• the ability of the Company to increase sales of higher margin products and services

• variations in the mix of products and services sold;

• the level of demand for our products and services and those that the Company may develop or acquire;

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

• variability of customer delivery requirements;

• the ability to successfully market WirelessDx services, manage the timing of investment in operational infrastructure, ability to accelerate the pace of revenues from customer implementation and fund the expansion of this operation;

• a stable interest rate market and/or a stable currency rate environment in the world, and specifically the countries the Company is doing business in or plans to do business in;

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

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

• ability to license our software, provide timely customization and updates;

• the ability to offset higher costs with price increases;

• adverse regulatory developments in the United States or any other country the Company plans to do business in;

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

• the ability of management to execute plans and motivate personnel in the execution of those plans;

• no adverse publicity related to the Company and or its products;

• no adverse claims relating to the Company's intellectual property;

• the adoption of new, or changes in, accounting principles;

• the passage of new, or changes in, regulations; legal proceedings; and

• other risks referenced from time to time elsewhere in this report and in the Company's filings with the SEC.

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 Company's primary source of revenue is from its medical electrode components and plastic molding segment, Micron, which manufactures components, devices and equipment primarily for the medical and defense industries. The single largest category of revenue in this segment is the production and sale of silver/silver chloride coated and conductive resin sensors used as 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. In an effort to leverage these skills, the Company has expanded into custom thermoplastic injection molded products with a full array of design, engineering and production services and management. With the addition of a medical machining cell, the Company began production of patient specific metal and plastic orthopedic devices. ART and WirelessDx provide medical software and services, respectively, to the medical industry. While not currently adding meaningful revenue to the results, management believes these businesses have significant potential for future growth of the Company. Management continues to identify complementary and/or synergistic products, technologies and lines of business in an effort to broaden the Company's offerings.

The following table sets forth for the periods indicated, the percentages of the net sales represented by certain items reflected in the Company's statements of operations.

                                                Years ended December 31,
                                                  2011              2010
Net sales                                        100.0    %         100.0  %
Cost of sales                                     81.0               80.1
Gross profit                                      19.0    %          19.9  %
Goodwill impairment                                0.4                  -
Selling and marketing                              7.2                4.3
General and administrative                        14.6               12.1
Research and development                           1.9                1.1
Other (expense) income                            (0.5 )              0.6
(Loss) income before income tax provision         (5.6 )              3.0
Income tax (benefit) provision                    (0.1 )              0.8
Net (loss) income                                 (5.5 )  %           2.2  %

Net Sales
The Company's consolidated net sales for 2011 were $24,256,373, an increase of $897,090 or 3.8%, when compared to the total net sales of $23,359,283 in 2010 as discussed by segment below.
Micron sales for 2011 were $24,123,170, an increase of $1,071,317 or 4.6%, when compared to sales of $23,051,853 in 2010. Micron continues to experience price pressure in a competitive global market. The revenue associated with the sensor business, including silver surcharge, increased as a result of increased volume and silver surcharge. This increase in sensor revenue was offset by the expected decrease in MIT division's custom manufacturing in defense industry revenue. WirelessDx net sales were $133,203 for 2011 compared to the segment's first revenues of $4,920 in the fourth quarter of 2010. The medical monitoring segment continued its expansion after receiving a contract with the Veterans Administration and being approved as a service provider and issued a provider number as an IDTF during 2011.
ART net sales were $0 for 2011 compared to $302,510 in 2010. The decrease was due to a lack of license sales with ART's OEM customer in the Japanese market. Programs with the customer beginning in 2012 are expected to yield revenues later in the year.
Cost of Sales
The Company's consolidated cost of sales was $19,648,470 (81.0% of net sales) in 2011 compared to $18,718,008 (80.1% of net sales) in 2010 an increase of $930,462 or 5% as discussed by segment below.
Micron cost of sales was $18,848,945 (78.1% of segment sales) in 2011 compared to $18,608,384 (80.7% of segment sales) in 2010 an increase of $240,561 or 1%. The segment's lean manufacturing programs have increased the gross margin percentage by improving the efficiency of the use of production materials. The cost of silver has generally been passed on to our customers in the form of a surcharge. The surcharge protects Micron from decreasing gross profits from an increase in the cost of silver. Management routinely reviews its products and programs, including those in development, for contribution and value to our overall business strategy and results. Those that do not have contribution margins equal to or greater than the current average are the focus for process improvement teams. Programs with unacceptable margins will be phased out or discontinued, so that Micron's resources will be used to develop those of more strategic value.

WirelessDx cost of sales was $797,705 in 2011 compared to $6,802 in 2010 an increase of $790,903. The large increase includes the initial startup cost of monitoring and patient call centers. This cost is expected to grow at a slower pace as facilities are fully staffed and functional.
ART cost of sales was $1,820 in 2011 compared to $102,822 in 2010 a decrease of $101,002. In 2010, the software customization project was completed and the associated licenses sold.
Selling and Marketing
The Company's consolidated selling and marketing expense increased to $1,745,856 (7.2% of net sales) in 2011 from $996,183 (4.3% of net sales) in 2010, an increase of $749,673, or 75% as discussed by segment below.
Micron's selling and marketing expense decreased to $748,410 (3.1% of segment sales) in 2011 from $749,507 (3.2% of segment sales) in 2010, a decrease of $1,097, or less than 1%. Micron's selling expense remained stable and is expected to increase in 2012, but not as a percentage of sales. As new programs begin, commissions are higher and will add to expense; however, it is not expected to increase the expense as a percentage of sales.
WirelessDx's selling and marketing expense increased to $794,923 in 2011 from $105,124 in 2010, an increase of $689,798, or 656%. In 2011, the sales force was expanded by the addition of 4 employees. Also contributing to the increase in expense, was the cost of travel as the segment's growth included four additional geographic markets. Business development expense are expected to increase at a faster rate than revenue until scale is reached in late 2012.
ART's selling and marketing expense increased to $202,523 in 2011 from $141,552 in 2010, an increase of $60,971, or 43%. In 2011, ART had business development efforts, travel and trade show expense for the full year when compared to a partial period in 2010.
General and Administrative Expenses
The Company's consolidated general and administrative expense was $3,534,366 (14.6% of net sales) in 2011 as compared to $2,814,974 (12.1% of net sales) in 2010, an increase of $719,394 or 26% as discussed by segment below. Micron's general and administrative expense decreased to $811,627 (3.3% of net sales) in 2011 from $1,001,856 (4.3% of net sales) in 2010, a decrease of $190,229. This decrease was only a reduction to the cost assigned to this segment. Beginning in 2011, Micron's finance and human resources departments were transfered into the corporate segment as those functions began to service all segments.
WirelessDx's general and administrative expense increased to $955,019 (3.9% of net sales) in 2011 from $444,653 (1.9% of net sales) in 2010, an increase of $510,366. The expense includes the first full year for the segment as well as executive salaries, specific back office support, and travel expenses. ART's general and administrative expense was $76,888 (0.3% of net sales) in 2011 as compared to $93,328 (0.4% of net sales) in 2010, a decrease of $16,440. This includes costs of the legal work on existing patents, travel expense associated with ART products and other costs to maintain software library.
The Corporate segment increased to $1,690,832 (7.0% of net sales) in 2011 from $1,275,137 (5.5% of net sales) in 2010, an increase of $415,695. A large portion of this increase was the centralization of the finance and human resources departments to the Corporate segment. In 2011, personnel were transfered to this segment and provided support across all segments of the business. Other corporate and travel expenses include corporate attendance at trade events, expansion of the Board of Directors and evaluation of possible acquisition targets.
Research and Development
The Company's consolidated research and development costs increased to $461,225 (1.9% of net sales) in 2011 from $254,501 (1.1% of net sales) in 2010, an increase of $206,724, or 81% as discussed by segment below.
Micron's research and development costs increased to $188,479 (0.8% of net sales) in 2011 from $158,596 (0.7% of net sales) in 2010, an increase of $29,883, or 19%. The expense is related to process improvements on the Micron sensors and snap product lines as well as new processes and capabilities within MIT.
WirelessDx's research and development costs increased to $53,264 (0.2% of net sales) in 2011 from $0 in 2010, and increase of $53,264. This expense is related to various improvements to the proprietary web based physician reporting system. It is expected that this expense will continue with continuous improvements to security, report presentation and customer interface.
ART's research and development expenses increased to $219,482 (0.9% of net sales) in 2011 from $95,905 (0.4% of net sales) in 2010. Research and Development expense in 2011 included the addition of a full-time employee, and additional technical consulting for SAECG Software and PREDICTOR. The 2010 expenses included the technical support of a NIH research project utilizing ART's proprietary Signal Averaged ECG software and evaluation of other devices for software development.

Other Income (Expense)
Other expense was $134,889 in 2011 compared to income of $124,663 in 2010, a change of $259,552. Interest expense was $249 in 2011 compared to $0 in 2010. The Company does not incur an unused borrowing base fee under our current unsecured credit facility. Other income included bank interest of $11,030 and $11,850, in 2011 and 2010, respectively. In 2011, production machinery was taken offline and the net book value was written down by $153,000. The asset was held for a January 2012 sale. In 2010, the acquisition of RMDDx resulted in a onetime non-cash gain of $146,288 in the quarter ended June 30, 2010 due to bargain purchase accounting. The remainder of other income was net of the gain and other miscellaneous expense items including a loss in the disposal of assets, and currency losses relating to foreign operations in Canada. Income Taxes
The Company's combined federal and state effective income tax rate was (1)% and 26% in 2011 and 2010, respectively. The effective rate in 2011 includes the addition of a $351,000 valuation allowance against our foreign deferred tax asset related to the Canadian net operating loss carryforwards. The current year effective tax rate also includes the previous year's return to provision true-ups of $146,000 that are recorded against the current year provision. The effective rates in 2010 were lower than the statutory rates primarily due to the reductions in tax from state and federal research and development and investment tax credits.
Goodwill
The Company accounts for goodwill and indefinite lived intangibles in accordance with ASC 350 "Intangibles - Goodwill and other". Goodwill is reviewed for impairment annually, or when events arise that could indicate that impairment exists. The provisions of ASC 350 require that the Company perform a two-step impairment test. In the first step, the Company compares the fair value of its reporting units to the carrying value of the reporting units. If the carrying value of the net assets assigned to the reporting units exceeds the fair value of the reporting units, then the second step of the impairment test is performed in order to determine the implied fair value of the reporting units' goodwill. If the carrying value of the reporting units' goodwill exceeds its implied fair value, an impairment loss equal to the difference is recorded.
At December 31, 2011, the market price of the Company's stock was trading lower than its book value for a prolonged period. The Company was required to acknowledge this as a possible triggering event and that an impairment may exist. In addition, the Company had reorganized its reporting unit structure to combine the three reporting units (Micron Products, New England Molders, and Leominster Tool) with goodwill into one reporting unit. The combined reporting unit better reflects the synergies between these components and aligns the segment with how management reviews and operates the business. An analysis of goodwill of the three reporting units prior to combining was performed to determine fair value using income and market approaches. The income approach is based on a discounted cash methodology that includes assumptions of, among other things, forecast income, cash flow, growth rates, and long-term discount rates, all of which require significant judgment. The market approach utilitizes the Company's market data as well as market data from publicly traded companies that are similar to the Company. There are inherent uncertainties related to these factors and the judgment applied in the analysis. Management determined an impairment was required for the Leominster Tool portion of the goodwill equal to $85,239. The Company changed the goodwill annual test date to December 31 aligning the test with the year end audit. This change will provide more time for the Company to complete its assessment prior to its reporting deadline.
(Loss) Earnings Per Share The basic and diluted loss per share is $0.48 in 2011 as compared to basic and diluted earnings per share of $0.19 in 2010, a decrease of $0.67 per share. The loss per share reflects operational losses during the scale up of WirelessDx, the impairment of equipment held for sale and goodwill, and the addition of tax valuation allowance. The earnings per share for 2010 included a one time non-cash gain of $146,288 in the quarter ended June 30, 2010 due to purchase accounting related to the WirelessDx acquisition. This nontaxable gain, net of after tax acquisition related expenses of $80,000, increased basic earnings per share for 2010 by $0.02. Off-Balance Sheet Arrangements
The Company entered into a sale lease-back transaction for certain equipment purchased during 2009 totaling $677,810. A five year operating lease obligation for the equipment began December 31, 2009 with the first payment due February 1, 2010. The transaction includes an additional $320,817 of lease line capacity. The operating lease requires payments totaling $163,893 in 2010, and $207,591 for each year following until 2014. Liquidity and Capital Resources
Working capital was $6,118,678 as of December 31, 2011 as compared to $8,861,007 as of the same date in 2010. Operating activities produced positive cash flows of $926,488 in 2011, as compared to $2,183,115 in 2010.
Cash and cash equivalents were $1,358,223 and $3,962,454 at December 31, 2011, and 2010, respectively. Substantially all of these funds are invested in bank deposit accounts.

Inventories increased to $3,269,482 at the end of 2011, an increase of $200,305 from the end of 2010. The Company's continued lean manufacturing programs resulted in a reduction of inventory in production that was offset by a rise in the cost of silver.
Capital equipment expenditures were $3,703,631 in 2011 as compared to $1,617,238 in 2010. In 2011, Micron installed a 200kW solar panel array and completed an energy optimization program for a capital cost of approximately $1,384,000. This program is expected to significantly reduce Micron's electrical costs. Under a Federal program, Micron submitted a $318,000 grant application for the solar installation in 2012. The majority of Micron's remaining $1,215,000 of capital expenditures were spent on the addition and replacement of production equipment. In 2010, Micron spent approximately $1,302,000 on production equipment. In 2010, the net capital expenditures do not include automated inspection equipment for the sensor line costing $328,817. This equipment was put into service under an operating lease. In 2011 WirelessDx capital expenditures of $951,000 related to medical devices and software as compared to $291,000 for 2010.
An unsecured $3,000,000 demand line of credit was available in 2011, increased from $2,000,000 in 2010. The agreement provides for borrowings up to 80% of eligible accounts receivable plus 50% of finished goods inventories. This facility does not carry an annual borrowing base charge. There were no outstanding borrowings on our line of credit as of December 31, 2011 and 2010. The agreement contains covenants that apply upon drawing on the line. The covenants relate to various matters including notice prior to executing further borrowings and security interests, merger or consolidation, acquisitions, guarantees, sales of assets other than in the normal course of business, leasing, changes in ownership and payment of dividends. No funds have been drawn down on this line during 2011. Subsequent to year end the line of credit was amended to provide that borrowings are secured by accounts receivable, inventory, cash and deposit accounts and $250,000 was drawn on the line. The line of credit has an annual renewal date in April. Under this credit line, the Company has for the benefit of its subsidiary RMDDx secured a $1,000,000 letter of credit to replace a guarantee by the Province of Prince Edward Island. During the second quarter of 2011, this letter of credit lifted the restriction on $510,833 in restricted cash related to a performance guarantee and Canadian Federal contracting economic incentive program involving an unrelated third party.
On December 31, 2009, the Company received a payment of $677,810 for a sale lease-back transaction related to new production equipment installed during the second half of 2009. This transaction created a long term deferred gain on the sale of assets of $22,347, which will be amortized over the 5 year life of the lease. This arrangement included a lease line with a credit limit of $1,000,000. The Company used $320,817 of the remaining lease line for the acquisition of certain production equipment in May of 2010. This lease line was amended in 2012 to accommodate a credit limit increase to $2,000,000, and enable the flexibility of either an operating or capital lease. Production equipment for approximately $523,000 was purchased for Micron using this lease in early 2012. During the year ended December 31, 2011, the Board of Directors declared and paid two cash dividends of an aggregate of $0.12 per share or a total of $344,659.
The Company has funded working capital and capital expenditures from operations and, subsequent to year end, from borrowings under the line of credit. Management believes that in the event the Company needs to fund working capital, and or future capital expenditures, financing alternatives are available although no commitment for such financing has been arranged as of the date. Inflation
The Company believes that inflation in the United States or international markets has not had a significant effect on its results of operations except for the impact of the increase in volatility of materials and energy prices, particularly the cost of silver.
Environmental Groundwater
Like many industrial processes, the Micron manufacturing process utilizes hazardous and non-hazardous chemicals, the treatment and disposal of which are subject to federal and state regulation. Since its inception, Micron has expended significant funds to train its personnel, install waste treatment and recovery equipment and retain an independent environmental consulting firm to constantly review, monitor and upgrade its air and waste water treatment activities. As a result, Micron believes that the operations of its manufacturing facility are in compliance with currently applicable safety, health and environmental laws and regulations.
Based on the Company's analysis, the Company does not expect future costs in connection with environmental matters to have a material adverse effect on its financial condition, result of operations or liquidity. Recent Accounting Pronouncements
In June 2011, the FASB issued ASU 2011-05, "Comprehensive Income (Topic 220):
Presentation of Comprehensive Income". The ASU is effective for interim and annual periods beginning after December 15, 2011, with early adoption permitted. The new guidance eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholder's equity and states that an entity has the option to present the total of comprehensive income, the components of income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. Additionally, entities are required to present on the face of the financial statements

reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement(s) where the components of net income and the components of other comprehensive are presented. This ASU will change the financial statement presentation of comprehensive income but the Company does not expect the amendments to have a material impact on its results of operations, cash flows, or financial position.
In July 2011, the FASB issued ASU 2011-07, "Health Care Entities (Topic 954):
Presentation and Disclosure of Patient Service Revenue, Provision for Bad Debts, and the Allowance for Doubtful Accounts for Certain Health Care Entities." The ASU is effective for interim and annual periods beginning on or after December 15, 2011, with early adoption permitted. The new guidance changes certain presentation and disclosure requirements for Patient Service Revenue. The Company implemented this presentation requirements for year end 2011. As this only effects WirelessDx, the amendments do not have a material impact on its results of operations, cash flows, or a significant change in the presentation of the consolidated financial statements.
In September 2011, the FASB issued ASU 2011-08, "Intangibles-Goodwill and Other (Topic 350): Testing Goodwill for Impairment." The ASU is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, with early adoption permitted. The new guidance allows an entity the option to first assess qualitative factors to determine whether existence of events or circumstances lead to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the qualitative assessment leads to the determination that the fair value of the reporting unit is not more likely than not less than the carrying value, then performing a two-step impairment test is no longer necessary. The Company does not expect the amendments to have a material impact on its results of operations, cash flows, or financial position. Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the U.S.A. requires management to make judgments, assumptions and estimates that affect the amounts reported. Note 2 of Notes to Consolidated Financial Statements describes the significant accounting policies used in the preparation of the consolidated financial statements. Some of these significant accounting policies are considered to be critical accounting policies, as defined below. A critical accounting policy is defined as one that is both material to the presentation of the Company's financial statements and requires management to make difficult, subjective or complex judgments that could have a material effect on the Company's financial condition and results of operations. Specifically, critical accounting estimates have the following attributes: 1) the Company is required to make assumptions about matters that are highly uncertain at the time of the estimate; and 2) different estimates the Company could reasonably have used, or changes in the estimate that are . . .