The New York Post is reporting that FAO Inc., which owns the FAO Schwartz, Zany Brainy, and Right Start chains, is running low on cash and needs a big holiday season or an infusion of cash to survive.  Just six months after the company emerged from Chapter 11 bankruptcy in near record time (see 'FAO Emerges From Chapter 11'), FAO had only $1.3 million available on its credit line on September 12, according to filings with the Securities and Exchange Commission.  To take full advantage of the coming holiday season FAO must be able to stock (and restock) its stores, which could be difficult if  suppliers become wary of the company's financial position.

On the positive side, FAO has started to open boutiques in the Saks chain of department stores as part of an agreement that gave Saks a stake in FAO as a major stockholder (see 'FAO Inc. Forms Alliance').  Saks could come to the rescue with an infusion of cash, which could help in sourcing seasonal products.  FAO has also reached an agreement with Borders, which could also prove very beneficial in the long run.