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Tom Livia and Gary Stern, co-founders of online computer retailer PC Universe, have agreed to sell the company to a group of investors for about $500,000. Proceeds will go to paying off IBM Credit and other creditors.
Tom Livia and Gary Stern, co-founders of online computer retailer PC Universe Inc., have agreed to sell the 7-year-old company to a group of investors for about $500,000. Proceeds will go to paying off IBM Credit LLC and other creditors, Livia tells Internet Retailer. The e-commerce business will continue.
Of the $500,000 purchase price, up to $275,000 will be paid to IBM Credit to satisfy the terms of a settlement agreement. Up to $225,000 will be paid to cover “certain of the company’s unsecured trade debt in connection with the web business with respect to certain of its outstanding contracts,” according to a PC Universe Securities and Exchange Commission filing. “There were not a lot of other options, given that we are a public company and given the credit situation,” Livia says. “The other option would have been to cease operations.”
The sale of PC Universe was the preferred choice, meaning that some employees would keep their jobs while the company paid creditors, he says. Livia says he and Stern will serve as consultants for several months during a transition period. The sale is expected to close sometime in February, following SEC shareholder rules. Livia and Stern are the majority stockholders and both have agreed to sell the company to Emedia Management LLC, a newly formed entity.
The brand and web site will continue with no discernable differences to shoppers, Livia says. In the past, PC Universe had a corporate sales force targeting schools and government and provided technology service. “We were more of a total solution provider with a web site,” Livia says. “The new enterprise will be strictly e-commerce.”
The company was in default of debt repayment since December 2007 and IBM Credit had reduced the computer retailer’s credit line. In the third quarter of 2008, web sales at PC Universe, No. 366 in the Internet Retailer Top 500 Guide, decreased by 8.3% to $3.3 million from $3.6 million in Q3 of the prior year.
For the third quarter ended Sept. 30, 2008, PC Universe posted a net loss of $766,000 on sales of $5.6 million vs. a net loss of $107,000 on revenue of $8.2 million for the third quarter of 2007.
For the first three quarters, Internet sales increased 5.6% to $11.4 million from $10.8 million in the prior year. But overall revenue decreased 25.6% to $19.2 million from $25.8 million in the first three quarters of 2007. For the first three quarters the net loss at PC Universe widened to $1.6 million from a net loss of $264,000 in the previous year.
“Even with our problems, e-commerce was always the bright spot,” Livia says.