CompuSave Hit By New Setback : Supplier Cancels Contract; Firm Unable to Pay Dividends
In yet another signal of its persistent financial problems, CompuSave Corp. late Friday announced that one of its last major suppliers is canceling its contract with the company for alleged breach of obligations and that it would be unable to pay its preferred stock dividend due next month.
The cancellation of the contract with MarketDisc Corp. of Newport Beach leaves 3-year-old CompuSave with no immediate way to execute the new electronic advertising business that it has been trying to fashion for itself after failing as an electronic retailer. MarketDisc had been retained by CompuSave to produce the video advertisements used in its machines.
No Details Given
CompuSave’s announcement did not specify why MarketDisc intends to cancel the contract, and executives at either company could not be reached for comment.
In addition, the Irvine-based company said that because of its financial condition, it will be unable to pay the dividend on its preferred stock due April 1. The company said it will ask its shareholders to approve an increase in the number of authorized shares to allow the dividend to be paid with shares of common stock.
The latest announcements offer yet more evidence of the difficulties CompuSave has encountered in trying to find a market for its state-of-the-art, electronic video machines.
Needed Money
Last month, the company said it needed an additional $4 million to $5 million to pay off debts and nurture the new video-advertising business plan that depended heavily on MarketDisc Corp.
The company also revealed that it had lost a total of nearly $10.3 million since its inception in May, 1983 and that it is facing lawsuits and court claims amounting to $1 million.
CompuSave’s problems started about nine months ago, when it went into volume production for its electronic shopping machine that allowed customers to buy discounted merchandise by mail. Although the company sold about 450 machines to supermarkets and convenience stores, merchandise sales through the machines were disappointingly low.
In December, CompuSave shut down its retail operations and began converting its devices into electronic video machines that would advertise products in stores. Its first customer was Builders Emporium, a chain of 64 do-it-yourself stores.
CompuSave’s business plan called for it to sell advertising space on its video disks to various manufacturers of merchandise sold at the home-improvement chain, and the company retained MarketDisc Corp. to produce the video advertisements.
CompuSave’s announcement Friday night said that because of the dispute with MarketDisc Corp., it had taken over responsibility for servicing the Builders Emporium account.
The company added that it couLd not at this time “estimate the effect that these actions will have” on its business.
