Note 4. Liquidity

The Company continually projects its anticipated cash needs, which include its operating needs, capital needs, principal and interest payments on its indebtedness and preferred stock dividends. As of the filing of this Form 10-Q, management believes the Company can meet its liquidity needs through the end of fiscal year 2012 with cash and cash equivalents on hand, projected cash flows from operations and, to the extent necessary, through its borrowing capacity under the Credit Agreement, which was approximately $6.4 million at August 31, 2011. Based on these projections, management also believes the Company will be in compliance with its debt covenants through the end of fiscal year 2012.

Borrowings under the Credit Agreement depend upon our continued compliance with certain operating covenants and financial ratios. The Company must maintain a minimum amount of trailing twelve-month Consolidated EBITDA (as defined in the Credit Agreement) and at least $5 million in Liquidity (as defined in the Credit Agreement). The Credit Agreement also contains certain other non-financial covenants. We were in compliance with all financial and non-financial covenants as of August 31, 2011. Our Liquidity (as defined in the Credit Agreement) as of August 31, 2011 was $11.1 million. Our minimum Consolidated EBITDA (as defined in the Credit Agreement) requirement and actual amount as of August 31, 2011 was as follows:


	As of August 31, 2011
			Actual Trailing
	Covenant		Twelve-Month
	Requirement		Consolidated EBITDA¹
Trailing Twelve-month Consolidated EBITDA¹	$	25,000	$	29,837