Sharper Image (NASDAQ:SHRP) just handed in another dull quarter. Not only is the company still fighting to differentiate its merchandise and offer unique products in a highly competitive niche, but it's also amassing debt and burning through its cash so quickly that I wonder whether it will even survive.

We know Sharper Image has been struggling for some time now, and even with a new management team in place, the outcome hasn't changed much. Revenue for the most recent quarter sank 25%, and the bottom line continued to bleed red as losses widened to $1.36 per share.

One thing that caught my eye while skimming the balance sheet was the pile of debt the company has accumulated over the past year. Last year at this time, the company was debt-free. Of course, when you rip through $52.4 million for operations (compared with $29.8 million last year) and then tack on another $3 million for capital expenditures, it's not hard to see why the company needed to tap into its revolving credit facility. Sharper Image began the year with more than $18 million in cash and now has just a little more than $800,000 left.

The company faces a lot of tough competition, including much larger specialty retailers Best Buy (NYSE:BBY) and Circuit City (NYSE:CC). Even Wal-Mart (NYSE:WMT) and large warehouse discounters such as Costco (NASDAQ:COST) are offering items like big-screen televisions and DVD players. In today's fast-paced world of technology, how much can Sharper Image really hope to stand apart in the world of electronics?

Well, it is trying to offer a narrower range of products that are fresh and new. But it's difficult to stand out when specialty retailers are offering such a large breadth of products and discount retailers have lower prices. Sharper Image's air-purification products and massage chairs have seen a decline in sales over the past few years. Clearly, there will have to be other products to sell, but those products will still have to be distinguishable from those of its competitors. Looking at its tight financial situation, I'd say that Sharper Image doesn't have a whole lot of time to figure out what to do.

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