SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13G
(Rule 13d-102)
INFORMATION TO BE INCLUDED IN STATEMENTS
FILED PURSUANT TO RULE 13d-1(b), (c) AND (d)
AND AMENDMENTS THERETO FILED PURSUANT TO 13d-2(b)
(AMENDMENT NO. __)*
CONVERSION SERVICES INTERNATIONAL, INC.
-----------------------------------
(Name of Issuer)
Common Stock, $0.001 par value per share
----------------------------------------
(Title of Class of Securities)
21254R208
---------
(CUSIP Number)
March 1, 2007
--------------
(Date of Event which Requires Filing of this Statement)
Check the appropriate box to designate the rule pursuant to which this Schedule
is filed:
|_| Rule 13d-1 (b)
|X| Rule 13d-1 (c)
|_| Rule 13d-1 (d)
The information required in the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
--------- ----------------------------------------------------------------------
1 NAME OF REPORTING PERSON: Laurus Master Fund, Ltd.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: 98-0337673
--------- ----------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |_|
(b) |_|
--------- ----------------------------------------------------------------------
3 SEC USE ONLY
--------- ----------------------------------------------------------------------
4 CITIZENSHIP OR PLACE OF ORGANIZATION
Cayman Islands
--------- ----------------------------------------------------------------------
NUMBER OF 5 SOLE VOTING POWER: 0, shares of Common Stock. *
SHARES ---- --------------------------------------------------------------
BENEFICIALLY 6 SHARED VOTING POWER: 5,342,667 shares of Common Stock. *
OWNED BY ---- --------------------------------------------------------------
EACH 7 SOLE DISPOSITIVE POWER: 0 shares of Common Stock. *
REPORTING ---- --------------------------------------------------------------
PERSON 8 SHARES DISPOSITIVE POWER: 5,342,667 shares of Common Stock. *
--------- ----------------------------------------------------------------------
9 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,342,667 shares of Common Stock
--------- ----------------------------------------------------------------------
10 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (9) EXCLUDES CERTAIN SHARES
|X|
--------- ----------------------------------------------------------------------
11 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 9
9.99%
--------- ----------------------------------------------------------------------
12 TYPE OF REPORTING PERSON
CO
--------- ----------------------------------------------------------------------
---------------------------------
* Based on 53,480,153 shares of common stock, $0.001 par value per
share (the "Shares") of Conversion Services International, Inc., a Delaware
corporation (the "Company") outstanding, as disclosed on the Company's Quarterly
Report on Form 10-Q, as of November 13, 2006. As of March 9, 2007, the Fund held
(i) an Amended and Restated Secured Revolving Note (the "Revolving Note") in the
original principal amount of $4,500,000, which is convertible into Shares at a
conversion rate of $0.14 per Share, subject to certain adjustments, (ii) a
warrant (the "August Warrant") to acquire 800,000 Shares, at an exercise price
of $4.35 per Share for the first 400,000 Shares acquired thereunder, $4.65 per
Share for the next 200,000 Shares acquired thereunder and $5.25 per Share for
the remaining Shares acquired thereunder, subject to certain adjustments, (iii)
an option (the "Option" and together with the August Warrant, the "Existing
Instruments") to acquire 1,500,000 Shares at an exercise price of $0.001 per
Share, subject to certain adjustments and (iv) 2,319,825 Shares. The Revolving
Note and the Existing Instruments each contain an issuance limitation
prohibiting the Fund from exercising those securities to the extent that such
exercise would result in beneficial ownership by the Fund of more than 4.99% of
the Shares then issued and outstanding (the "4.99% Issuance Limitation"). The
4.99% Issuance Limitation may be waived by the Fund upon 75 days prior notice to
the Company and, shall in respect of each of the Revolving Note and the August
Warrant, automatically become null and void upon the occurrence and/or
continuance of an event of default (as defined in and pursuant to the terms of
the applicable instrument). In respect of the Option, the 4.99% Issuance
Limitation shall also automatically become null and void following written
notice to the Company of the occurrence and/or continuance of an event of
default (as defined in and pursuant to the terms of the applicable instrument).
On March 1, 2007, (a) the Fund provided the Company notice of the Fund's waiver
of the 4.99% Issuance Limitation under the Existing Instruments, which such
waivers shall be effective on the 75th day following the delivery of such notice
(the "Waiver Effective Date") and (b) the Company and the Fund agreed that on
the Waiver Effective Date the 4.99% Limitation under the Existing Instruments
shall be increased to an issuance limitation prohibiting the Fund from
exercising those securities to the extent that such exercise would result in
beneficial ownership by the Fund of more than 9.99% of the Shares then issued
and outstanding (the "9.99% Issuance Limitation"). As of March 1, 2007, the Fund
acquired an additional warrant (the "March Warrant", and collectively with the
Existing Instruments, the "Warrants and Option") to acquire 1,785,714 Shares at
an exercise price of $0.01 per Share, subject to certain adjustments. The March
Warrant contains a 9.99% Issuance Limitation. The 9.99% Issuance Limitation
under the Warrants and Option may be waived by the Fund upon 61 days prior
notice to the Company and shall, in connection with the Warrants and Option,
automatically become null and void following notice to the Company of the
occurrence and/or continuance of an event of default (as defined in and pursuant
to the terms of the applicable instrument). The Fund is managed by Laurus
Capital Management, LLC. Eugene Grin and David Grin, through other entities, are
the controlling principals of Laurus Capital Management, LLC and share sole
voting and investment power over the securities owned by the Fund reported in
this Schedule 13G, as amended.
---------- ---------------------------------------------------------------------
1 NAME OF REPORTING PERSON: Laurus Capital Management, LLC
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: 13-4150669
---------- ---------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |_|
(b) |_|
---------- ---------------------------------------------------------------------
3 SEC USE ONLY
---------- ---------------------------------------------------------------------
4 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
-------------------- ---------- ------------------------------------------------
NUMBER OF 5 SOLE VOTING POWER: 0 shares of Common Stock. *
SHARES ---- --------------------------------------------------------------
BENEFICIALLY 6 SHARED VOTING POWER: 5,342,667 shares of Common Stock. *
OWNED BY ---- --------------------------------------------------------------
EACH 7 SOLE DISPOSITIVE POWER: 0 shares of Common Stock. *
REPORTING ---- --------------------------------------------------------------
PERSON 8 SHARES DISPOSITIVE POWER: 5,342,667 shares of Common Stock. *
---------- ---------------------------------------------------------------------
9 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,342,667 shares of Common Stock
---------- ---------------------------------------------------------------------
10 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (9) EXCLUDES CERTAIN SHARES
|X|
---------- ---------------------------------------------------------------------
11 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 9
9.99 %
---------- ---------------------------------------------------------------------
12 TYPE OF REPORTING PERSON
OO
---------- ---------------------------------------------------------------------
--------------------------------
* Based on 53,480,153 shares of common stock, $0.001 par value per
share (the "Shares") of Conversion Services International, Inc., a Delaware
corporation (the "Company") outstanding, as disclosed on the Company's Quarterly
Report on Form 10-Q, as of November 13, 2006. As of March 9, 2007, the Fund held
(i) an Amended and Restated Secured Revolving Note (the "Revolving Note") in the
original principal amount of $4,500,000, which is convertible into Shares at a
conversion rate of $0.14 per Share, subject to certain adjustments, (ii) a
warrant (the "August Warrant") to acquire 800,000 Shares, at an exercise price
of $4.35 per Share for the first 400,000 Shares acquired thereunder, $4.65 per
Share for the next 200,000 Shares acquired thereunder and $5.25 per Share for
the remaining Shares acquired thereunder, subject to certain adjustments, (iii)
an option (the "Option" and together with the August Warrant, the "Existing
Instruments") to acquire 1,500,000 Shares at an exercise price of $0.001 per
Share, subject to certain adjustments and (iv) 2,319,825 Shares. The Revolving
Note and the Existing Instruments each contain an issuance limitation
prohibiting the Fund from exercising those securities to the extent that such
exercise would result in beneficial ownership by the Fund of more than 4.99% of
the Shares then issued and outstanding (the "4.99% Issuance Limitation"). The
4.99% Issuance Limitation may be waived by the Fund upon 75 days prior notice to
the Company and, shall in respect of each of the Revolving Note and the August
Warrant, automatically become null and void upon the occurrence and/or
continuance of an event of default (as defined in and pursuant to the terms of
the applicable instrument). In respect of the Option, the 4.99% Issuance
Limitation shall also automatically become null and void following written
notice to the Company of the occurrence and/or continuance of an event of
default (as defined in and pursuant to the terms of the applicable instrument).
On March 1, 2007, (a) the Fund provided the Company notice of the Fund's waiver
of the 4.99% Issuance Limitation under the Existing Instruments, which such
waivers shall be effective on the 75th day following the delivery of such notice
(the "Waiver Effective Date") and (b) the Company and the Fund agreed that on
the Waiver Effective Date the 4.99% Limitation under the Existing Instruments
shall be increased to an issuance limitation prohibiting the Fund from
exercising those securities to the extent that such exercise would result in
beneficial ownership by the Fund of more than 9.99% of the Shares then issued
and outstanding (the "9.99% Issuance Limitation"). As of March 1, 2007, the Fund
acquired an additional warrant (the "March Warrant", and collectively with the
Existing Instruments, the "Warrants and Option") to acquire 1,785,714 Shares at
an exercise price of $0.01 per Share, subject to certain adjustments. The March
Warrant contains a 9.99% Issuance Limitation. The 9.99% Issuance Limitation
under the Warrants and Option may be waived by the Fund upon 61 days prior
notice to the Company and shall, in connection with the Warrants and Option,
automatically become null and void following notice to the Company of the
occurrence and/or continuance of an event of default (as defined in and pursuant
to the terms of the applicable instrument). The Fund is managed by Laurus
Capital Management, LLC. Eugene Grin and David Grin, through other entities, are
the controlling principals of Laurus Capital Management, LLC and share sole
voting and investment power over the securities owned by the Fund reported in
this Schedule 13G, as amended.
---------- ---------------------------------------------------------------------
1 NAME OF REPORTING PERSON: David Grin
---------- ---------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |_|
(b) |_|
---------- ---------------------------------------------------------------------
3 SEC USE ONLY
---------- ---------------------------------------------------------------------
4 CITIZENSHIP OR PLACE OF ORGANIZATION
Israel
-------------------- ---------- ------------------------------------------------
NUMBER OF 5 SOLE VOTING POWER: 0 shares of Common Stock. *
SHARES ---- --------------------------------------------------------------
BENEFICIALLY 6 SHARED VOTING POWER: 5,342,667 shares of Common Stock. *
OWNED BY ---- --------------------------------------------------------------
EACH 7 SOLE DISPOSITIVE POWER: 0 shares of Common Stock. *
REPORTING ---- --------------------------------------------------------------
PERSON 8 SHARES DISPOSITIVE POWER: 5,342,667 shares of Common Stock. *
--------- ----------------------------------------------------------------------
9 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,342,667 shares of Common Stock
--------- ----------------------------------------------------------------------
10 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (9) EXCLUDES CERTAIN SHARES
|X|
--------- ----------------------------------------------------------------------
11 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 9
9.99 %
--------- ----------------------------------------------------------------------
12 TYPE OF REPORTING PERSON
IN
--------- ----------------------------------------------------------------------
--------------------------------
* Based on 53,480,153 shares of common stock, $0.001 par value per
share (the "Shares") of Conversion Services International, Inc., a Delaware
corporation (the "Company") outstanding, as disclosed on the Company's Quarterly
Report on Form 10-Q, as of November 13, 2006. As of March 9, 2007, the Fund held
(i) an Amended and Restated Secured Revolving Note (the "Revolving Note") in the
original principal amount of $4,500,000, which is convertible into Shares at a
conversion rate of $0.14 per Share, subject to certain adjustments, (ii) a
warrant (the "August Warrant") to acquire 800,000 Shares, at an exercise price
of $4.35 per Share for the first 400,000 Shares acquired thereunder, $4.65 per
Share for the next 200,000 Shares acquired thereunder and $5.25 per Share for
the remaining Shares acquired thereunder, subject to certain adjustments, (iii)
an option (the "Option" and together with the August Warrant, the "Existing
Instruments") to acquire 1,500,000 Shares at an exercise price of $0.001 per
Share, subject to certain adjustments and (iv) 2,319,825 Shares. The Revolving
Note and the Existing Instruments each contain an issuance limitation
prohibiting the Fund from exercising those securities to the extent that such
exercise would result in beneficial ownership by the Fund of more than 4.99% of
the Shares then issued and outstanding (the "4.99% Issuance Limitation"). The
4.99% Issuance Limitation may be waived by the Fund upon 75 days prior notice to
the Company and, shall in respect of each of the Revolving Note and the August
Warrant, automatically become null and void upon the occurrence and/or
continuance of an event of default (as defined in and pursuant to the terms of
the applicable instrument). In respect of the Option, the 4.99% Issuance
Limitation shall also automatically become null and void following written
notice to the Company of the occurrence and/or continuance of an event of
default (as defined in and pursuant to the terms of the applicable instrument).
On March 1, 2007, (a) the Fund provided the Company notice of the Fund's waiver
of the 4.99% Issuance Limitation under the Existing Instruments, which such
waivers shall be effective on the 75th day following the delivery of such notice
(the "Waiver Effective Date") and (b) the Company and the Fund agreed that on
the Waiver Effective Date the 4.99% Limitation under the Existing Instruments
shall be increased to an issuance limitation prohibiting the Fund from
exercising those securities to the extent that such exercise would result in
beneficial ownership by the Fund of more than 9.99% of the Shares then issued
and outstanding (the "9.99% Issuance Limitation"). As of March 1, 2007, the Fund
acquired an additional warrant (the "March Warrant", and collectively with the
Existing Instruments, the "Warrants and Option") to acquire 1,785,714 Shares at
an exercise price of $0.01 per Share, subject to certain adjustments. The March
Warrant contains a 9.99% Issuance Limitation. The 9.99% Issuance Limitation
under the Warrants and Option may be waived by the Fund upon 61 days prior
notice to the Company and shall, in connection with the Warrants and Option,
automatically become null and void following notice to the Company of the
occurrence and/or continuance of an event of default (as defined in and pursuant
to the terms of the applicable instrument). The Fund is managed by Laurus
Capital Management, LLC. Eugene Grin and David Grin, through other entities, are
the controlling principals of Laurus Capital Management, LLC and share sole
voting and investment power over the securities owned by the Fund reported in
this Schedule 13G, as amended.
--------- ----------------------------------------------------------------------
1 NAME OF REPORTING PERSON: Eugene Grin
--------- ----------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |_|
(b) |_|
--------- ----------------------------------------------------------------------
3 SEC USE ONLY
--------- ----------------------------------------------------------------------
4 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
------------------- ---------- -------------------------------------------------
NUMBER OF 5 SOLE VOTING POWER: 0 shares of Common Stock.*
SHARES ---- --------------------------------------------------------------
BENEFICIALLY 6 SHARED VOTING POWER: 5,342,667 shares of Common Stock. *
OWNED BY ---- --------------------------------------------------------------
EACH 7 SOLE DISPOSITIVE POWER: 0 shares of Common Stock. *
REPORTING ---- --------------------------------------------------------------
PERSON 8 SHARES DISPOSITIVE POWER: 5,342,667 shares of Common Stock. *
--------- ----------------------------------------------------------------------
9 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,342,667 shares of Common Stock
--------- ----------------------------------------------------------------------
10 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (9) EXCLUDES CERTAIN SHARES
|X|
--------- ----------------------------------------------------------------------
11 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 9
9.99 %
--------- ----------------------------------------------------------------------
12 TYPE OF REPORTING PERSON
IN
--------- ----------------------------------------------------------------------
--------------------------------
* Based on 53,480,153 shares of common stock, $0.001 par value per
share (the "Shares") of Conversion Services International, Inc., a Delaware
corporation (the "Company") outstanding, as disclosed on the Company's Quarterly
Report on Form 10-Q, as of November 13, 2006. As of March 9, 2007, the Fund held
(i) an Amended and Restated Secured Revolving Note (the "Revolving Note") in the
original principal amount of $4,500,000, which is convertible into Shares at a
conversion rate of $0.14 per Share, subject to certain adjustments, (ii) a
warrant (the "August Warrant") to acquire 800,000 Shares, at an exercise price
of $4.35 per Share for the first 400,000 Shares acquired thereunder, $4.65 per
Share for the next 200,000 Shares acquired thereunder and $5.25 per Share for
the remaining Shares acquired thereunder, subject to certain adjustments, (iii)
an option (the "Option" and together with the August Warrant, the "Existing
Instruments") to acquire 1,500,000 Shares at an exercise price of $0.001 per
Share, subject to certain adjustments and (iv) 2,319,825 Shares. The Revolving
Note and the Existing Instruments each contain an issuance limitation
prohibiting the Fund from exercising those securities to the extent that such
exercise would result in beneficial ownership by the Fund of more than 4.99% of
the Shares then issued and outstanding (the "4.99% Issuance Limitation"). The
4.99% Issuance Limitation may be waived by the Fund upon 75 days prior notice to
the Company and, shall in respect of each of the Revolving Note and the August
Warrant, automatically become null and void upon the occurrence and/or
continuance of an event of default (as defined in and pursuant to the terms of
the applicable instrument). In respect of the Option, the 4.99% Issuance
Limitation shall also automatically become null and void following written
notice to the Company of the occurrence and/or continuance of an event of
default (as defined in and pursuant to the terms of the applicable instrument).
On March 1, 2007, (a) the Fund provided the Company notice of the Fund's waiver
of the 4.99% Issuance Limitation under the Existing Instruments, which such
waivers shall be effective on the 75th day following the delivery of such notice
(the "Waiver Effective Date") and (b) the Company and the Fund agreed that on
the Waiver Effective Date the 4.99% Limitation under the Existing Instruments
shall be increased to an issuance limitation prohibiting the Fund from
exercising those securities to the extent that such exercise would result in
beneficial ownership by the Fund of more than 9.99% of the Shares then issued
and outstanding (the "9.99% Issuance Limitation"). As of March 1, 2007, the Fund
acquired an additional warrant (the "March Warrant", and collectively with the
Existing Instruments, the "Warrants and Option") to acquire 1,785,714 Shares at
an exercise price of $0.01 per Share, subject to certain adjustments. The March
Warrant contains a 9.99% Issuance Limitation. The 9.99% Issuance Limitation
under the Warrants and Option may be waived by the Fund upon 61 days prior
notice to the Company and shall, in connection with the Warrants and Option,
automatically become null and void following notice to the Company of the
occurrence and/or continuance of an event of default (as defined in and pursuant
to the terms of the applicable instrument). The Fund is managed by Laurus
Capital Management, LLC. Eugene Grin and David Grin, through other entities, are
the controlling principals of Laurus Capital Management, LLC and share sole
voting and investment power over the securities owned by the Fund reported in
this Schedule 13G, as amended.
Item 1(a). Name of Issuer: Conversion Services International, Inc.
Item 1(b). Address of Issuer's Principal Executive Offices:
100 Eagle Rock Avenue
East Hanover, New Jersey 07936
Item 2(a). Name of Person Filing: Laurus Master Fund, Ltd.
This Schedule 13G is also filed on behalf of Laurus Capital
Management, LLC, a Delaware limited liability company, Eugene Grin
and David Grin. Laurus Capital Management, LLC manages Laurus Master
Fund, Ltd. Eugene Grin and David Grin, through other entities, are
the controlling principals of Laurus Capital Management, LLC and
share sole voting and investment power over the shares owned by
Laurus Master Fund, Ltd. Information related to each of Laurus
Capital Management, LLC, Eugene Grin and David Grin is set forth on
Appendix A hereto.
Item 2(b). Address of Principal Business Office or if none, Residence:
c/o Laurus Capital Management, LLC, 825
Third Avenue, 14th Floor, New York, NY 10022
Item 2(c). Citizenship: Cayman Islands
Item 2(d). Title of Class of Securities: Common Stock ("Common Stock")
Item 2(e). CUSIP Number: 21254R208
Item 3. Not Applicable
Item 4. Ownership:
(a) Amount Beneficially Owned: 5,342,667 shares of Common Stock
(b) Percent of Class: 9.99%
(c) Number of shares as to which such person has:
(i) sole power to vote or to direct the vote: 0 shares of Common
Stock.*
(ii) shared power to vote or to direct the vote: 5,342,667 shares
of Common Stock. *
(iii) sole power to dispose or to direct the disposition of: 0
shares of Common Stock. *
(iv) shared power to dispose or to direct the disposition of:
5,342,667 shares of Common Stock. *
Item 5. Ownership of Five Percent or Less of a Class:
Not applicable
Item 6. Ownership of More than Five Percent on Behalf of Another Person:
Not applicable
Item 7. Identification and Classification of Subsidiary Which Acquired the
Securities: Not applicable
Item 8. Identification and Classification of Members of the Group:
Not applicable
Item 9. Notice of Dissolution of Group: Not applicable
Item 10. Certification:
By signing below, I certify to the best of my knowledge and belief,
the securities referred to above were not acquired and are not held for the
purpose of or with the effect of changing or influencing the control of the
issuer of the securities and were not acquired and are not held in connection
with or as a participant in any transaction having that purpose or effect.
-----------------------------------
* Based on 53,480,153 shares of common stock, $0.001 par value per
share (the "Shares") of Conversion Services International, Inc., a Delaware
corporation (the "Company") outstanding, as disclosed on the Company's Quarterly
Report on Form 10-Q, as of November 13, 2006. As of March 9, 2007, the Fund held
(i) an Amended and Restated Secured Revolving Note (the "Revolving Note") in the
original principal amount of $4,500,000, which is convertible into Shares at a
conversion rate of $0.14 per Share, subject to certain adjustments, (ii) a
warrant (the "August Warrant") to acquire 800,000 Shares, at an exercise price
of $4.35 per Share for the first 400,000 Shares acquired thereunder, $4.65 per
Share for the next 200,000 Shares acquired thereunder and $5.25 per Share for
the remaining Shares acquired thereunder, subject to certain adjustments, (iii)
an option (the "Option" and together with the August Warrant, the "Existing
Instruments") to acquire 1,500,000 Shares at an exercise price of $0.001 per
Share, subject to certain adjustments and (iv) 2,319,825 Shares. The Revolving
Note and the Existing Instruments each contain an issuance limitation
prohibiting the Fund from exercising those securities to the extent that such
exercise would result in beneficial ownership by the Fund of more than 4.99% of
the Shares then issued and outstanding (the "4.99% Issuance Limitation"). The
4.99% Issuance Limitation may be waived by the Fund upon 75 days prior notice to
the Company and, shall in respect of each of the Revolving Note and the August
Warrant, automatically become null and void upon the occurrence and/or
continuance of an event of default (as defined in and pursuant to the terms of
the applicable instrument). In respect of the Option, the 4.99% Issuance
Limitation shall also automatically become null and void following written
notice to the Company of the occurrence and/or continuance of an event of
default (as defined in and pursuant to the terms of the applicable instrument).
On March 1, 2007, (a) the Fund provided the Company notice of the Fund's waiver
of the 4.99% Issuance Limitation under the Existing Instruments, which such
waivers shall be effective on the 75th day following the delivery of such notice
(the "Waiver Effective Date") and (b) the Company and the Fund agreed that on
the Waiver Effective Date the 4.99% Limitation under the Existing Instruments
shall be increased to an issuance limitation prohibiting the Fund from
exercising those securities to the extent that such exercise would result in
beneficial ownership by the Fund of more than 9.99% of the Shares then issued
and outstanding (the "9.99% Issuance Limitation"). As of March 1, 2007, the Fund
acquired an additional warrant (the "March Warrant", and collectively with the
Existing Instruments, the "Warrants and Option") to acquire 1,785,714 Shares at
an exercise price of $0.01 per Share, subject to certain adjustments. The March
Warrant contains a 9.99% Issuance Limitation. The 9.99% Issuance Limitation
under the Warrants and Option may be waived by the Fund upon 61 days prior
notice to the Company and shall, in connection with the Warrants and Option,
automatically become null and void following notice to the Company of the
occurrence and/or continuance of an event of default (as defined in and pursuant
to the terms of the applicable instrument). The Fund is managed by Laurus
Capital Management, LLC. Eugene Grin and David Grin, through other entities, are
the controlling principals of Laurus Capital Management, LLC and share sole
voting and investment power over the securities owned by the Fund reported in
this Schedule 13G, as amended.
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
March 9, 2007
----------------
Date
/s/ David Grin
--------------
David Grin
Director
APPENDIX A
A. Name: Laurus Capital Management, LLC, a Delaware limited
liability company
825 Third Avenue, 14th Floor
New York, New York 10022
Place of
Organization: Delaware
B. Name: David Grin
Business 825 Third Avenue, 14th Floor
Address: New York, New York 10022
Principal Director of Laurus Master Fund, Ltd.
Occupation: Principal of Laurus Capital Management, LLC
Citizenship: Israel
C. Name: Eugene Grin
Business 825 Third Avenue, 14th Floor
Address: New York, New York 10022
Principal Director of Laurus Master Fund, Ltd.
Occupation: Principal of Laurus Capital Management, LLC
Citizenship: United States
Each of Laurus Capital Management, LLC, Eugene Grin and David Grin hereby agree,
by their execution below, that the Schedule 13G to which this Appendix A is
attached is filed on behalf of each of them, respectively.
Laurus Capital Management, LLC
/s/ David Grin
-----------------------------------------
David Grin
Principal
March 9, 2007
/s/ Eugene Grin, on his individual behalf
-----------------------------------------
Eugene Grin
March 9, 2007
/s/ David Grin, on his individual behalf
-----------------------------------------
David Grin
March 9, 2007