NOTE 4 - FINANCING ARRANGEMENTS

On August 15, 2011, the Company and Square 1 Bank entered into a Fourth Amendment (the “Fourth Amendment”) to the Loan and Security Agreement dated as of December 22, 2009 (as amended, the "Amended Loan Agreement"), which provides for borrowings of up to $12 million. Effective with the Fourth Amendment, the facility is now comprised of a $3 million term loan facility, which was fully funded on the date of the Fourth Amendment, and a revolver of up to $12 million, and the maturity date is August 15, 2014. The revolver borrowing limit is equal to the lesser of (a) $12 million minus the term loan principal outstanding at any point in time, or (b) 85% of eligible accounts receivable. The term loan principal is repayable at the rate of $100,000 per month beginning April 2012. All borrowings under the Amended Loan Agreement bear interest at Square 1 Bank's prime rate plus 1.0% per annum. Interest is payable on the last day of each calendar month. The Company paid a loan fee of $60,000 to Square 1 Bank in connection with entering into the Fourth Amendment.

At August 31, 2011, the Company had outstanding borrowings under the revolver of $5,274,000, and the amount available to borrow at that date amounted to $3,726,000. At August 31, 2011, the effective interest rate on the revolver and bank term loan was 4.25%. At February 28, 2011, the effective interest rate on the revolver was 6.0%.

The Amended Loan Agreement contains a financial covenant that requires the Company to maintain minimum levels of earnings before interest, income taxes, depreciation, amortization and other noncash charges ("EBITDA") on a rolling six-month basis and a minimum debt coverage ratio. The Amended Loan Agreement also provides for a number of customary events of default, including a provision that a material adverse change constitutes an event of default that permits the lender, at its option, to accelerate the loan. Among other provisions, the Amended Loan Agreement requires a lock-box and cash collateral account whereby cash remittances from the Company's customers are directed to the cash collateral account and which amounts are applied to reduce the revolving loan principal balance. Borrowings under the Amended Loan Agreement are secured by substantially all of the assets of the Company and its domestic subsidiaries.

Long-term debt is comprised of the following (in thousands):

	August 31,			February 28,
	2011			2011
Bank term loan	$	3,000		$	-
Subordinated promissory notes		-			5,000
Less unamortized discount on subordinated notes		-			(540	)
		3,000			4,460
Less portion due within one year		(500	)		-
Long-term debt	$	2,500		$	4,460

On December 22, 2009 and January 15, 2010, the Company raised an aggregate amount of $5,000,000 from the issuance of subordinated promissory notes (the "Subordinated Notes") that bore interest at 12% per annum and had a maturity date of December 22, 2012. On August 15, 2011, in conjunction with entering into the Fourth Amendment, the Company paid in full the $5,000,000 outstanding principal balance of the Subordinated Notes plus accrued interest of approximately $76,000. The 500,000 common stock purchase warrants that were issued to the subordinated note holders at the time the notes were issued have an expiration date of December 22, 2012, and are exercisable at $4.02 per share.

Other Non-Current Liabilities

Other non-current liabilities consist of the following (in thousands):

	August 31,		February 28,
	2011		2011
Deferred rent	$	12	$	4
Deferred revenue		558		550
	$	570	$	554