EX-99.1 3 dex991.txt PRO FORMA FINANCIAL STATEMENTS EXHIBIT 99.1 Level 8 Systems Inc Unaudited Pro Forma Consolidated Financial Information The following unaudited pro forma consolidated balance sheet as of June 30, 2001, and the unaudited pro forma consolidated statements of operations for the year ended December 31, 2000 and the six months ended June 30, 2001 effect to the disposition of the Company's Geneva AppBuilder software and related assets ("GAB"). The unaudited pro forma consolidated financial statements are intended for informational purposes only and are not necessarily indicative of the future financial position or future results of operations of the existing company, or of the financial position or the results of operations of the existing company that would have actually occurred had the disposition been in effect as of the date or for the periods presented. These unaudited pro forma consolidated financial statements and the accompanying notes should be read in conjunction with the historical consolidated financial statements and the related notes thereto of registrant contained in its 2000 Annual Report on Form 10-K and its Quarterly Report on Form 10-Q for the quarter ended June 30, 2001.
Level 8 Systems, Inc Pro Forma Balance Sheet as of June 30, 2001 As Reported Pro Forma (Unaudited) Adjustment Adjusted ASSETS Cash and cash equivalents 11,445 19,000 (b) 8,445 (22,000) (c) Available-for-Sale Securities 235 235 Trade accounts receivable, net 4,310 4,310 Other Receivables 279 279 Notes Receivable 1,636 1,636 Rltd Party Notes Receivable 199 199 Assets held for resale 17,840 (17,840) (a) - Other current assets 3,072 3,072 ----------------- ----------------- ------------------ Total current assets 39,015 (20,840) 18,175 Property and equipment, net 1,281 1,281 Goodwill and intangible assets 24,300 24,300 Capitalized software cost, net 34,603 34,603 Notes Receivable 500 1,000 (b) 1,500 Rltd Party Notes Receivable 396 396 Investment in Access International - - Other assets 674 674 ----------------- ----------------- ------------------ Total non-current assets 61,754 1,000 62,754 ----------------- ----------------- ------------------ Total assets 100,769 (19,840) 80,929 ================= ================= ================== LIABILITIES AND EQUITY/(DEFIC) Current maturity-LT debt 15,000 (15,000) (c) - Accounts payable 3,594 3,594 Accounts payable, Liraz 99 99 Accrued expenses: - Wages, Salaries and Related 1,212 1,212 Restructuring 3,093 3,093 Merger Related 110 110 Other 6,793 6,793 Deferred revenue 4,809 4,809 ----------------- ----------------- ------------------ Total current liabilities 34,711 (15,000) 19,711 Long-term debt-net current mat 10,000 (7,000) (c) 3,000 Stockholders' Equity/(Defic.) Common stock 16 16 Preferred Stock 0 0 Additonal paid-in-capital 197,993 197,993 Accum. Other Comp. Loss (4,543) (4,543) Accumulated deficit (137,407) 2,160 (d) (135,247) ----------------- ----------------- Total stockholders'equity 56,058 2,160 58,218 ----------------- ----------------- ------------------ Total liab. and equity 100,769 (19,840) 80,929 ================= ================= ================== All adjustments are related to the sale of the GAB business unit assuming it occurred June 30, 2001.
Notes to Unaudited Pro Forma Consolidated Balance Sheet For the Six Months Ended June 30, 2001 (a) To remove assets and liabilities of the Company's Geneva AppBuilder ("GAB") business unit as if the sale occurred June 30, 2001. (b) To reflect the total proceeds from the sale of GAB, comprised of $19 million of cash and $1 million in a note receivable. (c) To reflect the use of $12 million of the cash proceeds to pay down the Bank Hapoalim debt. In addition, the Company paid an additional $10 million of Bank Hapoalim debt with the proceeds from the certificate of deposit securing the debt, leaving a $3 million debt facility, which was converted to long term debt. (d) To adjust retained earnings to reflect the gain on the sale of the Company's Geneva AppBuilder software and related assets.
Level 8 Systems Pro Forma Statement of Operations for the Six months ended June 30,2001 and the Year Ended December 31, 2000 Six-Months Ended June 30, 2001 Twelve-Months Ended December 31, 2000 Historical Less Historical Less Level 8 GAB (a) Pro Forma Level 8 GAB (a) Pro Forma Revenue Software $ 1,464 $ 151 $ 1,313 $ 45,998 $13,307 $ 32,691 Maintenance 7,758 5,321 2,437 15,967 11,484 4,483 Services 5,888 3,843 2,045 20,626 9,089 11,537 --------- ------- -------- -------- ------- -------- Total Revenue 15,110 9,315 5,795 82,591 33,880 48,711 Cost of Revenue Software 7,295 1,183 6,112 9,844 2,855 (g) 6,989 Maintenance 2,444 1,661 783 5,716 4,568 1,149 Services 4,686 3,074 1,612 18,619 8,192 (h) 10,427 --------- ------- -------- -------- ------- -------- Total Cost of Revenue 14,425 5,918 8,507 34,179 15,615 18,564 --------- ------- -------- -------- ------- -------- Gross Profit 685 3,397 (2,712) 48,412 18,265 30,147 Operating Expenses: Sales and Marketing 9,781 365 9,416 35,177 10,201 (i) 24,976 Research and Development 4,611 1,411 3,200 8,861 3,143 5,718 General and Administrative 8,783 2,000 (b) 7,766 12,682 2,335 (j) 10,692 In-process Research and Development 1,800 - 1,800 Amortization of Intangible Assets 6,727 2,858 3,869 14,191 5,715 8,476 Restructuring 8,650 3,460 5,190 - - (Gain) Loss on Disposal of Assets (160) (160) 379 379 Impairment of Intangible Assets 21,824 - 21,824 - - - --------- ------- -------- -------- ------- -------- Total Operating expenses 60,216 10,094 51,105 73,090 21,394 52,041 --------- ------- -------- -------- ------- -------- Loss from Operations (59,531) (6,698) (53,817) (24,678) (3,129) (21,894) Other Income (Expense) Interest Income 561 341 (c) 220 976 658 (k) 318 Other Income 870 870 - - Interest Expense (2,885) (2,539) (d) (346) (3,337) (895) (l) (2,442) Foreign Currency Losses (158) (103) (e) (55) (265) (172) (m) (93) --------- ------- -------- -------- ------- -------- Loss Before Provision for Income Taxes (61,143) (8,999) (52,144) (27,304) (3,539) (24,111) Income Tax Provision 275 124 (f) 151 1,063 478 (n) 585 --------- ------- -------- -------- ------- -------- Net Loss (61,418) (9,122) (52,296) (28,367) (4,017) (24,695) ========= ======= ======== ======== ======= ======== Net loss from continuing operations - basic and diluted ($3.93) ($3.41) ($2.10) ($1.83) Weighted common shares outstanding - 15,845 15,845 14,019 14,019 basic and diluted
Notes to Unaudited Pro Forma Statement of Operations For the Six Months Ended June 30, 2001 (a) The operating results of the GAB business unit have been eliminated as if the sale was consummated on June 30, 2001. During the six months ended June 30, 2001 the Company recorded the transactions of the GAB business unit as a separate business unit. (b) General and administrative expenses were calculated by excluding executive and all general and administrative costs, i.e. finance, legal, HR and IT support costs and then pro rating 28% of the remaining costs which include telecommunications, facilities, leases and contract review costs. (c) To eliminate the interest income earned on the $10 million certificate of deposit securing the Bank of Hapoalim debt. (d) To reflect a reduction in interest expense as a result of part of the cash proceeds received from the transaction used to pay Bank Hapoalim debt. The adjustment was calculated based on the ratio of Bank Hapoalim debt paid off to total debt outstanding (i.e. approximately 88% of the Bank Hapoalim debt was paid off as result of this transaction). (d) Foreign currency losses allocation was based on foreign operations revenue for the GAB business unit to total company foreign operations revenue. (f) Level 8 Systems operating results reflect a provision for income taxes as if the GAB business unit was a separate taxpayer. For pro forma purposes, tax expense was calculated per country using a percentage of personnel associated with the GAB business unit. Notes to Unaudited Pro Forma Statement of Operations For the Year Ended December 31, 2000 (a) The operating results of the GAB business unit have been eliminated as if the sale was consummated on January 1,2000. The GAB business unit's transactions, except for revenue, intangible assets, research and development, and maintenance costs were not recorded separately during the twelve months ended December 31, 2000. As described below allocations were made for certain costs. (g) GAB cost of software is calculated using the percentage of GAB generated software revenue to the total software revenue for the company. (h) GAB cost of services is calculated using the percentage of GAB generated service revenue to the total service revenue for the company. (i) GAB sales and marketing expense is calculated using the percentage of GAB generated software revenue to the total software revenue for the company. (j) General and Administrative expenses were calculated by deducting all general and administrative personnel costs and allocating the remaining expense by 28% which is based on the weighted average of total operating expenses. (k) GAB general and administrative expense is the total GAB business unit general and administration expenses captured within the foreign operations unit disposed of in the transaction. (l) To eliminate the interest income earned on the $10 million certificate of deposit securing the Bank of Hapoalim debt. (m) To reflect a reduction in interest expense as a result of part of the cash proceeds received from the transaction used to pay Bank Hapoalim debt. Pro forma interest expense reductions were calculated using an average interest rate of 7.46% on $12 million for one year. (n) Foreign currency losses allocation was based on foreign operations revenue for the GAB business unit to total company foreign operations revenue. (o) Level 8 Systems operating results reflect a provision for income taxes as if the GAB business unit was a separate taxpayer. For pro forma purposes, tax expense was calculated per country using a percentage of personnel associated with the GAB business unit.