ARRHYTHMIA RESEARCH TECHNOLOGY INC /DE/ (Form: 10-K, Received: 03/22/2017 16:59:43)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

________________________________________________

FORM 10-K

________________________________________________

☒ Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2016

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

001-9731

(Commission file number)

ARRHYTHMIA RESEARCH TECHNOLOGY, INC.

(Name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation of organization)

72-0925679

(IRS Employer Identification Number)

25 Sawyer Passway, Fitchburg, MA

(Address of principal executive offices)

01420

(Zip Code)

(978) 345-5000

( Registrant's telephone number)

________________________________________________

Securities Registered pursuant to Section 12 (b) of the Act:

Common Stock, $.01 par value

(Title of Each Class)

NYSE MKT

(Name of each exchange on which registered)

Securities Registered pursuant to Section 12 (g) of the Act:

None

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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 if the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) 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 req uirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐

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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ 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 ☒

Indicate by check mark whether the registrant is a shell company (as defined in R ule 12b-2 of the Exchange Act). Yes ☐ No ☒

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter: $17, 660,327 .

On March 22, 2017 , there were 2,820,999 shares of the registrant's common stock, par value $.01, outstanding, which is the only class of common or voting stock of the issuer.

DOCUMENTS INCORPORATED BY REFERENCE

The registrant intends to file a definitive proxy statement pursuant to Regulation 14A within 120 days following the fiscal year ended December 31, 2016 . Portions of such proxy statement are incorporated by reference into Part III of this Form 10-K.

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Arrhy thmia Research Technology, Inc.

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Part I	Item 1	Business	1
	Item 1A	Risk Factors	6
	Item 1B	Unresolved Staff Comments	11
	Item 2	Properties	11
	Item 3	Legal Proceedings	11
	Item 4	Mine Safety Disclosures	11
Part II	Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	12
	Item 6	Selected Financial Data	12
	Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
	Item 7A	Quantitative and Qualitative Disclosures about Market Risk	19
	Item 8	Financial Statements and Supplementary Data	19
	Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosures	19
	Item 9A	Controls and Procedures	20
	Item 9B	Other Information	20
Part III	Item 10	Directors, Executive Officers and Corporate Governance	21
	Item 11	Executive Compensation	21
	Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	21
	Item 13	Certain Relationships and Related Transactions and Director Independence	21
	Item 14	Principal Account ing Fees and Services	21
Part IV	Item 15	Exhibits , Financial Statement Schedules	21
	Item 16	Form 10-K Summary	21
		Signatures	22
Exhibit Index			23

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PA RT I

Ite m 1. BUSINESS

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 components requiring precision machining and injection molding. The Company also manufactures components, devices and equipment for military, law enforcement, automotive 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 machining operations produce quick-turn, high volume and patient-specific finished orthopedic implant components. The Company has custom thermoplastic injection molding capabilities as well, and provides a full array of design, engineering, production services and management. The Company competes globally, with nearly forty percent of its revenue derived from exports. The Company ’s shares have traded on the NYSE MKT since 1992 under the symbol HRT.

Micron is a diversified contract manufacturing organization and provides design, engineering , quality and regulatory expertise across the Company’s three product lines, machining, thermo plastic injection molding and sensors, with lean and fast fulfillment systems using proprietary manufacturing processes to enable the Company’s customers to be competitive throughout the product life cycle .

ART's wholly-owned Pennsylvania subsidiary, RMDDxUSA Corp, ("RMDDxUSA") and that subsidiary's Prince Edward Island subsidiary, RMDDx Corporation ("RMDDx" and, collectively with RMDDxUSA, sometimes referred to as “WirelessDx”) discontinued operations in 2012 and filed a voluntary petition for relief under Chapter 7 (Liquidation) of the United States Bankruptcy Code in May 2014. In March 2015, the Chapter 7 Order was formally discharged by the assigned trustee and the case was closed. The results of WirelessDx are presented as discontinued operations throughout the financial statements and footnotes included elsewhere in this Form 10-K.

Contract Manufacturing

Machining

The Company is a cont ract manufacturer of components and instruments for medical devices including , but not limited to large joint replacements. The Company manufactures replacement knee components including femorals, tibia trays, ultra-high-molecular-weight polyethylene (“ UHMWPE ”) inserts , trials and instrumentation as well as hip stems and smaller fixation plates used in rib and wrist fractures . These parts are made from investment castings (F-75 , stainless steel ), machining wrought bar (F-75, stainless steel , F-136 Ti 6A-4V ELI), UHMWPE, polyether ether ketone (“PEEK”), Raydel® and other materials. The Company also provides medical grade finishing, polishing, ultrasonic cleaning and passivation. The manufacturing process includes computer aided design ("CAD") , computer-aided manufacturing (“CAM”) computer numerical controlled ("CNC") machining using single piece flow manufacturing methods for personalized orthopedic implant components as well as higher volume off-the-shelf components in a variety of sizes. The Company deploys the latest technologies in computer aided design, computer aided manufacturing (CAD/CAM) methodology, and up to 11-axis CNC vertical milling, mill- turning and wire electrical discharge machining (“EDM”). These products involve complex programming and machining of wrought , cast and forged cobalt-chromium-molybdenum, titanium, and stainless steel alloys , as well as ultra- high molecular weight polymers to customer specifications. The Company brings articular surfaces of implant components to a highly polished state as part of the manufacturing process and offers , passivation, cleaning and packaging. The Company produces superior contoured machined surfaces on metal and high molecular weight polymers to complete the implant kit. Whether patient-specific, where each implant is a different geometry, or standard-sized off-the-shelf products, each requires precision, speed, and adherence to the most stringent of quality standards. Additional capabilities include laser marking, automated polishing, passivation, and coatings.

Thermop lastic Injection Molding

The Company's custom thermo plastic injection molding services are especially suited to meet the needs of customers who require very high quality parts, clean room molding, assembly and packaging to tight tolerance s using engineered materials. The Company offers highly automated pick and place packaging, assembly, and in-cycle vision inspection. Micron’s ITAR registration and Federal Firearms license assures military and defense customers that their stringent regulatory requirements are in compliance . The Company also offers over-molding, insert molding, high volume/low change, and low volume/high change injection molding. The Company adds value with highly repeatable and reliable manufacturing with ongoing innovations for cost improvements. Other value added services including packaging, assembly, pad printing, ultrasonic welding, stamping, laser marking, clean room molding, clean room assembly, specialty coatings, and plastic machining.

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Other Products and Services

The Company provides its customers with key value added services, including the design, manufacture, and rehabilitation of injection molding tools. These capabilities leverage significant cost savings and speed by vertically integrating mold making and repair into the Company’s sensor and thermoplastic injection molding businesses. The Company’s engineers and mold designers work with customers’ product development engineers to design and produce unique tooling for their products. The Company creates a sustainable partnership with the customers from prototyping to full scale production. The design and manufacture of tooling is an indicator of future product revenue.

The Company's product life cycle management program is focused on the integration of plastic and metal components into sub-assemblies. The value added service of in-house production capabilities combined with a network of subcontracted specialty coatings, metallurgical treatments, and unique production capabilities has enabled the Company to diversify its capabilities to include defense industry consumables and equipment sub-assemblies.

Sensors

Micron is a manufacturer and distributor of silver-plated and non-silver plated conductive resin sensors for use in the manufacture of disposable electrodes for electrocardiogram ("ECG") diagnostic, monitoring and related instrumentation. Micron's sensors consist of a molded plastic substrate plated with a silver/silver chloride surface, which is a highly sensitive conductor of electrical signals. Silver/silver chloride-plated disposable electrodes are utilized in coronary care units, telemetry units, and for other monitoring purposes. In addition to the traditional ECG tests, disposable electrodes incorporating Micron’s sensors are used in connection with stress tests, Holter monitoring, and event recorders.

Micron also manufactures sensors and conductive plastic studs used in the manufacture of radio translucent electrodes. The radio translucent conductive plastic studs are manufactured with uniquely engineered resin to enable electrical conductivity between the sensor and the recording instrument without the use of a metal snap. The radio translucent electrodes are virtually invisible to X-rays and are preferred in some medical environments such as nuclear medicine, cardiac catheterization laboratories, and certain stress procedures. Micron also manufactures the mating conductive resin snaps, which replace traditional metal snap fasteners in the radio translucent applications. These sensors and snaps have undergone testing and received a MR-Conditional designation in accordance with the American Society for Testing and Materials (ASTM) specifications F2052-06e1, F2182-09 and F2119-07 from a licensed, accredited, independent testing laboratory. Other custom designed sensors are manufactured for specific unique applications in the electroencephalogram (EEG), electro-muscular stimulation (EMG) or thermo-electrical neural stimulation (TENS) markets.

Customers and Net Sales

The Company offers its products and services to customers of all sizes, including large original equipment manufacturers (OEMs) and other contract manufactur ing organizations. The Company manufactures products upon receipt of purchase orders. The Company generally does not receive purchase volume commitments extending beyond several months; however, the Company has a track record of establishing long term relationships with customers which results in repeat business year over year.

During the year ended December 31, 2016 , the Company had net sales to two customers constituting 19% and 12% of total 2016 net sales. Accounts receivable from these two customers at December 31, 2016 was 26% and 7% , respectively, of the total accounts receivable balance at year end. During the year ended December 31, 2015 , the Company had net sales to two customers constituting 16% and 13% , respectively, of total 2015 net sales. Accounts receivable from the se two customers at December 31, 2015 was 9% for each of the total accounts receivable balance at year end.

Net sales to the largest two customers accounted for 31 % of total net sales in 2016 whereas in 2015 the top two customers accounted for 2 9 % of total net sales. In 2016 , the Company's two largest customers represented two of the Company's product lines. The following table sets forth, for the periods indicated, the consolidated revenue from continuing operations and percentages of revenue derived from the sale of the Company’s products and services in certain industries.



	Revenue for the Years Ended December 31,
	2016		%	2015		%
Medical	$	14,543,315	74	$	16,770,788	78
Automotive/Industrial		3,787,312	19		2,839,926	13
Consumer Products		744,738	4		647,190	4
Military and Law Enforcement		383,254	2		943,603	4
Other		179,598	1		293,677	1
Total	$	19,638,217	100	$	21,495,184	100

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The following table sets forth, for the periods indicated, the consolidated revenue from continuing operations and percentages of revenue derived from the sales of all of the Company's products and services by geographic market.



	Revenue for the Years Ended December 31,
	2016		%	2015		%
United States	$	12,206,761	62	$	13,199,188	61
Asia		4,283,180	22		4,774,910	22
Europe		1,677,100	9		1,662,318	9
Canada		1,268,817	6		1,607,445	7
Other		202,359	1		251,323	1
Total	$	19,638,217	100	$	21,495,184	100

While some risks exist in foreign markets, the Company’s customers have historically been based in stable regions. Approximately 40% of the Company’s revenue is derived from exports. To reduce the risks associated with foreign shipment s and currency exchange fluctuations, the title to most of the products are transferred to the customers when shipped . P ayment is required in U.S. Dollars. The Company also has agreements with certain foreign cust omers to hold inventory at customer locations where revenue is recognized when the product is consumed by the customer.

Marketing and Competition

The Company markets its capabilities and services to current and potential customers to provide full product life-cycle support to their product manufacturing needs. The Company's sales force leverages its long standing relationships, targeting new and potential customers through direct marketing via Micron ’s website ( www.micronproducts.com ) and regularly attending industry trade shows. The Company provides value added U.S. based manufacturing capabilities with plating/coating, injection molding, machining, mold making, maintenance and repair. Customers seek the Company's ability to produce complex products on short time lines and to their specifications. Micron’s ISO 13485:2003 and ISO 9001:2008, registrations, the international quality standards for medical devices and manufacturing, qualify Micron to further expand into products requiring tight controls and high standards. The Company’s International Traffic in Arms Regulation ("ITAR") registration with the U.S. Department of State ("State Department") allows the Company to compete in military and law enforcement applications restricted by export controls and the U.S. Department of Defense ("DOD"). Micron also holds a class 10 federal firearms license and a federal explosives license for manufacture of products for the military and law enforcement.

The Company's U.S. based manufacturing capabilities are offered in a global and highly competitive market. Free trade agreements increase global competition, making every company in the same manufacturing arena around the world a potential customer or competitor. To meet this challenge, the Company focuses its development efforts on complex engineered products. Some of these products require specialty material, such as engineered resins , exotic metals, and alloys . Micron has over forty years of experience in some product areas with long customer relationships and has developed competitive advantages through decades of constant process improvement and utilization of Lean/Six Sigma principles. The Company competes on the basis of quality and speed to market. The Company also believes its expertise in manufacturing and processes to comply with governmental regulations governing medical devices provides a competitive advantage in the marketplace. To remain competitive and to expand market share, the Company invests in training and educating its workforce, expanding manufacturing capacity and automating processes to increase productivity.

Manufacturing and Suppliers

The Company has registered its facilities with the U.S. Food and Drug Administration ("FDA") as well as under the U.S. State Department's ITAR registration. Micron is ISO 13485:2003 and ISO 9001:2008 registered. Micron's injection molding machine capacity ranges from 15 to 220 tons and includes a n ISO class 7 clean room. Machining, mold making and tooling capabilities include up to 11 axis CNC machining and mill-turn centers , wire electrical discharge machining ("EDM"), milling, turning , grinding , polishing, cleaning, passivation, assembly and packaging . Surface coating capabilities include electroless and electrolytic silver plating . A skilled employee base provides expertise in engineering, complex manufacturing, materials, process control, quality and automation.

While some customers may require engineered raw materials, the Company also uses commodity raw materials as the basis for its value-added manufacturing operations. Many of these commodities are widely available from multiple sources. Some specialty plastics are single sourced and, in a few cases, proprietary to the products the Company manufactures. The Company monitors the supply chain for commodity materials to manage availability in case of breaks in the global supply chain. For many products, the Company is one step in a complex supply chain for OEM customers. This requires coordination with upstream and downstream vendors in the supply chain. Coordination of production scheduling is imperative to meeting customer expectations.

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Inventory Requirements

The Company stocks inventory of raw materials, work in process, and finished goods.

The Company manages inventory levels to balance customer delivery requirements, manufacturing production scheduling efficiencies and supply chain coordination from suppliers and to customers. In many cases, the Company produces to a purchase order in a single production run to optimize production efficiency and holds inventory for customers to support multiple delivery dates. The Company also has supply agreements with certain foreign customers to hold inventory at customer’s warehouses. Customers benefit from Micron's ability to hold inventory on their behalf for just-in-time deliveries while the Company benefits from being able to optimize efficiencies of production scheduling and raw material volume purchasing.

Research and Development

Research and development of a unique process to improve silver coating and sensor performance is ongoing and includ es the design and testing of specific process improvements for certain medical device components. The Company also conducts customer funded research and development of new products in the military and law enforcement industry. For the year ended December 31, 2016 the Company spent $97,234 on research and development compared to $241,100 for the year ended December 31, 2015.

Patents and Proprietary Technology

The Company develops and utilizes proprietary manufacturing processes to establish and maintain a competitive advantage. By having internal engineering, mold making, automation and manufacturing expertise, the Company is able to develop specialized processes throughout the product development and product manufacturing cycle. The Company is currently developing software to automate the CAM programming for orthopedic implant s and instrumentation for it s customers. The Company submitted one patent application following work completed during 2016. The Company is also working on several other projects which may qualify for patent protection.

Government Regulation

The Company's operations are subject to government regulations which establish compliance standards. As a result, there may be additional costs incurred to comply with such regulations in order to participate in certain markets. The medical device industry in particular requires strict compliance with governmental standards. The Company believes its expertise in manufacturing and processes to comply with these regulations provides a competitive advantage in the marketplace. The FDA and the European Union equivalent ("CE Mark") promulgate quality systems requirements under which a medical device is to be developed, validated and manufactured. The DOD, Bureau of Alcohol, Tobacco, Firearms and Explosives ( B ATF E ) and the State Department also impose regulations on the production and transfer of certain goods and technical data. Because customers own the product designs, they may be directly subject to such regulations. The development or manufacture of such products must be managed in accordance with applicable regulatory requirements and any special controls required by customers. The Company's manufacturing facilities are subject to periodic inspections by the FDA to determine compliance with the quality system and medical device reporting regulations and other requirements.

Conflict Minerals

The Financial Reform Bill (H.R. 4173) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, also known as the Dodd-Frank Act, imposed reporting requirements relating to the use of a group of minerals extracted from the Democratic Republic of Congo ("DRC") and surrounding regions. These minerals are known as “Conflict Minerals” and include tin, tungsten, tantalum and gold. The Company uses tin in parts of its production and its suppliers have confirmed that none of the tin or tin concentrates used by the Company in the production of products originate from the DRC or surrounding regions.

Environmental Regulation

The Company's operations involve use of hazardous and toxic materials and generate hazardous, toxic and other regulated wastes. Its operations are subject to federal, state and local laws, regulations and directives governing the use, storage, handling and disposal of such materials and certain waste products . Micron practices and rea ff irms its commitment to and performance of the highest standards of environmental controls and occupational health and safety standards . Micron has developed an int ernal system of compliance and has introduced many new initiatives including the use of solar energy to benefit from renewable energy generation and reduce overall costs associated with production. The C ompany employs best practices to reduce waste from its manufacturing operations and reclaims, recovers, and reuses materials to reduce pollutants and to minimize the impact on the environment. The Company also works closely with state and local officials to ensure compliance with current and proposed regulations while supporting a regulatory environment that allows complex manufacturing to be competitive globally.

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Seasonality

In general, the Company does not experience significant seasonality in its business. However, as a component supplier within broad manufacturing supply chains, occasional seasonal adjustments to production schedules may impact timing of orders from customers and consequently result in quarterly fluctuations in revenue.

Employees

As of December 31, 2016 , the Company had a total of 10 7 employees, of which 10 6 were full time employees as compared to 1 08 , of which 1 04 were full time at December 31, 2015 . Management believes that continued success will depend on its ability to retain and recruit skilled personnel. The Company has never had a work stoppage and none of the Company's employees are represented by a union. Management believes the Company has a good relationship with its employees.

Periodic Reporting and Financial Information

The Company registered its common stock under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and has reporting obligations, including the requirement that it file annual and quarterly reports with the SEC. The public may read and copy materials the Company files with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549, on official business days during the hours of 10:00 am to 3:00 pm. You may obtain information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov. The Company also makes available through its website the annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and amendments to those reports as soon as reasonably practical after filing with the SEC. Its website address is http ://www.arthrt.com. Information on the Company's website is not part of this Annual Report on Form 10-K.

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Ite m 1A. RISK FACTORS

In addition to the other information in this Form 10-K, the following factors should be considered in evaluating the Company and its business. The risks and uncertainties described below are not the only ones facing the Company. Further, the market price of the Company’s common stock could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties described in this “Risk Factors” section. Additional risks and uncertainties that the Company does not presently know or that are currently not deemed significant to the Company's business may also impair the Company’s business, results of operations and financial condition.

The Company’s operating results may fluctuate significantly in the future as a result of a variety of factors, many of which are outside of the Company's control. These factors include:

the Company's ability to obtain and retain order volumes from customers who represent high proportions of revenue;

the Company's ability to maintain the pricing model, offset higher costs with price increases and/or decrease the cost of sales;

the variability of customer delivery requirements and the ability of the Company to anticipate and respond thereto;

the level of sales of higher margin products and services and the Company's ability to increase such sales;

volatility in commodity and energy prices and the Company's ability to offset higher costs with price increases;

the Company's ability to renew its credit facility and manage its level of debt which makes the Company sensitive to the effects of economic downturns; the Company's level of debt and provisions in the debt agreements could limit the Company's ability to react to changes in the economy or its industry;

the Company's failure to comply with the financial and other covenants contained in its credit facility, including as a result of events beyond its control, which could result in an event of default, and adversely affect the Company's operating results and financial condition;

the Company’s reliance on revenue from exports and the impact on the Company’s financial results due to economic uncertainty , changes in trade policy, tax laws and regulations, or downturns in foreign markets;

continued availability of supplies or materials used in manufacturing at competitive prices;

the amount and timing of investments in capital equipment, sales and marketing, engineering and information technology resources;

the Company's ability to attract and retain employees with the skills to meet the technically complex demands of manufacturing;

entrance of competitive products and services in the Company's markets;

the Company's ability to execute plans and motivate personnel in the execution of those plans;

the Company's ability to protect and retain trade secrets related to the Company's manufacturing processes;

adverse claims relating to the Company's intellectual property and product liability claims affecting the Company's products;

adoption of new, or changes in, accounting principles; and passage of new, or changes in regulations;

adverse regulatory developments specifically healthcare policy changes, environmental and other regulatory changes;

the costs inherent with complying with statutes and regulations applicable to public reporting companies, such as the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010;

the Company's ability to efficiently integrate future acquisitions and new lines of business that the Company may enter in the future, if any;

the Company's ability to maintain compliance with the NYSE MKT requirements for continued listing of the Company's common stock in which event the Company's securities may be delisted from the NYSE MKT which could limit investors' ability to effect transactions in the Company's securities and subject the stock to additional trading restrictions;

other risks referenced from time to time elsewhere in this report and in the Company’s filings with the SEC; and

general economic conditions.

As a response to changes in the competitive environment, the Company may from time to time make certain pricing, service, technology or marketing decisions, or business or technology acquisitions, or experience fluctuations or reductions in customer orders that could have a material adverse effect on the quarterly and annual results. Due to all of these factors, the operating results may fall below the expectations of stockholders and investors in any future period and make period to period comparisons difficult.

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The Company is dependent on a limited number of large customers. The loss of, or inability to obtain and retain order volumes from, one or more of these customers, could have an adverse effect on the Company's financial results.

During the year ended December 31, 2016 , the Company had net sales to two customers constituting 19% and 12% of total 2016 net sales. Accounts receivable from these two customers at December 31, 2016 was 26% and 7%, respectively , of the total accounts receivable balance at year end. During the year ended December 31, 2015 , the Company had net sales to two customers constituting 16% and 13% , respectively, of total 2015 net sales. Accounts receivable from the se two customers at December 31, 2015 was 9% for each of the total accounts receivable balance at year end.

Sales to the largest two customers accounted for 31 % of total net sales in 2016 whereas in 2015 the top two customers accounted for 29 % of total net sales. Large corporations can change their demand for the Company's products and services with little or no warning making it difficult to forecast beyond the current or next quarter. In the case of precious metal plating, customer purchase arrangements take into account the fluctuating price of precious metals.

The loss of, or significant reduction in order volume, from one or more of these customers, could have an adverse effect on the Company's financial results.

The Company competes globally , with a large portion of its revenue derived from exports. Economic uncertainty or downturns in foreign markets could result in variability or have an adverse effect on the Company’s financial results.

While some risks exist in foreign markets, the Company’s customers have historically been based in stable regions. Approximately 40 % of the Company’s revenue is derived from exports. To reduce the risks associated with foreign shipment s and currency exchange fluctuations, the title to most of the products are transferred to the customers when shipped . The Company also has agreements with certain foreign customers to hold inventory at customer locations where revenue is recognized when the product is consumed by the customer. Payment for all product is required in U.S. Dollars. Additionally, the strength of the U.S. Dollar could affect the demand for the Company’s products, or the timing of orders. This uncertainty could have an adverse effect on the Company’s financial results.

I n June 2016, the United Kingdom (the “U.K .”) held a referendum in which voters approved an exit from the European Union (the “E.U.”), commonly referred to as “Brexit”. The uncertainty surrounding the terms of the U.K.’s withdrawal and its consequences may create global economic uncertainty, or disrupt trade between the U.K. and the E.U. This uncertainty may cause the Company’s customers to closely monitor their costs and reduce their spending budget which could adversely affect the Company’s financial condition.

Adverse developments in U.S. government trade policy and legislation, the imposition of tariffs or changes in diplomatic relations with countries in which our customers are located or conduct business may adversely affect our financial condition and results of operations.

The recent presidential and congressional elections in the United States could result in significant changes in, and uncertainty with respect to, legislation, regulations and monetary, tax and trade policy, among other things. Potential changes in U.S. government trade policy and legislation, including changes to tax laws, withdrawal from or modification of international trade agreements, the imposition of additional tariffs on goods or other restrictions on trade and any changes in diplomatic relations with countries in which our customers are located or in which they conduct business may adversely affect our customers and, as a result, could materially affect our operating results.

Quarter to quarter variables, such as customer mix and profitability by product line, can be expected to result in fluctuations in quarterly results and make quarter to quarter comparisons difficult.

The Company is a contract manufacturing organization providing components to a wide array of industries and supplying OEM’s of various sizes up to and including Fortune 500 Companies. As a result of the diversity of components and the Company’s reliance on large OEM’s, who can change their demand with little or no notice, the Company will continue to see fluctuations in quarterly revenue and earnings, which could make quarter to quarter and year over year comparisons difficult.

The Company’s top five customers, covering all three products lines, comprised 51% of sales in both 201 6 and 2015 . As the Company continues to diversify its revenue base across all its product lines, the broader customer mix results in additional variables which can affect operating results , product mix, product line gross margins and customer ordering patterns.

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If the Company is unable to keep up with rapid technological changes, the processes or services it offers, or products it manufactures, may become obsolete or if the Company is no longer able to effectively manufacture, market and distribute these products, it could have a material adverse effect on the Company's financial condition.

The medical device industry is characterized by continual technological change. Although the Company attempts to expand technological capabilities in order to remain competitive, the Company may be unable to effectively develop and market competitive products, processes and services, or be able to meet the manufacturing needs related to new discoveries or developments by others, on a timely basis. This may make the Company’s processes, products or services obsolete or uneconomical. Any substantial technological advance that eliminates one or more of the Company’s product line s could have a material adverse effect on the Company's operating results. The Company generally does not receive purchase volume commitments extending beyond several months. Large corporations can shift focus away from a need for the Company’s products and services with little or no warning. Additionally, should any of the Company’s large OEM customers decide to vertically integrate the manufacturing of a product line, or chose to limit the number of qualified suppliers, the Company’s operating results may be adversely impacted. If the Company cannot compete effectively in the marketplace, the Company's future prospects and financial results may be adversely impacted.

The Company's dependence on large OEM customers, which can change demand on short notice, adds to the unpredictability of quarterly sales and earnings.

The Company’s large OEM customers are not required to have purchase volume commitments extending beyond several months and often lack dependable long-term forecasts. In addition, the Company’s large OEM customers may change their demand schedule, either up or down, within a relatively short time horizon. Further, large OEM customers may choose to develop the capability of producing their own products. In addition, new customers may experience development delays, such as delays in FDA approvals, marketing delays in the development of sales channels or inadequate financing, any of which may delay the launch of new products and therefore may affect the timing of sales.

The Company's quarterly results have in the past and can be expected in the future to vary due to changes in demand within a quarter from large OEM customers. These changes in demand may also result in the Company incurring additional working capital costs and increased manufacturing unit cost due to these short-term fluctuations. The expense levels and inventory, to a large extent, are based on shipment expectations in the quarter. If sales levels fall below these expectations, through a delay in orders or otherwise, operating results are likely to be adversely affected. An inability to accurately predict customer requirements makes cost-saving measures more difficult to implement.

Although the Company seeks to leverage its demonstrated product quality and expertise to expand its customer base and lessen its dependence on a few large customers, it can provide no assurance that it will be able to materially alter this dependency in the immediate future, if at all.

The failure to repay or renew the Company's credit facility upon maturity or to comply with financial and other covenants contained therein, or to timely repay or refinance its subordinated debt, including as a result of events beyond the Company's control, could result in an event of default, which, if incurred, could materially and adversely affect operating results and financial condition.

The Company's credit facility contains covenants that relate to various matters including debt and leverage ratios, further borrowings and security interests, merger or consolidation, acquisitions, guarantees, sales of assets other than inventory or obsolete equipment in the normal course of business, changes in management or ownership and payment of dividends. If there were an event of default under any of the debt instruments under the credit facility or the Company’s subordinated debt that was not cured or waived, the holder of the defaulted debt could cause all amounts outstanding with respect to all debt owed to it to be due and payable immediately. The Company's ability to make payments on the indebtedness depends on the ability to generate cash. If the Company does not generate sufficient cash flow to meet the debt service and working capital requirements, it may need to seek additional financing. Failure to generate sufficient cash flow may result in a violation of financial covenants and default under the Company's debt agreements, cause the Company to default on its subordinated debt and make it more difficult to obtain financing on terms that are acceptable, or at all. Management cannot assure that the Company's assets or cash flow would be sufficient to fully repay borrowings under the outstanding debt instruments, either upon maturity or upon an event of default, or that the Company would be able to extend, refinance or restructure the payments on those debt instruments.

The level of debt makes the Company more sensitive to the effects of economic downturns; the level of debt and provisions in the debt agreements could limit the Company's ability to react to changes in the economy or industry.

The level of debt makes the Company more vulnerable to changes in the results of operations. The Company's level of debt could have other negative consequences, including the following:

Limiting the Company's ability to borrow money or sell stock for working capital, capital expenditures, debt service requirements or other general corporate purposes;

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Limiting the Company's flexibility in planning for, or reacting to, changes in operations, business or the industries in which the Company competes; and

Leverage may place the Company at a competitive disadvantage by limiting its ability to invest in the business or in further research and development.

In addition, the Company's credit facility contains covenants that limit the flexibility in planning for or reacting to changes in the business and industry, including limitations on incurring additional indebtedness, making investments, granting liens and merging or consolidating with other companies. Complying with these covenants may impair the Company's ability to finance the future operations or capital needs or to engage in other favorable business activities.

Medical devices are subject to extensive governmental regulations relating to the manufacturing, labeling and marketing of such products and failure to comply with such regulations may adversely impact the Company’s operations and results of operations.

The medical device components the Company manufactures for its customers are subject to regulation by the FDA in the United States and other governmental authorities internationally. The process of obtaining regulatory approvals to market a medical device can be costly and time consuming for the Company's customers and approvals might not be granted for future products on a timely basis, if at all. Any such approvals may delay the Company's ability to commence production of a new or modified product. Under FDA regulations such products and the Company's manufacturing facilities are subject to periodic inspections by the FDA to determine compliance with the quality system and medical device reporting regulations and other requirements. If the Company fails to fully comply with applicable regulatory requirements, the Company or its customers may be subject to a range of sanctions, including warning letters, product recalls and the suspension of product manufacturing, monetary fines and criminal prosecution.

Economic uncertainty , as well as impact of healthcare reform legislation, may reduce patient demand for knee or other joint replacement procedures. If there is not sufficient patient demand for the procedures for which orthopedic implant products are used, customer demand for the Company’s orthopedic implant compon ents and instruments would likely drop, and its business, financial condition and results of operations could be harmed.

The orthopedics industry in which the Company’s customers operate is vulnerable to economic trends and the impact of healthcare reform legislation . If j oint replacement procedures are deemed to be elective procedures, the cost of the procedure may not be fully covered by or reimbursable through government, including Medicare or Medicaid, or private health insurance. In times of economic uncertainty or recession, individuals may reduce the amount of money that they spend on deferrable medical procedures, including joint replacement procedures. Economic downturns in the United States and international markets could have an adverse effect on demand for the Company’s orthopedic implant components and instruments . In addition, the Company’s customers may be impacted by current or future executive orders and legislative actions impacting healthcare reform.

Failure to comply with Quality System Regulations or industry standards could result in a material adverse effect on the Company's business and results of operations.

The Company's Quality Management System complies with the requirements of ISO 13485:2003 and ISO 9001:2008. In addition the Company has registered its manufacturing facilities under ITAR and with the FDA. If the Company is not able to comply with the Company’s Quality Management System or industry-defined standards, it may not be able to fill customer orders to the satisfaction of its customers. Failure to produce products compliant with these standards could lead to a loss of customers which would have an adverse impact on the Company's business and results of operations. Violations of the ITAR, FDA and other regulations may subject the Company to significant fines or penalties, which could have an adverse impact on the Company’s results of operations.

If trade secrets are not kept confidential, the secrets may be used by others to compete against the Company.

The Company relies on trade secrets to protect its proprietary processes and there are no assurances that others will not independently develop or acquire substantially equivalent technologies or otherwise gain access to the proprietary process. T he meaningful protection of such proprietary technology cannot be guaranteed. The Company relies on confidentiality agreements with its employees. Remedies for any breach by a party to these confidentiality agreements may not be adequate to prevent such actions. Failure to maintain trade secret protection, for any reason, could have a material adverse effect on the Company.

The Company is subject to stringent environmental regulations.

The Company's manufacturing operations are subject to a variety of federal, state and local requirements governing the protection of the environment. These environmental regulations include those related to the use, storage, handling, discharge and disposal of toxic or otherwise hazardous materials used in or resulting from the Company's manufacturing processes. Failure to comply with environmental laws could subject the Company to substantial liability or force the Company to significantly change its

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manufacturing operations. In addition, under some of these laws and regulations, the Company could be held financially responsible for remedial measures if its properties are contaminated, even if it did not cause the contamination.

A product liability suit could adversely affect the Company's operating results.

The testing, manufacturing , marketing and sale of the customer's and Company's medical devices and/or components, including orthopedic implant components and instruments , as well as components for the military and law enforcement industry, entail the inherent risk of liability claims or product recalls. If the Company's customers are involved in a lawsuit, it is possible that the Company would also be named. Although the Company maintains product liability insurance, coverage may not be adequate. Product liability insurance is expensive, and in the future may not be available on acceptable terms, if at all. In addition, the Company may incur significant legal expenses and damage to the Company’s reputation in the event of any such claim regardless of whether the Company is found to be liable. A successful product liability claim or product recall could have a material adverse effect on the business, financial condition, and ability to market the Company's products and services in the future.

The market price of the Company’s common stock is volatile.

The market price of the Company’s common stock has in the past been, and may in the future continue to be, volatile. A variety of events may cause the market price of the Company’s common stock to fluctuate significantly, including, but not limited to, quarter to quarter variations in operating results, adverse or positive news reports or public announcements and market conditions within the Company’s industry. Due to the relatively small public float for the Company’s common stock, trading of such shares may have a disproportionate effect on the stock price. In addition, the stock market in recent years has experienced significant price and volume fluctuations. This volatility has had a substantial effect on the market prices of stock , at times for reasons unrelated to their operating performance. Trading in the Company’s stock or market fluctuations may adversely affect the price of the Company’s common stock.

The Compan y may seek to make acquisitions of companies, products or technologies that may disrupt the business and divert management’s attention, cause the Comp any to incur additional costs, debt or issue equity securities and adversely impact its results of operations and financial condition.

The Company may seek to develop or make acquisitions of complementary companies, products or technologies from time to time. Any acquisitions will require the assimilation of the operations, products and personnel of the acquired businesses and the training and motivation of these individuals. Further, such activities may divert management's attention and could result in an inability to realize the expected benefits, savings or synergies from the acquisition, the loss of key personnel of the acquired company, and exposure to unexpected liabilities of the acquired company. The Company also may have to, or choose to, incur additional costs, incur debt or issue equity securities to pay for any future acquisitions and its working capital needs. Such financing may not be available to the Company or may be on terms that involve covenants and financial ratios that may restrict the Company's ability to operate its business. The issuance of common stock, preferred stock or other equity se curities in connection with an acquired business could be substantially dilutive to the stockholders’ holdings. The Company cannot give any assurance that any such acquisitions will become profitable or remain so or will not have a material unfavorable impact on it. The Company is not currently party to any agreements, written or oral, for the acquisition of any company, product or technology.

The Company could be negatively affected as a result of the actions of activist or hostile stockholders.

The Company could be negatively affected as a result of shareholder activism, which could cause the Company to incur significant expense, hinder execution of its business strategy and impact the trading value of the Company’s stock . Shareholder activism, which could take many forms or arise in a variety of situations, has been increasing in publicly traded companies in recent years. The Company is subject to the risks associated with such activism in light of the fact that a shareholder filed a Schedule 13D in November 2015 expressing an intent to engage in substantive discussions with management, the Board of Directors and others relating to the Company’s operations, its management, strategy and other matters. Shareholder activism, including potential proxy contests, requires significant time and attention by management and the Board of Directors, potentially interfering with the Company’s ability to execute its strategic plan. Additionally, such shareholder activism could give rise to perceived uncertainties as to the Company’s future direction, adversely affect its relationships with key executives, customers and other business partners, or make it more difficult to attract and retain qualified personnel. Also, the Company has been , and may in the future be , required to incur significant legal fees and other expenses related to activist shareholder matters. Any of these impacts could materially and adversely affect the Company and operating results.

The Company may be exposed to potential risks relating to internal control over financial reporting.

As required by Section 404 of the Sarbanes-Oxley Act of 2002 (“SOX”), the SEC adopted rules requiring public companies to include a report of management on the Company’s internal control over financial reporting in their annual reports, including Form 10-K. In addition, if a reporting company is an accelerated filer or a large accelerated filer (as defined by the Exchange Act), the independent registered public accounting firm auditing a reporting C ompany’s financial statements must also attest to and report on

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the reporting company’s internal control over financial reporting as well as the operating effectiveness of the reporting company’s internal control. The Company was only subject to the management evaluation and review portion of these requirements for the fiscal year ended December 31, 201 6 . The Company's failure to satisfy the requirements of Section 404 of SOX on an ongoing, timely basis could result in the loss of investor confidence in the reliability of the Co m p any’s financial statements, which in turn could harm the Company’s business and negatively impact the trading price of the Company’s common stock. In addition, any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm the Company’s operating results or cause the Company to fail to meet its reporting obligations.

Failure to comply with the listing requirements of the NYSE MKT could lead to the commencement of delisting proceedings in accordance the NYSE MKT’s Company Guide. Delisting could limit investors' ability to effect transactions in the Company's securities and subject the stock to additional trading restrictions.

The Company’s common stock is listed on the NYSE MKT, a national securities exchange. To maintain such listing, the Company is required to meet the continued listing requirements of the NYSE MKT as set forth in its Company Guide. If the Company is unable to maintain the listing of its stock on the NYSE MKT or another exchange for failure to comply with the continued listing requirements, including timely filing of Exchange Act reports and compliance with the NYSE MKT’s corporate governance requirements, the Company and its security holders could face significant material adverse consequences including a limited availability of market quotations for its stock and a decreased ability to issue additional securities or obtain additional financing in the future.

Ite m 1B. UNRESOLVED STAFF COMMENTS

Not applicable.

Ite m 2. PROPERTIES

The manufacturing facilities and offices of the Company are located in two buildings in an industrial area in Fitchburg, Massachusetts. The first building consists of an approximately 22,000 square foot, six story building. The second building is over 94,000 square feet. Additionally, the Company owns two unoccupied buildings in the complex with a total of approximate ly 52,000 square feet. The Company believes its current facilities are sufficient to meet current and future production needs through the fiscal year ending December 31, 201 7 .

The Company entered into an agreement with a Buyer in January 2016 for the sale of the two unoccupied buildings and land. In December 2016, the Parties agreed to an amendment extending the terms of the agreement to January 2018 . In January 2017, the Parties entered into a second amendment whereby the Buyer assigned its rights under the agreement to a third party and the Parties further agreed to extend ing the term to March 2018 with a further extension to July 2018 only for the purpose of allow ing the assignee to secure historical tax credits. The closing is subject to permitting and approvals from the City of Fitchburg and the Commonwealth of Massachusetts and is expe cted to take place no later than July 2018 (see Note 4) .

I tem 3. LEGAL PROCEEDINGS

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.

Ite m 4. MINE SAFETY DISCLOSURES

Not applicable.

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PA RT II

Ite m 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The Company's common stock has been listed on the NYSE MKT since 1992 and trades under the ticker symbol HRT.

The following table sets forth, for the periods indicated, the high , low and quarter end sale prices per share of common stock as quoted by the NYSE MKT.



Year Ended December 31, 2016	High		Low		Close
1st Quarter	$	5.45	$	3.55	$	4.25
2nd Quarter		4.83		3.52		4.40
3rd Quarter		4.68		3.47		4.19
4th Quarter		4.44		3.56		3.80
Year Ended December 31, 2015	High		Low		Close
1st Quarter	$	7.79	$	6.30	$	7.25
2nd Quarter		7.35		6.04		6.27
3rd Quarter		6.47		5.85		6.24
4th Quarter		6.24		5.10		5.48

Holders

As of March 20, 2017 the number of holders of the Company's common stock is estimated to be in excess of 1,500, including beneficial and record holders of our common stock.

Dividend Policy

No dividends were declared or paid in 2016 or 2015 . Future determination as to the payment of cash dividends, if any, will be at the discretion of the Board of Directors and will be dependent upon the Company’s financial condition, results of operations, capital requirements, potential acquisitions, and other such factors as the Board of Directors may deem relevant, including any restrictions under any credit facilities in place now or in the future. T he Company's credit facility provides that the Company shall not declare, pa y or authorize any dividend without prior notifica tion.

It em 6. SELECTED FINANCIAL DATA

Not Applicable.

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It em 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussions of the Company’s results of operations and financial condition should be read in conjunction with the consolidated financial statements and notes pertaining to them that appear elsewhere in this Form 10-K. Any forward-looking statements made herein are based on current expectations of the Company that involve a number of risks and uncertainties and should not be considered as guarantees of future performance. These statements are made under the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Forward looking statements may be identified by the use of words such as “expect,” “anticipate,” “believe,” “intend,” “plans,” “predict,” or “will”. Although the Company believes that expectations are based on reasonable assumptions, management can give no assurance that the expectations will materialize. Many factors could cause actual results to differ materially from the Company’s forward looking statements. These factors include those contained in more detail in Item 1A,“Risk Factors”. 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.

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.



	Years Ended
	December 31,
	2016	%	2015	%
Net sales	100.0		100.0
Cost of sales	85.2		85.3
Gross profit	14.8		14.7
Selling and marketing	5.9		5.1
General and administrative	11.0		11.0
Research and development	0.5		1.1
Other expense	1.1		1.3
Loss from continuing operations before income taxes	(3.7)		(3.8)
Income tax provision	—		—
Loss from continuing operations	(3.7)		(3.8)
Income from discontinued operations	—		1.7
Net loss	(3.7)	%	(2.1)	%

Net Sales

The Company's consolidated net sales for 2016 were $19,638,217 , a decrease of $1,85 6,967 , or 8.6% , from net sales of $21,495, 184 in 2015 . The de crease in net sales was due primarily to decreased net sales of orthopedic implant components and instruments as well as sensors , partially offset by a n increase in net sales of thermoplastic injection molding.

The decrease in net sales was largely due to a 29.3% decrease in n et sales of orthopedic implant components and instruments for the year ended December 31, 2016 due to lower than expected volume from a large customer as compared to the same period in 2015. The Company was notified by this customer at the end of the second quarter to expect lower demand for the remainder of 2016 as the customer intended to vertically integrate by bringing the manufacturing of the ir orthopedic implant compone nts in house . Partially offsetting the decrease in demand fr om this customer was revenue from new orthopedic implant components and instrument s customers beginning in the second quarter of 2016. In addition , booked orders at the year ended December 31, 2016 increased when compared to the same period in 2015 from multiple new customers.

Additionally, net sales of sensors decreased 10.3% for the year ended December 31, 2016 when compared to the same period last year. Sensor production volume in creased over the same period last year , however, net sales were lower due largely to the timing of shipments, versus the recognition of revenue, related to supply agreements with certain foreign customers entered into in the third and fourth quarters of 2016. Sensor net sales also decreased due to customer mix, product mix and competitive pricing . S ilver surcharge billed decreased 5.0% due in part to a decrease in silver volume due to customer demand for lower silver content on parts. The decrease in silver surcharge billed was partially offset by a 7.6% increase in the weighted average cost of silver as compared to the same period last year.

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The decrease in net sales was partially offset by a 6.1% increase in n et sales in thermoplastic injection molding for the year ended December 31, 2016 when compared to 2015. The increase was due to increased sales of automotive components and medical components partly offset by lower sales of military and law enforcement components when compared to the same period in 2015.

Additionally , the decrease in net sales was partially offset by a 27.5% increase in tooling sales, net of deferred tooling revenue , due primarily to the sale of a large tool to the Company’s largest customer.

Gross Profit

Gross profit for the year ended December 31, 2016 was $2,898,691 , a decrease of $264,147 , or 8.4% , from gross profi t of $3,162,838 in 2015 . Gross profit as a percentage of net sales in creased slightly to 14.8% in 2016 , from 14.7% in 201 5 . The decrease in gross profit was due primarily to declining sales as a result of decreased order volumes in orthopedic implant components and instruments as well as in sensors . Partially offsetting these decreases were increased gross profit from thermoplastic injection molding and net tooling for the year ended December 31, 2016 when compared to 2015.

The decrease in gross profit for the year ended December 31, 2016 when compared to 2015 was due in part to a 40.4% decrease in gross profit from orthopedic implant components and instruments largely due to lower demand as well as higher costs related to the validation of orthopedic instrumentation . Gross profit as a percentage of sales from orthopedic implant component s and instruments decreased 4.0 points due partly to lower net sales and product mix , engineering and product va lidations. The decrease was partially offset by improved efficiencies through automation .

The decrease in gross profit was also due in part to a decrease of 18.2 % in gross profit from sensors due primarily to price reductions as well as customer and product mix. Gross profit as a percentage of sales from sensors decreased 1. 6 points due primarily to the reduction in selling price partly offset by increased gross profit from silver surcharge due to the increase in the weighted average price of silver .

Partially offsetting the decreases in g ross profit outlined above, gross profit from thermoplastic injection molding increased 4.9 % in 2016 when compared to the same period in the prior year due to customer and product mix. While gr oss profit increased, gross profit as a percentage of sales from thermoplastic injection molding decreased slightly due to the product mix partly offset by improved efficiencies through automation.

Also partly offsetting t he decrease in gross profit for the year ended December 31, 2016 was a 31.6% increase in gross profit from tooling sales , net of deferred tooling, due primarily to the sale of a large tool to the Company’s largest customer.

The decrease in gross profit for the year ended December 31, 2016 was also partly offset by a decrease in expenses for other indirect manufacturing overhead departments. The lower expenses were due to adjustments made in part as a result of lower sales as well as customer mix of orthopedic implants and instruments. Other manufacturing overhead as a percentage of sales decreased to 9.1 % for the year ended December 31 , 2016 as compared to 10. 2 % in the same period last year.

Selling and Marketing

The Company's consolidated selling and marketing expenses increased to $1,153,044 , or 5.9% of net sales, in 2016 from $1,086,586 , or 5.1% of net sales, in 2015 ; an increase of $66,458 or 6.1 % . For the year ended December 31, 2016, the increase was primarily due to increased compensation of $265,849 as a result of two additional salespersons hired in the fourth quarter of 2015 . The increase was partially offset by an $8 2,463 decrease in commissions due primarily to lower sales of orthopedic implant components. Additionally, there were no recruiting agency fees in 2016 versus $82,500 in 2015.

General and Administrative Expenses

The Company's consolidated general and administrative expenses de creased to $2,15 1,244 , or 11.0% of net sales, in 2016 compared to $2,355,484 , or 11.0% of net sales, in 2015 ; a de crease of $ 204,240 or 8. 7 % . The decrease in general and administrative expenses is mainly due to 2015 expenses for an impairment charge of $118,318 as well as $45,000 related to merger and acquisition activities. The decrease is also due in part to lower compensation costs of $72,596 which were due to the reduction of two positions, a 10% voluntary executive off ic er reduction in pay in the second quarter and no bonus expense in 2016 when compared to 2015. Further decreases include accounting related expenses of $ 34,091 , due in part to savings realized from new SEC filing software, a reduction of $34,847 in investor relations expense and lower c onsulting fees of $21,147 related to environmental, health and safety due to bringing these function s in house in 2016 .

The decrease in general and administrative expenses was partially offset by $51,600 of recruiting agency fees related to the replacement of three positions in the first quarter of 2016 , as well as increases in depreciation expense of $ 42,916 related to general and administrative assets and share-based compensation of $ 18,078 in 2016 versus the same period in the prior year.

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Research and Development

The Company's consolidated research and development expenses de creased to $97,234 , or 0.5% of net sales in 2016 , from $241,100 or 1.1% of net sales in 2015 ; a decrease of $143,866 , or 59.7% . The net decrease is due primarily to a reduction in wages, taxes and benefits of $ 90,951 due primarily to turnover of one employee and a decrease of $ 51,206 for internal research and development costs for the development of new products and capabilities related to medical device components.

Other Income (Expense)

Other expense, net, was $209,631 in 2016 compared to $270,512 in 2015 , a decrease of $60,881 . The decreased expense is due in part to the release of a $25,000 deposit related to the sale of real estate as well as a $23,750 increase in the carrying value of the a ssets h eld for s ale in 2016 (see Note 4 ) . Interest expense was $259,762 in 2016 compared to $260,300 in 2015 , a decrease of $538 . In 2015, the Company incurred $30,463 in expenses related to the assets held for sale at December 31, 2015 .

Income Tax Provision

The tax provisions for the years ended December 31, 201 6 and 201 5 are attributable to the U.S. federal and state income taxes on our continuing operations. The Company’s combined federal and state effective income tax rate from continuing operations was 0% and 0. 1 % in 201 6 and 201 5 , respectively, due to the impact of deferred tax assets reserved for with a valuation allowance.

Income from Discontinued Operations

The Company's subsidiary, RMDDxUSA Corp. and its Prince Edward Island subsidiary RMDDx Corporation (collectively "WirelessDx"), discontinued operations in 2012, filed for relief under Chapter 7 (Liquidation) of the United States Bankruptcy Code in 2014 and on March 20, 2015, the Chapter 7 Order was formally discharged and the case was closed. In 2015, net income of $362,610 was recorded from discontinued operations as a result of the related write-off of the remaining liabilities and cumulative translation adjustment .

Comprehensive Loss

In 201 6 and 201 5 , the Company has other comprehensive loss of $0 and $42,502 , respectively. In 2016 , the change in comprehensive loss was a result of the bankruptcy of RMDDx USA Corp . (see Note 12).

Earnings Per Share

Basic and diluted loss per share from continuing operations for the year ended December 31, 2016 was $0.25 per share compared with $0.28 per share for the year ended December 31, 2015, a decrease in loss per share from continuing operations of $0.03 per share. Consolidated basic and diluted loss per share for the year ended December 31, 2016 was $0.25 per share compared with $0.15 per share for 201 5 , a decrease in loss per share of $0. 10 per share . The increase in consolidated basic and diluted loss per share is due to the $0.13 earnings per share from discontinued operations in 2015.

Off-Balance Sheet Arrangements

In 2016, the Company entered into two operating leases for office equipment. The Company’s leases require future minimum annual lease payments of $24,036 for fiscal years 2017 and 2018, respectively.

Liquidity and Capital Resources

Working capital was $1,530,773 as of December 31, 2016 as compared to $2, 48 9,175 at December 31, 2015 a decrease of $ 958,402 . The decrease is primarily due to the reclassification of the revolving line of credit of $1, 785,795 from long - term to current liabilities because the maturity date is June 30, 2017 . The decrease in working capital is also due in part to increases in accounts payable, accrued expenses and other current liabilities and customer deposits related to tooling , as well as a decrease in accounts receivable partially offset by increased inventory, prepaid expenses and other current assets . Working capital also benefited from the reclassification of the subordinated promissory notes from current to long - term liabilities as a result of the extension of the maturity date to December 2018 (see Note 5) .

Net cash provided by operating activities of continuing operations was $661,247 in 2016 , as compared to net cash provided by operating activities of continuing operations of $1,469,766 in 2015 .

Cash on hand was $380,381 and $272,291 at December 31, 2016 , and 2015 , respectively. Substantially all of these funds are maint ained in bank deposit accounts.

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Trade accounts receivable, net of allowance for doubtful accounts were $2,276,608 and $2,798,353 at December 31, 2016 and December 31, 2015, respectively, a decrease of $521,745. The decrease is primarily due to the impact of the timing of shipments versus invoicing related to supply agreements with certain foreign customers entered into in the t hird and fourth quarter s of 2016.

Inventories were $3,060,085 at December 31, 2016 as compared to $2,118,712 at December 31, 2015 , a n increase of $941,373 . In 2016 , the Company entered into supply agreements with certain foreign customers to hold inventory at customer’s warehouses . This resulted in increased finished goods inventory for sensors as of December 31, 2016. In addition, there is increased work in progress related to tooling orders and machining . Raw materials for thermoplastic injection molding , namely resin, increased due to strong demand from a customer in the automotive market.

Accounts payable increased $ 190,873 due to the timing of disbursements for the year ended December 31 , 2016 as compared to December 31, 2015 as well as increased goods received not yet invoiced .

Capital equipment expenditures were $1,354,091 in 2016 as compared to $1,182,541 in 2015 due to the acquisition of machinery and equipment primarily for the contract manufacturing of components for orthopedic implants and instruments as well as thermoplastic injection molding .

At December 31, 2016 the Company’s total debt , net of debt issuance costs, was $ 4, 778,637 as compared to $ 3,985,838 at December 31, 201 5 , a n in crease of $ 792,7 99 or 19.7 %. The balance at December 31, 201 6 was comprised of outstanding principal amounts of $ 2,458,331 of term debt, $1, 785,795 on a revolving line of credit, $ 102,500 on an equipment line of credit and $ 432,011 of subordinated promissory notes as discussed in more detail below.

The Company has a multi-year credit facility with a Massachusetts based bank consisting of a revolving line of credit (the "revolver"), a commercial term loan and an equipment line of credit at December 31, 2016 . The debt is secured by substantially all assets of the Company with the exception of real property.

At December 31, 2015 , the credit facility included a revolver, a commercial term loan, two equipment term loans and an equipment line of credit. In June 2016 , the equipment line of credit converted to a term loan . In November 2016 , these four term loans, along with $500,000 from the revolver , were consolidated into a single commercial term loan (see Note 5 ) .

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% (4.0 % at December 31, 201 6 ). The revolver has a maturity date of June 2017. The Company expects to renew the revolver prior to its expiration. Amounts available to borrow under the revolver are $ 727,156 at December 31, 201 6 .

In November 2016 , the Company refinanced its bank term debt , along with $500,000 from the revolver, into a new consolidated five - year term loan with a maturity date of November 20 21 . The interest rate on the loan is a fixed 4. 6 5 % per annum and the loan requires monthly payments of principal and interest of approximately $ 46,500 . The outstanding balance on the term loan at December 31, 201 6 was $ 2,444,728 , excluding debt issuance costs .

I n November 2016 , the Company entered into a new equipment line of credit for $1.0 million under the Company's multi-year credit facility. At December 31, 201 6 , $102,500 has been drawn on the new equipment line of credit. The term of this equipment line of credit is six years, maturing in November 2022, 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.

The bank facility 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 receiving bank approval prior to executing further borrowings or 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. The Company was in compliance with all bank covenants as of December 31, 201 6 .

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 4.66% and require monthly payments of principal and interest totaling approximately $5,000 over the term of five years. The outstanding balance of these equipment notes at December 31, 201 6 was $ 59,46 1 .

In December 2013, the Company completed a private offering in which the Company sold an aggregate of $500,000 in subordinated promissory notes maturing in December 2016 . The unsecured notes require d quarterly interest-only payments at a rate of 10% per annum for the first two years . I n December 2015, the interest rate increased to 12% per annum . In October 2016 , the Company and six of the seven investors in the private offering , aggregating $450,000 of the notes, agreed to extend the maturity dates

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of the notes to December 31, 2018 at a rate of 10% per annum . One investor did not extend the maturity date and that $50,000 note was paid at maturity in December 2016. The notes are subordinated to all indebtedness of the Company pursuant to its multi-year bank credit facility.

In connection with the subordinated promissory notes, the Company issued 100,000 warrants to purchase the Company's common stock. The warrants were exercisable through December 2016 at an exercise price of $3.51 per share. In 2014, 30,000 warrants were exercised. No warrants were exercised in 2015 or 2016. In October 2016, in connection with the extension of the maturity dates of the subordinated promissory notes, the expiration date of the remaining 70,000 warrants was extended to December 31, 2018. The exercise price remain s unchanged at $3.51 per share. The 70,000 warrants remain unexercised at December 31, 201 6 (see Note 5) .

No dividends were declared or paid in 201 6 or 201 5 .

The Company believes that cash flows from its operations, together with its existing working capital , increased booked orders , the renewal of the revolving line of credit and other resources, will be sufficient to fund operations at current levels and repay the next twelve months of debt obligations.

Summary of Changes in Cash Position

As of December 31, 2016 , the Company had cash on hand related to continuing operations of $380,381 , a n increase of $108,090 from December 31, 2015 . Net cash provided by operating activities in 2016 totaled $ 661,247 . Net cash used in investing activities in 2016 was $1,367,296 . Net cash provided by financing activities in 2016 totaled $ 814,139 . The net cash flows for the year ended December 31, 201 6 are discussed in further detail below.

Operating Cash Flows

Net cash provided by operating activities in 2016 was $661,247 . C ash provided was due largely to a decrease in accounts receivable of $5 5 1,745 due primarily to the impact of supply agreements entered into with certain foreign customers in the third and fourth quarters of 2016, which require the Company to hold inventory at the customer’s warehouses . This impacted accounts receivable due to the timing of shipments versus invoicing for these foreign customers. Cash was also provided by an increase in accounts payable of $190,873 due to the timing of disbursements for the year ended December 31, 2016 a s compared to December 31, 2015 . Additionally, decreases in other non-current assets of $112,604, and an increase in accrued expenses and other current liabilities of $3 8 ,618 provided operating cash flows. In addition, operating activities was impacted by non-cash add-backs for depreciation and amortization of $1,541,006, share-based compensation of $47,256 and non-cash interest expense of $27,186.

Cash provided as described above was partially offset by $941,373 of cash used for an increase in inventory. The increase in inventory was due in part to increased finished goods inventory related to sensors due to supply agreements with certain foreign customers as mentioned above . In addition, there is increased work in progress related to tooling orders and machining. Raw materials for thermoplastic injection molding increased due to strong demand from a customer in the automotive market. Operating activities was also impacted by a decrease of $30,000 in the allowance for doubtful accounts.

Investing Cash Flows

Net cash used in investing activities in 2016 was $1,367,296 and was used for capital expenditures , largely for machinery and equipment, primarily for the contract manufacturing of orthopedic implants and instruments as well as thermoplastic injection molding equipment.

Financing Cash Flows

Net cash provided by financing activities in 2016 was $814,139 . The increase in financing acti vities was due in part to $647,351 in proceeds from the equipment line of credit. Additionally, proceeds of $500,000 for term debt were the result of consolidating a portion of the revolver as part of the November 2016 consolidation and refinancing of term debt. There was also cash provided from net proceeds of $ 2 74,300 from the revolver (excluding the $500,000 above), and proceeds from the exercise of stock options provided $51,150. These proceeds were partly offset by payments on term notes payable of $587,799 , a payment on the subordinated debt of $50,000 and $20,863 of cash paid for debt issuance costs related to the refinancing of term debt (see Note 5 ) .

Inflation

The Company believes that inflation in the United States or international markets has not had a significant effect on its results of operations. However, there has been considerable volatility in both energy and commodity prices, particularly the cost of silver.

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Environmental Matters

Like many industrial processes, the Company's manufacturing processes utilize hazardous and non-hazardous chemicals, the treatment and disposal of which are subject to federal and state regulation. Since its inception, the Company has expended significant funds to train its personnel, install waste treatment and recovery equipment and retain independent environmental consulting firm s to regularly review, monitor and upgrade its air and waste water treatment activities. The Company believes that the operations of its manufacturing facility are in compliance with currently applicable safety, health and environmental laws and regulations.

Based on the Company’s analysis, the Company does not expect future costs in connection with environmental matters to have a material adverse effect on its financial condition, result of operations or liquidity aside from the cost of regulatory compliance and maintaining certifications and processes related to compliance with environmental regulations.

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make judgments, assumptions and estimates that affect the amounts reported. Note 2 of the Notes to Consolidated Financial Statements describes the significant accounting policies used in the preparation of the consolidated financial statements. Some 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 Item 1A, “ Risk Factors ” above. 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

Revenue is recorded when all criteria for revenue recognition have been satisfied . R evenue is recognized in the period when persuasive evidence of an arrangement with a customer exists, the products are shipped and title has transferred or when exclusive control has been transferred to the customer , the price is fixed or determinable and collection is probable. The Company has entered into supply agreements with certain foreign customers where revenue is not recognized when the product i s shipped but instead is recognized when the customer consumes the product .

The Company enters into arrangements containing multiple elements which may include a combination of the sale of molds, tooling, engineering and validation services ("tooling") and production units. The Company has determined that certain tooling arrangements, and the related production units, represent one unit of accounting, based on an assessment of the respective standalone value. When the Company determines that an arrangement represents one unit of accounting, the revenue is deferred over the estimated product life-cycle, based upon historical knowledge of the customer, which is generally three years. The Company carries the sales and tooling costs, associated with the related arrangement, as deferred revenue and other current and non-current assets, respectively, on the Company's balance sheet. As the deferred revenue is amortized to sales, the associated prepaid tooling costs are amortized to cost of sales.

The Company cannot effectively predict short-term or long-term production volume in a consistent and meaningful manner due to the nature of these molds and associated products. Therefore, the Company is unable to account for the transactions under the Units of Production method and management has determined the most appropriate amortization method to be the Straight-Line method.

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ownership to the customer and (iii) the segregation of inventory, along with other elements in accordance with the Company's revenue recognition policy and relevant accounting guidance.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable represent amounts invoiced by the Company. Management maintains allowance for doubtful accounts based on information obtained regarding individual accounts and historical experience. Amounts deemed uncollectible are written off against the allowance for doubtful accounts. Bad debts have not had a significant impact on the Company’s financial position, resul ts of operations and cash flows.

The Company insures receivables for certain customers based upon several factors. Such factors include the customer ’ s payment terms, ordering patterns and volume requirements, the customers payment history, or general economic conditions of the region in which a customer is located.

Inventory and Inventory Reserves

The Company values its inventory at the lower of average cost, first-in-first-out (FIFO) or net realizable value. The Company reviews its inventory for quantities in excess of production requirements, obsolescence and for compliance with internal quality specifications. A review of inventory on hand is made at least annually and obsolete inventory may be disposed of and/or recycled. 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. The Company has entered into supply agreements with certain foreign customers to hold inventory at the customer’s warehouse s .

Deferred Tax Assets

The Company assesses the realization of its deferred tax assets based upon a more likely than not criteria. The Company considers future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for valuation allowances. The Company recognizes the benefits of a tax position if that position is more likely than not to be sustained on audit, based on the technical merit of the position. As of December 31, 201 6 , the Company has a full valuation for the Company’s deferred tax assets.

Asset Impairment – Long-Lived Assets

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. Based upon the annual review, the Company recorded impairment charges of $ 0 and $ 118,318 in 201 6 and 201 5 , respectively.

In 2015, the Company reviewed unamortized costs for patents pending. As a result of this review, the Company determined that the patents pending related to the Triggering Recharging and Wireless Transmission of Remote Patient Monitoring Device, as well as the Seed-Beat Selection Method for Signal-Averaged Electrocardiography were no longer patentable and recorded an impairment charge of $103,287 for the full costs of these patents pending. Additionally, after a review of trade names, the Company determined that the Leominster Tool & Die name no longer provided any future economic benefit and recorded an impairment charge of $15,031 for the remaining unamortized balance of the trade names.

Ite m 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable.

Ite m 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this item may be found on pages F-1 through F-21 of this Annual Report on Form 10-K.

It em 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

None .

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Ite m 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this annual report the Company's management, with the participation of the Company's principal executive officer and principal financial officer (“the Certifying Officers”), conducted evaluations of the Company's disclosure controls and procedures as defined under Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based upon the evaluations, the Certifying Officers have concluded that as of December 31, 201 6 , the Company's disclosure controls and procedures were effective.

Management’s Report on Internal Control Over Financial Reporting

The Company's Certifying Officers are responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act.

Internal control over financial reporting is a process designed by, or under the supervision of, the Certifying Officers and effected by the Company's Board of Directors, management and other personnel, 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 and includes those policies and procedures that:

pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the Company's assets;

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that the Company's receipts and expenditures are being made only in accordance with authorizations of the Company's management and directors; and

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition or disposition of the Company's assets that could have a material effect on the financial statements.

Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. It is a process that involves human diligence and compliance and is subject to lapses in judgment or breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. While process safeguards can reduce risks, because of inherent limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Company, under the supervision and with the participation of the Certifying Officers, has evaluated the effectiveness of the Company's internal control over financial reporting as of December 31, 2016 based upon the framework in Internal Control Integrated Framework (2013 ) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on such evaluations, the Certifying Officers have concluded that the Company's internal control over financial reporting was effective as of December 31, 2016 .

Changes in Internal Control Over Financial Reporting

During the three months ended December 31, 2016 , 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.

Ite m 9B. OTHER INFORMATION

None.

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PA RT III

It em 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required under this item is incorporated by reference to the applicable information set forth in the Proxy Statement for the 2016 Annual Meeting of Stockholders.

Ite m 11. EXECUTIVE COMPENSATION

The information required under this item is incorporated by reference to the applicable information set forth in the Proxy Statement for the 2016 Annual Meeting of Stockholders.

It em 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required under this item is incorporated by reference to the applicable information set forth in the Proxy Statement for the 2016 Annual Meeting of Stockholders.

It em 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

The information required under this item is incorporated by reference to the applicable information set forth in the Proxy Statement for the 2016 Annual Meeting of Stockholders.

Ite m 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required under this item is incorporated by reference to the applicable information set forth in the Proxy Statement for the 2016 Annual Meeting of Stockholders.

P ART IV

It em 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

We have filed the following documents as part of this report:

1. Consolidated Financial Statements



	Report of Independent Registered Public Accounting Firm
	Consolidated Financial Statements:
	Balance sheets
	Statements of operations and comprehensive income (loss)
	Statements of changes in shareholders' equity
	Statements of cash flows
	Notes to consolidated financial statements

2. Financial Statement Schedules

S chedules have been omitted because they are not required, not applicable, or the required information is otherwise included.

3. Exhibits

The Company hereby furnishes the exhibits listed on the attached exhibit index. Exhibits, which are incorporated herein by reference, may be inspected and copied at the public reference facilities maintained by the SEC at Room 1580, Washington, D.C. 20549. Copies of such material may be obtained by mail from the Public Reference Section of the SEC at 100 F Street, N.E., Washington, D.C. 20549, at prescribed rates. The SEC also maintains a website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC at http://www.sec.gov . The Company maintains a web site that contains reports, proxy and information statements and other information electronically at the address http://www.arthrt.com . Information on our website is not a part of this Annual Report on Form 10-K.

Ite m 1 6 . F ORM 10-K S UMMARY

Not applicable .

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SIG NATURES

Pursuant to the requirements of Section 13 or 15(d) 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/	Salvatore Emma, Jr.
		Salvatore Emma, Jr.,
		President , Chief Executive Officer
		March 22 , 201 7

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


Signature	Capacity	Date

/s/ Salvatore Emma, Jr.	President, Chief Executive Officer and Director	March 22, 2017
Salvatore Emma, Jr.	(principal executive officer)

/s/ Derek T. Welch	Chief Financial Officer, Treasurer and Secretary	March 22, 2017
Derek T. Welch	(principal financial and accounting officer)

/s/ Jason R. Chambers	Chairman of the Board	March 22, 2017
Jason R. Chambers

/s/ Marco F. Benedetti	Director	March 22, 2017
Marco F. Benedetti

/s/ E. P. Marinos	Director	March 22, 2017
E. P. Marinos

/s/ Robert A. Mello	Director	March 22, 2017
Robert A. Mello

/s/ Paul F. Walter, MD	Director	March 22, 2017
Paul F. Walter, MD

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EX HIBIT INDEX


Exhibit Number	Description of Exhibit	Page
3.0	Certificate of Incorporation (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).
3.1	Amended and Restated By-laws (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K as filed with the Commission on July 1, 2011).
3.2	Certificate of Amendment of Certificate of Incorporation (incorporated by reference to Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q as filed with the Commission on August 13, 2015).
3.3	Certificate of Amendment of Certificate of Incorporation (incorporated by reference to Exhibit 4.1 to the Company's Report on Form 8-K as filed with the Commission on March 14, 2017).
4.0	Form of Certificate evidencing shares of the Company's Common Stock (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).
4.6(1)	2001 Stock Option Plan (incorporated by reference to Exhibit 99.6 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).
4.10(1)	2010 Equity Incentive Plan (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-8 as filed with the Commission on May 6, 2010, Registration Statement No. 333-166600).
4.11	Form of Subordinated Note (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K as filed with the Commission on December 23, 2013).
4.12	Form of Subordination Agreement (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K as filed with the Commission on December 23, 2013)
4.13	Form of Warrant to Purchase Common Stock (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K as filed with the Commission on December 23, 2013).
4.14	Form of Amended and Restated Subordinated Promissory Note (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K as filed with the Commission on October 17, 2016).
4.15	Form of Amendment No. 1 to Warrant to Purchase Shares of Common Stock (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K as filed with the Commission on October 17, 2016).
10.51	Loan and Security Agreement between UniBank for Savings and Arrhythmia Research Technology, Inc. and Micron Products, Inc. dated March 29, 2013 (incorporated by reference to Exhibit 10.51 to the Company’s Quarterly Report on Form 10-Q as filed with the Commission on July 1, 2013).
10.58	Third Amendment to Loan and Security Agreement and Commercial Equipment Line of Credit Promissory Note dated June 26, 2014 (incorporated by reference to Exhibit 10.58 to the Company’s Quarterly Report on Form 10-Q as filed with the Commission on August 7, 2014).
10.59(1)	Employment Agreement between the Company and Salvatore Emma, Jr. dated as of January 20, 2015 (incorporated by reference to Exhibit 10.59 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014 as filed with the Commission on March 20, 2015).
10.60(1)	Employment Agreement between the Company and Derek T. Welch dated as of January 20, 2015 (incorporated by reference to Exhibit 10.60 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014 as filed with the Commission on March 20, 2015).
10.61	Fourth Amendment to Loan and Security Agreement and Commercial Equipment Line of Credit Promissory Note dated June 19, 2015 (incorporated by reference to Exhibit 10.61 to the Company’s Quarterly Report on Form 10-Q as filed with the Commission on August 13, 2015).
10.62**	Fifth Amendment to Loan and Security Agreement dated as of November 15, 2016	X-1
10.63**	Commercial Term Promissory Note dated November 15, 2016	X-2
10.64**	Commercial Equipment Line of Credit Promissory Note dated November 15, 2016	X-3
10.65(1)	Executive Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K as filed with the Commission on December 6, 2016).
10.66(1)**	Employment Agreement between the Company and Salvatore Emma, Jr. dated as of January 1, 2017.	X-4
10.67(1)**	Employment Agreement between the Company and Derek T. Welch dated as of January 1, 2017.	X-5
21	Subsidiaries (incorporated by reference to Exhibit 21.0 to the Company’s Annual Report on Form 10-K for fiscal year ended December 31, 2010 as filed with the Commission on March 23, 2011).

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23.1**	Consent of Wolf & Company, P.C.	X-6
31.1**	Certification of the CEO pursuant to Rule 13a-14(a) or Rule 15(d)-14(a)	X-7
31.2**	Certification of the CFO pursuant to Rule 13a-14(a) or Rule 15(d)-14(a)	X-8
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-9
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-10
101.INS†	XBRL Instance Document
101.SCH†	XBRL Taxonomy Extension Schema Document
101.CAL†	XBRL Taxonomy Extension Calculation Linkbase Document
101.PRE†	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF†	XBRL Taxonomy Extension Definition Linkbase Document
(1) Indicates a management contract or compensatory plan required to be filed as an exhibit.
**Filed herewith
† XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

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Arrhythmia Research Technology, Inc.

and Subsidiaries

Contents


Report of Independent Registered Public Accounting Firm		F- 2
Consolidated Financial Statements:
Consolidated balance sheets		F- 3
Consolidated statements of operation s and comprehensive loss		F- 4
Consolidated statements of changes in shareholders' equity		F- 5
Consolidated statements of cash flows		F- 6
Notes to consolidated financial statements		F- 8

F- 1

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Re port of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders

Arrhythmia Research Technology, Inc.

We have audited the accompanying consolidated balance sheets of Arrhythmia Research Technology, Inc. and its subsidiaries (collectively the “Company”) as of December 31, 2016 and 2015 and the related consolidated statements of operations and comprehensive loss , changes in shareholders’ equity and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of m aterial misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosu res in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Arrhythmia Research Technology, Inc. and its subsidiaries as of December 31, 2016 and 2015 , and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

/s/ WOLF & COMPANY, P.C.

Boston, Massachusetts

March 2 2 , 2017

F- 2

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Arr hythmia Research Technology, Inc. and Subsidiaries

Consolidated Balance Sheets



	December 31,		December 31,
	2016		2015
Assets
Current assets:
Cash and cash equivalents	$	380,381	$	272,291
Trade accounts receivable, net of allowance for doubtful accounts of $30,000 at December 31, 2016 and $60,000 at December 31, 2015		2,276,608		2,798,353
Inventories		3,060,085		2,118,712
Prepaid expenses and other current assets		614,362		593,716
Total current assets		6,331,436		5,783,072
Property, plant and equipment, net		6,440,911		6,626,069
Assets held for sale, net		688,750		665,000
Intangible assets, net		30,093		18,645
Other assets		156,231		243,319
Total assets	$	13,647,421	$	13,336,105
Liabilities and Shareholders’ Equity
Current liabilities:
Revolving line of credit, current portion	$	1,785,795	$	—
Equipment line of credit, current portion		102,500		35,718
Term notes payable, current portion, net of debt issuance costs		487,468		589,635
Subordinated promissory notes, net of discount		—		473,135
Accounts payable		1,744,261		1,553,388
Accrued expenses and other current liabilities		333,361		275,777
Customer deposits		122,290		93,407
Deferred revenue, current		224,988		272,837
Total current liabilities		4,800,663		3,293,897
Long-term liabilities:
Revolving line of credit, non-current portion		—		1,511,495
Equipment line of credit, non-current portion		—		301,132
Term notes payable, non-current portion, net of debt issuance costs		1,970,863		1,074,723
Subordinated promissory notes, net of discount		432,011		—
Deferred revenue, non-current		156,953		272,181
Total long-term liabilities		2,559,827		3,159,531
Total liabilities		7,360,490		6,453,428
Commitments and Contingencies
Shareholders’ equity :
Preferred stock, $0.001 par value; 2,000,000 shares authorized, none issued		—		—
Common stock, $0.01 par value; 10,000,000 shares authorized; 3,926,491 issued, 2,820,999 outstanding at December 31, 2016 and 3,926,491 issued, 2,801,639 outstanding at December 31, 2015		39,265		39,265
Additional paid-in-capital		11,457,320		11,381,536
Treasury stock at cost, 1,105,492 shares at December 31, 2016 and 1,124,852 shares at December 31, 2015		(3,028,564)		(3,069,496)
Accumulated deficit		(2,181,090)		(1,468,628)
Total shareholders’ equity		6,286,931		6,882,677
Total liabilities and shareholders’ equity	$	13,647,421	$	13,336,105

S ee accompanying notes to consolidated financial statements.

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Ar rhythmia Research Technology, Inc. and Subsidiaries

Consolidated Statements of Operations and Comprehensive Loss



	Years Ended
	December 31,
	2016		2015
Net sales	$	19,638,217	$	21,495,184
Cost of sales		16,739,526		18,332,346
Gross profit		2,898,691		3,162,838

Selling and marketing		1,153,044		1,086,586
General and administrative		2,151,244		2,355,484
Research and development		97,234		241,100
Total operating expenses		3,401,522		3,683,170

Net loss from continuing operations		(502,831)		(520,332)
Other expense:
Interest expense		(259,762)		(260,300)
Other income (expense), net		50,131		(10,212)
Total other expense, net		(209,631)		(270,512)
Loss from continuing operations before income taxes		(712,462)		(790,844)
Income tax provision		—		932
Loss from continuing operations		(712,462)		(791,776)
Discontinued Operations:
Income from discontinued operations, net of tax provision of $0 for the years ended December 31, 2016 and 2015		—		362,610
Net loss	$	(712,462)	$	(429,166)
Other comprehensive loss:
Reclassification of gains from foreign currency translation		—		(42,502)
Comprehensive loss	$	(712,462)	$	(471,668)
Earnings (loss) per share - basic
Continuing operations	$	(0.25)	$	(0.28)
Discontinued operations		—		0.13
Earnings (loss) per share - basic	$	(0.25)	$	(0.15)
Earnings (loss) per share - diluted
Continuing operations	$	(0.25)	$	(0.28)
Discontinued operations		—		0.13
Earnings (loss) per share - diluted	$	(0.25)	$	(0.15)
Weighted average common shares outstanding - basic		2,816,516		2,784,757
Weighted average common shares outstanding - diluted		2,816,516		2,784,757

See accompanying notes to consolidated financial statements.

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Arrh ythmia Research Technology, Inc. and Subsidiaries

Consolidated Statements of Changes in Shareholders' Equity



									Accumulated
				Additional					other
	Common Stock			paid-in		Treasury stock			comprehensive		Accumulated
	Shares	Amount		capital		Shares	Amount		income		deficit		Total
December 31, 2014	3,926,491	$	39,265	$	11,336,693	1,148,152	$	(3,133,883)	$	42,502	$	(1,039,462)	$	7,245,115
Accumulated comprehensive income from unrealized gains and losses in currency translation					(51)					(42,502)				(42,553)
Share-based compensation - options					29,178									29,178
Issuance of common stock from treasury					15,716	(23,300)		64,387						80,103
Net loss												(429,166)		(429,166)
December 31, 2015	3,926,491	$	39,265	$	11,381,536	1,124,852	$	(3,069,496)	$	—	$	(1,468,628)	$	6,882,677
Share-based compensation - options					47,256									47,256
Change in the incremental fair value of warrants					18,310									18,310
Issuance of common stock from treasury					10,218	(15,000)		40,932						51,150
Net loss												(712,462)		(712,462)
December 31, 2016	3,926,491	$	39,265	$	11,457,320	1,109,852	$	(3,028,564)	$	—	$	(2,181,090)	$	6,286,931

See accompanying notes to consolidated financial statements.

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Ar rhythmia Research Technology, Inc. and Subsidiaries

Consolidated Statements of Cash Flows



	Years Ended
	December 31,
	2016		2015
Cash flows from operating activities:
Net loss	$	(712,462)	$	(429,166)
Income from discontinued operations		—		(362,610)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Loss on sale of property, plant and equipment		—		13,320
Change in fair value of assets held for sale		(23,750)		—
Depreciation and amortization		1,541,006		1,464,588
Impairment of intangibles		—		118,318
Non-cash interest expense		27,186		27,683
Change in allowance for doubtful accounts		(30,000)		15,000
Share-based compensation expense		47,256		29,178
Changes in operating assets and liabilities:
Accounts receivable		551,745		723,394
Inventories		(941,373)		395,529
Prepaid expenses and other current assets		(25,228)		(94,547)
Other non-current assets		112,604		301,522
Accounts payable		190,873		(303,768)
Accrued expenses and other current liabilities		38,618		(90,426)
Other non-current liabilities		(115,228)		(338,249)
Net cash provided by (used in) operating activities		661,247		1,469,766
Cash flows from investing activities:
Purchases of property, plant and equipment		(1,354,091)		(1,182,541)
Proceeds from sale of property, plant and equipment		—		35,700
Cash paid for patents and trademarks		(13,205)		(6,176)
Net cash provided by (used in) investing activities		(1,367,296)		(1,153,017)
Cash flows from financing activities:
Proceeds from (payments on) revolving line of credit, net		274,300		(560,000)
Proceeds from equipment line of credit		647,351		752,635
Proceeds from term note payable		500,000		—
Payments on term notes payable		(587,799)		(526,594)
Payment of debt issuance costs		(20,863)		—
Payment on subordinated debt		(50,000)		—
Proceeds from stock option exercises		51,150		80,103
Net cash provided by (used in) financing activities		814,139		(253,856)
Net increase (decrease) in cash and cash equivalents		108,090		62,893
Cash and cash equivalents , beginning of period		272,291		209,398
Cash and cash equivalents , end of period	$	380,381	$	272,291

See accompanying notes to consolidated financial statements.

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Arrhythmia Research Technology, Inc. and Subsidiaries

Consolidated Statements of Cash Flows Supplemental Information



	Years Ended
	December 31,
Supplemental Cash Flow Information	2016		2015
Cash paid for interest	$	233,330	$	222,237

Non-cash activities:
Reclassified assets held for sale	$	—	$	665,000
Change in incremental value of warrants	$	18,310	$	—
Non-cash payoff of revolver as part of refinancing	$	500,000	$	—
Non-cash payoff of notes as part of refinancing	$	457,828	$	—
Equipment line of credit converted to term notes payable	$	1,524,115	$	415,785

See accompanying notes to consolidated financial statements.

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Arrhythmia Research Technology, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 201 6 and 201 5

1. De scription of Business

Arrhythmia Research Technology ® , Inc., (“ART”), through its wholly-owned subsidiary, Micron Products ® , Inc. ("Micron", and collectively with ART, the "Company") is a diversified contract manufacturing organization (“CMO”) that produces highly-engineered, innovative components requiring precision machining and thermoplastic injection molding. The Company also manufactures components, devices and equipment for military, law enforcement, automotive and consumer products applications. The Company's capabilities include 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 . T he Company’s machining operations produce quick-turn , high volume and patient-specific orthopedic implant component s and instruments. The Company also has custom thermoplastic injection molding capabilities as well as a full array of design, engineering, production services and management . The Company competes globally, with nearly forty percent of its revenue derived from exports.

The Company ’s shares have traded on the NYSE MKT since 1992 under t he symbol HRT. The Company has grown organically and through acquisitions. Today, the Company has diversified manufacturing capabilities with the capacity to participate in full product life-cycle activities from early stage development and engineering and prototyping to full scale manufacturing as well as packaging and product fulfillment services.

Operating matters and liquidity

The revolver under the Company's credit facility has a maturity date of June 2017 (see Note 5). At December 31, 2016 , the outstanding balance on the revolver was $1,785,795 . The Company believes that cash flows from its operations, together with its existing working capital , increased booked orders , the renewal of the revolver and other resources, will be sufficient to fund operations at current levels and repay debt obligations over the next twelve months and beyond; however, there can be no assurance that the Company will be able to do so.

Assessment of going concern

In 2016, the Company adopted new accounting standard ASU No. 2014-15, “Presentation of Financial Statements - Going Concern (Subtopic 205-40), Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. The n ew accounting standard requires management to evaluate whether there are conditions that give rise to substantial doubt as to the Company ’ s ability to continue as a going concern within one year from the date of issuance of these financial statements. Substantial doubt exists when conditions and events, considered in the aggregate, indicate that it is probable that a company will be unable to meet its obligations as they become due within one year after the financial statement issuance date. Management evaluations include identifying relevant conditions and events that were known and reasonably knowable as of the date these financial statements have been issued .

The Company identified certain conditions and events which in the aggregate required management to perform a n assessment of the Company’s ability to continue as a going concern. These conditions in clud e the Company ’ s ability to renew the revolver which matures in June 2017, negative financial history and the Company’s limited liquidity to meet the working capital needs to support the Company ’ s operations .

Management’s assessment included an analysis of the Company’s financial forecasts. Management’s assessment also considered the Company’s history of meeting financial covenants and being able to renew and refinance its debt obligations. Based on t he anticipated renewal of the Company’s revolver, cash forecast s, expected fulfillment of booked orders from existing customers, new customer prospects, and the closing on the sale of certain real estate held for sale, the Company expects to continue to meet its financial covenants and its obligations for the next year.

2. Accounting Policies

Principles of consolidation

The consolidated financial statements (the "financial statements") include the accounts of ART, Micron and WirelessDx. WirelessDx is presented herein as discontinued operations. All intercompany balances and transactions have been eliminated in consolidation.

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Arrhythmia Research Technology, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 201 6 and 201 5

Use of estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 revenue and expenses during the reporting periods. Actual results could differ from those estimates.

Revenue r ecognition

Revenue is recorded when all criteria for revenue recognition have been satisfied . R evenue is recognized in the period when persuasive evidence of an arrangement with a customer exists, the products are shipped and title has transferred or when exclusive control has been transferred to the customer , the price is fixed or determinable and collection is probable. The Company has entered into supply agreements with certain foreign customers where revenue is not recognized when the product is shipped but instead is recognized when the customer consumes the product.

The Company enters into arrangements containing multiple elements which may include a combination of the sale of molds, tooling, engineering and validation services ("tooling") and production units. The Company has determined that certain engineering and tooling arrangements, and the related production units, represent one unit of accounting , based on an assessment of the respective standalone value. When the Company determines that an arrangement represents one unit of accounting, the revenue is deferred over the estimated product life-cycle, based upon historical knowledge of the customer, which is generally one to three years. The Company carries the sales and tooling costs, associated with the related arrangement, as deferred revenue and other current and non-current assets, respectively, on the Company's balance sheet. As the deferred revenue is amortized to sales over the product lifecycle , the associated prepaid tooling costs are amortized to cost of sales.

The Company cannot effectively predict short-term or long-term production volume in a consistent and meaningful manner , due to the nature of these molds and associated products. Therefore, the Company is unable to account for the transactions under the Units of Production method and management has determined the most appropriate amortization method to be the Straight-Line method.

The Company may from time to time, at the customer's request, enter into a bill and hold arrangement. The Company evaluates the nature of the arrangement including, but not limited to (i) the customer's business purpose, (ii) the transfer of risk of ownership to the customer and (iii) the segregation of inventory, along with other elements in accordance with relevant accounting guidance to determine the appropriate method of revenue recognition for each arrangement.

Revenue for software license sales is recognized when licenses are sold as the revenue cycle is completed with no warranty, returns or technical support to customers. Total revenue from software sales was immaterial in relation to consolidated revenues.

Fair value of financial instruments

The carrying amount reported in the balance sheets for cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their fair value due to the immediate or short-term nature of such instruments. The carrying value of debt approximates fair value since it provides for market terms and interest rates.

Concentration of credit risk

Financial instruments which potentially expose the Company to concentrations of credit risk consist primarily of accounts receivable and cash and cash equivalents. It is the Company’s policy to place its cash in high quality financial institutions. The Company does not believe significant credit risk exists above federally insured limits with respect to these institutions.

Accounts receivable are customer obligations due under normal trade terms. A large portion of the Company's products are sold to large diversified medical, military and law enforcement product manufacturers. The Company does not generally require collateral for its sales; however, the Company believes that its terms of sale provide adequate protection against credit risk. While the Company has a strong record of collecting on its receivables, the Company maintains Accounts Receivables insurance in order to mitigate concentration of credit risk where our top five customers in revenue constituted 46% of the Accounts Receivables at December 31, 2016 as compared to 51% at December 31, 2015.

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Arrhythmia Research Technology, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 201 6 and 201 5

constituting 16% and 13% , respectively, of total 2015 net sales. Accounts receivable from the two customers at December 31, 2015 was 9% for each of the total accounts receivable balance at year end.

Cash and cash equivalents

Cash and cash equivalents consist of cash on hand and on deposit in high quality financial institutions with maturities of three months or less at the time of purchase.

Accounts r eceivable and a llowance for d oubtful a ccounts

Accounts receivable represent amounts invoiced by the Company. Management maintains an allowance for doubtful accounts based on information obtained regarding individual accounts and historical experience. Amounts deemed uncollectible are written off against the allowance for doubtful accounts. Bad debts have not had a significant impact on the Company’s financial position, results of operations and cash flows.

The Company insures receivables for certain customers based upon several factors. Such factors include the customer’s payment term s, ordering patterns and volume requirements, the customer’s payment history, or general economic conditions of the region in which a customer is located.

Inventories

The Company values its inventory at the lower of average cost, first-in-first-out (FIFO) or net realizable value. The Company reviews its inventory for quantities in excess of production requirements, obsolescence and for compliance with internal quality specifications. A review of inventory on hand is made at least annually and obsolete inventory may be disposed of and/or recycled. 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. The Company also has supply agreements with certain foreign customers to hold inventory at the customer’s warehouses.

Property, plant and equipment

Property, plant and equipment are recorded at cost and include expenditures which substantially extend their useful lives. Depreciation on property, plant and equipment is calculated using the straight-line method over the estimated useful lives of the assets. Expenditures for maintenance and r epairs are charged to earnings as incurred. When equipment is retired or sold, the resulting gain or loss is reflected in earnings.

Assets held for sale

Property classified as held for sale is measured at the lower of its carrying value or fair value less cost to sell. Gains or losses are recognized for any subsequent changes to fair value less cost to sell; however, gains that may be recognized are limited by cumulative losses previously recognized. Property held for sale is not depreciated.

Property is classified as held for sale in the period in which management with the appropriate authority commits to a plan to sell the asset; the asset is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets; an active program to locate a buyer and other actions required to complete the plan of sale have been initiated; the sale of the property or asset within one year is probable and will qualify for accounting purposes as a sale; the asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and actions required to complete the plan of sale indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. Long-lived assets classified as held for sale are presented separately in the statement of financial position of the current period (see Note 4) .

Fair value hierarchy

The Company groups its assets and liabilities generally measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.

Level 1 – Valuation is based on quoted prices in active markets for identical assets or liabilities. Valuations are obtained from readily available pricing sources.

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Arrhythmia Research Technology, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 201 6 and 201 5

Level 2 – Valuation is based on observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using unobservable inputs to pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment. The Company recognizes transfers between levels at the end of the reporting period. There were no changes in levels in 2016.

At December 31, 2016 and 2015, assets held for sale is the only item in the financial statements reflected at fair value. Assets held for sale are considered level 3. The fair value of assets held for sale was determined using the sales price per the amended purchase and sale agreement, less the estimated cost to sell (see Note 4) .

Long-lived and intangible assets

The Company assesses the impairment of long-lived and intangible assets with finite lives annually or whenever events or changes in circumstances indicate that the carrying value may not be fully recoverable. Based upon the annual review, the Company recorded no impairment charges in 2016 and recorded $118,318 in impairment charges in 201 5 .

Intangible assets consist of the following:



	Estimated	December 31, 2016						December 31, 2015
	Useful Life			Accumulated						Accumulated
	(in years)	Gross		Amortization		Net		Gross		Amortization		Net
Patents and trademarks	10	$	26,290	$	9,738	$	16,552	$	26,290	$	7,981	$	18,309
Patents and trademarks pending	—		13,541		—		13,541		336		—		336
Total intangible assets		$	39,831	$	9,738	$	30,093	$	26,626	$	7,981	$	18,645

Amortization expense related to intangible assets, excluding the above noted 2015 impairment charge s , was $1,757 and $3,235 in 2016 and 2015 , respectively. Estimated future annual amortization expense for currently amortizing intangible assets is expected to approximate $1,757 .

Income taxes

The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using tax rates in effect for the year in which the differences are expected to reverse.

The Company follows the provisions of FASB ASC 740, “Accounting for Uncertainty in Income Taxes—An Interpretation of FASB No. 109.” FASB ASC 740 provides detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in the financial statements in accordance with SFAS No. 109. Tax positions must meet a “more-likely-than-not” recognition threshold at the effective date to be recognized upon the adoption of FASB ASC 740 and in subsequent periods. No interest and penalties related to uncertain tax positions were accrued at December 31, 201 6 . The Company ’s primary

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Arrhythmia Research Technology, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 201 6 and 201 5

operations are located in the US. Tax years ended December 31, 201 3 or later remain subject to examination by the IRS and state taxing authori ties.

Share-based compensation

Share-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the employee’s requisite service period (generally the vesting period of the share-based grant).

Comprehensive loss

Earnings per share data

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.

Research and development

Research and development expenses include costs directly attributable to conducting research and development programs primarily related to the development of a unique process to improve silver coating during the manufacturing processes, including the design and testing of specific process improvements for certain medical device components. Such costs include salaries, payroll taxes, employee benefit c osts, materials, supplies, depreciation on research equipment, and services provided by outside contractors. All costs associated with research and development programs are expensed as incurred.

Recently Issued Accounting Pronouncements

In the normal course of business, management evaluates all new accounting pronouncements issued by the Financial Accounting Standard Board (“FASB”), Securities and Exchange Commission (“SEC”), Emerging Issues Task Force (“EITF”), or other authoritative accounting bodies to determine the potential impact they may have on the Company’s Consolidated Financial Statements. Based upon this review, except as noted below, management does not expect any of the recently issued accounting pronouncements, which have not already been adopted, to have a material impact on the Company’s consolidated financial statements.

In August 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-15, “ Statement of Cash Flows (Topic 230) Classification of Certain Cash Receipts and Cash Payments” . This standard provides guidance for eight cash flow classification issues in current GAAP. The standard is effective for interim and annual reporting periods beginning after December 15, 2017. The Company is currently evaluating the impact that the standard will have on its consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, “Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting”. The standard is intended to simplify several areas of accounting for share-based compensation arrangements, including the income tax impact, classification on the statement of cash flows and forfeitures. The standard is intended to reduce the cost and complexity with maintaining or improving the usefulness of information provided to users of financial statements. The standard is effective for interim and annual reporting periods beginning after December 15, 2016 and early adoption is permitted. The Company is currently evaluating the impact that the standard will have on its consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842),” which requires companies to recognize all leases as assets and liabilities on the consolidated balance sheet. The standard retains a distinction between finance leases and operating leases, and the classification criteria for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing between capital leases and operating leases in the current accounting literature. The result of retaining a distinction between finance leases and operating leases is that under the lessee accounting model in Topic 842, the effect of leases in a consolidated statement of comprehensive income and a consolidated statement of cash flows is largely unchanged from previous GAAP. The amendments in this standard are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Earlier application is permitted. The Company is currently evaluating the impact that the adoption of this standard will have on its consolidated financial statements.

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Arrhythmia Research Technology, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 201 6 and 201 5

In November 2015, the FASB issued ASU No. 2015-17, "Balance Sheet Classification of Deferred Taxes" which requires the presentation of deferred tax assets and deferred tax liabilities, and any related valuation allowances, as noncurrent on the consolidated balance sheets. The standard is effective for interim and annual reporting periods beginning after December 15, 2016 and early adoption is permitted. The Company is currently evaluating the impact that the standard will have on its consolidated financial statements.

In July 2015, the FASB issued ASU No. 2015-11, “Simplifying the Measurement of Inventory,” which simplifies the subsequent measurement of inventory by requiring inventory to be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. This standard is effective for public business entities for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. The Company is currently assessing the impact of adopting this standard on its consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-03, "Simplifying the Presentation of Debt Issuance Costs". ASU 2015-03 requires that debt issuance costs be presented as a direct deduction from the carrying amount of the related debt liability, consistent with the presentation of debt discounts. Prior to the issuance of ASU 2015-03, debt issuance costs were required to be presented as deferred charge assets, separate from the related debt liability. ASU 2015-03 does not change the recognition and measurement requirements for debt issuance costs. The Company adopted ASU 2015-03 as of December 31, 2016, and applied its provisions retrospectively. The adoption of ASU 2015-03 did not have an impact on the Company’s financial results nor did it represent a material change to the consolidated balances sheets.

In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements - Going Concern (Subtopic 205-40), Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”, which requires management to assess a company’s ability to continue as a going concern and to provide related footnote disclosures in certain circumstances. The standard provides guidance on evaluating whether there are conditions or events that raise substantial doubt about an entity’s ability to continue as a going concern. Substantial doubt exists when conditions or events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued. The new standard is effective for the annual and interim periods ending after December 15, 2016. The Company adopted the standard in 2016 and management’s assessment has determined that certain disclosures required are included in these statements (see Note 1).

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”). The core principle behind ASU No. 2014-09 is that an entity should recognize revenue in an amount that reflects the consideration to which the entity expects to be entitled in exchange for delivering goods and services. This model involves a five-step process that includes identifying the contract with the customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations in the contract and recognizing revenue when the entity satisfies the performance obligations. This ASU allows two methods of adoption; a full retrospective approach where historical financial information is presented in accordance with the new standard, and a modified retrospective approach where this ASU is applied to the most current period presented in the financial statements. In August 2015, the FASB issued ASU No 2015-14 “Revenue from Contracts with Customers: Deferral of the Effective Date,” which deferred the effective date of ASU 2014-09 to annual reporting periods beginning after December 15, 2017, with earlier application permitted as of annual reporting periods beginning after December 15, 2016. The Company is currently assessing the financial impact of adopting ASU 2014-09 and the methods of adoption; however, given the scope of the new standard, the Company is currently unable to provide a reasonable estimate regarding the financial impact or which method of adoption will be elected.

Reclassification of prior period balances

Amounts in prior year financial statements are reclassified when necessary to conform to the current year presentation , most notably debt issuance costs in according with ASU 2015-03 as described more fully above .

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Arrhythmia Research Technology, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 201 6 and 201 5

3. Inventories

Inventories consist of the following:



	December 31,		December 31,
	2016		2015
Raw materials	$	1,027,474	$	775,427
Work-in-process		537,858		265,113
Finished goods		1,494,753		1,078,172
Total	$	3,060,085	$	2,118,712

The total cost of silver in our inventory as raw materials, as work-in-process or as a plated surface on finished goods had an estimated cost of $521,746 and $313,738 at December 31, 2016 and 2015 , respectively. The increase in inventory was due i n part to increased finished goods inventory for sensors as a result of c ertain supply agreements with foreign customers.

4. Property, Plant and Equipment, Net

Property, plant and equipment , net consist of the following:



	Asset Lives			December 31,		December 31,
	(in years)			2016		2015
Machinery and equipment	3	to	15	$	16,647,302	$	15,168,377
Building and improvements	5	to	25		3,986,715		3,978,387
Vehicles	3	to	5		90,713		90,713
Furniture, fixtures, computers and software	3	to	5		1,504,776		1,437,692
Construction in progress					402,099		682,069
Total property, plant and equipment					22,631,605		21,357,238
Less: accumulated depreciation					(16,190,694)		(14,731,169)
Property, plant and equipment, net				$	6,440,911	$	6,626,069

For the year ended December 31, 2016 , the Company recorded $1,539,249 of depreciation expense compared to $1,461,353 for the year ended December 31, 2015 . There are no commitments related to the completion of construction in process as of December 31, 2016 .

In December 2015, the Company entered into a Letter of Intent with a Buyer (collectively the “Parties”) to sell two unoccupied buildings, with a total of approximately 52,000 square feet, and land, at its Fitchburg, Massachusetts campus. Subsequently, i n January 2016, the Parties entered into a Purchase and Sale Agreement (“Agreement”) for th is real estate to close within twelve months from the date of the Agreement . As these buildings were under agreement to be sold at December 31, 2015 they were classified as Assets Held for Sale valued at $665,000 as of December 31, 2015. The carrying value approximated the fa ir value less the cost to sell.

I n December 2016 , the Parties entered into a First Amendment to the Purchase and Sale Agreement ( the “ First Amendment”). The First Amendment extended the time to close to January 1 3 , 2018. As consideration for extending the Agreement , the B uyer agreed to (i) release the $25,000 being held as a deposit to the Company; (ii) increase the purchase price by $25,000 ; (iii) pay the Company $4,000 per month as an extension fee beginning in January 2017 through January 2018 , or the culmination of the Agreement, and (iv) pay the Company $7,500 per month for a 150 day additional extension, to June 2018, only for the purpose of the B uyer securing historical tax credits until the termination or culmination of the Agreement . The $25,000 deposit released to the Company is recorded as Other Income for the year ended December 31, 2016.

In January 2017 , the Parties entered into a Second Amendment to the Purchase and Sale Agreement (the “Second Amendment”). The Second Amendment (i) permit s the Buyer to assign the Agreement to a third party ; (ii) extend s the term of the $4,000 per month extension fee from January 2018 to March 2018 and (iii) and amend s the term of the additional extension fee of $7,500 per month to April 2018 through Ju ly 2018.

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Table of Contents

Arrhythmia Research Technology, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 201 6 and 201 5

As a result of the increase in sale price and other considerations, the Company determined t he carrying value at December 31, 2016 to be $688,750 . The increase in the carrying value is recorded as Other Income for the year ended December 31, 2016 and did not exceed the amount of previously recorded losses in accordance with appropriate accounting guidance .

5. Debt

The following tables set forth the items which comprise debt for the Company:



	December 31,		December 31,
	2016		2015
Revolving line of credit	$	1,785,795	$	1,511,495
Equipment line of credit	$	102,500	$	336,850
Subordinated promissory notes, net of discount	$	432,011	$	473,135

Term notes payable:
Commercial term loan, net of debt issuance costs	$	2,398,870	$	668,246
Equipment term loans		—		879,898
Equipment notes		59,461		116,214
Total term notes payable	$	2,458,331	$	1,664,358

Total Debt	$	4,778,637	$	3,985,838

Bank Debt

The Company has a multi-year credit facility with a Massachusetts based bank . At December 31, 2016 this credit facility consisted of a revolving line of credit (the "revolver"), a commercial term loan and an equipment line of credit . The debt is secured by substantially all assets of the Company with the exception of real property.

At December 31, 2015 the credit facility included a revolver, a commercial term loan, two equipment term loans and an equipment line of credit. In June of 2016 the equipment line of credit converted to a term loan . In November 2016 these four borrowings , along with $500,000 from the revolver, were consolidated into a single commercial term loan as further described below.

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% ( 4.0 % at December 31, 2016 ). The revolver has a maturity date of June 201 7 . Amounts available to borrow under the revolver are $727,156 at December 31, 2016 . In November 2016 the Company refinanced and consolidated $500,000 from the revolver into a new term loan as further described below.

Commercial term loan

In November 2016 , th e Company refinanced its bank term debt, including the commercial term loan and three equipment term loans, along with $500,000 from the revolver, into a new $2,481,943 consolidated five yea r commercial term loan with a maturity date in November 2021. The interest rate on the loan is a fixed 4.65% per annum and the loan requires monthly payments of principal and interest of approximately $46,500 .

Equipment line of credit and equipment term loan s

In March 2013, the Company entered into an equipment line of credit that 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 in March 2 014 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 in March 2019 . In November 2016, the outstanding principal and accrued interest of $380,791 on the equipment term loan was refinanced and consolidated into a ne w term loan as described above.

In June 2014, the Company entered into an equipment line of credit that 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 in June 2015 and the then

F- 15

Table of Contents

Arrhythmia Research Technology, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 201 6 and 201 5

outstanding balance on the equipment line of credit of $415,785 was converted to an equipment term loan with a five -year term, maturing in June 2020 . In November 2016, the outstanding principal and accrued interest of $315,272 on the equipment term loan was refinanced and consolidated into a new term loan as described above.

In June 2015, the Company entered into a n equipment line of credit that allowed for advances of up to $1.0 million and included a one -year draw period during which payments were interest only. At December 31, 2015, the Company ha d drawn $336,850 on the equipment line of credit. The draw period ended in June 2016 and the then outstanding balance on the equipment line of credit of $881,701 was converted to an equipment term loan with a five-year term, maturing in June 2021. In November 2016, the outstanding principal and accrued interest of $832,420 on the equipment term loan was refinanced and consolidated into a new term loan as described above. In November 2016, the Company entered into a new equipment line of credit that allows for advances of up to $1.0 million under the Company's multi-year credit facility. At December 31, 201 6 , $102,500 has been drawn on the new equipment line of credit. The term of this equipment line of credit is six years, maturing in November 2022, 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.

Debt issuance costs

The amount of the commercial term loan presented in the table above is net of debt issuance costs of $45,858 and $45,929 at December 31, 2016 and 2015 respectively .

Bank covenants

The bank facility 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. The Company was in compliance with all bank covenants as of December 31, 2016 .

Other debt

Equipment notes

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 unsecured notes require d quarterly interest-only payments at a rate of 10% per annum for the first two years . I n December 2015, the interest rate increased to 12% per annum . The Company’s two largest beneficial owners of stock and a director participated in the private offering as follows: REF Securities, LLP, beneficial owner of approximately 13% of the Company’s common stock, invested $100,000 in the offering ; t he Chambers Medical Foundation (the “Foundation”), beneficial owner of approximately 10% of the Company’s common stock, invested $100,000 in the offering ; and Mr. E.P. Marinos, a director, invested $50,000 in the offering. The Company’s Chairman of the Board is a co-trustee o f the Foundation but has held no dispositive powers since his appointment as such.

In October 2016 , the Company and six of the seven investors in the private offering, aggregating $450,000 of the notes, including the three related parties holding $250,000 of the notes , agreed to extend the maturity dates of the notes to December 31, 2018 at a rate of 10% per annum. One investor did not extend the maturity date and that $50,000 note was paid at maturity in December 2016. The notes are subordinated to all indebtedness of the Company pursuant to its multi-year bank credit facility.

In connection with the subordinated promissory notes, the Company issued 100,000 warrants to purchase the Company's common stock , including 20,000 warrants to R EF Securities, LLP , 20,000 warrants to the Foundation and 10,000 warrants to Mr. Marin os . The warrants were exercisable through December 2016 at an exercise price of $3.51 per share. In 2014, 30,000 warrants were exercised , including 20,000 by the Foundation . No warrants were exercised in 2015 or 2016. In October 2016, in connection

F- 16

Table of Contents

Arrhythmia Research Technology, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 201 6 and 201 5

with the extension of the maturity dates of the subordinated promissory notes, the expiration date of the remaining 70,000 warrants was extended to December 31, 2018. The exercise price remained unchanged at $3.51 per share. The 70,000 warrants remain unexercised at December 31, 2016.

The Company calculated the incremental fair value of extending the expiration date of the Notes and Warrants and determined that the amendment represented a debt modification in accordance with the guidance outlined in ASC -470, “Debt”. Using the Black-Scholes model, and the 10% test, the Company determined that the incremental fair value of the warrants to be $18,3 10 which was recorded as a reduction against the Notes and an increase in Additional Paid-in Capital.

Future maturities of debt for the years ending December 31 are as follows:



	2017		2018		2019		2020		2021		Thereafter	Total
Revolver	$	1,785,795	$	—	$	—	$	—	$	—	—	$	1,785,795
Subordinated promissory notes		—		450,000		—		—		—	—		450,000
Term debt and equipment notes		513,602		493,337		516,975		541,616		520,782	20,376		2,606,688
Total	$	2,299,397	$	943,337	$	516,975	$	541,616	$	520,782	20,376	$	4,842,483

6. Income Taxes

The income tax provision consists of the following:



	Years Ended
	December 31,
	2016		2015
Current:
Federal	$	—	$	—
State		—		932
Total current income taxes		—		932
Deferred:
Federal		—		—
State		—		—
Total deferred income taxes		—		—
Total income tax provision	$	—	$	932

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Table of Contents

Arrhythmia Research Technology, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 201 6 and 201 5

The components of deferred income taxes are as follows:



	Years Ended
	December 31,
	2016		2015
Deferred tax assets:

Net operating loss carryforwards	$	3,671,600	$	3,221,000
Federal and state tax credit carryforwards		493,800		608,000
Accruals and reserves		104,600		117,300
Stock based compensation		96,000		89,800
Patents and intangibles		51,100		68,100
Other long-term		500		45,500
Total long-term deferred tax assets		4,417,600		4,149,700

Deferred tax valuation allowance		(3,812,900)		(3,472,300)
Deferred tax assets, net of allowance		604,700		677,400

Property, plant and equipment		(544,000)		(612,800)
Prepaid expenses		(60,700)		(64,600)
Total deferred tax liabilities		(604,700)		(677,400)

Net deferred tax assets (liabilities)	$	—	$	—

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax-planning strategies in making this asse ssment. As of December 31, 2016 , the C ompany continues to maintain a valuation allowance against all of its deferred tax assets.

In 2016, the Company adopted ASU No. 2015-17, "Balance Sheet Classification of Deferred Taxes" . Under this new guidance the Company is required to present deferred tax assets and deferred tax liabilities, and any related valuation allowances, as noncurrent on the consolidated balance sheet s . There was no cumulative effect of the change and no impact to shareholders’ equity, results of operations or cash flows.

For the year ended December 31, 2016 , the Compan y has federal and state net operating loss carryforwards totaling $9,124,000 and $10,780,000 respecti vely, which begin to expire in 203 1 . The Company also had federal and state tax credit carryovers of $305,800 and $188,000 , respectively. The federal and state credits begin to expire in 202 7 and 201 6 , respectively.

The Company files a consolidated federal income tax return. The actual income tax provision differs from applying the Federal statutory income tax rate ( 34% ) to the pre-income tax loss from continuing operations as follows:



	Years Ended
	December 31,
	2016		2015
Tax benefit computed at statutory rate	$	(250,071)	$	(145,442)
Increases (reductions) due to:
Change in valuation allowance		340,600		230,300
State income taxes, net of federal benefit		(27,646)		615
Permanent differences		15,124		479
Tax credits (federal and state)		(32,577)		(108,194)
Differences on prior returns (federal and state)		(45,430)		23,174
Income tax (benefit) provision	$	—	$	932

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Table of Contents

Arrhythmia Research Technology, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 201 6 and 201 5

7. Employee Benefit Plans

The Company sponsors an Employee Savings and Investment Plan under Section 401(k) of the Internal Revenue Code covering all eligible employees of the Company. Employees can contribute up to 90% of their eligible compensation to the maximum allowable by the IRS. The Company’s matching contributions are at the discretion of the Company. The Company’s matching contributions in 2016 and 2015 we re $41,072 and $47,858 , respectiv ely.

8. Commitments and Contingencies

Legal matters

Operating lease agreements

In 2016 , the Company entered into two operating leases for office equipment. The Company’s leases require future minimum annual lease payments o f $24,036 for fiscal years 2017 and 2018 , respec tively.

9. Shareholders’ equity

Common stock

In 201 6 , 15,000 shares were issued out of treasury as a result of the exercise of stock options and no warrants were exercised. In 201 5 , 23,300 shares were issued out of treasury as a result of the exercise of stock options and no warrants were exercised .

No dividends were declared or paid in 201 6 or 201 5 .

Warrants

In connection with the subordinated promissory notes issued in December 2013 (see Note 5) , the Company issued warrants to purchase 100,000 shares of the Company's common stock. The warrants were exercisable through December 2016 at an exercise price of $3.51 per share. In 2014, 30,000 warrants were exercised. No warrants were exercised in 2015 or 2016. In October 2016, in connection with the extension of the maturity dates of the subordinated promissory notes, the expiration date of the remaining 70,000 warrants was extended to December 31, 2018. The Company determined that the amendment represented a debt modif ication and did not constitute an extinguishment for accounting purposes (see Note 5 ) . The exercise price remained unchanged at $3.51 per share. The 70,000 warrants remain unexercised at December 31, 2016.

Stock options and Share-Based Incentive Plan

In March 2010, the Company's Board of Directors adopted the Arrhythmia Research Technology, Inc. 2010 Equity Incentive Plan (the “ Plan”) . The Plan authorizes the issuance of an aggregate of 500,000 shares. The Plan provides the Company flexibility to award a mix of stock options, equity incentive grants, performance awards and other types of stock-based compensation to certain eligible employees, non-employee directors, or consultants and under which an aggregate of 500,000 shares have been reserved for such grants . The options granted have ten year contractual terms that vest annually between three to five-year term s .

At December 31, 2016, there were options to acquire an aggregate of 214,500 shares outstanding. At December 31, 2016, there were 273,000 shares available for future grants u nder the Plan , after giving effect to shares which became available for reissuance due to expired or forfeited options .

The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option pricing model that uses the assumptions noted in the following table. Expected volatilities are based on historical volatility of the Common Stock using historical periods consistent with the expected term of the options. The expected term of options granted under the Company’s equity incentive plan, all of which qualify as “plain vanilla,” is based on the average of the contractual term and the vesting period as permitted under SEC Staff Accounting Bulletin Nos. 107 and 110. The risk-free rate is based on the yield of a U.S. Treasury security with a term consistent with the option.

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Table of Contents

Arrhythmia Research Technology, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 201 6 and 201 5

During 2016 and 2015 there were 45,000 and 62,500 new option grants, respectively. The assumptions used to measure the fair value of option grants in 2016 and 2015 were as follows:



	Years Ended
	December 31,
	2016		2015
Expected option term		6.0 to 6.5		4.0 to 6.5
Expected volatility factor		23.7% to 24.4%		23.8% to 26.7%
Risk-free rate		.90% to .99%		.90% to 1.28%
Expected annual dividend yield		—%		—%

The following table sets forth the stock option transactions for the year ended December 31, 201 6 :



				Weighted
		Weighted		average
		Average		remaining	Aggregate
	Number of	Exercise		contractual	Intrinsic
	options	Price		term (in years)	Value
Outstanding at December 31, 2015	184,500	$	6.21	6.80	$	235,293
Granted	45,000		4.07
Exercised	(15,000)		3.41
Outstanding at December 31, 2016	214,500	$	5.96	7.12	$	17,340
Exercisable at December 31, 2016	109,495	$	6.90	5.47	$	8,880
Exercisable at December 31, 2015	83,500	$	6.60	4.73	$	106,565

The total intrinsic value of options exercised during 2016 and 2015 were $30,600 and $ 60,197 , respectively. For the years ended December 31, 2016 and 2015 , share-based compensation expense related to stock options and the non-cash issuance of common stock amounted to $47,256 and $29,178 , respectively, and is included in general and administrative expenses. As of December 31, 2016 and 2015 , there was $134,354 and $134,160 of unrecognized compensation costs, respectively, related to non-vested share-based compensation arrangements granted under the stock option plan. This cost is expected to be recognized over a weighted average period of 2.7 years. The weighted average grant date fair value of options issued in 2016 was $1.05 .

10. Earnings per share

As of December 31, 2016 , there were options to purchase 214,500 shares and warrants to purchase 70,000 shares of the Company's common stock outstanding, all of which were anti-dilutive. Therefore, none of these options or warrants were included in the calculation of loss per share in 2016 .

As of December 31, 2015 , there were options to purchase 184,500 shares and warrants to purchase 70,000 shares of the Company's common stock outstanding , all of which were anti-dilutive . Therefore, none of these options or warrants were included in the calculation of loss per share in 2015 .

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Table of Contents

Arrhythmia Research Technology, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 201 6 and 201 5

The following table shows the calculation of earnings (loss) per share for the years ended December 31, 2016 and 2015 :



	Years Ended
	December 31,
	2016		2015
Loss from continuing operations	$	(712,462)	$	(791,776)
Income from discontinued operations, net of tax		—		362,610
Net loss available to common shareholders	$	(712,462)	$	(429,166)
Basic EPS:
Weighted average common shares outstanding		2,816,516		2,784,757
Earnings (loss) per share - basic
Continuing operations	$	(0.25)	$	(0.28)
Discontinued operations		—		0.13
Consolidated basic EPS	$	(0.25)	$	(0.15)
Diluted EPS:
Weighted average common shares outstanding		2,816,516		2,784,757
Assumed conversion of net common shares issuable under stock option plans		—		—
Assumed conversion of net common shares issuable under warrants		—		—
Weighted average common and common equivalent shares outstanding, diluted		2,816,516		2,784,757
Earnings (loss) per share - diluted
Continuing operations	$	(0.25)	$	(0.28)
Discontinued operations		—		0.13
Consolidated diluted EPS	$	(0.25)	$	(0.15)

11. Industry and Geographic Segments

The Company’s Chief Operating and Decision Maker ("CODM") manages the operations and reviews the results of operations as a single reporting unit. While the Company operates its business as one segment, the Company has diversified manufacturing capabilities as evidenced by its product offerings across several industry categories support ing customers around the globe.

The following table sets forth, for the periods indicated, the consolidated revenue and percentages of revenue from continuing operations derived from the sales of the Company's products and services in certain industries.



	Revenue for the Years Ended December 31,
	2016		%	2015		%
Medical	$	14,543,315	74	$	16,770,788	78
Automotive/Industrial		3,787,312	19		2,839,926	13
Consumer Products		744,738	4		647,190	4
Military and Law Enforcement		383,254	2		943,603	4
Other		179,598	1		293,677	1
Total	$	19,638,217	100	$	21,495,184	100

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Table of Contents

Arrhythmia Research Technology, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 201 6 and 201 5

The following table sets forth, for the periods indicated, the consolidated revenue and percentages of revenue from continuing operations derived from the sales of all of the Company's products and services by geographic market.



	Revenue for the Years Ended December 31,
	2016		%	2015		%
United States	$	12,206,761	62	$	13,199,188	61
Asia		4,283,180	22		4,774,910	22
Europe		1,677,100	9		1,662,318	9
Canada		1,268,817	6		1,607,445	7
Other		202,359	1		251,323	1
Total	$	19,638,217	100	$	21,495,184	100

12. Discontinued Operations

The Company's subsidiary, RMDDxUSA Corp. and its Prince Edward Island subsidiary RMDDx Corporation (collectively "WirelessDx"), discontinued operations in 2012, filed for relief under Chapter 7 (Liquidation) of the United States Bankruptcy Code in 2014 and in March 2015, the Chapter 7 Order was formally discharged and the case was closed. In 2015 , net income of $362,610 was recorded from discontinued operations as a result of the related write-off of the remaining liabilities and cumulative translation adjustment.

13. Subsequent Events

Assets held for sale

In January 2017, the Company entered into a Second Amendment to the Purchase and Sale Agreement (the “Second Amendment”) related to the sale of certain real estate recorded as assets held for sale (see Note 4). The Second Amendment (i) permits the Buyer to assign the Agreement to a third party; (ii) extends the term of the $4,000 per month extension fee from January 2018 to March 2018 and (iii) and amends the term of the additional extension fee of $7,500 per month to April 2018 through July 2018.

Company name change

On March 9, 2017, Arrhythmia Research Technology, Inc. ( the “ Company ”) fi led a Certificate of Amendment to its Certificate of Incorporation, as amended, with the Delaware Secretary of State to amend Article Fi r st of the Company’s Certificate of Incorporation to change the name of the corporation to “Micron Solutions, Inc.”. The effective date of the amendment is March 24, 2017.

F- 22

Exhibit 10.62

F IFTH AMENDMENT

LOAN AND SECURITY AGREEMENT

This Fif th Amendment to Loan and Security Agreement (“ Fifth Amendment to Loan and Secu rity Agreement”) is dated as of November 15, 2016 and is made by and among UniBank for Savings (together with its successors and assigns, the “Bank” or “Lender”), Arrhythmia Research Technology, Inc. , a corporation duly organized and validly existing under the laws of the State of Delaware (sometimes referred to herein as “Arrhythmia”) and Micron Products Inc. , a corporation duly organized and validly existing under the laws of the Commonwealth of Massachusetts (sometimes referred to herein as “Micron”).

RECITALS

A. The Bank extended a line of credit dated March 29, 2013 to the Borrowers as evidenced by the $4,000,000.00 Commercial Revolving Line of Credit Promissory Note made by the Borrowers in favor of the Bank, as amended by First Amendment to Commercial Revolving Line of Credit Promissory Note dated October 3, 2013 (as amended to date and as may be further amended from time to time, the “Line Note”).

B. The Bank extended a term loan dated March 29, 2013 to the Borrowers as evidenced by the $1,500,000.00 Commercial Term Promissory Note made by the Borrowers in favor of the Bank (as amended to date and as may be further amended from time to time, the “ Term Note”).

C. The Bank extended an equipment line of credit dated March 29, 2013 to the Borrowers as evidenced by the $1,000,000.00 Commercial Equipment Line of Credit Promissory Note made by the Borrowers in favor of the Bank , as amended by First Amendment to Commercial Equipment Line of Credit Promissory Note dated April 10, 2014 (as amended to date and as may be further amended from time to time, the “Equipment Note”).

D. The Bank extended an equipment line of credit dated June 26, 2014 to the Borrowers as evidenced by the $1,000,000.00 Commercial Equipment Line of Credit Promissory Note made by the Borrowers in favor of the Bank (as amended to date and as may be further amended from time to time, the “2014 Equipment Note”).

E. The Bank extended an equipment line of credit dated June 19, 2015 to the Borrowers as evidenced by the $1,000,000.00 Commercial Equipment Line of Credit Promissory Note made by the Borrowers in favor of the Bank (as amended to date and as may be further amended from time to time, the “2015 Equipment Note”).

F. Except where the context requires otherwise, all capitalized terms used herein shall have the meanings set forth in the Loan and Security Agreement between the Bank and the Borrowers dated as of March 29, 2013 (as amended to date and as may be further amended from time to time, the “Loan Agreement”).

G. The Borrowers have requested that the Bank:

Client Files/21878/0162/02177698.DOCX , 2

(i)

Modify certain provi sions in the Loan Agreement;

(ii)

Provide additional financing accommodations to the Borrower in the form of a $2, 481,943.19 term loan to the Borrowers in order to c onsolidate the existing term debt of the Borrower under the Term Loan, the Equipment Line of Credit, the 2014 Equipment Line of Credit and the 2015 Line of Credit Note and term out a portion of the Line of Credi t in an amount not to exceed $500,000.00; and

(iii)

Provide additional financial accommodations to the Borrowers in the form of a $1,000,000.00 Equipment Line of Credit Loan to the Borrowers.

Now therefore, in order to induce the Bank to enter into this Fif th Amendment to Loan a nd Security Agreement, the F ifth Modification Documents (as hereafter defined) , to provide the additional financial accommodations to the Borrowers and for other valuable consideration , the receipt and sufficiency of which is acknowledged, the Borrowers jointly and severally make the following representations, warranties, covenants and agreements effective as of the date of this Fif th Amendment to Loan and Security Agreement:

1. Inducement Representations . The Borrower s hereby jointly and severally represent, warrant and covenant to the Bank that: (a) no Event of Default has occurred, and no event has occurred which with notice or lapse of time or both would constitute an Event of Default under any of the Loan Documents; (b) th e Loan Documents, including this Fif th Amendment to Loan and Security Agreement and the other Fif th Modification Documents are the valid, binding and enforceable obligations of the Borrower s , as applicable; (c) the Borrower s have no defenses, setoffs, claims or counterclaims against the Bank with respect to any of the Loans and to the extent any such defenses, setoffs, claims or counterclaims exist, the Borrower s hereby waive and release the same; (d) th e execution and delivery of this F ifth Amendment to Loan and Security Agreement and each of the other Fif th Modification Documents have been duly authorized b y all necessary corporate action ; (e) all of the representations and warranties of the Borrower s set forth in the Loan Agreement and the other Loan Documents, as amended hereby, are true, accurate and complete on and as of the date hereof; (f) the payment and performance of all Obligations of the Borrower s to the Bank (as defined in the Loan Agreement) are secured and shall continue to be secured in accordance with the terms of the Loan Agreement and all other Loan Documents which create or perfect security interests in favor of the Bank; and ( g ) all facts set forth in t he Recital Section of this Fif th Amendment to Loan and Security Agreement are true, accurate, and complete .

2. Amendment to Definitions in Section 1 of the Loan Agreement .

(a) Section 1 of the Loan Agreement is hereby amended by adding thereto the following new definitions and, for terms already defined therein, amending and restating such definitions as set forth bel ow:

- 2 -

Client Files/21878/0162/02177698.DOCX , 2

2016 Equipment Line of Credit means the Borrowers’ Equipment Line of Credit Loan with the Bank referred to in Section 2 hereof, the indebtedness o f which is evidenced by the 2016 Equipment Note.

201 6 Equipment Note means the Commercial Equipment Line of Credit Promissory Note dated November 15 , 2016 made by the Borrowers in favor of the Lender in the original face amount of $1,000,000.00 evid encing indebtedness for the 2016 Equipment Line of Credit, as the same may be amended, modified, restated or replaced from time to time.

2016 Term Loan means the Borrowers’ term loan with the Bank referred to in Section 2 hereof, the indebtedness of which is evidenced by the 2016 Term Note.

2016 Term Note means the Commercial Term Promissory Note dated November 15, 2016 made by the Borrowers in favor of the Lender in the original principal amount of $2, 481,943.19 evidencing indebtedness for the 2016 Term Note, as the same may be amended, modified, restated or replaced from time to time.

Agreement or Loan Agreement means the Loan and Security Agreement, as amended by the First Amendment to Loan and Security Agreement dated October 3, 2013 , as further amended by the Second Amendment to Loan and Security Agreement dated April 10, 2014, as further amended by Third Amendment to Loan and Security Agreement dated June 26 , 2014 , as further amended by Fourth Amendment to Loan and Security Agreement dated June 19 , 2015, as further amended by Fifth Amendment to Loan and Security Agreement dated November 15 , 2016, as the same may be further amended from time to time. Any and all reference s to the Agreement or Loan Agreement shall include th e First Amendment to Loan and Security Agreement , the Second Amendment to Loan and Security Agreement , the Third Amendment to Loan and Security Agreement , the Fourth Amendment to Loan and Security Agreement and the Fifth Amendment to Loan and Security Agreement .

Fif th Amendment to Loan and Security Agreement means this Fif th Amendment to Loan and Security Agreement, which amends the Loan and Security Agreement between the Bank and the Borrowers dated as of March 29, 2013.

Fif th Modification Documents mean the following:

(i)

the F if th Amendment to the Loan and Security Agreement;

(ii)

the 2016 Term Note ;

(iii)

the 2015 Equipment Note; and

(iv)

all other documents executed by the Borrowers listed on the Closing Agenda attached hereto as Schedule I .

Loan Documents - the definition thereof shall additionally include this F ifth Amendment to Loan and Security Agreement and the F ifth Modification Documents.

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Loans mean:

(i)

the Line of Credit evidenced by the Line Note;

(ii)

the Term Loan evidenced by the Term Note;

(iii)

the Equipment Line of Credit evidenced by the Equipment Note;

(iv)

the 2014 Equipment Line of Credit evidenced by the 2014 Equipment Note ;

(v)

the 2015 Equipment Line of Credit evidenced by the 2015 Equipment Note;

(vi)

the 2016 Term Loan evidenced by the 2016 Term Note;

(vii)

the 2016 Equipment Line of Credit evidenced by the 2016 Equi p ment Note; and

(viii)

any other loans made by the Bank to Arrhythmia or Micron or both at any time.

(b) All other existing definitions in the Loan Agreement are hereby ratified and confirmed as amended to date.

3. Amendment to Section 2.1 of the Loan Agreement . Existing Section 2.1 is hereby deleted and the following is hereby inserted in its stead:

4. New Section s 2.3 C and 2.3D . The following new Section s 2.3 C and 2.3D are inserted immediately following the end of Section 2. 3B and immediately preceding Section 2.4:

“ 2.3C 201 6 Equipment Line of Credit .

(a) Pursuant to this Agreement and the terms and conditions of the 201 6 Equipment Note and upon satisfaction of the conditions precedent in Section 5 hereof, the Borrowers may borrow and repay (b ut not reborrow) under the 2016 Equipment Line of Credit; provided , however, that (i) the aggregate amount of all advances and borrowings at any one time outstanding thereunder shall not exceed the face amount of the 201 6 Equipment Note minus the amount of all Open Credits (such maximum permitted amount being referred to as the “201 6 Equipment Maximum Availability”); (ii) any privilege of the Borrowers to request adva nces or to borrow under the 2016 Equipment Line of Credit shall termin ate on the earlier of: (A) November 15 , 2017 or (B) the date upon which the amount of all advances under the 2016 Equipment Line of Credit are equa l to the face amount of the 2016 Equipment Note (such date as it may be extended in writing from time to time, in the Bank’s sole discretion, being referred to herein

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as the “ 2016 Equipment Conversion Date”) or, at the Bank’s option, on the earlier occurrence of a Default or an Event of Default.

(b) All advances under the 2016 Equipment Line of Credi t shall be evidenced by the 2016 Equipment Line Note, shall bear interest thereunder and all principal, interest and other amounts due thereunder shall be due and payable in full on the Matur ity Date (as defined in the 2016 Equipment Note).

(c) Any advance under the 201 6 Equipment Line of Credit shall not exceed eighty percent (80%) of the invoice amount of the equipment being purchas ed with the proceeds of the 2016 Equipment Line of Credit.

(d) Borrowers shall not request advances under the 2016 Equipment Line of C redit which would cause the 2016 Equipment Maximum Availability to be exceeded if the advance were made.

(e) The making of any advances by the Bank to the Borrowers under the 201 6 Equipment Line of Credit in excess of the 2016 Equipment Maximum Availability is for the Borrowers’ benefit and does not in any way effect the unconditional obligation of the Borrowers to repay such adva nces under the terms of the 2016 Equipment Line Note and the other applicable Loan Documents. Without limiting any other rights available to the Bank under the Loan Documents, the Borrowers agree to pay to the Bank upon DEMAND (whether or not an Event of Default exists) the principal balance of the 2015 Equipment Line of Credit o utstanding in excess of the 2016 Equipment Maximum Availability together with all accrued and unpaid interest owing on said excess a mounts.

2.3D. 2016 Term Loan .

(a) Pursuant to this Agreement and the terms and conditions of the 2016 Term Note and upon satisfaction of the conditions precedent set forth in Section 5 hereof, the Bank shall make the 2016 Term Loan in the principal amount of $2, 481,943.19 to the Borrower s , said 2016 Term Loan to be evidenced by and repaid in accordance with the 2016 Term Note.

(b) Amounts advanced under the 2016 Term Loan shall be evidenced by the 2016 Term Note, shall bear interest as called for therein and shall be repaid in accordance with the provisions of the 2016 Term Note. ”

5. Amendment to Section 5.1 of the Loan Agreement . Existing Section 5.1 of the Loan Agreement is hereby deleted and the following is inserted in its stead:

“5.1 Initial Advances . The initial advance under the Line of Credit, the single advance under the Term Loan, the initial advance under the Equipment Line of Credit, the initial advance under the 2014 Equipment Line of Credit , the initial advance under the 2015 Equipment Line of Credit , the initial advance under the 2016 Equipment Line of

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Credit and the single advance under the 2016 Term Note shall be subject to the following conditions precedent (unless waived by the Bank in its sole discretion):

(a) Approval of Bank Counsel . All legal matters incident to the transactions hereby contemplated shall be satisfactory to counsel for the Bank.

(b) Proof of Action . The Bank shall have received such documents evidencing each Borrower’s power to execute and deliver this Agreement and the other Loan Documents and the Bank shall have received evidence of compliance with all conditions set forth in the Bank’s Commitment Letter to the Borrowers dated March 12, 2013 in a timely fashion, all satisfactory to the Bank and its counsel.

(c) The Note and Loan Documents . The Borrowers shall have delivered to the Bank the Notes, this Agreement, the other Loan Documents and such other documents as the Bank may request including without limitation all documents necessary to confirm, secure and perfect the Bank’s security interest in the Collateral in form and substance satisfactory to the Bank (the “Security Documents”) including without limitation the Landlord’s Consents and Waivers, the Financing Statements of the Borrowers, the Patent Security Agreements and Trademark Security Agreements.

(d) Opinion of Counsel . The Bank shall have received from counsel for the each of the Borrowers a written opinion, satisfactory in form and substance to the Bank and its counsel, including without limitation due authority and enforceability opinions for each Borrower.

(e) No Event of Default . No Event of Default has occurred, and no Default shall have occurred, the Maximum Availability under the Line of Credit and the Equipment Maximum Availability under the Equipment Line of Credit, as applicable, shall not be exceeded at the time of the advance request or the making of the advance.

(f) No Material Adverse Change . There shall have been no material adverse change in the assets, liabilities, financial condition or business of the Borrowers since the date of any financial statements delivered to the Bank before or after the date of this Agreement.

(g) Collateral Priority . The Bank shall have received evidence satisfactory to it that all Loan Documents perfecting the Bank’s security interest in Collateral have been duly recorded and filed and all other action necessary to perfect the Bank’s liens in the Collateral have been taken such that the Bank’s liens shall constitute first priority perfected liens in all Collateral, subject to no other liens or encumbrances unacceptable to the Bank, all to the Bank’s complete satisfaction.

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(h) Evidence of Insurance . At or prior to Closing, the Borrowers shall deliver to the Bank an insurance binder or binders evidencing insurance coverage(s) as required in Section 6.3 hereof.

(i) Organizational Documents . The Bank shall have received from each Borrower and satisfactorily reviewed and approved certified copies of the organizational documents for each Borrower and all amendments thereto, together with the resolutions of the appropriate parties authorizing the execution and delivery of the Loan Documents, said organizational documents to be in form and substance satisfactory to the Bank and its counsel.

(j) Operating Accounts. Prior to Closing, the Borrowers shall establish its operating accounts with the Bank.

(k) Certificates . The Bank shall have received from the Borrowers and satisfactorily reviewed and approved Certificates of Legal Existence and Certificates of Good Standing issued by the Secretary of State for each jurisdiction in which each Borrower is registered to conduct its business, Certificates of Tax Good Standing issued by the Delaware Division of Revenue and the Massachusetts Department of Revenue and an accountant’s letter of tax good standing with respect to filing and payment of any and all taxes for the Borrowers.

(l) 2012 Financial Statements . The Bank shall have received and satisfactorily reviewed the 2012 financial statements of the Borrowers, said financial statements to be in form, scope and substance satisfactory to the Bank in its sole and absolute discretion.

(m) Other Conditions . There shall be compliance with all other conditions and provisions contained in this Agreement and the other Loan Documents as applicable pertaining to advances.”

6. Amendment to Section 5.2 of the Loan Agreement . Existing Section 5.2 of the Loan Agreement is hereby deleted and the following is inserted in its stead:

“5.2 Subsequent Advances . Every subsequent advance under the Line of Credit, the Equipment Line of Credit, the 2014 Equipment Line of Credit , the 2015 Equipment Line of Credit and the 201 6 Equipment Line of Credit will be made subject to the continued satisfaction of the conditions set forth in Sections 5.1 (a) through (m) inclusive above through the date of the applicable advance and to the following additional conditions precedent that:

(a) Representations and Warranties . The representations and warranties contained in Section 4 hereof and in each other Loan Document shall be true and correct. Any request for a borrowing shall be deemed a certification by each Borrower as to the truth and accuracy of the representations and

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warranties contained in Section 4 hereof and in each other Loan Document as of the date of such request.

(b) Termination Date; Conversion Date . As applicable, the Termination Date (as defined in the Line Note) of the Line of Credit has not been reached, the Conversion Date (as defined in the Equipment Note) of the Equipment Line of Credit has not been reached, the 2014 Equipment Conversion Date (as defined in the 2014 Equipment Note) has not been reached , the 2015 Equipment Conversion Date (as defined in the 2015 Equip ment Note) has not been reached and the 2016 Equipment Conversion Date (as defined in the 2016 Equipment Note) has not been reached. ”

7. Amendment to Section H of Schedule A to the Loan Agreement. Existing Section H of Schedule A to the Loan Agreement is hereby deleted and the following is inserted in its stead:

“H. Use of Loan Proceeds .

1. Proceeds of the Line of Credit are to be used to payoff and terminate the existing Line of Credit with Citizens Bank and other obligations to Citizens Bank, including but not limited to the letter of credit issued for the benefit of the Bank of Nova Scotia and to pay costs and expenses and costs associated with the Line of Credit, Term Loan and Equipment Loan with UniBank for Savings (including without limitation UniBank for Saving’s legal costs and expenses) and for working capital including without limitation those purposes and payees set forth in the Authorization to Disburse associated with the Line of Credit dated March 29, 2013 this day.

2. Proceeds of the Term Loan are to be used to pay off existing debt owing under existing equipment leases, to finance accounts payable and costs associated with the closure of the Borrower’s Wireless DX division, and to pay costs and expenses and costs associated with the Line of Credit, Term Loan and Equipment Loan with UniBank for Savings (including without limitation UniBank for Saving’s legal costs and expenses) and for working capital including without limitation those purposes and payees set forth in the Authorization to Disburse associated with the Term Loan dated March 29, 2013.

3. Proceeds of the Equipment Loan are to be used to purchase equipment and to pay costs and expenses and costs associated with the Line of Credit, Term Loan and Equipment Loan with UniBank for Savings (including without limitation UniBank for Saving’s legal costs and expenses) and for working capital including without limitation those purposes and payees set forth in the Authorization to Disburse associated with the Equipment Loan dated March 29, 2013.

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4. Proceeds of the 2014 Equipment Line of Credit are to be used to purchase new and used equipment and to pay expenses and costs associated with the 2014 Equipment Line of Credit with UniBank for Savings (including without limitation UniBank for Savings’ legal costs and expenses) all as more particularly set forth in the authorization to disburse dated June 26, 2014.”

5. Proceeds of the 2015 Equipment Line of Credit are to be used to purchase new and used equipment and to pay expenses and costs associated with the 2015 Equipment Line of Credit with UniBank for Savings (including without limitation UniBank for Savings’ legal costs and expenses) all as more particularly set forth in the authorization to disburse dated June 19, 2015.

6. Proceeds of the 2016 Equipment Line of Credit are to be used to purchase new and used equipment and to pay expenses and costs associated with the 2016 Equipment Line of Credit with UniBank for Savings (including without limitation UniBank for Savings’ legal costs and expenses) all as more particularly set forth in the authorization to disburse dated November 15 , 2016.

7. Proceeds of the 2016 Term Loan are to be used to consolidate existing term debt with UniBank for Savings and to term out a portion of the Line of Credit (in an amount not to exceed $500,000.00) and to pay expenses and costs associated with the 2016 Term Loan with UniBank for Savings (including without limitation UniBank for Savings’ legal costs and expenses) all as more particularly set forth in the authorization to disburse dated November 15 , 2016.

8. New Schedule I . The following new Schedule I attached hereto is added to the Loan Agreement following the end of Schedule H .

9. No Waiver . T he Borrower s hereby acknowledge that the Bank has made no waiver of any provision of the Loan Documents nor of any Default or Event of Default which may exist and that no such waiver shall be implied by virtue of this Fifth Amendment or otherwise.

10. Costs and Expenses . The Borrower s will pay to the Bank upon demand all costs and expenses (including attorney ’ s fees) reasonably incurred by the Lender in connection with the documentation and closing of the Fif th Modification Documents.

11. Conditions . The effectiveness of the F ifth Modification Documents shall be conditioned upon, at the Bank ’ s option: (a) the execution and delivery of this F ifth Amendment to Loan and Security Agreement and the other F if th Modification Documents by all of the parties thereto; and (b) the receipt by Bank of all other documents and certificates reasonably requested

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by Bank and its counsel including without limitation , the Bring D own Certificate for each Borrower .

12. Reaffirmation of Loan Documents . Except as expressly modified herein , all other terms and conditions of the Loan Documents are hereby ratified and confirmed and the Loan Documents, as modified hereby, are and continue to be in full force and effect. All references in the Loan Documents to any Loan Document shall mean that Loan Document, as amended to date and as further amended from time to time.

13. Reaffirmation of Cross-Collateralization and Cross-De fault . The Borrower s hereby acknowledge that the obligations of the Borrowers set forth in the Loan and Security Agreement and the other Loan Documents are intended to capture all obligations and debts of the Borrowers owing to the Bank. This includes any agreements, loan agreements, security agreements, mortgages, letters or credit, and any other existing or future loans. The Borrowers acknowledge that all obligations of the Borrowers owing to t he Bank are cross-collateralized and cross-defaulted with all obligations outstanding.

[This space intentionally left blank; signature page to follow.]

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IN WITNESS WHEREOF the parties have executed this instrument under seal as of the 15 th day of November, 201 6 .


		Borrower s :

		Arrhythmia Research Technology, Inc.
		By:	/s/ Salvatore Emma, Jr.
			Salvatore Emma, Jr., President and
			Chief Executive Officer
			Duly Authorized

		Micron Products Inc.
		By:	/s/ Salvatore Emma, Jr.
			Salvatore Emma, Jr., President and
			Chief Executive Officer
			Duly Authorized

		Bank:

		UniBank for Savings
		By:	/s/ Bernard P. Gagnon, V. P .
			Bernard P. Gagnon, Vice President

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SCHEDULE I

CLOSING DOCUMENT AGENDA

FIFTH MODIFICATION TO FINANCING ARRANGEMENTS

ARRHYTHMIA RESEARCH TECHNOLOGY, INC. AND

MICRON PRODUCTS INC.

MADE BY

UNIBANK FOR SAVINGS

CLOSING DATE: November 15, 2016


Lender:		Borrowers:
Bernard P. Gagnon, Vice President		Arrhythmia Research Technology, Inc.
UniBank for Savings		Micron Products Inc.
24 Gold Star Boulevard
Worcester, MA 01605		Guarantors:
Phone:	(508) 849-4253	Massachusetts Development Finance Agency
Fax:	(508) 793-2940
Email:	bernard.gagnon@unibank.com

Lender's Counsel:		Borrowers' Counsel:
Anthony J. Salvidio, II, Esquire		Paul J. D'Onfro, Esquire
Fletcher Tilton, PC ("FT")		Mirick O'Connell DeMaille & Lougee LLP ("MODL")
370 Main Street, 11 th Floor		100 Front Street
Worcester, MA 01608		Worcester, MA 01608
Phone:	(508) 459-8004	Phone:	(508) 929-1624
Fax:	(508) 459-8304	Fax:	(508) 983-6249
Email:	asalvidio@fletchertilton.com	Email:	pdonfro@mirickoconnell.com

Karen M. LaFond, Esquire
Phone:	(508) 459-8015
Fax:	(508) 459-8315
Email:	klafond@fletchertilton.com


DOCUMENTS				RESPONSIBLE PARTY

A.	Fifth Modification to Financing Arrangements

	1.	Fifth Amendment to Loan and Security Agreement		FT
	2.	Consent and Waiver (as to sale of 10 Main Street, Fitchburg, 15 Summer Street, Fitchburg, MA and 1 Summer Street, Fitchburg, MA)		FT
	3.	Copy of existing and continuing UCC-1 Financing Statements (All Asset)		FT
		a)	Arrhythmia Research Technology, Inc. (Delaware)
		b)	Micron Products Inc. (Massachusetts)

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4.	Copy of existing and continuing UCC-1 Financing Statements (Specific Equipment)		FT
	a)	Arrhythmia Research Technology, Inc. (Delaware)
	b)	Micron Products Inc. (Massachusetts)

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B.	New $1,000,000.00 Equipment Line of Credit

	5.	$1,000,000.00 Equipment Line of Credit Promissory Note		FT
	6.	Form of UCC-1 Specific Equipment Financing Statement [for specific equipment being purchased with $1,000,000.00 Equipment Line of Credit]:		FT [to come and to be
		a)	Arrhythmia Research Technology, Inc. (Delaware Secretary of State)	filed upon purchase
		b)	Micron Products Inc. (Massachusetts Secretary of the Commonwealth)	of each unit of specific equipment]
	7.	Evidence of Hazard and Liability Insurance coverage listing Lender as Loss Payee and Additional Insured, as applicable		MODL
		a)	Arrhythmia Research Technology, Inc.
		b)	Micron Products Inc.
	8.	Disbursement Authorization		FT

C.	New $2,481,943.19 Term Loan

	9.	$2,481,943.19 Commerical Term Promissory Note		FT
	10.	UCC-1 All Asset Financing Statements of Arrhythmia Research Technology, Inc. filed with:		FT
		a)	Delaware Secretary of State
		b)	Worcester North District Registry of Deeds
		c)	Any and all other applicable filing/ recording offices where specific equipment is possessed
	11.	UCC-1 All Assest Financing Statements of Micron Products, Inc. filed with:		FT
		a)	Massachusetts Secretary of the Commonwealth
		b)	Worcester North District Registry of Deeds
		c)	Any and all other applicable filing/ recording offices where specific equipment is possessed
	12.	Evidence of Hazard and Liability Insurance coverage listing Lender as Loss Payee and Additional Insured, as applicable		MODL
		a)	Arrhythmia Research Technology, Inc.
		b)	Micron Products Inc.
	13.	Payoff and Discharge Letters/Paydown Letters (including approx. $416,861.40 Term Loan, approx. $535,670.84 Term Loan, approx. $333,979.28 Term Loan and approx. $855,953.29 Term Loan)		Lender
	14.	Disbursement Authorization		FT

D.	Miscellaneous Documents

	15.	UCC, Tax Lien and Judgment Searches		FT
		a)	Arrhythmia Research Technology, Inc.
		b)	Micron Products Inc.
	16.	Certificates of Good Standing		MODL
		a)	Arrhythmia Research Technology, Inc.
		b)	Micron Products Inc.
	17.	Bring Down Certificates		FT
		a)	Arrhythmia Research Technology, Inc.
		b)	Micron Products Inc.

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	18.	Opinion of Counsel to Borrowers re: Authorization, Due Authority, Enforceability	MODL
	19.	Identification	Each signatory

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Exhibit 10.63

COMMERCIAL TERM PROMISSORY NOTE


$2, 481,943.19	Worcester, Massachusetts
	November 15 , 2016

FOR VALUE RECEIVED Arrhythmia Research Technology, Inc. , a corporation duly organized and validly existing under the laws of the State of Delaware having a principal place of business at 25 Sawyer Passway, Fitchburg, Massachusetts 01420 and Micron Products Inc. , a corporation duly organized and validly existing under the laws of the Commonwealth of Massachusetts having a principal place of business at 25 Sawyer Passway, Fitchburg, Massachusetts 01420 (each and collectively, the “Borrower”) jointly and severally promise to pay to the order of UniBank for Savings (with its successors, assigns and any future holder or holders of this Note being the “Lender”) at its offices at 49 Church Street, Whitinsville, Massachusetts 01588 or at such other place as the Lender may from time to time designate in writing, the principal sum of Two Million Four Hundred Eighty One Thousand Nine Hundred Forty Three and 19/100 Dollars ($2,481,943.19) together with interest on the unpaid principal balance thereof at a fixed per annum rate of interest equal to four and sixty five one hundredths of one percentage points (4.65 %) (the “Interest Rate”), unless the Default Rate is in effect, in which event the Interest Rate shall be the Default Rate all in lawful money of the United States and in immediately available funds in the manner set forth below.

Principal and interest shall be due and payable in sixty (60) consecutive monthly installments of which all but the last (the “Final Payment”) shall be in such amount as is necessary to amortize the outstanding principal balance of this Note with interest thereon at the rate applicable from time to time hereunder based upon an assumed direct reduction amortization schedule equal to five (5) years from the date hereof. Each such monthly installment of principal and interest shall be subject to adjustment by the Lender from time to time in order to insure that payments are sufficient to properly amortize the then outstanding principal balance of this Note with interest thereon based upon the applicable assumed amortization schedule and changes in the rate of interest applicable from time to time to the principal balance of this Note. The Lender may adjust any monthly installment upon written notice to the Borrower if a failure to so adjust would result in less than the total amount of all accrued interest due being paid on any Payment Date (as hereafter defined).

The first of said consecutive monthly payments of principal and interest shall be due and payable one month from the date hereof and the remainder of said monthly payments shall be due on the same day or last day, whichever shall first occur, of each succeeding month (each a “Payment Date”). The Final Payment shall be in an amount equal to the then outstanding principal balance of this Note plus all accrued and unpaid interest and all other amounts owing hereunder. The Final Payment, unless sooner paid, shall be due and payable in full five (5) years from the date of this Note (the “Maturity Date”), without notice or demand.

This Note has been executed and delivered subject to the following additional terms and conditions:

Client Files/21878/0162/02177702.DOC

1. Definitions. As used in this Note, the following terms shall have the following

definitions:

1.1 “Banking Day” means any day other than a Saturday or Sunday, or other day on which commercial banks in the Commonwealth of Massachusetts are authorized or required to close under the laws of the Commonwealth of Massachusetts.

1. 2 “Default” means the occurrence of any event, which with the giving of notice or the passage of time, or both would constitute an Event of Default.

1.3 “Event of Default” has the meaning given to it in Section 7 hereof and in the Loan Agreement and includes but is not limited to a failure by the Borrower to comply with any term or condition of this Note or the Loan Agreement or any other Loan Document.

1.4 “Governing State” means the Commonwealth of Massachusetts.

1.5 “Loan Agreement” means the Loan and Security Agreement between the Lender and the Borrower dated March 29, 2013, as the same may be amended from time to time.

1.6 “Loan Documents” mean any and all agreements, instruments, documents, security agreements, mortgages, financing statements, and supplements thereto and relating to the loan evidenced by this Note (the “Loan”), or entered into between the Borrower or any one of them in favor of, or with, the Lender, at any time, for any purpose, all as amended from time to time.

1. 7 “Obligations” mean all liabilities, indebtedness, obligations, advances, covenants and loans now or hereafter due or owing by or from any Borrower (including without limitation any obligation as a guarantor) to the Lender of whatever kind, description or nature, whether or not evidenced by any note or other instrument, whether or not for the payment of money, whether or not currently contemplated at the time of this Note, whether now existing, or hereafter arising or created, whether such obligations be direct or indirect, absolute or contingent, primary or secondary, secured or unsecured, or due or to become due, including, without limitation, all liabilities and obligations under the Notes and other Loan Documents, and all indemnity and reimbursement obligations of any Borrower, actual or contingent, in respect of letters of credit or banker’s acceptances issued by the Lender for the account of or guaranteed by any Borrower, all obligations of any partnership of joint venture as to which any Borrower is or may become liable and any so called SWAP contracts entered into by or given by any Borrower to the Lender, regardless of how they arise or by what agreement or instrument they may be evidenced or whether evidenced by any agreement or instrument, any and all obligations arising under any foreign exchange contracts, interest rate cap, floor or hedging agreements, or similar agreements, all obligations of any Borrower to the Lender arising out of or in connection with any Automated Clearing House (“ACH”) Agreements relating to the processing of ACH transactions, all obligations of any Borrower to the Lender to repay overdrafts whether or not such obligations are related to the transactions

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described in the Notes and other Loan Documents, and includes obligations to perform acts and refrain from taking action as well as obligations to pay money. The term “Obligations” shall also include without limitation all accrued interest and all costs and expenses, including attorney’s fees, costs and expenses relating to the appraisal and/or valuation of assets and all costs and expenses incurred or paid by the Lender in exercising, preserving, defending, collecting, administering, enforcing or protecting any of its rights under the Obligations or hereunder or with respect to the Collateral or in any litigation arising out of the transactions evidenced by the Obligations. The term “Obligations” shall be construed in its broadest and most comprehensive sense.

2. Accounts; Records . The Lender is authorized (but not required) to charge principal and interest and all other amounts due under this Note to any account of any Borrower with the Lender when and as it becomes due. All advances made by the Lender to the Borrower shall be evidenced by an appropriate notation on the books and records of the Lender, which records shall reflect each repayment on account of the principal thereof, and the amount of interest paid; and the Borrower authorizes the Lender to maintain such records or make such notations and agrees that the amount shown on the books and records of the Lender, as outstanding from time to time shall constitute the amount owing to the Lender pursuant to this Note, absent manifest error; provided, however, that the failure by the Lender to make any such notation with respect to any advance or payment shall not limit or otherwise affect the obligations of the Borrower hereunder.

3. Default Rate/360 Day Year . All computations of interest under this Note shall be made on the basis of a three hundred sixty (360) day year and the actual number of days elapsed. After the occurrence of any Event of Default, all outstanding principal and unpaid interest shall bear, until paid, interest at a rate per annum equal to four (4.00) percentage points greater than that which would otherwise be applicable (the “Default Rate”).

4. Late Charge . If a regularly scheduled payment is fifteen (15) days or more late, the Borrower will be charged five percent (5.00%) of the unpaid portion of the regularly scheduled payment or twenty five dollars ($25.00), whichever is greater. If the Lender demands payment of the Loan, and the Borrower does not pay the Loan within fifteen (15) days after the Lender’s demand, the Borrower will be charged either five percent (5.00%) of the unpaid principal plus accrued unpaid interest or twenty five dollars ($25.00), whichever is greater.

5. Expenses . The Borrower further promises to pay to the Lender, as incurred, and as an additional part of the unpaid principal balance, all costs, expenses and reasonable attorneys’ fees incurred (i) in the protection, modification, collection, defense, or enforcement of all or part of this Note or any guaranty hereof, or (ii) in the foreclosure or enforcement of any mortgage or security interest which may now or hereafter secure either the debt hereunder or any guaranty thereof, or (iii) with respect to any action taken to protect, defend, modify, or sustain the lien of any such mortgage or security agreement, or (iv) with respect to any litigation or controversy arising from or connected with this Note or any mortgage or security agreement or collateral which may now or hereafter secure this Note, or (v) with respect to any act to protect defend, modify, enforce, or release any of its rights or remedies with regard to, or otherwise effect collection of, any collateral which may now or in the future secure this Note or with regard to or against the Borrower or any endorser, guarantor, or surety of this Note.

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6. Application of Payments. All payments, including any prepayments, shall, at the option of the Lender, be applied first to interest on the unpaid principal of all advances due under this Note, then to the payment of all fees, costs, and expenses incurred by the Lender or owing to the Lender by the Borrower arising out of the loan transaction evidenced by this Note which have not been paid or reimbursed to the Lender, and then to the balance on account of the principal due under this Note.

Prepayments of principal (whether voluntary or involuntary) shall be applied to unpaid principal installments under this Note in inverse order of their maturity and shall not affect the obligation to pay regular installments due hereunder until the entire indebtedness is paid in full. Amounts repaid by the Borrower may not be reborrowed.

7. Default .

7.1. The happening of any of the following events or conditions shall constitute an “Event of Default” under this Note:

7.1.1. Failure to make any payment of principal or interest or any sum due under this Note or any other promissory note or instrument made by the Borrower or any one or more of them in favor of the Lender; or

7.1.2. Failure by any Borrower to observe or perform any covenant contained herein; or

7.1.3 The occurrence of an Event of Default (as defined in the Loan Agreement) in any other Loan Document including, without limitation, the Loan Agreement.

7.2. Upon and after an Event of Default, at the option of the Lender, the whole of the indebtedness evidenced by this Note, both principal and interest, and all other sums which may be or become due under this Note, shall, at the option of the holder of this Note, immediately become due and payable without presentment, demand, protest, notice of protest, or other notice of dishonor of any kind, all of which are hereby expressly waived by the Borrower.

8. Prepayment . In the event the Borrower shall make any payment of principal evidenced by this Note on a date prior to the date scheduled therefore (a “Prepayment” as a result of a refinance with another financial or lending institution or entity, Borrower shall pay to the Bank a fee (the “Prepayment Fee”) as hereinafter provided. The Borrower shall pay such Prepayment Fee upon DEMAND. The Prepayment Fee shall be as follows:

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Note Year of Prepayment	Prepayment Fee (% of the Prepayment Amount)
11 / 15 /16 through and including 11 / 15 /17	3%
11/16 /17 through and including 11 / 15 /18	2%
11 / 16 /18 thro ugh and including the Maturity Date	1%

Any prepayment of principal shall be accompanied by payment of all accrued interest to the date of such prepayment. Any prepayments shall be applied first to the payment of the Prepayment Fee, next to the payment of accrued interest to the date of the Prepayment and then to the unpaid principal installments of this Note in the inverse order of their maturity and shall not affect the obligation to pay the regular installments required hereunder, until the entire indebtedness has been paid.

9. Right of Set Off . Each Borrower hereby grants to the Lender a lien, security interest, and a right of setoff as security for all liabilities and obligations to the Lender, whether now existing or hereafter arising, upon and against all deposits, credits, collateral, and property, now or hereafter in the possession, custody, safekeeping, or control of the Lender or any entity under the control of the Lender, or in transit to any of them. At any time, without demand or notice, the Lender may set off the same or any part thereof and apply the same to any liability or obligation of the Borrower even though unmatured and regardless of the adequacy of any other collateral securing the Loan. ANY AND ALL RIGHTS TO REQUIRE THE LENDER TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS, OR OTHER PROPERTY OF EACH BORROWER, ARE HEREBY KNOWINGLY, VOLUNTARILY, AND IRREVOCABLY WAIVED. The Lender shall not be required to marshal any present or future security for, or guarantees of, the Obligations or to resort to any such security or guarantee in any particular order and each Borrower waives, to the fullest extent that it lawfully can, (a) any right they might have to require the Lender to pursue any particular remedy before proceeding against them and (b) any right to the benefit of, or to direct the application of the proceeds of any collateral until the Obligations are paid in full.

10. Maximum Permissible Interest Rate. The Borrower shall not be obligated to pay and the Lender shall not collect interest at a rate higher than the maximum permitted by law or the maximum that will not subject the Lender to any civil or criminal penalties. If, because of the acceleration of maturity the payment of interest in advance or any other reason, the Borrower is required, under the provisions of any Loan Document or otherwise, to pay interest at a rate in excess of such maximum rate, the rate of interest under such provisions shall immediately and automatically be reduced to such maximum rate and any payment made in excess of such maximum rate, together with interest thereon at the rate provided herein from the date of such payment, shall be immediately and automatically applied to the reduction of the unpaid principal balance of this Note as of the date on which such excess payment was made. If the amount to be so applied to reduction of the unpaid principal balance exceeds the unpaid principal balance, the amount of such excess shall be refunded by the Lender to the Borrower.

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11. Loan Agreement . This Note has been executed and delivered in accordance with the Loan Agreement which sets forth further terms and conditions upon which the entire unpaid principal hereof an all interest hereon may become due and payable prior to the Maturity Date, and generally as to further rights of the Lender and duties of the Borrower with respect hereto. Capitalized terms not defined herein, which are defined terms in the Loan Agreement, shall have the meanings set forth therein. No reference to the Loan Agreement or other Loan Documents or to any provision thereof shall affect or impair the absolute and unconditional obligation of the Borrower to pay principal or interest or other amounts owing under this Note.

12. Pledge to the Federal Reserve . The Lender may at any time pledge all or any portion of its rights under the Loan Documents including any portion of this Note to any of the twelve (12) Federal Reserve Banks organized under Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341. No such pledge or enforcement thereof shall release the Lender from its obligations under any of the Loan Documents.

13. Right to Assign . The Lender shall have the unrestricted right at any time or from time to time, and without any Borrower’s consent, to sell, assign, endorse, or transfer all or any portion of its rights and obligations hereunder to one or more lenders or other entities (each an “Assignee”), and each Borrower agrees that it shall execute, or cause to be executed such documents including without limitation, amendments to this Note and to any other Loan Documents as the Lender shall deem necessary to effect the foregoing. In addition, at the request of the Lender or any such Assignee, the Borrower shall issue one or more new promissory notes, as applicable, to any such Assignee and, if the Lender has retained any of its rights and obligations hereunder following such assignment, to the Lender, which new promissory notes shall be issued in replacement of, but not in discharge of, the liability evidenced by this Note prior to such assignment and shall reflect the amount of the respective commitments and loans held by such Assignee and the Lender after giving effect to such assignment. Upon the execution and delivery of appropriate assignment documentation, amendments, and any other documentation required by the Lender in connection with such assignment, and the payment by such Assignee of the purchase price agreed to by the Lender and such Assignee, such Assignee shall be a party to this Note and shall have all of the rights and obligations of the Lender hereunder (and under any and all other guaranties, documents, instruments, and agreements executed in connection herewith) to the extent that such rights and obligations have been assigned by the Lender pursuant to the assignment documentation between the Lender and such Assignee, and the Lender shall be released from its obligation hereunder and thereunder to a corresponding extent.

14. Right to Sell Participation . The Lender shall have the unrestricted right at any time and from time to time, and without the consent of or notice to the Borrower, to grant to one or more institutions or other persons (each, a “Participant”) participating interests in the Lender’s obligation to lend hereunder and/or any or all of the loans held by the Lender hereunder. In the event of any such grant by the Lender of a participating interest to a Participant whether or not upon notice to the Borrower, the Lender shall remain responsible for the performance of its obligations hereunder and the Borrower shall continue to deal solely and directly with the Lender in connection with the Lender’s rights and obligations hereunder. The Lender may furnish any information concerning the Borrower in its possession from time to time to prospective assignees

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and Participants, provided that the Lender shall require any such prospective assignee or Participant to agree in writing to maintain the confidentiality of such information.

15. Replacement of Documents . Upon receipt of an affidavit of an officer of the Lender as to the loss, theft, destruction or mutilation of this Note or any other security document which is not of public record, and, in the case of any such loss, theft, destruction or mutilation, upon cancellation of such Note or other security document, the Borrower will issue, in lieu thereof, a replacement Note or other document in the same principal amount thereof and otherwise of like tenor and the Lender, to the fullest extent permitted by law, will indemnify and hold the Borrower harmless from and against any losses of the Borrower caused thereby.

16. COMMERCIAL TRANSACTION. EACH BORROWER ACKNOWLEDGES THAT THE ADVANCES EVIDENCED BY THIS NOTE ARE PART OF A COMMERCIAL TRANSACTION.

17. Joint and Several Obligations; Miscellaneous . This Note and all representations and covenants of the Borrower herein shall be the joint and several obligation of the Borrower and each provision of this Note shall apply to each and all jointly and severally and to the property and liabilities of each and all. This Note is the final, complete and exclusive statement of the terms governing this Note. No modification or amendment hereof shall be effective unless the same shall be in writing and signed by the Lender and the Borrower. If any provision of this Note shall to any extent be held invalid or unenforceable, then only such provision shall be deemed ineffective and the remainder of this Note shall not be affected. The provisions of this Note shall bind the heirs, executors, administrators, assigns and successors of each and every Borrower and shall inure to the benefit of Lender, its successors and assigns. This Note shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts.

18. Waivers, Consent to Jurisdiction . Each Borrower agrees that no delay or failure on the part of the Lender in exercising any power, privilege, remedy, option or right hereunder shall operate as a waiver thereof or of any other power, privilege, remedy or right; nor shall any single or partial exercise of any power, privilege, remedy, option or right hereunder preclude any other or future exercise thereof or the exercise of any other power, privilege, remedy, option or right. The rights and remedies expressed herein are cumulative, and may be enforced successively, alternately, or concurrently and are not exclusive of any rights or remedies which holder may or would otherwise have under the provisions of all applicable laws, and under the provisions of the Loan Documents.

Each Borrower hereby waives presentment, demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note. Each Borrower hereby assents to any extension or postponement of the time of payment or any other indulgence, to the addition or release of any party or person primarily or secondarily liable, and to the addition, release and/or substitution of all or any portion of any collateral now or hereafter securing this Note.

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Each Borrower waives any right it may have to require Lender to provide a bond or other security as a precondition to or in connection with any prejudgment remedy sought by Lender, and waives any objection to the issuance of such prejudgment remedy based on any offsets, claims, defenses or counterclaims to any action brought by the Lender.

EACH BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE OR ANY OTHER DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. tHIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR LENDER TO MAKE THE LOAN EVIDENCED BY THIs NOTE.

Each Borrower hereby agrees that the following courts: State Court - Any state or local court of the Commonwealth of Massachusetts; Federal Court - United States District Court for the District of the Commonwealth of Massachusetts; or at the option of Lender, any court in which Lender shall initiate legal or equitable proceedings and which has subject matter jurisdiction over the matter in controversy, shall have exclusive jurisdiction to hear and determine any claims or disputes between Borrower and Lender pertaining directly or indirectly to this Note or to any matter arising in connection with this Note. Each Borrower expressly submits and consents in advance to such jurisdiction in any action or proceeding commenced in such courts, hereby waiving personal service of the summons and complaint, or other process or papers issued therein, and agreeing that service of such summons and complaint, or other process or papers, may be made by registered or certified mail addressed to Borrower at the address set forth herein. Should Borrower fail to appear or answer any summons, complaint, process or papers so served within thirty (30) days after the mailing thereof, it shall be deemed in default and an order and/or judgment may be entered against it as demanded or prayed for in such summons, complaint, process or papers. The exclusive choice of forum set forth herein shall not be deemed to preclude the enforcement of any judgment obtained in such forum or the taking of any action under this Note to enforce the same in any appropriate jurisdiction.

19. Extension of Relevant Dates . In the event that any relevant date upon which a payment is due and payable under this Note or which affects any interest rate option of the Borrower shall fall on a date which is not a Banking Day, then any such relevant date may be extended by the Lender in accordance with the Modified Following Banking Day Convention and interest shall continue to accrue, and the relevant due dates shall also be extended, for the period of that extension at the interest rate or rates then in effect. For purposes hereof, the “Modified Following Banking Day Convention” shall mean the convention for adjusting any relevant date if it would otherwise fall on a day that is not a Banking Day. When used in conjunction with the term, “Modified Following Banking Day Convention”, and a date, such term shall mean that an adjustment will be made if that date would otherwise fall on a day that is not a Banking Day so that the date will be the first following day that is a Banking Day.

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Notwithstanding anything to the contrary hereinabove contained, if application of the Modified Following Banking Day Convention would cause any payment due under the terms of this Note to be due and payable in a calendar month which differs from the month in which the payment would otherwise have been due, then, at the Lender’s option, the Modified Following Banking Day Convention shall not apply and such payment shall be due and payable on the immediately preceding Banking Day.

20. Acknowledgment of Borrower . The Borrower acknowledges receipt of a copy of this Note, and attests that each advance is to be used for general commercial purposes and that no part of such proceeds will be used, in whole or in part, for the purpose of purchasing or carrying any “margin stock” as such term is defined in Regulations U and X of the Board of Governors of the Federal Reserve System.

21. Security . This Note and all other Obligations are secured by all assets of each Borrower whenever arising or created in accordance with the terms of the Loan Agreement and other documents which create or perfect security interests in assets or properties of any Borrower. This Note and all other Obligations are further secured by that certain specific equipment of the Borrower, including, but not limited to, that purchased with the proceeds of the Loan.

22. Additional Payments . If the Lender in its reasonable judgment determines that the effect of an applicable law or government regulation, guideline or order or the interpretation thereof by any governmental authority charged with the administration thereof (such as, for example, a change in official reserve requirements which the Lender is required to maintain in respect of loans or deposits or other funds procured for funding such loans) is to increase the cost to the Lender of making or continuing a Loan hereunder or to reduce the amount of any payment of principal or interest receivable by the Lender thereon, then the Borrower shall pay to the Lender on demand such additional amounts as the Lender may determine in its sole and absolute discretion, to be required to compensate the Lender for such additional costs or reduction. Any additional payment under this section will be computed from the effective date at which such additional costs have to be borne by the Lender. A certificate as to any additional amounts payable pursuant to this section setting forth the basis and method of determining such amounts shall be conclusive, absent manifest error, as to the determination by the Lender set forth therein if made reasonably and in good faith. The Borrower shall pay any and all amounts so certified to it by the Lender within ten (10) days of receipt of such certificate.

[This space intentionally left blank; signature page to follow.]

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This Note has been executed as a sealed instrument on the date first above written.


		A rrhythmia Research Technology, Inc.
		By:	/s/ Salvatore Emma, Jr.
			Salvatore Emma, Jr., President and
			Chief Executive Officer
			Duly Authorized

		Micron Products Inc.
		By:	/s/ Salvatore Emma, Jr.
			Salvatore Emma, Jr., President and
			Chief Executive Officer
			Duly Authorized

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Exhibit 10.64

COMMERCIAL EQUIPMENT LINE OF CREDIT

PROMISSORY NOTE


$ 1,000 ,000.00	Worcester, Massachusetts
	November 15 , 2016

FOR VALUE RECEIVED Arrhythmia Research Technology, Inc. , a corporation duly organized and validly existing under the laws of the State of Delaware having a principal place of business at 25 Sawyer Passway, Fitchburg, Massachusetts 01420 and Micron Products Inc. , a corporation duly organized and validly existing under the laws of the Commonwealth of Massachusetts having a principal place of business at 25 Sawyer Passway, Fitchburg, Massachusetts 01420 (each and collectively, the “Borrower”) jointly and severally promise to pay to the order of UniBank for Savings (with its successors, assigns and any future holder or holders of this Note being the “ Lender ” ) at its offices at 49 Church Street, Whitinsville, Massachusetts 01588 or at such other place as the Lender may from time to time designate in writing, the principal sum of One Million and 00/100 Dollars ($ 1,00 0,000.00) , or the aggregate unpaid principal amount of all advances made by the Lender to the Borrower under terms hereinafter set forth, whichever is less, in lawful money of the United States, to pay interest on each advance at a variable per annum rate equal to th e Interest Rate (as hereafter defined) , unless the Default Rate is in effect in which event the Interest Rate shall be the Default Rate . All advances shall be due and payable as set forth herein, but if not sooner paid, this Note and all amounts due hereun der shall be due and payable on November 15 , 2022 (said date as the same may be extended from time to time in the Lender ’ s discretion, being the “ Maturity Date ” ), without notice or demand.

This Note evidences the Borrower ’s indebtedness under the $1,000,000 Equipment Line of Credit made by the Bank to the Borrower of even date herewith as defined in the Loan and Securit y Agreement among the Borrower and the Bank dated March 29, 2013 ( as the same may be amended or modified from time to time, the “ Loan Agreement ” ), incorporated herein by reference (the “ 2016 Equipment Line of Credit ” ).

Subject to the terms and conditions set forth herein and in the Loan Agreement, the Borrower may request advances and borrow funds under the 2016 Equipment Line of Credit during the period from the date he reof until the earlier of: (i) November 15 , 201 7 or (ii) the date upon which the amount of all advances under this Note are equal to the face amount of this Note (such date as it may be extended in writing from time to time, in the Bank ’ s sole discretion, being referred to herein as the “ 2016 Equipment Conversion Date ” ). The Borrower ’ s privilege to request advances and borrow funds under the 201 6 Equipment Line of Credit shall terminate on the 201 6 Equipment Conversion Date or, at the Bank ’ s option, an earlier Default or Event of Default . The aggregate amount of all advance s advanced under the 2016 Equipment Line of Credit shall not exceed $ 1,00 0,000.00 . Advances which are repaid may not be reborrowed. S hould the amount of said advances at any time exceed the maximum amount permitted herein, the Borrower shall be obligated to immediately pay to the Bank the amount of such excess together with accrued and unpaid interest.

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Interest on the outstanding principal of all advances hereunder shall be due and payable commencing one month from the date hereof and continuing monthly thereafter on the same day or last day, whichever shall first occur, of each succeeding month (each a “ Payment Date ” ) u ntil the 2016 Equipment Conversion Date .

Commencing with the first Payment Date after the 201 6 Equipment Conversion Date , principal and interest shall be due and payable in consecutive monthly installments the number of which shall be equal to the number of months remaining between the 201 6 Equipment Conversion Date and the Maturity Date and of which all but the last (the “ Final Payment ” ) shall be in such amount as is necessary to amortize the outstanding principal balance of this Note with interest thereon at the rate applicable from time to time hereunder based upon an assumed direct reduction amortization schedule equal to six (6) years from the date of this Note . Each such monthly installment of principal and interest shall be subject to adjustment by the Lender from time to time in order to insure that payments are sufficient to properly amortize the then outstanding principal balance of this Note with interest thereon based upon the applicable assumed amortization schedule and changes in the rate of interest applicable from time to time to the principal balance of this Note. The Lender may adjust any monthly installment upon written notice to the Borrower if a failure to so adjust would result in less than the total amount of all accrued interest due being paid on any Payment Date (as hereafter defined).

The first of said consecutive monthly payments of principal and interest shall be due and payable on the first Payment Date after the 201 6 Equipment Conversion Date and the remainder of said monthly payments shall be due on the same day or last day, whichever shall first occur, of each succeeding month thereafter (each a “ Payment Date ” ). The Final Payment shall be in an amount equal to the then outstanding principal balance of this Note plus all accrued and unpaid interest and all other amounts owing hereunder. The Final Payment, unless sooner paid, shall be due and payable on the Maturity Date, without notice or demand.

This Note has been executed and delivered subject to the following additional terms and conditions:

1. Definitions . For purposes of this Note, the following terms shall have the following meanings:

1.1 “ Banking Day ” means any day other than a Saturday or Sunday, or other day on which commercial banks in the Commonwealth of Massachusetts are authorized or required to close under the laws of the Commonwealth of Massachusetts.

1.2 “ Base Rate ” means the Federal Home Loan Bank of Boston Five Year Rate of interest, as disclosed on the rate sheet provided to Lender. In the event that such rate of interest currently referred to shall no longer exist or no longer be referred to as the “ Federal Home Loan Bank of Boston Five Year Rate ” or “ Federal Home Loan Bank of Boston Rate ” , or in the event the Lender or a future holder of the Note shall no longer use the Federal Home Loan Bank of Boston Five Year Rate as its reference rate of interest, then the term “ Base Rate ” shall be deemed to refer to the comparable reference rate of

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interest adopted or used in lieu thereof by the Lender or any such future holder, which represents a reasonable substitute in the form of Standards Rates used in the market at that time such as the Treasury Rates or other indexes, whether such rate be referred as to the “ Base Rate ” or otherwise.

1. 3 “ Default ” means the occurrence of an Event of Default or the occurrence of any event, which with the giving of notice or the passage of time, or both would constitute an Event of Default.

1.4 “ Event of Default ” has the m eaning given to it in Section 11 hereof and the Loan Agreement and includes but is not limited to a failure by the Borrower to comply with any term or condition of this Note or any other Loan Document.

1. 5 “ Governing State ” means the Commonwealth of Massachusetts.

1.6 “ Interest Rate ” shall have the meaning given to it in Section 2 hereof, unless the Default Rate is in effect, in which event the Interest Rate shall be the Default Rate.

1.7 “ Loan Agreement ” means the Loan and Security Agreement be tween the Lender and the Borrower dated March 29, 2013, as the same may be amended from time to time.

1. 8 “ Loan Documents ” has the meaning given to it in the Loan Agreement and includes without limitation this Note and any and all agreements, instruments, documents, security agreements, mortgages, financing statements, and supplements thereto and relating to the loan evidenced by this Note (the “ Loan ” ), or entered into between the Borrower or any one of them in favor of, or with, the Lender, at any time, for any purpose, all as amended, renewed or extended from time to time.

1.9 “ Obligations ” mean all liabilities, indebtedness, obligations, advances, covenants and loans now or hereafter due or owing by or from any Borrower (including without limitation any obligation as a guarantor) to the Lender of whatever kind, description or nature, whether or not evidenced by any note or other instrument, whether or not for the payment of money, whether or not currently contemplated at the time of this Agreement, whether now existing, or hereafter arising or created, whether such obligations be direct or indirect, absolute or contingent, primary or secondary, secured or unsecured, or due or to become due, including, without limitation, all liabilities and obligations under the Notes and other Loan Documents, and all indemnity and reimbursement obligations of any Borrower, actual or contingent, in respect of letters of credit or banker ’ s acceptances issued by the Lender for the account of or guaranteed by any Borrower, all obligations of any partnership of joint venture as to which any Borrower is or may become liable and any so called SWAP contracts entered into by or given by any Borrower to the Lender , regardless of how they arise or by what agreement or instrument they may be evidenced or whether evidenced by any agreement or instrument, any and all obligations arising under any foreign exchange contracts, interest rate cap, floor or hedging agreements, or similar ag reements, all obligations of any

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Borrower to the Lender arising out of or in connection with any Automated Clearing House ( “ ACH ” ) Agreements relating to the processing of ACH transactions, all obligations of any Borrower to the Lender to repay overdrafts whether or not such obligations are related to the transactions described in the Notes and other Loan Documents, and includes obligations to perform acts and refrain from taking action as well as obligations to pay money. The term “ Obligations ” shall also include without limitation all accrued interest and all costs and expenses, including attorney ’ s fees, costs and expenses relating to the appraisal and/or valuation of assets and all costs and expenses incurred or paid by the Lender in exercising, preserving, defending, collecting, administering, enforcing or protecting any of its rights under the Obligations or hereunder or with respect to the Collateral or in any litigation arising out of the transactions evidenced by the Obligations. The term “ Obligations ” shall be construed in its broadest and most comprehensive sense.

1.11 “ Open Credits ” mean the face amount of all advances, letters of credit or bankers acceptances issued by the Lender for the account of any Borrower or guaranteed by any Borrower .

1.1 2 “ Prime Rate ” means the highest per annum rate of interest published by the Wall Street Journal from time to time as the Prime Rate. In the event that the reference rate of interest currently referred to in the Wall Street Journal as the “ Prime Rate ” shall no longer exist or no longer referred to as the “ Prime Rate ” , or in the event the Lender or a future holder of the Note shall no longer use the Wall Street Journal published Prime Rate as its reference rate of interest, then such term shall be deemed to refer to the comparable fluctuating reference rate of interest adopted or used in lieu thereof by the Lender or any such future holder, whether such rate be referred as to the “ prime rate ” , “ base rate ” or otherwise.

2. Interest Rate . Except as hereinafter provided, the outstanding principal balance of this Note shall bear interest at a fluctuating per annum rate of interest equal to the Prime Rate plus one quarter of one percent (0.25%) until the 201 6 Equipment Conversion Date . On the 2016 Equipment Conversion Date , the per annum rate of interest shall be automatically adjusted to a fixed per annum rate equal to the greater of: (i) the Base Rate as of the 2016 Equipment Conversion Date plus three percentage points ( 3.00 ) or (ii) four and one quarter of one percent (4.25%) , at which time the interest rate shall be fixed until the Maturity Date. Changes in the rate of interest resulting from changes in the Prime Rate shall take place immediately without notice or demand of any kind. For all purposes of this Note, the Lender ’ s written notice or statement to the Borrower of the applicable rate of interest shall be conclusive and binding absent manifest error.

3 . Advances, Notice Of Borrowing .

3 .1 When the Borrower desires to borrow hereunder, it shall give the Lender notice specifying the date of the proposed borrowing (which shall be a Banking Day) and the amount to be borrowed. If any advance is made, the Lender shall record on the books and records of the Lender an appropriate notation evidencing such advance, each

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repayment on account of the principal thereof and the amount of interest paid; and the Borrower authorizes the Lender to maintain such records or make such notations and agrees that the amount shown on the books and records as outstanding from time to time shall constitute the amount owing to the Lender pursuant to this Note, absent manifest error. Amounts borrowed under this Note may not be reborrow ed. Unless a Default or an Event of Default occurs, the Borrower may borrow and repay under this Note; provided, however, that: (i) each request by the Borrower for an advance hereunder shall be accompanied by an invoice evidencing the price and specifications of the equipment being purchased; (ii) at no time shall the outstanding principal balance of this Note exceed an amount equal to the face amount of this Note minus the aggregate amo unt of all Open Credits (the “ 201 6 Equipment Maximum Availability” ) ; ( i ii) at no time shall advances be requested which would cause the outstanding principal balance of this Note to excee d the 201 6 Equipment Maximum Availability ; (iv ) all outstanding principal plus accrued and unpaid interest shall be paid in full on the Maturity Date; and (v) any privilege to request advances hereunder shall terminate on the 2016 Equipment Conversion Date .

3 .2 [Intentionally omitted].

3.3 A ny a dvance hereunder shall not exceed eighty percent ( 8 0%) of the invoice amount of the equipment being purchased with the proceeds of the 2016 Equipment Line of Credit.

3 . 4 The making of any advances by the Lender to the Borrower under the 2016 Equipment Line of Credit in excess of the 2016 Equipment Maximum Availability is for the Borrower ’ s benefit and does not in any way effect the unconditional obligation of the Borrower to repay such advances under the terms of this Note and the other applicable Loan Documents. Without limiting any other rights available to the Lender under the Loan Documents, the Borrower agrees to pay to the Lender upon DEMAND (whether or not an Event of Default exists) the principal balance of the 201 6 Equipment Line of Credit outstanding in excess of the 2016 Equipment Maximum Availability together with all accrued and unpaid interest.

4 . Interest Rate/Payments .

4 .1. Interest Rate, Payment of Interest . So long as no Event of Default has occurred and subject to the terms hereof, each advance hereunder shall bear interest at the interest rate called for and calculated pursuant to the terms of this Note.

4 .2. Accounts; Records. The Lender is authorized (but not required) to charge principal and interest and all other amounts due under this Note to any account of any Borrower with the Lender when and as it becomes due. All a dvances made by the Lender to the Borrower shall be evidenced by an appropriate notation on the books and records of the Lender, which records shall reflect each repayment on account of the principal thereof, and the amount of interest paid; and the Borrower authorizes the Lender to maintain such records or make such notations and agrees that the amount shown on the

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books and records of the Lender, as outstanding from time to time shall constitute the amount owing to the Lender pursuant to this Note, absent manifest error; provided, however, that the failure by the Lender to make any such notation with respect to any advance or payment shall not limit or otherwise affect the obligations of the Borrower hereunder.

4 .3 Additional Payments . If the Lender in its reasonable judgment determines that the effect of an applicable law or government regulation, guideline or order or the interpretation thereof by any governmental authority charged with the administration thereof (such as, for example, a change in official reserve requirements which the Lender is required to maintain in respect of loans or deposits or other funds procured for funding such loans) is to increase the cost to the Lender of making or continuing a Loan hereunder or to reduce the amount of any payment of principal or interest receivable by the Lender thereon, then the Borrower shall pay to the Lender on demand such additional amounts as the Lender may determine in its sole and absolute discretion, to be required to compensate the Lender for such additional costs or reduction. Any additional payment under this section will be computed from the effective date at which such additional costs have to be borne by the Lender. A certificate as to any additional amounts payable pursuant to this section setting forth the basis and method of determining such amounts shall be conclusive, absent manifest error, as to the determination by the Lender set forth therein if made reasonably and in good faith. The Borrower shall pay any and all amounts so certified to it by the Lender within ten (10) days of receipt of such certificate.

5 . 360 Day Y ear / Default Rate . All computations of interest under this Note shall be made on the basis of a three hundred sixty (360) day year and the actual number of days elapsed. To the extent allowed by applicable law, after the occurrence of any Event of Default, after the Maturity Date or after judgment has been rendered on this Note, all outstanding principal and unpaid interest shall bear, until paid, interest at a r ate per annum equal to four (4. 00) percent age points greater than the Interest R ate called for and calculated pursuant to the terms of this Note (the “ Default Rate ” ).

6 . Late Charge . If a regularly scheduled payment is fifteen (15) days or more late, Borrower will be charged five percent (5.00%) of the unpaid portion of the re gularly scheduled payment or twenty five dollars ($25 .00), whichever is greater. If the Lender demands payment of the Loan and the Borrower does not pay the Loan within fifteen (15) days after the Lender ’ s demand, the Borrower will be charged either five percent (5.00%) of the unpaid principal plus accrued unpaid interest or t w en ty five dollars ($ 25 .00), whichever is greater.

7 . Expenses . The Borrower further promises to pay to the Lender, as incurred, and as an additional part of the unpaid principal balance, all costs, expenses and reasonable attorneys ’ fees (which may include, without limitation, the allocable cost of the Lender ’ s internal legal counsel) incurred: (a) in the protection, modification, collection, defense or enforcement of all or part of this Note or any guaranty hereof or any other Loan Document; (b) in the foreclosure or enforcement of any mortgage or security interest which may now or hereafter secure either the debt hereunder or any guaranty thereof; (c) with respect to any action taken to protect, defend, modify or sustain the lien of any such mortgage or security agreement; (d) with respect to any

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litigation or controversy arising from or connected with this Note or any mortgage or security agreement or collateral which may now or hereafter secure this Note; or (e) with respect to any act to protect defend, modify, enforce or release any of its rights or remedies with regard to, or otherwise effect collection of, any collateral which may now or in the future secure this Note or with regard to or against the Borrower or any endorser, guarantor or surety of this Note.

8 . Prepayment . The Borrower may prepay this Note in whole or in part, at any time, without penalty or premium.

9 . Mandatory Prepayment / Application of Payments .

9 .1. The Borrower shall be required to prepay ON DEMAND all advances made under this Note to the extent the aggregate of all such advances exceeds the amounts permitted hereunder. In addition the Borrower shall pay, if applicable, charges incurred pursuant to the terms hereof.

9 .2. All payments, including any prepayments shall, at the option of the Lender, be applied first to interest on the unpaid principal of all advances due under this Note, and then to the payment of all fees, costs, and expenses incurred by the Lender or owing to the Lender by the Borrower arising out of the loan transaction evidenced by this Note which have not been paid or reimbursed to the Lender, and then to the balance on account of the principal due under this Note.

10 . Loan Agreement . This Note has been executed and delivered in accordance with the Loan Agreement which sets forth further terms and conditions upon which the entire unpaid principal hereof and all interest hereon may becom e due and payable prior to the Maturity Date, and generally as to further rights of the Lender and duties of the Borrower with respect hereto. Capitalized terms not defined herein which are defined terms in the Loan Agreement shall have the meanings set forth therein. No reference to the Loan Agreement or other Loan Documents or to any provision thereof shall affect or impair the absolute and unconditional obligation of the Borrower to pay principal or interest or other amounts owing under this Note.

11 . Default .

1 1 .1. The happening of any of the following events or conditions shall constitute an “ Event of Default ” under this Note:

1 1 .1.1. Failure to make any payment of principal or interest or any sum due under this Note or any other promissory note or instrument made by the Borrower or any one or more of them in favor of the Lender; or

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11 .1.2. Failure by any Borrower to observe or perform any covenant contained herein; or

11 .1.3 A default or the occurrence of an event of default in any other Loan Document including, without limitation, an Event of Default as defined in the Loan Agreement.

1 1 .2. Upon and after the occurrence of a Default or an Event of Default, the availability of advances hereunder shall, at the option of the Lender, be deemed to be automatically terminated. Upon and after an Event of Default, at the option of the Lender, the whole of the indebtedness evidenced by this Note, including principal and interest, and all other amounts which may be or become due or owing by the Borrower to the Lender shall, at the option of the Lender, immediately become due and payable without presentment, demand, protest, notice of protest, or other notice of dishonor of any kind, all of which are hereby expressly waived by the Borrower.

1 2 . Waivers, Con sent t o Jurisdiction . Each Borrower agrees that no delay or failure on the part of the Lender in exercising any power, privilege, remedy, option or right hereunder shall operate as a waiver thereof or of any other power, privilege, remedy or right; nor shall any single or partial exercise of any power, privilege, remedy, option or right hereunder preclude any other or future exercise thereof or the exercise of any other power, privilege, remedy, option or right. The rights and remedies expressed herein are cumulative, and may be enforced successively, alternately, or concurrently and are not exclusive of any rights or remedies which holder may or would otherwise have under the provisions of all applicable laws, and under the provisions of all agreements between the Borrower and the Lender.

Each Borrower hereby waives such rights as it may have to notice and/or hearing under any applicable federal or state laws pertaining to the exercise by Lender of such rights as the Lender may have regarding the right to seek prejudgment remedies and/or deprive Borrower of or affect the use of or possession or enjoyment of Borrower ’ s property prior to the rendition of a final jud gment against the Borrower. Each Borrower further waives any right it may have to require Lender to provide a bond or other security as a precondition to or in connection with any prejudgment remedy sought by Lender, and waives any objection to the issuance of such prejudgment remedy based on any offsets, claims, defenses or counterclaims to any action brought by the Lender.

EACH BORROWER AND LENDER MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE OR ANY OTHER DOCUMENTS CONTEMPLATED TO

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BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. tHIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR LENDER TO MAKE THE LOAN AND ACCEPT THIs NOTE.

Each Borrower hereby agrees that the following courts: State Court - Any state or local court of the Governing State; Federal Court - United States District Court for the District of the Governing State; or at the option of Lender, any court in which Lender shall initiate legal or equitable proceedings and which has subject matter jurisdiction over the matter in controversy, shall have exclusive jurisdiction to hear and determine any claims or disputes between Borrower and Lender pertaining directly or indirectly to this Note or to any matter arising in connection with this Note. Each Borrower expressly submits and consents in advance to such jurisdiction in any action or proceeding commenced in such courts, hereby waiving personal service of the summons and complaint, or other process or papers issued therein, and agreeing that service of such summons and complaint, or other process or papers, may be made by registered or certified mail addressed to Borrower at the address set forth herein. Should Borrower fail to appear or answer any summons, complaint, process or papers so served within thirty (30) days after the mailing thereof, it shall be deemed in default and an order and/or judgment may be entered against it as demanded or prayed for in such summons, complaint, process or papers. The exclusive choice of forum set forth herein shall not be deemed to preclude the enforcement of any judgment obtained in such forum or the taking of any action under this Note to enforce the same in any appropriate jurisdiction.

This Note shall be governed by and construed in accordance with the laws of the Governing State.

13 . Maximum Permissible Interest Rate . The Borrower shall not be obligated to pay and the Lender shall not collect interest at a rate higher than the maximum permitted by law or the maximum that will not subject the Lender to any civil or criminal penalties. If, because of the acceleration of maturity the payment of interest in advance or any other reason, the Borrower is required, under the provisions of any Loan Document or otherwise, to pay interest at a rate in excess of such maximum rate, the rate of interest under such provisions shall immediately and automatically be reduced to such maximum rate and any payment made in excess of such maximum rate, together with interest thereon at the rate provided herein from the date of such payment, shall be immediately and automatically applied to the reduction of the unpaid principal balance of this Note as of the date on which such excess payment was made. If the amount to be so applied to reduction of the unpaid principal balance exceeds the unpaid principal balance, the amount of such excess shall be refunded by the Lender to the Borrower.

14 . Replacement Documents . Upon receipt of an affidavit of an officer of Lender as to the loss, theft, destruction or mutilation of the Note or any other security document(s) which is not of public record and, in the case of any such loss, theft, destruction or mutilation, upon surrender and cancellation of such Note or other document(s), the Borrower will issue, in lieu thereof, a replacement Note or other document(s) in the same principal amount thereof and otherwise of like tenor.

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15 . Transfer a nd Assignment .

1 5 .1. The Lender may at any time pledge, endorse, assign, or transfer all or any portion of its rights under the Loan Documents including any portion of this Note to any of the twelve (12) Federal Reserve Banks organized under Section 4 of the Federal Reserve Act. 12 U.S.C. Section 341. No such pledge or enforcement thereof shall release the Lender from its obligations under any of the Loan Documents.

15 .2. The Lender shall have the unrestricted right at any time or from time to time, and without any Borrower ’ s consent, to sell, assign, endorse, or transfer all or any portion of its rights and obligations hereunder to one or more lenders or other entities (each an “ Assignee ” ), and each Borrower agrees that it shall execute, or cause to be executed such documents including without limitation, amendments to this Note and to any other documents, instruments, and agreements executed in connection herewith as the Lender shall deem necessary to effect the foregoing. In addition, at the request of the Lender or any such Assignee, the Borrower shall issue one or more new promissory notes, as applicable, to any such Assignee and, if the Lender has retained any of its rights and obligations hereunder following such assignment, to the Lender, which new promissory notes shall be issued in replacement of, but not in discharge of, the liability evidenced by the note held by the Lender prior to such assignment and shall reflect the amount of the respective commitments and loans held by such Assignee and the Lender after giving effect to such assignment. Upon the execution and delivery of appropriate assignment documentation, amendments, and any other documentation required by the Lender in connection with such assignment, and the payment by such Assignee of the purchase price agreed to by Lender and such Assignee, such Assignee shall be a party to this Note and shall have all of the rights and obligations of the Lender hereunder (and under any and all other guaranties, documents, instruments and agreements executed in connection herewith) to the extent that such rights and obligations have been assigned by the Lender pursuant to the assignment documentation between the Lender and such Assignee, and the Lender shall be released from its obligation hereunder and thereunder to a corresponding extent.

15 .3. The Lender shall have the unrestricted right at any time and from time to time, and without the consent of or notice to the Borrower to grant to one or more institutions or other persons (each a “ Participant ” ) participating interests in the Lender ’ s obligations to lend hereunder and/or any or all of the loans held by the Lender hereunder. In the event of any such grant by the Lender of a participating interest to a Participant, whether or not upon notice to the Borrower, the Lender shall remain responsible for the performance of its obligations hereunder and the Borrower shall continue to deal solely and directly with the Lender in connection with Lender ’ s rights and obligations hereunder. The Lender shall furnish any information concerning the Borrower in its possession from time to time to any prospective assignees and Participants, provided that the Lender shall require any such prospective assignee or Participant to maintain the confidentiality of such information.

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16 . Setoff . Each Borrower hereby grants to the Lender a lien, security interest, and a right of setoff as security for all of the Obligations, upon and against all deposits, credits, collateral, and property of any Borrower, now or hereafter in the possession, custody, safekeeping, or control of the Lender or any entity under the control of the Lender, or in transit to any of them. At any time, without demand or notice, the Lender may set off the same or any part thereof and apply the same to any liability or obligation of the Borrower even though unmatured and regardless of the adequacy of any other collateral securing the Obligations. ANY AND ALL RIGHTS TO REQUIRE THE LENDER TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS, OR OTHER PROPERTY OF EACH BORROWER ARE HEREBY KNOWINGLY, VOLUNTARILY, AND IRREVOCABLY WAIVED. The Lender shall not be required to marshal any present or future security for, or guarantees of, the Obligations or to resort to any such security or guarant ee in any particular order and each Borrower waives, to the fullest extent that it lawfully can: (a) any right it might have to require the Lender to pursue any particular remedy before proceeding against them; and (b) any right to the benefit of, or to direct the application of the proceeds of any collateral until the Obligations are paid in full.

17 . Security . This Note and all other Obligations are secured by all assets of each Borrower whenever arising or created in accordance with the terms of the Loan Agreement and all other documents which create or perfect security interest s in assets or properties of any Borrower. This Note and all other Obligations are further secured by th at certain specific equipment of the Borrower to be purchased with the proceeds of the Loan.

18 . Extension of Relevant Dates . In the event that any relevant date upon which a payment is due and payable under this Note or which affects any interest rate option of the Borrower shall fall on a date which is not a Banking Day, then any such relevant date may be extended by the Lender in accordance with the Modifi ed Following Banking Day Convention and interest shall continue to accrue, and the relevant due dates shall also be extended, for the period of that extension at the interest rate or rates then in effect. For purposes hereof, the “ Modified Following Banking Day Convention ” shall mean the convention for adjusting any relevant date if it would otherwise fall on a day that is not a Banking Day. When used in conjunction with the term, “ Modified Following Banking Day Convention ” , and a date, such term shall mean that an adjustment will be made if that date would otherwise fall on a day that is not a Banking Day so that the date will be the first following day that is a Banking Day.

Notwithstanding anything to the contrary hereinabove contained, if application of the Modified Following Banking Day Convention would cause any payment due under the terms of this Note to be due and payable in a calendar month which differs from the month in which the payment would otherwise have been due, then, at the Lender ’ s option, the Modified Following Banking Day Convention shall not apply and such payment shall be due and payable on the immediately preceding Banking Day.

19 . Joint and Several Obligations; Miscellaneous . This Note and all representations and covenants of the Borrower herein shall be the joint and several obligation of the Borrower and each provision of this Note shall apply to each and all jointly and severally and to the

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property and liabilities of each and all. This Note is the final, complete and exclusive statement of the terms governing this Note. No modification or amendment hereof shall be effective unless the same shall be in writing and signed by the Lender and the Borrower. If any provision of this Note shall to any extent by held invalid or unenforceable, then only such provision shall be deemed ineffective and the remainder of this Note shall not be affected. The provisions of this Note shall bind the heirs, executors, administrators, assigns and successors of each and every Borrower and shall inure to the benefit of Lender, its successors and assigns. This Note shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts.

20 . Acknowledgment of Borrower . The Borrower acknowledges receipt of a copy of this Note, and attests that each advance is to be used for general commercial purposes and that no part of such proceeds will be used, in whole or in part, for the purpose of purchasing or carrying any “ margin stock ” as such term is defined in Regulation s U and X of the Board of Governors of the Federal Reserve System , 12 C.F.R. Parts 221 and 224 .

21. COMMERCIAL TRANSACTION. EACH BORROWER ACKNOWLEDGES THAT THE ADVANCES EVIDENCED BY THIS NOTE ARE PART OF A COMMERCIAL TRANSACTION.

[This space intentionally left blank; signature page to follow.]

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This Note has been executed as a sealed instrument on the date first above written.


		Arrhythmia Research Technology, Inc.
		By:	/s/ Salvatore Emma, Jr.
			Salvatore Emma, Jr., President and
			Chief Executive Officer
			Duly Authorized

		Micron Products Inc.
		By:	/s/ Salvatore Emma, Jr.
			Salvatore Emma, Jr., President and
			Chief Executive Officer
			Duly Authorized

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Exhibit 10.6 6

EXECUTIVE EMPLOYMENT AGREEMENT

THIS AGREEMENT is made and entered into as of the 1st day of January, 2017, by and between Arrhythmia Research Technology, Inc. (“ ART ”) , with its principal place of business located in Fitchburg , Massachusetts , and Salvatore Emma, Jr. ( “Executive” or “ Employee” ), who resides in Ashburnham , Massachusetts . ART and Employee are collectively referred to herein as the “Parties.”

WHEREAS, ART desires to retain the services of Employee as President and Chief Executive Officer of ART and its subsidiary, Micron Products, Inc. (“Micron”) (collectively referred to herein as “the Company” or “the Companies”), and Employee desires to be employed by ART in such capacity, all upon the terms and subject to the conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the recitals and the mutual covenants and undertakings herein, each party agrees as follows:

1. Employment and Duties . ART hereby agrees to employ Employee, and Employee hereby accepts employment, as President and Chief Executive Officer of the Companies, upon the terms and conditions hereinafter set forth, both Parties expressly revoking any and all prior employment agreements between them. In his capacity as President and Chief Executive Officer , Employee, to the best of his abilities, shall be responsible for performing the duties co mmensurate with his position. Employee shall report to ART’ s Board of Directors (the “Board”) , and Employee agrees to perform such duties as the Board may ass ign to him.

Employee agrees that he is an employee-at-will, and, as such, his employment and compensation can be terminated, with or without cause, and with or without notice, at any time, at the option of either Employee or ART.

If Employee dies or becomes totally disabled during the term of this Agreement, Employee’ s employment and salary shall terminate at the end of the month during which death or total disability occurs, and no other compensation or benefits shall be paid to Employee . For the purposes of this Agreement, Employee shall be deemed to be “totally disabled” if he has been unable to perform his duties by reason of medical condition for 90 days in any 365-day period, all as determined in good faith by ART’s Board .

2. Exclusive Services . Employee agrees that he will, during the employment term, devote his entire working time, attention and best efforts to the performance of the duties as aforesaid and to the business and interests of the Companies, and he shall perform such duties as may be assigned to him ably, faithfully and diligently. Employee shall not at any time or in any manner, either directly or indirectly, be involved in any other occupation while he is employed by ART unless agreed to specifically by the Board. Employee hereby represents and w arrants that he is not now subject to any agreement which is or would be inconsistent or in conflict with his obligations hereunder.

Client Matter/23832/00001/A3567283.DOC

3. Compensation .

(a) Base Salary . As compensation for the services to be rendered by Employee under this Agreement, ART agrees to pay, and Employee agrees to accept a base salary at the annualized rate of $ 2 4 7 , 5 00 . Employee’s salary shall be payable in accordance with the Company’s regular payroll practice s , subject to withholding and other app licable taxes.

(b) Bonus . Employee shall be eligible to receive compensation under the Company’s Executive Incentive Plan. The specific goals criteria and target for earning such compensation will be mutually agreed upon by the Parties within the context of the Employee Incentive Plan and in good faith by the Parties.

A ll of Employee’s compensation is subject to deductions for regular payroll taxes and withholding, as required by State and Federal law, as w ell as other deductions that Employee authorize s .

( c ) Fringe Benefits . Employee also shall be entitled to the following benefits in each year of this Agreement:

(i) Employee shall be eligible to participate in the Company ’s various benefit plans (including health, dental, life, disability and retirement) on the same basi s as the Company’s other employees ; and

(ii) Employee shall be eligible to receive the Company’s various paid time off benefit s (including paid vacations and holidays ) on the same basis as the Company’s other employees.

4. Confidentiality . Employee is aware that the Companies develop and utilize, and that he has had and will continue to have, access to valuable technical and nontechnical trade secrets and confidential information including, but not limited to, knowledge, information and materials about the Companies’ trade secrets, mailing lists, methods of operation, advertiser lists, advertisers, customer lists, customers or clients, products, services, know-how, business plans and confidential information about financial, marketing, pricing, compensation and other proprietary matters relating to the Companies which are not in the public domain (“Confidential Information”), all of which constitutes a valuable part of the assets of the Companies which the Companies seek to protect.

Accordingly, Employee shall not at any time during or after the termination of his employment by the Companies for any reason, reveal, disclose or make known to any person (other than as may be required by law or in the performance of his duties), or use for his own or another’s account or benefit, any such Confidential Information, whether or not developed, devised or otherwise created in whole or in part by the efforts of Employee.

Employee represents and warrants that he has not revealed, disclosed or made known to any person (other than as may be required by law or in the performance of his duties), or used for his own or another’s account or benefit, any such Confidential Information, whether or not developed, devised or otherwise created in whole or in part by the efforts of Employee.

Client Matter/23832/00001/A3567283.DOC

Upon cessation of Employee’s employment, no documents, records or other matter or information belonging to the Companies, whether prepared by Employee or otherwise, and relating in any way to the business of the Companies, shall be taken or kept by Employee without the written consent of the Companies.

5. Non-Competition . Employee acknowledges that, in the course of his employment by ART, he will have access to the Companies’ Confidential Information; and he will be intimately and directly involved in developing and maintaining the Companies’ goodwill and serving the Companies’ customers and prospective customers. Accordingly, Employee agrees that:

(a) d uring his employment by ART and for a period of two ( 2 ) year s after such employment has ceased for any reason, Employee shall not, without the prior written consent of ART:

(i) directly or indirectly solicit or accept any business substantially similar to that done by any of the Companies from any person, company, firm or organization, or any affiliate of the foregoing, which is or was a customer or active prospect of any of the Companies during the two (2) year period prior to the end of Employee ’s employment at ART , for or on account of any individual, business enterprise, firm, partnership, association or corporation other than the Companies; or

(ii) directly or indirectly solicit the employment of, entice away, or in any other manner persuade or attempt to persuade any person employed by any of the Companies to leave such employment; or

(b) d uring his employment by ART and for a period of six ( 6 ) months after such employment has ceased for any reason, Employee shall not, without the prior written consent of ART d irectly or indirectly engage in, assist or have an interest in (whether as proprietor, partner, investor, stockholder, officer, director of any type of principal), or enter the employment of or act as an agent for or advisor or consultant to, any person, firm, partnership, association, corporation, busi ness organization, entity or enterprise which is, or is about to become, directly or indirectly engaged in any business which is directly or indirectly competitive with any of the Companies ; provided that Employee may own less than five percent (5%) of the outstanding equity securities of a corporation that is engaged in such a competitive business if the equity securities of such corporation are publicly traded and registered under the Secur ities Exchange Act of 1934; provided, however, that the post-employment restrictive period contained in this Section 5(b) shall be extended to (i) one (1) year if Employee’s employment terminates for Cause (as defined in Section 8(a) below), in connection with a Change in Control (as defined in Section 8(b) below), or as a result of his resignation, or (ii) two (2) years with respect to any such engagement with or interest in Select Engineering in Fitchburg, MA.

6. Innovations .

Client Matter/23832/00001/A3567283.DOC

Employee makes, authors, conceives, reduces to practice or otherwise acquires during any period of his employment by ART (either solely or jointly with others), and which are related to the Companies’ present or planned business, the Companies’ services or products, and any and all patents, copyrights, trademarks, trade names and applications therefor, in the United States and elsewhere, relating thereto. The Innovations shall be the sole property of ART and shall at all times be held by Employee in a fiduciary capacity for the sole benefit of ART.

(b) All such Innovations that consist of works of authorship capable of protection under copyright laws shall be prepared by Employee as works made for hire, with the understanding that ART shall own all of the exclusive rights to such works of authorship under the United States copyright law and all international copyright conventions and foreign laws. The foregoing notwithstanding, to the extent that any such Innovations is not deemed a work made for hire, Employee hereby assigns to ART the entire right, title, and interest in such Innovations and any and all patents, copyrights, trademarks, trade names and applications therefor, in the United States and elsewhere, relating thereto.

(c) Employee shall maintain adequate and current written records of all such Innovations, which shall be available to and remain the sole property of ART at all times. Employee shall promptly disclose to ART the details of any and all such Innovations and shall provide ART with all information relative thereto. Employee , without further compensation, shall fully cooperate with and assist ART in obtaining and enforcing for its own benefit patents and copyright registrations on and in respect of such Innovations in all countries in all ways that ART may request, to secure and enjoy the full benefits and advantages of such Innovations, including executing any and all documents that ART deems necessary to obtain, maintain, and/or enforce its rights in such Innovations and providing any testimony required to obtain, maintain, and/or enforce such Innovations. Employee agrees , for himself , and his heirs, legal representatives and assigns, without further compensation, to execute further assignments and other lawful documents as ART may reasonably request to effectua te fully this assignment. Employee understands that his obligations under this section shall continue after the termin ation of his employment by ART.

7 . Injunctive Relief . Employee acknowledges that the restrictions contained in Sections 4 , 5 and 6 above, in view of the nature of the business in which the Companies are engaged, are reasonable and necessary to protect the legitimate interests of the Companies . Employee understands that the remedies at law for his violation of any of the covenants or provisions of Sections 4 , 5 or 6 may be inadequate, that such violations may cause irreparable injury within a short period of time, and that the Companies shall be entitled to seek preliminary injunctive relief and other injunctive relief against such violation. Such injunctive relief shall be in addition to, and in no way in limitation of, any and all other remedies the Companies shall have in law and equity for the enforcement of those covenants and provisions.

8. Severance Benefits .

Client Matter/23832/00001/A3567283.DOC

in ART’s group health plan and he elect s continuation of coverage either under COBRA or an Exchange under the Affordable Care Act , ART wi ll reimburse him in an amount equal to the Company ’s share of his prior health and dental insuran ce premium p ayment covering his 26-week severance period .

For the purposes of this Section 8(a) , “Cause” means (i) willful and deliberate misconduct by Employee, such as being under the influence of drugs or alcohol on the job, dishonesty, misappropriation of assets, insubordination or refusal to follow reasonable directives and other misconduct of comparable magnitude and kind; (ii) willful neglect of duty or other material breach of this Agreement by Employee; (iii) commission of any act of fraud involving ART, involvement in any material conflict of interest or self-dealing involving ART, or conviction of a felony or any offenses involving moral turpitude or any criminal offense involving ART; (iv) any act or omission by Employee which has a material adverse effect on the business activities, financial condition, affairs or reputation of ART; (v) violation of any of ART’s policies or (vi) Employee’s failure or refusal to perform a substantial or important portion of his duties under this Agreement (for a reason other than illness or incapacity) , which failure or refusal continues for thirty (30) days after ART’s written notice to Employee, which notice reasonably informs him of such failure or refusal, and he fails to cure such failure within such 30-day period (the determination as to whether the Employee has cured such failure will be determined by ARTs Board in its sole discretion).

(b) Change-in-Control Severance Benefits . In the event that Employee’s employment involuntarily terminates as a result of ART’s “change in control” (as defined below), Employee will be paid severance in an amount which is equivalent to his regular bi-weekly salary (at the rate then in effect) for a period of twenty-four (24) months; provided, however, that Employee will not be entitled to such severance payments or the continuation of such severance payments, as the case may be, if Employee violates any of his obligations under Sections 4 , 5 or 6 above. For the purposes of this provision, a “change of control” is defined as (i) a merger or consolidation of ART in which the stockholders of ART immediately prior to such transaction would own, in the aggregate, less than 50% of the total combined voting power of all classes of capital stock of the surviving entity normally entitled to vote for the election of directors of the surviving entity, and is a change of ownership under Treasury Regulations Section 1.409A-3(i)(5)(v) or a change in effective control of ART under Treasury Regulation Section 1.409A-3(i)(5)(vi) or (ii) the sale of a substantial portion of ART's assets, as defined under Treasury Regulation Section 1.409A-3(i)(5)(vii), in one transaction or in a series of related transactions.

(c) Se paration Agreement . A s a prerequisite to receiving any severance pay or benefits under this Agreement, Employee shall be required to sign a se paration agreement, including a release of claims against ART and its affiliated entities, and their employees , officers, and directors. Such severance payments shall be paid according to ART’s regular payroll schedule and shall be subject to and reduced by regular payroll taxes and withholding, and the first installment of the severance payments shall be paid on the Company’s first regular pay day following the expiration of the separation agreement’s seven-day revocation period.

Client Matter/23832/00001/A3567283.DOC

of “termination of employment” shall mean a “separation from service with the employer” within the meaning of Treasury Regulation Section 1.409A-3(a)(1).

9. Mediation/Arbitration of Disputes . In the event of a dispute between the Parties , Employee and ART agree to work cooperatively to resolve the dispute amicably at appropriate, mutually determined management levels. In the event that a resolution at such management levels does not occur, either party may submit the dispute to mediation. Both Parties shall agree on one mediator and participate in said mediation in good faith. If the matter has not been resolved pursuant to mediation within sixty (60) days of the commencement of such procedure, which may be extended by mutual agreement of the Parties , the dispute shall be settled by final and binding arbitration in Worcester, Massachusetts in accordance with the rules then prevailing of the American Arbitration Association. Judgment upon the award rendered by the arbitrators may be entered in any court of competent jurisdiction, and each party shall bear his or its own costs, including attorneys’ fees. Notwithstanding the foregoing, any dispute relating Employee ’s obligations pursuant to Section s 4 , 5 , and 6 above shall not be subject to the mediation/ arbitration provisions set forth in this Section .

10. Agreement Binding Upon Successors . This Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective successors, assigns, personal representatives, heirs, legatees and beneficiaries, provided, however, that Employee may not delegate his duties and obligations hereunder to any other person, and further provided that no assignment of this Agreement by ART shall relieve ART of any of its obligations under the terms of this Agreement.

11. Waiver of Breach . The waiver of either party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach by either ART or Employee. The failure to enforce any provision(s) of this Agreement shall not be construed as a waiver of such provision(s).

12. Severability . It is the desire and intent of the Parties that the provisions of this Agreement be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Each provision of this Agreement or part thereof shall be severable. If for any reason any provision or part thereof of this Agreement is finally determined to be invalid and contrary to, or in conflict with any existing or future law or regulation of a court or agency having valid jurisdiction, such determination shall not impair the operation or affect the remaining provisions of this Agreement, and such remaining provisions will continue to be given full force and effect and bind each party.

13. Notices . Any notices or other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given if delivered personally, or sent by registered or certified mail, return receipt requested, postage prepaid, to the address listed below for the Parties, or to such other address as any party may hereafter direct in writing to the other party.


	To ART:	To Employee:
	Chairman of the Board	Salvatore Emma, Jr.
	Arrhythmia Research Technology, Inc.	26 Cobb Road
	25 Sawyer Passway	Ashburnham , MA 01430
	Fitchburg, MA 01420

Client Matter/23832/00001/A3567283.DOC

14. Entire Agreement; Amendment . This Agreement contains the entire agreement of the Parties and supersedes any and all prior agreements between the Parties. It may not be changed orally but only by an agreement in writing signed by both Parties hereto.

15. Governing Law . This Agreement is made in, and shall be governed by, the laws of the Commonwealth of Massachusetts without reference to its conflict of laws provisions.

IN WITNESS WHEREOF, the Parties hereto, individually or by their duly authorized representatives, have executed and delivered this Agreement to be effective as of the day and year first above written.


	ARRHYTHMIA RESEARCH
	TECHNOLOGY, INC.


	By:	/s/ Jason R. Chambers
Witness		Jason R. Chambers
		Chairman of the Board


	EMPLOYEE


		/s/ Salvatore Emma, Jr.
Witness		Salvatore Emma, Jr.
		President & Chief Executive Officer

Client Matter/23832/00001/A3567283.DOC

Exhibit 10.67

EXECUTIVE EMPLOYMENT AGREEMENT

THIS AGREEMENT is made and entered into as of the 1st day of January, 2017, by and between Arrhythmia Research Technology, Inc. (“ART”), with its principal place of business located in Fitchburg, Massachusetts, and Derek T. Welch ( “Executive” or “Employee”), who resides in Lunenburg, Massachusetts. ART and Employee are collectively referred to herein as the “Parties.”

WHEREAS, ART desires to retain the services of Employee as Chief Financial Officer ART and its subsidiary, Micron Products, Inc. (“Micron”) (collectively referred to herein as “the Company” or “the Companies”), and Employee desires to be employed by ART in such capacity, all upon the terms and subject to the conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the recitals and the mutual covenants and undertakings herein, each party agrees as follows:

1. Employment and Duties . ART hereby agrees to employ Employee, and Employee hereby accepts employment, as Chief Financial Officer of the Companies, upon the terms and conditions hereinafter set forth, both Parties expressly revoking any and all prior employment agreements between them. In his capacity as Chief Financial Officer, Employee, to the best of his abilities, shall be responsible for performing the duties commensurate with his position. Employee shall report to ART’s President and Chief Executive Officer (the “CEO”), and Employee agrees to perform such duties as the CEO may assign to him.

2. Exclusive Services . Employee agrees that he will, during the employment term, devote his entire working time, attention and best efforts to the performance of the duties as aforesaid and to the business and interests of the Companies, and he shall perform such duties as may be assigned to him ably, faithfully and diligently. Employee shall not at any time or in any manner, either directly or indirectly, be involved in any other occupation while he is employed by ART unless agreed to specifically by ART’s CEO. Employee hereby represents and w arrants that he is not now subject to any agreement which is or would be inconsistent or in conflict with his obligations hereunder.

3. Compensation .

(a) Salary . As compensation for the services to be rendered by Employee under this Agreement, ART agrees to pay, and Employee agrees to accept, a base salary at the

Client Matter/23832/00001/A3564622.DOC

annualized rate of $170,000.00 , payable in accordance with the Company’s regular payroll practice s , subject to withholding and other app licable taxes.

A ll of Employee’s compensation is subject to deductions for regular payroll taxes and withholding, as required by State and Federal law, as w ell as other deductions that Employee authorize s .

( c ) Fringe Benefits . Employee also shall be entitled to the following benefits in each year of this Agreement:

(ii) Employee shall be eligible to receive the Company’s various paid time off benefit s (including paid vacations and holidays ) on the same basis as the Company’s other employees.

Client Matter/23832/00001/A3564622.DOC

(a) d uring his employment by ART and for a period of two ( 2 ) year s after such employment has ceased for any reason, Employee shall not, without the prior written consent of ART:

( i) directly or indirectly solicit or accept any business substantially similar to that done by any of the Companies from any person, company, firm or organization, or any affiliate of the foregoing, which is or was a customer or active prospect of any of the Companies during the two (2) year period prior to the end of Employee ’s employment at ART , for or on account of any individual, business enterprise, firm, partnership, association or corporation other than the Companies; or

(ii) directly or indirectly solicit the employment of, entice away, or in any other manner persuade or attempt to persuade any person employed by any of the Companies to leave such employment; or

6. Innovations .

(a) Employee hereby assigns, transfers and conveys to ART and its successors and assigns the entire right, title, and interest in any and all inventions, processes, procedures, systems, discoveries, designs, configurations, technology, works of authorship, trade secrets and improvements (whether or not they are made, conceived or reduced to practice during working hours or using any of the Companies’ data or facilities) (collectively, “Innovations”) which Employee makes, authors, conceives, reduces to practice or otherwise acquires during any period of his employment by ART (either solely or jointly with others), and which are related to the Companies’ present or planned business, the Companies’ services or products, and any and all patents, copyrights, trademarks, trade names and applications therefor, in the United States and

Client Matter/23832/00001/A3564622.DOC

elsewhere, relating thereto. The Innovations shall be the sole property of ART and shall at all times be held by Employee in a fiduciary capacity for the sole benefit of ART.

8. Severance Benefits .

(a) Termination Without Cause Severance Benefits . As set forth in Section 1 above, Employee’s employment by ART is on an at-will basis. However, i n the event of that Employee ’s employment is involuntarily terminated without Cause (as defined below) and for reasons unrelated to Employee’s death or disability, or a Change of Control (as defined below), (i) the Company will pay Employee severance in an amount which is equivalent to his weekly salary (at the rate then in effect) for eighteen (18) weeks , and (ii) if Employee is a participant in ART’s group health plan and he elect s continuation of coverage either under COBRA or an Exchange under the Affordable Care Act , ART wi ll reimburse him in an amount equal to the Company ’s share of his prior health and dental insuran ce premium p ayment covering his 18-week severance period .

Client Matter/23832/00001/A3564622.DOC

(d) Section 409A . This A greement is intended to meet the requirements of Section 409A of the Internal Revenue Code, and shall be interpreted and construed and administered consistent with that intent. Without limiting the foregoing, the use of the concept of “termination of employment” shall mean a “separation from service with the employer” within the meaning of Treasury Regulation Section 1.409A-3(a)(1).

9. Mediation/Arbitration of Disputes . In the event of a dispute between the Parties , Employee and ART agree to work cooperatively to resolve the dispute amicably at appropriate,

Client Matter/23832/00001/A3564622.DOC

mutually determined management levels. In the event that a resolution at such management levels does not occur, either party may submit the dispute to mediation. Both Parties shall agree on one mediator and participate in said mediation in good faith. If the matter has not been resolved pursuant to mediation within sixty (60) days of the commencement of such procedure, which may be extended by mutual agreement of the Parties , the dispute shall be settled by final and binding arbitration in Worcester, Massachusetts in accordance with the rules then prevailing of the American Arbitration Association. Judgment upon the award rendered by the arbitrators may be entered in any court of competent jurisdiction, and each party shall bear his or its own costs, including attorneys’ fees. Notwithstanding the foregoing, any dispute relating Employee ’s obligations pursuant to Section s 4 , 5 , and 6 above shall not be subject to the mediation/ arbitration provisions set forth in this Section .


	To ART:	To Employee:
	Salvatore Emma, Jr.	Derek T. Welch
	President & Chief Executive Officer	405 New West Townsend Rd
	Arrhythmia Research Technology, Inc.	Lunenburg, MA 01462
	25 Sawyer Passway
	Fitchburg, MA 01420

Client Matter/23832/00001/A3564622.DOC

15. Governing Law . This Agreement is made in, and shall be governed by, the laws of the Commonwealth of Massachusetts without reference to its conflict of laws provisions.


	ARRHYTHMIA RESEARCH
	TECHNOLOGY, INC.


	By:	/s/ Jason R. Chambers
Witness		Jason R. Chambers
		Chairman of the Board



	EMPLOYEE


		/s/ Derek T. Welch
Witness		Derek T. Welch
		Chief Financial Officer

Client Matter/23832/00001/A3564622.DOC

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in Registration Statements (Nos. 333-166600 and 333-150044) on Form S-8 of Arrhythmia Research Technology, Inc. and Subsidiaries of our report dated March 2 2 , 201 7 , relating to our audit of the consolidated financial statements, which appear in this Annual Report on Form 10-K of Arrhythmia Research Technology, Inc. and Subsidiary for the year ended December 31, 201 6 .

/s/ Wolf & Company, P.C.

Boston, Massachusetts

March 2 2 , 201 7

Exhibit 31.1

OFFICER'S CERTIFICATION

PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Salvatore Emma, Jr., certify that:

I have reviewed this annual report on Form 10-K of Arrhythmia Research Technology, Inc. for the fiscal year ended December 31, 201 6 ;

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;

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;

The registra nt'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:

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;

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;

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;

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

The registra nt'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):

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

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


DATE: March 2 2 , 201 7		/s/ Salvatore Emma, Jr.
		Salvatore Emma, Jr.
		President and Chief Executive Officer

Exhibit 31.2

OFFICER'S CERTIFICATION

PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Derek T. Welch , certify that:

I have reviewed this annual report on Form 10-K of Arrhythmia Research Technology, Inc. for the fis cal year ended December 31, 201 6 ;

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my 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;

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


DATE: March 2 2 , 201 7		/s/ Derek T. Welch
		Derek T. Welch
		Chief Financial Officer

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 a nnual r eport on Form 10-K of Arrhythmia Research Technology, Inc. ("the Company”) for the year ended December 31, 201 6 , as filed with the Securities and Exchange Commission on the date hereof ("the Report”), the undersigned President and Chief 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: March 2 2 , 201 7		/s/ Salvatore Emma, Jr.
		Salvatore Emma, Jr.
		President and
		Chief Executive Officer

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 a nnual r eport on Form 10-K of Arrhythmia Research Technology, Inc. ("the Company”) for the year ended December 31, 201 6 , as filed with the Securities and Exchange Commission on the date hereof ("the Report”), the undersigned Chief Financial 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: March 2 2 , 201 7		/s/ Derek T. Welch
		Derek T. Welch
		Chief Financial Officer