6. WARRANT LIABILITY

9 Months Ended

Sep. 28, 2012

Notes to Financial Statements

Note 7 - WARRANT LIABILITY

The following warrants for our common stock were issued and outstanding for the period ending September 28, 2012 and December 30, 2011, respectively:

	September 28, 2012		December 30, 2011
Warrants outstanding at beginning of period		12,137,803		14,887,803
Exercised		-		(2,750,000	)
Warrants outstanding at end of period		12,137,803		12,137,803

A detail of warrants outstanding September 28, 2012 is as follows:

	Number of Warrants		Expiration Date
Exercisable at $1.25 per share		6,312,803	6/20/2013
Exercisable at $1.50 per share		250,000	4/14/2012
Exercisable at $0.08 per share		4,200,000	4/1/2014
Exercisable at between $0.32 and $1.00 per share		1,375,000	4/15/13 to 4/15/15
		12,137,803

The fair values of outstanding warrants defined as a derivative instrument are estimated each period using the Black-Scholes pricing model. The assumptions used to calculate the fair value are as follows:

	September 28, 2012			December 30, 2011
Expected terms (years)		1.51			2.25
Expected volatility		83.20	%		106.20	%
Dividend yield		-			-
Risk-free rate		0.23	%		0.25	%

The change in fair value amounted to approximately $376,000 and $404,000 for the thirteen weeks ended September 28, 2012 and September 30, 2011, respectively, and $192,000 and $86,000 for the thrity-nine weeks ended September 28, 2012 and September 30, 2011, respectively. These changes are included in the line item Gain (loss) on derivative liabilities in  our Statement of Operations.