LOS ANGELES (AP) Days after warning the government that it might have to shut down, Internet retailer Buy.com announced Thursday that it has reached agreement with a company to keep processing its credit card transactions, thanks to a rescue by its founder.
The unidentified credit card processor agreed to an automatic renewal of its contract to service Buy.com through August 2002 after Scott Blum, Buy.com's founder, agreed to provide unspecified financial support, the company's president, Robert Price, said Thursday night.
I am happy to provide the necessary financial backing for the company's continuing operations,'' Blum said in a press statement. I am pleased to report that it's business as usual.''
``I'm certain that it has to do with financial support,'' Price added in a telephone interview.
``Being an e-tail company where the majority of your sales are done through a credit card transaction, it's critical that you have a credit card processing relationship,'' he said.
In a filing this week with the Securities and Exchange Commission, Buy.com revealed that its contract with its credit card processing company was in jeopardy and could end by Sept. 1.
The company said the unidentified credit card processor notified it on June 22 that it would stop working with Buy.com the next day. The company was able to extend the contract to Sept. 1, but only by agreeing to pay an additional 1 percent of each transaction and allowing the processor to withhold 5 percent of daily receipts as security.
Price said the renewal eliminates those costs.
``The fees that were being charged went back to where they were at. There's no longer going to be any daily holdback,'' he said.
Buy.com has been struggling in recent months and has never achieved profitability. It recently reported it lost $50.9 million for the first six months of this year.
In January, the company laid off approximately 115 employees. Earlier this month, another 50 were let go.
The company also agreed earlier this month to be acquired by a company run by Blum. The sale is supposed to close by Nov. 30. The same day it was announced, Buy.com's stock was delisted from the Nasdaq.
As part of the acquisition agreement, Blum agreed to provide Buy.com with interim financing of up to $9 million. The financing that led to renewal of the credit card processing contract is in addition to that amount, Price said.
