Ailing CompuSave Plans to End Electronic Retailing
Faced with mounting debts and disenchanted customers, CompuSave Corp. of Irvine said Tuesday that it will permanently close its electronic retailing operations today and will need an additional $4 million to pay its debts and stay in business.
The announcement came as the company said it suffered a $2.4-million loss in its fiscal second quarter, ended Nov. 30. The latest red ink brings the ailing company’s losses since May, 1984, to $9.8 million, nearly equivalent to the $10 million the company raised in two stock offerings.
Although the company’s announcement late Tuesday was a revealing chronicle of CompuSave’s current financial woes and choices for the future, it did not discuss the possibility of filing for bankruptcy or reorganization and did not mention a court hearing scheduled for today on a creditor’s efforts to freeze the company’s assets for non-payment of debts.
CompuSave officials could not be reached to elaborate on the statement.
The announcement, however, said the company’s cash as of Nov. 30 totaled $465,000, an amount that included $453,000 pledged as collateral. The cash balance had declined from $1.2 million as of Aug. 31. The company said, however, that cash and cash equivalents had risen to about $520,000 as of Monday but made no mention of any pledged as collateral.
In its announcement, the company blamed “lack of funds and unsatisfactory sales results” for its decision to shut down its retailing operations, a novel concept that allowed customers to buy discounted merchandise through an electronic, video shopping machine.
The machines, which were hooked up to a central computer and warehouse in Irvine, were sold to grocery store and convenience store operators who received a percentage of each sale generated by the machine. Sales of machines and merchandise were $976,652 in the second quarter, about one-third the amount generated in the previous three-month period.
The company said it hoped to use the technology of its machines for in-store advertising programs and other promotions. However, the statement said the company would need additional financing to pursue that business.
In addition, the company said it expects to be required to repurchase about 130 of the nearly 600 “shopping machines” it sold because the devices have not generated the level of merchandise sales originally promised. Under certain sales contracts, CompuSave promised to buy back machines if they failed to generate a minimum level of sales for their purchasers.
The owners of 46 machines have requested reimbursements, the company said.
