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, ~~2018~~2019

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

001-9731

(Commission file number)

MICRON SOLUTIONS, 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~~registered pursuant to Section 12 (b) of the Act:

Common Stock, $.01 par value (Title of Each Class) NYSE AMERICAN (Name of each exchange on which registered)

SES

Title of each class	Trading symbol	Name of each exchange on which registered
Common Stock, $0.01 par value	MICR	NYSE AMERICAN

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

None

________________________________________________

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 requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every interactive data file required to be submitted 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 such files). 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 is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large Accelerated filer ☐ Accelerated filer ☐ Non‑Accelerated filer ☒ Smaller reporting company ☒

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

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 was $97,~~260~~063,~~225~~813.

On March 1830, ~~2019~~2020, there were 2,~~872~~906,~~208~~609 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, 2018. Portions of such proxy statement are incorporated by reference into Part III of this Form 10-K. None

Table of Contents

Micron Solutions, Inc. and Subsidiary

TABLE OF CONTENTS

Part I	Item 1	~~Business~~	1Business	1
	Item 1A	~~Risk Factors~~	4Risk Factors	3
	Item 1B	~~Unresolved Staff Comments~~	4Unresolved Staff Comments	3
	Item 2	~~Properties~~	4Properties	3
	Item 3	~~Legal Proceedings~~	4Legal Proceedings	3
	Item 4	~~Mine Safety Disclosures~~	4Mine Safety Disclosures	3
Part II	Item 5	~~Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities~~	5Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	4
	Item 6	~~Selected Financial Data~~	5Selected Financial Data	4
	Item 7	~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~	6Management’s Discussion and Analysis of Financial Condition and Results of Operations	5
	Item 7A	~~Quantitative and Qualitative Disclosures about Market Risk~~	10Quantitative and Qualitative Disclosures about Market Risk	9
	Item 8	~~Financial Statements and Supplementary Data~~	10Financial Statements and Supplementary Data	9
	Item 9	~~Changes in and Disagreements with Accountants on Accounting and Financial Disclosures~~	10Changes in and Disagreements with Accountants on Accounting and Financial Disclosures	9
	Item 9A	~~Controls and Procedures~~	10Controls and Procedures	9
	Item 9B	~~Other Information~~	11Other Information	10
Part III	Item 10	~~Directors, Executive Officers and Corporate Governance~~	12Directors, Executive Officers and Corporate Governance	11
	Item 11	~~Executive Compensation~~	12Executive Compensation	14
	Item 12	~~Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters~~	12Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	17
	Item 13	~~Certain Relationships and Related Transactions and Director Independence~~	12Certain Relationships and Related Transactions and Director Independence	19
	Item 14	~~Principal Accounting Fees and Services~~	12Principal Accounting Fees and Services	20
Part IV	Item 15	~~Exhibits, Financial Statement Schedules~~	12Exhibits, Financial Statement Schedules	21
	Item 16	~~Form 10-K Summary~~	12Form 10-K Summary	21
		~~Signatures~~	12Signatures	22
Exhibit Index			14	23

Micron Solutions®, Micron Products® and our other registered or common law trademarks, service marks or trade names appearing in this ~~annual~~Annual ~~report~~Report on Form 10-K are the property of Micron Solutions, Inc. and/or Micron Products, Inc.. Other trademarks and trade names referred to in this annual report on Form 10-K are the property of their respective owners.

Table of Contents

PART I

Item 1. BUSINESS

Overview

Micron Solutions®, Inc., a Delaware corporation ("Micron Solutions”), through its wholly-owned Massachusetts operating subsidiary, Micron Products®, Inc. (“Micron” and together with Micron Solutions, 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~~and ~~enforcement,~~ automotive ~~and~~components ~~consumer product applications. The Company is engaged in the production~~ and ~~sale~~assemblies ofrequiring ~~silver/silver~~precision ~~chloride~~machining ~~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 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 approximately 45% of its revenue derived from exports.~~

Micron provides design, engineering, quality and regulatory expertise across the Company’s three product lines, machining, thermoplastic 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 ~~the~~Company ~~product~~competes ~~life~~globally, ~~cycle~~with approximately 37% of its revenue derived from exports.

Contract Manufacturing

Machining

The Company is a contract manufacturer of machined components, primarily for original equipment manufacturers (OEMs) in the medical device industry as well as the defense industry. The Company machines components for implants and instruments for medical devices including, ~~but not limited to~~ large joint replacements, wrist plates, rib fixation plates, and screws. Specialized components used in Total Knee Arthroscopy including femoral surface replacements, tibia trays, ultra-high-molecular-weight polyethylene (“UHMWPE”) inserts, trials and instrumentation as well as hip stems and fixation plates used in rib and wrist fractures are fabricated, machined and polished, heat treated and passivated at Micron. These parts are primarily 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 employs validated processes and controls suitable for medical device components including heat treating, finishing, polishing, ultrasonic cleaning and passivation. The~~ manufacturing process includes computer aided design ("CAD"), computer-aided manufacturing (“CAM”), and computer numerical controlled ("CNC") machining. 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 and other polymers to customer specifications. The Company brings articular surfaces of implant components to a highly polished state as part of the manufacturing process, ready for sterilization and packaging. The Company produces superior contoured machined surfaces on metal and high molecular weight polymers to complete the implant kit. Additional capabilities include laser marking, automated polishing, passivation, and coatings. The Company also offers contract inspection and packaging in its own clean room facilities.

Thermoplastic Injection Molding

The Company's custom thermoplastic injection molding services ~~are especially suited to~~ meet the needs of customers who require very high quality parts, clean room molding, in-cycle vision inspection, assembly and packaging to tight tolerances using engineered materials. 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 include pad printing, ultrasonic welding, stamping, laser marking, clean room molding, clean room assembly, specialty coatings, and plastic machining.~~ Micron’s International Traffic in Arms Regulation ("ITAR") registration, Federal Firearms class-10 and Federal Explosive licenses assure military and defense customers that their stringent regulatory requirements are in compliance.

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.~~

Other value added services include pad printing, ultrasonic welding, stamping, laser marking, clean room molding, clean room assembly, specialty coatings, plastic machining, and high-precision optical and CMM metrology.

Sensors

Micron is a leading 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.

Table of Contents

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 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 OEM’s and other contract manufacturing 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, ~~2018~~2019, the Company had net sales to ~~three~~ two customers constituting 18%, ~~12%~~ and 10% of total net sales. During the year ended December 31, ~~2017~~2018, the Company had net sales to ~~two~~three customers constituting 1718%, 12% and 10%, respectively, of total net sales.

During the ~~years~~year ended December 31, ~~2018~~2019 ~~and 2017~~ approximately 7569% of the Company’s net sales were to customers in the medical device industry. During the year ended December 31, 2018, medical device net sales were approximately 75% of total net sales. The Company also had net sales to customers in the automotive, industrial, consumer products, and military and law enforcement industries.

The Company competes globally, with approximately 4537% of its revenue derived from exports in 2019. While some risks exist in foreign markets, the Company’s customers have historically been based in stable regions. To reduce the risks associated with foreign shipments and currency exchange fluctuations, the title to most of the products are transferred to the customers when shipped and payment is required in U.S. Dollars. The Company ~~also~~ has agreements with certain foreign customers to hold inventory at customer locations where title transfers and revenue is recognized when the product is consumed by the customer. To Accounts ~~further reduce risk, the Company sells to certain markets only with cash-in-advance or letter-of-credit terms. In addition, accounts~~ receivable insurance is used where available and appropriate to ~~further~~ reduce risk in these markets.

The extent of the impact of COVID-19 on our customers, we believe, will depend largely on future developments, including new information that may emerge concerning the severity and actions taken to contain or prevent further spread both within the United States and globally.

Marketing and Competition

The Company's ~~markets~~U.S. ~~its~~based ~~capabilities~~contract ~~and~~manufacturing ~~services~~capabilities toare ~~current~~offered ~~and~~globally ~~potential customers~~ to ~~provide~~the ~~full~~medical, ~~product~~defense ~~life-cycle~~and ~~support~~automotive tomarkets. ~~their~~Core ~~product~~competencies ~~manufacturing~~include, ~~needs.~~FDA, ~~The~~ITAR ~~Company's~~PPAP, ~~sales~~ATF ~~force~~compliance, ~~leverages~~speed ~~its~~to ~~long~~market ~~standing~~for ~~relationships~~high ~~and~~precision, ~~targets~~tight ~~new~~tolerance ~~and~~injection ~~potential~~molded ~~customers~~parts, ~~through~~molding ~~direct~~tools, ~~marketing~~CNC ~~via~~machining, ~~Micron’s~~assembly ~~website~~service ~~(www.micronproducts.com)~~ and ~~regularly~~specialty ~~attending industry trade shows~~packaging. AsThe ~~part~~Company ofdevelops along-term ~~total~~value-based ~~marketing~~relationships ~~and~~based ~~sales~~upon ~~strategy~~highly ~~the~~personalized ~~Company~~interactions ~~continues~~with toour ~~invest~~clients. inThe ~~website~~Company ~~enhancements~~utilize ~~and~~ a ~~variety~~proprietary ofprocess ~~internet~~for ~~marketing~~new ~~and~~product ~~lead~~launches ~~generation~~for ~~programs. The~~complex ~~Company~~engineered ~~provides~~products. ~~value~~Many ~~added~~of ~~U.S.~~these ~~based~~products ~~manufacturing~~require ~~capabilities~~specialty ~~with plating/coating~~material, ~~injection~~such ~~molding,~~as ~~machining~~engineered resins, ~~mold~~exotic ~~making~~metals, ~~maintenance~~secondary coatings and ~~repair.~~polishing ~~Customers~~processes, ~~seek the Company's ability to produce~~ complex ~~products~~automation ~~on short time lines~~ and tometrology ~~their specifications~~equipment. ~~Micron’s~~The ~~ISO~~Company ~~13485:2003~~has ~~registration,~~an ~~the~~experienced ~~international~~engineering ~~quality standards for medical devices~~ and ~~manufacturing,~~technical ~~qualifies~~team ~~Micron~~that toleverages ~~supply~~decades ~~products~~of ~~requiring tight~~ process ~~controls~~knowledge and ~~high~~lean ~~standards. The~~manufacturing ~~Company’s ITAR registration with the U~~principles.S. ~~Department~~To ofremain ~~State~~competitive, ~~("State Department") allows~~ the Company tocontinuously ~~compete~~invests in ~~military~~training and ~~law~~education ~~enforcement~~for ~~applications~~its ~~restricted~~workforce, byin ~~export~~automation ~~controls~~ and ~~the~~specialty ~~U.S.~~software ~~Department~~for ofenterprise ~~Defense~~resource ~~("DOD").~~planning ~~Micron also holds a class-10 federal firearms license~~ and ain ~~federal~~quality ~~explosives~~systems ~~license for manufacture of products for the military and law enforcement~~management.

2The Company's sales force is comprised of direct sales and independent sales representatives. As part of a total marketing and sales strategy the Company continually invests in website enhancements, social media campaigns and software tools together with a variety of internet marketing and lead generation programs.

~~Table~~The Company competes primarily against one other manufacturer in the sensors market and against a multitude of ~~Contents~~contract manufacturers for its other product lines.

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-five years of experience in some product areas with long customer relationships and has developed competitive advantages through decades of 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, military and law enforcement provide competitive advantages 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") asand ~~well~~has asan ~~under~~ITAR registration with the U.S. State Department~~'s ITAR registration~~. It ~~Micron~~ is ISO 13485:2003 registered and compliant to 21CFR part 820. ~~Micron's~~The ~~injection~~Company ~~molding~~is ~~machine~~also ~~capacity~~a ~~ranges~~licensed ~~from~~ATF 15manufacturer towith ~~220~~the ~~tons~~Bureau of Alcohol, Tobacco, Firearms and ~~includes~~Explosives. Injection anmolding capabilities include ISO class 7 clean room manufacturing. 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~~The ~~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.

~~Inventory~~Due ~~Requirements~~to the outbreak of the COVID-19 virus, we are closely watching lead times and availability of material, especially those materials that our suppliers purchase from outside the United States.

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 their 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.

Patents and Proprietary Technology

The Company develops and utilizes proprietary manufacturing processes to establish and maintain a competitive advantage. ByWith ~~having~~ internal engineering, mold making, automation and manufacturing expertise, the Company ishas ~~able~~developed ~~to develop~~ specialized processes throughout the product development and product manufacturing cycle. In July 2018, the Company was awarded a U.S. Patent for an invention which improves the high-low pressure system in 40MM M212 casing used in military, law enforcement and other markets. Under a multi-year exclusive supply agreement with a Company’s customer, the patent rights and obligations are shared equally.

~~Government Regulation~~2

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 (BATFE) 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 and other agencies to determine compliance with regulations and other requirements.

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throughout the product development and product manufacturing cycle. In July 2018, the Company was awarded a U.S. Patent for an invention which improves the high-low pressure system in 40MM M212 casing used in military, law enforcement and other markets. Under a multi-year exclusive supply agreement with a Company’s customer, the patent rights and obligations are shared equally.

Government Regulation

The Company's operations are subject to government regulations which establish compliance standards. 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 (ATF) and the State Department impose regulations on the production and transfer of certain goods and technical data. The development or manufacture of such products must be managed in accordance with applicable regulatory requirements and special controls required by customers. The Company's manufacturing facilities are subject to periodic inspections by the FDA and other agencies to determine compliance with regulations and other requirements.

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 has developed an internal system of compliance as well as retained independent environmental consulting firms to regularly review, monitor and upgrade its air and waste water treatment facilities. The Company has introduced several new initiatives including the use of solar energy and energy efficient machinery and lighting to benefit from renewable energy generation and reduce overall costs associated with production. The Company 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. The Company does not expect future costs in connection with environmental matters to have a material adverse effect on its financial condition, results of operations or liquidity aside from the cost of regulatory compliance and maintaining certifications and processes related to compliance with environmental regulations.

Employees

As of December 31, ~~2018~~2019, the Company had a total of 8886 employees, of which 8382 were full time employees.

~~Periodic~~Available ~~Reporting and Financial~~ Information

The Company ~~registered~~was ~~its~~originally ~~common~~incorporated ~~stock~~ under the ~~Securities~~name ~~Exchange~~Arrhythmia ~~Act~~Research ~~of 1934~~Technology, asInc. ~~amended~~under (the ~~"Exchange~~laws ~~Act"),~~of ~~and has reporting obligations, including~~ the ~~requirement~~State ~~that~~of itLouisiana ~~file~~in ~~annual~~1981 and ~~quarterly~~reincorporated ~~reports~~under ~~with~~ the ~~SEC. You~~laws ~~may~~of ~~obtain information about~~ the ~~operation~~State of ~~the~~Delaware ~~Public~~in ~~Reference Room by calling the SEC at 1-800-SEC-0330~~1987. ~~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~~The Company’s website address is http://www.micronsolutionsinc.com. Information on the Company's website is not part of this Annual Report on Form 10-K.

Item 1A. RISK FACTORS

Smaller reporting companies are not required to provide the information required by this item.

Item 1B. UNRESOLVED STAFF COMMENTS

Smaller reporting companies are not required to provide the information required by this item.

Item 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,~~feet on six ~~story building~~stories. The second building is over 94,000 square feet. The property on which the two buildings are situated is subject of a mortgage in favor of the Company’s asset based lender entered into in December 2017. See Note 7 to the consolidated financial statements. The Company believes its current facilities are sufficient to meet current and future production needs. ~~Additionally, the Company owns two unoccupied buildings in the complex with a total of approximately 52,000 square feet.~~

In January 2016, the Company entered into a Purchase and Sale Agreement with a Buyer for the sale of the two unoccupied buildings and land. The closing under the Purchase and Sale Agreement is subject to permitting and approvals from the City of Fitchburg and the Commonwealth of Massachusetts and is expected to take place by the end of June 2019. See Note 6 to the consolidated financial statements.

Item 3. LEGAL PROCEEDINGS

None.

Item 4. MINE SAFETY DISCLOSURES

Not applicable.

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PART II

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

Market Information

The Company's common stock has been listed on the NYSE American since 1992 and currently trades under the ticker symbol MICR. On March 16, 2020, the Company notified the NYSE American of its intent to delist from the NYSE American. On March 26, 2020, the Company filed a Form 25 with the SEC seeking to voluntarily delist from the NYSE American and anticipates that it will be delisted from the NYSE American on or about April 6, 2020 and begin trading on the OTCQB under the symbol “MICR”.

Holders

As of March 1911, ~~2019~~2020, the number of record 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~~was 180.

Item 6. SELECTED FINANCIAL DATA

Smaller reporting companies are not required to provide the information required by this item.

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

The following discussion 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 the following, among other matters: 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; the Company's level of debt and provisions in ~~the~~its ~~debt~~credit ~~agreements~~agreement which could limit the Company's ability to react to changes in the economy or its industry; the Company's ability to comply with the financial and other covenants contained in its credit agreement, including as a result of events beyond its control, which could result in an event of default; the Company’s reliance on revenue from exports and the impact on the Company’s financial results due to economic uncertainty and disruption including, but not limited to, recent events concerning COVID-19, changes in trade policy and tariffs, tax laws and regulations, or downturns in foreign and domestic markets; and continued availability of supplies or materials used in manufacturing at competitive prices. 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 consolidated statements of operations.

	Year Ended
	December 31,
	2018		2017
	2019		2018
Net sales	100.0	%	100.0	%
Cost of sales	8889.19		88.61
Gross profit	1110.91		11.49
Selling and marketing	3.76		43.27
General and administrative	1115.58		11.75
Research and development	0.5		0.65
Other expense	12.74		1.7
Loss before income tax provision (benefit)	(512.52)		(65.85)
Income tax provision (benefit)	—		—
Net loss	(5.5)	%	(6.8)	%
Net income (loss)	(12.2)	%	(5.5)	%

Net Sales

Net sales	~~2018~~2019		~~2017~~2018		$ Change		% Change
Year ended December 31,	$	19,564,981	$	20,102,662	$	(537,681)	(2.7)%
Twelve months ended December 31,	$	17,499,364	$	19,564,981	$	(2,065,617)	(10.6)%

The decrease in consolidated net sales for ~~2018~~2019 versus ~~2017~~2018 was due primarily to decreased net sales of ~~machined~~sensors ~~components,~~and thermoplastic injection molding ~~and~~(“injection ~~tooling~~molding”) partly offset by anincreases ~~increase~~ in net sales of ~~sensors~~tooling and of machined components.

~~The~~Net ~~decrease in net~~ sales ~~was~~of ~~due~~sensors indecreased ~~part~~approximately ~~to a 15~~21.87% ~~decrease in sales of machined components~~ for the year ended December 31, ~~2018~~2019, ~~when~~as compared to the ~~same period in the~~ prior year~~. The~~, ~~decrease~~primarily ~~in machined components was~~ due ~~primarily~~ to decreased ~~demand~~sales ~~in the fourth quarter from the Company’s largest machining customer. In 2019, the Company expects the demand from this customer~~ to ~~return~~three ~~to levels more consistent with volumes in the first half of 2018~~customers. ~~Additionally, a second customer’s demand decreased in the latter half of 2018 due to delays at the customer in obtaining its FDA 510(k) approval.~~

~~The~~Net ~~decrease in net~~ sales ~~was~~of ~~also~~injection ~~due~~molding indeclined ~~part~~approximately ~~to a 6~~10.83% ~~decrease~~for inthe ~~sales~~year ofended ~~thermoplastic~~December ~~injection~~31, ~~molding. The~~2019, ~~decrease~~as incompared ~~net~~to ~~sales~~the ofprior ~~thermoplastic~~year, ~~injection~~largely ~~molding was~~ due ~~largely~~ to decreases in ~~the~~sales ~~military~~to ~~and~~two ~~law~~medical ~~enforcement,~~device ~~consumer~~customers and ~~medical~~a ~~device~~decrease ~~industries. Additionally,~~in ~~net~~ sales ofto ~~tooling~~an ~~decreased~~automotive 28parts customer.5% The ~~due~~medical todevice ~~fewer~~declines ~~tooling~~were ~~projects~~the inresult ~~2018~~of ~~than~~decreased inproduct ~~2017~~demand.

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~~The~~Net ~~decreases~~sales ~~above~~of ~~were~~machining ~~partly~~components ~~offset~~increased by ~~an 8~~7.27% ~~increase in net sales from sensors~~ for the year ended December 31, ~~2018~~2019, ~~when~~as compared to the ~~same period in the~~ prior year~~. The~~, ~~increase~~primarily ~~was~~ due ~~largely~~ to anincreased ~~increase~~sales inof ~~production~~military ~~volume~~parts, topartially ~~the highest level in the Company’s history. Silver surcharge billed increased 2.0% based largely upon an increase in volume over the same period last year. The increase in volume was partly~~ offset by ~~declining~~a ~~silver~~decrease ~~prices compared to the same period last year and~~ in ~~part~~medical ~~due~~parts ~~to the timing of shipments versus the changes in the daily spot rate of the price of silver. Approximately 90% of net~~ sales ~~from~~for ~~sensors~~one ~~are~~customer infor ~~foreign~~whom ~~markets. All~~there ~~net~~was ~~sales~~unusually ofhigh ~~sensors~~volume ~~are~~ in ~~U.S.~~2018 ~~Dollars~~related to ~~protect~~relocation ~~the Company from foreign currency fluctuations~~logistics.

Net sales of tooling increased 95.7% for the year ended December 31, 2019, as compared to the prior year, due to the completion of more major tooling projects in 2019 than in 2018.

Gross Profit

Gross profit	~~2018~~2019		~~2017~~2018		$ Change		% Change
Year ended December 31,	$	2,323,692	$	2,292,378	$	31,314	1.4%
Twelve months ended December 31,	$	1,761,895	$	2,323,692	$	(561,797)	(24.2)%
As a percentage of sales		1110.91%		11.49%

The ~~increase~~decrease in consolidated gross profit for the year ended December 31, ~~2018~~2019 versus ~~2017~~2018 was primarily due to ~~higher~~the ~~gross~~$2.065M ~~profit~~overall ~~from~~sales ~~sensors~~decrease. ~~The~~Gross ~~increase~~profit ~~was~~margins ~~partly~~declined ~~offset~~slightly byfor ~~lower~~sensors, ~~gross~~injection ~~profit~~molding, ~~from~~and ~~machined~~machining ~~components,~~and ~~thermoplastic~~increased ~~injection~~significantly ~~molding~~for ~~and~~ tooling. The ~~gross~~margin ~~profit~~decrease ~~fluctuation~~was isprimarily due to product mix for machining and primarily ~~driven~~due byto ~~sales~~a ~~volume~~decline in absorbed overhead, ~~customer~~related to the decline in sales, for both sensors and ~~product~~custom ~~mix~~molding.

Selling and Marketing

The Company's consolidated selling and marketing expenses decreased to $~~730~~636,~~863,~~170 or (3.76% of net sales,) in ~~2018~~2019 from $~~841~~730,~~845,~~863 ~~or 4~~(3.27% of net sales,) in ~~2017~~2018, a 13% decrease of $~~110~~94,~~982 or 13~~692.~~2%.~~ For the year ended December 31, ~~2018~~2019, the decrease was primarily due to decreased ~~compensation in~~trade ~~part~~show aspresence aand ~~result of the departure of a~~ sales ~~person~~prospecting ~~in the third quarter of 2017~~services. ~~Additionally, marketing, advertising and professional fees decreased due in part to lower costs related to online lead generation programs.~~ ~~Depreciation~~Outside ~~expense,~~sales ~~office~~representatives ~~and~~have ~~computer~~replaced ~~supplies,~~these ~~and~~activities ~~travel~~as ~~expense~~a means ~~also~~of ~~all~~sourcing ~~decreased~~new ~~compared to the prior year~~business. ~~The decreases were partly offset by an increase in commissions due in part to the mix of commissionable parts.~~

General and Administrative Expenses

The Company's consolidated general and administrative expenses ~~decreased~~increased to $2,~~243~~760,~~595, or 11~~786 (15.58% of net sales,) in ~~2018~~2019 compared to $2,~~357~~243,~~909,~~595 or (11.75% of net sales,) in ~~2017;~~2018, a 23% ~~decrease~~increase of $~~114~~517,~~314~~192 oryear 4over year.~~8%.~~ ~~The~~Approximately ~~decrease~~$200,000 inof ~~general~~the ~~and~~increase ~~administrative~~relates ~~expense~~to isnew ~~due~~management inteam ~~part~~salaries, toincluding ~~lower~~a ~~compensation~~new ~~expense~~position ~~due~~of inVice ~~part~~President toof ~~outsourcing~~Operations. An ~~the~~additional IT$130,000 ~~function~~was ~~and~~for ~~non-recurring~~severance ~~charges~~ related ~~to outside consulting services in 2017~~costs. ~~Partially~~ Additional ~~offsetting~~general ~~the~~and ~~decreases~~administrative ~~was~~expense anincreases ~~increase~~include incosts ~~accounting~~of ~~and~~financial ~~professional fees~~consulting, ~~largely~~legal costs related to the ~~implementation~~sale of ~~new~~two ~~revenue~~buildings, ~~recognition~~SEC ~~guidance~~matters, inand ~~the first quarter of 2018 as well as~~ increased ~~environmental~~stock ~~health~~compensation ~~and safety expenses~~costs.

Research and Development

The Company's consolidated research and development expenses decreased to $~~106~~80,~~814,~~357 or (0.5% of net sales) in ~~2018~~2019 from $~~111~~106,~~014,~~814 or (0.65% of net sales) in ~~2017~~2018, a decrease of $426,~~200~~457, or 325.8%, due to ~~lower~~organizational ~~compensation expense~~restructuring.

Other Income (Expense)

Other expense, net, was $~~338~~425,~~559~~718 in ~~2018~~2019 compared to $~~337~~338,~~666~~559 in ~~2017~~2018, an increase of $~~893~~87,161. Interest expense was $~~391~~431,~~437~~544 in ~~2018~~2019 compared to $~~395~~391,~~085~~437 in ~~2017~~2018, aan ~~decrease~~increase of $340,~~648~~107. Interest expense ~~decreased~~on subordinated promissory notes, issued in ~~part~~July ~~due~~2019, towas $25,206. Interest expense on the ~~discharge~~Revolving Line of ~~the~~Credit ~~higher~~(“Revolver”) increased $22,085 and interest ~~rate~~expense ~~subordinated~~for ~~promissory~~the ~~notes,~~Company’s ~~partly~~term ~~offset~~loans bydecreased ~~higher~~$11,456. Deferred ~~deferred~~Financing ~~financing~~amortization costs ~~related~~were $67,723 in 2019 compared to ~~entering~~$62,120 ~~into~~in ~~the~~2018, ~~new~~an ~~credit~~increase ~~agreement~~of $5,602. Other income was $22,500 in ~~December~~2019 ~~2017~~compared to $45,991 in 2018, the decrease primarily due to the elimination of fees collected for the costs of maintenance on two buildings that were sold during 2019.

Income Tax Provision

The tax provisions for the years ended December 31, ~~2018~~2019 and ~~2017~~2018 are attributable to the U.S. federal and state income taxes. The Company’s combined federal and state effective income tax rate was 0% in ~~2018~~2019 and ~~2017~~2018 due to the impact of deferred tax assets reserved for with a valuation allowance.

Earnings Per Share

Consolidated basic and diluted loss per share for the year ended December 31, ~~2018~~2019 was $0.3974 per share compared with a loss per share of $0.4839 per share for the year ended December 31, ~~2017~~2018, aan ~~decrease~~increase in loss per share of $0.~~09 per share~~35. The ~~decreased~~change in loss per share for the year ended December 31, ~~2018~~2019, is due largely to athe sales decrease of $~~229~~2,~~496~~065,617 inand ~~operating~~a ~~expenses~~$517,192 ~~as well as an~~ increase in ~~gross~~general ~~profit~~and ofadministrative ~~$31,314~~expenses ~~despite~~as ~~lower net sales of $537,681~~ compared to the prior year period.

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~~Off-Balance~~Commitments ~~Sheet~~and ~~Arrangements~~Contingencies

No lease assets or liabilities have been recognized under ASC 842 in these financial statements as management has determined the individual leases to be immaterial. Lease expense under all operating leases was ~~approximately~~ $2420,~~033~~613 and $24,~~954~~033 for the years ended December 31, ~~2018~~2019 and ~~2017~~2018, respectively. Future minimum lease payments for the years ending December 31 are as follows:

			2019	$	20,222
2020	$	18,851
			2020	$	18,222
2021	$	10,996
			2021	$	10,630

Liquidity and Capital Resources

Working capital was a deficit position of $21,~~455~~182,~~498~~868 at December 31, ~~2018~~2019 compared to a positive working capital of $2,~~548~~455,~~692~~498 at December 31, ~~2017~~2018, a decrease of $933,~~194~~638,366. The decrease is primarily due to ~~decreases~~reclassification inof ~~cash~~approximately ~~and cash equivalents~~$3,100.000 ~~restricted~~of ~~cash,~~term ~~accounts~~notes ~~receivable~~payable asfrom ~~well~~long-term asto ~~prepaid expenses and other~~ current ~~assets. The~~liabilities, a $1,216,411 decrease in ~~working~~inventory, ~~capital~~a is$688,750 ~~also~~decrease due ~~in part~~ to ~~increases in~~ the ~~revolver,~~2019 ~~accrued~~sale ~~expenses~~of ~~and~~two ~~other~~buildings ~~current~~classified ~~liabilities~~as held-for-sale, ~~contract~~a ~~liabilities~~$173,550 ~~and~~decrease ~~current~~in ~~portion~~accounts ofreceivable ~~term~~and ~~notes~~a ~~payable. The~~$131,026 decrease in ~~working~~pre-paid ~~capital was~~ expenses, partially offset by ~~the~~a ~~reclassification~~$751,293 ofdecrease ~~assets~~in ~~held~~the ~~for sale from long-term to short-term~~Revolver, ana ~~increase in inventory~~$555,329 a decrease in ~~accounts~~contract ~~payable~~liabilities, and ~~due~~a to$371,833 ~~the~~decrease ~~discharge~~in ofaccounts ~~the subordinated promissory notes~~payable. ~~See Note 7 to the consolidated financial statements.~~

Cash on hand was $~~1,715~~503 and $~~956~~1,~~988~~ 715 at December 31, ~~2018~~2019 and ~~2017~~2018, respectively. Cash on hand atis ~~December~~kept ~~31,~~low ~~2018 was lower~~ due to the Company’s credit agreement providing ~~for~~that deposits ~~being~~be swept daily against the revolver. Cash on hand at December 31, 2017 consisted of cash and cash equivalents of $606,988 and restricted cash of $350,000. The decrease in cash and cash equivalents is due in part to $250,000 in proceeds from the credit agreement for the purpose of providing adequate float for the transitioning of operating accounts from the previous lender. The $350,000 decrease in restricted cash is due to the discharge of the subordinated promissory notes using the proceeds from the credit agreement designated for that purpose.

Trade accounts receivable, net of allowance for doubtful accounts were $2,~~325~~152,~~804~~254 and $2,~~595~~325,~~248~~804 at December 31, ~~2018~~2019 and December 31, ~~2017~~2018, respectively, a decrease of $~~269~~173,~~444~~550. The decrease is primarily due to lower sales in the fourth quarter of ~~2018~~2019 when compared to the fourth quarter of ~~2017~~2018.

Inventories were $32,~~685~~468,~~059~~648 at December 31, ~~2018~~2019 as compared to $3,~~413~~685,~~199~~ 059 at December 31, ~~2017~~2018, a andecrease ~~increase~~ of $~~271~~1,~~860~~216,411 due largely to ana ~~increase~~decrease in work-in-process inventory related to ~~machining~~closed tooling projects, overall decreased sales, and ~~tooling~~procedures implemented to tighten inventory levels.

Accounts payable decreased by $~~343~~359,~~038~~230 ~~due to the timing of disbursements~~ for the year ended December 31, ~~2018~~2019 as compared to December 31, ~~2017. Accrued~~2018, primarily ~~expenses~~due ~~and~~to ~~other~~reductions ~~current~~in ~~liabilities~~inventory ~~increased~~purchases ~~$157,376~~with ~~due~~the ~~partly~~decrease toin ~~increased~~sales. Accrued ~~accrued~~expenses ~~interest,~~and asother ~~well~~current asliabilities ~~benefits~~decreased ~~and~~$83,367 primarily ~~repair~~related ~~and~~to ~~maintenance~~compensation related accruals. ~~Additionally,~~ Contract ~~contract~~ liabilities ~~increased~~decreased $~~134~~555,~~345~~530 due ~~in part~~ to athe ~~tooling~~closing ~~project~~of ~~with~~several atooling ~~military and law enforcement customer~~projects.

Capital equipment expenditures were $~~801~~169,~~884~~131 in ~~2018~~2019 as compared to $~~924~~801,~~621~~884 in ~~2017~~2018. ~~Capital~~ ~~expenditures~~2019 capital purchases were primarily for ~~replacement~~manufacturing ~~equipment~~robotics, asautomated ~~well~~quality assystems, ~~upgrades~~and toCompany-owned sensors tooling. 2018 capital purchases were primarily for replacement equipment, robotics upgrades and new equipment for machining ~~equipment~~operations.

On December 29, 2017, the Company entered into a three-year $9,500,000 credit agreement (the “Credit Agreement”) with Rockland aTrust ~~Massachusetts trust company~~Company, replacing the credit facility and forbearance agreement with the Company’s previous lender. The Credit Agreement includes a revolving line of credit of up to $5.0 million (“Revolver”), a machinery and equipment term loan of $2.5 million (“Equipment Loan”) and a real estate term loan of $2.0 million (“Real Estate Loan” and together with the “Equipment Loan” the “Term Loans”).

At December 31, ~~2018~~2019, the Company’s total debt, net of debt issuance costs, was $5,~~972~~301,~~470~~909 as compared to $65,~~575~~972,~~241~~470 at December 31, ~~2017~~2018, a decrease of $~~602~~670,~~771~~561 or 911.2%. The total outstanding debt at December 31, ~~2018~~2019 and ~~2017~~2018 was comprised of outstanding principal amounts of $3,~~946~~557,~~878~~ 458 and $43,~~346~~946,~~194~~878 of Term Loans, net of debt issuances costs, respectively, and $21,~~025~~274,~~592~~ 299 and $12,~~879~~025,~~047~~592 due on the Revolver, respectively ~~and $350,000 of subordinated promissory notes at December 31, 2017~~. ~~The~~Approximately ~~decrease is due to~~ $~~419~~3,~~047 of payments on the Term Loans as well as the discharge of the $350~~100,000 of ~~subordinated~~long-term ~~promissory~~ notes inpayable ~~2018,~~converted ~~partly offset by a net increase in the revolver of $146,545. See Note 7~~ to ~~the~~short-term ~~consolidated~~with ~~financial~~balloon ~~statements. The~~payments ~~Credit~~due ~~Agreement~~and ~~was~~payable ~~amended~~in ~~subsequent~~full toupon ~~year~~maturity ~~end~~on toDecember 29, ~~revise certain financial covenants~~2020.

NoAdditionally, ~~dividends~~the ~~were~~Company ~~declared~~entered orinto ~~paid~~subordinated debt agreements in ~~2018~~July or2019, receiving ~~2017~~proceeds in the amount of $500,000. See Note 6 to the consolidated financial statements.

~~The~~No ~~Company~~dividends ~~believes~~were ~~that~~declared ~~cash~~or ~~flows~~paid ~~from~~in ~~its~~2019 ~~operations,~~or together with its existing working capital, booked orders, the sale of the vacant buildings, expense management, and its Revolver, will be sufficient to fund operations at current levels and repay debt obligations over the next twelve months; however, there can be no assurance that the Company will be able to do so2018.

8Cash flows from operations, together with existing working capital, booked orders, expense management, the Revolver and alternative financing options, which may include a sale/leaseback of certain real estate and equipment, or the sale of other assets, will be sufficient to fund operations at current and projected levels and to repay debt obligations over the next twelve months. However, there can be no assurance that the Company will be able to do so.

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Summary of Changes in Cash Position

At December 31, ~~2018~~2019, the Company had cash on hand of $1503,~~715,~~ a decrease of $~~955~~1,~~273~~212 from December 31, ~~2017~~2018. The Company’s credit agreement provides for daily sweeps of cash on hand against the revolver. Net cash provided by operating activities in ~~2018~~2019 totaled $~~505~~180,~~803~~419. Net cash ~~used~~provided inby investing activities in ~~2018~~2019 was $~~796~~526,~~185~~805, primarily the result of the sale of two buildings. Net cash used in financing activities in ~~2018~~2019 totaled $~~664~~708,~~891~~436. The net cash flows for the year ended December 31, ~~2018~~2019 are discussed in further detail below.

Operating Cash Flows

Net cash provided by operating activities in ~~2018~~2019 was $~~505~~180,~~803~~419, as a result of the net loss, changes in working capital components and non-cash add-backs, primarily depreciation and amortization. Net cash provided by operating activities in 2018 was $505,803. The decrease from year to year was primarily attributable to the increased net loss.

Investing Cash Flows

Net cash ~~used~~provided inby investing activities in ~~2018~~2019 was $~~796~~526,~~185~~805. $169,131 ~~primarily~~was ~~for~~spent on capital ~~expenditures~~equipment investments, ~~largely~~including ~~for~~robotics, ~~machinery~~automated quality systems and ~~equipment~~sensors ~~for~~tooling. Proceeds ~~the~~of ~~contract~~$663,334 ~~manufacturing~~were received upon the sale of ~~machined~~two ~~components~~buildings. Net ascash ~~well~~used asin ~~the~~investing ~~molding~~activities in 2018 was $796,185, primarily for capital expenditures of machining operations equipment and sensors molding tools.

Financing Cash Flows

Net cash used in financing activities in ~~2018~~2019 was $~~664~~708,~~891~~436. Cash used in financing activities was ~~largely~~for ~~due~~$457,143 toin payments on term ~~notes~~loans and the ~~discharge~~$673,029 reduction of ~~subordinated~~the ~~debt~~Revolver balance, ~~partly~~partially offset by ~~net~~$500,000 in proceeds from ~~the~~subordinated ~~revolver~~notes payable.

COVID-19

On January 30, 2020, the World Health Organization declared that the recent coronavirus disease (“COVID-19”) outbreak was a global health emergency. On March 11, 2020 the World Health Organization raised the COVID-19 outbreak to pandemic status. Management is actively monitoring the global situation on its financial condition, liquidity, operations, customers, supplies and workforce and, given the daily evolution of COVID-19 and the global and local responses to curb its spread, the Company is uncertain as to what effects COVID-19 will have on its customers, suppliers, and workforce and the Company’s results of operations, financial condition, or liquidity.

Inflation

The Company believes that inflation in the United States or international markets has not had a significant effect on its results of operations. for the fiscal years ended 2019 and 2018. However, there has been considerable volatility in both energy and commodity prices, particularly the cost of silver.

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 to the 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. 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.

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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. See Note 2 to the consolidated financial statements for application and impact of these accounting policies to the Company.

· ~~The initial adoption of Accounting Standards Codification (ASC) 606,~~ Revenue from Contracts with Customers (ASC 606). Based on the Company’s assessment, the implementation of Topic 606 affects the timing of certain revenue related transactions primarily resulting from the earlier recognition ~~of the Company's tooling revenue and costs~~.

Inventory valuation; and

Deferred tax assets.

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Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Smaller reporting companies are not required to provide the information required by this item.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this item may be found on pages F-1 through F-2420 of this Annual Report on Form 10-K.

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

None.

Item 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(d)-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, ~~2018~~2019, 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(d)-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, ~~2018~~2019 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, 2018.

~~Changes in Internal Control Over Financial Reporting~~9

During the three months ended December 31, 2018, 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.

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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, 2019.

Changes in Internal Control Over Financial Reporting

During the three months ended December 31, 2019, there have been no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15(d)-15(f) of the Exchange Act) that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 9B. OTHER INFORMATION

None.

1110

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PART III

Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

~~The~~Directors ~~information~~and ~~required~~Executive ~~under this item is incorporated by reference to the applicable information set forth in the Proxy Statement for the 2018 Annual Meeting of Stockholders.~~Officers

The current directors and executive officers of the Company are as follows:

irector
Name	Age	Title
Jason R. Chambers	42	Director
William J. Laursen	49	President, Chief Executive Officer and Director
Marco F. Benedetti	60	Director
Rodd E. Friedman	53	Director
Robert A. Mello	66	Director
Andrei Soran	60	Chairman of the Board
Wayne M. Coll	56	Chief Financial Officer, Treasurer and Secretary

Set forth below are descriptions of the backgrounds of the executive officers and directors of the Company and their principal occupations for the past five years.

Jason R. Chambers. Mr. Chambers has served as a director of the Company since 2006. He served as Chairman of the Board from July 2016 through May 2019. Mr. Chambers has served as VP Business Development for DS Services of America, Inc. from January 2020 to present. Mr. Chambers previously served as President of Mountain Brook Water, a water bottling and distribution company, from 2002 to 2019, and from 2001 to present has served as a consultant assisting The Chambers Medical Foundation, a private foundation (the "Foundation"), in assessing medical grant applications. Mr. Chambers was appointed Trustee of the Foundation in 2011. Mr. Chambers holds a Bachelor of Science degree from Vanderbilt University School of Engineering and a Masters of Business Administration degree from Owen Graduate School of Management, Vanderbilt University with a concentration in finance and marketing. Mr. Chambers is a member of Vanderbilt’s School of Engineering Board of Visitors.

Mr. Chambers brings over 15 years of practical business and finance experience as a president and vice president of growing enterprises, with knowledge of and relationships with the medical community through his non-profit activities. His advanced degree in business administration and finance experience qualify him to serve on the Company's Audit Committee.

William J. Laursen. Mr. Laursen has served as the Company’s President, Chief Executive Officer and Director since November 28, 2018. From January 2012 to November 2018 he was the Executive Vice President, Sales and Strategy of The Coghlin Companies, Inc., a privately held, time to market services company, offering engineering, prototyping and contract manufacturing of complex electro-mechanical and electro-optical devices and equipment for a variety of markets including military and medical devices. From April 2003 until October 2009, Mr. Laursen served as President and BOA member for M2 America Corp. an engineering and manufacturing firm focused on Optical media manufacturing equipment. Since 2009, Mr. Laursen has also been a principal of MAKS, LLC, a project oriented company that provides strategic planning, business development and systems implementation.

Mr. Laursen brings over 25 years of experience focused on innovation in highly automated manufacturing environments in many industries such as medical devices, instrumentation, plastics, consumables and consumer products as well as experience in contract manufacturing. His expertise in business development, sales and marketing, strategic development and operations make him well suited to serve as a member of the Board of Directors. As the only management representative on the Company's Board, Mr. Laursen provides an insider's perspective to the Board about operations and strategy of the Company.

Marco F. Benedetti. Mr. Benedetti has served as a director since July 2015. Mr. Benedetti is currently Vice President for Business & Finance and Treasurer of Canisius College, a private college based in western New York with 4,000 full time students and a $100 million annual operating budget. Prior to joining Canisius College in 2013, Mr. Benedetti served nearly ten years at Greatbatch, Inc., a publicly-traded global manufacturer of components for medical devices for a variety of applications. He held a number of senior financial roles there, including Vice President of Finance - Financial Planning and Analysis, Investor Relations and Treasurer. Before that, Mr. Benedetti held senior finance positions at Ashton-Potter, U.S.A. LTD and International Imaging Materials, Inc. Mr. Benedetti is a certified public accountant and began his career at KPMG, LLP. He received a Masters of Business Administration and a Bachelor of Science in Business Administration from the State University of New York at Buffalo.

Mr. Benedetti brings over 30 years of financial and operational experience from medical device manufacturing, technology printing and public auditing. During that time, he built and led global operational, accounting and finance teams, directed strategic planning initiatives, analyzed and supported multiple acquisitions, identified growth and efficiency opportunities, and drove financial results. His advanced degree in business administration, and finance experience, qualify him to serve as a member of the Company’s Audit Committee.

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Rodd E. Friedman. Mr. Friedman has served as a director of the Company since his appointment on July 21, 2017. Mr. Friedman is the founder and managing member of REF Securities & Co. (“REF”), a private investment firm. Mr. Friedman, through REF, has been principally engaged in investing in public and private equities and derivatives since 1991. Prior to founding REF, Mr. Friedman was employed as an options trader at O’Connor and Associates, a market maker on the American Stock Exchange. Mr. Friedman received a Bachelor of Science in Finance from NYU Stern School of Business.

Mr. Friedman brings a background in finance with over 25 years of experience investing in private and publicly traded companies, including conducting due diligence, analyzing financial statements and assessing strategic options, which qualify him to serve as a director of the Company.

Robert A. Mello. Mr. Mello has served as a director since April 2015. Mr. Mello has served as the Vice President and Chief Operating Officer of Advanced Instruments, Inc., a leading supplier of instrumentation for clinical, pharmaceutical, biotechnology and microbiology laboratories around the world, from July 2013 to December 2018. From April 2000 to July 2013, Mr. Mello was employed as Corporate Vice President of IRIS International, Inc. and President of its IRIS Sample Processing division. Iris International is a leading provider of automated urinalysis instrumentation and bench top centrifuge products for use in major medical institutions, commercial laboratories, clinics, doctors' offices and research institutions. From 1988 to 2000, Mr. Mello was an operations executive with bioMerieux, which designs, manufactures and markets medical instruments and consumables, including from 1996 to 2000 as its Vice President of Operations at their Boston Immunodiagnostics facility and Vice President of Disposables Manufacturing-Clinical Microbiology. Prior to joining bioMerieux, Mr. Mello served as Vice President of Operations for Medical & Scientific Designs, Inc., an in-vitro diagnostics company where he joined the founding team in 1983 and as a Senior Technical Support Engineer at Ortho Diagnostics, Inc., a division of Johnson & Johnson. Mr. Mello is affiliated with the Diagnostics Marketing Association (DXMA), American Management Association (AMA), American Production and Inventory Control Society (APICS), and is certified in Production and Inventory Management (CPIM). He received his Management, B.S. degree from Lesley University, and his Electrical Engineering, ASEE degree from Bristol College.

Mr. Mello brings over 40 years of experience in startup and turn around operations for both small entrepreneurial companies and large public corporations in the medical diagnostics industry including instrumentation and consumables. Throughout his career he has directed all aspects of R&D, marketing, sales, manufacturing, engineering, QA/RA, materials, distribution, finance and facilities management. Mr. Mello has broad M&A experience from due diligence through deal negotiation to successful integration.

Andrei Soran. Mr. Soran has served as a director of the Company since December 8, 2017. He was elected to Chairman of the Board at the Company’s May 23, 2019 Annual Meeting. Mr. Soran served from May 2019 to September 2019 as CEO of Trident USA Health, the largest provider of mobile diagnostic services in Post Acute Care. The company employs Physicians, Nurse Practitioners, Radiology Technicians, and Phlebotomists providing services at the sites where the patients reside. He served as the CEO of Novaseek Research, Inc. (“Novaseek”), since August 2017. Novaseek is a provider of cloud-based Clinical Data Network for Research (“CDNR”) services. Before Novaseek, he served from July, 2016 to July, 2017 as the CEO and from April, 2016 to July, 2016 as the President and Chief Operating Officer of Verity Health Systems, a Redwood City, California multi-facility hospital, and healthcare network. Mr. Soran previously served from July, 2014 to April, 2016 as COO and Executive VP at Tenet Healthcare Corporation’s (“Tenet”) Detroit Medical Center. He also served from August, 2013 to June, 2014, as president of Tenet’s, Huron Valley-Sinai Hospital, DMC Surgery Hospital. Prior to Tenet, from April, 2006 to June, 2013, Mr. Soran served as CEO of Framingham, Massachusetts based MetroWest Medical Center, a Vanguard Health Systems facility. Vanguard was acquired by Tenet in 2013. Mr. Soran holds a Bachelor degree in Physical Therapy from Tel Aviv University in Israel and a Master’s degree in Business Administration and Management from Boston University-Metropolitan College.

Mr. Soran brings over 20 years of experience in hospital operations, strategy and long-term planning, with the medical and medical device community, as well as in corporate financial and operational restructuring and private equity, making him well suited to serve as a director of the Company.

Wayne M. Coll. Mr. Coll has served as the Chief Financial Officer, Treasurer and Principal Accounting and Financial Officer of the Company since July 15, 2019. Mr. Coll, was engaged from October 2018 to May 2019 as Chief Financial Officer of Keystone Dental, Inc, a privately-held medical device manufacturer. From October 2013 to September 2018, Mr. Coll served as Chief Financial and Operating Officer of Modern Dental Laboratory, USA LLC, a manufacturer of medical devices and the North American unit of the publicly-traded Modern Dental Group Limited (HKEX:3600). Beginning in November 2011, Mr. Coll served as Chief Financial Officer of Pluromed, Inc. a medical device manufacturer acquired by Genzyme Corporation, where he continued until September 2013. From October 1990 to May 2011 Mr. Coll held a variety of senior financial management roles including Chief Financial Officer at National Dentex Corporation (NASDAQ:NADX).

Mr. Coll has over 30 years of financial management experience focused on the medical device industry. His expertise in public company governance, mergers and acquisitions and strategy development and execution, qualify him to serve as Chief Financial Officer.

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Delinquent Section 16(a) Reports

Section 16(a) of the Exchange Act requires the Company's executive officers and directors, and persons who own more than ten percent of any publicly traded class of the Company's equity securities, to file reports of ownership and changes in ownership of equity securities of the Company with the SEC and the New York Stock Exchange. Officers, directors, and greater-than-ten-percent stockholders are required by the SEC's regulations to furnish the Company with copies of all Section 16(a) forms that they file.

Based solely upon a review of Forms 3 and Forms 4 furnished to the Company during the most recent fiscal year, the Company believes that all such forms required to be filed pursuant to Section 16(a) of the Exchange Act were filed, as necessary, by the executive officers, directors, and security holders required to file the same during the fiscal year ended December 31, 2019. All except the following were filed on a timely basis: (i) Wayne M. Coll had one Form 3 filing that was filed tardy, with respect to one transaction. (ii) a late Form 4 was filed for each of Jason R. Chambers, Rodd E. Friedman, and Andrei Soran for warrants issued to such persons or their affiliates on July 5, 2019.

Code of Conduct and Ethics

The Company has adopted a Code of Conduct and Ethics that applies to all its employees as well as its principal executive, financial and accounting officers. The current Code can be found on the Company’s website at http://www.micronsolutionsinc.com/investor-relations/corporate-governance/. The Company intends to satisfy the disclosure requirements regarding any amendments to or waivers from a provision of the Code that applies to its principal executive, financial and accounting officers by posting such information on its website at the address set forth above.

Audit Committee:

The Audit Committee is presently composed of three members of the Board: Mr. Marco F. Benedetti (Chairman) Mr. Robert A. Mello and Mr. Jason R. Chambers. The Audit Committee assists the Board of Directors in the oversight of the audit of the Company’s financial statements and the quality and integrity of its accounting, auditing and financial reporting processes. The Audit Committee also has the responsibility of reviewing the qualifications, independence and performance of the Company’s independent registered public accounting firm and is responsible for the appointment, retention, oversight and, where appropriate, termination of the independent registered public accounting firm. The Board of Directors has determined that each of the members of the Audit Committee meets the criteria for independence under the applicable listing standards of the NYSE American. The Company’s Board of Directors has determined that the Audit Committee has two members, each independent, who qualify as an “audit committee financial expert,” as defined by the rules adopted by the SEC, namely, Mr. Benedetti and Mr. Mello.

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Item 11. EXECUTIVE COMPENSATION

~~The~~Compensation ~~information~~of ~~required~~Directors ~~under~~and ~~this item is incorporated by reference to the applicable information set forth in the Proxy Statement for the 2018 Annual Meeting of Stockholders~~Officers.

Summary Compensation Table

The following table sets forth information regarding annual and long-term compensation with respect to the fiscal years ended December 31, 2019 and 2018, paid or accrued by the Company to or on behalf of those persons who were, during the fiscal year ended December 31, 2019, the Company's Chief Executive Officer, Chief Financial Officer and the Company's most highly compensated executive officers serving as such as of December 31, 2019 whose compensation was in excess of $100,000 (the “Named Executive Officers”). The dollar amount of Option Awards reflect the aggregate grant date fair value of option awards computed in accordance with FASB ASC Topic 718. The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model. A more detailed discussion of the assumptions used in the valuation of option awards made in fiscal year 2019 may be found in Note 11 of the Notes to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.



Name and Principal Position	Year	Salary ($)	Bonus ($)	Stock Awards ($)	Option Awards ($)		Non Equity Incentive Plan Compensation ($)	Nonqualified Deferred Compensation Earnings ($)	All Other Compensation ($)		Total ($)
William J. Laursen, President & CEO (1)	2019	280,000	—	—	—		—	—	—		280,000
	2018	19,385	12,500	—	87,876	(2)	—	—	—		119,761
Wayne M. Coll, Chief Financial Officer, Treasurer and Secretary (3)	2019	88,461	—	—	39,461	(4)	—	—	—		127,922
Salvatore Emma, Jr., COO (1)	2019	26,922	—	—	—		—	—	123,500	(5)	150,422
Salvatore Emma, Jr., President & CEO (1)	2018	222,032	—	—	29,971	(6)	—	—	—		252,003
Derek T. Welch, Chief Financial Officer, Treasurer and Secretary (3)	2019	56,231	—	—	—		—	—	—		56,231
	2018	159,212	—	—	19,633	(7)	—	—	—		178,845

(1)

Mr. William J. Laursen was appointed President and CEO effective November 29, 2018, replacing Mr. Salvatore Emma, Jr. in that position.

(2)

Amount reflects the grant date fair value of option awards the were approved by the Board of Directors on October 29, 2018, effective November 29, 2018, using a Black-Scholes value of $0.88 per share.

(3)

Mr. Wayne M. Coll was appointed CFO effective July 15, 2019, replacing Mr. Derek T. Welch. in that position.

(4)

Amount reflects the aggregate grant date fair value of option awards for grants made on July 15, 2019, using a Black-Scholes value of $1.32 per share.

(5)

Amount reflects severance costs incurred upon termination of employment for Mr. Salvatore Emma, Jr.

(6)

Amount reflects the aggregate grant date fair value of option awards for grants made on March 23, 2018, using a Black-Scholes value of $0.98 per share and for grants made on October 29, 2018, using a Black-Scholes value of $0.88 per share. Mr. Emma’s employment with the Company ended February 8, 2019. Pursuant to the 2010 Equity Incentive Plan, options expired on May 8, 2019.

(7)

Amount reflects the grant date fair value of option awards that were made on March 23, 2018, using a Black-Scholes value of $0.98 per share. Mr. Welch’s employment with the Company ended April 23, 2019. Pursuant to a consulting agreement with Mr. Welch, all options expired on December 31, 2019.

Employment Agreements

On October 29, 2018, the Company entered into an employment agreement with Mr. William Laursen pursuant to which Mr. Laursen will serve as the President and Chief Executive Officer of the Company and its wholly owned subsidiary commencing as of November 29, 2018. Mr. Laursen’s employment agreement provides for an annualized salary of $280,000. He may qualify for performance bonuses for an amount up to 50% of his base salary. Upon entering the employment agreement, Mr. Laursen received a signing bonus of options to purchase 100,000 shares of the Company’s common stock, which options shall vest over a four year period, beginning with a 25% vest on the first anniversary of his start date. The vesting of the options also accelerate upon a change in control. Mr. Laursen also received a $12,500 cash bonus upon joining the Company. The agreement contains certain change in control provisions providing for payment of salary to Mr. Laursen for up to 18 months. Mr. Laursen is also subject to certain non-competition and non-solicitation restrictions.

On October 29, 2018, the Company entered into a new employment agreement, effective November 29, 2018, with Mr. Salvatore Emma, Jr. pursuant to which Mr. Emma would serve as the Company’s Chief Operating Officer. The agreement replaced a prior agreement entered into in December 2016 pursuant to which Mr. Emma was employed as the Company’s President and Chief

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Executive Officer. Mr. Emma’s employment agreement provided for an annualized salary of $200,000 and eligibility for a performance bonus under the Company’s Executive Incentive Plan. He received options to purchase 5,000 shares of the Company’s common stock, which shares were subject to a one-year vesting period.

On February 8, 2019, Mr. Emma’s employment with the Company terminated. On February 28, 2019, the Company and Mr. Emma, entered into an Agreement and Release which entitled Mr. Emma to a severance benefit, $1,187.50 per pay period over 24 months or an aggregate of $123,500. The agreement also included a general release of claims by Mr. Emma and certain confidentiality, non-competition and non-solicitations and innovations provisions.

On December 28, 2016, the Board of Directors entered into an at-will employment agreement with Mr. Derek T. Welch, pursuant to which Mr. Welch was to be continued to be employed as the Chief Financial Officer and Secretary of the Company and its wholly- owned subsidiary, Micron Products, Inc. commencing as of January 1, 2017 and continuing thereafter unless terminated by the Company with or without cause, pursuant to the terms of the agreement. The agreement replaced a prior two-year agreement entered into in January 2015. Pursuant to the agreement, Mr. Welch was entitled to a base salary at the annualized rate of $170,000, was eligible for compensation under the Executive Incentive Plan adopted in 2016 and to participate in the Company’s other benefit plans. The agreement contained certain change in control provisions providing for payment equivalent to two years of base salary at the rate then in effect and confidentiality, non-compete and non-solicitation restrictions.

Mr. Welch resigned from the Company effective April 19, 2019. Under the terms of a consultant agreement entered into on April 22, 2019 the Company permitted all stock options granted to Mr. Welch during his employment with the Company, whether vested or unvested at the date of separation, to continue to vest and remain exercisable until December 31, 2019.

On July 15, 2019, Mr. Wayne Coll commenced employment with the Company as Chief Financial Officer, Treasurer and Principal Accounting and Financial Officer. Mr. Coll’s employment agreement provides for an annualized salary of $200,000. He may qualify for performance bonuses for an amount up to 25% of his base salary. Upon entering the employment agreement, Mr. Coll received a signing bonus of options to purchase 30,000 shares of the Company’s common stock, which options shall vest over a four year period, beginning with a 25% vest on the first anniversary of the grant date. The vesting of the options also accelerate upon a change in control. Mr. Coll is also subject to certain non-competition and non-solicitation restrictions.

2019 Equity Incentive Plan

On March 25, 2019, the Company’s Board of Directors adopted the 2019 Equity Incentive Plan (the “2019 Equity Plan”) upon the recommendation of the Compensation Committee. The 2019 Equity Plan was approved by the stockholders at the 2019 Annual Meeting. The 2019 Equity Plan authorizes the issuance of an aggregate of 500,000 shares. All non-issued shares of the 2010 Equity Incentive Plan expired upon the adoption of the 2019 Equity Plan, as approved by the stockholders at the 2019 Annual Meeting. The 2019 Equity Plan provides the Company flexibility to award a mix of stock options, equity incentive grants, performance awards and other types of stock-based compensation.

2019 Executive Incentive Compensation Plan

The 2019 Executive Incentive Compensation Plan established cash and equity incentive awards that may be earned by executives approved for participation in the plan, including the Chief Executive Officer (CEO), the Chief Financial Officer (CFO) and other Executives (“Executives” or “Participants”) as may be presented to the Compensation Committee by the CEO for consideration as an Executive. The Compensation Committee has the sole discretion to determine whether an employee is an Executive, determine their compensation and determine whether the employee is eligible under this Plan. The Compensation Committee may remove any individual from participation in the plan at any time for cause.

The bonus pool “Pool” for any fiscal year will be determined during the budget process, reviewed by the Compensation Committee and approved by all of the Board of Directors. Funding of the Pool is scaled relative to the extent of achievement of the plan as follows:


	% Plan Achievement		% Target Amount Funded
	<75%		0%
	>75% but <100%		Proportionate
	105%		110%
	110%		120%
	115%		130%
	120%		140%
	125%		150%
	>125%		150%

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Target awards are determined by the position level and will be typically expressed as a percentage of a Participant’s annual base salary rate as of the last day of the applicable fiscal year. Annual base salary does not include other forms of compensation (such as, without limitation, bonus payments, long-term incentives, overtime compensation, stock based compensation and other variable compensation). Target awards may also be a specified fixed dollar amount.

Awards shall be comprised of cash and equity. Awards, and the split between cash and equity, shall be determined by any employment agreements and the Compensation Committee. Awards payable in the form of equity may take the form of stock grants, stock options or restricted stock units at the discretion of the Board of Directors, or other forms of stock based compensation in accordance with the Company’s 2019 Equity Incentive Plan.

The 2019 Plan also contains a long-term incentive plan (LTIP) to reward executives for achievement of the Company’s strategic objectives that lead to maximization of shareholder value by continual improvement in financial performance or strategic initiatives. The LTIP is in addition to the annual bonus plan. The Board will approve LTIP grants, if any, on an annual basis.

For the years ended December 31, 2019 and December 31, 2018, no incentive awards were paid or are payable under the 2019 Executive Incentive Compensation Plan.

Outstanding Equity Awards at Fiscal Year End, December 31, 2019



	Option Awards							Stock Awards
Name	Number of Securities Underlying Unexercised Options (#) Exercisable		Number of Securities Underlying Unexercised Options (#) Unexercisable		Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)	Option Exercise Price ($)	Option Expiration Date	Number of Shares or Units of Stock That Have Not Vested (#)	Market Value of Shares or Units of Stock That Have Not Vested ($)	Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)	Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)
William J. Laursen	25,000	(1)	75,000	(1)	—	3.50	10/29/2028	—	—	—	—

Wayne M. Coll	—		30,000	(2)	—	2.51	7/15/2023	—	—	—	—

Derek T. Welch	10,000	(3)			—	3.67	12/31/2019	—	—	—	—
	6,000	(3)	4,000	(3)	—	7.74	12/31/2019	—	—	—	—
	10,000	(3)	5,000	(3)	—	4.02	12/31/2019	—	—	—	—
	6,666	(3)	13,334	(3)	—	3.81	12/31/2019	—	—	—	—

(1)

Exercisable as to 25,000 shares on November 29, 2019 and each anniversary until all 100,000 options are exercisable.

(2)

Exercisable as to 7,500 shares on July 15, 2020 and each anniversary until all 30,000 options are exercisable.

(3)

Mr. Welch’s employment with the Company ended April 23, 2019. Pursuant to a consulting agreement with Mr. Welch, all options expired on December 31, 2019.

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 2019 and 2018 were $40,477 and $39,039, respectively.

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Director Compensation

For fiscal year 2019, each non-employee director was entitled to receive annual compensation of $30,000 in either cash or the cash equivalent in shares of the Company’s common stock or a combination thereof. Additionally, the Chairman of the Board received a pro rata portion of an additional $5,000 and the chairman of the audit committee received a pro rata portion of an additional $4,000. Directors who are full time employees receive no compensation for serving as directors. The non-employee directors who were serving in such capacity in 2019 received the following fees for the year ended December 31, 2019:



Name	Fees Earned or Paid in Cash ($)(1)	Stock Awards ($)(2)	Option Awards ($)(3)	Non-Equity Incentive Plan Compensation ($)	Nonqualified Deferred Compensation Earnings	All Other Compensation ($)	Total ($)
Jason R. Chambers	—	32,083	—	—	—	—	32,083
Marco F. Benedetti	17,000	17,000	—	—	—	—	34,000
Rodd E. Friedman	—	30,000	—	—	—	—	30,000
Robert A. Mello	15,000	15,000	—	—	—	—	30,000
Andrei Soran	16,458	16,458	—	—	—	—	32,916

(1)

Includes amounts earned from the annual retainer and chairperson fees, prorated for partial year service as appropriate.

(2)

Represents the aggregate grant date fair value computed in accordance with ASC Topic 718 for awards of stock granted under our 2010 Equity Incentive Plan and the 2019 Equity Incentive Plan during 2019. Fair value of the stock awards was determined using the closing price per share of the Company’s common stock on the grant date.

(3)

No stock options were awarded to non-employee Directors in 2019. As of December 31, 2019, each Director held the following number of outstanding options to purchase the Company’s common stock: Mr. Chambers held 27,500 options; Mr. Benedetti held 7,500 options; Mr. Friedman did not hold any options; Mr. Mello held 7,500 options and Mr. Soran did not hold any options.

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

~~The~~Securities ~~information~~Authorized ~~required under this item is incorporated by reference to the applicable information set forth in the Proxy Statement~~ for ~~the~~Issuance ~~2018~~under ~~Annual~~Equity ~~Meeting~~Compensation ~~of Stockholders.~~Plans

The following table provides information, as of December 31, 2019, with respect to the Company’s equity compensation plans:




Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)		Weighted-average exercise price of outstanding options, warrants and rights (b)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders	346,165	(1)	$	4.51	439,080	(2)
Equity compensation plans not approved by security holders	—			—	—
Total	346,165		$	4.51	439,080

(1)

Options for 308,665 shares under the 2010 Equity Incentive Plan approved by stockholders at the 2010 annual meeting. Options for 37,500 shares under the 2019 Equity Incentive Plan approved by stockholders at the 2019 annual meeting.

(2)

439,080 shares remain available under the 2019 Equity Incentive Plan.

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Beneficial Owners of at Least Five Percent of the Company’s Common Stock

The following table shows, to the best of the Company’s knowledge, all persons known to be beneficial owners of five percent or more of the voting securities of the Company as of March 16, 2020.



Name and Address of Beneficial Owner	Common Stock Beneficially Owned(1)		Percent of Class(1)
REF Securities & Co.	341,607	(2)	11.8%
Rodd Friedman
12 South Main Street, Suite 203
Norwalk, CT 06854
Chambers Medical Foundation	296,268	(3)	10.2%
Edwin K. Hunter, Trustee
1807 Lake Street
Lake Charles, LA 70601
Steven D. Heineman	190,543	(4)	6.8%
1123789 Indian Road
North Palm Beach, FL 33408
Andrei Soran	189,232	(5)	6.5%
MLPF&S Cust FPO Andrei Soran IRA
The Andrei Soran Trust, Andrei Soran Trustee, Ilana Soran, Trustee, 11/15/2013
27 Lothrop Street
Newton, MA 02460
Jason R. Chambers	176,561	(6)	6.1%
1266 West Paces Ferry RD, NW
Suite 461
Atlanta, GA 30327

(1)

Unless otherwise noted in these footnotes, the Company believes that all shares referenced in this table are owned of record by each person named as beneficial owner and that each person has sole voting and dispositive power with respect to the shares of Common Stock owned by each of them. In accordance with Rule 13d-3 under the Exchange Act, each person’s percentage ownership is determined by assuming that the options and warrants to purchase common stock that are held by that person, and which are exercisable within 60 days of March 16, 2020, have been exercised.

(2)

Rodd E. Friedman, the managing partner and majority owner of REF Securities, has sole voting and dispositive power over 341,607 shares of common stock including 296,986 shares held in the name of REF Securities and 4,710 shares held in the name of REF Securities Profit Sharing.

(3)

Based on information included in a Schedule 13D/A filed with the SEC on September 21, 2011, by the Chambers Medical Foundation (“Foundation”), such Trustee has sole voting and dispositive power with respect to 276,268 shares of common stock. In addition, in October 2014, the Foundation exercised warrants to purchase 20,000 shares of the Company’s common stock held by it.

(4)

Based on information included in a Schedule 13G/A filed with the SEC on January 31, 2020 by Steven D. Heinemann. Mr. Heinemann has sole voting and dispositive power with respect to 190,543 shares of common stock.

(5)

Of the 189,232 shares, 68,100 shares are held by MLPFS Cust FBO Andrei Soran IRA, a self-directed IRA and 121,132 shares are held in The Andrei Soran Trust, Andrei Soran Trustee, Ilana Soran, Trustee, November 15, 2013. Mr. Soran holds sole voting and dispositive powers to all 189,232 shares.

(6)

Based on a Form 4 filed on November 19, 2019, Mr. Chambers holds sole voting and dispositive powers to 149,061 shares. Additionally, Mr. Chambers holds 27,500 options to purchase common stock.

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Security Ownership of Directors and Executive Officers

The following table shows the securities owned by each director, the Named Executive Officers as defined below, and by all of the current executive officers and directors as a group as of March 16, 2020.



Name and Address of Beneficial Owner	Common Stock Beneficially Owned(1)		Percent of Class(1)
Rodd E. Friedman	341,607	(2)	11.8%
Andrei Soran	189,232	(3)	6.5%
Jason R. Chambers	176,561	(4)	6.1%
Wayne M. Coll	—		*%
Robert A. Mello	35,678	(5)	1.2%
Marco F. Benedetti	24,916	(6)	*%
William J. Laursen	25,000	(7)	*%
All Executive Officers and Directors as a Group (7 Persons)	792,994	(8)	26.1%

*Less than 1%

(1)

Unless otherwise noted in these footnotes, the Company believes that all shares referenced in this table are owned by each person named as beneficial owner and that each person has sole voting and dispositive power with respect to the shares of Common Stock owned by each of them. In accordance with Rule 13d-3 under the Exchange Act, each person’s percentage ownership is determined by assuming that the options and warrants to purchase common stock that are held by that person, and which are exercisable within 60 days of March 16, 2020, have been exercised. The address of all persons listed above is c/o Micron Solutions, Inc., 25 Sawyer Passway, Fitchburg, MA 01420.

(2)

Rodd E. Friedman, the managing partner and majority owner of REF Securities, has sole voting and dispositive power over 341,607 shares of common stock including the 296,986 held in the name of REF Securities and 4,710 shares held in the name of REF Securities Profit Sharing.

(3)

(4)

Includes 27,500 shares issuable upon exercise of options.

(5)

Includes 7,500 shares issuable upon exercise of options.

(6)

Includes 7,500 shares issuable upon exercise of options.

(7)

Shares issuable upon exercise of options.

(8)

Includes 67,500 shares of the Company's common stock that executive officers and directors have the right to acquire upon exercise of stock options and warrants that are currently exercisable or exercisable within 60 days of March 16, 2020.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

~~The~~Certain ~~information~~Relationships ~~required~~and ~~under~~Related ~~this item is incorporated by reference to the applicable information set forth in the Proxy Statement for the 2018 Annual Meeting of Stockholders.~~Transactions

Subordinated promissory notes

In June 2019, the Company initiated a private offering to raise up to $500,000 through the sale of subordinated promissory notes (the “Notes”). The subscription for $500,000 was completed on July 5, 2019. The Notes bear interest on the unpaid principal at a simple annual interest rate equal to 10% per annum from the date of issuance. Interest only is payable in cash on a quarterly basis. The Notes mature on June 28, 2022. Each investor entered into a Subordination Agreement providing that the indebtedness pursuant to the Notes shall be subordinated to all indebtedness of the Company pursuant to its existing credit agreement.

For every $50,000 in principal invested in the notes, each investor received a warrant to purchase 10,000 shares of common stock (collectively, the “Warrants”, see Note 10 to the Consolidated Financial Statements). The Warrants are exercisable at an exercise price equal to $2.90 per share, namely, the average closing market price of the Company’s common stock on the fifteen days prior to the date of the Warrant, plus 12%. The Warrants contain standard provisions relating to anti-dilution adjustments for stock splits and recapitalizations. The Warrants also provide the investors with standard piggy-back registration rights in the event the Company files a registration statement (other than a registration statement on Form S-4 or S-8) to register the shares of common stock subject to standard limitations in the discretion of any underwriter.

In order to account for the Notes and Warrants, the Company allocated the proceeds between the Notes and Warrants on a relative fair value basis. As a result, the Company allocated $464,182 to the Notes and $35,818 to the Warrants. The total discount on the notes is being recognized as non-cash interest expense over the term of the notes. As of December 31, 2019, there was $5,970 in non-cash interest expense recorded related to the amortization of the discount.

Table of Contents

Related parties participated in the private offering as follows:


Jason Chambers, Director	$	50,000
Rodd Friedman, Director	$	100,000
Andrei Soran, Director	$	50,000

Director Independence

The Company's common stock is listed on the NYSE American stock exchange. The Board considers the status of its members pursuant to the independence requirements set forth in the NYSE American Company Guide and applicable federal securities laws. Under these requirements, the Board undertakes a review at least annually of director independence. During this review, the Board considers transactions and relationships between each director or any member of his immediate family and the Company and its affiliates, if any. The purpose of this review is to determine whether any such relationships or transactions exist that are inconsistent with a determination that the director is independent. The following current directors, Mr. Chambers, Mr. Benedetti, Mr. Friedman, Mr. Mello and Mr. Soran are each “independent” in each case as defined in the NYSE American Company Guide. The members of the Compensation Committee, Audit Committee and Nominating and Corporate Governance Committee are also “independent” for purposes of Section 10A-3 of the Exchange Act and NYSE American listing requirements. The Board bases these determinations primarily on a review of the responses of the directors to questions regarding employment and transaction history, affiliations and family and other relationships and on discussions with the directors.

Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

~~The~~Fees ~~information~~billed ~~required~~by ~~under~~Wolf ~~this~~& ~~item~~Company, isP.C. ~~incorporated~~(“Wolf”), bythe ~~reference~~Company’s toindependent ~~the~~accounting ~~applicable~~firm, ~~information~~for ~~set~~services ~~forth~~rendered in connection with the ~~Proxy~~fiscal ~~Statement~~year ~~for~~ended ~~the~~December 31, 2019 and 2018 ~~Annual~~are ~~Meeting~~set offorth ~~Stockholders~~below. All fees earned by Wolf were pre-approved by the Audit Committee.



	2019		2018
Audit fees	$	162,500	$	159,000
Audit-related fees		4,000		5,700
Tax fees		—		—
All other fees		—		—

Audit Fees

Audit fees billed by Wolf for 2019 consist of fees for the audit of the Company’s financial statements for the fiscal year ended December 31, 2019, and the review of the interim financial statements in the Company’s quarterly reports for the quarters ended March 31, 2019, June 30, 2019 and September 30, 2019. Audit fees billed by Wolf for 2018 consist of fees for the audit of the Company’s financial statements for the fiscal year ended December 31, 2018, and the review of the interim financial statements in the Company’s quarterly report for the quarters ended March 31, 2018, June 30, 2018 and September 30, 2018.

Audit-Related Fees

Audit-related fees billed by Wolf for 2019 were for their consent of incorporation by reference related to the Company’s S-8 Registration of 500,000 shares of common stock under the provisions of the Company’s 2019 Equity Incentive Plan. Audit-related fees billed by Wolf for 2018 were for audit procedures related to the Company’s implementation of new revenue recognition requirements as further outlined in the Annual Report on Form 10-K filed with the Commission on March 19, 2019.

Tax Fees

There were no tax fees billed by Wolf in 2019 or 2018.

All Other Fees

There were no other fees billed by Wolf for 2019 or for 2018.

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PART IV

Item 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
	Statements of changes in shareholders' equity
	Statements of cash flows
	Notes to consolidated financial statements

2. Financial Statement Schedules

Schedules 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 that are filed electronically with the SEC and are available 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.micronsolutionsinc.com. Information on our website is not a part of this Annual Report on Form 10-K.

Item 16. FORM 10-K SUMMARY

Not applicable.

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SIGNATURES

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.


	MICRON SOLUTIONS, INC.

March 30, 2020	By: /s/ William J. Laursen
	William J. Laursen
	President and Chief Executive Officer
	(principal executive officer)
March 30, 2020	By: /s/ Wayne Coll
	Wayne Coll
	Chief Financial Officer
	(principal financial and accounting officer)

~~Table~~KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints William J. Laursen and Wayne M. Coll, and each of ~~Contents~~them, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and re-substitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K for the year ended December 31, 2019, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming that all said attorneys-in-fact and agents, or any of them or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

MICRON SOLUTIONS, INC.

By:	/s/	William J. Laursen
		William J. Laursen
		President and Chief Executive Officer
		March 19, 2019

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints William J. Laursen and Derek T. Welch, and each of them, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and re-substitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K for the year ended December 31, 2018, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming that all said attorneys-in-fact and agents, or any of them or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

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/ William J. Laursen	President and Chief Executive Officer and Director	March 1930, ~~2019~~2020
William J. Laursen	(principal executive officer)
/s/ Derek T. Welch	Chief Financial Officer	March 19, 2019
/s/ Wayne M. Coll	Chief Financial Officer	March 30, 2020
Derek T. Welch	(principal financial and accounting officer)
Wayne M. Coll	(principal financial and accounting officer)
/s/ Jason R. Chambers	Chairman of the Board	March 19, 2019
/s/ Andrei Soran	Chairman of the Board	March 30, 2020
Jason R. Chambers
Andrei Soran
/s/ Marco F. Benedetti	Director	March 1930, ~~2019~~2020
Marco F. Benedetti
/s/ Rodd E. Friedman	Director	March 1930, ~~2019~~2020
Rodd E. Friedman
/s/ Robert A. Mello	Director	March 1930, ~~2019~~2020
Robert A. Mello
/s/ Andrei Soran	Director	March 19, 2019
/s/ Jason R. Chambers	Director	March 30, 2020
Andrei Soran
Jason R. Chambers

1322

Table of Contents

EXHIBIT 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 Current 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).
4.1	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 July 11, 2019).
4.2	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 July 11, 2019).
4.3	Form of Warrant (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K as filed with the Commission on July 11, 2019).
4.10*	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).
4.11*	2019 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 September 30, 2019, Registration Statement No. 333-234016).
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)
10.1*	Executive Incentive Compensation Plan (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K as filed with the Commission on November 22, 2019).
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).
10.66*	Employment Agreement between the Company and Salvatore Emma, Jr. dated as of January 1, 2017 (incorporated by reference to Exhibit 10.66 to the Company's Annual Report on Form 10-K for fiscal year ended December 31, 2016 as filed with the Commission on March 22, 2017).
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).
10.67*	Employment Agreement between the Company and Derek T. Welch dated as of January 1, 2017 (incorporated by reference to Exhibit 10.67 to the Company's Annual Report on Form 10-K for fiscal year ended December 31, 2016 as filed with the Commission on March 22, 2017).
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).
10.70	Credit and Security Agreement between Micron Products, Inc. and Rockland Trust Company dated December 29, 2017 (incorporated by reference to Exhibit 10.70 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 as filed with the Commission on March 26, 2018).
10.51	Loan and Security Agreement between UniBank for Savings and Micron Solutions, 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).
10.71	General Security Agreement between the Company and Rockland Trust Company dated December 29, 2017 (incorporated by reference to Exhibit 10.71 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 as filed with the Commission on March 26, 2018).
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).
10.72	Mortgage, Security Agreement and Financing Statement entered into by Micron Products, Inc. dated December 29, 2017 (incorporated by reference to Exhibit 10.72 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 as filed with the Commission on March 26, 2018).
10.62	Fifth Amendment to Loan and Security Agreement dated as of November 15, 2016 (incorporated by reference to Exhibit 10.62 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 as filed with the Commission on March 22, 2017).
10.73	M&E Term Loan Note entered into by Micron Products, Inc. dated December 29, 2017 (incorporated by reference to Exhibit 10.73 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 as filed with the Commission on March 26, 2018).
10.63	Commercial Term Promissory Note dated November 15, 2016 (incorporated by reference to Exhibit 10.63 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 as filed with the Commission on March 22, 2017).
10.74	Real Estate Term Loan Note entered into by Micron Products, Inc. dated December 29, 2017 (incorporated by reference to Exhibit 10.74 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 as filed with the Commission on March 26, 2018).
10.64	Commercial Equipment Line of Credit Promissory Note dated November 15, 2016 (incorporated by reference to Exhibit 10.64 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 as filed with the Commission on March 22, 2017).
10.75	Revolver Note entered into by Micron Products, Inc. dated December 29, 2017 (incorporated by reference to Exhibit 10.75 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 as filed with the Commission on March 26, 2018).
10.65*	Executive Incentive Plan (incorporated by reference to Exhibit 10.65 to the Company's Current Report on Form 8-K as filed with the Commission on December 6, 2016).

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10.66*	Employment Agreement between the Company and Salvatore Emma, Jr. dated as of January 1, 2017 (incorporated by reference to Exhibit 10.66 to the Company's Annual Report on Form 10-K for fiscal year ended December 31, 2016 as filed with the Commission on March 22, 2017).
10.67*	Employment Agreement between the Company and Derek T. Welch dated as of January 1, 2017 (incorporated by reference to Exhibit 10.67 to the Company's Annual Report on Form 10-K for fiscal year ended December 31, 2016 as filed with the Commission on March 22, 2017).
10.68	Sixth Amendment to Loan and Security Agreement dated June 16, 2017 (incorporated by reference to Exhibit 10.68 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017 as filed with the Commission on August 11, 2017).
10.69	Forbearance Agreement between UniBank for Savings, Micron Solutions, Inc. and Micron Products, Inc. dated September 29, 2017 (incorporated by reference to Exhibit 10.69 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017 as filed with the Commission on November13, 2017).
10.70	Credit and Security Agreement between Micron Products, Inc. and Rockland Trust Company dated December 29, 2017 (incorporated by reference to Exhibit 10.70 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 as filed with the Commission on March 26, 2018).
10.71	General Security Agreement between the Company and Rockland Trust Company dated December 29, 2017 (incorporated by reference to Exhibit 10.71 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 as filed with the Commission on March 26, 2018).
10.72	Mortgage, Security Agreement and Financing Statement entered into by Micron Products, Inc. dated December 29, 2017 (incorporated by reference to Exhibit 10.72 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 as filed with the Commission on March 26, 2018).
10.73	M&E Term Loan Note entered into by Micron Products, Inc. dated December 29, 2017 (incorporated by reference to Exhibit 10.73 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 as filed with the Commission on March 26, 2018).
10.74	Real Estate Term Loan Note entered into by Micron Products, Inc. dated December 29, 2017 (incorporated by reference to Exhibit 10.74 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 as filed with the Commission on March 26, 2018).
10.75	Revolver Note entered into by Micron Products, Inc. dated December 29, 2017 (incorporated by reference to Exhibit 10.75 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 as filed with the Commission on March 26, 2018).
10.76	General Continuing Guarantee entered into by the Company dated as of December 29, 2017 (incorporated by reference to Exhibit 10.76 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 as filed with the Commission on March 26, 2018).
10.77*	Employment Agreement between the Company and Salvatore Emma, Jr. dated as of October 29, 2018 (incorporated by reference to Exhibit 10.77 to the Current Report on Form 8-K filed with the Commission on November 2, 2018).
10.77	First Amendment to the Credit and Security Agreement between Micron Products, Inc. and Rockland Trust Company dated March 7, 2019 (incorporated by reference to Exhibit 10.79 to the Company’s Current Report on Form 8-K filed with the Commission on March 12, 2019).
10.78*	Employment Agreement between the Company and William J. Laursen dated as of October 29, 2018 (incorporated by reference to Exhibit 10.78 to the Current Report on Form 8-K filed with the Commission on November 2, 2018).
10.78	Second Amendment and Consent to the Credit Agreement dated as of August 6, 2019 by and among Micron Products, Inc. (as Borrower), the Company (as Guarantor) and Rockland Trust Company (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 10-Q filed with the Commission on November 14, 2019).
10.79	~~First~~Third Amendment and Consent to the Credit ~~and~~Agreement ~~Security~~dated ~~Agreement~~as ~~between~~of August 13, 2019 by and among Micron Products, Inc. ~~and~~(as ~~Rockland~~Borrower), ~~Trust~~the Company ~~dated~~(as ~~March~~Guarantor) 7,and ~~2019~~Rockland Trust Company (incorporated by reference to Exhibit 10.792 to the Company’s Current Report on Form 810-KQ filed with the Commission on ~~March~~November 1214, 2019).
10.80**	Fourth Amendment and Consent to the Credit Agreement dated as of March 12, 2020 by and among Micron Products, Inc. (as Borrower), the Company (as Guarantor) and Rockland Trust Company	X-1
10.81*	Employment Agreement between the Company and Salvatore Emma, Jr. dated as of October 29, 2018 (incorporated by reference to Exhibit 10.77 to the Current Report on Form 8-K filed with the Commission on November 2, 2018).
10.82*	Employment Agreement between the Company and William J. Laursen dated as of October 29, 2018 (incorporated by reference to Exhibit 10.78 to the Current Report on Form 8-K filed with the Commission on November 2, 2018).
10.83*	Employment Agreement between the Company and Wayne Coll dated as of July 15, 2019 (incorporated by reference to Exhibit 10.80 to the Current Report on Form 8-K filed with the Commission on July 17, 2019).
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).
23.1**	Consent of Wolf & Company, P.C.	X-1
31.1**	Certification of the CEO pursuant to Rule 13a-14(a) or Rule 15(d)-14(a)	X-2
31.2**	Certification of the CFO pursuant to Rule 13a-14(a) or Rule 15(d)-14(a)	X-3
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-4
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-5
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
* 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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**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.

Table of Contents

Micron Solutions, Inc.

and Subsidiary

Contents


Report of Independent Registered Public Accounting Firm		F-2
Consolidated Financial Statements:
Consolidated Balance Sheets		F-3
Consolidated Statements of Operations		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

Table of Contents

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of Micron Solutions, Inc. and Subsidiary

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Micron Solutions, Inc. and Subsidiary (the "Company") as of December 31, ~~2018~~2019 and ~~2017~~2018, the related consolidated statements of operations, changes in shareholders' equity, and cash flows for the years then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, ~~2018~~2019 and ~~2017~~2018, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting, 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.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ WOLF & COMPANY, P.C.

We have served as the Company’s auditor since 2013.

Boston, Massachusetts

March 1930, ~~2019~~2020

F-2

Table of Contents

Micron Solutions, Inc. and Subsidiary

Consolidated Balance Sheets

	December 31,		December 31,
	2018		2017
	2019		2018
Assets
Current assets:
Cash and cash equivalents	$	~~1,715~~503	$	~~606~~1,~~988~~715
Restricted cash		—		350,000
Trade accounts receivable, net of allowance for doubtful accounts of $39,169 at December 31, 2019 and $40,000 at December 31, 2018		2,152,254		2,325,804
Trade accounts receivable, net of allowance for doubtful accounts of $40,000 at December 31, 2018 and 2017		2,325,804		2,595,248
Inventories		2,468,648		3,685,059
Inventories		3,685,059		3,413,199
Assets held for sale, net		688,750		—
Prepaid expenses and other current assets		389,390		460,954
Total current assets		7,090,718		7,426,389
Property, plant and equipment, net		5,131,773		5,744,039
Assets held for sale, net		—		688,750
Intangible assets, net		53,155		55,133
Prepaid expenses and other current assets		257,859		389,390
Other assets		5,140		10,289
Total current assets		4,879,264		7,090,718
Total assets	$	12,280,786	$	13,924,600
Property, plant and equipment, net		3,801,916		5,131,773
Intangible assets, net		47,509		53,155
Other assets		5,645		5,140
Total assets	$	8,734,334	$	12,280,786
Liabilities and Shareholders’ Equity
Current liabilities:
Revolving line of credit	$	21,~~025~~274,~~592~~299	$	12,~~879~~025,~~047~~592
Term notes payable, current portion		389,420		367,779
Term notes payable, current portion, net		3,557,458		389,420
Subordinated promissory notes, current portion		—		350,000
Accounts payable		841,068		1,200,298
Accounts payable		1,200,298		1,534,349
Accrued expenses and other current liabilities		383,836		459,108
Accrued expenses and other current liabilities		459,108		320,065
Contract liabilities, current portion		5,472		560,802
Contract liabilities, current portion		560,802		426,457
Total current liabilities		6,062,133		4,635,220
Total current liabilities		4,635,220		4,877,697
Long-term liabilities:
Term notes payable, non-current portion		3,557,458		3,978,415
Term notes payable, non-current portion, net		—		3,557,458
Total long-term liabilities		3,557,458		3,978,415
Subordinated promissory notes, net		470,152		—
Total liabilities		8,192,678		8,856,112
Total long-term liabilities		470,152		3,557,458
Total liabilities		6,532,285		8,192,678
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, 2,861,008 outstanding at December 31, 2018 and 3,926,491 issued, 2,839,274 outstanding at December 31, 2017		39,265		39,265
Common stock, $0.01 par value; 10,000,000 shares authorized; 3,926,491 issued, 2,906,609 outstanding at December 31, 2019 and 3,926,491 issued, 2,861,008 outstanding at December 31, 2018		39,265		39,265
Additional paid-in-capital		11,~~604~~735,~~817~~457		11,~~532~~604,~~207~~817
Treasury stock at cost, 1,065,483 shares at December 31, 2018 and 1,087,217 shares at December 31, 2017		(2,907,490)		(2,966,798)
Treasury stock at cost, 1,019,882 shares at December 31, 2019 and 1,065,483 shares at December 31, 2018		(2,783,055)		(2,907,490)
Accumulated deficit		(46,~~648~~789,~~484~~618)		(34,~~536~~648,~~186~~484)
Total shareholders’ equity		42,~~088~~202,~~108~~049		54,~~068~~088,~~488~~108
Total liabilities and shareholders’ equity	$	128,~~280~~734,~~786~~334	$	1312,~~924~~280,~~600~~786

See accompanying notes to consolidated financial statements.

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Table of Contents

Micron Solutions, Inc. and Subsidiary

Consolidated Statements of Operations

	Year Ended
	December 31,
	2018		2017
	2019		2018
Net sales	$	1917,~~564~~499,~~981~~364	$	2019,~~102~~564,~~662~~981
Cost of sales		1715,~~241~~737,~~289~~469		17,~~810~~241,~~284~~289
Gross profit		21,~~323~~761,~~692~~895		2,~~292~~323,~~378~~692
Selling and marketing		~~730~~636,~~863~~167		~~841~~730,~~845~~863
General and administrative		2,~~243~~760,~~595~~787		2,~~357~~243,~~909~~595
Research and development		~~106~~80,~~814~~357		~~111~~106,~~014~~814
Total operating expenses		3,~~081~~477,~~272~~311		3,~~310~~081,~~768~~272
Net loss from operations		(~~757~~1,~~580~~715,416)		(1757,~~018,390~~580)
Other income (expense):
Interest expense		(~~391~~431,~~437~~544)		(~~395~~391,~~085~~437)
Other income, net		52,878		57,419
Other income (expense), net		5,826		52,878
Total other expense, net		(~~338~~425,~~559~~718)		(~~337~~338,~~666~~559)
Net loss before income tax provision (benefit)		(1,096,139)		(1,356,056)
Net loss before income tax provision		(2,141,134)		(1,096,139)
Income tax provision (benefit)		2,168		(960)
Income tax provision		—		2,168
Net loss	$	(1,098,307)	$	(1,355,096)
Net income (loss)	$	(2,141,134)	$	(1,098,307)
Earnings (loss) per share - basic and diluted	$	(0.39)	$	(0.48)
Loss per share - basic and diluted	$	(0.74)	$	(0.39)
Weighted average common shares outstanding - basic and diluted		2,~~850~~883,~~397~~861		2,~~824~~850,~~061~~397

See accompanying notes to consolidated financial statements.

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Table of Contents

Micron Solutions, Inc. and Subsidiary

Consolidated Statements of Changes in Shareholders' Equity

				Additional
	Common stock			paid-in		Treasury stock			Accumulated
	Shares	Amount		capital		Shares	Amount		deficit		Total
December 31, 2016	3,926,491	$	39,265	$	11,457,320	1,109,852	$	(3,028,564)	$	(2,181,090)	$	6,286,931
Share-based compensation - options					48,129							48,129
Issuance of common stock from treasury					26,758	(22,635)		61,766				88,524
Net loss										(1,355,096)		(1,355,096)
December 31, 2017	3,926,491	$	39,265	$	11,532,207	1,087,217	$	(2,966,798)	$	(3,536,186)	$	5,068,488
Change in accounting principle (see Note 3)										(13,991)		(13,991)
Change in Accounting Principle - ASC 606										(13,991)		(13,991)
Share-based compensation - options					56,168							56,168
Share based compensation					56,168							56,168
Issuance of common stock from treasury					16,442	(21,734)		59,308				75,750
Net loss										(1,098,307)		(1,098,307)
December 31, 2018	3,926,491	$	39,265	$	11,604,817	1,065,483	$	(2,907,490)	$	(4,648,484)	$	4,088,108
Share-based compensation					108,716							108,716
Issuance of common stock from treasury					(13,894)	(45,601)		124,435				110,541
Issuance of warrants					35,818							35,818
Net loss										(2,141,134)		(2,141,134)
December 31, 2019	3,926,491	$	39,265	$	11,735,457	1,019,882	$	(2,783,055)	$	(6,789,618)	$	2,202,049

See accompanying notes to consolidated financial statements.

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Table of Contents

Micron Solutions, Inc. and Subsidiary

Consolidated Statements of Cash Flows

	Year Ended
	December 31,
	2018		2017
	2019		2018
Cash flows from operating activities:
Net loss	$	(12,~~098~~141,~~307~~134)	$	(1,~~355~~098,~~096~~307)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Adjustments to reconcile net loss to net cash provided byoperating activities:
Gain on sale of property, plant and equipment		(8,360)		(21,750)
Gain on sale of assets		(7,602)		(8,360)
Depreciation and amortization		1,~~504~~463,~~037~~443		1,~~611~~504,~~139~~037
Impairment of intangibles		—		1,771
Non-cash interest expense		94,392		62,120
Non-cash interest expense		62,120		63,846
Change in allowance for doubtful accounts		831		—
Change in allowance for doubtful accounts		—		10,000
Share-based compensation expense		219,257		131,918
Share-based compensation expense		131,918		136,653
Changes in operating assets and liabilities:
Accounts receivable		~~269~~172,~~444~~719		~~(328~~269,~~640)~~444
Inventories		~~(348~~1,~~121)~~258,015		(~~353~~348,~~114~~121)
Prepaid expenses and other current assets		43,394		153,408
Prepaid expenses and other current and non-current assets		131,026		44,389
Other non-current assets		995		145,942
Accounts payable		(371,833)		(343,038)
Accounts payable		(343,038)		(209,912)
Accrued expenses and other current liabilities		(83,367)		157,376
Accrued expenses and other current liabilities		157,376		(13,296)
Contract liabilities		(555,329)		134,345
Contract liabilities		134,345		79,179
Net cash provided by operating activities		180,419		505,803
Other non-current liabilities		—		(156,953)
Net cash provided by (used in) operating activities		505,803		(236,823)
Cash flows from investing activities:
Purchases of property, plant and equipment		(~~801~~169,~~884~~131)		(~~924~~801,~~621~~884)
Proceeds from sale of property, plant and equipment		832,~~360~~602		348,~~600~~360
Cash paid for patents and trademarks		(2,661)		(29,307)
Proceeds from sale of assets held for sale		663,334		—
Net cash provided by (used in) investing activities		(796,185)		(919,328)
Cash paid for patents and trademarks		—		(2,661)
Net cash provided by (used in) investing activities		526,805		(796,185)
Cash flows from financing activities:
Proceeds from (payments on) revolving line of credit, net		146,545		93,252
(Borrowings) payments on revolving line of credit, net		(751,293)		146,545
Proceeds from term notes		—		4,500,000
Payments on term notes		(457,143)		(419,047)
Payments on term notes payable		(419,047)		(2,606,688)
Payments of debt issuance costs		—		(42,389)
Payments of debt issuance costs		(42,389)		(153,806)
Proceeds from (payments on) subordinated notes payable		500,000		(350,000)
Payments on subordinated debt		(350,000)		(100,000)
Net cash (used in) financing activities		(708,436)		(664,891)
Net cash provided by (used in) financing activities		(664,891)		1,732,758
Net change in cash and cash equivalents		(1,212)		(955,273)
Net change in cash and cash equivalents and restricted cash		(955,273)		576,607
Cash and cash equivalents, beginning of period		1,715		956,988
Cash and cash equivalents and restricted cash, beginning of period		956,988		380,381
Cash and cash equivalents, end of period	$	503	$	1,715
Cash and cash equivalents and restricted cash, end of period	$	1,715	$	956,988

See accompanying notes to consolidated financial statements.

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Table of Contents

Micron Solutions, Inc. and Subsidiaries

Consolidated Statements of Cash Flows Supplemental Information

	Year Ended
	December 31,
Supplemental Cash Flow Information	~~2018~~2019		~~2017~~2018
Cash paid for interest	$	~~313~~353,~~425~~343	$	~~324~~313,~~641~~425
Non-cash activities:
Issuance of treasury stock for directors fees	$	75,750	$	88,524
Issuance of common stock warrants in connection with subordinated notes payable	$	35,818	$	—
Adjustment to accumulated deficit for change in accounting principle (Note 3)	$	(13,991)	$	—
Issuance of treasury stock for directors' fees	$	110,541	$	75,750
Adjustment to accumulated deficit for change in accounting principle (ASC 606)	$	—	$	(13,991)

See accompanying notes to consolidated financial statements.

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Table of Contents

Micron Solutions, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Years Ended December 31, ~~2018~~2019 and ~~2017~~2018

1. Description of Business

Micron Solutions®, Inc., a Delaware corporation ("Micron Solutions"), through its wholly-owned Massachusetts operating subsidiary, Micron Products®, Inc. (“Micron” and together with Micron Solutions, 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~~products 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. The Company’s machining operations produce quick-turn, high volume and patient-specific orthopedic implant components and instruments as well as products for the defense industry. The Company ~~also~~ has ~~custom~~diversified ~~thermoplastic~~manufacturing ~~injection~~capabilities ~~molding~~with ~~capabilities~~the ascapacity ~~well~~to asparticipate ain full ~~array~~product oflife-cycle ~~design,~~activities ~~engineering,~~from ~~production~~early ~~services~~stage development and ~~management. The~~engineering ~~Company~~and ~~competes~~prototyping ~~globally,~~to ~~with~~full ~~approximately~~scale ~~45%~~manufacturing ofas ~~its~~well ~~revenue~~as ~~derived~~packaging ~~from~~and ~~exports~~product fulfillment services.

~~Today,~~The ~~the~~ Company ~~has~~competes ~~diversified~~globally, ~~manufacturing capabilities~~ with ~~the~~approximately ~~capacity~~37% toof ~~participate~~its inrevenue ~~full~~derived ~~product life-cycle activities~~ from ~~early stage development and engineering and prototyping to full scale manufacturing as well as packaging and product fulfillment services~~exports.

Liquidity and Management’s Plan

At December 31, ~~2018~~2019, the Company identified certain conditions and events which in the aggregate required management to perform an assessment of the Company’s ability to continue as a going concern. These conditions included the Company’s negative financial history and the Company’s ability to generate sufficient cash to support the Company’s operations and to meet debt service requirements under the Company’s credit agreement. As of December 31, ~~2018~~2019, the Company has $~~1,715~~503 of cash and approximately $~~285~~810,000 of borrowing capacity on its revolving line of credit (“Revolver”). As a result of the above factors, management has performed an analysis to evaluate the entity’s ability to continue as a going concern for one year after the financial statements issuance date.

Management’s analysis includes forecasting future revenues, expenditures and cash flows, taking into consideration past performance and the requirements under the credit agreement. Revenue and cash flow forecasts are dependent on the Company’s ability to fill booked orders ~~from existing customers~~, ~~its~~to ~~ability~~ close on new and expanded business ~~and~~ , to improve overall financial performance and its ability to obtain alternative financing, which may include a sale/leaseback of certain real estate and equipment.

~~Management~~On also believes that it is probable that the Company will close on the sale of the vacant buildings, shown as assets held for sale on the consolidated balance sheets, on or about June 30, 2019 and the proceeds of approximately $700,000 will be applied against the Company’s revolver. Additionally, subsequent to year end, on March 712, ~~2019~~2020, the Company entered into the ~~First~~ Fourth Amendment to the Credit and Security Agreement in which the quarterly debt service coverage ratio measurement requirements for ~~2019~~2020 were amended to lessen the burden of compliance and non-compliance with the debt service coverage ratio for the fourth quarter of 2019 was waived. See Note 76.

Based on management’s analysis, the Company believes that cash flows from ~~its~~ operations, together with ~~its~~ existing working capital, booked orders, ~~the~~expense ~~sale~~management, of the ~~vacant~~Revolver and ~~buildings,~~alternative ~~expense~~financing ~~management~~options, ~~and~~which ~~its~~may ~~Revolver~~include a sale/leaseback of certain real estate and equipment, will be sufficient to fund operations at current and projected levels and to repay debt obligations over the next twelve months. ~~from the financial statements issuance date; however~~However, there can be no assurance that the Company will be able to do so.

2. Accounting Policies

Principles of consolidation

The consolidated financial statements (the "financial statements") include the accounts of Micron Solutions, Inc. and its operating subsidiary, Micron Products, Inc. All intercompany balances and transactions have been eliminated in consolidation.

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 recognition

The Company adopted ~~Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“~~ASU”) No. 2014-09, “Revenue from Contracts with Customers, Topic 606” (“Topic 606”) effective January 1, 2018 using the modified retrospective approach. Under the modified retrospective method, a cumulative effect of initially applying the new standard is recorded as an adjustment to the opening balance of retained earnings at the date of initial application. By electing to use this method, there is no restatement of the comparative periods presented (i.e., interim periods and fiscal year ending 2017). As permitted by Topic 606 transition guidance (outlined below), the Company has elected to apply the new standard only to

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Table of Contents

Micron Solutions, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Years Ended December 31, ~~2018~~2019 and ~~2017~~2018

approach. Under the modified retrospective method, a cumulative effect of initially applying the new standard is recorded as an adjustment to the opening balance of retained earnings at the date of initial application. By electing to use this method, there is no restatement of the comparative periods presented. As permitted by Topic 606 transition guidance, the Company applied the new standard only to contracts that were not completed contracts at the date of initial application, and therefore, the Company only evaluated those contracts that were in-process and not completed before January 1, 2018.

~~Beginning~~The ~~January 1, 2018, the~~ Company ~~applied~~determined ~~Topic~~that ~~606~~customer ~~using~~purchase ~~the~~orders ~~five~~represent ~~step approach outlined in the guidance: (1) Identify~~ contracts with ~~the~~a customer,. For ~~(2)~~each ~~Identify the performance obligations in the~~ contract, ~~(3) Determine~~ the ~~transaction~~Company ~~price,~~considers ~~(4) Allocate~~ the ~~transaction~~promise ~~price~~ to ~~the~~transfer ~~performance obligations in the contract~~products, ~~and~~each ~~(5)~~of ~~Recognize~~which ~~revenue~~are ~~when~~distinct, ~~(or~~to ~~as)~~be the ~~entity~~identified ~~satisfies the~~ performance obligations.

The Company determined that customer purchase orders represent contracts with a customer. For each contract, the Company considers the promise to transfer products, each of which are distinct, to be the identified performance obligations. Shipping and handling activities for which the Company is responsible are not a separate promised service but instead are activities to fulfill the entity’s promise to transfer goods. Shipping and ~~are~~handling fees will be recognized at the same time as the related performance ~~obligation~~obligations isare satisfied.

The Company determines the transaction price as the amount of consideration it expects to receive in exchange for transferring promised goods or services to the customer. If a contract includes a variable amount, such as a rebate, then the Company estimates the transaction price using either the expected value or the most likely amount of consideration to be received, depending upon the specific facts and circumstances. The Company includes estimated variable consideration in the transaction price only to the extent it is probable that a significant reversal of revenue will not occur when the uncertainty is resolved. The Company updates its estimate of variable consideration at the end of each reporting period to reflect changes in facts and circumstances.

The Company recognizes revenue at the point in time when it transfers control of the promised goods or services to the customer, which typically occurs once the product has shipped or has been delivered to the customer. For certain customer warehousing agreements, delivery is deemed to have occurred when the customer pulls inventory out of the warehouse for use in their production. Additionally, for certain customers, delivery is deemed to have occurred when items are delivered to bill and hold locations at the Company’s facility.

The Company evaluated the nature of any guarantees or warranties related to its contracts with customers. The Company ~~determined that any such warranty is~~ provides an assurance-type warranty that only covers the products’ compliance with agreed-upon specifications and does not provide the customer with a service in addition to the assurance that the product complies with agreed-upon specifications.

Certain contracts contain prepayment terms that result in liabilities for customer deposits. Additionally, certain contracts provide for invoicing before all performance obligations have been fulfilled which results in deferred revenue. Customer deposits and advance invoicing are recorded as contract liabilities on the Company’s consolidated balance sheet.

The Company generally expenses sales commission when incurred because the amortization period would have been one year or less. These costs are recorded within selling and marketing expenses.

The Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected duration of one year or less.

The implementation of Topic 606 affects the timing of certain revenue related transactions primarily resulting from the earlier recognition of the Company's tooling revenue and costs. Under legacy GAAP, the Company accounted for tooling as multiple element arrangements whereby revenue and cost were recognized over a period of time after the tool was completed. Upon adoption of ASU 2014-09, tooling sales and costs are now recognized at the point in time upon which the tool is complete and the Company has satisfied all its performance obligations under the contract.

As a result of the initial application of Topic 606 in 2018, the Company made an adjustment to its beginning accumulated deficit of ($13,991) to recognize the remaining deferred revenue ($18,333) and deferred costs ($32,324) recorded as of December 31, 2017 relative to certain completed tooling sales.

During the twelve months ended December 31, 2019, the Company recognized as revenue $549,326 of amounts recorded as Contract Liabilities at December 31, 2018. During the twelve months ended December 31, 2018, the Company recognized as revenue $85,833 of amounts recorded as Contract Liabilities at December 31, 2017.

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.

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Table of Contents

Micron Solutions, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Years Ended December 31, ~~2018~~2019 and ~~2017~~2018

~~During~~Concentration ~~the year ended December 31, 2018, the Company had net sales to three customers constituting 18%, 12% and 10%~~ of ~~total~~credit net sales. Accounts receivable from these three customers at December 31, 2018 was 19%, 7% and 7%, respectively, of the total accounts receivable balance at year end. During the year ended December 31, 2017, the Company had net sales to two customers constituting 17% and 10%, respectively, of total net sales. Accounts receivable from these two customers at December 31, 2017 was 13% and 3%, respectively, of the total accounts receivable balance at year end. risk

~~During~~Financial instruments which potentially expose the ~~years~~Company ~~ended~~to ~~December~~concentrations ~~31,~~of ~~2018~~credit risk consist primarily of accounts receivable and ~~2017~~cash ~~approximately~~and ~~75%~~cash ofequivalents. It is the Company’s ~~net~~policy ~~sales~~to ~~were~~place toits ~~customers~~cash in ~~the~~high ~~medical~~quality ~~industry~~financial institutions. The Company ~~also~~does ~~had~~not ~~net~~believe ~~sales~~significant tocredit ~~customers~~risk inexists ~~the~~above ~~automotive,~~federally ~~industrial,~~insured ~~consumer~~limits ~~products,~~with ~~and~~respect ~~military~~to ~~and~~these ~~law enforcement industries~~institutions.

~~The~~Accounts ~~Company~~receivable ~~competes~~are ~~globally,~~customer ~~with~~obligations ~~approximately~~due ~~45%~~under ofnormal ~~its~~trade ~~revenue derived from exports~~terms. ~~While~~ ~~some~~A ~~risks~~large ~~exist~~portion inof ~~foreign markets,~~ the Company’'s ~~customers have historically been based in stable regions. To reduce the risks associated with foreign shipments and currency exchange fluctuations, the title to most of the~~ products are ~~transferred~~sold to ~~the~~large ~~customers~~diversified ~~when~~medical, ~~shipped~~military and ~~payment~~automotive isparts ~~required~~product ~~in U~~manufacturers.S. ~~Dollars.~~ The Company ~~also~~does ~~has~~not ~~agreements~~generally ~~with~~require ~~certain~~collateral ~~foreign~~for ~~customers~~its tosales; ~~hold inventory at customer locations where title transfers and revenue is recognized when the product is consumed by the customer. To further reduce risk~~however, the Company ~~sells~~believes tothat ~~certain~~its ~~markets~~terms ~~only with cash-in-advance or letter-~~of~~-credit~~ ~~terms. In~~sale ~~addition,~~provide ~~accounts~~adequate ~~receivable~~protection ~~insurance~~against iscredit ~~used where available and appropriate to further reduce~~ risk ~~in these markets~~.

During the year ended December 31, 2019, the Company had net sales to two customers constituting 18% and 10% of total net sales. Accounts receivable from these two customers at December 31, 2019 was 16% and 9%, respectively, of the total accounts receivable balance at year end. During the year ended December 31, 2018, the Company had net sales to three customers constituting 18%, 12% and 10%, respectively, of total net sales. Accounts receivable from these three customers at December 31, 2018 was 20%, 7% and 7%, respectively, of the total accounts receivable balance at year end.

The Company competes globally, with 37% of its revenue derived from exports in 2019. While some risks exist in foreign markets, the Company’s customers have historically been based in stable regions. The Company has agreements with certain foreign customers to hold inventory at customer locations where title and control transfers and revenue is recognized when the product is consumed by the customer. Accounts receivable insurance is used where available and appropriate to reduce risk in these markets.

Cash and cash equivalents

~~Cash~~The ~~and~~Company ~~cash~~considers ~~equivalents~~all ~~consist~~highly ofliquid ~~cash~~investments onwith ~~hand~~an ~~and~~original onmaturity ~~deposit in high quality financial institutions with maturities~~ of three months or less at the ~~time~~date of purchase to be cash equivalents. Cash and cash equivalents consist of cash on hand in high quality financial institutions The Company’s credit agreement provides for a daily sweep of cash balances against the balance of the Revolver (see Note 76).

Restricted cash

Restricted cash represents cash obtained pursuant to the Company's credit agreement for the designated purpose of discharging the subordinated promissory notes, which occurred on January 2, 2018 (see Note 7).

Accounts receivable and allowance for doubtful accounts

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.

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 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, or net realizable value, and cost is determined using first in first out (FIFO) or, for sensors, using average cost. The Company reviews its inventory for quantities in excess of production requirements, for 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~~realizable 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 repairs are charged to earnings as incurred. When equipment is retired or sold, the resulting gain or loss is reflected in earnings.

Fair value hierarchy

The Company groups its assets and liabilities 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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Table of Contents

Micron Solutions, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Years Ended December 31, ~~2018~~2019 and ~~2017~~2018

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.

Fair value hierarchy

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

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.

There were no assets or liabilities measured at fair value at December 31, 2019. At December 31, 2018 ~~and 2017~~, assets held for sale is the only item in the financial statements ~~reflected~~measured 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 65).

Long-lived and intangible 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 did not record any impairment charges in ~~2018. The~~2019 ~~Company~~or ~~recorded impairment charges of $1,771 in 2017~~2018.

Intangible assets consist of the following at:

Estimated

December 31, ~~2018~~2019

December 31, ~~2017~~2018

Useful Life

Accumulated

(in years)

Gross

Amortization

Net

Gross

Amortization

Net

Patents and trademarks

36,880

1215,~~134~~382

2421,~~746~~498

2236,~~911~~880

912,~~888~~134

1324,~~023~~746

Patents and trademarks pending

—

2,143

—

2,143

132,~~786~~143

—

132,~~786~~143

Trade names

29,398

35,~~132~~530

2623,~~266~~868

29,~~062~~398

~~738~~3,132

2826,~~324~~266

Total intangible assets

68,421

1520,~~266~~912

5347,~~155~~509

6568,~~759~~421

1015,~~626~~266

5553,~~133~~155

Amortization expense related to intangible assets, ~~excluding the 2017 impairment charge noted above,~~ was $45,~~639~~646 and $24,~~496~~639 in ~~2018~~2019 and ~~2017~~2018, respectively. Estimated future annual amortization expense for currently ~~amortizing~~amortized intangible assets is expected to ~~approximate~~range from approximately $45,~~000~~600 annually, declining to approximately $2,600 annually, through ~~2031~~the year 2033.

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 Income Taxes”, which provides detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in the financial statements. Tax positions must meet a “more-likely-than-not” recognition threshold at the effective date to be recognized. No interest and penalties related to uncertain tax positions were incurred during 2019 and 2018. The Company’s primary operations are located in the United States. Tax years ended December 31, 2016 or later remain subject to examination by the IRS and state taxing authorities.

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).

F-11

Table of Contents

Micron Solutions, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Years Ended December 31, ~~2018~~2019 and ~~2017~~2018

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 Income Taxes”, which provides detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in the financial statements. Tax positions must meet a “more-likely-than-not” recognition threshold at the effective date to be recognized. No interest and penalties related to uncertain tax positions were incurred during 2018 and 2017. The Company’s primary operations are located in the United States. Tax years ended December 31, 2015 or later remain subject to examination by the IRS and state taxing authorities.

Share-based compensation

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 costs, 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 FASB to determine the potential impact they may have on the Company’s Consolidated Financial Statements. Based upon this review, 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 February 2016, the FASB issued ASU ~~No.~~ 2016-02, “Leases,” which requires a lessee to recognize lease liabilities for the lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and right-of-use assets, representing the lessee’s right to use, or to control the use of, specified assets for the lease term. The ~~ASU~~Company ~~became~~adopted ~~effective~~the ASU on January 1, 2019~~. As~~ ofand, ~~the~~based ~~date~~on ofits ~~this~~current ~~report,~~portfolio ~~the~~of ~~Company~~leases is(which ~~the~~consists ~~lessee~~solely of office equipment inleases), ano ~~single operating~~ lease ~~and~~assets isor ~~the~~liabilities ~~lessee~~have ofbeen arecognized ~~parking lot. The Company is not a lessor~~ in ~~any~~these ~~arrangements. The~~financial ~~Company does not expect any material impact on reporting or on the results of operations~~statements.

On August 29, 2018, the FASB issued ASU 2018-15, to address a customer’s accounting for implementation costs incurred in a cloud computing arrangement (CCA) hosted by the vendor - that is a service contract. The Company adopted the ASU on January 1, 2019. ASU 2018-15 aligns the accounting for costs incurred to implement a CCA that is a service arrangement with the guidance on capitalizing costs associated with obtaining internal-use software. Specifically, implementation and development costs, including those for CCAs that do not transfer a software license, may qualify for capitalization based on the phase and nature of the costs. During 2019, the Company initiated a cloud-based software implementation. As of December 31, 2019, the company capitalized $4,331 (the first costs of implementation), which will be expensed over the remaining life of the service agreement upon completion.

Management does not expect any recently issued, but not yet effective, accounting standards to have a material effect on its results of operations or financial conditions.

Reclassification of prior period balances

Amounts in prior year financial statements are reclassified when necessary to conform to the current year presentation.

3. ~~Change in Accounting Principle~~Inventories

~~Revenue~~Inventories ~~Recognition~~consist of the following:

Based on the Company’s assessment, the implementation of Topic 606 affects the timing of certain revenue related transactions primarily resulting from the earlier recognition of the Company's tooling revenue and costs. Under legacy GAAP, the Company accounted for tooling as multiple element arrangements whereby revenue and cost were recognized over a period of time after the tool was completed. Upon adoption of ASU 2014-09, tooling sales and costs are now recognized at the point in time upon which the tool is complete and the Company has satisfied all its performance obligations under the contract.



	December 31,		December 31,
	2019		2018
Raw materials	$	923,502	$	1,079,887
Work-in-process		393,433		1,105,272
Finished goods		1,151,713		1,499,900
Total	$	2,468,648	$	3,685,059

The total cost of silver in inventory as raw materials, as work-in-process or as a plated surface on finished goods had an estimated cost of $380,347 and $461,272 at December 31, 2019 and 2018, respectively.

F-12

Table of Contents

Micron Solutions, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Years Ended December 31, ~~2018~~2019 and ~~2017~~2018

~~As a result of the initial application of Topic 606~~4. Property, ~~the~~Plant ~~Company made an adjustment to its beginning accumulated deficit of ($13,991) to recognize the remaining deferred revenue ($18,333)~~ and ~~deferred costs ($32~~Equipment,~~324)~~ ~~recorded as of December 31, 2017 relative to certain completed tooling sales.~~ Net

~~The~~Property, ~~table~~plant ~~below~~and ~~compares~~equipment, ~~the~~net ~~affected~~consist ~~lines~~of on the ~~consolidated statements of operations as presented to legacy GAAP treatment.~~following:

	Year Ended
	Asset Lives				December 31,		December 31,
	December 31,
	(in years)				2019		2018
	2018			2018
Machinery and equipment	3	to	15		$	18,129,460	$	17,978,781
	Aspresented			LegacyGAAP
Building and improvements	5	to	25			3,991,951		3,991,951
Net sales	$	19,564,981		$	19,208,155
Vehicles	3	to	5			100,096		98,119
Cost of sales		17,241,289			16,979,892
Furniture, fixtures, computers and software	3	to	5			1,470,102		1,440,071
Gross profit		2,323,692			2,228,263
Construction in progress						25,207		168,094
Net loss from operations		(757,580)			(853,009)
Total property, plant and equipment						23,716,816		23,677,016
Net loss before income tax provision (benefit)		(1,096,139)			(1,191,568)
Less: accumulated depreciation						(19,914,900)		(18,545,243)
Net loss	$	(1,098,307)		$	(1,193,736)
Property, plant and equipment, net					$	3,801,916	$	5,131,773
Earnings (loss) per share - basic and diluted	$	(0.39)		$	(0.42)
Weighted average common shares outstanding - basic and diluted		2,850,397			2,850,397

~~The~~For ~~table~~the ~~below~~year ~~compares~~ended December 31, 2019, the ~~affected~~Company ~~lines~~recorded on$1,457,797 of depreciation expense compared to $1,499,398 for the ~~consolidated~~year ~~balance~~ended ~~sheets~~December 31, as2018. ~~presented~~There are no commitments related to ~~legacy~~the ~~GAAP~~completion ~~treatment~~of construction in process as of December 31, 2019.

	December 31,		December 31,
	2018		2018
	As presented		Legacy GAAP
Assets
Current assets:
Prepaid expenses and other current assets	$	389,390	$	488,817
Total current assets		7,090,718		7,190,145
Other assets		5,140		167,110
Total assets	$	12,280,786	$	12,542,183
Liabilities and Shareholders’ Equity
Current liabilities:
Contract liabilities, current portion	$	560,802	$	697,733
Total current liabilities		4,635,220		4,772,151
Long-term liabilities:
Contract liabilities, non-current portion		—		219,895
Total long-term liabilities		3,557,458		3,777,353
Total liabilities		8,192,678		8,549,504
Shareholders’ equity:
Accumulated deficit		(4,648,484)		(4,743,913)
Total shareholders’ equity		4,088,108		3,992,679
Total liabilities and shareholders’ equity	$	12,280,786	$	12,542,183

5. Assets Held for Sale

~~Contract~~In ~~liabilities~~January ~~would~~2016, bethe ~~presented~~Company asentered ~~customer~~into ~~deposits~~a Purchase and ~~deferred~~Sale ~~revenue~~Agreement ~~under~~with ~~legacy~~a ~~GAAP~~buyer to sell two unoccupied buildings, with a total of approximately 52,000 square feet, and land. As a result, the Company classified the property as Assets Held for Sale with a carrying value of $688,750, which approximated the fair value less the expected cost to sell.

On August 6, 2019, the Company closed on the sale of the property and received proceeds of $663,334 which is net of selling costs incurred.

6. Debt

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




	December 31,		December 31,
	2019		2018
Revolving line of credit	$	1,274,299	$	2,025,592

Total term notes payable, net of issuance costs	$	3,557,458	$	3,946,878
Less current portion, net		3,557,458		389,420
Term notes payable, non-current, net		—		3,557,458

Subordinated notes payable, non-current, net		470,152		—
Total long term debt, net		3,636,819		3,557,458

Total short and long term debt, net	$	5,301,909	$	5,972,470

Bank Debt

On December 29, 2017, the Company entered into a three-year $9,500,000 Credit and Security Agreement (the “credit agreement”) with a Massachusetts trust company, replacing the credit facility and forbearance agreement with the Company’s previous lender. The credit agreement also provided funds with which to discharge existing subordinated promissory notes.

The credit agreement includes a revolving line of credit of up to $5.0 million (“Revolver”), a machinery and equipment term note of $2.5 million (“Equipment Loan”) and a real estate term note of $2.0 million (“Real Estate Loan” and together with the “Equipment Loan” the “Term Loans”).

F-13

Table of Contents

Micron Solutions, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Years Ended December 31, ~~2018~~2019 and ~~2017~~2018

4. Inventories

Inventories consist of the following:

	December 31,		December 31,
	2018		2017
Raw materials	$	1,079,887	$	1,100,187
Work-in-process		1,105,272		822,244
Finished goods		1,499,900		1,490,768
Total	$	3,685,059	$	3,413,199

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 $461,272 and $536,963 at December 31, 2018 and 2017, respectively.

5. Property, Plant and Equipment, Net

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

	Asset Lives			December 31,		December 31,
	(in years)			2018		2017
Machinery and equipment	3	to	15	$	17,978,781	$	17,498,586
Building and improvements	5	to	25		3,991,951		3,986,715
Vehicles	3	to	5		98,119		90,713
Furniture, fixtures, computers and software	3	to	5		1,440,071		1,542,027
Construction in progress					168,094		17,412
Total property, plant and equipment					23,677,016		23,135,453
Less: accumulated depreciation					(18,545,243)		(17,391,414)
Property, plant and equipment, net				$	5,131,773	$	5,744,039

For the year ended December 31, 2018, the Company recorded $1,499,398 of depreciation expense compared to $1,608,643 for the year ended December 31, 2017. There are no commitments related to the completion of construction in process as of December 31, 2018.

6. Assets Held for Sale

In January 2016, the Company entered into a Purchase and Sale Agreement 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. As a result, the Company has since classified the property as Assets Held for Sale. The carrying value of $665,000 approximates the fair value less the expected cost to sell.

The Parties have since entered into multiple amendments which provided for, among other things, an extension of the expiration date of the agreement to June 2019 in exchange for monthly extension fees. The closing is expected to take place by the end of June 2019.

F-14

Table of Contents

Micron Solutions, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Years Ended December 31, 2018 and 2017

7. Debt

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

	December 31,		December 31,
	2018		2017
Revolving line of credit	$	2,025,592	$	1,879,047
Subordinated promissory notes	$	—	$	350,000
Total term notes payable, net of issuance costs	$	3,946,878	$	4,346,194
Less current portion, net		389,420		367,779
Term notes payable, non-current, net		3,557,458		3,978,415
Total short and long term debt, net	$	5,972,470	$	6,575,241

Bank Debt

The credit agreement includes a revolving line of credit of up to $5.0 million (“Revolver”), a machinery and equipment term loan of $2.5 million (“Equipment Loan”) and a real estate term loan of $2.0 million (“Real Estate Loan” and together with the “Equipment Loan” the “Term Loans”).

Revolver

The Revolver allows for interest only payments during the term of the facility with the full principal outstanding balance to be paid upon maturity on December 29, 2020. Interest on all borrowings from the Revolver shall be equal to the Wall Street Journal prime rate (“Prime Rate”) plus 0.5%. In lieu of having interest charged at the Prime Rate, the Company shall have the option, on the last day of each month, (the “LIBOR Option”) to have interest charged at a rate of interest equal to the daily one-month LIBOR plus 3.25% for the following month. The interest rate will automatically convert back to the Prime Rate at the beginning of the next month unless the Company elects the LIBOR Option for the next month. The interest rate was 4.94% and 5.59% at December 31, ~~2018~~2019 ~~was~~and 5at December 31, 2018, respectively.~~59%.~~

~~This~~The Revolver carries a provision for a quarterly unused facility fee equal to 0.25% per annum of the average daily undisbursed face amount of the Revolver during the three months immediately preceding the applicable due date and has no prepayment penalty. The credit agreement provides for a daily sweep of cash balances against the balance of the Revolver. Availability to borrow under the Revolver is based on conditions defined in the credit agreement and amounts to approximately $~~284~~810,~~968~~000 at December 31, ~~2018~~2019.

Term Loans

The Equipment Loan requires monthly principal payments of approximately $29,762, payable on the first day of each month commencing February 1, 2018. The Equipment Loan is based upon an 84 month amortization with a balloon payment of approximately $1,458,333 due and payable in full upon maturity on December 29, 2020.

The Real Estate Loan requires monthly principal payments of approximately $8,333, payable on the first day of each month commencing February 1, 2018. The Real Estate Loan is based upon a 240 month amortization with a balloon payment of approximately $1,708,333 due and payable in full upon maturity on December 29, 2020.

Interest on the Term Loans shall be at such Wall Street Journal prime rate plus 0.75%. In lieu of having interest charged at the Prime Rate, the Company shall have a LIBOR Option, as described above, to have interest charged at a rate of interest equal to the daily one-month LIBOR plus 3.5% for the following month. The interest rate was 5.19% and 5.84% at December 31, ~~2018~~2019 ~~was~~and 5at December 31, 2018, respectively.~~84%.~~

All interest will be calculated based upon a year of 360 days for actual days elapsed. All interest will accrue from the Closing Date and will be payable monthly in arrears. Upon the occurrence and during the continuation of an Event of Default, all interest will be increased by 2% above the per annum rate otherwise applicable thereto. The Term Loans carry a prepayment penalty with respect to the prepayment of any portion of either Term Loan.

F-15

Table of Contents

Micron Solutions, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Years Ended December 31, 2018 and 2017

to the prepayment of any portion of either Term Loan equal to 3%, 2%, and 1% of the amount prepaid in the first, second, and third years, respectively, of the credit agreement.

This credit agreement contains covenants related to various matters including certain financial covenants, prohibitions on further borrowings and security interests, merger or consolidation, acquisitions, guarantees, sales of assets other than in the normal course of business, leasing, and payment of dividends. The lender has a security interest in all assets and a mortgage encumbering certain real property.

~~Subsequent~~On ~~to year end, on~~ March 7, 2019, the Company entered into the First Amendment to the Credit and Security Agreement in which the quarterly debt service coverage ratio measurement requirements for 2019 were amended. On August 6, 2019 the Company entered into the Second Amendment to the Credit and Security Agreement which consented to the sale of property (see Note 5) and to private placement loans in the form of subordinated promissory notes (see below). On August 19, 2019 the Company entered into the Third Amendment to the Credit and Security Agreement in which the debt service coverage ratio requirements for Q219 and Q319 were removed. On March 12, 2020 the Company entered into the Fourth Amendment to the Credit and Security Agreement in which the debt service coverage ratio requirement for Q419 was removed, the debt service coverage ratio for the first three quarters of 2020 was amended, and any noncompliance with the debt service coverage ratio for Q419 was waived.

Other debt

Subordinated promissory notes

In ~~December~~June ~~2013~~2019, the Company ~~completed~~initiated a private offering into ~~which~~raise ~~the~~up ~~Company~~to ~~sold an aggregate of~~ $500,000 inthrough the sale of subordinated promissory notes ~~and~~(the ~~issued~~“Notes”). ~~warrants~~The tosubscription ~~purchase~~for ~~100~~$500,000 ~~shares~~was ofcompleted ~~common~~on ~~stock.~~July ~~$50~~5,~~000~~ ~~of the notes were repaid in 2016~~2019. In ~~2017,~~The ~~the~~Notes ~~Company~~bear ~~paid~~interest ~~one~~on of the ~~subordinated~~unpaid ~~notes in the~~ principal ~~amount~~at ofa ~~$100,000. The~~simple ~~remaining~~annual ~~five~~interest ~~notes,~~rate ~~totaling~~equal anto ~~aggregate~~10% ~~principal~~per ~~amount~~annum offrom ~~$350,000, including $100,000 each with~~ the ~~two~~date ~~largest beneficial shareholders~~ of ~~the Company, were repaid in 2018~~issuance. ~~The~~ ~~Company~~Interest ~~carried~~only ~~$350,000~~is aspayable ~~restricted~~in cash aton ~~December 31,~~a ~~2017~~quarterly ~~for this purpose~~basis. AThe ~~discount~~Notes mature on ~~the~~July ~~notes~~5, ~~related~~2022. Each toinvestor ~~the~~entered ~~attached~~into ~~warrants~~a ~~was~~Subordination ~~being~~Agreement ~~recognized~~providing asthat ~~non-cash~~the ~~interest~~indebtedness ~~expense~~pursuant ~~over~~to the ~~term~~Notes ofshall ~~the~~be ~~notes.~~subordinated ~~The~~to ~~Company~~all ~~recorded~~indebtedness ~~$0 and $17,989~~ of ~~non-cash interest expense for~~ the ~~years~~Company ~~ended~~pursuant ~~December 31,~~to ~~2018~~its ~~and~~existing ~~2017~~credit agreement.

~~No warrants were exercised in 2018 or 2017 and unexercised warrants expired on December 31, 2018.~~ F-14

Table of Contents

Micron Solutions, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Years Ended December 31, 2019 and 2018

For every $50,000 in principal invested in the notes, each investor received a warrant to purchase 10,000 shares of common stock (collectively, the “Warrants”, see Note 10). The Warrants are exercisable at an exercise price equal to $2.90 per share, namely, the average closing market price of the Company’s common stock on the fifteen days prior to the date of the Warrant, plus 12%. The Warrants contain standard provisions relating to anti-dilution adjustments for stock splits and recapitalizations. The Warrants also provide the investors with standard piggy-back registration rights in the event the Company files a registration statement (other than a registration statement on Form S-4 or S-8) to register the shares of common stock subject to standard limitations in the discretion of any underwriter.

In order to account for the subordinated notes payable and warrants, the Company allocated the proceeds between the notes and warrants on a relative fair value basis. As a result, the Company allocated $464,182 to the notes and $35,818 to the warrants. The total discount on the notes is being recognized as non-cash interest expense over the term of the notes. As of December 31, 2019, there was $5,970 in non-cash interest expense recorded related to the amortization of the discount.

Related parties participated in the private offering as follows:


Jason Chambers, Director	$	50,000
Rodd Friedman, Director	$	100,000
Andrei Soran. Director	$	50,000

Future maturities of term debt

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

	2019		2020		2021		2022		2023		Thereafter	Total
	2020		2021		2022		2023		2024		Thereafter	Total
Term notes		457,143		3,623,809		—		—		—	—		4,080,952
Term loans		3,623,809		—		—		—		—	—		3,623,809
Subordinated promissory notes		—		—		500,000		—		—	—		500,000

~~8. Income Taxes~~F-15

The income tax provision consists of the following:

	Year Ended
	December 31,
	2018		2017
Current:
Federal	$	—	$	—
State		2,168		2,140
Total current income taxes		2,168		2,140
Deferred:
Federal		—		(3,100)
State		—		—
Total deferred income taxes		—		(3,100)
Total income tax provision (benefit)	$	2,168	$	(960)

F-16

Table of Contents

Micron Solutions, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Years Ended December 31, ~~2018~~2019 and ~~2017~~2018

7. Income Taxes

The income tax provision consists of the following:



	Year Ended
	December 31,
	2019		2018
Current:
Federal	$	—	$	—
State		—		2,168
Total current income taxes		—		2,168
Deferred:
Federal		—		—
State		—		—
Total deferred income taxes		—		—
Total income tax provision	$	—	$	2,168

The components of deferred income taxes are as follows:

	Year Ended
	December 31,
	2018		2017
	2019		2018
Deferred tax assets:
Net operating loss carryforwards	$	3,~~144~~541,~~600~~500	$	23,~~936~~144,~~800~~600
Federal and state tax credit carryforwards		~~525~~476,~~000~~100		~~517~~525,~~700~~000
Accruals and reserves		~~104~~150,~~400~~800		81104,~~500~~400
Stock based compensation		68106,~~300~~400		6468,300
Patents and intangibles		125,000		2212,000
Other long-term		455,~~300~~400		2145,~~400~~300
Total long-term deferred tax assets		34,~~899~~285,~~600~~200		3,~~643~~899,~~700~~600
Deferred tax valuation allowance		(3,~~374~~877,~~800~~700)		(3,~~172~~374,~~100~~800)
Deferred tax assets, net of allowance		~~524~~407,~~800~~500		~~471~~524,~~600~~800
Property, plant and equipment		(43379,~~500~~900)		(45478,~~300~~200)
Prepaid expenses		(~~478~~24,~~200~~500)		(~~423~~43,~~200~~500)
Total deferred tax liabilities		(~~521~~404,~~700~~400)		(~~468~~521,~~500~~700)
Net deferred tax assets	$	3,100	$	3,100

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 assessment. As of December 31, ~~2018~~2019, the Company continues to maintain a valuation allowance against all of its domestic and foreign deferred tax assets, except for its AMT Credit carryforward, which is treated as a refundable attribute under the new tax law.

OnFor ~~December 22, 2017,~~ the ~~U.S.~~year ~~government~~ended ~~enacted~~December ~~comprehensive~~31, ~~tax~~2019, ~~legislation commonly referred to as~~ the ~~Tax~~Company ~~Cuts~~has federal and ~~Jobs~~state ~~Act~~net ~~(the~~operating ~~“Tax~~loss ~~Act”).~~carryforwards ~~The~~totaling ~~Tax~~$12,988,000 ~~Act makes broad~~ and ~~complex~~$12,885,000, ~~changes to the U.S. tax code that affect fiscal 2017 including~~respectively, ~~but~~which ~~not~~begin ~~limited~~ to, aexpire ~~reduction~~in ~~of the U~~2031.S. ~~federal~~The ~~corporate~~Company ~~tax~~also ~~rate~~had ~~from~~federal ~~35%~~and tostate ~~21%~~tax ~~starting~~credit ~~January~~carryovers 1,of ~~2018~~$306,000 ~~changes~~and ~~to bonus depreciation starting late September 2017~~$219,000, ~~and the elimination of the Alternative Minimum Tax starting in 2018~~respectively. The ~~primary~~federal ~~provision~~and ofstate ~~the~~credits ~~Tax~~begin ~~Act which impacted the Company’s 2017 income tax provision relate~~ to ~~the~~expire ~~revaluation~~in of2027 ~~the Company's deferred tax assets~~ and ~~liabilities~~2020, respectively.

In December 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for income tax effects of the Tax Act. The final amounts may differ from these provisional amounts, possibly materially, due to, among other things, additional analysis, changes in interpretations and assumptions the Company has made, additional regulatory guidance that may be issued, and actions the Company may take as a result of the Tax Act. The Company has completed is assessment of the impact of the Tax Act in 2018, and no change was recorded from the originally presented balances.F-16

For the year ended December 31, 2018, the Company has federal and state net operating loss carryforwards totaling $11,300,000 and $12,195,000, respectively, which begin to expire in 2031. The Company also had federal and state tax credit carryovers of $306,000 and $277,000, respectively. The federal and state credits begin to expire in 2027 and 2018, respectively.

F-17

Table of Contents

Micron Solutions, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Years Ended December 31, ~~2018~~2019 and ~~2017~~2018

The Company files a consolidated federal income tax return. The actual income tax provision differs from applying the Federal statutory income tax rate (21% ~~in 2018 and 34% in 2017~~) to the pre-income tax loss from continuing operations as follows:

	Year Ended
	December 31,
	2018		2017
	2019		2018
Tax benefit computed at statutory rate	$	(~~216~~481,~~791~~139)	$	(~~461~~216,~~347~~791)
Increases (reductions) due to:
Change in valuation allowance		~~202~~502,~~700~~900		~~(640~~202,~~800)~~700
State income taxes, net of federal benefit		1(19,~~713~~580)		1,~~431~~713
Permanent differences		912,~~669~~348		139,~~636~~669
Tax credits (federal and state)		~~(7,326)~~—		(737,~~618~~326)
Change in tax rates		—		1,002,994
Differences on prior returns (federal and state)		(14,529)		12,203
Differences on prior returns (federal and state)		12,203		156,744
Income tax provision	$	—	$	2,168
Income tax provision (benefit)	$	2,168	$	(960)

98. 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 ~~2018~~2019 and ~~2017~~2018 were $3940,~~039~~477 and $4239,~~215~~039, respectively.

109. Commitments and Contingencies

Legal matters

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

Operating lease agreements

			2019	$	20,222
2020	$	18,851
			2020	$	18,222
2021	$	10,996
			2021	$	10,630

1110. Shareholders’ equity

Common stock

In ~~2018~~2019 and ~~2017~~2018, the Company issued 2122,~~734~~181 and 2221,~~635~~ 734 shares of the Company’s common stock from treasury, pursuant to the 2010 Equity Incentive Plan, with a fair value of $7555,~~750~~791 and $8875,~~524~~750, respectively, for directors’ fees in lieu of cash payments.

NoIn ~~shares~~2019, ~~were~~the Company issued as23,420 ashares ~~result~~ of the ~~exercise~~Company’s ofcommon stock ~~options~~from orTreasury, pursuant to the ~~exercise~~2019 Equity Incentive Plan with a fair value of ~~warrants~~$54,750 for directors’ fees in ~~2018~~lieu orof ~~2017~~cash payments.

No ~~dividends~~shares were ~~declared~~issued as a result of the exercise of stock options or ~~paid~~the exercise of warrants in ~~2018~~2019 or ~~2017~~2018.

~~F-18~~No dividends were declared or paid in 2019 or 2018.

Warrants

No warrants were exercised in 2019 or 2018. 70,000 warrants expired on December 31, 2018.

F-17

Table of Contents

Micron Solutions, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Years Ended December 31, ~~2018~~2019 and ~~2017~~2018

~~Warrants~~On June 28, 2019, 90,000 warrants were issued with an exercise price of $2.90 in conjunction with the Company’s subordinated notes payable offering. On July 5, 2019, 10,000 warrants were issued with an exercise price of $2.90. The warrants are exercisable upon issuance for three years and expire in July 2022.

NoStock ~~warrants~~options ~~were exercised in 2018 or 2017~~ and ~~70,000~~Share-based ~~warrants~~incentive ~~expired on December 31, 2018. There are no warrants outstanding as of December 31, 2018.~~plans

~~Stock~~Equity ~~options and Share-Based~~ Incentive ~~Plan~~Plans

In March 2010, the Company's Board of Directors adopted the Micron Solutions, Inc. 2010 Equity Incentive Plan (the “2010 Plan”). The 2010 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. An ~~and under which an~~ aggregate of 500,000 shares ~~have~~were ~~been~~ reserved for such grants. The options granted have ten year contractual terms that vest annually between three to five-year terms.

At December 31, ~~2018~~2019, there were options to acquire an aggregate of ~~393~~293,~~500~~ 665 shares outstanding. Atunder ~~December 31,~~the ~~2017,~~2010 ~~there were options to acquire an aggregate of 205,500 shares outstanding~~Plan.

On March 25, 2019, the Company’s Board of Directors adopted the 2019 Equity Incentive Plan (the “2019 Plan”) which was approved by the stockholders at the May 23, 2019 Annual Meeting. The 2019 Plan authorizes the issuance of an aggregate of 500,000 shares. All non-issued shares of the 2010 Equity Incentive Plan expired upon the adoption of the 2019 Plan. The 2019 Plan provides the Company flexibility to award a mix of stock options, equity incentive grants, performance awards and other types of stock-based compensation. The options granted have five year contractual terms for grants issued to greater than 10% stockholders and ten year contractual terms for less than 10% stockholders.

At December 31, 2019, there were options to acquire an aggregate of 37,500 shares outstanding under the 2019 Plan.

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.

~~During 2018, there were 195,000 new option grants. No options were granted in 2017. The assumptions used to measure the fair value of option grants in 2018 and 2017 were as follows:~~ F-18

	Year Ended
	December 31,
	2018		2017
Expected option term		5.5 to 6.25		-
Expected volatility factor		16.96% to 26.87%		-
Risk-free rate		2.36% to 2.94%		-
Expected annual dividend yield		-		-

Table of Contents

~~The~~Micron ~~following~~Solutions, ~~table~~Inc. ~~sets~~and ~~forth the stock option transactions for the year ended December 31, 2018:~~Subsidiary

				Weighted
		Weighted		average
		Average		remaining	Aggregate
	Number of	Exercise		contractual	Intrinsic
	options	Price		term (in years)	Value
Outstanding at December 31, 2017	205,500	$	6.04	6.07	$	28,750
Granted	195,000		3.64
Forfeited	(7,000)		3.81
Outstanding at December 31, 2018	393,500	$	4.89	7.22	$	960
Exercisable at December 31, 2018	182,164	$	6.09	4.81	$	960
Exercisable at December 31, 2017	114,583	$	6.42	5.30	$	20,551

Notes to Consolidated Financial Statements

~~For~~Years ~~the~~Ended ~~years ended~~ December 31, ~~2018~~2019 and 2017, share-based compensation expense related to stock options and the non-cash issuance of common stock amounted to $56,168 and $48,129, respectively, and is included in general and administrative expenses. As of December 31, 2018, $127,944 of unrecognized compensation costs 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 2.59 years. The weighted average grant date fair value of grants made in 2018 was $0.55.

AtDuring ~~December 31~~2019, ~~2018~~ there were 317,~~631~~500 ~~shares~~new ~~available~~option ~~for future~~ grants under the 2010 Equity Incentive Plan and 37,500 ~~after~~new ~~giving~~option ~~effect~~grants tounder ~~shares~~the ~~which~~2019 ~~became~~Equity ~~available~~Incentive ~~for~~Plan. During ~~reissuance~~2018, ~~due~~there towere 195,000 new ~~expired~~option orgrants ~~forfeited~~under ~~options~~the 2010 Equity Incentive Plan.

The assumptions used to measure the fair value of option grants in 2019 and 2018 were as follows:



	Year Ended
	December 31,
	2019		2018
Expected option term		5.5 to 6.0		5.5 to 6.25
Expected volatility factor		53.42%		16.96% to 26.87%
Risk-free rate		1.52% to 2.51%		2.36% to 2.94%
Expected annual dividend yield		-		-

The following table sets forth stock option activity for the year ended December 31, 2019:



				Weighted
		Weighted		average
		Average		remaining	Aggregate
	Number of	Exercise		contractual	Intrinsic
	options	Price		term (in years)	Value
Outstanding at December 31, 2018	393,500	$	4.89	7.22	$	960
Granted	45,000		2.50
Forfeited	(51,671)		4.04
Expired	(55,664)		5.68
Outstanding at December 31, 2019	331,165	$	4.57	6.63	$	1,050
Exercisable at December 31, 2019	179,824	$	5.62	4.75	$	1,050
Exercisable at December 31, 2018	182,164	$	6.09	4.81	$	960

During 2019, the Company issued 15,000 restricted stock units with a fair value of $3.20 per share which vest on the one year anniversary of the grant.

The following table sets forth restricted stock unit activity for the year ended December 31, 2019:



		Weighted
		Average
	Number of	Grant Date
	options	Fair Value
Outstanding at December 31, 2018	—	$	—
Granted	21,667		2.58
Exercised	—		—
Forfeited	(6,667)		2.25
Expired	—		—
Outstanding at December 31, 2019	15,000	$	3.20
Exercisable at December 31, 2019	—	$	—
Exercisable at December 31, 2018	—	$	—

F-19

Table of Contents

Micron Solutions, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Years Ended December 31, ~~2018~~2019 and ~~2017~~2018

12For the years ended December 31, 2019 and 2018, share-based compensation expense related to stock options and the non-cash issuance of common stock amounted to $70,133 and $56,168, respectively. ~~Subsequent~~For ~~Events~~the year ended December 31, 2019 share-based compensation expense related to restricted stock units amounted to $38,583. Share-based compensation is included in general and administrative expenses. As of December 31, 2019 there was $166,820 of unrecognized compensation costs related to non-vested share-based compensation arrangements granted under the stock option plans. This cost is expected to be recognized over a weighted average period of 2.59 years for stock option and .2 years for restricted stock units. The weighted average grant date fair value of grants made in 2019 was $0.44 for stock options and $3.20 for restricted stock units.

~~Changes~~At December 31, 2019 there were 439,080 shares available for future grants under the 2019 Plan after giving effect to ~~Management~~shares which became available for reissuance due to expired or forfeited options.

Mr11. ~~Salvatore Emma, Jr.’s employment with the Company terminated effective February 8, 2019.~~ ~~Mr.~~Subsequent Emma most recently served as Chief Operating Officer of the Company. On February 28, 2019, the Company and Mr. Emma entered into an Agreement and Release effective March 7, 2019. Subject to the terms of the agreement, Mr. Emma shall be entitled to, as a severance benefit, $1,187.50 per week over 24 months or an aggregate of $123,500. The agreement also included a general release of claims by Mr. Emma and certain confidentiality, non-competition and non-solicitations and innovations provisions. Events

Amendment to the Credit and Security Agreement

In March 2020, the Company executed the Fourth Amendment to its Credit and Security Agreement (see Note 1).

NYSE American Voluntary Delisting

On March 16, 2020, the Company notified the NYSE American of its intent to delist from the NYSE American. On March 26, 2020, the Company filed a Form 25 with the SEC notifying them of the Company’s delisting from the NYSE American, which is expected to take place on or about April 6. 2020.

COVID-19

On January 30, 2020, the World Health Organization declared that the recent coronavirus disease (“COVID-19”) outbreak was a global health emergency. On March 11, 2020, the World Health Organization raised the COVID-19 outbreak to pandemic status. The Company has taken steps to protect the health, safety and well-being of its employees, customers, and associates while continuing to operate as an essential business. The full impact of COVID-19 continues to evolve as of the date of this Annual Report. Management is actively monitoring the global situation on its financial condition, liquidity, operations, customers, suppliers and workforce and given the daily evolution of COVID-19 and the global and local responses to curb its spread, the Company is uncertain as to what effects COVID-19 will have on its customers, suppliers and workforce, and the Company’s results of operations, financial condition, or liquidity.

F-20

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