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) August 2, 2005 (July 29, 2005)
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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
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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 1.01. Entry into Material Definitive Agreement.
On July 29, 2005 ("Closing Date"), Conversion Services International,
Inc., a Delaware corporation (the "Company"), entered into (and simultaneously
consummated) an agreement and plan of merger (the "Agreement") with ISI Merger
Corp., a Delaware corporation and wholly owned subsidiary of the Company
("Merger Sub"), Integrated Strategies, Inc., a Delaware corporation ("ISI"), ISI
Consulting, LLC, a Delaware limited liability company ("LLC"), and Adam and
Larry Hock, individual majority stockholders and members of ISI and LLC,
respectively (the "Majority Stockholders"). Pursuant to the Agreement, ISI and
LLC merged with and into Merger Sub and the Company and Merger Sub paid the
following consideration: $2,050,000 in cash (reduced by certain amounts
specified below), the issuance by Merger Sub of a promissory note in the amount
of $580,000 (which was reduced as specified below) (the "Note"), the issuance by
the Company of a subordinated promissory note in the amount of $165,000 (the
"Subordinated Note"), and the assumption of substantially all the liabilities of
ISI and LLC (the "Assumed Liabilities"). The Agreement also provides for the
commitment, subject to certain revenue and profit thresholds (as described in
the Agreement), to pay additional cash and issue shares of the Company common
stock (the "Shares", and together with the additional cash, the "Additional
Consideration"). On August 1, 2005, Merger Sub changed its name to Integrated
Strategies, Inc.
Reference is made to the Agreement which is being filed as an Exhibit
to this Form 8-K. All statements made with respect to the transaction discussed
in this Item 1.01 are qualified by such reference.
Item 2.01. Completion of Acquisition or Disposition of Assets.
See Item 101 of this Current Report on Form 8-K, which Item is
incorporated herein by this reference for a description of the transaction. The
following describes certain of the material terms of the transaction. The
description below is not a complete description of the material terms of the
transaction and is qualified in its entirety by reference to the agreements
entered into in connection with the transaction which are included as exhibits
to this Current Report on Form 8-K:
General
On the Closing Date, the Company completed the merger of ISI and LLC
with and into Merger Sub. As a result of the merger, Merger Sub will continue as
the surviving corporation. Pursuant to the Agreement, the merger was effected in
exchange for $2,050,000 in cash (less amounts owed by ISI under a line of credit
(in the approximate amount of $580,000) which was assumed by the Company), the
issuance of the Note, the issuance of the Subordinated Note, and the assumption
of the Assumed Liabilities. The Agreement also provides for the commitment,
subject to certain revenue and profit thresholds (as described in the
Agreement), to pay the Additional Consideration in cash and in Shares.
On the Closing Date, Merger Sub issued the Note in the face amount of
$177,937 in favor of the Majority Stockholders. The face amount of the Note
reflects the amount of the line of credit assumed by the Company ($580,000),
reduced by (i) $352,063 (the amount by which ISI's working capital was below
$450,000, which was required under the Agreement) and (ii) $50,000. The Note is
unsecured, non-interest bearing and is due and payable on the seventh (7th)
business day following the day that Merger Sub collects any payments from the
accounts receivable of ISI and LLC acquired by Merger Sub. No payment shall be
made under the Note unless and until $352,063 has first been collected by either
the Company or Merger Sub in connection with such accounts receivable.
On the Closing Date, the Company issued the Subordinated Note in the
face amount of $165,000 in favor of the Majority Stockholders. The Note is
unsecured and payment thereon is subordinated to payment in full of all amounts
owed by the Company to holders of the Company's debt obligations specified in
the Subordinated Note. The Subordinated Note bears interest at the rate of five
(5%) percent per annum and the maturity date is October 28, 2006.
Additional Consideration
If ISI satisfies certain revenue and profit thresholds for the two
six-month periods subsequent to the Closing Date, then the Company and Merger
Sub will pay and issue to the Majority Stockholders Additional Consideration.
The amount of this Additional Consideration is determined by a formula as more
fully specified in the Agreement.
In the event that Shares are issued as part of the Additional
Consideration, the Company will be obligated to file a registration statement
registering the resale of the Shares so issued. The Majority Stockholders have
one demand registration right and piggyback registration right in connection
with such Shares.
Item 2.03. Creation of a Direct Financial Obligation.
See Items 1.01 and 2.01 of this Current Report on Form 8-K, which Items
are incorporated herein by this reference, for a more detailed description of
the terms of the transaction that includes the issuance of the Note and
Subordinated Note.
Item 7.01. Regulation FD Disclosure.
On August 1, 2005, the Company issued a press release announcing
completion of the transaction described in Item 2.01 above. The press release is
attached hereto as Exhibit 99. 1 and is incorporated herein by this reference.
The press release and the information in Item 7.01 of this Form 8-K shall not be
deemed "filed" for purposes of Section 18 of the Securities Exchange Act of
1934, nor shall they be deemed incorporated by reference in any filing under the
Securities Act, except as shall be expressly set forth by specific reference in
such filing.
Item 9.01. Financial Statements and Exhibits.
(c) Exhibits.
2 Agreement and Plan of Merger dated July 29, 2005 by and among
Conversion Services International Inc., a Delaware corporation, ISI
Merger Corp., a Delaware corporation, Integrated Strategies, Inc., a
Delaware corporation, ISI Consulting, LLC, a Delaware limited
liability company, Adam Hock, and Larry Hock.
3.1 Certificate of Merger of Integrated Strategies, Inc. and ISI
Consulting, LLC with and into ISI Merger Corp. filed with the
Secretary of State of the State of Delaware on July 29, 2005.
10.1 Promissory Note by ISI Merger Corp. dated July 29, 2005 in the
amount of $177,937 issued in favor of Adam Hock and Larry Hock.
10.2 Subordinated Promissory Note by Conversion Services International
Inc. dated July 29, 2005 in the amount of $165,000 issued in favor
of Adam Hock and Larry Hock.
99.1 Press Release of Conversion Services International Inc., dated
August 1, 2005.
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, (i) statements
with respect to the Company's plans, objectives, expectations and intentions;
and (ii) 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.
August 2, 2005 CONVERSION SERVICES INTERNATIONAL, INC.
By: /s/ Scott Newman
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Name: Scott Newman
Title: President and Chief Executive Officer