Infinium Needs ‘Immediate’ Funds to Survive, SEC Filing Says

With a “burn rate” is about $300,000 cash monthly, the firm needs about $3.6 million the next 12 months to sustain current operations, it said. The disclosure came only 3 days after the SEC filed a complaint against company chmn. and former CEO Timothy Roberts in a central Fla. U.S. Dist. Court over his role in what the agency called a “fraudulent ‘junk fax’ scheme” hyping Infinium’s stock (CED May 17 p10).

Infinium life-to-date losses nearly doubled as of Dec. 31, 2005, to $66.6 million, from $36.8 million a year earlier, the firm said. Loss from operations for the past year totaled $29.8 million, with a working capital deficit of $12 million. Infinium defaulted on $3.5 million in notes payable Dec. 31, it said. As a result, its independent auditors again voiced “substantial doubt” about Infinium’s “ability to continue as a going concern.” The company said in the fiscal year ended Dec. 31 it lost $29.8 million, down from $33.8 million a year earlier.

Infinium long ago shifted focus to the Phantom Lapboard and away from the “always-on” broadband Phantom Game Service and console it failed to deliver after various delays. But the Lapboard, shown at the 2004 E3 show, still has not been delivered either. The 10-KSB filing downplayed Infinium’s game service plans more than ever, saying now only that it “may seek to develop and commercialize” the service after the Lapboard debuts. However, Infinium said in the filing it had defaulted on game software distribution deals with Riverdeep, Codemasters, Atari, Eidos, Enlight and Vivendi. The Riverdeep deal expired March 30; those with Codemasters and Eidos, Dec. 31. Infinium said Vivendi had the right to terminate its deal with Infinium as of Sept. 5, since the Phantom Game Service hadn’t been launched. But Infinium said the Atari and Enlight deals don’t expire until Sept. 14, 2007, and Sept. 2, 2009, respectively.

“We anticipate release of the Phantom Lapboard in October” but “delays may occur and, given our limited resources,” the firm said, adding that it needs more capital to bring the device to market. If the money materializes, Infinium plans to “heavily rely on viral marketing and viral advertising to achieve our marketing objectives,” rather than traditional ads, initially selling the product direct to consumers via its website although “we may establish other sales and marketing distribution channels through brick and mortar retailers,” it said.

Offering no comment on the charges, Infinium revealed the SEC complaint against Roberts was made in U.S. Dist. Court, Orlando. The firm didn’t respond to a request for comment by our deadline. Roberts was accused by the SEC of authorizing a fax promotion and making $400,000-plus unloading his Infinium shares in the ensuing run-up in trading volume. According to the complaint, in Nov. 2004 Roberts hired a promoter to send faxes to “tens of thousands of potential investors” across the U.S. The faxes “made it appear as if Infinium Labs were on the verge of launching its flagship model,” the Phantom Game Service, when “in fact, at the time of the fax campaign, Infinium Labs lacked the financial resources to overcome the significant technological and manufacturing hurdles preventing it from marketing the game system to consumers,” the SEC said.

A breach of contract suit against Infinium by Longview Special Finance in U.S. Dist. Court, N.Y., was dismissed early this month and Infinium’s suit against Digital Interactive Streams (DiStream), filed in Aug. 2004, was dismissed May 9, the company said in the filing. Infinium had accused DiStream of breaching a settlement. But judgments were filed against Infinium in other cases and it settled with firms that brought suit. Infinium vowed to challenge some judgments against it.

Infinium said as of May 16 it only had 5 full-time staff -- one in R&D, the others general and administrative workers. As of Dec. 31, 2004, it was saying that it had 41 full-time employees, including 24 in R&D and 17 executives, marketers or administrators. It didn’t say precisely when jobs were cut, but at least some disappeared last year, when its hq shifted from Fla. to Seattle. It moved to Seattle while promoting Kevin Bachus to CEO, replacing Roberts. But Bachus -- who brought cachet thanks to his involvement in the development of the Xbox console at Microsoft -- left Infinium, replaced by Greg Koler. As of May 16, holders of Infinium common stock numbered about 743, the company said. - - Jeff Berman