Note 9 - Derivative Instruments; Fair Value

The following tables represents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of March 31, 2014 and December 30, 2013, and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value:

	Amount as of
Description	3/31/2014		Level 1		Level 2		Level 3

Interest Rate Swap	$	41,000	$	-	$	41,000	$	-
Warrant Liability		779,000		-		779,000

	$	820,000	$	-	$	820,000	$	-

	Amount as of
Description	12/31/2013		Level 1		Level 2		Level 3

Interest Rate Swap	$	60,000	$	-	$	60,000	$	-
Warrant Liability		816,000		-		816,000		-

	$	876,000			$	876,000

The Company is exposed to certain market risks including the effect of changes in interest rates. The Company uses derivative instruments to manage financial exposures that occur in the normal course of business. It does not hold or issue derivatives for speculative trading purposes. The Company is exposed to non-performance risk from the counterparties in its derivative instruments. This risk would be limited to any unrealized gains on current positions. To help mitigate this risk, the Company transacts only with counterparties that are rated as investment grade or higher and all counterparties are monitored on a continuous basis. The fair value of the Company’s derivatives reflects this credit risk.

On July 1, 2011, the Company entered into a swap agreement with BMO Capital Markets with respect to $6,780,000 of our loan balances with BMO Harris Bank N.A. This swap agreement limits the Company’s exposure to interest rate fluctuations on the Company’s floating rate loans. The swap agreement has the effect of fixing the interest rate on the loan balances covered by the swap at 4.65% per annum. The swap agreement is a derivative financial instrument and we determine and record the fair market value of the swap agreement each quarter. The value is recorded on the balance sheet of the Company and the amount of the unrealized gain or loss for each period is recorded as interest income or expense.

Fair Values of Derivative Instruments in the Statement of Financial Position

	Liability Derivatives as of
	March 31, 2014			December 31, 2013
Derivatives not designated as hedging instruments under Statement 133	Balance Sheet Location		Fair Value	Balance Sheet Location		Fair Value
Interest Rate Contracts	Accrued Liabilities	$	41,000	Accrued Liabilities	$	60,000

The Effect of Derivative Instruments on the Statement of Financial Performance

	For the three months ended
	March 31, 2014			March 31, 2013
Derivatives not Designated as Hedging Instruments under Statement 133	Location of Gain (Loss) Recognized in Income on Derivative		Amount of Gain (Loss) Recognized in Income on Derivative	Location of Gain (Loss) Recognized in Income on Derivative		Amount of Gain (Loss) Recognized in Income on Derivative
Interest Rate Contracts	Interest Expense	$	1,000	Interest Expense	$	(5,000)
Interest on fixed/variable rate variances		$	21,000		$	19,000