• Filing Date: 2013-08-09
  • Form Type: 10-Q
  • Description: Quarterly report
6 Months Ended
Jun. 28, 2013
Notes to Financial Statements  

Issuance of Common Stock: There were no shares issued during the thirteen and twenty-six weeks ended June 28, 2013. There are approximately 1.3 million shares to be issued related to the acquisition of assets of DR Services of Louisiana, LLC as part of a contingent fee calculation. The shares are to be issued to DR Services of Louisiana, LLC upon final approval by our Board of Directors. Due to the pending issuance, we reclassified approximately $323,000 recorded as a contingent liability to additional paid-in capital in stockholders' equity as of June 28, 2013 as the contingent fee was fully earned.


Stock Warrants: The following warrants for our common stock were issued and outstanding on June 28, 2013 and December 28, 2012, respectively:


  June 28, 2013   December 28, 2012
Warrants outstanding at beginning of period 11,887,803   12,137,803
Expired  (6,312,803)    (250,000)
Warrants outstanding at end of period 5,575,000   11,887,803


A detail of warrants outstanding June 28, 2013 is as follows:


  Number of Warrants   Expiration Date
Exercisable at $0.08 per share 4,200,000   4/1/2014
Exercisable at between $0.50 and $1.00 per share 1,375,000   4/15/14 to 4/15/15


Of the warrants outstanding, 4.2 million are defined as a derivative instrument and the fair value of these warrants is estimated each period using the Black-Scholes pricing model. Expected volatility is based on historical annualized volatility of our stock. The expected term of warrants issued represents the period of time that warrants issued are expected to be outstanding. The risk-free rate is based upon the U.S. Treasury yield curve in effect at the time of issuance. The assumptions used to calculate the fair value are as follows:


  June 28, 2013   December 28, 2012
Expected terms (years) 0.8   1.3
Expected volatility 103.9%   95.2%
Dividend yield 0.0%   0.0%
Risk-free rate 0.2%   0.2%


The change in fair value amounted to approximately $97,000 and $(155,000) for the twenty-six weeks ended June 28, 2013 and June 29, 2012, respectively. These changes are included in the line item Change in fair value of derivative liabilities in our Statements of Income.