UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or Section 15(d) of the Securities Exchange Act of
1934
Date
of
Report (Date of earliest event reported) March 7, 2007 (March 1,
2007)
Conversion
Services International, Inc.
(Exact
name of registrant as specified in its charter)
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Delaware
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0-30420
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20-0101495
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(State
or other jurisdiction
of
incorporation)
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(Commission
File
Number)
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(IRS
Employer
Identification
No.)
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100
Eagle Rock Avenue, East Hanover, New Jersey
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07936
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant’s
telephone number, including area code: (973)
560-9400
Not
Applicable
(Former
name or former address, if changed since last report)
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□
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Written
communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
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□
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR 240.14d-2(b))
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□
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR 240.13e-4(c))
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Item
1.01. Entry into a Material Definitive Agreement.
On
March
1, 2007, Conversion Services International, Inc. (the “Company”)
issued
a 10% Convertible Unsecured Note (the “Note”)
to
certain
investors represented by TAG Virgin
Islands, Inc.
(the
“Investor”)
for
$4,000,000. The Note will automatically convert into 13,333,333 shares of the
Company’s common stock, $0.001 par value (the “Common
Stock”),
upon
the effectiveness of the Information Statement on Schedule 14C, to be filed
preliminarily by the Company with the Securities and Exchange Commission in
March 2007 (the “Information
Statement”).
The
Information Statement relates to a stockholder action which has been approved
by
written consent of stockholders of the Company who hold approximately 56% (in
excess of a majority) of the voting power of the Common Stock. Such stockholder
action has approved: (i) a Certificate of Amendment to the Certificate of
Incorporation of the Company (the “Certificate of Amendment”) pursuant to which
the authorized Common Stock of the Company under the Certificate of
Incorporation, as amended, will be increased from 100,000,000 shares up to
200,000,000 shares of such Common Stock, to be effective as of the filing of
the
Certificate of Amendment with the Delaware Secretary of State, and (ii) as
required by the rules of the American Stock Exchange, the issuance of the Note
that, upon exercise and conversion thereof, would result in the issuance in
an
aggregate amount greater than 20% of our outstanding shares of Common Stock.
In
accordance with Rule 14c-2 under the Securities Exchange Act of 1934, as
amended, the stockholder action is expected to become effective twenty
(20) calendar days following the mailing of the Information Statement, or
as soon thereafter as is reasonably practicable.
The
Investor was also
granted a warrant (the “Warrant”)
to
purchase 13,333,333 shares of the Common Stock, exercisable at a price of $0.33
per share (subject to adjustment). The Warrant is exercisable for a period
of five years.
Pursuant
to a Registration Rights Agreement, the Company agreed to file a registration
statement covering the shares of Common Stock underlying the Note and the
Warrant. Such registration rights are more fully set forth in the Registration
Rights Agreement attached to this Current Report on Form 8-K as Exhibit
10.2.
The
information set forth herein with respect to the Note, the Warrant and the
Registration Rights Agreement is meant to be a summary only. The entire
agreements are attached hereto as Exhibits to this Current Report on Form
8-K.
Item
2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
Reference
is made to that certain Amended and Restated Senior Subordinated Convertible
Promissory Note issued to Sands Brothers Venture Capital LLC by Conversion
Services International, Inc. (“CSI”),
to
that certain Amended and Restated Senior Subordinated Convertible Promissory
Note issued to Sands Brothers Venture Capital III LLC by CSI and to that certain
Amended and Restated Senior Subordinated Convertible Promissory Note issued
to
Sands Brothers Venture Capital IV LLC by CSI (the “Sands
Notes”).
The
Maturity Date in each of the Notes is March 1, 2007. The Company, and each
of
Sands Brothers Venture Capital LLC, Sands Brothers Venture Capital III LLC
and
Sands Brothers Venture Capital IV LLC (collectively, the “Funds”),
have
agreed that the Company will pay the Funds $900,000 cash, as well as issue
shares of Common Stock and warrants to purchase Common Stock at as final payment
to satisfy the Sands Notes in full. Such payment plan is more fully set forth
in
the Third Extension Agreement attached to this Current Report on Form 8-K as
Exhibit 10.4. The Company made its first two cash payments of $500,000 (with
corresponding shares of Common Stock and warrants) on March 7,
2007.
Reference
is also made to that certain Overadvance Side Letter (the “Letter”)
dated
as of February 1, 2006 among the Company, its subsidiaries and Laurus Master
Fund, Ltd. (“Laurus”).
Pursuant to the Letter, the Company is to pay Laurus approximately $258,424
per
month, starting February 1, 2007, until the aggregate principal amount of
$3,101,084 is paid in full (the Company has already made the first two
payments). The Company and Laurus have agreed that the Company will pay to
Laurus $2,084,237 and issue a warrant to purchase 1,785,714 shares of Common
Stock at an exercise price of $0.01 as final payment to satisfy the Letter
in
full. This agreement is reflected in the Omnibus Amendment and Waiver No. 2
among the Company, CSI Sub Corp. (DE), DeLeeuw Associates, Inc. and Laurus
(“Omnibus”),
as
well as an Amended and Restated Registration Rights Agreement (the “RRA”).
Additionally, the Company, CSI Sub Corp. (DE), DeLeeuw Associates, Inc. and
Laurus entered into that certain Assumption, Adoption and Consent Agreement,
detailing an agreement among the parties related to the Company’s recent
corporate consolidation (along with the Omnibus, the RRA and the warrant issued
to Laurus, the “Laurus
Documents”).
Finally, on March 7, 2007, the Company satisfied the outstanding amount on
that
certain Secured Non-Convertible Term Note, issued to Laurus on February 1,
2006,
with a cash payment to Laurus of $409,721.64.
The
information set forth herein with respect to the Sands Notes, the Letter and
the
Laurus Documents are meant to be a summary only. The Laurus Documents are
attached hereto as Exhibits 10.5, 10.6, 10.7 and 10.8 to this Current Report
on
Form 8-K.
Item
3.02 Unregistered Sales of Equity Securities.
See
Items 1.01 and 2.03 of this Current Report on Form 8-K, which is
incorporated herein by this reference, for a description of the terms of the
common stock purchase instrument and the warrant exercisable into shares of
the
Company’s common stock.
Item
9.01. Financial Statements and Exhibits.
(c) Exhibits
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Exhibit
Number
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Description
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10.1
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10%
Convertible Unsecured Note issued to the Investor,
dated March
1,
2007.
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10.2
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Registration
Rights Agreement by and between the Company
and the Investor,
dated March 1, 2007.
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10.3
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Common
Stock Purchase Warrant issued to the
Investor,
dated March 1, 2007.
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10.4
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Third
Extension Agreement among the Company and the Funds, dated March
1,
2007.
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10.5
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Omnibus
Amendment and Waiver No. 2 among the Company, CSI Sub Corp. (DE),
DeLeeuw
Associates, Inc. and Laurus Master Fund, Ltd. dated March 1,
2007.
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10.6
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Common
Stock Warrant issued to Laurus Master Fund, Ltd., dated March 1,
2007.
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10.7
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Assumption,
Adoption and Consent Agreement among the Company, CSI Sub Corp.
(DE),
DeLeeuw Associates, Inc. and Laurus Master Fund, Ltd. dated March
1,
2007.
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10.8
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Amended
and Restated Registration Rights Agreement among the Company and
Laurus
dated March 1, 2007.
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This
Current Report on Form 8-K may contain, among other things, certain
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995, including, without limitation, statements with
respect to the Company’s plans, objectives, expectations and intentions and
other statements identified by words such as “may”, “could”, “would”, “should”,
“believes”, “expects”, “anticipates”, “estimates”, “intends”, “plans” or similar
expressions. These statements are based upon the current beliefs and
expectations of the Company’s management and are subject to significant risks
and uncertainties. Actual results may differ from those set forth in the
forward-looking statements. These forward-looking statements involve certain
risks and uncertainties that are subject to change based on various factors
(many of which are beyond the Company’s control).
*
*
*
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
caused this report to be signed on its behalf by the undersigned hereunto duly
authorized.
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CONVERSION
SERVICES INTERNATIONAL, INC. |
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| March
7,
2007 |
By: |
/s/ Scott
Newman |
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Name:
Scott
Newman |
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Title: President,
Chief Executive Officer and
Chairman |