Table of Contents

# UNITED STATES
SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549

# FORM 10-QSB

[ x ]  Quarterly report under
Section 13 or 15(d) of the Securities Exchange Act of 1934 
For the quarterly period ended September 30,2004 or

[   ]  Transition report under 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 small business issuer 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)

(978) 345-5000(Issuers telephone number, including area code)

Check whether the issuer (1) filed
all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the
past 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days.  
Yes  X    No_____.

As of October 15, 2004 there were
2,655,822 shares of the Companys common stock outstanding.

Transitional Small Business Disclosure Format   Yes 

  No  X

---

# ARRHYTHMIA RESEARCH TECHNOLOGY, INC.

TABLE OF CONTENTS

FORM 10-QSB

September 30, 2004

|PART I - FINANCIAL INFORMATION                                                                                    | 
|----------------------------------------------------------------------------------------------------------------- | 
|                                                                                                                 
|Item 1.  Consolidated Financial Statements                                                                       
|Consolidated Balance Sheets                                                                                      
|Consolidated Statements of Income                                                                                
|Consolidated Statements of Cash Flows                                                                            
|Notes to the Consolidated Financial Statements                                                                   
|Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations                   
|Item 3.  Controls and Procedures                                                                                 
|                                                                                                                 
|PART II - OTHER INFORMATION                                                                                      
|                                                                                                                 
|Item 2.  Changes in Securities and Small Business Issuer Purchases of Equity Securities                          
|Item 6.  Exhibits                                                                                                
|SIGNATURES                                                                                                       
|                                                                                                                 
|                                                                                                                 
|Exhibit 31.1 - Certification of Chief Executive Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002
|Exhibit 31.2 - Certification of Chief Financial Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002
|Exhibit 32.1 - Certification of Chief Executive Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002
|Exhibit 32.2 - Certification of Chief Financial Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002

---

# PART I  FINANCIAL
INFORMATION

# Item 1. Consolidated
Financial Statements

ARRHYTHMIA RESEARCH
TECHNOLOGY, INC. AND SUBSIDIARY

Consolidated Balance
Sheets

(Unaudited)

|ASSETS                                                     | September 30, |  | December 31,
|---------------------------------------------------------- | ------------- |  | ------------
|
|Current assets:                                            |               |  |             
|Cash and cash equivalents                                  |               |  | $           
|Trade and other accounts receivable, net of allowance for  |               | 
|doubtful accounts of $8,960 and $15,173                    |               |  |             
|Inventories, net                                           |               |  |             
|Deposits, prepaid expenses and other current assets        |               |  |             
|                                                           |               |  |             
|Total current assets                                       |               |  |             
|                                                           |               | 
|Property and equipment, net of accumulated depreciation of |               | 
|$5,246,481 and $4,873,203                                  |               |  |             
|Goodwill                                                   |               |  |             
|Other intangible assets, net                               |               |  |             
|Deferred income taxes, net                                 |               |  |             
|Other assets                                               |               |  |             
|                                                           |               |  |             
|Total assets                                               |               |  | $           
|                                                           |               |  |             

|LIABILITIES AND SHAREHOLDERS' EQUITY                                   
|-----------------------------------------------------------------------
|
|Current liabilities:                                                   
|Accounts payable                                                       
|Accrued expenses                                                       
|Acquisition price payable                                              
|                                                                       
|Total current liabilities                                              
|                                                                       
|Shareholders' equity:                                                  
|Preferred stock, $1 par value; 2,000,000 shares authorized, none issued
|Common stock, $0.01 par value; 10,000,000 shares authorized,           
|3,926,491 shares and 3,917,491 shares issued                           
|Additional paid-in-capital                                             
|Common stock held in treasury, 1,270,669 and 1,287,918 shares at cost .
|Retained earnings                                                      
|                                                                       
|Total shareholders' equity                                             
|                                                                       
|Total liabilities and shareholders' equity                             
|                                                                       

The
accompanying notes are an integral part of the consolidated financial statements.

---

ARRHYTHMIA RESEARCH
TECHNOLOGY, INC. AND SUBSIDIARY

Consolidated Statements
of Income

(Unaudited)

|                                       | Three Months Ended | Nine Months Ended
|-------------------------------------- | ------------------ | -----------------
|
|
|
|Revenue                                |                    |                  
|Cost of sales                          |                    |                  
|                                       |                    |                  
|Gross profit                           |                    |                  
|                                       |                   
|Selling and marketing                  |                    |                  
|General and administrative             |                    |                  
|Research and development               |                    |                  
|                                       |                    |                  
|Income from operations                 |                    |                  
|                                       |                    |                  
|Other income (expense)                 |                    |                  
|Interest expense                       |                    |                  
|Other income, net                      |                    |                  
|                                       |                    |                  
|Other income and interest expense, net |                    |                  
|                                       |                    |                  
|Income before income taxes             |                    |                  
|                                       |                   
|Income tax provision                   |                    |                  
|                                       |                    |                  
|Net income                             |                    |                  
|                                       |                    |                  
|Net income per share - basic           |                    |                  
|                                       |                    |                  
|Net income per share - diluted         |                    |                  
|                                       |                    |                  
|Cash dividends declared per share      |                    |                  
|                                       |                    |                  
|Weighted average common shares         |                    |                  
|outstanding - basic                    |                    |                  
|Weighted average common shares         |                    |                  
|outstanding - diluted                  |                    |                  

The
accompanying notes are an integral part of the consolidated financial statements.

---

ARRHYTHMIA RESEARCH
TECHNOLOGY, INC. AND SUBSIDIARY

Consolidated Statements
of Cash Flows

(Unaudited)

|                                                            | Nine Months Ended
|----------------------------------------------------------- | -----------------
|                                                            | September 30,    
|
|Cash flows from operating activities:                       |                  
|Net income                                                  |                  
|Adjustments to reconcile net income to net cash provided by |                  
|operating activities, net of effects of acquisition:        |                  
|Depreciation and amortization                               |                  
|Changes in operating assets and liabilities:                |                  
|Trade and other accounts receivable                         |                  
|Inventories                                                 |                  
|Deposits, prepaid expenses and other assets                 |                  
|Accounts payable and accrued expenses                       |                  
|                                                            |                  
|Net cash provided by operating activities                   |                  
|                                                            |                  
|Cash flows from investing activities:                       |                  
|Capital expenditures, net of disposals                      |                  
|Cash paid for acquisitions                                  |                  
|                                                            |                  
|Net cash used in investing activities                       |                  
|                                                            |                  
|Cash flows from financing activities:                       |                  
|Cash dividend paid                                          |                  
|Proceeds from the exercise of stock options                 |                  
|Purchase of treasury stock                                  |                  
|                                                            |                  
|Net cash used in financing activities                       |                  
|                                                            |                  
|Net increase (decrease) in cash and cash equivalents        |                  
|Cash and cash equivalents at beginning of period            |                  
|                                                            |                  
|Cash and cash equivalents at end of period                  |                  
|                                                            |                  

|Supplemental Information:
|-------------------------
|                         

The accompanying notes are an integral part of the consolidated financial statements.

---

Notes to the Consolidated Financial Statements

1. Basis of Presentation:

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 Arrhythmia
Research Technology, Inc. (the Company) Annual Report on Form 10-KSB for the
year ended December 31, 2003.

The
information furnished reflects, in the opinion of the management of the Company, all
adjustments necessary for a fair presentation of the financial results for the interim
period presented.

Interim
results are subject to year-end adjustments and audit of year-end results by independent
certified public accountants.

2. Inventories:

Inventories consist of the following as of:

|                | September 30, | December 31,
|--------------- | ------------- | ------------
|
|Raw materials   |               |             
|Work-in-process |               |             
|Finished goods  |               |             
|                |               |             
|Total           |               |             
|                |               |             

3. Stock-Based Compensation:

The
Company accounts for stock options at intrinsic value in accordance with Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees (APB 25), and related interpretations. Had
compensation cost for the Companys stock options been determined based upon the fair
value at the grant date for awards under the plans consistent with the methodology
prescribed under Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation (SFAS 123), the
Companys net income would have been adjusted to the pro forma amounts indicated
below:

|                                       | Three months ended | Nine months ended
|-------------------------------------- | ------------------ | -----------------
|
|
|Net income - as reported               |                    |                  
|                                       |                    |                  
|Deduct: Total stock-based compensation |                    |                  
|expense determined under fair         
|value based method                     |                    |                  
|                                      
|Net income - pro forma                 |                    |                  
|                                      
|Basic earnings per share:              |                    |                  
|as reported                            |                    |                  
|pro forma                              |                    |                  
|                                       |                    |                  
|Diluted earnings per share:            |                    |                  
|as reported                            |                    |                  
|pro forma                              |                    |                  

4. Acquisition:

On
May 7, 2004, the Company issued a press release reporting that its wholly-owned
subsidiary, Micron Products, Inc., completed the purchase of substantially all of the
operating assets of privately-held Shrewsbury Molders Inc. formerly known as New England
Molders, Inc. (NEMI) of Shrewsbury, Massachusetts. Micron paid NEMI a total
purchase price of $1,546,000, including $1,146,000 in cash, $200,000 in ART common stock
with the remaining $200,000 payable in ART stock or cash at ARTs option. Micron
funded the cash portion of the purchase out of working capital. At closing $900,000 was
paid in cash, and the remaining required cash payment of $246,000 was paid 90 days from
the closing date. At closing 7,559 shares were issued to cover the first $100,000 stock
payment, and 9,690 shares were issued for the second payment. The price of the stock is
the ten day average closing price prior to the payment date. The remaining $200,000
payable in ART common stock or cash at our option is payable in 2 equal payments at 90 day
intervals. The purchase price has been allocated to net assets acquired based on their
estimated fair values. The preliminary valuation is subject to further review which may
result in adjustments to allocation of the purchase price in the future. The Company has
recorded approximately $55,100 in amortization related to the acquired intangible assets
from the date of the acquisition through September 30, 2004. New England Molders is a high
quality custom injection molder with the majority of its customer base in the medical
industry. It is a division of the wholly owned subsidiary Micron Products, Inc.

---

The
Company expects to complete the move of the division into its newly renovated white room
molding facility located at its Fitchburg facility by the beginning of the fourth quarter
of 2004. The relocation will provide operation synergies and cost savings in manufacturing
and administration.

The
preliminary allocation of the purchase price of NEMI, based on the purchase prices
calculated for accounting purposes, is as follows:

|Current assets                            |  |  | $ | 390,601   |  
|----------------------------------------- |  |  | - | --------- | -
|Property and equipment                    |  |  |   | 821,219   |  
|Identified intangible assets              |  |  |   | 257,050   |  
|Goodwill                                  |  |  |   | 294,306   |  
|Assumed liabilities and transaction costs |  |  |   | (216,821  | )
|                                          | 
|                                          |  |  | $ | 1,546,355 |  
|                                          | 

Identified
intangible assets acquired in connection with the acquisition of NEMI consist primarily of
acquired contracts, customer relationships and non-compete agreements with key employees.
These intangible assets are amortized over their estimated useful lives of 1 to 8 years.

|                                    |  | Weighted Average
|----------------------------------- |  | ----------------
|
|Gross carrying amount:              |  |                 
|Acquired orders                     |  |                 
|Customer Relationships              |  |                 
|Key employee non-compete agreements |  |                 
|                                    |  |                 
|Total identified intangible assets  |  |                 
|                                    |  |                 
|Accumulated amortization:           |  |                 
|Acquired orders                     |  |                 
|Key employee non-compete agreements |  |                 
|                                    |  |                 
|Total accumulated amortization      |  |                 
|                                    |  |                 
|Identified intangible assets, net   |  |                 
|                                    |  |                 

(a)       
          The identified intangible asset customer relationships represents the weighted
          average profit value of each customer relationship taking into account the rate
          of turnover. This intangible asset will be tested for possible impairment at
          least annually. The estimated annual amortization expense for 2004 will be
          $80,000, with an estimated $21,000 for each year following.

The
unaudited pro forma and combined selected operating data are presented as if the
acquisition of NEMI had occurred on January 1, 2003.

|                            | For the three months ended | For the nine months ended
|--------------------------- | -------------------------- | -------------------------
|
|Revenue                     |                            |                          
|Operating Income            |                            |                          
|Net Income                  |                            |                          
|                            |                            |                          
|Earning per share - basic   |                            |                          
|Earning per share - diluted |                            |                          

---

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

Forward-Looking Statements

Any
forward looking statements made herein are based on current expectations of the Company,
involve a number of risks and uncertainties and should not be considered as guarantees of
future performance. The factors that could cause actual results to differ materially
include: interruptions or cancellation of existing contracts, inability to integrate
acquisitions, 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, changing economic conditions in
developing countries, and an inability to arrange additional debt or equity financing.
More information about factors that potentially could affect the Companys financial
results is included in the Companys filings with the Securities and Exchange
Commission, including its Annual Report on Form 10-KSB for the year ended December 31,
2003.

Results of Operations

Revenue
for the three months ended  September 30, 2004 was  $2,980,976  versus  $1,975,049  for the three months ended  September 30,
2003,  an increase of 51%. For the nine months ended  September 30, 2004,  revenue was  $8,246,968  versus  $5,790,252 in the
same period in 2003,  an increase of 42%.  The New England  Molders  division  contributed  revenues of $743,226 in the three
month period ending  September 30, 2004, and $1,120,887  for the period of the  acquisition  date of May 7, 2004 to September
30,  2004.  The  remaining  increase in revenue of $262,701 or 13% for the three  months and  $1,335,829  or 23% for the nine
months ended  September 30, 2004 is due to continued  growth in the Micron sensor product line, and increases in sales to our
existing customer base.  There were no significant sales of the Companys signal-averaging ECG products in 2004.

Revenue from domestic and foreign
sales for the first nine months is as follows:

|              | Nine Months Ending September 30,
|------------- | --------------------------------
|
|Europe        |                                 
|Canada        |                                 
|United States |                                 
|Pacific Rim   |                                 
|Other         |                                 
|              |                                 
|Total         |                                 
|              |                                 

The shift in distribution of
sales to the domestic market was not just a result of the new divisions higher
percentage of domestic sales, but an increase of more than $400,000 with Micron
Products existing domestic customer base.

Cost of sales sales was 61% of revenue for the three and nine months ended September 30, 2004 compared to 63% of revenue for the same
periods in 2003.  The process improvements made during the past year continue to contribute to the stability of the cost to
manufacture product.  These programs instituted over the last 18 months continue to maintain margins, and improvements
offset any increases in material costs.  The expansion of programs into the new division and its relocation into an
adjoining facility expected to be complete in the fourth quarter of 2004 presents an opportunity for further cost control.
Management continues to investigate new methods to increase the overall gross margin without sacrificing product quality.

Selling and marketing expense was  $111,211  and  $230,564  for the three and nine  months  ended
September  30, 2004 as compared to $52,256 and
$149,016  for the same  periods  in 2003.  The  increased  expense of $58,955  and  $81,548  for the three and nine
months ended  September  30, 2004 are directly  attributable  to the sales staff in the new  division.  The selling
and  marketing  expense  was 3.7% and 2.6% of sales in three  months  and 2.8% and 2.6% of sales in the nine  ended
September 30, 2004 and 2003, respectively.

General and administrative expense was $355,330 and  $1,026,667  for the three and nine months
 ended  September  30, 2004 as compared to $254,953 and
$823,691  for the same  periods in 2003.  The  increase of $100,377 in the three  months  ended  September  30,2004
includes the  combination  of $48,000 for the new  division,  approximately  $20,000 for computer  consulting  fees
related  to  integrating   networks  and  web  sites,  and  approximately   $20,000  attributed  to  Sarbanes-Oxley
compliance.  The increase of $202,976 for the nine months ended  September  30, 2004  includes the increase for the
three month period as well as additional  Sarbanes-Oxley  expense and  administration  associated  with the new division.
Management  expects a decrease in general and  administrative  expenses with the consolidation of office operations
following the relocation of the new division to the Fitchburg facilities.

---

Research and development expense was $8,054 and $47,467 for the three and nine months  ended
 September  30, 2004 as compared to $273 and $3,978 for
the same periods in 2003.  The increase was related to research  expenditures  for ARTs  product,  Predictor® 7 as
well as work in previous quarters related to specialized unique electrode sensor applications at Micron.

Other income (expense) was $4,160 and  $16,125 of income for the three and nine  months  ended
  September  30, 2004 as compared to $34,368
and $43,372 of income in the same periods of 2003.  The income in the third  quarter of 2003 was  attributed to the
collection  of a $21,000 note  originally  written off in December of 2001.  The note was  collected  with interest
income owed to ART.  The remaining income is interest income on the cash balance.

Income taxestaxes as a percent of income before income taxes were 37% for the nine months ended September 30, 2004 as
compared to 29% for the nine months ended September 30, 2003.  The lower effective tax rate in 2003 as compared
to 2004 can be attributed to the utilization of net operating loss carryforward deductions.  The effective tax
rate is lower than statutory in the nine months ended September 30, 2004 due to continued utilization of net
operating loss carryforward deductions and various tax credits.  The tax provision increased by $111,000 and
$334,000 for the three months and nine months ended September 30, 2004 as compared to the same periods in 2003.
Management will continue to maximize any tax planning opportunities that could effectively reduce the Companys
tax liability in the future.

Liquidity and Capital Resources

Working
capital was $3,499,646 on September 30, 2004 compared to $4,122,793 at December 31, 2003,
a decrease of $623,147. The working capital requirements for the acquisition caused the
decrease. Capital investment could decrease working capital further with any significant
obligation resulting from another acquisition, significant expansion of production
capacity, a medical study, or further software development.

Net
capital expenditures were $938,339 for the first nine months of 2004 as compared to
$408,787 for the same period in 2003. Capital expenditures in the first nine months of
2004 include $488,000 incurred in the renovation of 45,000 square feet of space expected
to be fully occupied by the end of 2004. The remaining capital expenditure included
$450,000 in new tools, production design technology, and machinery and equipment.

The
Companys stock buyback program announced in June of 2003 resulted in the use of
$438,640 of operating cash flows to acquire 148,200 shares of common stock in the first
nine months of 2003. There has been no stock buy back in the first nine months of 2004.

The
Company negotiated the terms of a demand line of credit with a different bank than that of
the same period in 2003. The new bank has agreed to an unsecured $1,000,000 credit line.
This non-collateralized financial vehicle was in place in December of 2003. No funds have
been drawn down on the line as of September 30, 2004.

A
cash dividend reduced retained earnings and cash by $159,350 in the third quarter of 2004.
The cash dividend was an increase over the $127,035 dividend paid in the third quarter of
2003, and the $131,929 paid in the first quarter of 2004. The change represented a 20%
increase in the cash dividend over the March 2004 dividend.

The
large increase in raw material inventory is attributable to an effort by the company to
stabilize rising costs of our base resins. Our primary vendor had notified the company of
an increase in material pricing. In an effort to reduce the impact of the price change,
the Company took delivery of its demand for this material through the end of the calendar
year. This delivery will enable the vendor quotation process for next years
requirements to be competitive, and without tight time constraints. The portion of the
increase of raw material inventory related to this transaction was approximately $140,000,
and was payable at the end of the quarter.

The
Company expects to meet cash demands with current operating cash flows for the foreseeable
future.

On
May 7, 2004, the Companys wholly-owned subsidiary, Micron Products, Inc., completed
the purchase of substantially all of the operating assets of privately-held Shrewsbury
Molders Inc. formally known as New England Molders, Inc. (NEMI) of Shrewsbury,
Massachusetts. Micron paid NEMI a total purchase price of $1,546,000, including $1,146,000
in cash, $200,000 in ART common stock with the remaining $200,000 payable in ART stock or
cash at ARTs option. Micron funded the cash portion of the purchase out of working
capital. The future cash payments required by the terms of this agreement are expected to
be made from the operating cash flows of Micron Products and its new division.

---

Critical Accounting Policies

The
preparation of financial statements and related disclosures in conformity with generally
accepted accounting principles requires management to make judgments, assumptions and
estimates that affect the amounts reported. Certain of these significant accounting
policies are considered to be critical accounting policies, as defined below.

A
critical accounting policy is defined as one that is both material to the presentation of
the Companys financial statements and requires management to make difficult,
subjective or complex judgments that could have a material effect on the Companys
financial condition and results of operations. Specifically, critical accounting estimates
have the following attributes: 1) the Company is required to make assumptions about
matters that are highly uncertain at the time of the estimate; and 2) different estimates
the Company could reasonably have used, or changes in the estimate that are reasonably
likely to occur, would have a material effect on the Companys financial condition or
results of operations.

Estimates
and assumptions about future events and their effects cannot be determined with certainty.
The Company bases its estimates on historical experience and on various other assumptions
believed to be applicable and reasonable under the circumstances. These estimates may
change as new events occur, as additional information is obtained and as the
Companys operating environment changes. These changes have historically been minor
and have been included in the consolidated financial statements as soon as they became
known. In addition, management is periodically faced with uncertainties, the outcomes of
which are not within its control and will not be known for prolonged periods of time.
These uncertainties are discussed in the section above entitled Forward-looking
Statements. Based on a critical assessment of its accounting policies and the
underlying judgments and uncertainties affecting the application of those policies,
management believes that the Companys consolidated financial statements are fairly
stated in accordance with generally accepted accounting principles, and present a
meaningful presentation of the Companys financial condition and results of
operations.

Management
believes that the following are critical accounting policies:

Revenue
Recognition and Accounts Receivable

Revenues
from the sale of products are recorded when the product is shipped, title and risk of loss
have transferred to the purchaser, payment terms are fixed or determinable and payment is
reasonably assured.

Based
on managements on-going analysis of accounts receivable balances, and after the
initial recognition of the revenue, if an event occurs which adversely affects the
ultimate collectibility of the related receivable, management will record an allowance for
the bad debt. Bad debts have not had a significant impact on our financial condition,
results of operations or cash flows.

Inventory
and Inventory Reserves

The
Company values its inventory at the lower of cost or market. The Company reviews its
inventory for quantities in excess of production requirements, obsolescence and for
compliance with internal quality specifications. Any adjustments to inventory would be
equal to the difference between the cost of inventory and the estimated net market value
based upon assumptions about future demand, market conditions and expected cost to
distribute those products to market. If actual market conditions are less favorable than
those projected by management, additional inventory reserves may be required.

The
Company maintains a reserve for excess, slow moving, and obsolete inventory as well as
inventory with a carrying value in excess of its net realizable value. A review of
inventory on hand is made at least annually and a provision for excess, slow moving, and
obsolete inventory is recorded. The review is based on several factors including a current
assessment of future product demand, historical experience, and product expiration.

Deferred
Tax Assets

The
Company previously recorded a valuation allowance to reduce its deferred tax assets to the
amount that is more likely than not to be realized. While the Company has considered
future taxable income and ongoing prudent and feasible tax planning strategies in
assessing the need for the valuation allowance, the Company determined in 2003 that it
would be able to realize its deferred tax assets in the future faster than expected, an
adjustment to the deferred tax asset was made and an increase to income in the period. At
this time the Company does not have a valuation allowance on its deferred tax assets.

---

Asset
Impairment  Goodwill

The
Company reviews the valuation of goodwill and intangible assets to assess potential
impairments on an annual basis. The management evaluates the carrying value of goodwill
and other intangible assets in accordance with the guidelines set forth in SFAS 142. The
value assigned to intangible assets is determined by a valuation based on estimates and
judgment regarding expectations for the success and life cycle of products acquired. To
test for impairment, a present value of an estimate of future cash flows related to the
intangible asset are calculated compared to the value of the intangible asset. Impairment
may have a material adverse effect on the Companys financial condition or results of
operations. There was no impairment at September 30, 2004.

Asset
Impairment  Long Lived Assets

The
Company assesses the impairment of long-lived assets whenever events or changes in
circumstances indicate that the carrying value may not be fully recoverable. When it is
determined that the carrying value of such assets may not be recoverable, the Company
generally measures any impairment on a projected discounted cash flow method using a
discount rate determined by our management to be commensurate with the risk inherent in
our current business model.

# Item 3. Controls and
Procedures

As
of the end of the period covered by this interim report on Form 10-QSB, the Company
carried out, under the supervision of, and with the participation of the Companys
Chief Executive Officer and Chief Financial Officer (the Certifying Officers),
an evaluation of the effectiveness of its disclosure controls and procedures
(as the term is defined under Rules 13a15(e) and 15d15(e) promulgated under
the Securities Exchange Act of 1934 as amended (the Exchange Act)). Based on
this evaluation, the Certifying Officers have concluded that the Companys disclosure
controls and procedures were effective to ensure that material information required to be
disclosed in the Companys filings under the Exchange Act with respect to the Company
and its consolidated subsidiaries is recorded, processed, summarized and reported on a
timely basis in order to comply with the Companys disclosure obligations under the
Exchange Act and the rules and regulations promulgated thereunder.

Further,
there were no changes in the Companys internal control over financial reporting
during the Companys third fiscal quarter that materially affected, or are reasonably
likely to materially affect, the Companys internal control over financial reporting.

# PART II  OTHER
INFORMATION

Item 2. Changes in Securities and
Small Business Issuer Purchases of Equity Securities.

The
Company, as previously reported, in connection with the acquisition of the operating
assets of Shrewsbury Molders, Inc. issued on or about August 5, 2004, as partial
consideration for the assets, an aggregate of 9,690 unregistered shares of its common
stock, par value $0.01 per share, with a value of $100,000 from shares held in treasury.
This was the second issuance of unregistered shares as required to the terms of the May 7,
2004 acquisition agreement.

In
connection with the issuance, the Company relied upon the exemption from registration
pursuant to Regulation D promulgated under the Securities Act of 1933.

# Item 6. Exhibits

| | Exhibit 31.1 - Certification of the CEO pursuant to Rule 13a-14(a) or Rule 15(d)-14(a)                                                                
| | ------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                       
| | Exhibit 31.2 - Certification of the CFO pursuant to Rule 13a-14(a) or Rule 15(d)-14(a)                                                                
| |                                                                                                                                                       
| | Exhibit 32.1 - Certification  pursuant to 18 U.S.C. §.1350 as adopted pursuant to Section 906 of the 
                      Sarbanes-Oxley Act of 2002
| |                                                                                                                                                       
| | Exhibit 32.2 - Certification  pursuant to 18 U.S.C. §.1350 as adopted pursuant to Section 906 of the
                      Sarbanes-Oxley Act of 2002 

---

# SIGNATURES

In accordance with 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.        
| | --------------------------------------------
| |                                             
| | By:     /s/  James E. Rouse                 
| | James E. Rouse                              
| | President and Chief Executive Officer       
| | (Principal Executive Officer)               
| |                                             
| |                                             
| | By:      /s/  David A. Garrison             
| | David A. Garrison                           
| | Chief Financial Officer                     
| | (Principal Financial and Accounting Officer)

November 12, 2004