As filed with the Securities and Exchange Commission on March 13,
1997
Registration No. 333-22979
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
LEVEL 8 SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
__________________________________________
New York 11-2920559
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification
Number)
One Penn Plaza
New York, New York 10119-0002
(212) 244-1234
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive
offices)
Robert R. MacDonald
Chairman of the Board
One Penn Plaza
New York, New York 10119-0002
(212) 244-1234
(Name, address, including zip code, and
telephone number,
including area code, of agent for service)
__________________________________________
Copies to:
Edward W. Kerson, Esq.
Proskauer Rose Goetz & Mendelsohn LLP
1585 Broadway
New York, New York 10036-8299
(212) 969-3000
__________________________________________
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this
Registration Statement.
If any of the securities being registered on this form are to
be offered on a delayed or continuous basis pursuant to Rule 415
under the Securities Act of 1933, check the following box.
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) of the Securities Act, please
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same offering.
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and
list the Securities Act registration statement number of the
earlier effective registration statement for the same offering.
If delivery of the prospectus is expected to be made pursuant
to Rule 434, please check the following box.
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective date
until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the Registration
Statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
SUBJECT TO COMPLETION DATED MARCH 13, 1997
PROSPECTUS
March , 1997
140,000 Shares
LEVEL 8 SYSTEMS, INC.
Common Stock
This Prospectus relates to the offer and sale from time to
time by Hampshire Securities Corporation (the "Selling
Stockholder") of up to a total of 140,000 shares (the "Shares") of
common stock, par value $.01 per share (the "Common Stock"), of
Level 8 Systems, Inc., a New York corporation (the "Company").
Such Shares may be offered in amounts, at prices and on terms to be
determined at the time of sale. See "Selling Stockholder and Plan
of Distribution."
The Company's Common Stock is quoted on the Nasdaq National
Market under the trading symbol "LVEL." On March 11, 1997, the
closing sale price of the Common Stock was $12 3/8 per share.
The Company will not receive any part of the proceeds from
sales of the Shares. All expenses of registration incurred in
connection herewith are being borne by the Company, but all selling
and other expenses incurred by the Selling Stockholder will be
borne by the Selling Stockholder.
Liraz Systems Ltd. and its wholly-owned subsidiaries (together
with its wholly-owned subsidiaries, "Liraz") own approximately 53%
of the outstanding Common Stock.
See "Risk Factors" beginning on page 4 for a discussion of
certain factors that should be considered by prospective
purchasers.
______________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
_________________________________________________________________
The Shares to which this Prospectus relates may be offered and
sold from time to time by the Selling Stockholders to or through
one or more brokers, dealers or agents or directly to purchasers.
See "Selling Stockholder and Plan of Distribution."
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements under the caption "Risk Factors" herein as
well as under the captions "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business" which
are incorporated herein by reference constitute "forward-looking
statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements involve known
and unknown risks, uncertainties and other factors, which may cause
the actual results, performance or achievements of the Company, or
industry results, to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among others,
the following general economic and business conditions: the loss
of, or the failure to replace, any significant customers; changes
in business strategy or development plans; the timing and success
of new product introductions; the quality of management; the
availability, terms and deployment of capital; the business
abilities and judgments of personnel; the availability of qualified
personnel; and other factors referenced in this Prospectus or in
the materials incorporated herein by reference. These
forward-looking statements speak only as of the date of this
Prospectus. The Company expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any
forward-looking statement contained herein or incorporated by
reference to reflect any change in the Company's expectations with
regard thereto or any change in events, conditions or circumstances
on which any such statement is based.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange
Commission (the "Commission") a Registration Statement on Form S-3
(collectively with all amendments, exhibits, schedules and
supplements thereto, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act") with
respect to the Shares offered hereby. This Prospectus, which forms
a part of the Registration Statement, does not contain all the
information set forth in the Registration Statement, as permitted
by the rules and regulations of the Commission. For further
information with respect to the Company and the Shares offered
hereby, reference is made to the Registration Statement.
Statements contained in this Prospectus as to the contents of any
contract or other document that has been filed as an exhibit to the
Registration Statement are qualified in their entirety by reference
to such exhibits for a complete statement of their terms and
conditions. The Company also files periodic reports and other
information required to be filed pursuant to the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). The
Registration Statement and such periodic reports and other
information may be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth
Street N.W., Washington, D.C. 20549 or at certain of the regional
offices of the Commission located at 7 World Trade Center, 13th
Floor, New York, New York 10048 and 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661, upon payment of the fees
prescribed by the Commission. Copies of such material may be
obtained from the Public Reference Section of the Commission at 450
Fifth Street N.W., Washington, D.C. 20549, at prescribed rates.
The Commission also maintains a Web site (http://www.sec.gov)
through which the Registration Statement and the Company's periodic
reports and other information can be retrieved.
The Common Stock is quoted on the Nasdaq National Market under
the trading symbol "LVEL." Reports and other information
concerning the Company may be inspected at the offices of the
National Association of Securities Dealers, Inc., 1735 K Street
N.W., Washington, D.C. 20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents or portions of documents filed by the
Company with the Commission are incorporated by reference in this
Prospectus:
(a) The Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996 (the "1996 10-K") (file no. 033-92230),
which contains consolidated financial statements of the Company and
certain other information regarding the Company.
Each document filed subsequent to the date of this Prospectus
by the Company pursuant to Sections 13(a), 14 or 15(d) of the
Exchange Act, prior to the filing of a post-effective amendment
which indicates that all securities offered hereby have been sold
or which deregisters all securities remaining unsold, shall be
deemed to be incorporated by reference herein and to be a part
hereof from the date of the filing of such reports and documents.
Any statement contained in a document, all or a portion of
which is incorporated by reference herein, shall be deemed to be
modified or superseded for purposes of this Prospectus to the
extent that a statement contained or incorporated by reference
herein modified or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to
each person to whom a copy of this Prospectus has been delivered,
upon the written or oral request of any such person, a copy of any
or all such documents which are incorporated herein by reference
(other than exhibits to such documents unless such exhibits are
specifically incorporated by reference into the documents that this
Prospectus incorporates). Written or oral requests for copies
should be directed to: Joseph J. DiZazzo, Level 8 Systems, Inc.,
382 Main Street, Salem, New Hampshire, 03079, telephone number:
(603) 898-9800.
THE COMPANY
The Company began operations in 1988 as a wholly-owned
subsidiary of Liraz, an Israeli public company that is a systems
integrator. Since 1988, the Company, through its ASU consulting
division ("ASU"), has provided systems integration consulting
services primarily to manufacturing businesses in the State of
California. In October 1994, the Company acquired ProfitKey
International, Inc. ("ProfitKey") and Bizware Computer Systems
(Canada) Inc. ("Bizware") and, in April 1995, the Company acquired
Level 8 Systems, Inc. ("Level 8"). In July 1996, the Company
decided to focus on the middleware activities of Level 8, and, in
that connection, on September 9, 1996, sold substantially all the
assets of Bizware for $230,000 and subsequently changed the
Company's name from Across Data Systems, Inc. to Level 8 Systems,
Inc. Middleware is computer software that facilitates
communication among otherwise incompatible computer hardware and
software.
The Company believes that it has established itself as a
technology leader in the rapidly growing middleware marketplace.
The Company's middleware products and services, some of which have
been developed pursuant to contracts with International Business
Machines Corporation ("IBM") and Microsoft Corporation
("Microsoft"), utilize messaging and object technology to solve
enterprise-wide integration problems associated with linking legacy
environments, the desktop and the internet. The Company recently
entered into agreements with Candle Corporation ("Candle"),
pursuant to which Candle purchased 246,800 shares of Common Stock
for $11 per share and acquired certain rights to technology
developed by the Company and will acquire certain non-exclusive
distribution rights to the Company's products, including Falcon
External Gateways (which is referred to below). In addition, the
Company, through its wholly-owned subsidiary, ProfitKey
International, Inc. ("ProfitKey"), offers MRP II and shop-floor
scheduling packages and related services.
The Company has experienced substantial growth on a quarter-
to-quarter basis in its middleware products and services operations
since last year, as the Company's focus and operating strategy have
evolved from that of an industry specific ("vertical") software
developer to a provider of middleware products and services.
Industry sources have estimated that the messaging middleware
market exceeded $100 million in 1995 and that such market is
expected to grow to approximately $1.7 billion by the year 2000.
The Company, through it wholly-owned subsidiary, Level 8
Technologies, Inc. ("Level 8"), formerly Level 8 Systems, Inc., has
been designated as an IBM Premier Partner for IBM MQSeries.
Pursuant to a contract with IBM, Level 8 has ported version 2 of
MQSeries to the DEC VMS platform and will be entitled to royalties,
if any, from sales of the ported product and has ported IBM's
distributed object product, DSOM. In addition, the Company
provides installation, education, integration and help-desk
services in support of IBM and Level 8 sales of IBM MQSeries
licenses. Samuel Somech, a co-founder of Level 8, was the original
designer of the transactional messaging product that became version
1 of the MQSeries.
Microsoft has selected the Company to develop messaging
gateways (currently called "Falcon External Gateways") to
facilitate communications between computer running Microsoft's
messaging product (currently called "Falcon") and various non-
Microsoft environments. Microsoft developed Falcon as a
transactional messaging system for use within Microsoft Windows NT
and Windows 95. Level 8's Falcon External Gateways are being
developed and are owned by Level 8 and facilitate communications of
Falcon with IBM MQSeries, mainframes and UNIX-based systems.
Microsoft's Falcon and Level 8's Falcon External Gateways are
currently being Beta tested and are expected to be available for
shipment in mid-1997. Microsoft has indicated an intent to promote
Level 8's Falcon External Gateways.
The Company is developing DOT/XM, a product that uses third-
party transactional messaging and distributed object products in a
Level 8 designed tool that facilitates integration of larger,
centralized computer systems (so called "legacy systems") into
modern open system architectures by representing the legacy system
as a collection of objects. Consulting services associated with
DOT/XM technology have generated approximately $700,000 of revenue
during the nine months ended September 30, 1996. The first large
commercial installation of DOT/XM is currently taking place at
ABN/AMRO Bank.
The Company's expansion plan is to grow primarily on the basis
of Level 8 middleware products, such as messaging gateways, DOT/XM
and other software tools that permit access to legacy information
from any computing environment. Other products under development
by the Company, and with respect to which the Company currently is
offering consulting services, are (a) a publish/subscribe product
which sends designated data ("publish") to interested users
("subscribers") using transactional messaging as the delivery
mechanism, and (b) an internet-application integration product
which uses portions of the DOT/XM framework to integrate commercial
transactions on the internet with the legacy systems of the selling
corporation.
Through ProfitKey, the Company offers MRP II and shop-floor
scheduling software packages, as well as related installation,
training and support services. Historically, ProfitKey has
directed its software packages to job shops and custom
manufactures, which use ProfitKey's software package to facilitate
"just-in-time" deliveries and efficient scheduling of expensive
shop-floor equipment.
The Company was incorporated in the State of New York in 1988.
Its executive offices are located at One Penn Plaza, Suite 3401,
New York, New York 10119-0002, and its telephone number at that
address is (212) 244-1234.
RISK FACTORS
An investment in the Shares involves a high degree of risk.
Prospective investors, prior to making an investment decision,
should carefully consider the following risk factors, together with
the other matters incorporated by reference herein. This section
contains forward-looking statements. See "Special Note Regarding
Forward-Looking Statements."
Losses from Recent Operations. The Company has incurred net
losses for each of the three months ended September 30, 1995,
December 31, 1995, March 31, 1996, June 30, 1996 and September 30,
1996 of $42,064, $89,413, $266,971, $557,985 and $187,626 (which
does not include the $1,484,061 loss attributable to the sale of
Bizware in the three months ended September 30, 1996),
respectively. In addition, the Company's future plans are subject
to known and unknown risks and uncertainties that may cause the
Company's actual results in future periods to be materially
different from any anticipated results. There can be no assurance
that the Company's operations will be profitable.
Risks Associated with Growth. The Company intends to expand
primarily by increasing sales personnel and marketing activities
and by increasing software development activities. The Company
expects that the expenses related to the planned expansion
generally will precede the Company's realization of the benefits,
if any, of any such expansion. Accordingly, the Company expects
that the incurrence of these expenses will adversely affect the
Company's earnings and working capital in the periods prior to the
Company's realization of the benefits, if any, of such expansion.
Additionally, the Company's results of operations may be
affected by any acquisition consummated by the Company or a
reorganization or disposition by the Company of its existing
assets. The Company has considered a reorganization or sale or
disposition of businesses that are not essential to its operations
in the middleware market. In that connection, the Company discussed
with certain unaffiliated third parties the sale of ProfitKey. Such
talks have been terminated, and the Company presently has no
arrangement, commitment or understanding to sell ProfitKey. If the
Company were to expand in the future by acquisitions of software
companies and licenses, there can be no assurance that it would be
successful in locating or acquiring suitable companies and licenses
on acceptable terms, or that any acquired companies could be
effectively integrated into, and profitably managed by, the
Company.
Dependence on Developing Market for Middleware. The market
for middleware in software applications is continuing to develop.
The Company's major products are transactional messaging and
distributed object middleware. There can be no assurance that the
Company's transactional messaging and distributed object middleware
will achieve broad market acceptance or that the market for
middleware will continue to grow. Even if transactional messaging
and distributed object middleware achieve broad market acceptance
and the market grows, there can be no assurance that the Company
will ever have a significant share of that market. See
"-Consequences of Rapid Technological Change."
Consequences of Rapid Technological Change. The software
industry is characterized by rapid technological change, frequent
introductions of new products and systems, changes in customer
demands and evolving industry standards. The introduction of
products embodying new technology or adapting products to the
computing market and the emergence of new industry standards often
render existing products obsolete and unmarketable. The Company's
success will depend upon its ability to enhance its existing
products and to develop, introduce or otherwise acquire on a timely
basis new products that keep pace with technological developments
and emerging industry standards in order to meet the changing needs
of the Company's customers. There can be no assurance that the
Company will be successful in developing and marketing product
enhancements or new products that respond to technological change
or evolving industry standards, that the Company will not
experience difficulties that could delay or prevent the successful
development, introduction or sale of these products or that the
Company's new products and product enhancements (if any) will
adequately meet the requirements of the marketplace and achieve
market acceptance. In addition, there can be no assurance that
technological changes or evolving industry standards will not
render the Company's products and technologies obsolete.
Competition. The Company competes in the application software
and systems integration services markets, as well as in the
developing market for transactional messaging and distributed
object middleware. Such markets are highly competitive, and the
Company believes competition will intensify in such markets. The
Company competes with developers of middleware, such as Digital
Equipment Corporation, International Business Machines Corporation
("IBM"), Candle Corporation ("Candle") and Microsoft Corporation;
with providers of systems integration services, such as Anderson
Consulting, Logica PLC and numerous local and regional providers;
and with providers of software packages for particular markets,
such as Fourth Shift Corporation and Symix Systems, Inc. The
Company's competitors generally have substantially larger
operations, have broader product lines with greater name
recognition and market acceptance and have significantly greater
financial, marketing, personnel and operating resources than the
Company. There can be no assurance the Company will successfully
compete in any market in which it conducts, or may conduct, its
operations.
Possible Need for Additional Financing. Based on the
Company's operating plan, the Company believes that its existing
cash, together with anticipated funds from operations, will be
sufficient to satisfy its capital requirements and planned software
development activities through June 1998, although there can be no
assurance that additional capital will not be required before such
time. In that connection, the Company is developing four new
products for introduction in 1997, which will require additional
investments in development and marketing. In addition, as yet
unplanned acquisition and development opportunities and other
contingencies may arise, which also could require the Company to
obtain additional capital. The Company anticipates that it could
require additional capital in order to finance its current plans
for expansion and its development activities. Sources of funds may
include the issuance of common or preferred stock sold in a public
offering or in private placements, debt securities or bank
financing. There can be no assurance that the Company would be able
to obtain capital on a timely basis, on favorable terms, or at all.
If the Company is unable to obtain such financing, or generate
funds from operations sufficient to meet its needs, the Company may
be unable to implement its current plans for expansion and software
development.
Absence of Patent Protection. The Company does not have any
patents and has not filed any patent applications. The Company
relies on a combination of trade secret laws, nondisclosure and
other contractual agreements with its employees and consultants and
technical measures to protect its rights in its know-how and
proprietary products. The foregoing may not afford the Company
sufficient protection for its know-how and products, and other
parties may develop similar know-how and products, duplicate the
Company's know-how and products or be granted patents that would
materially and adversely affect the Company's business.
The Company believes that its products and services do not
infringe the rights of third parties; however, while the Company
has not received notice of any infringement claims, third parties
may assert such claims against the Company, and such claims could
require the Company to enter into licensing agreements for the
technology in question or royalty arrangements or result in
litigation, which could materially and adversely affect the
Company's business. There can be no assurance that the Company
could acquire any such license on terms acceptable to the Company
or at all. Any failure of the Company to acquire such licenses
could materially and adversely affect the Company's business and
prospects.
Dependence Upon Key Personnel. The Company depends upon the
continued efforts and abilities of its senior management personnel,
including Arie Kilman, the Company's Chief Executive Officer, and
Samuel Somech, the President of the Company. Mr. Kilman and
Mr. Somech have entered into employment agreements with the
Company. These agreements terminate in the second quarter and
fourth quarter, respectively, of 1998. The loss or unavailability
of the services of either of these individuals for any significant
period could have a material adverse effect on the Company's
business and prospects. The Company is the sole beneficiary of
key-man life insurance in the amount of $1,000,000 on the life of
Mr. Somech. There can be no assurance that such insurance will
continue to be available on reasonable terms, or at all.
Dependence on Major Customers; Fluctuations of Operating
Results. A significant portion of the Company's business is
attributable to a limited number of changing customers. For the
nine months ended September 30, 1996, the Company's five largest
customers accounted for an aggregate of approximately 30% of the
Company's revenue. Such customers and the approximate percentage of
such revenue accounted for by each such customer are TransQuest,
Inc. (a wholly-owned subsidiary of Delta Airlines) (13%), Nelcor
Incorporated (5%), Ascend Communications, Inc. (4%), IBM (4%) and
American Express Corporation (4%). The loss of any such customer
and the failure to attract new customers could have a material
adverse effect upon the Company. As a result of the Company's
reliance on a limited number of changing customers, the Company's
results of operations have fluctuated, and will continue to
fluctuate, materially from period to period. Accordingly, the
results of operations in any one period may not be indicative of
the results of operations for any succeeding period.
Certain Non-Cash Charges to Earnings. The acquisitions of
ProfitKey and Level 8 have been accounted for as purchases.
Accordingly, in late 1994, the Company recorded, in connection with
the ProfitKey acquisition, approximately $2,702,600 for service
contracts acquired; and in April 1995, the Company recorded, in
connection with the Level 8 acquisition, approximately $2,960,400,
representing the excess of cost over net assets acquired. As a
consequence of the amortization of these intangible assets, the
Company will record amortization expense of approximately $526,400
each year through 2001, and a reduced amount each year for 13 years
thereafter. In September 1996, the Company recorded a loss of
approximately $1,484,000 in connection with the sale of Bizware.
Fluctuations in Personnel Needs; Dependence Upon Consultants.
Although the Company has a small number of employees, the Company
believes its existing staff is sufficient in number and expertise
to meet its existing requirements. However, the Company's required
staffing levels are likely to change materially from period to
period, depending upon customer requirements. The Company's ability
successfully to service significant projects depends, in large
part, on the Company's ability to attract and retain highly
qualified technical and managerial personnel during specific
periods. There can be no assurance that the Company will be able to
continue to attract and retain such personnel when needed, on terms
acceptable to the Company, or at all; the failure to do so would
materially and adversely affect the Company.
The Company depends upon the continued services of
approximately 14 non-employee consultants involved in a variety of
tasks, including developing software, training and on-site
programming. The computer industry is characterized by a high level
of employee mobility and aggressive recruiting of skilled
personnel. There can be no assurance that the consultants the
Company currently engages will continue to render services to the
Company, or that the Company will continue to be able to attract
and retain consultants when needed, on reasonable terms, or at all.
Control by Liraz; Potential Conflicts of Interest. Liraz owns
approximately 53% of the outstanding shares of Common Stock.
Therefore, Liraz will have the ability to control the election of
directors of the Company and the outcome of all issues (except with
respect to certain extraordinary matters requiring the affirmative
vote of holders of two-thirds of the outstanding shares) submitted
to a vote of shareholders of the Company. Such control could
adversely affect the market price of the Common Stock or delay or
prevent a change in control of the Company.
The Company has entered into various agreements with Liraz,
which the Company believes are on terms no less favorable than
those between unaffiliated parties.
Substantial Options and Warrants Reserved. The Company has
reserved 900,000 shares of Common Stock for issuance pursuant to
its 1995 Stock Incentive Plan (the "Plan") and expects to reserve
additional shares of Common Stock upon adoption of a new plan
within the next year. To date, options to purchase an aggregate of
873,196 shares of Common Stock have been granted pursuant to the
Plan and warrants to purchase an additional 256,188 shares of
Common Stock are outstanding. The exercise of such options and
warrants and subsequent sale of the underlying Common Stock in the
public market could adversely affect the market price of the
Company's securities. See "__Possible Need for Additional
Financing."
Shares Eligible for Future Sale. Future sales of substantial
numbers of shares of Common Stock (including shares issued upon the
exercise of stock options and warrants) by the Company, Liraz or
the executive officers or other affiliates of the Company, or the
perception that such sales could occur, could adversely affect the
market price for the Common Stock. In that regard, holders of
approximately 56% of the 6,953,575 shares of Common Stock,
including the officers and directors of the Company, have agreed
not to sell publicly or otherwise dispose of any shares of Common
Stock until June 17, 1997 (the "Lock-Up Period"), without the prior
written consent of the Hampshire Securities Corporation. Beginning
immediately or shortly after the Lock-Up Period, all the shares of
Common Stock currently owned by the Company's affiliates will be
eligible for resale in the public market pursuant to Rule 144 under
the Securities Act. In addition, the Company has granted certain
parties, including Candle (which owns 246,800 shares of Common
Stock) and Liraz, registration rights with respect to an aggregate
of 4,120,802 shares of Common Stock (or approximately 50% of the
Company's outstanding shares), which rights may be exercised after
March 1, 1999 and June 17, 1997 respectively.
Dividend Policy. The Company has never declared or paid cash
dividends on the Common Stock and does not anticipate paying any
cash dividends in the foreseeable future.
Anti-Takeover Effects of Provisions of New York Law and the
Restated Certificate of Incorporation. Certain provisions of
section 912 of the New York Business Corporation Law (the "BCL"),
which prohibit certain persons from engaging in business
combinations with the Company, may be considered to have
anti-takeover effects and may delay, defer or prevent a takeover
attempt that a shareholder may consider to be in the shareholder's
best interests. These provisions of the BCL also may adversely
affect the market price for the Common Stock. The Company's
certificate of incorporation authorizes the issuance, without
shareholder approval, of preferred stock with such designations,
rights and preferences as may be determined from time to time by
the Board of Directors. Such designations, rights and preferences
established by the Board may adversely affect the relative voting
power or other rights of, and may have a dilutive effect on,
holders of the Common Stock. In the event of issuance, the
preferred stock could be used, under certain circumstances, as a
method of discouraging, delaying or preventing a change of control
of the Company. Although the Company has no present intention to
issue any shares of preferred stock, there can be no assurance that
the Company will not do so in the future.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of
Shares.
SELLING STOCKHOLDERS AND PLAN OF DISTRIBUTION
All of the 140,000 Shares offered hereby represent all of the
shares of Common Stock underlying certain warrants (the "Warrants")
issued by the Company to the Selling Stockholder and are issuable
by the Company upon the exercise of the Warrants. The Selling
Stockholder purchased the Warrants from the Company in connection
with the Company's initial public offering in July, 1995. In
addition to Warrants, the Selling Stockholder beneficially owns
additional warrants to purchase 110,000 shares of Common Stock, the
additional warrants being purchased in connection with the
Company's public offering in December 1996. All shares or rights
to these shares are beneficially owned and sole voting and
investment power is held by the Selling Stockholder. To the
knowledge of the Company, the Selling Stockholder does not have any
other material relationship with the Company.
The Company has agreed that, until December 17, 1999,
Hampshire Securities Corporation may appoint an observer to attend
all meetings of the Company's Board of Directors. The Observer has
the right to receive notice of all meetings of the Board of
Directors and to attend such meetings. However, the Board of
Directors may exclude the observer from any meeting at which, in
the opinion of the Board, confidential or sensitive matters are to
be discussed. The observer will be entitled to reimbursement for
up to $500 of out-of-pocket expenses for attendance at those
meetings. In addition, the observer will be entitled to
indemnification, to the same extent as the Company's directors.
Hampshire Securities Corporation has advised the Company that its
initial designee is an officer of Hampshire Securities Corporation.
The Selling Stockholder is offering the Shares for its own
account, and not for the account of the Company. The Company will
not receive any of the net proceeds of the offering.
The Shares to be offered by the Selling Stockholder may be
sold, from time to time, on the Nasdaq National Market System, in
regular brokerage transactions, in transactions directly with
market makers or in privately negotiated transactions at market
prices prevailing at the time of sale, at prices related to such
prevailing prices or at negotiated prices. The Selling Stockholder
also may pledge the shares as collateral, and such shares could be
sold pursuant to the terms of such pledges.
Agents through whom the Shares may be offered may receive
compensation in the form of discounts, concessions or commissions
from the Selling Stockholder and/or the purchasers of such Shares
for whom they may act as agent. The Selling Stockholder and any
such agents that participate in the distribution of the Shares may
be deemed to be underwriters, and any profits on the sale of the
Shares by them and any discounts, commissions or concessions
received by any such agents might be deemed to be underwriting
discounts and commissions under the Securities Act. To the extent
the Selling Stockholder may be deemed to be an underwriter, the
Selling Stockholder may be subject to certain statutory liabilities
of the Securities Act, including but not limited to Sections 11 and
12 under the Securities Act and Rule 10b-5 under the Exchange Act.
Under the Exchange Act and the regulations thereunder, during
any period when it is engaged in a distribution of the Shares
offered by this Prospectus, the Selling Stockholder may not
simultaneously engage in market making activities with respect to
the Common Stock during any applicable "cooling off" periods prior
to the commencement of such distribution. In addition, and without
limiting the foregoing, the Selling Stockholder will be subject to
applicable provisions of the Exchange Act and the rules and
regulations thereunder including, without limitation, Rules 10b-6
and 10b-7, which may limit the timing of purchases and sales of
Common Stock by the Selling Stockholder.
The Registration Statement that includes this Prospectus is
filed pursuant to registration rights granted by the Company in
connection with the issuance of the underlying warrants. The
Company has agreed to indemnify the Selling Stockholder and its
directors, officers and affiliates for certain losses, claims and
liabilities in connection with the sale of Shares pursuant to the
Registration Statement of which this Prospectus forms a part. The
Company also has agreed to pay the expenses in connection with the
Registration Statement that includes this Prospectus, including
filing fees. The Selling Stockholder will pay any brokerage or
other fees or commissions, as well as Selling Stockholder's
incidental expenses, in connection with the offering.
To the extent required, the Company will use its best efforts
to file, during any period in which offers or sales are being made,
one or more supplements to this Prospectus to describe any material
information with respect to the plan of distribution not previously
disclosed in this Prospectus or any material change to such
information in this Prospectus.
EXPERTS
The audited financial statements, incorporated herein by
reference from the Company's 1996 Annual Report on Form 10-K (File
No. 033-92230) have been audited by Lurie, Besikof, Lapidus & Co., LLP,
independent public accountants, as indicated in their reports with
respect to those financial statements, and are incorporated by
reference in this Prospectus in reliance upon the authority of that
firm as experts in giving such reports.
No dealer, salesman or any other person has been authorized to
give any information or to make any representation not contained in
this prospectus in connection with the offering made hereby, and if
given or made, such information or representation by the Company or
the Selling Stockholder. This prospectus does not constitute an
offer to sell, or a solicitation of an offer to buy, any of the
securities offered hereby in any jurisdiction to any person to whom
it is unlawful to make such an offer or solicitation in such
jurisdiction. Neither the delivery of this prospectus nor any sale
made hereunder shall under any circumstances create any implication
that there has been no change in the affairs of the Company since
the date hereof or that the information contained herein is correct
as of any time subsequent to the dates as of which such information
is furnished.
______________________________
TABLE OF CONTENTS
Page
Special Note Regarding Forward-Looking Statements . . . . . . . .
. . . . . . 2
Available Information. . . . . . . . . . . . . . . . . . . . . .
. . . . . . 2
Incorporation of Certain Documents
by Reference. . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . 3
The Company. . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . 3
Risk Factors. . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . 5
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . 7
Selling Stockholder and Plan of Distribution. . . . . . . . . . .
. . . . . . 7
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . 8
______________________________
140,000 Shares
LEVEL 8 SYSTEMS, INC.
Common Stock
PROSPECTUS
March , 1997
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth all expenses in connection with
the registration of the securities described in this Registration
Statement, all of which are payable by the Company. All amounts
shown are estimates except the Securities and Exchange Commission
registration fee. No portion of these expenses will be borne by
the Selling Stockholder.
Securities and Exchange Commission registration fee. . . . . . $
515.00
Accounting Fees and Expenses. . . . . . . . . . . . . . . . . .
5,000.00
Legal fees and expenses . . . . . . . . . . . . . . . . . . . .
5,000.00
Blue Sky fees and expenses . . . . . . . . . . . . . . . . . .
2,500.00
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . .
2,500.00
Total . . . . . . . . . . . . . . . . . . . . . . . . . $
15,515.00
Item 15. Indemnification of Directors and Officers
The Amended Certificate of Incorporation provides that a
director of the Company shall not be liable to the Company or its
shareholders for damages for any breach of duty in such capacity
except for: (i) liability if a judgment or other final adjudication
adverse to a director establishes that his or her acts or omissions
were in bad faith or involved intentional misconduct or a knowing
violation of law or that the director personally gained in fact a
financial profit or other advantage to which he or she was not
legally entitled or that the director's acts violated Section 719
of New York Business Corporation law, or (ii) liability for any act
or omission prior to the adoption of the indemnification provision
in the Certificate of Incorporation.
The Company's Bylaws further provide for indemnification of
directors and officers of the Company to the fullest extent
permitted by New York law. Section 722 of the New York Business
Corporation Law provides, in substance, that New York corporations
may indemnify their directors and officers in connection with
actions or proceedings (other than one by or in the right of the
corporation to procure a judgment in its favor) brought against
such directors or officers, including actions brought against such
directors or officers by or in the right of any other corporation,
by reason of the fact that they are or were such directors or
officers, against judgments, fines, amounts paid in settlement and
reasonable expenses.
Insofar as indemnification for liabilities arising under the
1933 Act may be permitted to directors, officers or persons
controlling the Registrant pursuant to the foregoing provisions,
the Registrant has been informed that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the 1933 Act and is therefore
unenforceable.
Item 16. Exhibits
Exhibit No. Description of Exhibit
5.1 Opinion of Proskauer Rose Goetz & Mendelsohn LLP as to
the legality of the securities being registered. (2)
23.1 Consent of Proskauer Rose Goetz & Mendelsohn LLP
(included in Exhibit 5.1) (2)
23.2 Consent of Lurie, Besikof, Lapidus & Co., LLP (1)
24.1 Powers of Attorney (2).
(1) Filed herewith.
(2) Previously filed.
Item 17. Undertakings
A. Undertaking in Respect of Rule 415 Offering.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration
Statement;
(i) To include any Prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information
set forth in the Registration Statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would not exceed
that which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected in the
form of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee"
table in the effective Registration Statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information
in the Registration Statement;
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
B. Underwriting Incorporating Subsequent Exchange Act Documents
by Reference
The undersigned registrant hereby undertakes that, for
purposes of determining any likability under the Securities Act of
1933, each filing of the registrant's annual report pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona
fide offering thereof.
C. Undertaking in Respect of Indemnification.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 Act may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the 1933
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense
of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the 1933 Act and will be governed by the final adjudication of such
issue.
D. Undertaking in Respect of Warrants and Rights Offerings.
The undersigned registrant hereby undertakes to supplement the
prospectus, after the expiration of the subscription period, to set
forth the results of the subscription offer, the transactions by
the underwriters during the subscription period, the amount of
unsubscribed securities to be purchased by the underwriters, and
terms of any subsequent reoffering thereof. If any public offering
by the underwriters is to be made on terms differing from those set
forth on the cover page of the prospectus, a post-effective
amendment will be filed to set forth the terms of such offering.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized,
in the City of New York, State of New York, on the 13th day of
March, 1997.
LEVEL 8 SYSTEMS, INC.
By: /s/ ROBERT R. MACDONALD
Robert R. MacDonald
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933,
this Pre-Effective Amendment No. 1 to the Registration Statement
has been signed by the following persons in the capacities and on
the date indicated.
Signatures Title
Date
/s/ ROBERT R. MACDONALD Chairman Of The Board
March 13, 1997
Robert R. MacDonald
/s/ ROBERT R. MACDONALD* Chief Executive Officer
March 13, 1997
Arie Kilman And Director (Principal
Executive Officer)
/s/ ROBERT R. MACDONALD* Controller And Chief Accounting
March 13, 1997
Joseph J. Di Zazzo Officer (Principal Financial
and Accounting Officer)
Signatures Title
Date
/s/ ROBERT R. MACDONALD* Director
March 13, 1997
Samuel Somech
/s/ ROBERT R. MACDONALD* Director
March 13, 1997
Theodore Fine
/s/ ROBERT R. MACDONALD* Director
March 13, 1997
Lenny Recanati
/s/ ROBERT R. MACDONALD* Director
March 13, 1997
Frank J. Klein
*/s/ ROBERT R. MACDONALD Attorney in Fact
March 13, 1997
Robert R. MacDonald
Exhibit 23.2
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in this
Registration Statement (File No. 333-22979) of Level 8
Systems, Inc. on Amendment No. 1 to Form S-3 of our report
dated January 31, 1997, appearing in the Annual Report on
form 10-K of Level 8 Systems, Inc. for the year ended
December 31, 1996, and to the reference to us under the
heading "Experts" in the Prospectus, which is part of this
Registration Statement.
Our audits of the financial statements referred to in our
aforementioned report also included the financial statement
of Level 8 Systems, Inc. listed in Item 16. This financial
statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion
based on our audits. In our opinion, such financial
statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.
LURIE, BESIKOF, LAPIDUS & CO., LLP
Minneapolis, Minnesota
March 13, 1997
