Rosscomp’s Cash Problem Eased for Present by Loan

Rosscomp Corp., the struggling Costa Mesa computer parts maker, announced Monday that it has negotiated a tentative $150,000 loan that should solve the company’s money problems for the next four months.

The announcement came just three days after the company, which has lost $7 million in the last two years, said it faced “a severe and immediate” cash problem, its second financial crisis in the last three months.

However, Rosscomp Chairman Gerhard Rotter said the latest loan does not end the company’s cash woes. By the end of the year, Rotter said the company, which has already spent about $10 million developing a line of computer memory devices, would need an additional cash infusion.

The latest loan consists of a verbal agreement from one of Rosscomp’s venture capital investors to purchase approximately $150,000 of the company’s convertible secured subordinated notes. The notes, scheduled to expire in March, 1987, are identical to those issued by Rosscomp to other investors in May when the company suffered its first cash shortage.

Rotter said Rosscomp’s financial projections through the end of the year assume that the company will be able to collect about $500,000 from its customers and research and development partnership notes. If those notes are not paid, Rotter said the company could need additional cash before the end of the year to cover its routine operating expenses.

Rosscomp’s continuing financial bind is due to its newcomer status in the computer memory market, Rotter said.

Now four years old, Rosscomp initially entered the market with a device designed to handle an eight-inch magnetic recording tape. But the need to shrink the size of computer parts pushed the market toward smaller memory devices and earlier this year Rosscomp abandoned its first product in favor of the more acceptable 5-inch device.

“We’ve only been selling the 5-inch drive since January and it’s too early to have made much of a dent,” Rotter said. He added that several major computer manufacturers currently are evaluating the Rosscomp product for possible inclusion in their machines.

However, at least one analyst doubts whether Rosscomp will find a market for its product. Ray Freeman, a Santa Barbara computer market analyst, said computer manufacturers have stayed away from the Rosscomp product because it is unique and does not work with other magnetic tape products already on the market.