10. Shareholders’ equity

Common stock

In 2019 and 2018, the Company issued 22,181 and 21,734 shares of the Company’s common stock from treasury, pursuant to the 2010 Equity Incentive Plan, with a fair value of $55,791 and $75,750, respectively, for directors’ fees in lieu of cash payments.

In 2019, the Company issued 23,420 shares of the Company’s common stock from Treasury, pursuant to the 2019 Equity Incentive Plan with a fair value of $54,750 for directors’ fees in lieu of cash payments.

No shares were issued as a result of the exercise of stock options or the exercise of warrants in 2019 or 2018.

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.

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.

Stock options and Share-based incentive plans

Equity Incentive 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 aggregate of 500,000 shares were reserved for such grants. The options granted have ten year contractual terms that vest annually between three to five-year terms.

At December 31, 2019, there were options to acquire an aggregate of 293,665 shares outstanding under the 2010 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 2019, there were 7,500 new option grants under the 2010 Equity Incentive Plan and 37,500 new option grants under the 2019 Equity Incentive Plan. During 2018, there were 195,000 new option grants under 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	—	$	—

For 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. For 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.

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