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) |
April 21, 2006 (April 17, 2006)
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|
|
Conversion
Services International, Inc.
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(Exact
name of registrant as specified in its charter)
|
Delaware
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|
0-32623
------------------------------------
|
20-1010495
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|
|
(State
or other jurisdiction
of
incorporation)
|
(Commission
File
Number)
|
(IRS
Employer
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
---------------------------------------------------
(Former
name or former address, if changed since last report)
|
□
|
Written
communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
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|
□
|
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))
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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
3.01. Notice of Delisting or Failure to Satisfy a Continued Listing Rule or
Standard; Transfer of Listing
On
April
17, 2006, Conversion Services International, Inc. (the “Company”) announced that
it would not file its Annual Report on Form 10-KSB on time. As a result of
the
Company not filing its Annual Report on Form 10-KSB on or before April 17,
2006
(the “Filing Deadline”), the Company failed to comply with Section 1003(d) of
the American Stock Exchange (“AMEX”) listing standards. The Company was unable
to file the Form 10-KSB because it was not able to timely complete the
preparation of its consolidated financial statements and the additional work
needed to complete the revised accounting treatment of embedded derivatives
in
certain promissory notes related to conversion features and other similar reset
provisions therein, from the third quarter of 2004 to the present. Pursuant
to
the AMEX rules, AMEX may at any time, in view of the circumstances in each
case,
suspend dealings in, or remove, a security from listing or unlisted trading
when, in its opinion, such security is unsuitable for continued trading on
AMEX.
However, AMEX may give consideration to any action that a company proposes
to
take that would enable it to comply with the continued listing standards.
On
April
18, 2006, the Company received a letter from AMEX stating that the Company
was
not in compliance with continued listing standards. The letter required the
Company to submit a plan by May 2, 2006, advising AMEX of action it has taken,
or will take, that will bring the Company into compliance by no later than
June
16, 2006. On April 18, 2006, Management of the Company informally proposed
to
AMEX that it will file its Annual Report on Form 10-KSB on or prior to Friday,
April 21, 2006. On April 20, 2006, the Company filed its Annual Report on Form
10-KSB. Pursuant to discussions with its AMEX listing analyst, the Company
believes that because of its ability to file the Form 10-KSB shortly after
the
Filing Deadline, its securities will not be suspended or removed from continued
listing.
Item
4.02. Non-Reliance on Previously Issued Financial Statements or a Related Audit
Report or Completed Interim Review.
The
Company’s Annual Report on Form 10-KSB for the fiscal year ended December 31,
2005, restates certain aspects of its unaudited financial statements for the
quarters ended September 30, 2004, March 31, 2005, June 30, 2005 and September
30, 2005, and certain aspects of its audited financial statements for the year
ended December 31, 2004. Therefore, the prior financial statements as filed
with
the Securities and Exchange Commission should not be relied upon.
These
quarterly and annual financial statements were restated solely as a result
of
revised accounting treatment related to the Company’s issuance of financial
instruments in August 2004 and July 2005 to Laurus Master Fund, Ltd. (“Laurus”)
and to properly record the gain or loss resulting from the fair value adjustment
of such financial instruments. A description of the principal adjustments
resulting from the restatement will be set forth in Notes 12 and 22 to the
financial statements included with the Form 10-KSB.
The
Company’s determination to make such restatements was made by the Board of
Directors of the Company, as well as its Audit Committee, on April 17, 2006,
and
was discussed with the Company’s independent registered public accounting
firm.
During
2004, the Company consummated financing transactions with Laurus and with
Brothers Venture Capital LLC, Sands Brothers Venture Capital III LLC and Sands
Brothers Venture Capital IV LLC. The documents included, among other things,
convertible notes, freestanding warrant agreements and registration rights
agreements. The warrant agreements are subject to the registration rights
agreement which require that the Company register the shares within a specified
period of time and, in the event this is not done, provides for significant
liquidated damages. In accordance with EITF 00-19 “Accounting for Derivative
Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own
Stock”, the Company previously recorded a liability for these warrants. However,
although the convertible notes are also subject to the registration rights
agreement and are not “conventionally convertible”, the Company has not
previously recorded a liability for the derivative associated with the
conversion feature.
Additionally,
in July 2005, the Company renegotiated its financing with Laurus. As part of
this transaction, the Company repaid $4.3 million to Laurus, issued an option
to
purchase Company stock at $0.001 per share, and increased the availability
under
the revolving line of credit by $500,000. Since future cash flows under the
new
agreement with Laurus are more than 10% different than under the old agreement
with Laurus, it has been determined that this transaction should have been
accounted for as an early extinguishment of debt as opposed to a modification
of
existing debt.
The
Board
of Directors of the Company determined that the Company would restate its
financial statements for the three and nine months ended September 30, 2004,
the
year ended December 31, 2004, the three months ended March 31, 2005, the three
and six months ended June 30, 2005 and the three and nine months ended September
30, 2005 as appropriate to properly account for the above transactions. Such
restatement has been filed as Notes 12 and 22 to the audited financial
statements appearing in the Form 10-KSB. The Form 10-KSB was filed on April
20,
2006.
Item
9.01. Financial Statements and Exhibits.
Set
forth
below is a list of Exhibits included as part of this Current Report.
|
99.1
|
Press
Release, dated April 18, 2006
|
|
99.2
|
Press
Release, dated April 20, 2006
|
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.
| |
|
|
| April
21, 2006 |
CONVERSION
SERVICES INTERNATIONAL, INC. |
|
|
|
| |
By: |
/s/ Scott
Newman |
| |
|
| |
Name:
Scott Newman
Title:
President and Chief Executive
Officer
|