STOCKHOLDERS' EQUITY

6 Months Ended

Jul. 21, 2012

Stockholders' Equity Attributable to Parent [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

STOCKHOLDERS' EQUITY

Issuance of Warrants

On June 6, 2012, in connection with the Second Amendment to the Credit Agreement (see Note 8), the Company granted the lenders warrants to purchase an aggregate amount equal to 19.9% of the shares of common stock of the Company, calculated on a fully-diluted basis at the time of exercise. In effect, the lenders shall have the right to purchase 19.9% of the common stock of the Company, as determined on the exercise date, until the warrants are exercised in full.

The exercise price of the each warrant is $0.40 per share and may be exercised at any time through June 6, 2018. Warrants are not exercisable to the extent (but only to the extent) that the warrant holder or any of its affiliates would beneficially own in excess of 4.99% of the common stock, unless the warrant holder provides sixty (60) days' prior written notice to the Company.

Under the terms of the warrants, except for certain transactions, should the Company enter into any of the following transactions, any successor entity must assume all obligations of the Company under the warrant agreement (each a "Fundamental Transaction"):

• consolidate or merge with or into any other person; or

• dispose of all or substantially all of its respective properties or assets to any other person; or

• allow any other person to make a purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding shares of voting stock of the Company; or

• consummate a stock or share purchase agreement or other business combination with any other person whereby such other person acquires more than 50% of the outstanding shares of voting stock of the Company; or

• reorganize, recapitalize or reclassify the common stock of the Company.

Notwithstanding the above, in connection with the closing of a Fundamental Transaction, the Company may require the holder to exercise its warrants immediately prior to the closing of said Fundamental Transaction.

The Company estimated the fair value of the warrants using the Black-Scholes-Merton valuation model.  The term used was six years and is equal to the contractual term of the warrants. For valuation purposes, the Company expects 100% of the warrants to be exercised and the dividend yield to be zero. The Company determined that its historical stock price volatility over a six-year period was an appropriate indicator of expected volatility.  The interest rate was determined based on the average of the U.S. Treasury's five-year and seven-year daily yield curve rates in effect at the time of grant.  The Company’s assumptions are as follows:

Expected term until exercise (years)	6.0
Expected dividends	—	%
Expected stock price volatility	100.00	%
Weighted average historical stock price volatility	100.30	%
Risk-free interest rate	0.92	%

The weighted-average grant-date fair value of stock warrants granted was $350,000 and recorded in Additional paid-in capital on the Interim Consolidated Balance Sheet.

Stock Issuance

On June 5, 2012, the Company entered into a letter agreement with Sears, Roebuck and Co., a New York corporation, under which the Company issued 200,000 shares of common stock of the Company to Sears pursuant to a nonpublic offering under Section 4(2) of the Securities Act of 1933, as amended.