Gizmondo Reports Significant Cashflow Issues, Loan Restructuring

Tiger Telematics, parent company of recently controversial handheld firm Gizmondo, has released its latest SEC filing, revealing significant financial pressure at the firm, which launched its handheld in limited mall-kiosk outlets in the U.S. late last year, following its European launch, but is now experiencing some major creditor-related issues. Tiger explains in the filing: "The Company's Gizmondo Europe subsidiary has experienced severe financial pressures from various vendors as its cash flow has been unable to service the requirements. This has in part been aggravated by a lack of investor funding." The statement continues: "The company has been actively negotiating for further funds from debt and equity sources to assist the cash flow needs of Gizmondo Europe but there can be no assurances that this will be achieved. The Company may be required to seek other alternatives for the Gizmondo Europe operations." Foremost among these problems are loans from UK businessmen David Warnock and Simon Davies, who provided an aggregate total of approximately $21.2 million in two separate short-term loans to Gizmondo Europe, but have not yet received the money back, despite it being due in late 2005. These loans have now been combined into a UKP12.7 million ($22.4 million) loan, for which Tiger has pledged the patents and intellectual property rights of its Smart Adds product and the stock of its wholly owned subsidiary Smart Adds Inc. as security. In the short-term, Tiger has negotiated a $5 million bridge loan from an investment firm, but "has not been able to draw down under the facility as of yet", and unfortunately, more major financing for the firm is contingent on its settling all outstanding litigation, as well as settling "UK contingent tax PAYE liability with Inland Revenue", indicating that the company currently owes money to the tax authorities in the United Kingdom. Finally, the filing reveals a settlement in the company's litigation brought by HandHeld Games, under which Gizmondo Europe Ltd. is to pay to HandHeld Games the total settlement sum of $175,000 under certain conditions, following the developer's litigation claiming breach of development contract. Tiger is expected to continue updates on its overall financial situation in its SEC filings over the next few weeks.