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Derivative Liabilities
 12 Months Ended
Dec. 28, 2013
Derivative Instruments And Hedging Activities Disclosure [Abstract]  
Derivative Liabilities

NOTE 10 - DERIVATIVE LIABILITIES

As of December 31, 2012, derivative financial instruments recorded as liabilities consisted of Class B Warrants indexed to 1,112,487 shares of our common stock with an exercise price of $2.25. The fair value of the Class B warrants at December 31, 2012 was $0. The Company’s Class B Warrants expired on August 11, 2013.

The effects on our income associated with changes in the fair values of our derivative financial instruments for the year ended December 31, 2012 was $34,486 (none in 2013).

We estimate fair values of derivative financial instruments using various techniques (and combinations thereof) that are considered to be consistent with the objective measuring fair values. In selecting the appropriate technique, we consider, among other factors, the nature of the instrument, the market risks that it embodies and the expected means of settlement. We value our derivative warrants using a Binomial Lattice valuation model which provides for early exercise scenarios and incorporates the down-round anti-dilution protection possibilities that could arise in early exercise scenarios. Significant assumptions (or ranges) used in valuing our outstanding warrants at December 31, 2012 are as follows:

 

Trading market values (1)

    $ 0.60   

Term (years) (3)

      0.61   

Volatility (1)

      44.80 % 

Risk-free rate (2)

      0.06 % 

Fair value hierarchy:

 

  (1) Level 1 inputs are quoted prices in active markets for identical assets and liabilities, or derived there from. Our trading market values and the volatilities that are calculated thereupon are level 1 inputs.

 

  (2) Level 2 inputs are inputs other than quoted prices that are observable. We use the current published yields for zero-coupon US Treasury Securities, with terms nearest the remaining term of the warrants for our risk free rate.

 

  (3) Level 3 inputs are unobservable inputs. Inputs for which any parts are level 3 inputs are classified as level 3 in their entirety. The remaining term used equals the remaining contractual term as our best estimate of the expected term.