10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C.  20549

FORM 10-Q

[ x ] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2015 or

[    ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ______ to ______

001-9731

(Commission file No.)

ARRHYTHMIA RESEARCH TECHNOLOGY, INC.

(Exact name of registrant as specified in its charter)

DELAWARE	72-0925679
(State or other jurisdiction of incorporation or organization)	(I.R.S. employer identification no.)

25 Sawyer Passway

Fitchburg, Massachusetts  01420

(Address of principal executive offices and zip code)

(978) 345-5000

(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___.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes X No__

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated filer [  ]      Accelerated filer [  ]     Non-Accelerated filer [  ]     Smaller reporting company [ X ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes __ No X

As of May 13, 2015 there were 2,779,439 shares of the Company’s common stock outstanding.

Arrhythmia Research Technology, Inc.

TABLE OF CONTENTS

Part I		CONDENSED FINANCIAL STATEMENTS	3
	Item 1	Condensed Consolidated Financial Statements	3
		Condensed Consolidated Balance Sheets	3
		Condensed Consolidated Statements of Operations	4
		Condensed Consolidated Statements of Cash Flows	5
		Notes to the Condensed Consolidated Financial Statements	7
	Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
	Item 3	Quantitative and Qualitative Disclosures about Market Risk	16
	Item 4	Controls and Procedures	16
Part II		OTHER INFORMATION	17
	Item 6	Exhibit Index	17
		SIGNATURES	19

PART I - CONDENSED FINANCIAL STATEMENTS

Item 1.  Condensed Consolidated Financial Statements (unaudited)

Arrhythmia Research Technology, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (unaudited)
	March 31, 2015			December 31, 2014
Assets
Current assets:
Cash and cash equivalents	$	391,382		$	209,398
Trade accounts receivable, net of allowance for doubtful accounts of $48,000 at March 31, 2015 and $45,000 at December 31, 2014	4,010,069			3,536,747
Inventories, net	2,526,188			2,514,241
Prepaid expenses and other current assets	616,367			519,582
Total current assets	7,544,006			6,779,968
Property, plant and equipment, net	7,499,932			7,618,901
Intangible assets, net	134,085			134,022
Other assets	401,952			570,357
Total assets	$	15,579,975		$	15,103,248
Liabilities and Shareholders’ Equity
Current liabilities:
Revolving line of credit	2,321,495			2,071,495
Term notes payable, current portion	495,767			490,341
Accounts payable	2,268,833			1,857,156
Accrued expenses & other current liabilities	687,109			405,975
Customer deposits	89,373			98,110
Deferred revenue, current	313,769			228,363
Liabilities from discontinued operations, current	—			320,056
Total current liabilities	6,176,346			5,471,496
Long-term liabilities:
Term notes payable, non-current portion	1,204,778			1,330,755
Subordinated promissory notes	452,373			445,452
Deferred revenue, non-current	424,789			610,430
Total long-term liabilities	2,081,940			2,386,637
Total liabilities	8,258,286			7,858,133
Commitments and Contingencies
Shareholders’ equity:
Preferred stock, $1 par value; 2,000,000 shares authorized, none issued	—			—
Common stock, $.01 par value; 10,000,000 shares authorized; 3,926,491 issued, 2,779,439 outstanding at March 31, 2015 and 3,926,491 issued, 2,778,339 outstanding at December 31, 2014	39,265			39,265
Additional paid-in-capital	11,344,707			11,336,693
Treasury stock at cost, 1,147,052 shares at March 31, 2015 and 1,148,152 shares at December 31, 2014	(3,130,882		)	(3,133,883		)
Accumulated other comprehensive income	—			42,502
Accumulated deficit	(931,401		)	(1,039,462		)
Total shareholders’ equity	7,321,689			7,245,115
Total liabilities and shareholders’ equity	$	15,579,975		$	15,103,248
See accompanying notes to condensed consolidated financial statements.

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Arrhythmia Research Technology, Inc.and Subsidiaries

Condensed Consolidated Statements of Operations

(unaudited)

Three months ended March 31,	2015			2014
Net sales	$	5,858,342		$	6,029,843
Cost of sales	5,061,946			4,718,557
Gross profit	796,396			1,311,286
Selling and marketing	257,972			291,672
General and administrative	648,227			594,631
Research and development	92,561			96,827
Total operating expenses	998,760			983,130
Income (loss) from continuing operations	(202,364		)	328,156
Other income (expense):
Interest expense	(65,693		)	(70,149		)
Other income (expense), net	13,509			2,312
Total other expense, net	(52,184		)	(67,837		)
Income (loss) from continuing operations before income taxes	(254,548		)	260,319
Income tax provision	—			1,177
Net income (loss) from continuing operations	(254,548		)	259,142
Discontinued Operations:
Income (loss) from discontinued operations, net of tax provision of $0 for the three months ended March 31, 2015 and 2014	362,610			(2,425		)
Net income	$	108,062		$	256,717
Income (loss) per share - basic
Continuing operations	$	(0.09	)	$	0.09
Discontinued operations	0.13			—
Income per share - basic	$	0.04		$	0.09
Income (loss) per share - diluted
Continuing operations	$	(0.09	)	$	0.09
Discontinued operations	0.13			—
Income per share - diluted	$	0.04		$	0.09
Weighted average common shares outstanding - basic	2,778,935			2,722,239
Weighted average common shares outstanding - diluted	2,877,599			2,777,739

See accompanying notes to condensed consolidated financial statements.

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Arrhythmia Research Technology, Inc.and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(unaudited)

Three months ended March 31,	2015			2014
Cash flows from operating activities:
Net income	$	108,062		$	256,717
Loss (income) from discontinued operations	(362,610		)	2,425
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Gain on sale of property, plant and equipment	(11,029		)	—
Depreciation and amortization	356,382			385,359
Non-cash interest expense	6,921			6,921
Change in allowance for doubtful accounts	3,000			—
Share-based compensation expense	7,186			11,250
Changes in operating assets and liabilities:
Accounts receivable	(476,322		)	(242,185		)
Inventories	(11,947		)	(419,018		)
Prepaid expenses and other current assets	(96,785		)	25,441
Other non-current assets	168,405			13,097
Accounts payable	411,677			(34,492		)
Accrued expenses and other current liabilities	357,803			23,724
Other non-current liabilities	(185,641		)	(6,028		)
Net cash provided by (used in) operating activities of continuing operations	275,102			23,211
Net cash provided by (used in) operating activities of discontinued operations	—			(1,509		)
Net cash provided by (used in) operating activities	275,102			21,702
Cash flows from investing activities:
Purchases of property, plant and equipment	(242,390		)	(391,738		)
Proceeds from sale of property, plant and equipment	17,000			(303		)
Cash paid for patents and trademarks	(1,057		)	—
Net cash provided by (used in) investing activities from continuing operations	(226,447		)	(392,041		)
Net cash provided by (used in) investing activities from discontinued operations	—			—
Net cash provided by (used in) investing activities	(226,447		)	(392,041		)
Cash flows from financing activities:
Proceeds from (payments on) revolving line of credit, net	250,000			(118,000		)
Proceeds from equipment line of credit	—			116,905
Payments on term notes payable	(120,551		)	(82,593		)
Proceeds from stock option exercises	3,880			—
Net cash provided by (used in) financing activities from continuing operations	133,329			(83,688		)
Net cash provided by (used in) financing activities from discontinued operations	—			—
Net cash provided by (used in) financing activities	133,329			(83,688		)
Net increase (decrease) in cash and cash equivalents	181,984			(454,027		)
Cash and cash equivalents, beginning of period	209,398			751,275
Cash and cash equivalents, end of period	391,382			297,248
Less: cash and cash equivalents of discontinued operations at end of period	—			—
Cash and cash equivalents of continuing operations at end of period	$	391,382		$	297,248
(continued)

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	Three months ended March 31,
Supplemental Cash Flow Information (unaudited)	2015		2014
Cash paid for interest	$	53,705	$	59,632
Non-cash activities:
Equipment line of credit converted to term notes payable	$	—	$	740,999

See accompanying notes to condensed consolidated financial statements.

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Arrhythmia Research Technology, Inc. and Subsidiaries

Period Ended March 31, 2015

Notes to the Condensed Consolidated Financial Statements (unaudited)

1. Basis of Presentation

The consolidated financial statements (the "financial statements") include the accounts of Arrhythmia Research Technology, Inc.^® (“ART”) and its subsidiary, Micron Products, Inc.^® ("Micron" and together with ART, the “Company”). ART discontinued operations of it’s wholly-owned Pennsylvania subsidiary, RMDDxUSA Corp. (“RMDDxUSA”) and that subsidiary’s Prince Edward Island subsidiary, RMDDx Corporation (“RMDDx” and collectively with RMDDxUSA,“WirelessDx”) in the third quarter of 2012. In May 2014, RMDDxUSA filed for bankruptcy and the case was formally discharged in its bankruptcy proceedings March 20, 2015 (see Note 10). The WirelessDx results are presented herein as discontinued operations. All intercompany balances and transactions have been eliminated in consolidation.

The unaudited interim consolidated financial statements and related notes have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC").  Accordingly, certain information and footnote disclosures normally included in complete financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been omitted pursuant to such rules and regulations.  These financial statements and related notes should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2014 filed with the SEC on March 20, 2015. Certain reclassifications have been made to prior period amounts to conform to the current year presentation.

The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. The Company's balance sheet at December 31, 2014 has been derived from the audited financial statements at that date, but does not include all the information and footnotes required by GAAP for complete financial statements.

The information presented reflects, in the opinion of the management of the Company, all adjustments necessary for a fair presentation of the financial results for the interim periods presented. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.  

2.    Earnings per Share ("EPS")

Basic earnings (loss) per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding.  The computation of diluted earnings (loss) per share is similar to the computation of basic earnings (loss) per share except that the denominator is increased to include the average number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued.  In addition, the numerator is adjusted for any changes in net income (loss) that would result from the assumed conversions of those potential shares.

The following table presents the calculation of both basic and diluted EPS.

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Three months ended March 31,	2015			2014
Income (loss) from continuing operations	$	(254,548	)	$	259,142
Income (loss) from discontinued operations, net of tax	362,610			(2,425		)
Net income available to common shareholders	$	108,062		$	256,717
Basic EPS:
Weighted average common shares outstanding	2,778,935			2,722,239
Income (loss) per share - basic
Continuing operations	$	(0.09	)	$	0.09
Discontinued operations	0.13			—
Consolidated basic EPS	$	0.04		$	0.09
Diluted EPS:
Weighted average common shares outstanding	2,778,935			2,722,239
Assumed conversion of net common shares issuable under stock option plans	62,164			55,500
Assumed conversion of net common shares issuable under warrants	36,500			—
Weighted average common and common equivalent shares outstanding, diluted	2,877,599			2,777,739
Income (loss) per share - diluted
Continuing operations	$	(0.09	)	$	0.09
Discontinued operations	0.13			—
Consolidated diluted EPS	$	0.04		$	0.09

3. Inventories, net

Inventories consist of the following:

	March 31, 2015		December 31, 2014
Raw materials	$	1,127,527	$	873,306
Work-in-process	334,147		370,220
Finished goods	1,064,514		1,270,715
Total	$	2,526,188	$	2,514,241

The cost of silver in inventory that is included in raw materials, work-in-process and finished goods had an estimated cost of $333,371 and $439,800 as of March 31, 2015 and December 31, 2014, respectively.

4. Property, Plant and Equipment, Net

Property, plant and equipment consist of the following:

	Asset Lives (in years)			March 31, 2015			December 31, 2014
Machinery and equipment	3	to	15	$	14,679,442		$	14,608,949
Building and improvements	5	to	25	4,360,114			4,360,114
Vehicles	3	to	5	90,713			90,713
Furniture, fixtures, computers and software	3	to	5	1,364,461			1,349,931
Land				202,492			202,492
Construction in progress				543,735			568,234
Total property, plant and equipment				21,240,957			21,180,433
Less: accumulated depreciation				(13,741,025		)	(13,561,532		)
Property, plant and equipment, net				$	7,499,932		$	7,618,901

For the three months ended March 31, 2015 and 2014, the Company recorded depreciation expense of $355,388 and $377,515, respectively.

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5. Intangible Assets, Net

The Company assesses the impairment of long-lived assets and intangible assets with finite lives annually or whenever events or changes in circumstances indicate that the carrying value may not be fully recoverable. For the three months ended March 31, 2015, no impairment was required.

Intangible assets consist of the following:

		March 31, 2015						December 31, 2014
	Estimated Useful Life (in years)	Gross		Accumulated Amortization		Net		Gross		Accumulated Amortization		Net
Patents and trademarks	11	$	414,437	$	394,810	$	19,627	$	414,436	$	394,371	$	20,065
Patents and trademarks pending	—	98,503		—		98,503		97,447		—		97,447
Trade names	7	33,250		17,295		15,955		33,250		16,740		16,510
Total intangible assets		$	546,190	$	412,105	$	134,085	$	545,133	$	411,111	$	134,022

For the three months ended March 31, 2015 and 2014, the Company recorded amortization expense of $994.

6. Debt

The following table sets forth the items which comprise debt for the Company:

	March 31, 2015		December 31, 2014
Revolving line of credit	$	2,321,495	$	2,071,495
Subordinated promissory notes	$	452,373	$	445,452
Term notes payable:
Commercial term loan	$	937,080	$	1,009,977
Equipment term loan	606,388		640,734
Equipment notes	157,077		170,385
Total term notes payable	$	1,700,545	$	1,821,096
Total Debt	$	4,474,413	$	4,338,043

Bank Debt

The revolving line of credit (the "revolver"), commercial term loan and equipment term loan are all under the terms of a multi-year credit facility with a bank. This facility also includes an equipment line of credit which has no outstanding balance at March 31, 2015. The bank facility contains both financial and non-financial covenants, all of which the Company is in compliance with at March 31, 2015.

Revolver

The revolver provides for borrowings up to 80% of eligible accounts receivable and 50% of eligible raw materials inventory.  The interest rate on the revolver is calculated at the bank's prime rate plus 0.25% (3.50% at March 31, 2015). The revolver has a maturity date of June 2015 and is classified as a current liability on the Company's balance sheet at March 31, 2015.

On May 5, 2015, the Company received a commitment letter from the bank to extend the revolver for an additional two year period expiring June 30, 2017.

Commercial term loan

    The commercial term loan has a five year term with a maturity date in March 2018. The interest rate on the loan is a fixed 4.25% per annum, and requires monthly payments of approximately $28,000.

Equipment line of credit and equipment term loan

The original equipment line of credit allowed for advances of up to $1.0 million and included a one-year draw period during which payments were interest only. The draw period ended March 29, 2014 and the then outstanding balance on the

9

equipment line of credit of $740,999 was converted to an equipment term loan with a five-year term, maturing on of March 29, 2019. The equipment term loan requires monthly payments of approximately $14,000, consisting of principal and interest at a fixed rate of 4.65%.

On June 26, 2014, the Company entered into a new equipment line of credit for $1.0 million under the Company's multi-year credit facility. At March 31, 2015, no amounts had been drawn on the new equipment line of credit. The term of this equipment line of credit is six years, maturing on June 26, 2020, inclusive of a maximum one-year draw period. Repayment shall consist of monthly interest only payments, equal to the bank's prime rate plus 0.25% as to each advance commencing on the date of the loan through the earlier of: (i) one year from the date of the loan or (ii) the date upon which the equipment line of credit is fully advanced (the “Conversion Date”). On the Conversion Date, principal and interest payments will be due and payable monthly in an amount sufficient to pay the loan in full based upon an amortization schedule commensurate with the remaining term of the loan.

On May 5, 2015, the Company received a commitment letter from the bank to extend a new equipment line of credit of $1.0 million commencing June 26, 2015 under the same terms as the equipment line of credit dated June 26, 2014.

Other Debt

Equipment notes

In January 2013, the Company entered into two equipment notes totaling $272,500 with a financing company to acquire production equipment. The notes bear interest at the fixed rate of 4.66% and require monthly payments of principal and interest of approximately $2,800 over a five year term maturing in January 2018.

Subordinated promissory notes

In December 2013, the Company completed a private offering in which the Company sold an aggregate of $500,000 in subordinated promissory notes. The notes are unsecured and require quarterly interest-only payments at a rate of 10% per annum. On the second anniversary following issuance, the interest rate increases to 12% per annum. The notes mature in December 2016 at which point the outstanding balance is due in full. The subordinated promissory notes may be prepaid by the Company at any time following the first anniversary thereof without penalty. The notes are subordinated to all indebtedness of the Company pursuant to the bank credit facility.

In connection with the subordinated promissory notes, the Company issued warrants to purchase the Company's common stock at $3.51 per share. The warrants expire in December 2016. The proceeds were allocated between the notes and warrants on a relative fair value basis resulting in $416,950 allocated to the notes and $83,050 allocated to the warrants as part of Additional-Paid-in-Capital. The total discount on the notes is being recognized as non-cash interest expense over the term of the notes. For the three months ended March 31, 2015 and 2014, the Company recorded $6,921 of non-cash interest expense related to the amortization of the discount. The unamortized discount which is net against the outstanding balance of the subordinated promissory notes is $47,627 at March 31, 2015 and $54,548 at December 31, 2014.

7. Income Taxes

The tax provisions for the three months ended March 31, 2015 and 2014 are attributable to the U.S. federal, state and foreign income taxes on our continuing operations. The Company has a full valuation allowance against its deferred tax assets at March 31, 2015 and December 31, 2014. Management expects to reevaluate the allowance on its deferred tax assets at December 31, 2015.

The Company has federal and state net operating loss carryforwards totaling $7,752,000 and $7,202,000, respectively, which begin to expire in 2030. During the first quarter of 2015, the Company's subsidiary, RMDDxUSA, was formally discharged in its bankruptcy proceedings.  The tax attributes associated with this subsidiary expired upon the finalization of the bankruptcy. As a result, the Company's available foreign and state net operating loss carryforwards have been reduced by $1,039,000 and $4,315,000, respectively. 

The Company also had federal and state tax credit carryovers of $243,000 and $281,000, respectively. The federal and state tax credits begin to expire in 2026 and 2015, respectively.

8. Commitments and Contingencies

Legal matters

In the ordinary course of its business, the Company is involved in various legal proceedings involving a variety of matters. The Company does not believe there are any pending legal proceedings that will have a material impact on the Company’s financial position or results of operations.

Off-balance sheet arrangements

10

In 2014, the Company entered into two operating leases for office equipment. Lease expense under all operating leases was approximately $1,822 for three months ended March 31, 2015 and $0 for the same period in 2014.

9. Stock Options and Share-Based Incentive Plan

Options

The following table sets forth the stock option transactions for the three months ended March 31, 2015:

	Number of options		Weighted average Exercise Price		Weighted average remaining contractual term (in years)	Aggregate Intrinsic Value
Outstanding at December 31, 2014	165,800		$	5.58	6.09	$	305,124
Granted	25,000		7.74
Exercised	(1,100	)	3.53
Forfeited	(7,500	)	6.45
Expired	—		—
Outstanding at March 31, 2015	182,200		5.85		6.25	$	300,276
Exercisable at March 31, 2015	83,200		$	5.79	4.06	$	147,896
Exercisable at December 31, 2014	74,400		$	6.07	4.75	$	119,342

For the three months ended March 31, 2015 and 2014, share-based compensation expense related to stock options amounted to $7,186 and $11,250, respectively, and is included in general and administrative expenses.

For the three months ended March 31, 2015, 25,000 options were granted, 7,500 options were forfeited. Additionally, 1,100 options were exercised generating proceeds of $3,880.

For the three months ended March 31, 2014, there we no new grants, no exercises and 56,500 shares expired.

Warrants

For the three months ended March 31, 2015 and 2014, there were no warrants exercised. As of March 31, 2015, 70,000 warrants remain unexercised.

10. Discontinued Operations

On May 8, 2014, RMDDxUSA filed a voluntary petition for relief under Chapter 7 (Liquidation) of the United States Bankruptcy Code in the District of Massachusetts. A trustee was assigned to review the assets and liabilities of the company. At December 31, 2014, there were no assets and $320,056 of liabilities remaining on the balance sheet.

On March 20, 2015, the Chapter 7 Order was formally discharged by the assigned trustee and the case was closed. For the three months ended March 31, 2015, net income of $362,610, net of tax, was recorded from discontinued operations as a result of the write off of the remaining liabilities of $320,056 and the reversal of other comprehensive income of $42,502 from cumulative translation adjustments from RMDDx Corporation.

11. Subsequent Events

Appointment of Director

On April 23, 2015, the Company's Board of Directors appointed Mr. Robert A. Mello a director of the Company, effective April 27, 2015. A description of Mr. Mello's background can be found in the Current Report on Form 8-K filed on April 28, 2015 and in the Company's 2015 proxy statement filed on April 28, 2015.

Extension of the Revolver

On May 5, 2015, the Company received a commitment letter from the bank to extend the revolver for an additional two year period expiring June 30, 2017 and to extend a new equipment line of credit of $1.0 million commencing June 26, 2015 under the same terms as the equipment line of credit dated June 26, 2014.

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

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This Quarterly Report on Form 10-Q contains forward-looking statements that involve a number of risks and uncertainties. There are a number of factors that could cause the Company’s actual results to differ materially from those forecasted or projected in such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date hereof. The Company is under no obligation and does not intend to update, revise or otherwise publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of any unanticipated events.  More information about factors that potentially could affect the Company's financial results is included in the Company's filings with the SEC, including its Annual Report on Form 10-K for the year ended December 31, 2014.

Critical Accounting Policies

The critical accounting policies utilized by the Company in preparation of the accompanying financial statements are set forth in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. There have been no material changes to these policies since December 31, 2014.

Overview

Arrhythmia Research Technology^®, Inc., a Delaware corporation ("ART"), through its wholly-owned Massachusetts subsidiary, Micron Products^®, Inc. (“Micron” and together with ART, the "Company") is a diversified contract manufacturing organization (CMO) that produces highly-engineered, innovative medical device technologies requiring precision machining and injection molding. The Company also manufactures components, devices and equipment for military, law enforcement, industrial and consumer product applications. The Company is engaged in the production and sale of silver/silver chloride coated and conductive resin sensors used as consumable component parts in the manufacture of integrated disposable electrophysiological sensors. These disposable medical devices are used worldwide in the monitoring of electrical signals in various medical applications.  The Company's orthopedic implant manufacturing operation produces quick-turn, high volume and patient-specific finished orthopedic implants. The Company has custom thermoplastic injection molding capabilities as well, and provides a full array of design, engineering, production services and management.

The Company discontinued operations of its wholly-owned Pennsylvania subsidiary, RMDDxUSA Corp. ("RMDDxUSA") and that subsidiary's Prince Edward Island subsidiary, RMDDx Corporation ("RMDDx" and collectively with RMDDxUSA, “WirelessDx”) in the third quarter of 2012. The results of WirelessDx are presented as discontinued operations throughout the financial statements and footnotes in this Form 10-Q.

On May 8, 2014, RMDDxUSA filed a voluntary petition for relief under Chapter 7 (Liquidation) of the United States Bankruptcy Code in the District of Massachusetts and a trustee was assigned to review the assets and liabilities of the company. On March 20, 2015, the Chapter 7 Order was formally discharged by the assigned trustee and the case was closed.

Results of Operations

The following table sets forth for the periods indicated, the percentages of the net sales represented by certain items reflected in the Company's statements of operations.

Three months ended March 31,	2015			2014
Net sales	100.0		%	100.0		%
Cost of sales	86.4			78.3
Gross profit	13.6		%	21.7		%
Selling and marketing	4.4			4.8
General and administrative	11.1			9.9
Research and development	1.6			1.6
Other expense	(0.9	)		(1.1	)
Income (loss) before income tax provision and discontinued operations	(4.4	)		4.3
Income tax provision	—			—
Income (loss) from continued operations	(4.4	)		4.3
Income (loss) from discontinued operations	6.2			—
Net income	1.8		%	4.3		%

Net Sales

The Company's consolidated net sales for the three months ended March 31, 2015 was $5,858,342, a decrease of $171,501, or 2.8%, when compared to the consolidated net sales of $6,029,843 for the three months ended March 31, 2014.

12

The decrease in net sales for the three months ended March 31, 2015, was due primarily to a 29.7%, decrease in net sales related to the contract manufacturing of machined orthopedic implants as compared to the same period in 2014. The decrease in net sales of machined orthopedic implants was due to some production issues encountered as the Company continued efforts to implement lean manufacturing practices in this product line. Additionally, 2014 benefited from $250,000 of Predictor license sales.

The decrease in net sales was partially offset by a 25.6% increase in net sales of custom thermoplastic injection molding for the three months ended March 31, 2015 due to increased order volume of automotive and medical device components. Additionally, net sales from sensors increased 6.8%, over the same period in 2014. The increase in sensor sales was due to a 19.7% increase in volume. Despite the increased volume, silver surcharge billed was lower due primarily to a 17.8% decrease in the average price of silver for the three months ended March 31, 2015, as compared to the same period in 2014.

Gross Profit

Gross profit decreased $514,890for the three months ended March 31, 2015, as compared to the same period in 2014. Gross profit as a percentage of sales decreased 8.1 points from 21.7% for the three months ended March 31, 2014 as compared to 13.6%for the three months ended March 31, 2015. The decrease in gross profit was due primarily to a 13.2 point decrease in gross margin related to the contract manufacturing of orthopedic implant components as a result of some production issues encountered as the Company incurred increased overtime and reduced output in the first part of the quarter due to its continued efforts implementing lean manufacturing practices in this product line. For the three months ended March 31, 2014, gross profit included $248,463 from net sales of Predictor licenses. Additionally, investments of $116,368 in our manufacturing quality function to support the Company's growth strategy in the three months ended March 31, 2015, resulted in a decrease to gross profit when compared to the prior period.

Selling and Marketing

The Company's consolidated selling and marketing expenses amounted to $257,972 (4.4% of net sales) for the three months ended March 31, 2015 as compared to $291,672 (4.8% of net sales) for the three months ended March 31, 2014, a decrease of $33,700, or 11.6%.  For the three months ended March 31, 2015, travel expenses decreased $21,051 due in part to decreased international travel and travel to trade shows as well as decreased trade show expense of $7,290. Additionally, commissions decreased $4,213 due to lower net sales.

General and Administrative

The Company's consolidated general and administrative expenses increased to $648,227 (11.1% of net sales) for the three months ended March 31, 2015 as compared to $594,631 (9.9% of net sales) for the three months ended March 31, 2014, an increase of $53,596, or 9.0%.  

The increase in consolidated general and administrative expenses for three months ended March 31, 2015 was due in part to $20,550 related to the engagement of an investor relations firm in the second quarter of 2014. Wages, taxes, and benefits increased $18,242 due in part to increases in executive compensation which were effective January 1, 2015. Additionally, accounting fees and other related costs increased $17,034, due in part to increased software expenses as well as costs related to insuring the Company's trade accounts receivable. Consulting fees also increased $8,786 due largely to professional services related to environmental, health and safety.    

Research and Development

The Company's consolidated research and development expenses decreased to $92,561 (1.6% of net sales) for the three months ended March 31, 2015 as compared to $96,827 (1.6% of net sales) for the three months ended March 31, 2014, a decrease of $4,266, or 4.4%. The net decrease is due to a reduction in wages, taxes and benefits of $28,217 due primarily to turnover of two employees partially offset by an increase of $25,604 for internal research and development costs for the development of new products and capabilities related to medical device components.

The Company has also dedicated resources to customer funded research and development of new products in the military and law enforcement industry.

Other Income (Expense)

Other expense, net was $52,184 for the three months ended March 31, 2015 as compared to $67,837 for the three months ended March 31, 2014, a decrease of $15,653.

The decrease in other expense for the three months ended March 31, 2015 as compared to the same period in 2014 was primarily due to a $4,456 decrease in interest expense and a $11,029 gain on the sale of fixed assets.

Income Tax Provision

13

The tax provisions for the three months ended March 31, 2015 and 2014 are attributable to the U.S. federal, state and foreign income taxes on our continuing operations. The Company’s combined federal and state effective income tax rate from continuing operations for both the three months ended March 31, 2015 and 2014 was 0%.

Income from Discontinued Operations

On May 8, 2014, RMDDxUSA filed a voluntary petition for relief under Chapter 7 (Liquidation) of the United States Bankruptcy Code in the District of Massachusetts and a trustee was assigned to review the assets and liabilities of the company. On March 20, 2015, the Chapter 7 Order was formally discharged by the assigned trustee and the case was closed.

For the three months ended March 31, 2015, net income of $362,610, net of tax, was recorded from discontinued operations as a result of the write-off of the remaining liabilities of $320,056 and the reversal of accumulated other comprehensive income of $42,502 from cumulative translation adjustments from RMDDx Corporation.

Earnings (Loss) Per Share

Consolidated basic and diluted earnings per share for the three months ended March 31, 2015 was $0.04 per share as compared to $0.09 per share for the same period in 2014, a decrease of $0.05 per share. The decrease in earnings per share is due largely to the decrease in net sales of orthopedic implant components as well as the lack of net sales of Predictor licenses in the three months ended March 31, 2015 versus the same period in 2014, partially offset by the impact of other income from discontinued operations as a result of the final discharge order related to the bankruptcy of RMDDxUSA.

Basic and diluted loss per share from continuing operations for the three months ended March 31, 2015 was $0.09 per share as compared to basic and diluted earnings per share from continuing operations of $0.09 per share for the same period in 2014, a decrease in earnings per share of $0.18, due largely to the decrease in net sales of orthopedic implant components as well as the lack of net sales of Predictor licenses.

Basic and diluted earnings per share from discontinued operations, for the three months ended March 31, 2015 was $0.13 per share as compared to basic and diluted earnings per share from discontinued operations of $0.00 per share for the same period in 2014, an increase in earnings per share of $0.13, due to the final discharge order related to the bankruptcy of RMDDxUSA.

Off-Balance Sheet Arrangements

In 2014, the Company entered into two operating leases for office equipment. Lease expense under all operating leases was approximately $1,822 for the three months ended March 31, 2015 and $0 for the same period in 2014.

Liquidity and Capital Resources

Working capital was $1,367,660 as of March 31, 2015, as compared to $1,308,472 at December 31, 2014, an increase of $59,188.  The increase is due primarily to increases in accounts receivable and cash, partially offset by increased accounts payable and accrued expenses and other current liabilities.

Cash and cash equivalents were $391,382 and $209,398 at March 31, 2015 and December 31, 2014, respectively, an increase of $181,984.  Substantially all of these funds are maintained in bank deposit accounts.

Trade accounts receivable were $4,010,069 and $3,536,747 at March 31, 2015 and December 31, 2014, respectively, an increase of $473,322 due in part to the timing of, and the increase in, net sales in the month of March 2015 as compared to December 2014, as well as the timing of cash receipts.

Inventories were $2,526,188 at March 31, 2015, as compared to $2,514,241 at December 31, 2014, an increase of $11,947.  Raw materials increased $254,221 due to timing of resin receipts at quarter end for April 2015 orders. As on offset, work in progress decreased $36,073 and finished goods decreased $206,201, due to larger quarter end shipments.

Accounts payable increased $411,677 due in part purchases of raw material inventory driven by increased demand in custom thermoplastic injection molding.

Accrued expenses and other current liabilities increased $357,803 as compared to December 31, 2014 and is discussed below in the detail in Operating Cash Flows.

Capital equipment expenditures were $242,390 for the three months ended March 31, 2015, due to investments in machinery and equipment primarily for molding equipment as well as investments in equipment for the contract manufacturing of machined orthopedic implants.

In March 2013, the Company entered into a multi-year credit facility with a Massachusetts bank. Under this credit facility the Company has a revolving line of credit (the "revolver"), a commercial term loan, an equipment term loan and an equipment line of credit. The bank facility contains both financial and non-financial covenants, all of which the Company is in compliance with as of March 31, 2015.

The revolver provides for borrowings up to 80% of eligible accounts receivable and 50% of eligible raw materials inventory.  The interest rate on the revolver is calculated at the bank's prime rate plus 0.25% (3.50% at March 31, 2015). The

14

balance outstanding on the revolver was $2,321,495 as of March 31, 2015. The revolver has a maturity date of June 2015 and is classified as a current liability on the Company's balance sheet.

On May 5, 2015, the Company received a commitment letter from the bank to extend the revolver for an additional two year period expiring June 30, 2017.

    The commercial term loan has a five year term with a maturity date in March 2018. The interest rate on the loan is a fixed 4.25% per annum, and requires monthly payments of approximately $28,000. At March 31, 2015, the balance of the commercial term loan was $937,080.

The original equipment line of credit allowed for advances of up to $1.0 million and included a one-year draw period during which payments were interest only. The draw period ended March 29, 2014 and the then outstanding balance on the equipment line of credit of $740,999 was converted to a five-year term loan with monthly payments of approximately $14,000 consisting of principal and interest at a fixed rate of 4.65%. The balance of the equipment term loan was $606,388 as of March 31, 2015.

On June 26, 2014, the Company entered into a new equipment line of credit for $1.0 million under the Company's multi-year credit facility. At March 31, 2015, no amounts had been drawn on the equipment line. The term of this equipment line of credit is six years, maturing on June 26, 2020, inclusive of a maximum one year draw period. Repayment shall consist of monthly interest only payments, equal to the bank's prime rate plus 0.25% as to each advance commencing on the date of the loan through the earlier of: (i) one year from the date of the loan or (ii) the date upon which the equipment line of credit is fully advanced (the “Conversion Date”). On the Conversion Date, principal and interest payments will be due and payable monthly in an amount sufficient to pay the loan in full based upon an amortization schedule commensurate with the remaining term of the loan.

On May 5, 2015, the Company received a commitment letter from the bank to extend a new equipment line of credit of $1.0 million commencing June 26, 2015 under the same terms as the equipment line of credit dated June 26, 2014.

In January 2013, the Company entered into two equipment notes totaling $272,500 with a financing company to acquire production equipment. The notes bear interest at the fixed rate of 4.66% and require monthly payments of principal and interest of approximately $2,800 over a five year term maturing in January 2018. The outstanding balance of these equipment notes at March 31, 2015 was $157,077.

In December 2013, the Company completed a private offering in which the Company sold an aggregate of $500,000 in subordinated promissory notes. The notes are unsecured and require quarterly interest-only payments at a rate of 10% per annum. On the second anniversary following issuance, the interest rate increases to 12% per annum. The notes mature in December 2016 at which point the outstanding balance is due in full. The subordinated promissory notes may be prepaid by the Company at any time following the first anniversary thereof without penalty. The notes are subordinated to all indebtedness of the Company pursuant to the bank credit facility.

In connection with the subordinated promissory notes, the Company issued warrants to purchase the Company's common stock at $3.51 per share. The warrants expire in December 2016. The proceeds were allocated between the notes and warrants on a relative fair value basis resulting in $416,950 allocated to the notes and $83,050 allocated to the warrants as part of Additional-Paid-in-Capital. The total discount on the notes is being recognized as non-cash interest expense over the term of the notes. For the three months ended March 31, 2015 and 2014, the Company recorded $6,921 of non-cash interest expense related to the amortization of the discount. The unamortized discount which is net against the outstanding balance of the subordinated promissory notes is $47,627 at March 31, 2015 and $54,548 at December 31, 2014.

The borrowing agreement, under the bank facility as described above, contains both financial and non-financial covenants. The financial covenants include maintaining certain debt coverage and leverage ratios. The non-financial covenants relate to various matters including notice prior to executing further borrowings and security interests, mergers or consolidations, acquisitions, guarantees, sales of assets other than in the normal course of business, leasing, changes in ownership and payment of dividends.

No dividends were declared or paid in the three months ended March 31, 2015 and 2014.

The Company believes that cash flows from its operations, together with its existing working capital, the revolving line of credit and other resources, will be sufficient to fund operations at current levels and repay debt obligations over the next twelve months. The Company continues to develop opportunities within new and existing channels where the Company can maximize its return on investments in capital equipment, research and development, marketing and human resources.

Summary of Changes in Cash Position

As of March 31, 2015, the Company had cash on hand of $391,382. For the three months ended March 31, 2015, net cash provided by operating activities was $275,102. Net cash used in investing activities for the three months ended March 31, 2015 was $226,447. Net cash provided by financing activities for the three months ended March 31, 2015 was $133,329. All of the above were from continuing operations. The net cash flows for the three months ended March 31, 2015 are discussed in further detail below.

15

Operating Cash Flows

For the three months ended March 31, 2015, net cash provided by operating activities was $275,102, due partially to net income of $108,062. Cash provided by an increase in accounts payable was $411,677, due in part to purchases of raw material inventory driven by increased demand in custom thermoplastic injection molding.

Additionally, accrued expenses and other current liabilities increased $357,803 due in part to an increase of $160,530 for inventory received but not invoiced at March 31, 2015 as compared to December 31, 2014. Additionally, accrued payroll, taxes and benefits increased by $101,037 due in part to a seven day accrual at March 31, 2015 as compared to a three day accrual at December 31, 2014 as well as increased benefits costs due to higher headcount. In addition, current deferred revenue related to tooling increased by $85,406 as a result of additional customer tools being placed into service. As on offset, non-current liabilities consisting of non-current deferred revenues related to total tooling decreased $185,641.

These increases were partially offset by a decrease in other assets of $168,405 consisting of current and non-current deferred cost of goods sold related to tooling.

Cash provided by operating activities was also impacted by non-cash add-backs for depreciation and amortization of $356,382.

These sources of cash were partially offset by cash used to increase inventory of $11,947, as well as cash used in deposits, prepaid expenses and other assets which increased $96,785 and accounts receivable which increased $476,322 due to timing of shipments at quarter's end.

In addition, there was the non-cash adjustment for net income from discontinued operations of $362,610.

Investing Cash Flows

For the three months ended March 31, 2015, net cash used in investing activities was $226,447. The net cash used was primarily for capital expenditures of $242,390, largely for machinery and equipment, primarily molding equipment. The capital expenditures were partially offset by $17,000 of proceeds from the sale of fixed assets.

Financing Cash Flows

For the three months ended March 31, 2015, net cash provided by financing activities was $133,329. Cash was provided by proceeds of $250,000 from the Company's revolver, offset by payments on term notes payable of $120,551. Additionally, there were proceeds of $3,880 from the exercise of stock options.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not Applicable.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our principal executive officer and principal financial officer (“the Certifying Officers”) have evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)).  Based on such evaluation, our Certifying Officers have concluded the Company's disclosure controls and procedures, as of the end of the period covered by this report, were effective.

The effectiveness of a system of disclosure controls and procedures is subject to various inherent limitations, including cost limitations, judgments used in decision making, assumptions about the likelihood of future events, the soundness of internal controls, and fraud. Due to such inherent limitations, there can be no assurance that any system of disclosure controls and procedures will be successful in preventing all errors or fraud, or in making all material information known in a timely manner to the appropriate levels of management.

Changes in Internal Control over Financial Reporting

During the three months ended March 31, 2015 there have been no changes in the Company's internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

16

PART II - OTHER INFORMATION

Item 6. Exhibit Index

Exhibit Number	Description of Exhibit	Page
3.0	Certificate of Incorporation	(a)
3.1	Amended and Restated By-laws	(b)
4.0	Form of Certificate evidencing shares of the Company's Common Stock	(a)
4.6*	2001 Stock Option Plan	(c)
4.10*	2010 Equity Incentive Plan	(d)
4.11	Form of Subordinated Note	(e)
4.12	Form of Subordination Agreement	(e)
4.13	Form of Warrant to Purchase Common Stock	(e)
10.5	First Amendment and Loan Modification dated as of March 11, 2013 between the Company and RBS Citizens, National Association and RBS Asset Finance, Inc.	(f)
10.51	Loan and Security Agreement between UniBank for Savings and Arrhythmia Research Technology, Inc. and Micron Products, Inc. dated March 29, 2013	(f)
10.52*	Agreement and Releases between Arrhythmia Research Technology, Inc. and Michael S. Gunter dated March 31, 2013	(f)
10.53*	Employment Agreement between Arrhythmia Research Technology, Inc. and Salvatore Emma, Jr. dated as of March 28, 2013	(f)
10.54*	Amendment No. 2 to Executive Employment Agreement between David A. Garrison and the Companydated as of June 7, 2013	(g)
10.55*	Amended and Restated Agreement and Release between the Company and David A. Garrison entered into on September 12, 2013	(h)
10.56*	Employment Agreement between the Company and Salvatore Emma, Jr. dated as of January 9, 2014	(i)
10.57*	Employment Agreement between the Company and Derek T. Welch dated as of January 9, 2014	(i)
10.58	Third Amendment to Loan and Security Agreement and Commercial Equipment Line of Credit Promissory Note dated June 26, 2014	(j)
10.59*	Employment Agreement between the Company and Salvatore Emma, Jr. dated as of January 20, 2015	(k)
10.60*	Employment Agreement between the Company and Derek T. Welch dated as of January 20, 2015	(k)
21.0	Subsidiaries	(l)
31.1	Certification of the CEO pursuant to Rule 13a-14(a) or Rule 15(d)-14(a)	X-1
31.2	Certification of the CFO pursuant to Rule 13a-14(a) or Rule 15(d)-14(a)	X-2
32.1	Certification of the CEO pursuant to 18 U.S.C. §1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	X-3
32.2	Certification of the CFO pursuant to 18 U.S.C. §1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	X-4
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document

* Indicates a management contract or compensatory plan required to be filed as an exhibit.

(a) Incorporated by reference to the Company’s Registration Statement on Form S-18 as filed with the Commission in April 1988, Registration Statement No. 33-20945-FW.

(b) Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the Commission on July 1, 2011.

(c) Incorporated by reference to the Company’s Annual Report on Form 10-KSB for fiscal year ended December 31, 2001 as filed with the Commission on March 29, 2002.

17

(d) Incorporated by reference to the Company’s Registration Statement on Form S-8 as filed with the Commission on May 6, 2010, Registration Statement No. 333-166600.

(e) Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the Commission on December 23, 2013.

(f) Incorporated by reference to the Company’s Quarterly Report on Form 10-Q as filed with the Commission on July 1, 2013.

(g) Incorporated by reference to the Company’s Quarterly Report on Form 10-Q as filed with the Commission on October 8, 2013.

(h) Incorporated by reference to the Company’s Quarterly Report on Form 10-Q as filed with the Commission on November 19, 2013.

(i) Incorporated by reference to the Company’s Quarterly Report on Form 10-Q as filed with the Commission on May 9, 2014.

(j) Incorporated by reference to the Company’s Quarterly Report on Form 10-Q as filed with the Commission on August 7, 2014.

(k) Incorporated by reference to the Company's Form 10-K for fiscal year ended December 31, 2014 as filed with the Commission on March 20, 2015.

(l) Incorporated by reference to the Company's Form 10-K for fiscal year ended December 31, 2010 as filed with the Commission on March 23, 2011.

18

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.
May 13, 2015	By:  /s/ Salvatore Emma, Jr.
	Salvatore Emma, Jr.
	President and Chief Executive Officer
	(principal executive officer)
	By: /s/ Derek T. Welch
	Derek T. Welch
	Chief Financial Officer
	(principal financial and accounting officer)

19

EX-31.1

Exhibit 31.1

OFFICER'S CERTIFICATION

PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Salvatore Emma, Jr., certify that:

1. I have reviewed this report on Form 10-Q of Arrhythmia Research Technology, Inc. for the fiscal quarter ended March 31, 2015;

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

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

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d -15(f)) for the registrant and have:

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

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

d. disclosed in this report any change in the registrant's internal controls over financial reporting that occurred during the registrant's first fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal controls over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a.  All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.

DATE: May 13, 2015/s/ Salvatore Emma, Jr.

Salvatore Emma, Jr.

President and Chief Executive Officer

(principal executive officer)

X-1

EX-31.2

Exhibit 31.2

OFFICER'S CERTIFICATION

PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Derek T. Welch, certify that:

1. I have reviewed this report on Form 10-Q of Arrhythmia Research Technology, Inc. for the fiscal quarter ended March 31, 2015;

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

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

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d -15(f)) for the registrant and have:

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

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

d. disclosed in this report any change in the registrant's internal controls over financial reporting that occurred during the registrant's first fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal controls over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a.  All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.

DATE: May 13, 2015/s/ Derek T. Welch

Derek T. Welch

Chief Financial Officer

(principal financial and accounting officer)

X-2

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. §1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Arrhythmia Research Technology, Inc. (the “Company”) for the quarterended March 31, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned principal executive officer certifies, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 13, 2015

/s/  Salvatore Emma, Jr.

Salvatore Emma, Jr.

President and Chief Executive Officer

(principal executive officer)

X-3

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. §1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Arrhythmia Research Technology, Inc. (the “Company”) for the quarterended March 31, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned principal financial and accounting officer certifies, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)  The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 13, 2015

/s/ Derek T. Welch

Derek T. Welch

Chief Financial Officer

(principal financial and accounting officer)

X-4

XML

7. Income Taxes - (Details) (USD $)	Mar. 31, 2015
Federal [Member]
Tax Credit Carryforward [Line Items]
Operating loss carryforwards	$ 7,752,000
Tax credit carryover	243,000
State [Member]
Tax Credit Carryforward [Line Items]
Operating loss carryforwards	7,202,000
Operating loss carryforwards, reduction amount	4,315,000
Tax credit carryover	281,000
Foreign [Member]
Tax Credit Carryforward [Line Items]
Operating loss carryforwards, reduction amount	$ 1,039,000

XML

3. Inventories, Net - (Details) (USD $)	Mar. 31, 2015	Dec. 31, 2014
Inventories, net
Raw materials	$ 1,127,527	$ 873,306
Work-in-process	334,147	370,220
Finished goods	1,064,514	1,270,715
Total	2,526,188	2,514,241
Silver inventory	$ 333,371	$ 439,800

XML

10. Discontinued Operations - Discontinued Operations (Details) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Dec. 31, 2014
Discontinued Operations Information [Abstract]
Liabilities from discontinued operations, current	$ 0		$ 320,056
Accumulated other comprehensive income	0		42,502
Income (loss) from discontinued operations, net of tax	$ 362,610	$ (2,425)

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3. Inventories, Net

3 Months Ended

Mar. 31, 2015

Inventories [Abstract]

Inventories, Net

Inventories, net

Inventories consist of the following:

	March 31, 2015		December 31, 2014
Raw materials	$	1,127,527	$	873,306
Work-in-process	334,147		370,220
Finished goods	1,064,514		1,270,715
Total	$	2,526,188	$	2,514,241

The cost of silver in inventory that is included in raw materials, work-in-process and finished goods had an estimated cost of $333,371 and $439,800 as of March 31, 2015 and December 31, 2014, respectively.

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5. Intangible Assets, Net - Amortization and Impairment (Details) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Amortization and Impairment [Abstract]
Amortization expense	$ 994	$ 994

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5. Intangible Assets, Net - (Details) (USD $)	3 Months Ended
	Mar. 31, 2015	Dec. 31, 2014
Intangible Assets [Line Items]
Gross	$ 546,190	$ 545,133
Accumulated Amortization	412,105	411,111
Net	134,085	134,022
Patents and Trademarks [Member]
Intangible Assets [Line Items]
Finite-Lived Intangible Asset, Useful Life	11 years
Gross	414,437	414,436
Accumulated Amortization	394,810	394,371
Net	19,627	20,065
Patents and trademarks pending [Member]
Intangible Assets [Line Items]
Finite-Lived Intangible Asset, Useful Life	0 years
Gross	98,503	97,447
Accumulated Amortization	0	0
Net	98,503	97,447
Trade Names [Member]
Intangible Assets [Line Items]
Finite-Lived Intangible Asset, Useful Life	7 years
Gross	33,250	33,250
Accumulated Amortization	17,295	16,740
Net	$ 15,955	$ 16,510

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6. Debt - Total Debt (Details) (USD $)	Mar. 31, 2015	Dec. 31, 2014
Total debt [Abstract]
Revolving line of credit	$ 2,321,495	$ 2,071,495
Subordinated promissory notes	452,373	445,452
Term notes payable [Abstract]
Commercial term loan	937,080	1,009,977
Equipment term loan	606,388	640,734
Equipment notes	157,077	170,385
Total term notes payable	1,700,545	1,821,096
Total debt	$ 4,474,413	$ 4,338,043

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6. Debt - Bank Debt (Details) (USD $)	May 05, 2015	Mar. 31, 2015	Mar. 29, 2013	Mar. 29, 2014	Jun. 26, 2014
2015 Bank Commitment - Equipment line of credit [Member]
Bank Debt [Line Items]
Maximum borrowing capacity	$ 1,000,000
Revolving Credit Facility [Member]
Bank Debt [Line Items]
Percent Borrowable of net Elegible Recievable, Revolving Loan			80.00%
Percent Borrowable of net Eligible Raw Materials Inventory, Revolving Loan			50.00%
Revolving line of credit, interest in addition to prime rate		0.25%
Interest rate		3.50%
Commercial Loan [Member]
Bank Debt [Line Items]
Interest rate		4.25%
Commercial term loan, approximate monthly payments		28,000
Equipment line of credit [Member]
Bank Debt [Line Items]
Interest rate		4.65%
Maximum borrowing capacity			1,000,000
Original outstanding balance				740,999
2014 Equipment line of credit [Member]
Bank Debt [Line Items]
Outstanding balance		0
Maximum borrowing capacity					$ 1,000,000
2014 Equipment line of credit, interest in addition to prime rate		0.25%

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2. Earnings per share (Notes)

3 Months Ended

Mar. 31, 2015

Earnings Per Share [Abstract]

Earnings Per Share

Earnings per Share ("EPS")

Basic earnings (loss) per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding.  The computation of diluted earnings (loss) per share is similar to the computation of basic earnings (loss) per share except that the denominator is increased to include the average number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued.  In addition, the numerator is adjusted for any changes in net income (loss) that would result from the assumed conversions of those potential shares.

The following table presents the calculation of both basic and diluted EPS.

Three months ended March 31,	2015			2014
Income (loss) from continuing operations	$	(254,548	)	$	259,142
Income (loss) from discontinued operations, net of tax	362,610			(2,425		)
Net income available to common shareholders	$	108,062		$	256,717
Basic EPS:
Weighted average common shares outstanding	2,778,935			2,722,239
Income (loss) per share - basic
Continuing operations	$	(0.09	)	$	0.09
Discontinued operations	0.13			—
Consolidated basic EPS	$	0.04		$	0.09
Diluted EPS:
Weighted average common shares outstanding	2,778,935			2,722,239
Assumed conversion of net common shares issuable under stock option plans	62,164			55,500
Assumed conversion of net common shares issuable under warrants	36,500			—
Weighted average common and common equivalent shares outstanding, diluted	2,877,599			2,777,739
Income (loss) per share - diluted
Continuing operations	$	(0.09	)	$	0.09
Discontinued operations	0.13			—
Consolidated diluted EPS	$	0.04		$	0.09

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6. Debt - Other Debt (Details) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2014	Dec. 19, 2013
Equipment notes [Member]
Other debt [Line Items]
Original outstanding balance			$ 272,500
Interest rate	4.66%
Equipment notes, approximate monthly payments	2,800
Subordinated Debt [Member]
Other debt [Line Items]
Original outstanding balance					500,000
Subordinated borrowing, Interest rate years 1 and 2					10.00%
Subordinated Borrowing, Interest rate after year 2					12.00%
Exercise price of warrants					$ 3.51
Fair value of notes, subordinated debt					416,950
Fair value of warrants, subordinated debt					83,050
Non cash interest expense, subordinated promissory notes	6,921	6,921
Unamortized discount, net against outstanding balance of subordinated promissory notes	$ 47,627			$ 54,548

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Consolidated Balance Sheets (unaudited) (USD $)	Mar. 31, 2015	Dec. 31, 2014
Current assets:
Cash and cash equivalents	$ 391,382	$ 209,398
Trade accounts receivable, net of allowance for doubtful accounts of $48,000 at March 31, 2015 and $45,000 at December 31, 2014	4,010,069	3,536,747
Inventory, net	2,526,188	2,514,241
Prepaid expenses and other current assets	616,367	519,582
Total current assets	7,544,006	6,779,968
Property, Plant and Equipment, Net	7,499,932	7,618,901
Intangible assets, net	134,085	134,022
Other assets	401,952	570,357
Total assets	15,579,975	15,103,248
Current liabilities:
Revolving line of credit	2,321,495	2,071,495
Term notes payable, current portion	495,767	490,341
Accounts payable	2,268,833	1,857,156
Accrued expenses & other current liabilities	687,109	405,975
Customer deposits	89,373	98,110
Deferred revenue, current	313,769	228,363
Liabilities from discontinued operations, current	0	320,056
Total current liabilities	6,176,346	5,471,496
Long-term liabilities:
Term notes payable, non-current portion	1,204,778	1,330,755
Subordinated promissory notes	452,373	445,452
Deferred revenue, non-current	424,789	610,430
Total long-term liabilities	2,081,940	2,386,637
Total liabilities	8,258,286	7,858,133
Commitments and Contingencies
Shareholders' equity:
Preferred stock, $1 par value; 2,000,000 shares authorized, none issued	0	0
Common stock, $.01 par value; 10,000,000 shares authorized; 3,926,941 issued; 2,779,439 outstanding at March 31, 2015 and 3,926,491 issued, 2,778,339 outstanding at December 31, 2014	39,265	39,265
Additional paid-in-capital	11,344,707	11,336,693
Treasury stock at cost, 1,147,052 shares at March 31, 2015 and 1,148,152 shares at December 31, 2014	(3,130,882)	(3,133,883)
Accumulated other comprehensive income	0	42,502
Accumulated deficit	(931,401)	(1,039,462)
Total shareholders’ equity	7,321,689	7,245,115
Total liabilities and shareholders’ equity	$ 15,579,975	$ 15,103,248

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Consolidated Statements of Cash Flows (unaudited) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Cash flows from operating activities:
Net income	$ 108,062	$ 256,717
Income (loss) from discontinued operations	(362,610)	2,425
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Gain on sale of property, plant and equipment	(11,029)	0
Depreciation and amortization	356,382	385,359
Non-cash interest expense	6,921	6,921
Change in allowance for doubtful accounts	3,000	0
Share-based compensation expense	7,186	11,250
Changes in operating assets and liabilities:
Accounts receivable	(476,322)	(242,185)
Inventories	(11,947)	(419,018)
Prepaid expenses and other current assets	(96,785)	25,441
Other non-current assets	168,405	13,097
Accounts payable	411,677	(34,492)
Accrued expenses and other current liabilities	357,803	23,724
Other non-current liabilities	(185,641)	(6,028)
Net cash provided by (used in) operating activities of continuing operations	275,102	23,211
Net cash provided by (used in) operating activites of discontinued operations	0	(1,509)
Net cash provided by (used in) operating activities	275,102	21,702
Cash flows from investing activities:
Purchases of property, plant and equipment	(242,390)	(391,738)
Proceeds from sale of property, plant and equipment	17,000	(303)
Cash paid for patents and trademarks	(1,057)	0
Net cash provided by (used in) investing activities from continuing operations	(226,447)	(392,041)
Net cash provided by (used in) investing activities from discontinued operations	0	0
Net cash provided by (used in) investing activities	(226,447)	(392,041)
Cash flows from financing activities:
Proceeds from (payments on) revolving line of credit, net	250,000	(118,000)
Proceeds from equipment line of credit	0	116,905
Payments on term notes payable	(120,551)	(82,593)
Proceeds from stock options exercises	3,880	0
Net cash provided by (used in) financing activities from continuing operations	133,329	(83,688)
Net cash provided by (used in) financing activities from discontinued operations	0	0
Net cash provided by (used in) financing activities	133,329	(83,688)
Net increase (decrease) in cash and cash equivalents	181,984	(454,027)
Cash and cash equivalents, beginning of period	209,398	751,275
Cash and cash equivalents, end of period	391,382	297,248
Less: cash and cash equivalents of discontinued operations at end of period	0	0
Cash and cash equivalents of continuing operations at end of period	391,382	297,248
Supplemental Cash Flow Information (unaudited)
Cash paid for interest	53,705	59,632
Non-cash activities:
Equipment line of credit converted to term notes payable	$ 0	$ 740,999

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9. Stock Options & Share-based Incentive Plan - Stock Option Transactions (Details) (USD $)	3 Months Ended		12 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Dec. 31, 2014
Stock Options
Exercised in period	1,100
Forfeited in period	7,500
Number of options
Stock Options
Outstanding	182,200		165,800
Granted in period	25,000
Exercised in period	(1,100)
Forfeited in period	(7,500)
Expired in period	0	56,500
Exercisable	83,200		74,400
Weighted Average Exercise Price [Member]
Stock Options
Outstanding	5.85		5.58
Granted in period	7.74
Exercised in period	3.53
Forfeited in period	6.45
Expired in period	0.00
Exercisable	5.79		6.07
Weighted average remaining contractual term (in years)
Stock Options
Outstanding	6 years 3 months		6 years 1 month 2 days
Exercisable	4 years 0 months 22 days		4 years 9 months
Aggregate Intrinsic Value
Stock Options
Outstanding	300,276		305,124
Exercisable	147,896		119,342

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6. Debt (Tables)

3 Months Ended

Mar. 31, 2015

Debt [Abstract]

Debt and promissory notes

	March 31, 2015		December 31, 2014
Revolving line of credit	$	2,321,495	$	2,071,495
Subordinated promissory notes	$	452,373	$	445,452
Term notes payable:
Commercial term loan	$	937,080	$	1,009,977
Equipment term loan	606,388		640,734
Equipment notes	157,077		170,385
Total term notes payable	$	1,700,545	$	1,821,096
Total Debt	$	4,474,413	$	4,338,043

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9. Stock Options & Share-based Incentive Plan - Share-based Compensation (Details) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Stock Options [Abstract]
Share-based compensation expense	$ 7,186	$ 11,250
Proceeds from stock options exercises	$ 3,880	$ 0
Warrants [Abstract]
Warrants exercised	0	0
Warrants remained unexercised	70,000

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2. Earnings per share - (Details) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Earnings Per Share [Abstract]
Income (loss) from continuing operations	$ (254,548)	$ 259,142
Income (loss) from discontinued operations, net of tax	362,610	(2,425)
Net income available to common shareholder	$ 108,062	$ 256,717
Basic EPS:
Weighted average of common shares outstanding	2,778,935	2,722,239
Income (loss) per share - basic
Continuing operations	$ (0.09)	$ 0.09
Discontinued operations	$ 0.13	$ 0.00
Consolidated basic EPS	$ 0.04	$ 0.09
Diluted EPS:
Weighted average of common shares outstanding	2,778,935	2,722,239
Assumed conversion of net common shares issuable under stock options	62,164	55,500
Assumed conversion of net common shares issuable under warrants	36,500	0
Weighted average common and common equivalent shares outstanding, diluted	2,877,599	2,777,739
Income (loss) per share - diluted
Continuing operations	$ (0.09)	$ 0.09
Discontinued operations	$ 0.13	$ 0.00
Consolidated diluted EPS	$ 0.04	$ 0.09

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1. Basis of Presentation (Notes)

3 Months Ended

Mar. 31, 2015

Basis of presentation [Abstract]

Basis of Presentation

Basis of Presentation

The consolidated financial statements (the "financial statements") include the accounts of Arrhythmia Research Technology, Inc.^® (“ART”) and its subsidiary, Micron Products, Inc.^® ("Micron" and together with ART, the “Company”). ART discontinued operations of it’s wholly-owned Pennsylvania subsidiary, RMDDxUSA Corp. (“RMDDxUSA”) and that subsidiary’s Prince Edward Island subsidiary, RMDDx Corporation (“RMDDx” and collectively with RMDDxUSA,“WirelessDx”) in the third quarter of 2012. In May 2014, RMDDxUSA filed for bankruptcy and the case was formally discharged in its bankruptcy proceedings March 20, 2015 (see Note 10). The WirelessDx results are presented herein as discontinued operations. All intercompany balances and transactions have been eliminated in consolidation.

The unaudited interim consolidated financial statements and related notes have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC").  Accordingly, certain information and footnote disclosures normally included in complete financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been omitted pursuant to such rules and regulations.  These financial statements and related notes should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2014 filed with the SEC on March 20, 2015. Certain reclassifications have been made to prior period amounts to conform to the current year presentation.

The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. The Company's balance sheet at December 31, 2014 has been derived from the audited financial statements at that date, but does not include all the information and footnotes required by GAAP for complete financial statements.

The information presented reflects, in the opinion of the management of the Company, all adjustments necessary for a fair presentation of the financial results for the interim periods presented. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

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Consolidated Balance Sheets(unaudited) (Parentheticals) (USD $)	Mar. 31, 2015	Dec. 31, 2014
Consolidated Balance Sheet Parenthetical [Line Items]
Allowance for doubtful accounts receivable, current	$ 48,000	$ 45,000
Preferred stock, par value per share	$ 1	$ 1
Preferred stock, shares authorized	2,000,000	2,000,000
Preferred stock, shares issued	0	0
Common stock, par value per share	$ 0.01	$ 0.01
Common stock, shares authorized	10,000,000	10,000,000
Common stock, shares issued	3,926,491	3,926,491
Common stock, shares outstanding	2,779,439	2,778,339
Treasury stock, shares	1,147,052	1,148,152

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11. Subsequent Events (Notes)

3 Months Ended

Mar. 31, 2015

Subsequent Events [Abstract]

Subsequent Events [Text Block]

Subsequent Events

Appointment of Director

On April 23, 2015, the Company's Board of Directors appointed Mr. Robert A. Mello a director of the Company, effective April 27, 2015. A description of Mr. Mello's background can be found in the Current Report on Form 8-K filed on April 28, 2015 and in the Company's 2015 proxy statement filed on April 28, 2015.

Extension of the Revolver

On May 5, 2015, the Company received a commitment letter from the bank to extend the revolver for an additional two year period expiring June 30, 2017 and to extend a new equipment line of credit of $1.0 million commencing June 26, 2015 under the same terms as the equipment line of credit dated June 26, 2014.

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Document and Entity Information Document	3 Months Ended
	Mar. 31, 2015	May 13, 2015
Document Information [Line Items]
Entity Registrant Name	Arrhythmia Research Technology Inc /DE/
Entity Central Index Key	0000819689
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Document Type	10-Q
Document Period End Date	Mar. 31, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q1
Amendment Flag	false
Entity Common Stock, Shares Outstanding		2,779,439

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2. Earnings per share (Tables)

3 Months Ended

Mar. 31, 2015

Earnings Per Share [Abstract]

Earnings per Share

The following table presents the calculation of both basic and diluted EPS.

Three months ended March 31,	2015			2014
Income (loss) from continuing operations	$	(254,548	)	$	259,142
Income (loss) from discontinued operations, net of tax	362,610			(2,425		)
Net income available to common shareholders	$	108,062		$	256,717
Basic EPS:
Weighted average common shares outstanding	2,778,935			2,722,239
Income (loss) per share - basic
Continuing operations	$	(0.09	)	$	0.09
Discontinued operations	0.13			—
Consolidated basic EPS	$	0.04		$	0.09
Diluted EPS:
Weighted average common shares outstanding	2,778,935			2,722,239
Assumed conversion of net common shares issuable under stock option plans	62,164			55,500
Assumed conversion of net common shares issuable under warrants	36,500			—
Weighted average common and common equivalent shares outstanding, diluted	2,877,599			2,777,739
Income (loss) per share - diluted
Continuing operations	$	(0.09	)	$	0.09
Discontinued operations	0.13			—
Consolidated diluted EPS	$	0.04		$	0.09

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Consolidated Statements of Operations (unaudited) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Net sales	$ 5,858,342	$ 6,029,843
Cost of sales	5,061,946	4,718,557
Gross profit	796,396	1,311,286
Selling and marketing	257,972	291,672
General and administrative	648,227	594,631
Research and development	92,561	96,827
Total operating expenses	998,760	983,130
Income (loss) from continuing operations	(202,364)	328,156
Other income (expense):
Interest expense	(65,693)	(70,149)
Other income (expense), net	13,509	2,312
Total other expense, net	(52,184)	(67,837)
Income (loss) from continuing operations before income taxes	(254,548)	260,319
Income tax provision	0	1,177
Net income (loss) from continuing operations	(254,548)	259,142
Discontinued Operations:
Income (loss) from discontinued operations, net of tax provision of $0 for the three months ended March 31, 2015 and 2014	362,610	(2,425)
Net income	$ 108,062	$ 256,717
Income (loss) per share - basic
Continuing operations	$ (0.09)	$ 0.09
Discontinued operations	$ 0.13	$ 0.00
Income per share - basic	$ 0.04	$ 0.09
Income (loss) per share - diluted
Continuing operations	$ (0.09)	$ 0.09
Discontinued operations	$ 0.13	$ 0.00
Income per share - diluted	$ 0.04	$ 0.09
Weighted average common shares outstanding - basic	2,778,935	2,722,239
Weighted average common shares outstanding - diluted	2,877,599	2,777,739

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6. Debt

3 Months Ended

Mar. 31, 2015

Debt [Abstract]

Debt

Debt

The following table sets forth the items which comprise debt for the Company:

	March 31, 2015		December 31, 2014
Revolving line of credit	$	2,321,495	$	2,071,495
Subordinated promissory notes	$	452,373	$	445,452
Term notes payable:
Commercial term loan	$	937,080	$	1,009,977
Equipment term loan	606,388		640,734
Equipment notes	157,077		170,385
Total term notes payable	$	1,700,545	$	1,821,096
Total Debt	$	4,474,413	$	4,338,043

Bank Debt

The revolving line of credit (the "revolver"), commercial term loan and equipment term loan are all under the terms of a multi-year credit facility with a bank. This facility also includes an equipment line of credit which has no outstanding balance at March 31, 2015. The bank facility contains both financial and non-financial covenants, all of which the Company is in compliance with at March 31, 2015.

Revolver

The revolver provides for borrowings up to 80% of eligible accounts receivable and 50% of eligible raw materials inventory.  The interest rate on the revolver is calculated at the bank's prime rate plus 0.25% (3.50% at March 31, 2015). The revolver has a maturity date of June 2015 and is classified as a current liability on the Company's balance sheet at March 31, 2015.

On May 5, 2015, the Company received a commitment letter from the bank to extend the revolver for an additional two year period expiring June 30, 2017.

Commercial term loan

    The commercial term loan has a five year term with a maturity date in March 2018. The interest rate on the loan is a fixed 4.25% per annum, and requires monthly payments of approximately $28,000.

Equipment line of credit and equipment term loan

The original equipment line of credit allowed for advances of up to $1.0 million and included a one-year draw period during which payments were interest only. The draw period ended March 29, 2014 and the then outstanding balance on the equipment line of credit of $740,999 was converted to an equipment term loan with a five-year term, maturing on of March 29, 2019. The equipment term loan requires monthly payments of approximately $14,000, consisting of principal and interest at a fixed rate of 4.65%.

On June 26, 2014, the Company entered into a new equipment line of credit for $1.0 million under the Company's multi-year credit facility. At March 31, 2015, no amounts had been drawn on the new equipment line of credit. The term of this equipment line of credit is six years, maturing on June 26, 2020, inclusive of a maximum one-year draw period. Repayment shall consist of monthly interest only payments, equal to the bank's prime rate plus 0.25% as to each advance commencing on the date of the loan through the earlier of: (i) one year from the date of the loan or (ii) the date upon which the equipment line of credit is fully advanced (the “Conversion Date”). On the Conversion Date, principal and interest payments will be due and payable monthly in an amount sufficient to pay the loan in full based upon an amortization schedule commensurate with the remaining term of the loan.

On May 5, 2015, the Company received a commitment letter from the bank to extend a new equipment line of credit of $1.0 million commencing June 26, 2015 under the same terms as the equipment line of credit dated June 26, 2014.

Other Debt

Equipment notes

In January 2013, the Company entered into two equipment notes totaling $272,500 with a financing company to acquire production equipment. The notes bear interest at the fixed rate of 4.66% and require monthly payments of principal and interest of approximately $2,800 over a five year term maturing in January 2018.

Subordinated promissory notes

In December 2013, the Company completed a private offering in which the Company sold an aggregate of $500,000 in subordinated promissory notes. The notes are unsecured and require quarterly interest-only payments at a rate of 10% per annum. On the second anniversary following issuance, the interest rate increases to 12% per annum. The notes mature in December 2016 at which point the outstanding balance is due in full. The subordinated promissory notes may be prepaid by the Company at any time following the first anniversary thereof without penalty. The notes are subordinated to all indebtedness of the Company pursuant to the bank credit facility.

In connection with the subordinated promissory notes, the Company issued warrants to purchase the Company's common stock at $3.51 per share. The warrants expire in December 2016. The proceeds were allocated between the notes and warrants on a relative fair value basis resulting in $416,950 allocated to the notes and $83,050 allocated to the warrants as part of Additional-Paid-in-Capital. The total discount on the notes is being recognized as non-cash interest expense over the term of the notes. For the three months ended March 31, 2015 and 2014, the Company recorded $6,921 of non-cash interest expense related to the amortization of the discount. The unamortized discount which is net against the outstanding balance of the subordinated promissory notes is $47,627 at March 31, 2015 and $54,548 at December 31, 2014.

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5. Intangible Assets, Net (Notes)

3 Months Ended

Mar. 31, 2015

Intangible Assets, Net [Abstract]

Intangibles Assets, Net

Intangible Assets, Net

The Company assesses the impairment of long-lived assets and intangible assets with finite lives annually or whenever events or changes in circumstances indicate that the carrying value may not be fully recoverable. For the three months ended March 31, 2015, no impairment was required.

Intangible assets consist of the following:

		March 31, 2015						December 31, 2014
	Estimated Useful Life (in years)	Gross		Accumulated Amortization		Net		Gross		Accumulated Amortization		Net
Patents and trademarks	11	$	414,437	$	394,810	$	19,627	$	414,436	$	394,371	$	20,065
Patents and trademarks pending	—	98,503		—		98,503		97,447		—		97,447
Trade names	7	33,250		17,295		15,955		33,250		16,740		16,510
Total intangible assets		$	546,190	$	412,105	$	134,085	$	545,133	$	411,111	$	134,022

For the three months ended March 31, 2015 and 2014, the Company recorded amortization expense of $994.

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9. Stock Options & Share-based Incentive Plan (Tables)

3 Months Ended

Mar. 31, 2015

Stock Options [Abstract]

Stock Option Transactions

The following table sets forth the stock option transactions for the three months ended March 31, 2015:

	Number of options		Weighted average Exercise Price		Weighted average remaining contractual term (in years)	Aggregate Intrinsic Value
Outstanding at December 31, 2014	165,800		$	5.58	6.09	$	305,124
Granted	25,000		7.74
Exercised	(1,100	)	3.53
Forfeited	(7,500	)	6.45
Expired	—		—
Outstanding at March 31, 2015	182,200		5.85		6.25	$	300,276
Exercisable at March 31, 2015	83,200		$	5.79	4.06	$	147,896
Exercisable at December 31, 2014	74,400		$	6.07	4.75	$	119,342

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3. Inventories, Net (Tables)

3 Months Ended

Mar. 31, 2015

Inventory [Abstract]

Inventories, net

Inventories consist of the following:

	March 31, 2015		December 31, 2014
Raw materials	$	1,127,527	$	873,306
Work-in-process	334,147		370,220
Finished goods	1,064,514		1,270,715
Total	$	2,526,188	$	2,514,241

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9. Stock Options & Share-based Incentive Plan

3 Months Ended

Mar. 31, 2015

Stock Options [Abstract]

Stock Options & Share-based Incentive Plan

Stock Options and Share-Based Incentive Plan

Options

The following table sets forth the stock option transactions for the three months ended March 31, 2015:

	Number of options		Weighted average Exercise Price		Weighted average remaining contractual term (in years)	Aggregate Intrinsic Value
Outstanding at December 31, 2014	165,800		$	5.58	6.09	$	305,124
Granted	25,000		7.74
Exercised	(1,100	)	3.53
Forfeited	(7,500	)	6.45
Expired	—		—
Outstanding at March 31, 2015	182,200		5.85		6.25	$	300,276
Exercisable at March 31, 2015	83,200		$	5.79	4.06	$	147,896
Exercisable at December 31, 2014	74,400		$	6.07	4.75	$	119,342

For the three months ended March 31, 2015 and 2014, share-based compensation expense related to stock options amounted to $7,186 and $11,250, respectively, and is included in general and administrative expenses.

For the three months ended March 31, 2015, 25,000 options were granted, 7,500 options were forfeited. Additionally, 1,100 options were exercised generating proceeds of $3,880.

For the three months ended March 31, 2014, there we no new grants, no exercises and 56,500 shares expired.

Warrants

For the three months ended March 31, 2015 and 2014, there were no warrants exercised. As of March 31, 2015, 70,000 warrants remain unexercised.

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7. Income Taxes

3 Months Ended

Mar. 31, 2015

Income Taxes [Abstract]

Income Taxes

Income Taxes

The tax provisions for the three months ended March 31, 2015 and 2014 are attributable to the U.S. federal, state and foreign income taxes on our continuing operations. The Company has a full valuation allowance against its deferred tax assets at March 31, 2015 and December 31, 2014. Management expects to reevaluate the allowance on its deferred tax assets at December 31, 2015.

The Company has federal and state net operating loss carryforwards totaling $7,752,000 and $7,202,000, respectively, which begin to expire in 2030. During the first quarter of 2015, the Company's subsidiary, RMDDxUSA, was formally discharged in its bankruptcy proceedings.  The tax attributes associated with this subsidiary expired upon the finalization of the bankruptcy. As a result, the Company's available foreign and state net operating loss carryforwards have been reduced by $1,039,000 and $4,315,000, respectively. 

The Company also had federal and state tax credit carryovers of $243,000 and $281,000, respectively. The federal and state tax credits begin to expire in 2026 and 2015, respectively.

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8. Commitments and Contingencies

3 Months Ended

Mar. 31, 2015

Commitments and Contingencies [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Legal matters

In the ordinary course of its business, the Company is involved in various legal proceedings involving a variety of matters. The Company does not believe there are any pending legal proceedings that will have a material impact on the Company’s financial position or results of operations.

Off-balance sheet arrangements

In 2014, the Company entered into two operating leases for office equipment. Lease expense under all operating leases was approximately $1,822 for three months ended March 31, 2015 and $0 for the same period in 2014.

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10. Discontinued Operations

3 Months Ended

Mar. 31, 2015

Discontinued Operations [Abstract]

Discontinued Operations

Discontinued Operations

On May 8, 2014, RMDDxUSA filed a voluntary petition for relief under Chapter 7 (Liquidation) of the United States Bankruptcy Code in the District of Massachusetts. A trustee was assigned to review the assets and liabilities of the company. At December 31, 2014, there were no assets and $320,056 of liabilities remaining on the balance sheet.

On March 20, 2015, the Chapter 7 Order was formally discharged by the assigned trustee and the case was closed. For the three months ended March 31, 2015, net income of $362,610, net of tax, was recorded from discontinued operations as a result of the write off of the remaining liabilities of $320,056 and the reversal of other comprehensive income of $42,502 from cumulative translation adjustments from RMDDx Corporation.

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8. Commitments and Contingencies - (Details) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Commitments and Contingencies [Line Items]
Operating lease, office equipment	$ 1,822	$ 0

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5. Intangible Assets, Net (Tables)

3 Months Ended

Mar. 31, 2015

Intangible Assets, Net [Abstract]

Intangibles Assets, Net

Intangible assets consist of the following:

		March 31, 2015						December 31, 2014
	Estimated Useful Life (in years)	Gross		Accumulated Amortization		Net		Gross		Accumulated Amortization		Net
Patents and trademarks	11	$	414,437	$	394,810	$	19,627	$	414,436	$	394,371	$	20,065
Patents and trademarks pending	—	98,503		—		98,503		97,447		—		97,447
Trade names	7	33,250		17,295		15,955		33,250		16,740		16,510
Total intangible assets		$	546,190	$	412,105	$	134,085	$	545,133	$	411,111	$	134,022

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4. Property, Plant and Equipment, Net - (Details) (USD $)	3 Months Ended
	Mar. 31, 2015	Dec. 31, 2014
Property, Plant and Equipment
Machinery and equipment	14,679,442	$ 14,608,949
Building and improvements	4,360,114	4,360,114
Vehicles	90,713	90,713
Furniture, fixtures, computers and software	1,364,461	1,349,931
Land	202,492	202,492
Construction in progress	543,735	568,234
Total property, plant and equipment	21,240,957	21,180,433
Less: accumulated depreciation	(13,741,025)	(13,561,532)
Property, plant and equipment, net	7,499,932	$ 7,618,901
Machinery and equipment, minimum
Property, Plant and Equipment
Useful life	3 years
Building and improvements, minimum
Property, Plant and Equipment
Useful life	5 years
Vehicles, minimum
Property, Plant and Equipment
Useful life	3 years
Furniture, Fixtures, computers, and software, minimum
Property, Plant and Equipment
Useful life	3 years
Machinery and equipment, maximum
Property, Plant and Equipment
Useful life	15 years
Building and improvements, maximum
Property, Plant and Equipment
Useful life	25 years
Vehicles, maximum
Property, Plant and Equipment
Useful life	5 years
Furniture, fixtures, computers and software, maximum
Property, Plant and Equipment
Useful life	5 years

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Consolidated Statements of Operations (unaudited) (Parentheticals) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Consolidated Statement of Operations Parenthetical [Abstract]
Tax provision, discontinued operations	$ 0	$ 0

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4. Property, Plant and Equipment, Net

3 Months Ended

Mar. 31, 2015

Property, Plant and Equipment, Net [Abstract]

Property, Plant and Equipment, Net

Property, Plant and Equipment, Net

Property, plant and equipment consist of the following:

	Asset Lives (in years)			March 31, 2015			December 31, 2014
Machinery and equipment	3	to	15	$	14,679,442		$	14,608,949
Building and improvements	5	to	25	4,360,114			4,360,114
Vehicles	3	to	5	90,713			90,713
Furniture, fixtures, computers and software	3	to	5	1,364,461			1,349,931
Land				202,492			202,492
Construction in progress				543,735			568,234
Total property, plant and equipment				21,240,957			21,180,433
Less: accumulated depreciation				(13,741,025		)	(13,561,532		)
Property, plant and equipment, net				$	7,499,932		$	7,618,901

For the three months ended March 31, 2015 and 2014, the Company recorded depreciation expense of $355,388 and $377,515, respectively.

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4. Property, Plant and Equipment, Net - Depreciation Expense (Details) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Depreciation [Abstract]
Depreciation expense	$ 355,388	$ 377,515

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11. Subsequent Events - (Details) (2015 Bank Commitment - Equipment line of credit [Member], USD $)	May 05, 2015
2015 Bank Commitment - Equipment line of credit [Member]
Subsequent Event [Line Items]
Maximum borrowing capacity	$ 1,000,000

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4. Property, Plant and Equipment, Net (Tables)

3 Months Ended

Mar. 31, 2015

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment

Property, plant and equipment consist of the following:

	Asset Lives (in years)			March 31, 2015			December 31, 2014
Machinery and equipment	3	to	15	$	14,679,442		$	14,608,949
Building and improvements	5	to	25	4,360,114			4,360,114
Vehicles	3	to	5	90,713			90,713
Furniture, fixtures, computers and software	3	to	5	1,364,461			1,349,931
Land				202,492			202,492
Construction in progress				543,735			568,234
Total property, plant and equipment				21,240,957			21,180,433
Less: accumulated depreciation				(13,741,025		)	(13,561,532		)
Property, plant and equipment, net				$	7,499,932		$	7,618,901