Stock Issuance

12 Months Ended

Dec. 29, 2012

Stock Issuance

Note 10. Stock Issuance

On January 31, 2012, the Company entered into a definitive agreement with investors in a registered direct offering of common stock at a price per share of $0.75. On February 9, 2012, the registered direct offering was consummated and the Company sold 9,966,666 shares of common stock at a price per share of $0.75 for gross proceeds of $7,475,000, or net proceeds of $6,739,498 after deducting offering costs. As a part of the offering commission to its placement agent, the Company issued warrants to purchase 300,000 shares of the Company’s common stock to the placement agent, Aegis Capital Corp. and its designees. These warrants have an exercise price of $0.85 per share, a term of 2.5 years and a cashless exercise feature. The aggregate estimated fair value of these warrants was $44,610 and these warrants were determined to be equity awards. The fair value was estimated at the date of issuance using the Black-Scholes based valuation model. The table below outlines the assumptions for the warrants issued to Aegis Capital Corp. and its designees.

Year Ended December 29, 2012	2012
Volatility		29.7	%
Expected dividends		0.00	%
Expected term	2.5 years
Risk-free rate		0.28	%

The Company calculated expected volatility from the volatility of publicly held companies in similar industries. The dividend yield assumption is based on the Company’s history and expectation of future dividend payouts on the common stock. The risk-free interest rate is based on the implied yield available on U.S. treasury zero-coupon issues with an equivalent remaining term. The expected term of the warrants represents the contractual terms.

In addition, on January 31, 2012, the Company entered into an agreement with investors, including several members of the Company’s management, for the sale of restricted shares of common stock at a price per share of $0.75 per share in a private placement. On February 10, 2012, the sale to investors in a private placement was consummated and the Company sold 4,933,329 restricted shares of common stock at a price per share of $0.75 per share for gross proceeds of $3,699,997, or net proceeds of $3,330,740 after deducting offering costs.