issuance of stock for consulting         29,000              0
 Bad debt expense                         36,000              0
 Changes in assets and liabilities:
  (Increase)in accounts receivable     (186,247)      (544,308)
  (Increase)in inventories               (4,674)       (63,471)
  (Increase)in prepaid expenses                                
    and other current assets             (8,513)       (24,738)
  (Increase)decrease in other assets     (2,071)         26,837
  Increase (decrease) due to             134,259      (185,903)
    related party
  Increase (decrease) in accounts         25,156       (94,843)
    payable
  Increase (decrease) in accrued                               
    expenses and deferred revenue        194,829       (72,646)
  (Decrease) increase in deposits        (4,375)         10,621
    Net cash (used) by operating                               
       activities                       (98,761)    (1,262,070)

Cash flows from investing activities:
 Capital expenditures, net of                                  
 disposals                              (38,669)       (46,706)
 Purchase of short term investments            0    (9,975,031)
 Loan to Falfab                        (100,000)        (7,500)
   Net cash used in investing                                  
      activities                       (138,669)   (10,029,237)
                                                        
Net cash from financing activities:                            
Proceeds (repayment) of debentures,      687,500       (62,500)
Net proceeds from issuance of stock            0     12,415,175
 (Payment) of borrowings                (70,000)              0
  Payments of notes payable            (109,250)      (109,250)
   Net cash provided by financing                              
      activities                         508,250     12,243,425
                                                        
  Net increase (decrease) in cash        270,820        952,118
Cash, beginning of period                 20,008         34,588
Cash, end of period                      290,828        986,706
                                                        

Supplemental Statement of Cash Flow Information:

Supplemental Noncash Investing and Financing Activities:
During the nine months ended September 30, 1996, the holders of
$1,025,000   face   amount  of  long  term  debt   (the   "1995
Debentures") elected to exercise warrants ("the 1995 Warrants")
to  purchase 512,500 shares of common stock at $2.00 per  share
in lieu of receiving cash repayment of the debentures.  On June
30,  1996,  the  Company repaid the remaining outstanding  1995
Debentures in the face amount of $112,500 in cash.  The holders
of  the  remaining 1995 Warrants exercised warrants to purchase
56,250 shares of common stock at $2.00 per share.

Cash  paid  for interest was $26,708 and $60,969 for  the  nine
months ended September 30, 1995 and 1996, respectively.


The accompanying notes are an integral part of these statements

                      EP MEDSYSTEMS, INC.
          Notes to Consolidated Financial Statements
                          (unaudited)

Note 1 - Basis of Presentation

The  accompanying  unaudited consolidated financial  statements
reflect    all   adjustments   (including   normal    recurring
adjustments)  that  management considers necessary  to  present
fairly  the  Company's financial position as of  September  30,
1996;  the results of operations for the three and nine  months
ended  September 30, 1996 and 1995; and the cash flows for  the
nine  months  then  ended.  The results of operations  for  the
respective  interim periods are not necessarily  indicative  of
the  results  to be expected for the full year.  The  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  Registration
Statement on Form SB-2 (Reg. No. 333-3642).

Note 2 - Initial Public Offering

In  June,  1996,  the  Company  completed  its  initial  public
offering  consisting of 2,500,000 shares  of  common  stock  at
$5.50  per  share.   The net proceeds from  the  offering  were
approximately $11,786,000 after deducting offering expenses.

Note 3 - Repayment of Debentures and Exercise of Stock Purchase
Warrants

During  June,  1996, the holders of $1,025,000 face  amount  of
1995  Debentures  elected to exercise their  1995  Warrants  to
purchase  512,500 shares of common stock at $2.00 per share  in
lieu of receiving cash repayment of the Debentures. On June 30,
1996,  the  Company  repaid  the  remaining  outstanding   1995
Debentures in the face amount of $112,500 in cash.  During  the
three  months ended September 30, the holders of the  remaining
1995  Warrants exercised their option to purchase 56,250 shares
of common stock at $2.00 per share.  Upon repayment of the 1995
Debentures,  the  Company  recorded a  write  off  of  $46,497,
representing the unamortized value placed on the 1995  Warrants
issued in connection with the 1995 Debentures.

Note 4 - Repayment of Note Payable

During  September,  1996, the Company  repaid  the  outstanding
principal  and interest on a note payable issued in  connection
with  the acquisition of ProCath in the amount of $96,350  plus
accrued interest.

Note 5 - Inventories

Inventories consist of the following:
                             December      September
                               31,             30
                               1995           1996
     Raw materials       $     285,326  $     283,613
     Work-in-process            21,671         13,839
     Finished goods            162,268        235,284
                         $     469,265  $     532,736
                                           


Note 6 - Net Loss Per Common Share

Net  loss  per  share for the three months ended September  30,
1996  is  calculated according to Accounting  Principles  Board
Opinion  No.  15  ("APB  15"), "Earnings  per  Share,"  and  is
computed by dividing net loss by the weighted average number of
shares  of common stock outstanding during the period.  Options
and warrants have been excluded because they are anti-dilutive.

Net loss per share for the nine months ended September 30, 1996
is computed by dividing net loss by the weighted average number
of  shares of common stock and common stock equivalents  deemed
outstanding.    Pursuant   to  the  Securities   and   Exchange
Commission  Staff Accounting Bulletin No. 83  ("SAB  No.  83"),
common  stock,  stock options and warrants  issued  during  the
twelve  months preceding the Company's initial public  offering
at  prices  below the initial public offering price  have  been
included  in  the Company's loss per share computation  through
June  30,  1996,  the  period during which the  initial  public
offering  became  effective, using the treasury  stock  method,
even though they were anti-dilutive.

Net  loss  per  share  for  the three  and  nine  months  ended
September  30,  1995 is computed by dividing net  loss  by  the
weighted  average number of shares of common stock  and  common
stock   equivalents  deemed  outstanding  during  the   periods
presented.    Pursuant  to  SAB No.  83,  common  stock,  stock
options  and warrants issued during the twelve months preceding
the  Company's  initial public offering  at  prices  below  the
initial  public  offering  price  have  been  included  in  the
Company's  loss  per share computation for the three  and  nine
month  periods  ending September 30, 1995, using  the  treasury
stock  method,  even  though  they  were  antidilutive.   Stock
options issued prior to the twelve months preceding the initial
public offering are excluded as they are antidilutive.



                      EP MEDSYSTEMS, INC.
                               
       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
              CONDITION AND RESULTS OF OPERATIONS

The following is management's discussion of significant factors
that  affected  the Company's interim financial  condition  and
results of operations.  This should be read in conjunction with
Management's Discussion and Analysis of Financial Condition and
Results  of  Operations included in the Company's  Registration
Statement  on Form SB-2 filed with the Securities and  Exchange
Commission (Reg. No. 333-3642).

This  Report  on Form 10-QSB contains certain statements  of  a
forward looking nature relating to future events or the  future
financial  performance  of the Company.   Such  forward-looking
statements  are  only  predictions, and the  actual  events  or
results may differ materially from the results discussed in the
forward  looking  statements.   Factors  that  could  cause  or
contribute to such differences include those discussed below as
well  as  those  discussed in "Risk Factors" of  the  Company's
Registration  Statement on Form SB-2 filed with the  Securities
and Exchange Commission (Reg. No. 333-3642).

RESULTS OF OPERATIONS

General

Historically,   the   Company  has  relied   on   third   party
distributors for all of its sales activities.  Concurrent  with
the  completion  of  its initial public offering,  the  Company
began  efforts to build a direct sales and marketing  force  to
sell  all  of  its  products  in the  domestic  market  and  to
strengthen  its international distribution network.   To  date,
the  Company  has  hired  a new Vice  President  of  Sales  and
Marketing,  a  National  Sales  Manager,  four  Regional  Sales
Managers, a Director of Marketing and several technical service
and  administrative support personnel.  At the same  time,  the
Company  terminated its relationships with all of its  domestic
distributors.  The Company believes that the change over from a
distributor  based sales force to a direct sales  force  had  a
temporary   adverse   effect  on  sales  of   electrophysiology
equipment  during  the three month period ended  September  30,
1996.   However, the Company also believes its domestic  direct
sales force will generate greater sales in the future than  the
Company  would  have generated through the use of distributors.
It is likely that the Company will incur additional losses as a
result  of  the  increased fixed costs associated  with  direct
sales  until  such  time  as sufficient incremental  sales  are
generated  to  cover such costs.  The Company cannot  determine
when or if that level of sales will be achieved.

The Company intends to continue to utilize distributors to sell
its   products  overseas  and  is  in  the  process  of  adding
distributors  in several countries not previously  represented.
To assist in this process, the Company is appointing a Director
of  International  Sales  to  manage distributor  relationships
outside  of  the  United  States.   The  Company  has  recently
received approval from the Japanese Ministry of Health to  sell
electrophysiology  equipment  and  catheters  in  the  Japanese
market.   Therefore,  the  Company expects  to  initiate  sales
through  its Japanese distributor during the fourth quarter  of
1996.


Nine Months Ended September 30, 1996 Compared to Nine Months
Ended September 30, 1995

Total revenues increased $484,154 (or 31.8%) from $1,524,002 to
$2,008,156  in the nine months ended September 30,  1996.   The
increase  was due to the initiation of sales of the EP WorkMate
in   September,  1995,  recognition  of  deferred  revenue   on
disposable products and development income realized through the
development,  for  a third party, of a new  dual  shock  atrial
defibrillation catheter using a single catheter placed  in  the
coronary sinus.  Catheter development income may or may not  be
recurring.  As discussed under Results of Operation  -  General
above,  the Company has assembled a domestic direct  sales  and
marketing  force  to  sell all of the  Company's  products  and
terminated   all   of  its  domestic  independent   distributor
relationships.  The Company believes that the change over  from
a  distributor based sales force to a direct sales force had  a
temporary   adverse   effect  on  sales  of   electrophysiology
equipment for the three months ended September 30, 1996.  It is
likely  that  the  Company will incur additional  losses  as  a
result  of  the  increased fixed costs associated  with  direct
sales  until  such  time  as sufficient incremental  sales  are
generated  to  cover such costs.  The Company cannot  determine
when or if that level of sales will be achieved.  The level  of
1996  and 1997 sales will depend significantly on sales of  the
EP  WorkMate  and  the ability of the Company's  newly  created
domestic sales force to effectively market the EP WorkMate  and
the  Company's other products.  The Company expects to continue
to  utilize  independent  distributors  to  sell  its  products
overseas  and  is  in  the  process of adding  distributors  in
several  countries  not  previously represented.   The  Company
expects  to begin shipments to Japan during the fourth  quarter
of 1996.

Cost  of  products  sold  increased $112,668  (or  13.7%)  from
$824,097  to $936,765.  Gross margin on products sold increased
$121,486  (or  17.4%) from $699,905 to $821,391 due  to  higher
sales.    To  date,  the  Company  has  offered  discounts   to
purchasers  of  the  EP WorkMate to help establish  a  base  of
customers.  In the future, the Company will attempt  to  reduce
its  discount and increase its list price for the EP  WorkMate.
However,  given the competitive nature of the market there  can
be  no assurance that it will be successful with respect to its
pricing  goals  for  the EP WorkMate.  The use  of  a  domestic
direct  sales force may lead to an increased average net  sales
price  for certain of the Company's products, including the  EP
WorkMate,  however  this  may be offset  by  increased  selling
expenses.   The  realization  of catheter  development  revenue
improved operating margins during the period.  This revenue may
or may not be recurring.

Sales and marketing expenses increased $104,866 (or 30.6%) from
$342,694  to  $447,560.  The increase was due  to  the  initial
costs  associated with hiring a direct sales force  during  the
third  quarter, increased commissions paid to distributors  and
other  sales  costs associated with higher sales  volume.   The
Company  expects  sales  and  marketing  expenses  to  increase
significantly during the fourth quarter of 1996 and  beyond  to
support its increased sales efforts.  These costs include,  but
are  not  limited  to,  sales salaries  and  benefits,  travel,
increased  costs  associated with  attending  trade  shows  and
conventions and increased marketing and promotional costs.

General  and  administrative expenses  increased  $213,658  (or
41.8%)  from $511,027 to  $724,685.   The increase was  due  to
the  hiring of several management personnel and increased rent,
insurance  and other administrative costs associated  with  the
increased  operating  activities.  The  Company  expects  these
costs  to continue to increase to support increased operations,
the  upcoming clinical trials for the ALERT Catheter System and
activities  associated with obtaining and maintaining  ISO-9001
and CE Mark Certification for its products.

Depreciation  and amortization expenses increased  $11,841  (or
12.5%)  from  $94,495 to $106,336.  The  increase  was  due  to
depreciation on new property and equipment.  This was partially
offset   by   the  elimination  of  depreciation   on   product
demonstration equipment which was fully depreciated during  the
period.

Research and development expenses increased $91,275 (or  32.7%)
from   $279,534  to  $370,809.   The  increase   was   due   to
expenditures associated with the Company's preparations for the
ALERT  Catheter  System clinical trials, costs for  its  linear
flexible  catheter electrode technology which was  licensed  in
May,  1996  and  the  hiring  of additional  personnel  in  the
research  and  product  development areas.   The  increase  was
partially offset by a $138,000 charge to acquired research  and
development  expense  in  1995,  outside  consulting   expenses
associated  with the steerable catheter technology and  the  EP
WorkMate  product introduction in 1995 which were not recurring
during  the nine months ended September 30, 1996.  The  Company
expects   research   and  development  expenses   to   increase
significantly in future periods in connection with the proposed
clinical   evaluation  of  the  ALERT  Catheter   System,   the
development  of  new products and the enhancement  of  existing
products.

Write-off of intangible and other assets increased $107,500, as
the Company wrote off a loan to Falfab, a UK based manufacturer
of  angioplasty catheters, due to Falfab's inability  to  repay
such amount.

Write-off  of  debenture warrants upon  repayment  was  $49,232
during the nine months ended September 30, 1996, as the Company
expensed the value placed on the 1995 warrants due to the early
repayment of the 1995 Debentures and the concurrent exercise of
the 1995 Warrants.

Interest expense increased $12,636 (or 40.0 %) from $31,602  to
$44,238.   The increase was due to interest expense  associated
with  the 1995 Debentures issued beginning in July, 1995.   The
increase  was  partially offset by repayment of  a  portion  of
indebtedness incurred in the acquisition of catheter and  other
technologies.   During  1996,  the  Company  repaid  the   1995
Debentures  and  the  debt associated with the  acquisition  of
ProCath.

Interest income increased $174,930 from $9,018 to $183,948  due
to  interest  earned  on  the proceeds of  its  initial  public
offering  completed in June, 1996. The Company expects interest
income  to increase in future periods as it continues to invest
the balance of the offering proceeds.

The  Company incurred a net loss of $595,021, or $.09 per share
(per  share data based upon weighted average shares outstanding
of  6,491,235), for the nine month period ending September  30,
1996,  compared with a net loss of $550,429, or $.10 per  share
(per  share data based upon weighted average shares outstanding
of  5,789,654),  for the nine months ended September  30,  1995
(see  Note  6  to the Consolidated Financial Statements  for  a
discussion of the calculation of per share data).  The increase
of  $44,592  (or  8.1%) in net loss was caused by  the  factors
discussed above.


Three Months Ended September 30, 1996 Compared to Three Months
Ended September 30, 1995

Total  revenues decreased $203,919 (or 32.0%) from $637,380  to
$433,461  in  the three months ended September  30,  1996.   As
discussed  under  Results of Operation  -  General  above,  the
Company  has  assembled a domestic direct sales  and  marketing
force to sell all of the Company's products and terminated  all
of  its  domestic  independent distributor relationships.   The
Company believes that the change over from a distributor  based
sales  force  to  a direct sales force had a temporary  adverse
effect  on  sales of electrophysiology equipment for the  three
months ended September 30, 1996.  It is likely that the Company
will incur additional losses as a result of the increased fixed
costs   associated  with  direct  sales  until  such  time   as
sufficient incremental sales are generated to cover such costs.
The  Company  cannot determine when or if that level  of  sales
will be achieved.  The level of 1996 and 1997 sales will depend
significantly  on sales of the EP WorkMate and the  ability  of
the Company's newly created domestic sales force to effectively
market  the EP WorkMate and the Company's other products.   The
Company expects to continue to utilize independent distributors
to  sell its products overseas and is in the process of  adding
distributors  in several countries not previously  represented.
The  Company  expects to begin shipments to  Japan  during  the
fourth quarter of 1996.

Cost  of  products  sold  decreased  $93,604  (or  25.7%)  from
$364,563  to $270,959.  Gross margin on product sales decreased
$110,315  (or  59.6%) from $272,817 to $162,502  due  to  lower
sales. To date, the Company has offered discounts to purchasers
of  the EP WorkMate to help establish a base of customers.   In
the future, the Company will attempt to reduce its discount and
increase  its  list price for the EP WorkMate.  However,  given
the  competitive nature of the market there can be no assurance
that  it  will be successful with respect to its pricing  goals
for  the EP WorkMate.  The use of a domestic direct sales force
may lead to an increased average net sales price for certain of
the Company's products, including the EP WorkMate, however this
may be offset by increased selling expenses.

Sales and marketing expenses increased $83,875 (or 88.8%)  from
$94,497 to $178,372. The increase was due to the initial  costs
associated with hiring a direct sales force during the  period.
The  Company  expects sales and marketing expenses to  increase
significantly during the fourth quarter of 1996 and  beyond  to
support its increased sales efforts.  These costs include,  but
are  not  limited  to,  sales salaries  and  benefits,  travel,
increased  costs  associated with  attending  trade  shows  and
conventions and increased marketing and promotional costs.

General and administrative expenses increased $20,602 (or 9.5%)
from $216,935 to  $237,537.  The increase was due to the hiring
of  several management personnel and increased rent,  insurance
and  other  administrative costs associated with the  increased
operating  activities.   The Company  expects  these  costs  to
continue  to  increase  to  support increased  operations,  the
upcoming  clinical  trials for the ALERT  Catheter  System  and
activities  associated with obtaining and maintaining  ISO-9001
and CE Mark Certification for its products.

Depreciation  and  amortization expenses increased  $4,982  (or
16.0%)  from  $31,146  to $36,128. The   increase  was  due  to
depreciation on new property and equipment.  This was partially
offset   by   the  elimination  of  depreciation   on   product
demonstration equipment which was fully depreciated during  the
period.

Research and development expenses increased $37,033 (or  21.2%)
from   $174,504  to  $211,537.   The  increase   was   due   to
expenditures associated with the Company's preparations for the
ALERT  Catheter  System clinical trials, costs for  the  linear
flexible  catheter electrode technology which was  licensed  in
May,  1996  and  the  hiring  of additional  personnel  in  the
research  and  product  development areas.   The  increase  was
partially offset by a $138,000 charge to acquired research  and
development expense in 1995 which was not recurring during  the
three  months  ended September 30, 1996.  The  Company  expects
research and development expenses to increase significantly  in
future   periods  in  connection  with  the  proposed  clinical
evaluation of the ALERT Catheter System, the development of new
products and the enhancement of existing products.

Interest  expense decreased $6,305 (or 52.3 %) from $12,062  to
$5,757.   The  decrease was due to the repayment  of  the  1995
Debentures and debt associated with the acquisition of ProCath.

Interest income increased $173,488 from $0 to $173,488  due  to
interest earned on the proceeds of the Company's initial public
offering.

The  Company incurred a net loss of $333,341, or $.04 per share
(per  share data based upon weighted average shares outstanding
of  7,581,167,  which exclude options because  they  are  anti-
dilutive),  for  the  three month period ending  September  30,
1996,  compared with a net loss of $256,327, or $.04 per  share
(per  share data based upon weighted average shares outstanding
of  5,789,654), for the three months ended September  30,  1995
(see  Note  6  to the Consolidated Financial Statements  for  a
discussion of the calculation of per share data).  The increase
of  $77,014  (or 30.0%) in net loss was caused by  the  factors
discussed above.


LIQUIDITY AND CAPITAL RESOURCES

Since inception, the Company's expenses have exceeded revenues,
resulting  in  an  accumulated deficit of  approximately  $4.08
million.   The  Company's  expects  that  its  working  capital
requirements  will  continue to be significant.   On  June  21,
1996,  the  Company  completed an initial  public  offering  of
2,500,000 shares at $5.50 per share, for aggregate proceeds  of
approximately $11,786,000 which the Company intends to use for,
among  other things, filing its IDE application, completion  of
clinical   trials  of  the  ALERT  Catheter  System,  continued
expansion  of  its sales and marketing capabilities,  acquiring
new  products  and  expanding its existing product  line.   The
Company  believes,  based on its currently proposed  plans  and
assumptions  relating to its operations that  the  proceeds  of
this offering will be sufficient to support its domestic direct
sales  and  marketing efforts, complete research  and  clinical
studies,  prepare  and  file  a IDE application  and  otherwise
satisfy  its  contemplated cash requirements for at  least  the
next 12 months.

Net  cash  (used by) operating activities for the  nine  months
ended  September  30,  1996  was ($1,262,070)  as  compared  to
($98,761)  for the nine months ended September 30,  1995.   Net
cash  used  was primarily to fund the net loss of $595,021,  to
fund  increased  accounts receivable,  and  to  repay  accounts
payable, accrued expenses payable and amounts due to a  related
party.   Accounts  receivable increased $544,308  in  the  nine
months  ended  September 30, 1996 from  $446,318  to  $982,428.
This   increase   resulted   from  increased   product   sales,
particularly  EP  WorkMate, which are  often  sold  subject  to
extended  payment  terms secured by a  letter  of  credit,  and
catheter   development  revenue,  a   portion   of   which   is
outstanding.  At  September 30, 1996, the   Company's  accounts
payable,  accrued expenses and payables to related  party  were
$537,656  as  compared to $788,235 at December  31,  1995.   At
September  30, 1996, the Company had cash and cash  equivalents
of  $986,706, short term investments and marketable  securities
of $9,975.031 ($8,014,913 of which is classified as non-current
assets) and working capital of $3,857,532 due to the completion
of its initial public offering on June 21, 1996.

Cash  used  in  investing activities for the nine months  ended
September 30, 1996 included the purchase of $9,975,031 in short
term  investments  and marketable securities, representing  the
proceeds of the Company's initial public offering.  During  the
nine months ended September 30, 1996, capital expenditures were
$46,706  as compared to $38,669 in the corresponding period  in
1995.    The  Company  is  considering  purchasing  a  building
currently  leased  by its ProCath subsidiary for  approximately
$350,000 and expanding the available square footage at  ProCath
from  5,000  to 7,500.  As of this date, the Company  does  not
have  any other material commitments for capital  expenditures.
The  Company expects, however, to use a portion of the proceeds
of  its  offering  for the purchase of capital  equipment,  for
expansion  of manufacturing and assembly and implementation  of
ISO-9000  and obtaining the CE Mark for its products.    During
the  nine months ended September 30, 1996, the Company advanced
a $7,500 loan to Falfab, a UK based manufacturer of angioplasty
catheters.   The Company elected to write off this amount  plus
an  additional $100,000 note receivable advanced in 1995 due to
Falfab's  inability to repay the amounts due.  The Company  had
evaluated  Falfab  as  a potential manufacturing  facility  for
catheters in Europe.  Due to the anticipated expansion  of  the
ProCath facility and the expected CE Mark Certification for its
products, the Company is not considering the establishment of a
European based catheter manufacturing operation at this time.

Net  cash provided by financing activities was $12,243,425  for
the   nine   months  ended  September  30,  1996  and  included
approximately  $11,786,000 net proceeds of the  initial  public
offering,  $500,000 from the sale of 166,667 shares  of  common
stock  at $3.00 per share in January, 1996 and the proceeds  of
the exercise of 12,500 common stock options. During June, 1996,
the  Company  repaid $112,500 face amount of  1995  Debentures.
The  holders  of  $1,025,000  face amount  of  1995  Debentures
elected to exercise 1995 Warrants to purchase 512,500 shares of
common  stock  at  $2.00 per share in lieu  of  receiving  cash
repayment  of  the  debentures.  During  September,  1996,  the
Company  repaid $96,350 plus accrued interest  due  on  a  note
payable arising from the acquisition of ProCath.

During the periods discussed above, the overall effects of
inflation and seasonality on the Company's business were not
significant.

PART II.     OTHER INFORMATION
Item 6.      Exhibits and Reports on Form 8-K
             (a)     Exhibits
               The following exhibits will be filed as part of
this Form 10-QSB:

               Exhibit 11.1 * Computation of Earnings Per Share
               Exhibit 27 *   Financial Data Schedule
               * Filed herewith

          (b)  Reports on Form 8-K
               No reports on Form 8-K were filed during the
               quarter ended September 30, 1996

                          SIGNATURES

Pursuant to the requirements of the Securities Exchange Act  of
1934,  the Registrant has duly caused this report to be  signed
on its behalf by the undersigned thereunto duly authorized.


                         EP MEDSYSTEMS, INC.
                         (Registrant)


Date:  November 14, 1996      By:   /s/ David A. Jenkins
                                        David A. Jenkins,
                                        President and
                                        Chief Executive Officer

                              By:   /s/  James J. Caruso
                                         James J. Caruso,
                                        Vice President and
                                        Chief Financial Officer
                                        (Principal Financial
                                        and Accounting Officer)


                    EXHIBIT INDEX

Exhibit                                    
Number        Description of Exhibit       Method of
                                           Filing
                                           
11.1          * Statement regarding        EDGAR
              Calculation of Shares
              Used in Computing Net
              Loss Per Share
                                           
27            * Financial Data Schedule    EDGAR
                                           
              * Filed herewith