Blaming the high costs of introducing its electronic mail-order shopping machine throughout the nation, CompuSave Corp. of Irvine reported a first-quarter loss of $2.6 million, about 10 times the size of the loss posted in the period a year ago.
The loss in the quarter ended Aug. 31 comes on the heels of a $4.8-million loss for CompuSave's entire 1985 fiscal year and underscores the difficulty that the 3-year-old company has encountered with its novel "discount shopping machine."
The machine, which resembles a refrigerator with a built-in talking television screen, allows shoppers to order from an inventory of 2,500 discounted items by simply pressing its touch-sensitive screen and inserting a credit card. Delivery is guaranteed by mail.
The escalating losses have depleted nearly all the $9.6 million raised by CompuSave in two stock offerings and have forced the company to seek additional financing from its existing shareholders through a rights offering that is expected to raise between $2 million and $5.5 million.
David Young, CompuSave's chief financial officer, said the company had $1.2 million on hand at the end of August, about a seven-week supply of cash.
In the first quarter, sales of both machines and merchandise totaled $2.76 million. Because the company only started selling its machines in May, there are no comparable revenue figures for last year's quarter. Product development losses for the period last year totaled $194,701.
Young said the company has delivered 423 machines to supermarkets, convenience food outlets and other retailers, far below the 3,000 units the company had once projected delivering by year's end.
Furthermore, Young confirmed that merchandise orders at the machines were below initial projections. Earlier this year, executives claimed that each machine would handle about four sales a day. However, from June, when the first machines were delivered, until September, company sources said each machine handled an average of less than one sale a day.
"The merchandise sales were disappointingly low in the first quarter," Young said. "If this company has made any mistake at all, it was that they thought the machine would be accepted faster than it has been." In addition, Young said that the problem was compounded by the company's spending money as though it were a much larger company with much higher revenues.
The rights offering, which is expected to be made within the next 60 days, gives shareholders as of Oct. 26 the right to purchase shares of a new class of preferred stock and common stock warrants for a price that is still to be set.