UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
[X] ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE
SECURITIES EXCHANGE ACT OF 1934
For the
fiscal year ended December 31, 2004.
[_]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the
transition period from to
Commission
File Number: 0-26392
LEVEL
8 SYSTEMS, INC.
(Exact
name of registrant as specified in its character)
|
Delaware |
|
11-2920559 |
|
(State
of incorporation) |
|
(I.R.S.
Employer Identification No.) |
|
1433
State Highway 34, Building C, Farmingdale, New Jersey 07727
|
|
(Address
of principal executive offices, including Zip
Code) |
| |
|
(732)
919-3150 |
|
(Registrant’s
telephone number, including area code) |
_____________
|
Securities
registered pursuant to Section 12(b) of the Act: |
NONE |
|
Securities
registered pursuant to Section 12(g) of the Act: |
Common
Stock, $.001 par value |
_____________
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] No
[_]
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of the Registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [_X]
Indicate
by check mark whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Act). Yes [_] No [X]
Aggregate
market value of the outstanding voting stock held by non-affiliates of the
Registrant as of June 30, 2004 was approximately $5,695,050.
There
were 43,441,917 shares of Common Stock outstanding as of March 1, 2005.
LEVEL
8 SYSTEMS, INC.
Annual
Report on Form 10-K
For the
Fiscal Year Ended December 31, 2004
|
Item
Number |
|
Page
Number |
| |
PART
I |
|
|
1.
|
Business |
1 |
|
2. |
Properties |
12 |
|
3. |
Legal
Proceedings |
12 |
|
4. |
Submission
of Matters to a Vote of Security Holders |
12 |
| |
PART
II |
|
|
5. |
Market
for Level 8 Common Stock and Related Shareholder Matters |
13 |
|
6. |
Selected
Financial Data |
13 |
|
7. |
Management's
Discussion and Analysis of Financial Condition and Results of
Operations |
14 |
|
7A. |
Quantitative
and Qualitative Disclosures About Market Risk |
25 |
|
8. |
Financial
Statements and Supplementary Data |
26 |
|
9. |
Changes
in Accountants |
26 |
|
9A. |
Controls
and Procedures |
26 |
|
9B. |
Other
Information |
26 |
| |
PART
III |
|
|
10. |
Directors
and Executive Officers of Level 8 |
26 |
|
11.
|
Executive
Compensation |
29 |
|
12. |
Security
Ownership of Certain Beneficial Owners and Management |
31 |
|
13. |
Certain
Relationships and Related Transactions |
33 |
|
14. |
Principal
Accountant Fees and Services |
36 |
| |
PART
IV |
|
|
15. |
Index
Exhibits, Financial Statement Schedules, and Reports on Form
8-K |
37 |
| |
|
|
|
SIGNATURES |
43 |
|
INDEX
TO FINANCIAL STATEMENTS |
F-1 |
PART
I
Item
1.
Business
Overview
Level 8
Systems, Inc. (the “Company” or “Level 8”) provides next generation software
application integration products and services that are based on open technology
standards, and are licensed to a wide range of customers. Level 8 helps
organizations leverage their extensive system and business process technology
investments, increase operational efficiencies, reduce costs and strengthen
valued customer relationships by uniting disparate applications, systems,
information and business processes.
The
Company’s focus is on the growing desktop integration and business process
automation market with our Cicero® product.
Cicero is a business integration software product that maximizes end-user
productivity, streamlines business operations and integrates systems and
applications that would not otherwise work together. Cicero offers a proven,
innovative departure from traditional, costly and labor-intensive approaches to
application integration that enables clients to transform applications, business
processes and human expertise into a seamless, cost effective business solution
that provides a cohesive, task-oriented and role-centric interface that works
the way people think.
By using
Cicero, companies can decrease their customer management costs, increase their
customer service level and more efficiently cross-sell the full range of their
products and services resulting in an overall increase in return on their
information technology investments. In addition, Cicero enables organizations to
reduce the business risks inherent in replacement of mission-critical
applications and extend the productive life and functional reach of their
application portfolio.
Cicero is
engineered to harness diverse business applications and shape them to more
effectively serve the people who use them. Cicero provides an intuitive
development environment, which simplifies the integration of complex
multi-platform applications. Cicero provides a unique approach that allows
companies to organize components of their existing applications to better align
them with tasks and operational processes. Cicero streamlines all activities by
providing a single, seamless user interface for simple access to all systems
associated with a task. Cicero enables automatic information sharing among
line-of-business applications and tools. Cicero is ideal for deployment in
contact centers where its highly productive, task-oriented user interface
promotes user efficiency.
Until
October 2002, we also offered products under our Geneva brand name to provide
organizations with systems integration. Our systems integration products
included Geneva Enterprise Integrator and Geneva Business Process Automator.
These products were sold to EM Software Solutions Inc. in October
2002.
Level 8
Systems, Inc. was incorporated in New York in 1988, and re-incorporated in
Delaware in 1999. Our principal executive offices are located to 1433 State
Highway 34, Building C, Farmingdale, New Jersey 07727 and our telephone number
is (732) 919-3150. Our web site is located at www.level8.com.
In the
following narrative, all dollar amounts are in thousands.
Strategic
Realignment
Historically,
Level 8 Systems, Inc. has been a global provider of software solutions to help
companies integrate new and existing applications as well as extend those
applications to the Internet. This market segment is commonly known as
“Enterprise Application Integration” or “EAI.” Historically, EAI solutions work
directly at the server or back-office level allowing disparate applications to
communicate with each other.
Until
early 2001, we focused primarily on the development, sale and support of EAI
solutions through our Geneva product suite. After extensive strategic
consultation with outside advisors and an internal analysis of our products and
services, we recognized that a new market opportunity had emerged. This
opportunity was represented by the increasing need to integrate applications
that are physically resident on different hardware platforms, a typical
situation in larger companies. In most cases, companies with large customer
bases utilize numerous different, or "disparate," applications that were not
designed to effectively communicate and pass information. With Cicero, which
integrates the functionality of these disparate applications at the desktop, we
believe that we have found a novel solution to this disparate application
problem. We believe that our existing experience in and understanding of the EAI
marketplace coupled with the unique Cicero solution, which approaches
traditional EAI needs in a more effective manner, position us to be a
competitive provider of business integration solutions to the financial services
industry and other industries with large deployed call centers.
We
originally licensed the Cicero technology and related patents on a worldwide
basis from Merrill Lynch, Pierce, Fenner & Smith Incorporated in August of
2000 under a license agreement containing standard provisions and a two-year
exclusivity period. On January 3, 2002, the license agreement was amended to
extend our exclusive worldwide marketing, sales and development rights to Cicero
in perpetuity (subject to Merrill Lynch's rights to terminate in the event of
bankruptcy or a change in control of Level 8) and to grant ownership rights in
the Cicero trademark. Merrill Lynch indemnifies us with regard to the rights
granted to us by them. Consideration for the original Cicero license consisted
of 1,000,000 shares of our common stock. In exchange for the amendment, we
granted an additional 250,000 shares of common stock to MLBC, Inc., a Merrill
Lynch affiliate and entered into a royalty sharing agreement. Under the royalty
sharing agreement, we pay a royalty of 3% of the sales price for each sale of
Cicero or related maintenance services. The royalties over the life of the
agreement are not payable in excess of $20,000.
In
connection with executing our strategic realignment and focusing on Cicero, we
have restructured our business, reduced our number of employees and, in the
fourth quarter of 2002, sold the remaining assets associated with our Enterprise
Application Integration products. For the past three years, management made
operating decisions and assessed performance of the Company’s operations based
on the following reportable segments: (1) Desktop Integration (Cicero), (2)
System Integration (Geneva Enterprise Integrator and Geneva Business Process
Automator) and (3) Messaging and Application Engineering (Ensuredmail, Geneva
Integration Broker, Geneva Message Queuing, Geneva XIPC and Geneva AppBuilder).
We have sold most of the assets comprising the Messaging and Application
Engineering Products segment and all of the assets in the Systems Integration
segment. The Company has recognized the Systems Integration segment as a
discontinued business and, accordingly, has reclassified those assets and
liabilities and segregated the results of operations under gain or loss from a
discontinued business on the accompanying statement of operations. As such, the
Systems Integration segment has been eliminated. Ensuredmail and Geneva
Integration Broker are the current software products represented in the
Messaging and Application Engineering segment.
The
Company’s future revenues are entirely dependent on acceptance of a newly
developed and marketed product, Cicero, which has limited success in commercial
markets to date. The Company has experienced negative cash flows from operations
for the past three years. At December 31, 2004, the Company had a working
capital deficiency of approximately $10,255. Accordingly, there is substantial
doubt that the Company can continue as a going concern. In order to address
these issues and to obtain adequate financing for the Company’s operations for
the next twelve months, the Company is actively promoting and expanding its
product line and continues to negotiate with significant customers who have
demonstrated interest in the Cicero technology. The Company is experiencing
difficulty increasing sales revenue largely because of the inimitable nature of
the product as well as customer concerns about the Company’s financial
viability. The Company is attempting to solve the former problem by improving
the market’s knowledge and understanding of Cicero through increased marketing
and leveraging its limited number of reference accounts while enhancing its list
of resellers and system integrators to assist in the sales and marketing
process. Additionally, the Company is seeking additional equity capital or other
strategic transactions in the near term to provide additional liquidity. On
December 31, 2004, the Company completed a Note and Warrant Offering wherein it
has raised a total of approximately $1,615. Under the terms of the Offer,
warrant holders of Level 8’s common stock were offered a one-time conversion of
their existing warrants at a conversion price of $0.10 per share as part of a
recapitalization merger plan. Those warrant holders who elected to convert,
tendered their conversion price in cash and received a Note Payable in exchange.
Upon approval of the recapitalization merger at a Shareholders meeting in early
2005, these Notes would convert into common shares of Cicero, Inc., the
surviving corporation in the merger. These funds were used to finance the
operations of the Company.
The
Company has closed a strategic acquisition of an encryption technology asset in
January 2004 and a private placement of its common stock wherein it has raised
approximately $1,247. The Company expects that increased revenues will reduce
its operating losses in future periods; however, there can be no assurance that
management will be successful in executing as anticipated or in a timely manner.
If these strategies are unsuccessful, the Company may have to pursue other means
of financing that may not be on terms favorable to the Company or its
stockholders. If the Company is unable to increase cash flow or obtain
financing, it may not be able to generate enough capital to fund operations for
the next twelve months. The accompanying financial statements have been prepared
on a going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The financial
statements presented herein do not include any adjustments relating to the
recoverability of assets and classification of liabilities that might be
necessary should Level 8 be unable to continue as a going concern.
Market
Opportunity
Desktop
Integration Segment Products - Cicero
Our
target markets for Cicero are the customer contact centers of large consumer
oriented businesses, such as in the financial services, insurance and
telecommunications industries. Large scale customer contact centers are
characterized by large numbers of customer service agents that process phone
calls, faxes, e-mails and other incoming customer inquiries and requests. Our
goal is to automate business processes and applications, which greatly increase
the efficiency of customer service agents in our target markets, thereby
lowering operating costs and increasing customer retention and satisfaction.
This increased efficiency is attained in a non-invasive manner, allowing
companies to continue using their existing applications in a more productive
manner.
Generally,
managers of customer contact centers are under pressure to provide increased
customer service at the lowest possible cost while dealing with high employee
turnover and training costs. Some of the primary challenges faced by customer
contact centers include:
| · |
Customer
Service.
Currently, most customer contact centers require multiple transfers to
different agents to deal with diverse customer service issues. A one call,
one contact system enhances customer service by streamlining business
processes and responsibilities, avoiding these multiple transfers.
Ideally, the customer service agent provides customers with multi-channel
customer interfaces with timely access to all required information to
provide service. Customer service is one of the primary metrics on which
contact centers are evaluated by management. Improving customer service
through simplified processes and having access to additional information
in an integrated environment also provides opportunities to cross-sell
other products. |
| · |
Contact
Center Staffing.
The contact center industry is characterized by high training costs,
operational complexity, continuous turnover and increasing costs per call.
These difficulties stem from increased competition, higher customer
expectations, the ever-increasing complexity and diversity of the business
applications used by customer service agents, and pressure to decrease
training time and increase the return on investment in customer service
agents. |
| · |
Industry
Consolidation.
Many industries in our target market, including the financial services
industry, are in a constant state of consolidation. When companies
consolidate, the customer contact centers are generally merged to lower
overall costs and to reduce redundancies. This consolidation generally
leads to re-training and the use of multiple applications handling similar
functions that can be quite difficult to integrate successfully.
|
Our
Solution
We were
previously a provider of software that integrates an enterprise’s applications
at the server level so that disparate applications can communicate with each
other. Based on our experience in the EAI industry, we determined that a
compelling product would be one that integrates disparate applications at a
visual level in addition to at the server level. As a result, we proceeded to
procure an exclusive license to develop and market Cicero. Cicero was developed
internally by Merrill Lynch to increase the efficiency of 30,000 employees that
have daily contact with Merrill Lynch customers. Since then, Cicero has been
completely re-implemented to provide increased functionality and much more
powerful integration capabilities. When coupled with our existing technologies
or with solutions from other EAI vendors, Cicero becomes a comprehensive
business solution and provides our customers with a front-to-back integrated
system that appears as a single application to the end-user.
Cicero is
a software product that allows companies to integrate their existing
applications and processes into a seamless integrated desktop. Cicero
subordinates and controls most Windows-based applications and provides a
seamless environment with a consistent look and feel. The end-user can navigate
any number of applications whether local, client-server, mainframe legacy or
web-browser in a consistent and intuitive way that is completely customizable by
their firm.
The
Cicero solution provides the following key features:
| · |
Integrated
End-User Environment.
The end-user can use all of the applications necessary for his or her job
function from a single environment with a consistent look and feel. Cicero
integrates the execution and functionality of a variety of custom or
packaged applications simplifying navigation and sharing of data between
those applications. If a software product is designed to provide output
into a Windows environment, Cicero can subordinate its presentation and
control it through the Cicero environment. In addition, Cicero can guide
the user by providing assistance in tasks consisting of multiple steps,
and make additional information accessible without any extra effort on the
user’s part. Furthermore, Cicero can enforce steps to be performed in a
particular order, so as to enforce conformance with regulations, such as
HIPAA, across multiple applications, or when an older, non-conformant
application needs to be used in such an
environment. |
| · |
Information
Center -
The Information Center is a customizable hub of critical information that
facilitates the effective execution of processes and minimizes the need to
enter frequently accessed information repeatedly. The Cicero Information
Center provides a configurable information hub to enable end users to
interact with selected applications on a continuous basis and access real
time information. The Information Center is frequently used to support
incoming message alerts, scrolling headlines, key operational statistics,
interaction with Integrated Voice Response systems, and real-time video.
Any information that is time-sensitive or actionable can be displayed
side-by-side with the currently selected application page and information
can be readily exchanged between the Information Center and other
applications. |
| · |
Context
Sharing
-
Cicero’s unique, patented architecture enables just the right information
in any workstation application to be shared with the other applications
that need it. Cicero’s context-sharing Application Bus largely eliminates
the need for re-keying customer data, simplifies customer information
updates, and reduces errors and re-work. It also allows one subordinated
application to perform processing based on a change in another
application, thus causing applications to work together without end-user
intervention. |
| · |
Advanced
Integration Architecture -
Cicero is a sophisticated application integration platform that
subordinates and controls and non-invasively integrates any applications
with a “footprint” in the Windows environment. Cicero’s
publish-and-subscribe bus architecture provides for efficient
inter-application communication. Its event management capabilities allow
applications to respond to events that occur within unrelated
applications, making the integration more responsive. Cicero extends the
usefulness and life span of legacy architectures and provides a common
architecture for events across all platforms. Applications are integrated
using Cicero Studio, a visual integration tool that allows applications to
be quickly integrated. Integrators are not required to understand the
details of the underlying technology when integrating an application.
Cicero also supports open platform architecture for communication and
interoperability, native scripting languages and XML. Both Cicero and
Cicero Studio are designed to be extensible, allowing extensions to new
environments by using well-defined plug-ins. Cicero can also present
components or elements of integration as Web Services and incoming Web
Services requests can initiate Cicero processes without requiring any
action by a user. |
| · |
Management
Tools.
Comprehensive tools are built into the system for version management,
automatic component updates and user preference configuration. Remote
control and diagnostic tools are integrated to provide off-site help desk
and troubleshooting personnel with access to assist them in their support
duties. In addition, built-in trace and history mechanisms allow user’s
management to obtain operational information that can detail users’
activities or point out operational
problems. |
Deployment
of the Cicero solution can provide our customers with the following key
benefits:
| · |
Lower
Average Cost Per Call and Average Call Time.
Cicero increases the efficiency of the customer service agent by placing
all productivity applications within a few mouse clicks and consolidating
all standard applications into a single integrated desktop. Cost per call
is lowered because the customer service agent is more productive in moving
between disparate applications and is able to handle different requests
without having to transfer the customer to another customer service
agent. |
| · |
Reduce Staff Cost.
Cicero reduces staff cost in two ways. First, by increasing the efficiency
of each customer service agent, a contact center can handle the same
volume of customer service requests with a smaller staff. Secondly,
because Cicero simplifies the use of all contact center applications,
training costs and time can be reduced, placing newly hired staff into
productive positions faster than other contract center applications.
|
| · |
Increase
Cross-Selling Efficiency.
The consolidation of all customer data and customer specific applications
can increase the efficiency of cross selling of products and services. For
instance, a Cicero enabled contact center might be configured to inform
the customer service agent that the customer, while a brokerage services
customer, does not use bill paying or other offered services. On the other
hand, Cicero can help prevent customer service agents from selling a
product that is inappropriate for that customer or a product or service
that the customer already has through the company. Increasing the
efficiency of cross selling can both increase revenues and avoid customer
dissatisfaction. |
| · |
Deliver
Best in Class Customer Service.
Increasing customer service is one of the primary methods by which a
company in highly competitive customer-focused industries such as
financial services can differentiate itself from its competition. By
increasing the efficiency and training level of its agents, decreasing
average time per call and increasing effective cross-selling, the Cicero
enabled contact center presents its customers with a more intimate and
satisfying customer service experience that can aid in both customer
retention and as a differentiator for customer
acquisition. |
| · |
Preserve
Existing Information Technology Investment.
Cicero integrates applications at the presentation level, which allows
better use of existing custom designed applications and divergent
computing platforms (e.g., midrange, client/server, LAN and Web), which
are not readily compatible with each other or with legacy mainframe
systems. Linking together the newer computing applications to existing
systems helps preserve and increase the return on the investments made by
organizations in their information technology
systems. |
Additionally,
by visually and structurally linking the flexibility and innovations available
on newer computing platforms and applications to the rich databases and
functions that are typically maintained on the larger mainframe computers,
organizations can utilize this information in new ways. The Cicero solution
helps organizations bridge the gap between legacy systems and newer platforms
and the result is the extension of existing capabilities to a modern streamlined
interface in which the underlying system architectures, such as the Web,
mainframe, mid-range or client-server, are transparent to the end-user customer
service agent, thereby preserving the existing information technology
investments and increasing efficiency between applications.
| · |
Support
a Broad Range of Applications, Platforms and Standards.
The IT departments of larger enterprises need solutions to integrate a
broad array of applications and platforms using a wide variety of industry
standards to provide required functionality. The Cicero solution provides
visual application integration solutions that support common industry
standards and can handle a wide array of disparate applications and data
types while operating on a Windows NT, Windows XP or Windows 2000
platform. The Cicero solution can be used to link custom or packaged
applications together regardless of the tools or programming language used
to create the application by integrating those applications at the
presentation level. |
| · |
Ease
of Implementation and Enhanced Information Technology
Productivity.
The Cicero solution allows customers to create comprehensive data
transformation and information exchange solutions without the need for
non-standard coding. Our products provide pre-built adapters for a wide
variety of different systems that are pre-programmed for transforming data
into the format required by that system and transporting it using the
appropriate transport mechanism. This greatly simplifies and speeds
implementation of new solutions into the deployed Cicero framework. For
instance, while in operation at Merrill Lynch, Cicero was updated to
include software for Siebel Systems over a period of only two days when
Merrill Lynch decided to implement the Siebel Systems solution. The Cicero
solution allows our target markets to rapidly integrate new and existing
applications with little or no customization
required. |
Our
Strategy
Our
short-term goal is to be the recognized global leader in providing complete
desktop level application integration to the financial services industry. The
following are the key elements of our strategy:
| · |
Leverage
Our Existing Customers and Experience in the Financial Services
Industry.
We have had success in the past with our Geneva products in the financial
services industry. We intend to utilize these long-term relationships and
our understanding of the business to create opportunities for sales of the
Cicero solution. |
| · |
Build
on Our Successes to Expand into New Markets.
Our short-term goal is to gain a significant presence in the financial
services industry with the Cicero solution. The financial services
industry is ideal for Cicero because each entity has a large base of
installed users that use the same general groups of applications. However,
Cicero can be used in any industry that needs to integrate applications
and processes such as telecommunications and insurance. Additionally, we
believe that state and local governments, first responders and defense
agencies are excellent target markets for integration of legacy
applications. |
| · |
Develop
Strategic Partnerships.
The critical success factor for customers implementing Customer
Relationship Management (CRM) solutions in their contact centers is to
have the right balance of technology and service provision. Similarly,
penetration into the government market requires alliances with proven
government system integrators and suppliers. We are implementing a tightly
focused strategic teaming approach with a selected group of well-known
consultancy and systems integration firms that specialize in financial
services, government and eCRM integrated solutions. Leveraging these
organizations, who will provide such integration services as architecture
planning, technology integration and business workflow improvement, allows
us to focus on core application system needs and how Cicero best addresses
them, while our partners will surround the technology with appropriate
industry and business knowledge. |
| · |
Leverage
our In-House Expertise in the Cicero Software.
Merrill Lynch originally developed Cicero internally for use by
approximately 30,000 professionals worldwide. To approach the market from
a position of strength, we have added members of the Merrill Lynch
development team to our Cicero development team. We recruited and hired
Anthony Pizi, First Vice President and Chief Technology Officer of Merrill
Lynch’s Private Technology’s Architecture and Service Quality Group, and
the Cicero project director as our Chairman, Chief Executive Officer and
Chief Technology Officer as well as several of the primary Cicero
engineers from Merrill Lynch to support our ongoing Cicero development
efforts. |
| · |
Utilize
Market Analyses to Demonstrate Tangible Return-On-Investment
results.
Most contact centers benchmark their operational and services levels
against established industry norms. Metrics such as average waiting time
in the call queue, call abandonment rates, after call service work and
percentage of one-call completion are typically measured against norms and
trends. We believe that use of Cicero will provide tangible, demonstrable
improvements to these metrics. In addition, Cicero can integrate
applications and processes more efficiently than other competing
solutions. This reduces costs to customers and provides a faster ROI than
competing products. |
| · |
Augment
our product line with complementary product offerings.
In this area, we use three strategies. The first is to acquire, when
possible, complementary products that can be sold on their own, and can
also complement the Cicero product offering. In this area, we have
acquired the Ensuredmail product, which has been licensed both on its own,
as well as in conjunction with Cicero. The second strategy is to develop
Cicero connectors that facilitate the integration of existing products
under Cicero. Some of these connectors may be delivered along with Cicero,
while others may be licensed under separate product codes. The third
strategy is to develop Cicero-powered solutions that address specific
business challenges. These solutions such as our CTI Integrator not only
address specific integration problems but also provide us with an
opportunity to cross sell Cicero for additional future
integration. |
Products
Desktop
Integration Segment Products - Cicero
Level 8’s
Cicero software runs on Windows NT, Windows XP, and Windows 2000 and organizes
applications in a flexible graphical configuration that keeps all the
application functionality that the user needs within easy reach. For instance,
selecting a “memo” tab might cause a Microsoft Word memo-template to be created
within the Cicero desktop. The end-user need not even know that Microsoft Word
has been invoked to create the memo. Moreover, a customer-tracking database can
be linked with a customer relationship management software package. Virtually
any application that is used can be integrated under Cicero and be used in
conjunction with other applications.
The
patented Cicero technology, as exclusively licensed from Merrill Lynch, consists
of several components: The Event Manager, a Component Object Model (COM)-based
messaging service; The Context Manager, which administers the "publish and
subscribe" protocols; a Graphical User Interface (GUI) manager which allows
applications to be presented to the user in one or more flexible formats
selected by the user organization, and Cicero Studio, which allows applications
to be integrated mostly using a point-and-click methods. Cicero incorporates an
Application Bus with underlying mechanisms to handle the inter-application
connections. There are additional tools that provide ancillary functions, such
as integrator tools and tools to view history and traces.
Cicero
provides non-intrusive integration of desktop and web applications, portals,
third-party business tools, and even legacy mainframe and client server
applications, which co-exist and seamlessly share their information. Cicero's
non-invasive technology means that clients don't risk modifying either fragile
source code or sensitive application program interfaces - and they can easily
integrate applications where they do not have access to the source code, such as
web services, off-the-shelf applications, and legacy systems.
Cicero
allows end-users to access applications in the most efficient way possible, by
only allowing them to use the relevant portions of that application. For
instance, a contact center customer service representative does not use 90% of
the functionality of Microsoft Word, but might need access to a memorandum and
other custom designed forms as well as basic editing functionality. Cicero can
be set to control access to only those templates and, in a sense, turn-off the
unused functionality by not allowing the end-user direct access to the
underlying application. Under the same Cicero implementation, however, a
different Cicero configuration could allow the employees in the Marketing
department full access to Word because they have need of the full functionality.
The functionality of the applications that Cicero integrates can be modulated by
the business goals of the ultimate client, the parent company. This ability to
limit user access to certain functions within applications enables companies to
reduce their training burden by limiting the portions of the applications on
which they are required to train their customer service
representatives.
Cicero is
an ideal product for large customer contact centers. We believe that Cicero, by
combining ease of use, a shorter learning curve and consistent presentation of
information will allow our clients to leverage their existing investments in
Customer Relationship Management or CRM applications and further increase
customer service, productivity, return on investment and decrease costs across
the contact center.
Cicero is
also the ideal product for many office workers who repetitively need to share
information between different applications. Cicero improves worker efficiency
and reduces the number of mistakes. It can also enforce rules for such workers,
ensuring they comply with business regulations, such as HIPAA.
Cicero
CTI Integrator
Cicero CTI Integrator
enables contact centers to easily and quickly integrate their existing CTI
applications with any application running on contact center desktops without
modification of the underlying source code. This innovative solution works with
existing applications including legacy systems and delivers real time
efficiencies in terms of reducing key-strokes and errors while enhancing
customer satisfaction.
Cicero CTI is targeted at
contact centers that do not have the ability to integrate their computer
telephony and customer relationship management software. The product offers
entry-level integration within the contact center and is capable of upgrading to
the complete Cicero solution.
Messaging
and Application Engineering Segment Products
Ensuredmail
Ensuredmail is an off-the-shelf
package that provides encrypted e-mail capabilities. It provides all the
advantages of encryption, such as security, proof-of-delivery and
non-repudiation of origination. The recipient of an Ensuredmail message does not
need to be an Ensuredmail licensee. When an Ensuredmail user sends a message to
another user, the recipient receives instead an e-mail message containing a link
to a web site. Clicking on the link starts on the recipient’s machine a process
downloads the encryption software, if needed, and the message. The recipient
must provide a password to decrypt and read the message. When both sender and
recipient are licensees, then the process is simpler and more automated.
Ensuredmail can work alongside generally available e-mail servers, such as
Microsoft Exchange, and augment them. The client components can work within
commonly available packages, such as Microsoft Outlook, or even AOL.
Organizations typically use a server-based Ensuredmail implementation, whereas
individuals can use a person to person variation.
Ensuredmail
is FIPS140-1 certified, and in use by agencies of the Federal Government, in
addition to private sector organizations.
Geneva
Integration Broker.
Geneva
Integration Broker is a transport independent message broker that enables an
organization to rapidly integrate diverse business systems regardless of
platform, transport, format or protocol. The key feature of Geneva Integration
Broker is its support for XML and other standards for open data exchange on the
Internet. The product provides a robust platform for building eBusiness
applications that integrate with existing back-office systems. Geneva
Integration Broker's support for open data exchange and secure Internet
transports make it an excellent platform for building Internet-based
business-to-business solutions. Geneva Integration Broker does not represent a
significant portion of the Company’s current business or prospects.
Services
We
provide a full spectrum of technical support, training and consulting services
across all of our operating segments as part of our commitment to providing our
customers industry-leading business integration solutions. Experts in the field
of systems integration with backgrounds in development, consulting, and business
process reengineering staff our services organization. In addition, our services
professionals have substantial industry specific backgrounds with extraordinary
depth in our focus marketplace of financial services.
Maintenance
and Support
We offer
customers varying levels of technical support tailored to their needs, including
periodic software upgrades, telephone support and twenty-four hour, seven days a
week access to support-related information via the Internet. Cicero is
frequently used in mission-critical business situations, and our maintenance and
support services are accustomed to the critical demands that must be met to
deliver world-class service to our clients. Many of the members of our staff
have expertise in lights-out mission critical environments and are ready to
deliver service commensurate with those unique client needs.
Training
Services
Our
training organization offers a full curriculum of courses and labs designed to
help customers become proficient in the use of our products and related
technology as well as enabling customers to take full advantage of our
field-tested best practices and methodologies. Our training organization seeks
to enable client organizations to gain the proficiency needed in our products
for full client self-sufficiency but retains the flexibility to tailor their
curriculum to meet specific needs of our clients.
Consulting
Services
We offer
consulting services around our product offerings in project management,
applications and platform integration, application design and development and
application renewal, along with expertise in a wide variety of development
environments and programming languages. We also have an active partner program
in which we recruit leading IT consulting and system integration firms to
provide services for the design, implementation and deployment of our solutions.
Our consulting organization supports third party consultants by providing
architectural and enabling services.
Customers
Approximately
30,000 Merrill Lynch personnel are currently using the Cicero technology. We
licensed the Cicero technology from Merrill Lynch during 2000 and have developed
it to initially sell to the contact center industry. Our significant customers
include Nationwide Financial Services, Arvato Services, a division of
Bertlesmann A.G., Bank of America, Convergys, Science Applications International
Corporation (SAIC) and IBM.
Bank of
America and Nationwide Financial Services individually accounted for more than
ten percent (10%) of our operating revenues in 2002. In 2003, Bank of America,
Nationwide Financial Services, and Gateway Electronic Medical Management Systems
(GEMMS) each accounted for more than ten percent (10%) of our operating
revenues. In 2004, Bank of America, Convergys, IBM, Nationwide Financial
Services and SAIC each accounted for more than ten percent (10%) of our
operating revenue.
Sales
and Marketing
Sales
An important element of
our sales strategy is to expand our relationships with third parties to increase
market awareness and acceptance of our business integration software solutions.
As part of these relationships, we will jointly sell and implement Cicero
solutions with strategic partners such as systems integrators and embed Cicero
along with other products through OEM relationships. Level 8 will provide
training and other support necessary to systems integrators and OEMs to aid in
the promotion of our products. To date we have signed partner agreements with
Science Applications International Corporation, (SAIC), ThinkCentric, Hewlett
Packard, House of Code, Titan Systems Corporation, Silent Systems, Inc., ADPI
LLC, Arvato Services, a division of Bertlesmann A.G, Gateway Electronic Medical
Management Systems (GEMMS), Genesis Technology Group, Inc., Global Monitoring
Systems LLC, Plan B Technologies, Inc. Pyxislink, Gini Corporation, and Centrix
Communications Services S.p.A.
Marketing
The target market for our
products and services are large companies providing financial services and or
customer relationship management to a large existing customer base. Increasing
competitiveness and consolidation is driving companies in such businesses to
increase the efficiency and quality of their customer contact centers. As a
result, customer contact centers are compelled by both economic necessity and
internal mandates to find ways to increase internal efficiency, increase
customer satisfaction, increase effective cross-selling, decrease staff turnover
cost and leverage their investment in current information
technology.
Our
marketing staff has an in-depth understanding of the financial services customer
contact center software marketplace and the needs of customers in that
marketplace, as well as experience in all of the key marketing disciplines. The
staff also has broad knowledge of our products and services and how they can
meet customer needs.
Our
marketing functions include product marketing, marketing communications and
strategic alliances. We utilize focused marketing programs that are intended to
attract potential customers in our target vertical industries and to promote
Level 8 and our brands. Our programs, while limited by financial resources, are
specifically directed at our target market such as , public relations campaigns,
focused trade shows and web site marketing, while devoting resources to
supporting the field sales team with quality sales tools and collateral. As
product acceptance grows and our target markets increase, we will shift to
broader marketing programs.
The
marketing department also produces collateral material for distribution to
prospects including demonstrations, presentation materials, white papers, case
studies, articles, brochures, and data sheets.
Research
and Product Development
In
connection with the narrowing of our strategic focus, and in light of the sale
of our Systems Integration products, we anticipate an overall reduction in
research and development costs. Since Cicero is a new product in a relatively
untapped market, it is imperative to constantly enhance the f