EXHIBIT 99.1
ConSyGen, Inc.
125 S. 52nd. St.
Tempe, AZ 85281
19 December 2001
To: All ConSyGen, Inc. Shareholders
Subject: Options and Choices for ConSyGen's Future
Dear Shareholder,
As the recently-appointed President and CEO your company, and with the
concurrence of the Board of Directors, I believe that it is essential that I
should communicate to you as shareholders in this unusual way for two primary
purposes:
A. To acquaint you with the present financial and business condition of
ConSyGen, and
B. To seek your direct assistance as interested parties in recommendations
of how to proceed.
ConSyGen in its present form is in perilous financial condition. The management
and Board of ConSyGen are taking urgent steps to avert further financial
distress, while also seeking to determine how to return some benefit to the
Company's shareholders in our forthcoming decisions.
To summarize the situation within the Company (CSGI):
1. Counterfeit Cop. The CSGI Business Products Division, composed of
inventory and the various intellectual properties and rights
associated with the Counterfeit Cop, presently represents one of the
few assets remaining to the Company.
a) The Counterfeit Cop has not generated any of the expected levels
of revenue that the company had hoped for in the past.
i. The Business Products Division signed a purchase agreement
with First Data (FDC) on the 20th of October 1999 and
subsequently agreed to a modify portion of the agreement
sometime between the 20th and the 31st of October 1999,
thereby allowing FDC to accept the units on consignment,
rather than pay for the shipment of products ordered;
ii. The Business Products Division signed a one-year Distributor
agreement with Cardservice International (CSI) on the 23rd
of February 2000, which entitled CSI to purchase a minimum
order of units at a specified price;
iii. The Business Products Division signed a one-year Distributor
agreement with GMS Auditing, a private company in New York
in the 4th quarter of 1999, which entitled GMS to purchase a
minimum order of units at a specified price;
b) None of these agreements has any `teeth' or compulsory
requirements for either of these companies to actually purchase
any equipment - whatsoever;
c) Since the company no longer can afford the infrastructure to
market the product effectively, we are seeking to locate a
purchaser for the entire Division. The proceeds from this sale,
should it occur, would make the company's continued survival
possible for an extremely limited period during which we will
seek to work out the next steps.
2. BizPay. As one of my first actions on joining the Company in
mid-October, I conducted a thorough review of the architecture,
capabilities and potential of the BizPay technology, which had been
introduced to me earlier in 2001. My detailed analysis confirms to me
that:
a) The underlying architecture is generally sound, and there are
some attractive features;
b) The technology's ability to process very large volumes of online
transactions is far from adequate. In fact, ConSyGen would be
greatly exposed if it sought to promote and deploy the present
BizPay technology as a complete and robust Internet e-commerce
solution;
c) The management and user-friendliness of the system is extremely
inefficient and difficult, resulting in resistance from
prospective clients, excessive need for intervention by ConSyGen,
and a potentially-crippling customer support obligation in the
future if indeed the technology should become successful;
d) The previous interest of some of the large ISPs in the BizPay
technology has waned and vanished. It is unlikely that the
company will be able to revive their interest unless very
substantial and expensive re-design efforts are undertaken and
dedicated sales personnel hired to provide day-to-day account
management;
e) It is estimated that the cost of rectifying the above
deficiencies and bringing BizPay to an optimal level of
acceptance is approximately $5 million, to be spent over a period
of 1 year. Doing so would allow the company to seek a significant
amount of funding to begin marketing the product up against
PayPal and c2it. Regrettably, there are insufficient funds
available to the Company to do this at this time.
3. Liabilities. The Company is now facing a growing number of small but
irritating law-suits and complaints, primarily related to the
company's inability over the last several months to meet even small
creditor demands. In addition, there are pressing and immediate
obligations against the Company from both Arizona and Federal taxing
authorities. These problems threaten seizure of assets.
4. Staffing.
a) Headcount was dramatically reduced from the remaining 17 to 4 on
November 30 to both save expenses and accrued liability and to
obviate our continued dependence on the staff's goodwill;
b) The remaining four employees , including myself, continued
working on an unpaid basis as employees and consultants until
December 18, when they were all terminated.
c) Some of the staff affected by these terminations have been
working without pay for several months. There are also unpaid
obligations for ongoing staff expenses;
d) As a result of these terminations, the company is no longer able
to provide any level of support for our merchant clients that
they deserve, to accept any new merchants onto the system, or to
undertake the modifications and design efforts necessary to turn
BizPay into a successful commercial product.
5. Financing. As many of you are aware, the Company has been attempting
to raise operating capital for the last two years and has sold
securities through private placements. The Company has borrowed funds
from management and investors, and attempted to work with various
groups to secure the necessary funds required for growth. At various
times within the last two years, the Company has engaged Carriage
House Capital of Tempe, Arizona, iCapital of Irvine, California,
Swartz Institutional Finance of Atlanta, Georgia, and Breakout
Investment Marketing of Scottsdale, Arizona to assist CSGI in raising
funds. For various reasons, none of these groups has been successful
in assisting the Company with anything other than "survival" funding.
CSGI has never been able to secure funding to implement a growth
strategy or successfully market its product. Based on these facts and
our current financial condition:
a) Further infusions of debt financing into the Company are
unlikely, as there is no predictable revenue base on which to
arrange borrowings;
b) Equity financing is virtually impossible, since we have exhausted
our authorized capital of 69,000,000 shares; even if we had
further unissued capital available for financing, the current
depressed stock price would make the transaction extremely costly
in terms of stock dilution;
c) Over the last few weeks, despite all of the burdens facing the
Company, the management formulated a concept, to use existing
assets to bring the Company profitable within a 12-18 month
timeframe. Management contacted a new set of potential investors
regarding the concept, and was informed that ConSyGen is a
completely unfundable entity, and that it is extremely unlikely
that any source would commit funds to CSGI or any subsidiary in
its present financial condition. That opinion was unanimous among
the funding sources approached.
6. Next Steps: In the light of these items, I have advised the Board of
Directors that the most prudent, ethical and judicious decision is for
the Company to immediately seek the protection of the Courts by way of
a Chapter 11 Bankruptcy filing.
a) The Board has concurred;
b) However, it is the Company's intention to use the time available,
under this approach, to identify and undertake the most
beneficial strategy for its shareholders;
c) Currently, it is unknown who will shepherd the Company through
this difficult time because the Company now has no remaining
management or staff., and it is unreasonable to ask former staff
to return to assist in the orderly transition of the Company
without some assurance that they will receive payment for their
services, having gone without compensation for extended periods
already.
7. Summary.
It appears that ConSyGen has three major assets available to it:
a) The Business Products Division, with the Counterfeit Cop
inventory and rights;
b) The BizPay technology in its reasonably complete, non-scalable
form;
c) The Net Operating Loss (NOL) carry-forwards from prior years. At
May 31, 2001, these NOLs aggregated to approximately $33 million;
as such, they represent a persuasive reason for a qualifying
company to acquire ConSyGen.
In closing, I am now seeking your assistance, as well as each of the
shareholders in locating an appropriate company that would be interested in
either in purchasing ConSyGen to take advantage of the CSGI's very considerable
NOLs, or in providing a funding source to allow the company to sustain
operations and to launch BizPay. Such a company or group would ideally be
engaged in similar or complementary business activities as ConSyGen has been,
and should have a status which would allow ConSyGen shareholders to participate
in a valuable distribution as part of any acquisition. I am prepared to consider
all serious contacts, however time is of the essence. Your input in this regard
would be greatly appreciated.
It is truly most unfortunate that the Company doesn't have sufficient
funding or time to allow me to make use of my skills to drive CSGI towards a
successful future.
Thank you,
/s/ Bruce R. Shirey
Bruce R. Shirey
Former President and CEO