NEW YORK (Reuters) - Retailer Sharper Image Corp has filed for Chapter 11 bankruptcy protection, citing declining sales, three straight years of losses and litigation involving its Ionic Breeze air purifiers.

The San Francisco-based company filed for protection late Tuesday in U.S. bankruptcy court in Wilmington, Delaware. Sharper Image said it had $251.5 million in assets and $199 million in debt as of January 31, according to the filing. Cash on hand totaled about $700,000.

Its shares plunged 92 cents, or 64 percent, to 52 cents on Nasdaq.

“Sharper Image is in a severe liquidity crisis,” Chief Financial Officer Rebecca Roedell said in a separate filing.

She said the company has suffered from increased competition, narrowing margins, litigation, lower consumer and market confidence, tighter credit from suppliers, and poorly performing stores.

“The foregoing has been compounded by the ever-tightening and volatile credit and financing markets,” she added.

Sharper Image has seen its sales decline steadily since 2004, and has posted net losses in fiscal 2005, 2006, and 2007.

According to court papers, the electronics retailer also cited “negative publicity” from the litigation involving its Ionic Breeze air purifiers for its falling revenues.

In October, a federal court denied approval of a settlement of class-action suits related to the efficacy of the air purifiers. The product was sold to 3 million consumers, according to a previous filing.

Following the ruling, Sharper Image’s stock fell 18 percent, weakening support from suppliers and choking working capital as creditors tightened or withdrew credit terms, according to court documents.

The company deals with about 650 vendors and suppliers on a credit basis, many of whom began to request cash upon delivery, according to court papers.

Sharper Image is seeking a $60 million loan arranged by Wells Fargo Retail Finance LLC to keep operating, according to the court papers.

The company said in a separate filing it replaced Chief Executive Steven Lightman with Robert Conway on February 14.