SC 13D/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

SCHEDULE 13D

Under the Securities Exchange Act of 1934

(Amendment No. 1)

Talon International, Inc.

(Name of Issuer)

Common Stock

(Title of Class of Securities)

87484F108

(CUSIP Number)

Robert O’Sullivan

CVC California, LLC

525 Okeechobee Blvd., Suite 1050

West Palm Beach, Florida 33401

Telephone: (561) 727-2000

(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)

April 15, 2013

(Date of Event Which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of §§ 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box       ¨.

Note. Schedules filed in paper format shall include a signed original and five copies of the Schedule, including all exhibits. See § 240.13d-7 for other parties to whom copies are to be sent.

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*The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter the disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for 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)

Introduction

This Amendment No. 1 to Schedule 13D amends the Statement on Schedule 13D filed on August 10, 2010 (such filing, as amended herein, the “Statement”) with respect to the common stock, par value $0.001 per share (the “Common Stock”) of Talon International, Inc., a Delaware corporation (the “Issuer”). Amendment No. 1 is filed to amend Item 4 and Item 7 of the Statement, as set forth herein.

Item 4. Purpose of Transaction.

Item 4 is hereby amended and supplemented by adding the following disclosure:

On April 15, 2013, Mr. O’Sullivan, Partner of Comvest Capital, LLC (“Comvest”), delivered a letter to the Independent Directors of the Board of Directors of the Issuer, a copy of which is attached as Exhibit 99.1 hereto (the “Letter”). In the Letter, Mr. Sullivan, on behalf of Comvest, submitted a proposal (“Proposal”) for the merger of the Issuer into a new Delaware corporation to be formed by, and operated as a wholly owned subsidiary of Comvest. Pursuant to the Proposal, Comvest would enter into a definitive agreement to acquire all of the shares of the Issuer’s Common Stock for a per share consideration of $0.03 in cash, which represents a transaction value of approximately $24.9 million. The Letter indicates that Comvest would structure a definite agreement to provide time to the Issuer to seek an alternative proposal from a third party buyer and that, in order to provide the most value to the Issuer’s common shareholders, Comvest would consider supporting certain third-party proposals and may accept an inferior third-party proposal if it represents at least a $21.8 million transaction value. Under certain circumstances Comvest would consider reducing the amount due on its Series B Preferred Stock to help support a third party offer and shares such concession with the Issuer’s common shareholders. Comvest believes that the Proposal will provide liquidity and maximize value for all the Issuer’s shareholders.

Comvest notes that the Issuer has incurred a net loss per share applicable to the Issuer’s common shareholders for each of the past six years. For 2012 and 2011, while the Issuer has had net income of $679,000 and $729,000, respectively, such income was not sufficient to cover the accrued dividends on preferred stock, and the common shareholders have lost $0.12 and $0.10 per share for 2012 and 2011, respectively.

Item 7. Materials to be Filed as Exhibits.

The following document is filed as an exhibit:

99.1 Letter to the Independent Directors of the Board of Directors of the Issuer dated April 15, 2013.

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.

CVC CALIFORNIA, LLC

By:  /s/Cecilio M. Rodriguez

Name:  Cecilio M. Rodriguez

Title:  Chief Financial Officer

COMVEST CAPITAL, LLC

By: /s/Cecilio M. Rodriguez

Name:  Cecilio M. Rodriguez

Title:  Chief Financial Officer

COMVEST CAPITAL MANAGEMENT LLC

By: /s/Cecilio M. Rodriguez

Name:  Cecilio M. Rodriguez

Title:  Chief Financial Officer

EX-99.1

 

April 15, 2013

Independent Directors of the Board of Directors

Talon International, Inc.

21900 Burbank Boulevard, Suite 270

Woodland Hills, California 91367

Attention: Mark Dyne, David Ellis and Morris Weiss

Gentlemen:

I am writing on behalf of Comvest Capital LLC to submit our proposal for the merger of Talon International, Inc (“Talon”, the “Company” or “ Target”) into a new Delaware corporation (the “Acquiror”), to be formed by, and operated as a wholly owned subsidiary of, Comvest Capital LLC. Under our proposal, Comvest would enter into a definitive agreement to acquire all of the Company’s common shares for a per share consideration of $0.03 in cash. Our proposal represents a transaction value of approximately $24.9 million and is not subject to any diligence or financing conditions. Additionally, our proposal provides reasonable time for the Company to seek a superior proposal and, in fact, Comvest is prepared to support any superior proposal obtained or even to consider an inferior proposal from a third party wherein we would share proceeds with the common shareholders, as described below. Our current offer, which we believe to be in excess of the fair market value of the Company, provides liquidity and maximizes value for all shareholders.

This proposal addresses the concerns we have communicated to the Board of Directors (the “Board”) over the last year and a half. To reiterate, we strongly believe that action must be taken to provide liquidity to the common shareholders as they continue to suffer the dilutive effects of the Series A Preferred Liquidation Preference (“Liquidation Preference”). These include but are not limited to:

● The growth of the 16% compounding Liquidation Preference which has significantly outpaced the organic growth of the Company’s revenue and EBITDA. This obligation will reach roughly $41 million upon maturity in July 2016 or almost 16 times current EBITDA. As such, it is highly likely that, in our view, any and all value creation will benefit Comvest, not the common shareholders.

● Despite their significant common ownership, the management team’s interest in the Company is more and more misaligned as the Liquidation Preference accretes.

● The Liquidation Preference will continue to discourage institutional ownership of the Company’s shares and thereby depress trading liquidity.

 

 

● The financial disclosure requirements of a public company tend to attract a negative perception from customers, suppliers and competitors, and are particularly expensive for a company of Talon’s size.

We have been cooperative, patient and flexible as the Company has pursued various avenues to achieve a liquidity event over the last eighteen months. We appreciate the Board’s efforts in that regard, but, unfortunately, no viable solution has been achieved. However, we are committed to efforts to maximize value. Therefore, we recommend the Board enter into an agreement consistent with the terms presented herein and have its investment banker advise the Company as to a process to market the company for a 60 day period following execution of the definitive merger agreement. We suggest that they be incentivized to find a third party buyer at the highest consideration obtainable to the common shareholders.

We believe our offer values Talon in excess of its fair market value. Having said this and to underscore our commitment, Comvest will support any superior value obtained and will even accept an inferior proposal if it represents at least a $21.8 million transaction value. In the event such an offer manifests, we will share a percentage of our concession with the common shareholders and the Company can terminate our merger agreement without incurring a break-up fee, and simply reimbursing Comvest for actual out of pocket expenses.

Due to the importance of these discussions and the value represented by our proposal, we expect the Company’s Board to engage in a full review of our proposal. We hope that you share our enthusiasm, and look forward to a prompt and favorable reply.

Sincerely,

/s/ Robert O’Sullivan

Robert O’Sullivan

Vice Chairman