FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended September 30, 2002 or
[_] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ______ to ______
1-9731
(Commission file No.)
ARRHYTHMIA RESEARCH TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 72-0925679
(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
25 Sawyer Passway
Fitchburg, Massachusetts 01420
(Address of principal executive office 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___.
---
As of October 31, 2002 there were 2,748,413 shares of common stock outstanding.
This report consists of 26 pages.
ARRHYTHMIA RESEARCH TECHNOLOGY, INC.
TABLE OF CONTENTS
FORM 10-Q
September 30, 2002
Page
Part I - Financial Information ............................................ 3
Item 1. Financial Statements ............................................. 3
Consolidated Balance Sheets ............................................. 3
Consolidated Statements of Income ....................................... 4
Consolidated Statements of Changes in Shareholders' Equity .............. 5
Consolidated Statements of Cash Flows ................................... 6
Supplemental Notes to Consolidated Financial Statements ................. 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ................... 8
Item 3. Quantitative and Qualitative Disclosures and Market Risk ........ 10
Item 4. Evaluation of Disclosure Controls and Procedures ................ 10
Part II - Other Information ............................................... 10
Item 1. Legal Proceedings ............................................... 10
Item 4. Submission of Matters to a Vote of Security Holders ............. 10
Item 6. Exhibits and Reports on Form 8-K ................................ 10
SIGNATURES ................................................................ 11
CERTIFICATION ............................................................. 11
Exhibit 3.1 - Arrhythmia Research Technology, Inc. By-laws ............. 13
Exhibit 10.1 - Employment Agreement President James E. Rouse ............ 21
Exhibit 99.1 - Certification pursuant to 18 U.S.C.ss.1350, as adopted
pursuant to section 906 of the Sarbanes-Oxley Act of 2002 26
2
Part I - Financial Information
Item 1. Financial Statements
ARRHYTHMIA RESEARCH TECHNOLOGY, INC. AND SUBSIDIARY
Consolidated Balance Sheets
(Unaudited)
ASSETS September 30, December 31,
2002 2001
--------------- --------------
Current assets:
Cash and cash equivalents ......................................... $ 1,615,037 $ 1,860,822
Trade and other accounts receivable, net of allowance for
doubtful accounts of $51,000 ................................. 923,208 854,426
Inventories, net .................................................. 1,286,612 897,087
Deposits, prepaid expenses and other current assets ............... 61,478 27,887
------------ -----------
Total current assets ............................................ 3,886,335 3,640,222
Property and equipment, net of accumulated depreciation of
$4,271,826 and $4,358,954 ......................................... 3,053,161 3,272,592
Goodwill, net of accumulated amortization of $1,079,073 and
$1,147,326 ........................................................ 1,244,000 1,326,000
Deferred income taxes, net ........................................... 411,923 444,923
------------ -----------
Total assets ...................................................... $ 8,595,419 $ 8,683,737
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of 11% bonds payable ........................... - 113,028
Accounts payable .................................................. 242,231 343,010
Accrued expenses .................................................. 378,536 314,840
------------ -----------
Total current liabilities ....................................... 620,767 770,878
Shareholders' equity:
Preferred stock, $1 par value; 2,000,000 shares authorized,
none issued ..................................................... - -
Common stock, $.01 par value; 10,000,000 shares authorized,
3,888,131 and 3,758,181 issued .................................. 38,881 37,582
Additional paid-in-capital ........................................ 9,161,707 8,999,581
Common stock held in treasury, 1,059,718 and 869,305
shares at cost .................................................. (2,884,116) (2,357,279)
Retained earnings ................................................. 1,658,180 1,232,975
------------ -----------
Total shareholders' equity ...................................... 7,974,652 7,912,859
------------ -----------
Total liabilities and shareholders' equity ...................... $ 8,595,419 $ 8,683,737
============ ===========
The accompanying notes are an integral part of the
consolidated financial statements.
3
ARRHYTHMIA RESEARCH TECHNOLOGY, INC. AND SUBSIDIARY
Consolidated Statements of Income
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
---- ---- ---- ----
Revenue .............................................................. $1,630,427 $1,637,050 $5,377,761 $5,265,686
Cost of sales ........................................................ 1,081,964 1,180,898 3,619,737 3,670,360
---------- ---------- --------- ----------
Gross profit ....................................................... 548,463 456,152 1,758,024 1,595,326
---------- ---------- --------- ----------
Selling and marketing ................................................ 13,062 10,748 36,541 51,943
General and administrative ........................................... 320,858 295,635 1,033,583 1,014,469
Research and development ............................................. 15,322 50,078 59,233 151,046
Amortization of goodwill ............................................. - 32,472 - 97,417
---------- ---------- --------- ----------
Income from operations ............................................. 199,221 67,219 628,667 280,451
---------- ---------- --------- ----------
Other income (expense)
Interest expense ................................................... (2,656) (18,165) (13,532) (47,274)
Other income, net .................................................. 5,179 8,712 11,070 20,293
---------- ---------- --------- ----------
Income before income taxes and cumulative effect of
change in accounting principle ..................................... 201,744 57,766 626,205 253,470
Income tax provision (benefit) ....................................... 23,000 (23,000) 144,000 36,000
---------- ---------- --------- ----------
Income before cumulative effect of change in
accounting principle ............................................... 178,744 80,766 482,205 217,470
Cumulative effect of change in accounting principle,
net of tax ......................................................... - - (57,000) -
---------- ---------- --------- ----------
Net income ......................................................... $ 178,744 $ 80,766 $ 425,205 $ 217,470
========== ========== ========= ==========
Net income per share - basic ......................................... $ 0.06 $ 0.03 $ 0.15 $ 0.07
========== ========== ========= ==========
Weighted average common shares outstanding - basic ................... 2,905,804 2,976,724 2,915,089 3,034,481
========== ========== ========= ==========
Net income per share - dilutive ...................................... $ 0.06 $ 0.03 $ 0.14 $ 0.07
========== ========== ========= ==========
Weighted average common shares outstanding -dilutive ................. 2,927,540 3,150,890 2,955,486 3,202,341
========== ========== ========= ==========
The accompanying notes are an integral part of the
consolidated financial statements.
4
ARRHYTHMIA RESEARCH TECHNOLOGY, INC. AND SUBSIDIARY
Consolidated Statements of Changes in Shareholders' Equity
(Unaudited)
Common Shares Additional
-------------------- Paid-in Treasury Retained
Number Amount Capital Stock Earnings Total
------ ------ ---------- -------- --------- ----------
December 31, 1999 ............ 3,711,883 $37,119 $8,946,293 $(1,151,892) $ 390,219 $8,221,739
Issuance of common stock ..... 17,798 178 26,322 - - 26,500
Value of warrants with
bond renewal ............. - - 194,000 - - 194,000
Treasury stock purchase of
265,040 shares ........... - - - (502,772) - (502,772)
Net income ................... - - - - 620,127 620,127
--------- -------- ---------- ----------- ---------- ----------
December 31, 2000 ............ 3,729,681 $37,297 $9,166,615 $(1,654,664) $1,010,346 $8,559,594
Issuance of common stock ..... 28,500 285 29,996 - - 30,281
Warrants repurchased ......... - - (197,030) - - (197,030)
Treasury stock purchase of
305,859 shares ........... - - - (702,615) - (702,615)
Net income ................... - - - - 222,629 222,629
--------- -------- ---------- ----------- ---------- ----------
December 31, 2001 ............ 3,758,181 $37,582 $8,999,581 $(2,357,279) $1,232,975 $7,912,859
Exercise of stock options
and warrants ............. 129,950 1,299 162,126 - - 163,425
Treasury stock purchase of
190,413 shares ........... - - - (526,837) - (526,837)
Net income ................... - - - - 425,205 425,205
--------- -------- ---------- ----------- ---------- ----------
September 30, 2002 ........... 3,888,131 $38,881 $9,161,707 $(2,884,116) $1,658,180 $7,974,652
========= ======== ========== =========== ========== ==========
The accompanying notes are an integral part of the
consolidated financial statements.
5
ARRHYTHMIA RESEARCH TECHNOLOGY, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
Nine months ended
September 30,
2002 2001
---- ----
Cash flows from operating activities:
Net income ............................................................. $ 425,205 $ 217,470
Adjustments to reconcile net income to net cash provided by operating
activities:
Cumulative effect of change in accounting principle, net of tax ........ 57,000 -
Depreciation ........................................................... 466,575 496,033
Amortization ........................................................... 11,972 186,178
Deferred income tax provision .......................................... 33,000 20,000
Changes in assets and liabilities:
Trade and other accounts receivable ................................. (68,782) 540,318
Inventories ......................................................... (389,525) (61,969)
Deposits, prepaid expenses and other assets ......................... (33,591) 114,983
Accounts payable and accrued expenses ............................... (12,083) (192,206)
---------- ----------
Net cash provided by operating activities ......................... $ 489,771 $1,320,807
---------- ----------
Cash flows from investing activities:
Capital expenditures, net of disposals ................................. (247,144) (351,305)
---------- ----------
Net cash used in investing activities ............................. $ (247,144) $ (351,305)
---------- ----------
Cash flows from financing activities:
Issuance of common stock ............................................... 163,425 30,281
Payment of bonds ....................................................... (125,000) -
Principle payment of long term debt .................................... - (175,000)
Purchase of treasury stock ............................................. (526,837) (551,192)
---------- ----------
Net cash used in financing activities ............................. $ (488,412) $ (695,911)
---------- ----------
Net increase (decrease) in cash and cash equivalents ...................... $ (245,785) $ 273,591
Cash and cash equivalents at beginning of period .......................... 1,860,822 1,999,292
---------- ----------
Cash and cash equivalents at end of period ................................ $1,615,037 $2,272,883
========== ==========
The accompanying notes are an integral part of the
consolidated financial statements.
6
Supplemental Notes to Consolidated Financial Statements
The unaudited interim consolidated financial statements and related
notes have been prepared pursuant to the rules and regulations of the Securities
and Exchange Commission. Accordingly, certain information and footnote
disclosures normally included in complete financial statements prepared in
accordance with generally accepted accounting principles have been omitted
pursuant to such rules and regulations. The accompanying unaudited interim
consolidated financial statements and related notes should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's most recent Form 10-K covering the year ended December
31, 2001.
The information furnished reflects, in the opinion of the management of
Arrhythmia Research Technology, Inc. (the "Company") and its subsidiary Micron
Products Inc., all adjustments necessary for a fair presentation of the
financial results for the interim period presented.
Interim results are subject to year-end adjustments and audit of year
end results by independent certified public accountants.
Inventories:
Inventories consist of the following as of: September 30, December 31,
2002 2001
------------ ------------
Raw materials .................................................. $ 289,046 $166,835
Work-in-process ................................................ 315,829 318,070
Finished goods ................................................. 681,737 412,182
---------- ---------
Total ..................................................... $1,286,612 $897,087
========== =========
Goodwill:
Effective January 1, 2002 the Company adopted FASB Statement No.141,
Business Combinations ("SFAS 141") and No. 142, Goodwill and Other Intangible
Assets ("SFAS 142"). SFAS 141 requires the use of the purchase method of
accounting and prohibits the use of the pooling-of-interest method of accounting
for business combinations initiated after June 30, 2001. SFAS 141 also requires
that the Company recognize acquired intangible assets apart from goodwill if the
acquired intangible assets meet certain criteria. SFAS 141 applies to all
business combinations initiated after June 30, 2001 and for purchase business
combinations completed on or after July 1, 2001. It also requires, upon adoption
of SFAS 142, that the Company reclassify the carrying amounts of intangible
assets and goodwill based on the criteria in SFAS 141.
SFAS 142 requires, among other things, that companies no longer
amortize goodwill, but test goodwill for impairment at least annually. In
addition, SFAS 142, requires that the Company identify reporting units for the
purpose of assessing potential future impairments of goodwill, reassess the
useful lives of other existing recognized intangible assets, and cease
amortization of intangible assets with an indefinite useful life. An intangible
asset with an indefinite useful life should be tested for impairment in
accordance with the guidelines in SFAS 142. SFAS 142 is required to be applied
to all goodwill and other intangible assets regardless of when those assets were
initially recognized.
As of January 1, 2002, the Company's goodwill of $1,326,000 was
composed of $82,000 associated with attaching machine assets purchased from
Newmark, Inc. in 1997 and $1,244,000 associated with the acquisition of Micron
Products Inc. in 1992. As a result of the transitional impairment tests, the
goodwill associated with the Newmark agreement was determined to be impaired as
determined by using the present value of future cash flows solely related to
attaching machines. The balance of $82,000 ($57,000 net of tax) is being
reported as the cumulative effect of change in accounting principle for the nine
months ended September 30, 2002. The diminishing number of leases and sales of
attaching machines used for the assembly of disposable medical electrodes in
this mature industry lead to the impairment of Newmark goodwill. No adjustment
to the $1,244,000 balance of goodwill associated with the Micron Products
acquisition was deemed necessary as of September 30, 2002.
7
Goodwill - (continued)
The continued effect on reported net income due to the cumulative
effect of change in accounting principle, and the discontinuance of goodwill
amortization is as follows:
Three Months Ended Nine Months Ended September
September 30, 30,
2002 2001 2002 2001
-----------------------------------------------------------------------------------------------------------------
Reported net income $ 178,744 $ 80,766 $ 425,205 $ 217,470
Cumulative effect of change in accounting principle - - 57,000 -
Goodwill amortization - 32,472 - 97,417
-----------------------------------------------------------------------------------------------------------------
Adjusted net income before cumulative effect of $ $ $ $
change in accounting principle and
discontinuance of goodwill amortization 178,744 113,238 482,205 314,887
=================================================================================================================
Basic net income per share as reported $ .06 $ .03 $ .15 $ .07
Cumulative effect of change in accounting principle - - .02 -
Goodwill amortization - .01 - .03
-----------------------------------------------------------------------------------------------------------------
Basic net income per share before cumulative effect of $ .06 $ .04 $ .17 $ .10
change in accounting principle and discontinuance
of goodwill amortization
=================================================================================================================
Diluted net income per share as reported $ .06 $ .03 $ .14 $ .07
Cumulative effect of change in accounting principle - - .02 -
Goodwill amortization - .01 - .03
-----------------------------------------------------------------------------------------------------------------
Diluted net income per share before cumulative effect $ .06 $ .04 $ .16 $ .10
of change in accounting principle and
discontinuance of goodwill amortization
=================================================================================================================
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Any forward looking statements made herein are based on current
expectations of the Company that involves a number of risks and uncertainties
and should not be considered as guarantees of future performance. These
statements are made under the Safe Harbor Provisions of the Private Securities
Litigation Reform Act of 1995. Forward looking statements may be identified by
the use of words such as "expect," "anticipate," "believe," "intend," "plans,"
"predict," or "will." The factors that could cause actual results to differ
materially include: interruptions or cancellation of existing contracts, impact
of competitive products and pricing, product demand and market acceptance risks,
the presence of competitors with greater financial resources than the Company,
product development and commercialization risks and an inability to arrange
additional debt or equity financing.
Liquidity and Capital Resources
Working capital was $3,265,568 at September 30, 2002 compared to
$2,869,344 at December 31, 2001. The $396,224 increase in working capital for
the first nine months of 2002 is attributed to the generation of $489,771 of
operating cash flows in the nine months ending September 30, 2002. Cash of
$113,028 ($125,000 face value) was consumed in the redemption of 11% bonds
payable, which matured May 2002.
Increased inventories were created to offset possible production delays
as a result of the discontinued attempt to purchase certain business assets of a
competitor of Micron Products Inc. These inventories are expected to be lower at
year-end through sales to existing customers. The material for the new radio
translucent ECG sensor contributed to the increase in raw material inventory and
this product is expected to begin shipment in early 2003.
The Company has a $1,000,000 revolving line of credit with a bank that
has been extended until May 30, 2003. The credit line provides for borrowings to
be collateralized by accounts receivable and inventory. However, the Company has
not used the credit line due to sufficient liquidity provided by operations.
8
The Company has continued to execute the stock buy back program. During
the quarter ended September 30, 2002, 100,000 shares were repurchased with an
average share price of $2.65. In the first nine months of 2002, 190,413 shares
were acquired at a total market cost of $526,837. The Board of Directors has
authorized a continuation of the stock buy back program for another 50,000
shares in the 4th quarter.
Results of Operations
Revenue for the third quarter ended September 30, 2002 was $1,630,427
as the compared to $1,637,050 in the three months ended September 30, 2001. For
the nine months ended September 30, 2002, the sales of Micron's standard ECG
sensor products are 5% higher than in the same period of 2001. Micron has
received notification that it has been chosen as the new supplier of the radio
translucent ECG sensor from an existing customer, which will result in
additional sales revenue beginning first quarter 2003.
Sales of metal snap fasteners distributed by Micron to ECG electrode
manufacturers continued to decline as major accounts switch to direct purchase.
There were no significant sales of the Company's SAECG product in the first nine
months of 2002. These latter two product lines have combined for less than 10%
of revenue for the nine-month period ended September 30, 2002.
Domestic and foreign sales, which includes sales to Canadian operations
of $664,970 for the three months ended September 30, 2002 and $2,284,073 for the
nine months ended September 30, 2002 are as follows:
Three Months Ended September 30, Nine Months Ended September 30,
2002 % 2001 % 2002 % 2001 %
---- - ---- - ---- - ---- -
Foreign Sales $1,403,807 86 $1,326,656 81 $4,579,888 85 $4,355,652 83
Domestic Sales 226,620 14 310,394 19 797,873 15 910,034 17
---------- --- ---------- --- ---------- --- ---------- ---
Total $1,630,427 100 $1,637,050 100 $5,377,761 100 $5,265,686 100
========== === ========== === ========== === ========== ===
Currency risk does not affect the Company's financial results because
the Company's foreign sales contracts are denominated in U.S. Dollars.
Cost of sales was 67% of revenue for the nine months ended September
30, 2002 compared to 70% of revenue for the same period in 2001. The improvement
in 2002 was due to manufacturing efficiencies related to the increase in sales
volume of Micron's ECG sensors. There have been no significant changes in
material cost, wages, or production expenses over the last nine months and none
are expected for the remainder of 2002.
Selling and marketing expense was $15,402 lower in the first nine
months of 2002 compared to the same period in 2001. In 2001, Micron initiated a
program to expand sales of its ECG sensors in the Pacific Rim regions. This new
venture has not resulted in a significant increase in the Company's revenue for
the nine month period ended September 30, 2002 due to the limited availability
of the Company's foreign agent.
General and administrative expense includes approximately $111,000 of
legal expenses and $25,600 in other professional and corporate expenses in the
nine month period ended September 30, 2002, which was related to an attempt to
acquire certain business assets of a competitor of Micron Products Inc. The
negotiations to acquire the assets were discontinued in July 2002. The increase
in legal, professional and corporate expenses was offset by a reduction of
general and administrative expenses associated with the consolidation of the
Company's Texas office to Micron's existing location in Massachusetts. The net
effect is an increase of $19,114 in general and administrative expenses in the
nine months ended September 30, 2002 compared to the same period in 2001.
Research and development expense was $34,756 lower for the third
quarter of 2002 and $91,813 lower for the first nine months of 2002 compared to
similar periods in 2001 due to the elimination of the Company's in-house R&D
staff and overhead as part of closing the Austin, Texas office in 2001. The
redesign of the Predictor(R) 7 software has been completed and minor maintenance
is contracted through outside parties, if and when needed.
Interest expense is lower in both periods reported for 2002 when
compared to 2001, principally as a result of the early redemption of $425,000 of
11% bonds payable in late 2001, and maturity of $125,000 in 2002.
Other income includes interest earned on the Company's cash equivalents
of $21,862 for the first nine months of 2002 compared to $76,806 for the nine
months ended September 30, 2001. The reduction of interest income is due to the
lower returns on fixed rate investments. Offsetting part of the loss of interest
income was the elimination of amortization expense on debt discount when the 11%
bonds were redeemed.
9
Income taxes as a percent of income for the quarters ended September
30, 2002 and 2001 were 11% and (40%) respectively. For the nine month period
ended September 30, 2002 and September 30, 2001, income taxes as a percent of
income before income taxes and cumulative effect of change in accounting
principle (net of tax) were 23% and 14% respectively. No Federal income taxes
were owed for 2001, and the Company expects to substantially reduce the Federal
income taxes for 2002 by utilizing net operating loss carry forwards.
Item 3. Quantitative and Qualitative Disclosures and Market Risk
No material changes have occurred related to the Company's policies,
procedures, controls or risk profile.
Item 4. Evaluation of Disclosure Controls and Procedures
Within ninety days prior to the filing date of this report, the
management of the Company including James E. Rouse as President, Chief Operating
Officer and Acting Chief Financial Officer, evaluated the effectiveness of the
Company's disclosure controls and procedures. Under rules promulgated by the
SEC, disclosure controls and procedures are defined as those "controls and other
procedures of an issuer that are designed to ensure that information required to
be disclosed by the issuer in the reports that it files or submits under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported,
within the time periods specified in the Commission's rules and forms." Based on
the evaluation of the Company's disclosure controls and procedures, it was
determined that such controls and procedures were effective as of the date of
the conclusion of the evaluation.
Further, there were no significant changes in the internal controls or
in other factors that could significantly affect these controls after the date
of the conclusion of their most recent evaluation.
Part II - Other Information
Item 1. Legal Proceedings
From time to time the Company may be involved in disputes and
litigation in the normal course of business. The Company is not presently
involved in any disputes or litigation that reasonably could be expected to have
a material impact on the Company's business, operating results, financial
condition and cash flows.
Item 4. Submission of Matters to a Vote of Security Holders
On November 1, 2002, the Company held the 2002 Annual Meeting of
Stockholders. At the meeting, stockholders voted the following:
(1) The election of two Class I Directors, with terms expiring in
2005
For Withheld
--- --------
Russell C. Chambers MD 2,502,659 2,455
James E. Rouse 2,502,459 2,655
(2) The Appointment of BDO Seidman to audit the consolidated
financial statements of the Company for the year ended
December 31, 2002.
For Against Abstain
--- ------- -------
2,321,413 169,307 14,394
Item 6. Exhibits and Reports on Form 8-K
Exhibit 3.1 - Arrhythmia Research Technology, Inc. By-laws
Exhibit 10.1 - Employment Agreement President James E. Rouse
Exhibit 99.1 - Certification pursuant to 18 U.S.C.ss.1350, as adopted
pursuant to section 906 of the Sarbanes-Oxley Act of
2002
10
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 the
undersigned thereunto duly authorized.
Arrhythmia Research Technology, Inc.
/s/ James E. Rouse
---------------------------------------
President, Chief Operating Officer and
Acting Principal Financial Officer
November 12, 2002
11
CERTIFICATION
I, James E. Rouse, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Arrhythmia
Research Technology, Inc.;
2. Based on my knowledge, this quarterly 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 quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant issuer as of, and for, the periods
presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rule 13a-14 and 15d-14) for the registrant and
we have:
a. designed such disclosure controls and procedures 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
quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of the registrant's board of directors (or persons
performing the equivalent function):
a. All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; 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; and
6. The registrant's other certifying officers and I have indicated
in this quarterly report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of
our most recent evaluation, including any corrective actions in
regard to significant deficiencies and material weaknesses.
DATE: November 12, 2002
/s/ James E. Rouse
-------------------------------------
James E. Rouse
President and Chief Operating Officer
12
I, James E. Rouse, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Arrhythmia
Research Technology, Inc.;
2. Based on my knowledge, this quarterly 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 quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant issuer as of, and for, the periods
presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rule 13a-14 and 15d-14) for the registrant and
we have:
a. designed such disclosure controls and procedures 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
quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of the registrant's board of directors (or persons
performing the equivalent function):
a. All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; 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; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions in regard to significant
deficiencies and material weaknesses.
DATE: November 12, 2002
/s/ James E. Rouse
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James E. Rouse
Acting Chief Financial Officer
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