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Dow Jones News Service via DowVision 02/11/99 01:02 PM
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=ConSyGen's Ex-Chmn Keeps Holdings Despite Losses, Lawsuits
By Rick Jurgens
TEMPE, Ariz. (Dow Jones)--Bob Stewart, who founded ConSyGen Inc. (CSGI) and
controls 48.7% of its stock, is still betting on the company, despite his
decision last month to leave the company's board, which he chaired.
Stewart, 80, told Dow Jones he stepped down because he plans to spend about
60% of his time in China, where he is involved in other ventures. His departure
had nothing to do with the poor financial performance of the year-2000 software
solutions provider or a recent flurry of legal actions between ConSyGen and some
investors who lent it $3.5 million, he said.
"I'm not unloading any stock," Stewart said after joining an interview already
underway with Thomas Dreaper, ConSyGen's chief executive officer.
The company posted a loss of $1.3 million, or 8 cents a share, on revenue of
$324,000 for the fiscal second quarter ended Nov. 30. Dreaper said that the
company, which has had 10 straight money-losing quarters, will probably post
another loss for the current, third quarter, which runs through February.
In April 1998, the 20-year-old company began trading on the Nasdaq Stock
Market, where it recently traded at 3 5/8. The stock, which reached a 52-week
low of 11/16 in September, now faces delisting. No hearing has been held on the
delisting action, which is triggered when a company fails to meet certain
criteria, according to a Nasdaq spokesman, who declined further comment.
A hearing is scheduled for March 4 but delisting appears "very unlikely,"
Dreaper said.
ConSyGen is the defendant in a lawsuit by a group that lent it $3.5 million in
May 1998. That group, which includes Sovereign Partners LP, Dominion Capital
Fund Ltd. and Canadian Advantage Partnership, claims that ConSyGen failed to
allow the lenders to exercise their rights to convert debentures they hold into
common stock.
ConSyGen has countersued, saying it declined to convert the lenders' holdings
because the group's short-selling activities since making the loan drove down
the stock price. The group has an incentive to do that because a lower stock
price increases the rate at which it can convert its debentures into ownership
shares, ConSyGen said.
Hillary Richard, lawyer for the debenture holders, said the lenders' actions
hadn't caused ConSyGen's stock price to fall, although dilution of a company's
stock is a normal byproduct of such a deal and that can contribute to a stock's
decline. For the company to collapse and the lenders' shares to become worthless
would be the worst possible outcome for them, she said.
Some of the debenture holders have also sued ConSyGen. alleging defamation.
Dreaper said the current wave of lawsuits concerns agreements entered into
before he joined the company.
(MORE) DOW JONES NEWS 02-11-99
01:02 PM
Copyright 1999 Dow Jones & Company, Inc.
Courtesy of PR Newswire
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Dow Jones News Service via DowVision 02/11/99 01:02 PM
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