Infinium filing reveals near-empty coffers
Phantom maker claims that having $134,000 cash on hand--with a "capital deficiency" of nearly $4 million--is just business as usual.
When asked to explain the company's latest Securities and Exchange Commission filing, an Infinium Labs executive simply said start-ups often push the limits of their balance sheets. However, a read of that document will spark concerns among those who wish the company well.
In that filing, a 10-Q dated August 23, 2004, Infinium had exactly $134,226 in its bank account, with "a working capital deficiency of $3,962,226." That second amount equals the difference between the company's accounts payable (what it owes) and its accounts receivable (what it's owed). In other words: At present, Infinium can't pay its bills.
The 10-Q recaps Infinium's brief financial history. The company was incorporated on January 6, 2004, and trades in the over-the-counter market under the ticker IFLB. It has raised aggregate proceeds of $2,797,000 from the sale of common stock in 2004 and an additional $7,829,760 from bridge financing completed during the same year. And, by its own estimates, Infinium Labs will have operating costs that exceed $68 million over the next 12 months.
Highlights from the document include the following:
The document states that "the Company estimates based on its current business strategy that [it] will have operating cash requirements over the next twelve months of approximately $68,846,000 as follows: Operating expenses, including employee salaries and benefits, office expenses, rent expense, legal and accounting, publicity, investor relations, net of payables ($12,576,000); research and product development ($8,583,000); Marketing ($15,098,000); Production Costs ($31,319,060); Capital Expenditures ($1,270,000)."
The document continues, claiming that it "plans to sell $34,971,000 in product during the next 12-month period." To partially make up for the disparity in its funding profile, the Infinium statement says it "intends to pursue negotiations with its [current] bridge lenders to cover their notes to equity to reduce each outlays for the debt service."
Immediately following that note of optimism is the reality check: "As reflected in the accompanying financial statements, the Company is in the development stage with no sales, [and] a working capital deficiency of $3,962,226. This raises substantial doubt about its liability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company's ability to raise additional capital and implement its business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Management believes that actions presently being taken to obtain additional funding and implement its strategic plans provide the opportunity for the Company to continue as a going concern."
Is Infinium on track to go live with its Phantom gaming service on the promised date of November 18, 2004? With less than three months to launch, the answer apparently hinges on its ability to raise additional funding.