CVN Conversion Services International,

EAST HANOVER, N.J., May 1 /PRNewswire-FirstCall/ -- Conversion Services International, Inc. (AMEX:CVN), a premier professional services firm focused on delivering business intelligence and business process optimization solutions to Global 2000 organizations and other businesses, has announced its financial results for year-end 2007. (Logo: http://www.newscom.com/cgi-bin/prnh/20060421/NYF015LOGO ) Conversion Services ("CSI") reported revenues of $21.5 million for the year ended December 31, 2007, a decrease of $4.2 million, or 16.4%, compared to revenues of $25.7 million for the year ended December 31, 2006. The cost of that revenue was $16.3 million, or 75.7% of total revenues for the year ended December 31, 2007, as compared to cost of revenue of $19.9 million, or 77.6% of total revenues, for the previous year. Cost of revenue includes payroll, benefits and other direct costs for the Company's consultants. Gross profit of $5.2 million, or 24.3% of total revenue for the year ended December 31, 2007, decreased by $0.5 million, but increased as a percentage of revenue by 1.9% points, as compared to gross profit of $5.7 million, or 22.4% of total revenues for the year ended December 31, 2006. The improvement in the gross profit percentage reflects the Company's efforts to capture higher margin business during 2007. Operating expenses for the year ended December 31, 2007 of $9.0 million declined by $2.7 million, or 23.3%, from operating expenses of $11.7 million for the year ended December 31, 2006. Loss from operations for the year ended December 31, 2007 of $3.7 million declined by $2.2 million, or 37.0%, from the loss from operations of $5.9 million for the year ended December 31, 2006. This reduced loss from operations is the result of a $2.7 million reduction in operating expenses in 2007 versus the prior year. The Company reported a net loss for the year ended December 31, 2007 of $10.2 million, or $0.15 per share on a basic and diluted basis, as compared to a net loss of $9.6 million, or $0.19 per share on a basic and diluted basis, for the year ended December 31, 2006. Net loss attributable to common stockholders for the year ended December 31, 2007 was $11.0 million, or $0.16 per share on a basic and diluted basis, as compared to $10.2 million, or $0.20 per share on a basic and diluted basis, for the prior year. Scott Newman, chairman and chief executive officer of CSI, stated, "Our financial results for 2007 have caused us to take steps to strengthen our balance sheet as we work toward creating a stronger company. As 2007 ended, we made the final payment of $250,000 to repay our debt to Sands Brothers Venture Capital LLC, and we converted $2.5 million of debt to equity. In March 2008, we converted another $600,000 of long-term debt to equity and we have replaced our line of credit with the Laurus Master Fund with a revolver with Access Capital, Inc. that is more attuned to our long-term goals and short-term needs. He concluded, "We continue to develop our presence in the market. Most recently CSI, along with its wholly-owned subsidiary, DeLeeuw Associates, announced a strategic alliance to sponsor iSixSigma Financial Services, an Internet portal specifically for the financial services application of Six Sigma, a rigorous, data-driven method for business process improvement. The primary purpose for this co-branded portal is to facilitate improvements in financial services sector quality and efficiency by providing free and easy access to educational and reference materials, case studies, best practices and other information designed for financial services professionals. With 500,000 visitors a month, this portal represents significant potential." About Conversion Services International, Inc. Conversion Services International, Inc. (CSI) is a leading provider of professional services focusing on strategic consulting, data warehousing, business intelligence, business process reengineering, as well as integration and information technology management solutions. CSI offers an array of products and services to help companies define, develop, and implement the warehousing and strategic use of both enterprise-wide and specific categories of strategic data. CSI's current customers include ADP, Coach, Goldman Sachs, Liberty Mutual, Merck, Morgan Stanley, and Pfizer. Information about CSI can be found on the web at http://www.csiwhq.com/ or by calling its corporate headquarters at 888-CSI-5036. Note on Forward-Looking Statements Except for the historical information contained herein, this press release contains, among other things, certain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. Such statements may include, without limitation, statements with respect to CSI'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. 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 CSI's control). CSI undertakes no obligation to update publicly any forward-looking statements. Investor Relations: Porter, LeVay & Rose, Inc. Michael J. Porter, President Jeffrey Myhre, VP -- Editorial 212-564-4700 Media Contact: Tracee Lee Beebe Marketing & Communications Conversion Services International, Inc. 973-560-9400 Financial Tables to Follow CONVERSION SERVICES INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2007 2006 ASSETS CURRENT ASSETS Cash $1,506,866 $668,006 Accounts receivable, net of allowance for doubtful accounts of $142,181 and $279,422 as of December 31, 2007 and 2006, respectively 3,077,847 3,912,000 Accounts receivable from related parties, net of allowance for doubtful accounts of $16,244 and $8,972 as of December 31, 2007 and 2006, respectively 315,503 330,006 Prepaid expenses 199,635 132,087 TOTAL CURRENT ASSETS 5,099,851 5,042,099 PROPERTY AND EQUIPMENT, at cost, net 182,868 265,084 OTHER ASSETS Goodwill 6,135,125 6,826,705 Intangible assets, net of accumulated amortization of $1,754,344 and $1,265,958 as of December 31, 2007 and 2006, respectively 778,470 1,266,856 Deferred financing costs, net of accumulated amortization of $110,000 and $52,609 as of December 31, 2007 and 2006, respectively - 57,391 Discount on debt issued, net of accumulated amortization of $1,052,639 and $1,793,921 as of December 31, 2007 and 2006, respectively 447,361 786,079 Equity investments 82,253 176,152 Other assets 85,445 110,445 Total Assets $12,811,373 $14,530,811 CONVERSION SERVICES INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Continued) DECEMBER 31, LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES Line of credit $2,056,341 $5,795,552 Current portion of long-term debt 10,819 578,685 Accounts payable and accrued expenses 1,356,425 1,957,501 Short term notes payable - 2,745,000 Deferred revenue 59,350 74,450 Related party note payable 107,833 110,831 Financial instruments - 52,228 TOTAL CURRENT LIABILITIES 3,590,768 11,314,247 Long-term debt, net of current portion 1,533,126 1,769,154 Deferred taxes 363,400 363,400 Total Liabilities 5,487,294 13,446,801 Convertible preferred stock, $0.001 par value, $100 stated value, 20,000,000 shares authorized. Series A convertible preferred stock, 19,000 shares issued and outstanding at December 31, 2007 and 2006, respectively 728,333 348,333 Series B convertible preferred stock, 20,000 shares issued and outstanding at December 31, 2007 and 2006, respectively - 1,248,806 COMMITMENTS AND CONTINGENCIES - - STOCKHOLDERS' EQUITY (DEFICIT) Common stock, $0.001 par value, 200,000,000 shares authorized; 110,144,462 and 57,625,535 issued and outstanding at December 31, 2007 and 2006, respectively 111,290 57,625 Series B convertible preferred stock, 20,000 shares issued and outstanding at December 31, 2007 and 2006, respectively 1,352,883 - Additional paid in capital 66,742,898 50,829,255 Treasury stock, at cost, 1,145,382 shares in treasury as of December 31, 2007 and 2006 (423,869) (423,869) Accumulated deficit (61,187,456) (50,976,140) Total Stockholders' Equity (Deficit) 6,595,746 (513,129) Total Liabilities and Stockholders' Equity (Deficit) $12,811,373 $14,530,811 CONVERSION SERVICES INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2007 2006 REVENUE: Services $18,453,197 $22,550,805 Related party services 1,881,803 2,478,342 Reimbursable expenses 946,880 570,121 Other 184,457 74,789 21,466,337 25,674,057 COST OF REVENUE: Services (inclusive of stock based compensation of $0.3 million and $0.4 million for the years ended December 31, 2007 and 2006, respectively.) 13,507,340 16,868,554 Related party services 1,698,040 2,305,523 Reimbursable expenses 1,048,611 756,857 16,253,991 19,930,934 GROSS PROFIT 5,212,346 5,743,123 OPERATING EXPENSES Selling and marketing (inclusive of stock based compensation of zero and $1.0 million for the years ended December 31, 2007 and 2006, respectively.) 3,248,410 5,072,532 General and administrative (inclusive of stock based compensation of $0.1 million and $0.6 million for the years ended December 31, 2007 and 2006, respectively. 4,155,357 5,451,324 Lease impairment 210,765 - Goodwill & intangibles impairment 691,580 349,000 Depreciation and amortization 646,236 802,386 8,952,348 11,675,242 LOSS FROM OPERATIONS (3,740,002) (5,932,119) OTHER INCOME (EXPENSE) Equity in earnings (losses) from investments (18,329) 27,035 Gain (loss) on financial instruments 19,329 (351,132) Loss on extinguishment of debt (2,461,515) (2,311,479) Interest expense, net (4,010,799) (3,094,083) (6,471,314) (5,729,659) LOSS BEFORE INCOME TAXES (10,211,316) (11,661,778) INCOME TAXES - - LOSS FROM CONTINUING OPERATIONS (10,211,316) (11,661,778) CONVERSION SERVICES INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2007 2006 DISCONTINUED OPERATIONS: Gain on disposal of discontinued operations - 2,050,000 NET LOSS (10,211,316) (9,611,778) Accretion of issuance costs associated with convertible preferred stock (484,075) (429,747) Dividends on convertible preferred stock (263,212) (162,603) NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS $(10,958,603) $(10,204,128) Basic and diluted loss per common share from continuing operations $(0.15) $(0.23) Basic and diluted income per common share from discontinued operations $- $0.04 Basic and diluted loss per common share $(0.15) $(0.19) Basic and diluted loss per common share attributable to common stockholders $(0.16) $(0.20) Weighted average common shares used to compute income (loss) per common share: Basic and diluted 67,541,607 51,792,504 http://www.newscom.com/cgi-bin/prnh/20060421/NYF015LOGO http://photoarchive.ap.org/ DATASOURCE: Conversion Services International, Inc. CONTACT: Investor Relations, Porter, LeVay & Rose, Inc., Michael J. Porter, President, Jeffrey Myhre, VP - Editorial, +1-212-564-4700; or Media Contact, Tracee Lee Beebe, Marketing & Communications, Conversion Services International, Inc., +1-973-560-9400, Web site: http://www.csiwhq.com/

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