UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                  FORM 10-QSB/A
      (Amendment No. 1 to Quarterly Report Pursuant to Section 13 or 15(d)
                        of the Securities Exchange Act)

                                   (Mark One)
          (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                 For the quarterly period ended: March 31, 2001
                                 --------------

             ( ) 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                (IRS Employer Identification No.)
incorporation or organization)

100 Stierli Court, Mount Arlington, New Jersey                07856
(Address of principal executive offices)                   (Zip Code)

                                 (973) 398-2800
                           (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.
 Yes  X 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 May  9, 2001
   -----                                         ---------------------------
   Common Stock, without par value               13,648,967  shares

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



<PAGE>

                                EXPLANATORY NOTE

      This amendment to EP MedSystems' Quarterly Report on Form 10-QSB for the
quarter ended March 31, 2001 is being filed solely to reflect a revision of our
Consolidat 12 6 ted Financial Statements for the years ended December 31, 2001
and 2000 for certain tax matters. The revision was made to recognize certain tax
benefits realized in connection with the sale of New Jersey State Net Operating
Losses as an adjustment in the valuation allowance in the periods in which the
realization became probable as well as to reflect certain income statement
reclassifications related to those benefits. See Notes 2 and 6 to our
Consolidated Financial Statements contained under "Item 1. Financial Statements"
of Part I for a further discussion of this matter.

      The net result of this revision for the three-month periods ended March
31, 2001 and 2000 is that other income decreased and net losses increased by
$419,031 and $216,562, respectively. Total shareholders' equity at March 31,
2001 and 2000 was not affected. There was no effect on cash flows, liquidity or
loss from operations.

      Items 1 and 2 of Part I are the only items being amended by this Form
10-QSB/A and such amendments relate only to the revised Consolidated Financial
Statements. In all other respects, this amendment presents information as of the
original date of the Form 10-QSB for the quarter ended March 31, 2001.


                                       2
<PAGE>

                      EP MEDSYSTEMS, INC. AND SUBSIDIARIES
                                  FORM 10-QSB/A
                                    CONTENTS

PART I  -- Financial INFORMATION                                            Page
                                                                            ----

     Item 1.  Financial Statements

              Consolidated Balance Sheet at March 31, 2001
              (unaudited)                                                    4

              Consolidated Statements of Operations for three months
              ended March 31, 2001 and 2000 (unaudited) (revised)            5

              Consolidated Statements of Cash Flows for three months
              ended March 31, 2001 and 2000 (unaudited) (revised)            6

              Notes to Consolidated Financial Statements (unaudited)        7-10

     Item 2.  Management's Discussion and Analysis or Plan of Operation    10-15


PART II  -- OTHER INFORMATION

     Item 1.  Legal Proceedings                                              15

     Item 2.  Changes in Securities                                        15-16

     Item 3.  Defaults Upon Senior Securities                                17

     Item 4.  Submission of Matters to a Vote of Security Holders            17

     Item 5.  Other Information                                              17

     Item 6.  Exhibits and Reports on Form 8-K                               18

     Signatures and Exhibit Index                                          19-20


                                       3
<PAGE>

PART I - FINANCIAL INFORMATION

                      EP MEDSYSTEMS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET

                                                       March 31, 2001
                                                       --------------
ASSETS                                                   (unaudited)
Current assets:
   Cash and cash equivalents                            $  3,108,266
   Accounts receivable, net of allowances for
        doubtful accounts of $49,022                       2,842,213
   Inventory, net                                          2,693,359
   Prepaid expenses and other current assets                 153,956
                                                        ------------
          Total current assets                             8,797,794
Property and equipment, net                                2,447,026
Intangible assets, net                                       433,759
Other assets                                                 147,847
                                                        ------------
          Total assets                                  $ 11,826,426
                                                        ============

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Accounts payable                                     $    981,460
   Payables due to related parties                           291,076
   Accrued expenses                                          537,008
   Deferred warranty revenue                                  92,667
   Customer deposits                                          22,666
   Current portion of long-term debt                          41,233
                                                        ------------
          Total  current liabilities                       1,966,110
   Long-term debt, less current portion                    3,623,609
   Non-current deferred warranty                             102,100
                                                        ------------
          Total liabilities                             $  5,691,819
                                                        ------------
Commitments and contingencies
Shareholders' equity:
   Preferred Stock, no par value, 5,000,000 shares
         authorized, no shares issued and outstanding             --
   Common stock, $.001 stated value, 25,000,000
         shares authorized, 13,648,967 shares issued
         and outstanding                                      13,649
   Additional paid-in capital                             29,458,234
   Accumulated deficit                                   (23,337,276)
                                                        ------------
          Total shareholders' equity                       6,134,607
                                                        ------------
          Total liabilities and shareholders' equity    $ 11,826,426
                                                        ============


        The accompanying notes are an integral part of these statements.


                                       4
<PAGE>

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

                                               For the Three Months Ended
                                              ----------------------------
                                                March 31,        March 31,
                                                   2001             2000
                                                (revised)        (revised)
                                              ------------    ------------

Net sales                                     $  2,068,323    $  2,902,983
Cost of products sold                              950,828       1,373,237
                                              ------------    ------------
          Gross profit                           1,117,495       1,529,746

Operating costs and expenses:
   Sales and marketing expenses                  1,102,037       1,257,276
   General and administrative expenses             556,179         501,944
   Research and development expenses               646,123         631,762
                                              ------------    ------------
          Loss from operations                  (1,186,844)       (861,236)

Interest (expense) income                          (90,010)          9,589

Other income, net                                    3,151             250
                                              ------------    ------------
          Net loss                            $ (1,273,703)   $   (851,397)
                                              ============    ============

Basic and diluted loss per share              $      (0.11)   $      (0.07)
                                              ============    ============

Weighted average shares outstanding used
to compute basic and diluted loss per share     12,095,549      11,380,933
                                              ============    ============

        The accompanying notes are an integral part of these statements.


                                       5
<PAGE>

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

<TABLE>
<CAPTION>
                                                              For the Three Months Ended
                                                               --------------------------
                                                                 March 31,      arch 31,
                                                                   2001          2000
                                                                 (revised)      revised)
                                                               -----------    -----------
<S>                                                            <C>            <C>
Cash flows from operating activities:
  Net loss                                                     $(1,273,703)   $  (851,397)
  Adjustments to reconcile net loss to net cash
      Used in operating activities:
      Depreciation and amortization                                210,480        188,120
      Deferred income taxes                                        419,031        216,562
  Changes in assets and liabilities:
      (Increase) in accounts receivable                           (330,564)      (133,429)
      (Increase) decrease in inventories                          (315,957)        34,279
     (Increase) in prepaid and other assets                        (71,289)       (24,062)
      Increase (decrease) in payables due to related parties       291,001        (52,692)
      Increase in accounts payable                                  67,360         90,687
      Increase (decrease) in accrued expenses, deferred
          revenue and customer deposits                             44,487       (331,635)
                                                               -----------    -----------
          Net cash (used in) operating activities              $  (959,154)   $  (863,567)
                                                               -----------    -----------

Cash flows from investing activities:
   Capital expenditures                                            (95,280)      (320,631)
                                                               -----------    -----------
          Net cash (used in) investing activities              $   (95,280)   $  (320,631)
                                                               -----------    -----------

Cash flows from financing activities:
   Proceeds from exercise of warrants                                   --        718,375
   Proceeds from exercise of stock options                           1,600        388,000
   Net  borrowings (payments) under note payable                 1,571,529        (12,829)
   Net (payments) under revolving line of credit                  (761,560)            --
   Net proceeds from issuance of common stock, net of
           offering expenses                                     3,048,852             --
                                                               -----------    -----------
          Net cash provided by financing activities            $ 3,860,421    $ 1,093,546
                                                               -----------    -----------

Net  increase (decrease) in cash and cash equivalents            2,805,987        (90,652)
Cash and cash equivalents, beginning of period                     302,279      2,006,731
                                                               -----------    -----------
Cash and cash equivalents, end of period                       $ 3,108,266    $ 1,916,079
                                                               ===========    ===========
</TABLE>

      The accompanying notes are an integral part of these statements.


                                       6
<PAGE>

                      EP MEDSYSTEMS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Note 1. Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and in accordance with the instructions to Form 10-QSB.
Accordingly, they do not include all of the financial information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (including normal
recurring adjustments) considered necessary for a fair presentation have been
included.

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.

The results of operations for the respective interim periods are not necessarily
indicative of the results to be expected for the full year. The accompanying
unaudited consolidated financial statements should be read in conjunction with
the audited consolidated financial statements and the notes thereto included in
the Company's Form 10-KSB for the year ended December 31, 2000 filed with the
Securities and Exchange Commission.

Note 2. Revision of Financial Statements

The Company has revised its consolidated financial statements for the years
ended December 31, 2001, 2000, and 1999, and the interim quarters of fiscal 2001
and 2000, to recognize the Company's sales of New Jersey State Net Operating
Losses ("NOLs") as an adjustment to the valuation allowance in the period in
which those sales became probable upon the approval by the State of New Jersey.
These amounts were previously classified in "Other Income" in the Consolidated
Statement of Operations and were recognized at the time the transactions were
finalized. The result of the revision for the three-month periods ended March
31, 2001 and 2000 is that other income decreased and net losses increased by
$419,031 and $216,562, respectively. Total shareholders' equity for the
three-month periods ended March 31, 2001 and 2000 was not affected.

Note 3. Inventories

Inventories are valued at the lower of cost or market with cost being determined
on a first-in, first-out basis. Inventories at March 31, 2001 consist of the
following:

      Raw materials        $1,400,527
      Work in process         186,914
      Finished goods        1,105,918
                           -----------
                           $2,693,359
                           ===========


                                       7
<PAGE>

Note 4. Note Payable

On November 15, 2000, the Company completed a debt financing in the amount of
$3.2 million with Medtronic Asset Management, Inc., an affiliate of Medtronic,
Inc., one of the Company's shareholders ("Medtronic"). Approximately $2.3
million was utilized to repay outstanding amounts on the Company's revolving
credit facility with its bank. The note to Medtronic bears interest at the prime
rate plus 2%. The principal and all accrued interest on the note are to be
repaid on November 15, 2003 and the note is secured by a pledge of certain
shares of stock owned by David Jenkins, the Company's President and Chief
Executive Officer and a director and shareholder of the Company, in a
privately-held company. The debt financing is subordinate to existing rights of
the Company's senior lender, Fleet National Bank. The Company received $1.6
million at closing and $1.6 million on January 17, 2001.

During March 1999, the Company entered into a $500,000 Term Loan Agreement with
Fleet National Bank, maturing December 31, 2004. Interest on the term note is
payable monthly in arrears at either the prime rate plus 3/4% or LIBOR plus 3
1/4%. Principal became payable commencing January 2000 in 48 equal monthly
installments under a 15 year amortization schedule with a balloon payment due in
December 2004. In addition, concurrently with the term loan, the Company entered
into a $2 million Revolving Credit Facility to fund working capital purposes.
Under its loan arrangements with its bank, the Company is required to maintain
certain financial ratios and meet certain net worth and indebtedness tests. The
loan arrangements are collateralized by a first priority lien on all corporate
assets and, pursuant to the terms of the arrangements, the Company is prohibited
from incurring certain additional indebtedness, entering into certain
investments, making certain advances or loans and effecting substantial asset
sales, capital expenditures and cash dividends. At September 30 and December 31,
2000, the Company was not in compliance with certain financial ratios of the
bank debt. The Company received a waiver from the bank in consideration of the
repayment in January 2001 of approximately, $2.3 million outstanding on the
Company's revolving credit facility utilizing the funds received from the
Medtronic debt financing described above. The credit facility, which was to
terminate by its terms in March 2001, was terminated in January 2001 and was not
replaced.

Note 5. Common Stock and Liquidity

On February 9, 2001, the Board of Directors of EP MedSystems (with David
Jenkins, as an interested director, absent from the meeting) approved the sale
and issuance of up to 1,625,000 shares of common stock of the Company and
warrants for 812,500 additional shares to certain investors. Included among the
investors is Cardiac Capital, LLC, a limited liability company ("Cardiac
Capital"), of which our Chairman of the Board, President and Chief Executive
Officer and a shareholder of the Company, David A. Jenkins, is a 50% owner. The
aggregate amount of the new shares which potentially may be issued as a result
of this transaction (the "Private Placement Financing") is in excess of 20% of
the outstanding common stock of EP MedSystems assuming all warrants are
exercised and, as a result of this and of the related party nature of the
transaction and the view that the transaction possibly could constitute a change
of control under certain Nasdaq National Marketplace rules, in


                                       8
<PAGE>

accordance with the requirements of the Nasdaq National Market, the Company
sought shareholder approval.

On March 27, 2001 the shareholders of EP MedSystems approved the Private
Placement Financing and the closing of the transaction took place effective
March 28, 2001; 1,625,000 shares of common stock were issued together with
warrants for 812,500 additional shares at a purchase price of $1.99 per share of
common stock and $0.02 per warrant share. The consummation of the transaction
has provided the Company with over $3,000,000 in working capital after expenses
and may result in additional funds if warrants are exercised.

As a result of the Company's cash position of approximately $3,108,000 at March
31, 2001, our limited sources of liquidity, our prior inability to generate
significant revenues and expected continued losses and our monthly operating
expenses of approximately $500,000, there is uncertainty as to whether the
Company will be able to continue as a going concern. The Company's auditors have
included a going concern qualification in their report on our financial
statements for the year ended December 31, 2000 because, even with the proceeds
of the Private Placement Financing it is uncertain whether we will have funds
sufficient to continue operations at our current level for more than 6 to 7 more
months, though during such time we will have the opportunity to seek further
funding transactions. The going concern qualification in the auditors' report
may adversely affect our business prospects, financial condition and results of
operations and may harm our relationships with vendors and customers as well as
further limiting our ability to obtain financing.

We expect operating losses to continue in the near future due to continued
research and development activities and additional personnel and equipment
required to support increased manufacturing and assembly of our products. The
amount and timing of future losses will be dependent upon, among other things,
increased sales of our existing products, regulatory approval and market
acceptance of the ALERT(R) System and our Viewmate(TM) Ultrasound system
regulatory and market success of new products under development. There can be no
assurance that any of our development projects will be successful or that if
development is successful, that the products will generate any sales.

Note 6. Other

During the quarters ended March 31, 2001 and 2000, the Company received
approximately $419,000 and $217,000, respectively, in cash related to the sale
of a portion of its cumulative unused New Jersey State Net Operating Loss
carryforwards for one of 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 New Jersey State Net Operating Loss 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, 2001 and 2000, the
Company recorded approximately $419,000 and $217,000, respectively, in deferred
tax assets related to these sales. These deferred tax assets were reversed upon
receipt of cash from the sales of these benefits to a third party.


                                       9
<PAGE>

Note 7. Industry Segment and Geographic Information

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

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

                                       2001         2000
                                   ----------   ----------
            United States          $  595,000   $1,391,000
            Europe/Middle East        723,000      720,000
            Asia and Pacific Rim      750,000      792,000
                                   ----------   ----------
                                   $2,068,000   $2,903,000
                                   ==========   ==========

Sales of the Company's cardiac electrophysiology devices and related catheters
aggregated $1,718,000 and $350,000, respectively, for the three months ended
March 31, 2001 and $2,463,000 and $440,000, respectively, for the comparable
period in 2000. The Company's long-lived assets are located in the U.S.

Note 8. Subsequent Events

The Company entered into a Distribution Agreement (the "Distributor Agreement")
with Fischer Imaging, Inc., a Colorado corporation ("Fischer"), as of May 1,
2001, for the distribution by the Company of certain of Fischer's
electrophysiology products, on an exclusive and non-exclusive basis as to the
different products. Pursuant to the terms of the Distributor Agreement, Fischer
is to supply the Company with all of its requirements of the Fischer products
described in the agreement at fixed prices, subject to change annually upon 90
days' prior notice to the Company. The term of the Distributor Agreement is for
a one year period subject to renewal upon mutual agreement of the parties

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

Overview

Management's Discussion and Analysis or Plan of Operation for the three month
periods ended March 31, 2001 and 2000, presented below, reflects certain
revisions to EP Med's previously reported financial statements. See Note 2 to
the Consolidated Financial Statements contained under "Item 1. Financial
Statements."

The Company was incorporated in New Jersey in January 1993 and operates in a
single industry segment. We develop, manufacture and market a line of products
for the cardiac electrophysiology ("EP") market used to diagnose, monitor and
treat irregular heartbeats known as arrhythmias. Since inception, we have
acquired technology, have developed new products and have begun marketing
various electrophysiology products, including the EP-WorkMate(R)
electrophysiology work station, the EP-3(TM) Stimulator, diagnostic
electrophysiology catheters and the ALERT(R) System including the ALERT(R)
Companion and ALERT(R) internal cardioversion catheters.


                                       10
<PAGE>

We have identified the diagnosis and treatment of atrial fibrillation as a
primary focus for our ongoing development efforts. Atrial fibrillation is the
most prevalent type of abnormal heart rhythm estimated to afflict over 2,000,000
people in the United States with an estimated 200,000 to 350,000 new cases
developing each year. Although not immediately life threatening, atrial
fibrillation has been linked to a diminished lifestyle and to a significantly
increased risk of stroke. In patients over the age of 65, atrial fibrillation is
reported to quadruple the risk of stroke. In an effort to address this problem,
we have developed a new product for internal cardioversion of atrial
fibrillation known as the ALERT(R) System, which uses a patented electrode
catheter to deliver measured, variable, low-energy electrical impulses directly
to the inside of the heart in order to convert atrial fibrillation to a normal
heart rhythm.

The ALERT(R) System is not approved for sale in the United States, but we have
completed clinical trials of over 150 patients and we submitted our Pre Market
Approval ("PMA") application to the United States Food and Drug Administration
(the "FDA") on October 2, 2000, which application was accepted for filing on
November 21, 2000. On April 3, 2001, we received notification from the FDA
regarding our PMA application. The notification, which is a routine step in the
process of obtaining pre market approval, outlines questions, comments and
deficiencies in the PMA application as filed and request clarification and
additional information. The notification further indicates that our response and
submission of responsive documentation may extend the review period up to 180
days. We have scheduled a meeting with the FDA and we anticipate preparation of
a formal response together with requested information to be submitted shortly
after such meeting. After receipt of such responsive submission, the FDA will
determine the completeness thereof and begin its final review. Due to the fact
that review and verification of our submitted data is required, approval to sell
the ALERT(R) System in the United States may take until the fourth quarter of
2001, if approved at all. The Company has Class III Design Examination
Certification from the 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 thereby allowing us to sell the
ALERT(R) System in the European Community.

In addition, we have developed an intracardiac ultrasound product line including
the ViewMate(TM) ultrasound imaging console and deflectable intracardiac imaging
catheters. These products are designed to improve a physician's ability to
visualize the inside chambers of the heart, including the internal anatomy of
the heart. We believe that the ViewMate(TM) System may play an important role as
a new and effective treatment of complex cardiac arrhythmias, including
ventricular tachyarrhythmia and atrial fibrillation. Our ultrasound products are
not approved for sale and we do not anticipate receiving approval to sell these
products for at least 6 months, if approved at all.

Forward-Looking Statements

This report contains certain statements of a forward-looking nature relating to
such matters as anticipated financial and operational performance, business
prospects, technological developments, results of clinical trials, new products,
research and development activities and similar matters. These statements are
based on information currently available to management and on management's
beliefs and assumptions. When used in this document


                                       11
<PAGE>

the words "anticipate", "designed to", "estimate", "believe", "plans", and
similar expressions are intended to identify forward-looking statements but
these are not the exclusive means of identifying such statements. Such
statements are only predictions and are subject to risks and uncertainties and
that actual events or results may differ materially from those anticipated,
estimated, or projected due to a number of factors. In evaluating such
statements, specific consideration should be given to the various factors
effecting the industry and economy generally, as well as those identified in
this report and in the Company's other reports filed with the Securities and
Exchange Commission, which could cause actual results to differ materially from
those indicated by such forward-looking statements.

Results of Operations

Net sales were $2,068,000 for the three months ended March 31, 2001 as compared
to $2,903,000 for the prior period in 2000. This decrease is primarily due to
lower domestic sales of the EP-WorkMate(R) .

The ALERT(R) System is not approved for sale in the United States, but the
Company completed its clinical trial of over 150 patients and submitted a
Pre-Market Approval ("PMA") application to the United States Food and Drug
Administration (the "FDA") in September 2000. On April 3, 2001, the Company
received notification from the FDA requesting additional information and
clarification. The notification further indicates that submission of
documentation by the Company in response to the FDA's notification may extend
the review period up to 180 days. Approval to market and sell the ALERT(R)
System in the U.S. may take until the fourth quarter of 2001, if approved at
all. However, the Company is approved to market and sell the ALERT(R) System
with the CE Mark in the European Community. While, the Company expects the
ALERT(R) System to contribute a greater proportion of revenues in the future,
the Company cannot accurately predict when the ALERT(R) System will be
available, if at all, in the United States.

Cost of products sold decreased $422,000 (or 31%) to $951,000 for the three
months ended March 31, 2001 as compared to the same period in 2000. Gross profit
on sales for the three months ended March 31, 2001 was $1,118,000 as compared
with $1,530,000 for the same period in 2000. The gross profit improved slightly
as a percentage of sales from 53% to 54%. The increase was primarily due to cost
improvements in manufacturing the EP WorkMate(R). We hope to improve the
Company's overall gross profit percentage as sales of the ALERT(R) System and
other catheter products increase, which should offset the fixed costs,
associated with maintaining a catheter manufacturing operation.

Sales and marketing expenses decreased $155,000 to $1,102,000 for the three
months ended March 31, 2001 as compared to the same period in 2000. The decrease
during this period was primarily due to lower commissions and lower travel and
trade show expenses.

General and administrative expenses increased $54,000 to $556,000 for the three
months ended March 31, 2001 as compared to the first three months of 2000. The
increase during this period was primarily a result of professional fees relating
to completing the financing with Medtronic, audit and tax consulting services
and a foreign exchange loss. This amount was partially offset by decreased
salary expense.


                                       12
<PAGE>

Research and development expenses increased $14,000 to $646,000 for the three
months ended March 31, 2001 as compared to 2000. During this period, the Company
incurred research and development expenses primarily associated with the
ALERT(R) System and ultrasound imaging development costs, as well as costs
associated with several new products under development. In addition, the Company
has ongoing development efforts on existing products, including the EP
WorkMate(R) and the EP-3(TM) Stimulator. The Company expects that research and
development expenses are likely to increase in future periods, in part due to
ongoing expenses related to the ALERT(R) and ViewMate(TM) Ultrasound Systems,
new product development activities and continued regulatory affairs.

Interest expense increased $100,000 primarily due to interest accrued on the
$3,200,000 note payable to Medtronic entered into in November 2000.

Liquidity and Capital Resources

Since inception, the Company's expenses have exceeded its sales, resulting in an
accumulated deficit of approximately $23,337,000 at March 31, 2001.

During March 1999, the Company entered into a $500,000 Term Loan Agreement with
Fleet National Bank, maturing December 31, 2004. Principal became payable
commencing January 2000 in 48 equal monthly installments under a 15 year
amortization schedule with a balloon payment due in December 2004. In addition,
concurrently with the term loan, the Company entered into a $2 million Revolving
Credit Facility to fund working capital purposes. Under its loan arrangements
with its bank, the Company is required to maintain certain financial ratios and
meet certain net worth and indebtedness tests. At September 30 and December 31,
2000, the Company was not in compliance with certain financial ratios of the
bank debt. The Company received a waiver from the bank in consideration of the
repayment in January 2001 of approximately, $2.3 million outstanding on the
Company's revolving credit facility utilizing the funds received from the
Medtronic debt financing described above. The credit facility, which was to
terminate by its terms in March 2001, was terminated in January 2001 and was not
replaced.

During February 2000, the Company received $718,000 related to the exercise of
warrants that were issued in conjunction with the private placement in September
1999. Investors included in the exercise were two of the Company's institutional
shareholders and two members of its board of directors. Common stock of 205,250
shares was issued in conjunction with the exercise of the warrants. In addition,
the exercise price of the remaining unexercised warrants to purchase 362,250
shares of common stock was increased from $3.50 to $7.50 per share. The Company
used the net proceeds from the exercise of warrants for working capital
purposes.

On November 15, 2000, the Company entered into an arms-length financing
transaction, in the amount of up to $3.2 million, with Medtronic Asset
Management, Inc., an affiliate of Medtronic, Inc., one of the Company's
shareholders ("Medtronic"). The principal and all accrued interest on the note
are to be repaid on November 15, 2003. The Company received $1.6 million at
closing and $1.6 million on January 17, 2001. As part of the transaction,
Medtronic agreed to subordinate its rights


                                       13
<PAGE>

to repayment from the Company to existing rights of the Company's senior lender,
Fleet National Bank. The Company used $2.3 million to pay down the outstanding
balance under Revolving Credit Facility.

On February 9, 2001, the Board of Directors of EP MedSystems (with David
Jenkins, as an interested director, absent from the meeting) approved the sale
and issuance of up to 1,625,000 shares of common stock of the Company and
warrants for 812,500 additional shares to certain investors. Included among the
investors is Cardiac Capital, LLC, a limited liability company ("Cardiac
Capital"), of which our Chairman of the Board, President and Chief Executive
Officer and a shareholder of the Company, David A. Jenkins, is a 50% owner. The
aggregate amount of the new shares which potentially may be issued as a result
of this transaction (the "Private Placement Financing") is in excess of 20% of
the outstanding common stock of EP MedSystems assuming all warrants are
exercised and, as a result of this and of the related party nature of the
transaction and the view that the transaction possibly could constitute a change
of control under certain Nasdaq National Marketplace rules, in accordance with
the requirements of the Nasdaq National Market, the Company sought shareholder
approval.

On March 27, 2001 the shareholders of EP MedSystems approved the Private
Placement Financing and the closing of the transaction took place effective
March 28, 2001; 1,625,000 shares of common stock were issued together with
warrants for 812,500 additional shares at a purchase price of $1.99 per share of
common stock and $0.02 per warrant share. The consummation of the transaction
has provided the Company with over $3,000,000 in working capital after expenses
and may result in additional funds if warrants are exercised.

During the quarters ended March 31, 2001 and 2000, the Company received
approximately $419,000 and $217,000, respectively, in cash, related to the sale
of a portion of its cumulative unused New Jersey State Net Operating Loss
carryforwards related to 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 New Jersey State Net Operating Loss carryforwards and New
Jersey research and development tax credits to any profitable New Jersey company
qualified to purchase them for cash.

Net cash used in operating activities for the three months ended March 31, 2001
increased $96,000 as compared to the comparable prior period. The net use of
cash in operations for the three months ended March 31, 2001 was primarily due
to the Company's loss from operations. Payments to related parties are made on
terms similar to those of other suppliers.

Capital expenditures, were $95,000 during the three months ended March 31, 2001
as compared to $321,000 for the same period in 2000. The prior year capital
expenditures were primarily related to building infrastructure improvements on
our West Berlin manufacturing facility.

As of the date of this Quarterly Report on Form 10-QSB, the Company does not
have any other material commitments for capital expenditures. However, the
Company expects to purchase capital equipment and to expand its manufacturing
and assembly capabilities as it continues to grow. The Company leases office and
manufacturing space and certain office equipment under operating leases.


                                       14
<PAGE>

As a result of the Company's cash position of approximately $3,108,000 at March
31, 2001, our limited sources of liquidity, our prior inability to generate
significant revenues and expected continued losses and our monthly operating
expenses of approximately $500,000, there is uncertainty as to whether the
Company will be able to continue as a going concern. The Company's auditors
included a going concern qualification in their report on our financial
statements for the year ended December 31, 2000 because, even with the proceeds
of the Private Placement Financing it is uncertain whether we will have funds
sufficient to continue operations at our current level for more than 6 to 7 more
months, though during such time we will have the opportunity to seek further
funding transactions. The going concern qualification in the auditors' report
may adversely affect our business prospects, financial condition and results of
operations and may harm our relationships with vendors and customers as well as
further limiting our ability to obtain financing.

We expect operating losses to continue in the near future due to continued
research and development activities and additional personnel and equipment
required to increased manufacturing and assembly of our products. The amount and
timing of future losses will be dependent upon, among other things, increased
sales of our existing products, regulatory approval and market acceptance of the
ALERT(R) System and our Viewmate(TM) Ultrasound system, and the regulatory and
market success of new products under development. There can be no assurance that
any of our development projects will be successful or that if development is
successful, that the products will generate any sales. Based upon our current
plans and projections, we believe that our existing capital resources will be
sufficient to meet the Company's anticipated operational needs for at least the
next six months. In the event that we cannot raise capital funds within such
period, we believe that we can reduce non-core-related expenditures, which will
allow the Company to continue operations for sometime thereafter. However, that
continuation may not be possible should circumstances outside the Company's
control (including, for example, changes in general economic conditions or other
matters, which adversely affect the Company's business) significantly interfere
with the Company's business.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

There were no material developments in legal proceedings disclosed by the
Company in previous reports during the quarterly period ended March 31, 2001.

Item 2.  Changes in Securities

(a) Not applicable.

(b) Not applicable.

(c) On February 9, 2001, the Board of Directors of EP MedSystems (with David
Jenkins, as an interested director, absent from the meeting) approved the sale
and issuance of up to 1,625,000 shares of common stock of the Company and
warrants for 812,500 additional shares to certain investors at a price of $1.99
per share of common stock and $0.02 per warrant share. Included among the
investors is Cardiac Capital, LLC, a limited liability company


                                       15
<PAGE>

("Cardiac Capital"), of which our Chairman of the Board, President and Chief
Executive Officer and a shareholder of the Company, David A. Jenkins, is a 50%
owner. The aggregate amount of the new shares which potentially may be issued as
a result of this transaction (the "Private Placement Financing") is in excess of
20% of the outstanding common stock of EP MedSystems assuming all warrants are
exercised and, as a result of this and of the related party nature of the
transaction and the view that the transaction possibly could constitute a change
of control under certain Nasdaq National Marketplace rules, in accordance with
the requirements of the Nasdaq National Market, the Company sought shareholder
approval.

On March 27, 2001, the shareholders of EP MedSystems approved the Private
Placement Financing and the closing of the transaction took place effective
March 28, 2001; 1,625,000 shares of common stock were issued together with
warrants for 812,500 additional shares for an aggregate purchase price of
$3,250,000. The Company granted the investors certain registration rights with
respect to the shares purchased pursuant to a Registration Rights Agreement

The warrants contain the following provisions:

      o     the exercise period of the warrant is any time or from time to time
            between the date of closing and the fifth anniversary of closing;

      o     the initial exercise price is $4.00 per share;

      o     the warrants may be exercised on a "cashless" basis whereby the
            warrant holder would receive an amount of common stock in return for
            surrendering its warrant to the Company for cancellation instead of
            paying the exercise price. The number of shares which the warrant
            holder would receive by exercising its rights to purchase upon a
            "cashless" basis would be determined by a formula in the warrant,
            which number would in any event be less than the number of warrant
            shares to which the warrant holder would be entitled upon payment of
            the exercise price; and

      o     upon the occurrence of certain events that would otherwise dilute
            the aggregate value of the common stock issuable pursuant to the
            warrants, the exercise price or the number of warrant shares, or
            both, will be adjusted to avoid such dilution.

The consummation of the transaction has provided the Company with over
$3,000,000 in working capital after expenses and may result in additional funds
if warrants are exercised.

The Company relied on Rule 506 of Regulation D of the Securities Act of 1933, as
amended (the "Securities Act"), in claiming exemption from the registration
requirements of the Securities Act based upon the amount of capital raised and
the number and character of the investors.

(d) Not applicable.


                                       16
<PAGE>

Item 3. Defaults Upon Senior Securities

(a) Under the Company's loan arrangements with Fleet National Bank, the Company
is required to maintain certain financial ratios and meet certain net worth and
indebtedness tests. At September 30 and December 31, 2000, the Company was not
in compliance with certain financial ratios of the bank debt. The Company
received a waiver from the bank in consideration of the repayment in January
2001 of approximately, $2.3 million outstanding on the Company's revolving
credit facility utilizing the funds received from the Medtronic debt financing
described in "Management's Discussion and Analysis or Plan of Operation" above.
The credit facility, which was to terminate by its terms in March 2001, was
terminated in January 2001 and was not replaced. The Company is in compliance
with all debt covenants as of March 31, 2001.

(b) Not applicable.

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

(a) On March 27, 2001, the Company held a Special Meeting of Shareholders (the
"Meeting").

(b) Not applicable.

(c) The matter voted upon at the Meeting was the approval and adoption of the
Amended and Restated Common Stock and Warrant Purchase Agreement, dated as of
February 16, 2001, among the Company, Cardiac Capital, LLC and Texada Trust
pursuant to which the Company was to effect the Private Placement Financing
described in "Management's Discussion and Analysis or Plan of Operation" and
elsewhere herein. The results of the vote were as follows:


         For                 Against              Abstain            Not Voted
      ---------              -------              -------            ---------
      6,147,820              657,650              148,000            5,069,697
      ---------              -------              -------            ---------

(d) Not applicable.


Item 5. Other Information

The Company entered into a Distribution Agreement (the "Distributor Agreement")
with Fischer Imaging, Inc., a Colorado corporation ("Fischer"), as of May 1,
2001, for the distribution by the Company of certain of Fischer's
electrophysiology products, on an exclusive and non-exclusive basis as to the
different products. Pursuant to the terms of the Distributor Agreement, Fischer
is to supply the Company with all of its requirements of the Fischer products
described in the agreement at fixed prices, subject to change annually upon 90
days' prior notice to the Company. The term of the Distributor Agreement is for
a one year period subject to renewal upon mutual agreement of the parties


                                       17
<PAGE>

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 10.1   Distributorship Agreement, dated as of May 1,
                                 2001, between the Company and Fischer Imaging,
                                 Inc.

      (b)   Reports on Form 8-K

                  During the quarter ended March 31, 2001, the Company filed a
                  Current Report on Form 8-K dated February 23, 2001, reporting,
                  under "Item 5. Other Events and Regulation FD Disclosure"
                  thereunder, the proposed private sale and issuance of shares
                  of common stock and warrants. No financial statements were
                  included in such report.


                                       18
<PAGE>

                                   SIGNATURES

In accordance with the requirements of the Exchange Act, the Registrant caused
this Amendment No. 1 to the Form 10-QSB to be signed on its behalf by the
undersigned, thereunto duly authorized.



                                    EP MEDSYSTEMS, INC.
                                        (Registrant)

Date: April 26, 2002            By: /s/  David A. Jenkins
     ---------------                ---------------------
                                    David A. Jenkins
                                    President and Chief Executive Officer

Date: April 26, 2002            By: /s/  Joseph M. Turner
     ---------------                ---------------------
                                    Joseph M. Turner
                                    Vice President and Chief Financial Officer
                                    (Principal Financial and Accounting Officer)


                                       19

<PAGE>


                                    EXHIBIT INDEX

Exhibit
Number                     Description of Exhibit
------                     ----------------------
Exhibit 10.1*              Distributorship Agreement dated May 1, 2001, between
                           the Company and Fischer Imaging, Inc.


* Previously filed with original Form 10-QSB


                                       20