<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended SEPTEMBER 30, 1997 or
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ______ to ______
1-9731
(COMMISSION FILE NO.)
ARRHYTHMIA RESEARCH TECHNOLOGY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 72-0925679
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
5910 COURTYARD DRIVE #300
AUSTIN, TEXAS 78731
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
(512) 343-6912
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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.
Yes X No .
--- ---
As of November 6, 1997 there were 3,563,101 shares of common stock outstanding.
This report consists of 10 pages.
<PAGE>
ARRHYTHMIA RESEARCH TECHNOLOGY, INC. AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
FORM 10-Q
September 30, 1997
PART I - FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . 3
Item 1. Financial Statements. . . . . . . . . . . . . . . . . . . . . 3
CONSOLIDATED BALANCE SHEETS. . . . . . . . . . . . . . . . . . . . . . 3
CONSOLIDATED STATEMENTS OF OPERATIONS. . . . . . . . . . . . . . . . . 4
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY . . . . . . 5
CONSOLIDATED STATEMENTS OF CASH FLOWS. . . . . . . . . . . . . . . . . 6
SUPPLEMENTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. . . . . . . . 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. . . . . . . . . . . . . . . . . . . . . . 8
PART II - OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . 10
Item 1. Legal Proceedings - none. . . . . . . . . . . . . . . . . . . 11
Item 2. Changes in Securities - none. . . . . . . . . . . . . . . . . 11
Item 3. Defaults Upon Senior Securities - none. . . . . . . . . . . . 11
Item 4. Submission of Matters to a Vote of Security Holders - none. . 11
Item 5. Other Information - none. . . . . . . . . . . . . . . . . . . 11
Item 6. Exhibits and Reports on Form 8-K - none . . . . . . . . . . . 11
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Page 2 of 11
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
ARRHYTHMIA RESEARCH TECHNOLOGY, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, December 31,
ASSETS 1997 1996
------------- ------------
Current assets:
Cash and cash equivalents. . . . . . . . . $ 572,393 $ 232,135
Trade accounts receivable. . . . . . . . . 2,538,074 4,447,624
Inventories. . . . . . . . . . . . . . . . 2,093,113 2,238,436
Deposits, prepaid expenses and other
current assets . . . . . . . . . . . . . 209,261 164,879
----------- -----------
Total current assets . . . . . . . . . . 5,412,841 7,083,074
Property and equipment . . . . . . . . . . . 4,546,906 3,177,862
Patent, software development costs . . . . . 93,000 99,613
Goodwill . . . . . . . . . . . . . . . . . . 1,911,310 1,818,625
Deferred income taxes. . . . . . . . . . . . 493,767 493,767
Other. . . . . . . . . . . . . . . . . . . . 70,519 291,298
----------- -----------
Total assets . . . . . . . . . . . . . . $12,528,343 $12,964,239
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Revolving credit facilities. . . . . . . . $ 711,763 $ 1,158,660
Current maturities of long-term debt . . . 104,940 256,327
Accounts payable . . . . . . . . . . . . . 1,111,325 2,390,188
Income taxes payable . . . . . . . . . . . 147,785 34,161
Payable to related parties . . . . . . . .
Accrued liabilities. . . . . . . . . . . . 474,618 353,101
----------- -----------
Total current liabilities. . . . . . . . 2,550,431 4,192,437
Bonds payable. . . . . . . . . . . . . . . . 1,477,915 671,915
Deferred revenue . . . . . . . . . . . . . . 58,484 87,706
----------- -----------
Total liabilities. . . . . . . . . . . . 4,086,830 4,952,058
----------- -----------
Commitments & Contingencies. . . . . . . . . - -
Shareholders' equity:
Serial preferred stock . . . . . . . . . . - -
Common stock, $.01 par value; 10,000,000
shares authorized; 3,679,216 issued. . 36,792 36,792
Additional paid-in-capital . . . . . . . . . 8,909,307 8,909,307
Treasury stock, 116,115 shares at cost . . . (878,786) (878,786)
Unearned ESOP compensation . . . . . . . . . (92,848) (124,991)
Retained earnings. . . . . . . . . . . . . . 467,048 69,859
----------- -----------
Total shareholders' equity . . . . . . . 8,441,513 8,012,181
----------- -----------
Total liabilities and shareholders' equity $12,528,343 $12,964,239
----------- -----------
----------- -----------
The accompanying notes are an integral part of
the consolidated financial statements.
Page 3 of 11
<PAGE>
ARRHYTHMIA RESEARCH TECHNOLOGY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
1997 1996 1997 1996
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Net sales. . . . . . . . . . . . . . . . $ 2,825,939 $ 6,464,147 $ 9,529,080 $ 18,567,323
Cost of sales. . . . . . . . . . . . . . 1,655,159 5,112,182 6,177,775 14,962,270
------------ ------------ ------------ -------------
Gross profit . . . . . . . . . . . . . . 1,170,780 1,351,965 3,351,305 3,605,053
------------ ------------ ------------ -------------
Selling and marketing. . . . . . . . . . 161,906 159,779 473,773 456,873
General and administrative . . . . . . . 544,601 541,433 1,684,480 1,692,823
Research and development . . . . . . . . 133,130 41,368 256,426 126,596
Amortization of goodwill . . . . . . . . 31,800 28,716 92,315 86,148
------------ ------------ ------------ -------------
Total expenses . . . . . . . . . . . . . 871,437 771,296 2,506,994 2,362,440
------------ ------------ ------------ -------------
Income from operations . . . . . . . . . 299,343 580,669 844,311 1,242,613
Other income (expense):
Interest expense . . . . . . . . . . . (64,664) (67,338) (176,857) (211,733)
Other. . . . . . . . . . . . . . . . . (521) (3,953) (6,189) (7,313)
------------ ------------ ------------ -------------
Income before income taxes . . . . . . . 234,158 509,378 661,265 1,023,567
Income taxes . . . . . . . . . . . . . . (84,601) (227,632) (264,076) (496,609)
------------ ------------ ------------ -------------
Net income . . . . . . . . . . . . . . . $ 149,557 $ 281,746 $ 397,189 $ 526,958
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
Net income per share . . . . . . . . . . $ 0.04 $ 0.08 $ 0.11 $ 0.15
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
Weighted average number of common
and dilutive common equivalent
shares outstanding . . . . . . . . . . 3,563,101 3,563,101 3,563,101 3,563,414
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements.
Page 4 of 11
<PAGE>
ARRHYTHMIA RESEARCH TECHNOLOGY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
Net Retained
Common Shares Additional Unearned Unrealized Earnings
------------------ Paid-in Treasury ESOP Securities (Accumulated
Number Amount Capital Stock Compensation Gains Deficit) Total
--------- ------- ---------- --------- ------------ --------- ----------- ----------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
January 1, 1995. . . . . . . . . 3,613,035 $36,622 $8,002,299 $(363,939) $(210,705) $ 53,130 $(1,671,946) $5,845,461
Exercise of options. . . . . . . 17,000 170 67,830 68,000
Issuance of warrants . . . . . . 202,000 202,000
Maturity and repurchases of
redeemable common stock . . . . 627,132 627,132
ESOP payments. . . . . . . . . . 42,857 42,857
Treasury stock purchase. . . . . (65,524) (504,801) (504,801)
Unrealized securities gain . . . (53,130) (53,130)
Net income . . . . . . . . . . . 1,125,226 1,125,226
--------- ------- ---------- --------- ------------ --------- ----------- ----------
December 31, 1995. . . . . . . . 3,564,511 36,792 8,899,261 (868,740) (167,848) 0 (546,720) 7,352,745
Exercise of options. . . . . . .
Maturity and repurchases of
redeemable common stock. . . . 10,046 10,046
ESOP payments. . . . . . . . . . 42,857 42,857
Treasury stock purchase. . . . . (1,410) (10,046) (10,046)
Sale of securities . . . . . . . 0
Net income . . . . . . . . . . . 616,579 616,579
--------- ------- ---------- --------- ------------ --------- ----------- ----------
December 31, 1996. . . . . . . . 3,563,101 36,792 8,909,307 (878,786) (124,991) 0 69,859 8,012,181
ESOP payments. . . . . . . . . . 32,143 32,143
Net income . . . . . . . . . . . 397,189 397,189
--------- ------- ---------- --------- ------------ --------- ----------- ----------
September 30, 1997 . . . . . . . 3,563,101 $36,792 $8,909,307 $(878,786) $ 92,848 $ 0 $ 467,048 $8,441,513
--------- ------- ---------- --------- ------------ --------- ----------- ----------
--------- ------- ---------- --------- ------------ --------- ----------- ----------
</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements.
Page 5 of 11
<PAGE>
ARRHYTHMIA RESEARCH TECHNOLOGY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
Nine Months Ended September 30,
-------------------------------
1997 1996
----------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . $ 397,189 $ 526,958
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation . . . . . . . . . . . . . . . . . . 438,433 333,604
Amortization . . . . . . . . . . . . . . . . . . 113,719 115,555
Changes in assets and liabilities:
Trade and other accounts receivable, net . . . . 1,909,550 (995,430)
Deposits, prepaid expenses and other
current assets . . . . . . . . . . . . . . . . (44,382) 4,000
Inventories, net of effect of acquisition
of $165,000. . . . . . . . . . . . . . . . . . 310,323 1,018,040
Accounts payable and accrued liabilities . . . . (1,157,346) (291,629)
Income taxes payable . . . . . . . . . . . . . . 113,624 239,045
Bonds and accrued interest payable . . . . . . . 36,000
Deferred revenue . . . . . . . . . . . . . . . . (29,222) 44,722
Payable to related parties . . . . . . . . . . . (30,899)
Other assets . . . . . . . . . . . . . . . . . . 220,779 123,075
----------- ----------
Net cash provided by operating activities. . . . . . 2,308,667 1,087,041
----------- ----------
Cash flows from investing activities:
Capital expenditures . . . . . . . . . . . . . . . (1,407,477) (584,458)
Astro-Med acquisition. . . . . . . . . . . . . . . (50,000)
Newmark acquisition. . . . . . . . . . . . . . . . (200,000)
Patent and software development expenditures . . . (14,791) (15,718)
----------- ----------
Net cash used in investing activities. . . . . . (1,672,268) (600,176)
----------- ----------
Cash flows from financing activities:
Net repayments of revolving credit facilities. . . (446,897) (454,374)
Purchase of treasury stock . . . . . . . . . . . . (10,047)
Reduction of unearned ESOP compensation. . . . . . 32,143 32,143
Principal proceeds on long term debt, net. . . . . 400,000
Principal payments on long-term debt, net. . . . . (281,387) (294,870)
----------- ----------
Net cash used in financing activities. . . . . . (296,141) (727,148)
----------- ----------
Net increase (decrease) in cash and
cash equivalents . . . . . . . . . . . . . . . . 340,258 (240,283)
Cash and cash equivalents at beginning of period . . 232,135 397,799
----------- ----------
Cash and cash equivalents at end of period . . . . . $ 572,393 $ 157,516
----------- ----------
----------- ----------
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Astro-med acquisition and related note payable. $ 300,000
Newmark acquisition and related note payable. . 200,000
-----------
Total non-cash activity. . . . . . . . . . . $ 500,000
-----------
-----------
</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements.
Page 6 of 11
<PAGE>
ARRHYTHMIA RESEARCH TECHNOLOGY, INC. AND SUBSIDIARY
SUPPLEMENTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The unaudited interim consolidated financial statements and related notes
have been prepared pursuant to the rules and regulations of the Securities
and Exchange Commission. Accordingly, certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been omitted pursuant to
such rules and regulations. The accompanying unaudited interim consolidated
financial statements and related notes should be read in conjunction with the
consolidated financial statements and notes thereto included in Arrhythmia
Research Technology, Inc.'s ("ART" or the "Company") most recent Form 10-K
covering the year ended December 31, 1996.
The information furnished reflects, in the opinion of the management of the
Company, all adjustments necessary for a fair presentation of the financial
results for the interim period presented. Interim results are subject to
year-end adjustments and an audit by independent certified public accountants.
INVENTORIES:
Inventories consist of the following as of:
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
Raw materials . . . . . . . $ 249,565 $ 320,736
Work-in-process . . . . . . 335,206 354,838
Finished goods. . . . . . . 2,394,619 2,475,814
---------- ----------
2,979,390 3,151,388
Allowance for slow-moving
inventories. . . . . . . (886,277) (912,952)
---------- ----------
Total . . . . . . . . $2,093,113 $2,238,436
---------- ----------
---------- ----------
RECENT PRONOUNCEMENTS:
In February of 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 "Earnings Per Share"
("SFAS No. 128") which establishes standards for computing and presenting
earnings per share. SFAS No. 128 is effective for fiscal years ending after
December 15, 1997. Management does not believe the implementation of SFAS No.
128 will have a material effect on its financial statements.
In February 1997, the FASB issued Statement of Financial Accounting Standards
No. 129 "Disclosure of Information About Capital Structure" ("SFAS No. 129")
which establishes disclosure requirements for an entity's capital structure.
SFAS No. 129 is effective for fiscal years ending after December 15, 1997.
Management does not believe the implementation of SFAS No. 129 will have a
material effect on its financial statements.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income,"
which establishes standards for reporting and display of comprehensive income
and its components in a full set of general-purpose financial statements.
SFAS No. 130 is effective for fiscal years beginning after December 15, 1997.
Also in June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information," which establishes standards for
the way the public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports issued to shareholders. It also establishes standards for related
disclosures about products and services, geographic areas, and major
customers. SFAS No. 131 is effective for financial statements for periods
beginning after December 15, 1997.
Page 7 of 11
<PAGE>
ARRHYTHMIA RESEARCH TECHNOLOGY, INC. AND SUBSIDIARY
SUPPLEMENTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
PRODUCT LINE ACQUISITIONS:
In the second quarter of 1997, ART acquired the K-3 product family of
hemodynamic systems for the cath lab from Astro-Med, Inc. ART has been the
exclusive distributor of the K-3 product family in the U.S., Canada, Eastern
Block countries and Russia since December, 1995. The K-3 cath lab product
line will now be sold worldwide by ART. It is a fully optioned, competitive
state-of-the-art system with a price benchmark significantly less than
similar systems on the market. The system is currently installed in locations
overseas and in the U.S. ART's gross margins on K-3 sales will improve over
margins under the previous distribution agreement. In addition, ART has
contracted with a third party developer to convert the K-3 operating software
from a DOS platform to a Windows platform in order to respond to changes in
the marketplace and meet customer needs. Completion of this software
conversion is expected in the first quarter of 1998.
ART'S Micron Products Inc. ("Micron") subsidiary acquired a product line from
Newmark related to its high-speed electrode assembly machines. Newmark will
continue to manufacture and service the machines for one year. The
acquisition of this product line is consistent with ART's long-term growth
strategy into related product and market areas.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1997, the Company had working capital of approximately
$2,862,000 and a $3,500,000 working capital line of credit with a commercial
bank, collateralized by accounts receivable and inventory of ART and Micron,
bearing interest at prime plus .75% (9.25% at September 30, 1997). The
working capital line of credit matures December 15, 1999 and had an
outstanding balance of approximately $712,000 at September 30, 1997. For the
nine months ended September 30, 1997, the Company generated positive
operating cash flows of approximately $2,309,000 as compared to positive
operating cash flows of approximately $1,087,000 for the nine months ended
September 30, 1996. The increase in operating cash flows has been driven
primarily by improved collections on trade and other accounts receivable.
Capital expenditures excluding assets acquired in asset purchase agreements
during the first nine months of 1997 were approximately $1,407,000 compared
to approximately $584,000 in 1996. Capital expenditures have increased in the
first nine months of 1997 compared to 1996 as a result of additional
equipment acquired by Micron in the installation of a waste-water treatment
and filtration system completed in the second quarter. Capital
expenditures are expected to be higher in 1997 than they were in 1996.
Normal capital expenditures are funded from operating cash flows and capital
projects, such as the new waste-water treatment and filtration system, are
typically financed through long term debt. The waste-water treatment
facility equipment was purchased at a cost of $480,000 of which $400,000 was
financed by a bank facility. This note is payable in equal monthly
installments over four years and bears interest at a rate of prime plus .75%
(9.25% at September 30, 1997).
The Astro-Med and Newmark product line acquisitions were financed in part
through seller originated notes of $300,000 and $200,000 respectively. The
Astro-Med note bears interest at a rate of 8% per annum with quarterly
interest only payments in the first year beginning on June 30, 1997.
Principal and interest payments are due quarterly thereafter to amortize the
note in full by the April 30, 2000. The promissory note with Newmark is
non-interest bearing and is payable in twenty equal installments beginning in
May 1997.
Page 8 of 11
<PAGE>
ARRHYTHMIA RESEARCH TECHNOLOGY, INC. AND SUBSIDIARY
SUPPLEMENTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
RESULTS OF OPERATIONS
REVENUES for the three months ended September 30, 1997 decreased 56% when
compared to the same period in the prior year, and revenues for the nine
months ended September 30, 1997 decreased approximately 49% as compared to
the same period in the prior year. The reason for the reduced sales revenue
is that 1996 was the final year in which ART acted as the exclusive
distributor for CardioLab products under its contract with their
manufacturer, Prucka Engineering, Inc. For 1997, ART has not reported the
gross revenues nor the related cost of sales for CardioLab products except
for certain carry over orders shipped in 1997 of approximately $872,000.
CardioLab product sales and cost of sales approximated $10,741,000 and
$9,869,000, respectively for the nine months ended September 30, 1996.
During 1997 and 1998, ART will receive a 4% commission on net sales of
CardioLab systems and accessories sold anywhere in the world, up to a ceiling
of $10,000,000 in total annual net sales. From January 1, 1999 through
December 31, 2002, ART will receive a commission of 3% of the net sales of
CardioLab systems sold anywhere in the world, up to a ceiling of $10,000,000
in total net sales. ART will receive 25% of the commissions it would
otherwise be entitled to receive for revenues attributable to CardioLab sales
that exceed $10,000,000 in any given year.
Revenues from sales of ECG sensors increased 3% for the nine months ended
September 30, 1997, as compared to the same period in 1996. The increase in
sensor sales is due to increased demand in the international market. Pricing
on all products remained approximately the same for the third quarter and
first nine months of 1997 as compared to 1996. The sales mix for the Company
has changed with ECG sensors making up a greater proportion of sales and the
related cost of sales, as a result of the reduction in CardioLab sales. For
the nine months ended September 30, 1997, ECG sensor sales accounted for
approximately 77% of total sales as compared to 39% for the nine months ended
September 30, 1996.
The following table sets forth the domestic and foreign sales of the Company:
<TABLE>
THIRD QUARTER FIRST NINE MONTHS
------------------------------------ -------------------------------------
1997 % 1996 % 1997 % 1996 %
---------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Domestic . . . . . . $1,661,007 59 $4,452,075 69 $5,867,785 62 $12,328,202 66
Foreign. . . . . . . 1,164,932 41 2,012,072 31 3,661,295 38 6,239,121 34
---------- --- ---------- --- ---------- --- ----------- ---
Total. . . . . . . . $2,825,939 100 $6,464,147 100 $9,529,080 100 $18,567,323 100
---------- --- ---------- --- ---------- --- ----------- ---
---------- --- ---------- --- ---------- --- ----------- ---
</TABLE>
COST OF SALES for the quarter and nine months ended September 30, 1997
decreased 68% and 59%, respectively, as compared to the same periods in 1996,
because of significant improvements of silver yields in the manufacturing of
ECG sensors and the reduced CardioLab sales as noted above. These lower
costs were partially offset by increased overhead costs which have increased
due to higher maintenance and utility costs. The increased costs were in
preparation for an ISO 9001 certification, which will be obtained in the
fourth quarter. Cost of sales as a percent of sales is expected to remain
similar for the remainder of the year.
SELLING AND MARKETING expenses as a percent of sales have increased 130% and
100% for the quarter and nine months ended September 30, 1997, compared to
the third quarter and first nine months of 1996. The percentage increases
are due primarily to reduced CardioLab sales as noted above. The primary
components of marketing and selling expenses for the nine months ended
September 30, 1997 are salaries and trade show expenses. The current level
of marketing operations is expected to continue to increase for the remainder
of the year as a result of the acquisition of the K-3 product line and
increased worldwide marketing and sales efforts.
Page 9 of 11
<PAGE>
ARRHYTHMIA RESEARCH TECHNOLOGY, INC. AND SUBSIDIARY
SUPPLEMENTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
RESULTS OF OPERATIONS, CONTINUED
GENERAL AND ADMINISTRATIVE expenses have decreased slightly for the nine
months ended September 30, 1997, as compared to 1996 primarily because of
lower administrative costs. These lower costs are in part offset by
increased environmental monitoring expenses. The primary components of
general and administrative expenses are salaries and related payroll taxes
and benefits, environmental monitoring expenses, professional fees, and
insurance costs. General and administrative expenses are expected to continue
at this level for the remainder of the year.
RESEARCH AND DEVELOPMENT expenses have increased 230% for the quarter and
100% for the nine months ended September 30, 1997, as compared to the same
periods in 1996. The increases are due primarily to higher outside
consulting fees and software development expenses. The thrust of the
research and development effort is to develop new software applications for
existing signal averaging products, new products utilizing the patented
Simson method of signal averaging, and upgrading the K-3 operating software
from a DOS platform to a Windows platform.
SAFE HARBOR UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.
Forward looking statements made herein are based on current expectations of
the Company that involve a number of risks and uncertainties and should not
be considered as guarantees of future performance. These statements are made
under the Safe Harbor Provisions of the Private Securities Litigation Reform
Act of 1995. The factors that could cause actual results to differ
materially include: interruption or cancellation of existing contracts,
impact of competitive products and pricing, product demand and market
acceptance risks, the presence of competitors with greater financial
resources than the Company, product development and commercialization risks
and an inability to arrange additional debt or equity financing.
Page 10 of 11
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS - NONE
ITEM 2. CHANGES IN SECURITIES - NONE
ITEM 3. DEFAULTS UPON SENIOR SECURITIES - NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - NONE
ITEM 5. OTHER INFORMATION - NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - NONE
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.
ARRHYTHMIA RESEARCH TECHNOLOGY, INC.
/s/ Sid Barbanel
SID BARBANEL,
President and Chief Executive Officer
/s/ Anthony A. Cetrone
ANTHONY A. CETRONE,
President, Micron Products Inc.
Chairman of the Board
November 6, 1997
Page 11 of 11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 572,393
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0
0
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</TABLE>
