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):
September 28, 2005 (September 22, 2005)
Conversion Services International, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 0-30420 20-1010495
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
100 Eagle Rock Avenue, East Hanover,
New Jersey 07936
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (973) 560-9400
Not Applicable
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(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation to the registrant under any of the
following provisions:
|_| Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 2.03. CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN
OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT.
On September 22, 2004, Conversion Services International, Inc. (the "Company")
entered into a transaction pursuant to which the Company borrowed an aggregate
of $1,000,000 on a secured basis (the "Loan") from three affiliates of Sands
Brothers Venture Capital ("SBVC"). Pursuant to three separate Senior
Subordinated Secured Convertible Promissory Notes which evidence the Loan, the
Loan accrues interest at a simple rate of 8% per annum, has a one (1) year term
and is secured by a lien on all of the assets of the Company. The Loan and
related obligations (including the security interest in the Company's assets)
are subordinated to the loans made to the Company in August 2004 by Laurus
Master Fund, Ltd. Principal and accrued interest under the Loan are convertible
into shares of Company common stock (the "Common Stock") at a price (the
"Conversion/Exercise Price ") equal to either: (i) forty percent (40%) of the
price per security of the next public or private convertible debt or equity
financing of the Company which raises proceeds to the Company of $5,000,000 or
more or (ii) following September 7, 2005, $2.10 per share (subject, in each
case, to certain customary adjustments).
On September 22, 2005, pursuant to three separate Amended and Restated Senior
Subordinated Secured Convertible Promissory Notes (collectively, the "Notes"),
the Company and SBVC agreed to extend the maturity date of the Loan to January
1, 2007, and to increase the interest rate to 12% per annum. Principal and
accrued interest under the Loan are convertible into shares of Common Stock at
the Conversion/Exercise Price equal to either: (i) forty percent (40%) of the
price per security of the next public or private convertible debt or equity
financing of the Company which raises proceeds to the Company of $5,000,000 or
more or (ii) following December 15, 2006, $2.10 per share (subject, in each
case, to certain customary adjustments).
In connection with the Loan, SBVC was granted warrants (collectively, the
"Warrant") to purchase an aggregate of 400,000 shares of Common Stock at the
Conversion/Exercise Price (subject to certain customary adjustments). The shares
of Common Stock underlying the Notes and the Warrant are subject to registration
rights consisting of one demand right and unlimited "piggyback" rights.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
Set forth below is a list of Exhibits included as part of this Current Report.
4.1 Common Stock Purchase Warrant of the Company, dated September 22, 2005, in
favor of Sands Brothers Venture Capital LLC.*
4.2 Common Stock Purchase Warrant of the Company, dated September 22, 2005, in
favor of Sands Brothers Venture Capital III LLC.*
4.3 Common Stock Purchase Warrant of the Company, dated September 22, 2005, in
favor of Sands Brothers Venture Capital IV LLC.*
10.1 Amended and Restated Senior Subordinated Secured Convertible Promissory
Note, dated September 22, 2005, made by the Company in favor of Sands
Brothers Venture Capital LLC.*
10.2 Amended and Restated Senior Subordinated Secured Convertible Promissory
Note, dated September 22, 2005, made by the Company in favor of Sands
Brothers Venture Capital III LLC.*
10.3 Amended and Restated Senior Subordinated Secured Convertible Promissory
Note, dated September 22, 2005, made by the Company in favor of Sands
Brothers Venture Capital IV LLC.*
* To be filed by amendment.
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).
* * *
SIGNATURES
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.
September 28, 2005 CONVERSION SERVICES INTERNATIONAL, INC.
By: /s/ Scott Newman
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Name: Scott Newman
Title: President and Chief Executive Officer