The assets of CompuSave Corp., the struggling Irvine-based electronic retailer, have been temporarily frozen by a court order, offering one of the strongest signs yet of the company's financial problems.
According to documents in Orange County Superior Court, Pro-Tech, a Fountain Valley electronics manufacturer, successfully won a temporary protective order last month restricting CompuSave's access to its bank accounts, inventory, accounts receivable and other property. Pro-Tech sought the order after CompuSave had compiled debts with the supplier of nearly $58,000 over the previous five months.
The temporary order remains in effect until next Wednesday, when the court is scheduled to consider Pro-Tech's request to attach CompuSave's assets. The temporary order leaves unclear whether CompuSave is permitted to pay any of its estimated 30 remaining employees, and none of the principals involved in the case would comment on the order's provisions.
The court action is the latest in a series of disappointments for CompuSave and its novel electronic shopping machine that allowed customers to buy discounted merchandise by mail.
The 3-year-old company accumulated losses of more than $7 million in the first 15 months after becoming a publicly held company in May, 1984, and is said to have depleted virtually all of the $9.6 million it raised in two stock offerings. The company is expected next week to release the results of the fiscal quarter ended Nov. 30, along with a public statement about its financial condition, according to President Larry Mayle.
In requesting the asset attachment, Pro-Tech President Charles McGarry said in court papers that CompuSave Treasurer David Young had responded to requests for payment by claiming that "the corporation has no money."
McGarry added in the filing: "He (Young) told me that they cannot pay the monies owed to Pro-Tech . . . (because) the financing the company had hoped for did not materialize."
Even before Pro-Tech's suit, CompuSave had announced its intention to shut down its electronic retailing network for a "strategic reevaluation" of its operations. The network hooked the company's central offices in Irvine to about 600 refrigerator-size electronic "Touch-n-Save" shopping machines CompuSave built and shipped throughout the nation.
Although CompuSave found a market for its product, it was less than company founders Mayle and Roger Miller had projected and built the company to handle. At the beginning of 1985, the founders predicted sales of 3,000 machines in the company's first year of production.
In addition to falling short of their machine sales goal, merchandise sales through the machines, which were placed in a variety of supermarkets and convenience stores, were said to be far below initial projections, causing the company to carry a burdening amount of unsold inventory, including blankets, televisions and toasters.
Furthermore, at a time when its operations were falling short of goals, CompuSave was hit by what it claimed was a smear campaign aimed at damaging its business and depressing the value of its stock.