Conversion Services International Reports Year-End 2007 Financial Results

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.

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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


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DATASOURCE: Conversion Services International, Inc.



CONTACT:  Investor Relations, Porter, LeVay & Rose, Inc., Michael J.

Porter, President, Jeffrey Myhre, VP - Editorial, [phone]; or Media

Contact, Tracee Lee Beebe, Marketing & Communications, Conversion Services

International, Inc., [phone],  



Web site:  http://www.csiwhq.com/

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