AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON ~~MAY 17, 2004~~ APRIL 19, 2007

REGISTRATION NOS. ~~333-_____; 333-104892; 333-82768; 333-100983 - --------------------------------------------------------------------------------~~ 333-

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM S-1

REGISTRATION STATEMENT UNDER

THE SECURITIES ACT OF 1933 ~~------------------------------ LEVEL 8 SYSTEMS,~~

CICERO INC. ~~(Exact~~

(Exact Name of Registrant as Specified in Its Charter) DELAWARE 11-2920559 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification Number)

DELAWARE	11-2920559
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification Number)

7372 ~~SERVICES, PREPACKAGED SOFTWARE ------------------------------ (Primary~~Services, Prepackaged Software

(Primary Standard Industrial Classification Code) 214 CARNEGIE CENTER, SUITE 303, PRINCETON, NEW JERSEY 08540 (609) 987-9001 (Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices) ------------------------------ JOHN P. BRODERICK CHIEF FINANCIAL OFFICER LEVEL 8 SYSTEMS, INC. 214 CARNEGIE CENTER, SUITE 303, PRINCETON, NEW JERSEY 08540 (609) 987-9001 ------------------------------ (Name,

1433 State Highway 34

Farmingdale, New Jersey 07727

(732) 919-3150

(Address, Including Zip Code, and Telephone Number, Including

Area Code, of Registrant’s Principal Executive Offices)

John P. Broderick

Chief Financial Officer

Cicero Inc.

1433 State Highway 34

Farmingdale, New Jersey 07727

(732) 919-3150

(Name, Address, Including Zip Code, and Telephone Number,

Including Area Code, of Agent for Service) ~~COPIES OF COMMUNICATIONS TO: SCOTT D. SMITH, ESQ. POWELL, GOLDSTEIN, FRAZER~~

Copies to:

Lawrence M. Bell, Esq.

Golenbock Eiseman Assor Bell & ~~MURPHY~~Peskoe LLP SIXTEENTH FLOOR 191 PEACHTREE STREET, N.E. ATLANTA, GEORGIA 30303 (404) 572-6600 ------------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:

437 Madison Ave

New York, NY, 10022

(212) 907-7300

Approximate Date of Commencement of Proposed Sale to the Public: From time to time or at one time after the effective date of this registration statement as determined by the selling stockholders.

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. ~~[X]~~ x

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under 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. ~~[ ]~~ o

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. ~~[ ]~~ o

If this form is a post-effective amendment filed pursuant to Rule 462(d) 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. ~~[ ]~~ o

If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. ~~[ ]~~ o

CALCULATION OF REGISTRATION FEE

TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED	AMOUNT TO BE REGISTERED	PROPOSED MAXIMUM OFFERING PRICE PER SHARE(1)	PROPOSED MAXIMUM AGGREGATE OFFERING PRICE	AMOUNT OF REGISTRATION FEE
Common Stock, par value $.001 per share (2)	40,641,978	$1.11	$45,122,595.62	$1,384.96

CALCULATION OF REGISTRATION FEE - --------------------------------------- ------------------- ------------------------ ------------------------- --------------------- PROPOSED PROPOSED MAXIMUM TITLE OF EACH CLASS OF SECURITIES TO AMOUNT TO BE MAXIMUM OFFERING AGGREGATE OFFERING AMOUNT OF BE REGISTERED REGISTERED PRICE PER UNIT PRICE REGISTRATION FEE - --------------------------------------- ------------------- ------------------------ ------------------------- ---------------------
(1)	Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(c ) under the Securities Act of 1933 and based upon the average high and low prices of the registrant’s common stock on the Over the Counter Bulletin Board on April 16, 2007.

(2)

Includes Common Stock, par value $.001 per share (issuable upon the conversion of preferred stock), and Common Stock, par value $.001 per share (issuable upon the exercise of warrants. This Registration Statement also carries forward the registration of 449,476 shares of Level 8 Systems common stock, $.001 par value 13,307,135 (1) $ 0.29 (2) $ 3,859,069 (2) $ 595 - --------------------------------------- ------------------- ------------------------ ------------------------- --------------------- on Form S-1 filed May 18, 2004. A Registration Fee $595 of was previously paid to register such securities.

~~(1)~~

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 this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

Pursuant to Rule 429 of the Securities Act of 1933, the prospectus which is a part of this Registration Statement is a combined prospectus and includes all the information currently required in a prospectus relating to the securities covered by Registration Statement Nos. 333-115580, 333-104892, 333-82768 and 333-100983 previously filed by Registrant. This Registration Statement, also ~~carries forward~~constitutes a Post-Effective Amendment to Registration Statement Nos. 333-115580, 333-104892, 333-82768 and 333-100983.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration ~~of 21,079,805 shares by Level 8 Systems, Inc. of common stock, $.001 par value on Form S-1,~~statement filed ~~May 1, 2003, Registration Number 333-104892,~~with the Securities and ~~4,583,540 shares by Level 8 Systems, Inc. of common stock, $.001 par value, on Form S-3, filed February 14, 2002, Registration Number 333-82768~~Exchange Commission is effective. This prospectus is not an offer to sell these securities and ~~7,693,058 shares of common stock, $.001 par value, on Form S-3, filed on November 4, 2002, Registration Number 33-100983. A Registration Fee of was previously paid~~it is not soliciting an offer to ~~register such securities. (2) Estimated solely for~~buy these securities in any jurisdiction where the ~~purpose of computing the registration fee pursuant to Rule 457(c) based on the average high and low~~offer or sale prices of the Company's stock on the Over-the-Counter Bulletin Board on May 10, 2004. 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 THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. PURSUANT TO RULE 429 OF THE SECURITIES ACT OF 1933, THE PROSPECTUS WHICH IS A PART OF THIS REGISTRATION STATEMENT IS A COMBINED PROSPECTUS AND INCLUDES ALL THE INFORMATION CURRENTLY REQUIRED IN A PROSPECTUS RELATING TO THE SECURITIES COVERED BY REGISTRATION STATEMENT NOS. 333-104892, 333-82768 AND 333-100983 PREVIOUSLY FILED BY REGISTRANT. THIS REGISTRATION STATEMENT, ALSO CONSTITUTES A POST-EFFECTIVE AMENDMENT TO REGISTRATION STATEMENT NOS. 333-104892, 333-82768 AND 333-100983. - -------------------------------------------------------------------------------- THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. - -------------------------------------------------------------------------------- is not permitted.

SUBJECT TO COMPLETION, DATED ~~MAY 17, 2004~~ APRIL 19, 2007

PROSPECTUS ~~42,018,051 SHARES LEVEL 8 SYSTEMS,~~

40,641,978

CICERO INC. ~~[LEVEL 8 SYSTEMS, INC. LOGO]~~

This prospectus relates to the resale of up to ~~42,018,051~~40,641,978 shares of our common stock, $.001 par value, which are being offered for resale from time to time by the stockholders named in the section entitled ~~"Selling Stockholders"~~“Selling Stockholders” on page 8.9. The number of shares the selling stockholders may offer and sell under this prospectus includes common shares: o the selling stockholders currently hold; o issuable to them upon the conversion of outstanding convertible preferred stock; and, o issuable to them upon the exercise of warrants previously issued by us. The selling stockholders may also offer additional shares of common stock acquired upon conversion of convertible preferred stock or exercise of the warrants as a result of anti-dilution provisions, stock splits, stock dividends or similar transactions. stock:

the selling stockholders currently hold;

issuable to them upon the conversion of outstanding convertible preferred stock; and

issuable to them upon the exercise of warrants previously issued

We are registering these shares to satisfy registration rights of the selling stockholders.

We are not offering or selling any shares under this prospectus and we will not receive any of the proceeds from any resales by the selling stockholders. We ~~will,~~may, however, receive the proceeds from the exercise of the warrants issued to the selling stockholders. The selling stockholders may sell the shares of common stock from time to time in various types of transactions, including on the Over-the-Counter Bulletin Board and in privately negotiated transactions. For additional information on methods of sale, you should refer to the section entitled ~~"Plan~~“Plan of ~~Distribution"~~Distribution” on page ~~16.~~ .

On ~~May 11, 2004,~~April 16, 2007, the last sales price of the common stock quoted on the Over-the-Counter Bulletin Board was ~~$0.29~~$1.11 per share. Our ~~company's~~ common stock is quoted on the Over-the-Counter Bulletin Board under the symbol ~~"LVEL." INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 3.~~ “CICN.”

Investing in our common stock involves a high degree of risk. See “Risk Factors” beginning on page 3.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY ~~OTHER REGULATORY BODY~~STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The date of this Prospectus is ____________

TABLE OF CONTENTS


ABOUT THIS PROSPECTUS	i
Prospectus ~~Summary..........................................................................1~~ Summary	1
Risk ~~Factors................................................................................3~~ Factors	3
Use of ~~Proceeds.............................................................................7~~ Proceeds	8
Price Range of Our Common ~~Stock.............................................................7~~ Stock	8
Dividend ~~Policy.............................................................................7~~ Policy	8
Selling ~~Stockholders........................................................................8~~ Stockholders	9
Plan of ~~Distribution.......................................................................16~~ Distribution	27
Selected Consolidated Financial ~~Data.......................................................18~~ Data	28
Business ~~..................................................................................19 Properties.................................................................................28~~	29
Properties	42
Legal ~~Proceedings..........................................................................28 Management's~~Proceedings	42
Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations.....29~~ Operations	44
Significant Accounting Policies and ~~Estimates..............................................43 Management.................................................................................46~~ Estimates	51
Management	55
Executive ~~Officers.........................................................................47 Executive Compensation.....................................................................49~~ Compensation	58
Principal ~~Stockholders.....................................................................51~~ Stockholders	60
Certain Relationships and Related Party ~~Transactions.......................................53~~ Transactions	62
Changes in and Disagreements With Accountants on Accounting and Financial ~~Disclosure.......53~~ Disclosure	64
Description of Capital ~~Stock...............................................................53~~ Stock	64
Legal ~~Matters..............................................................................54 Experts....................................................................................54~~ Matters	65
Experts	65
Available ~~Information......................................................................55~~ Information	65
Index to Financial ~~Statements.............................................................F-1~~ Statements	F-1

~~------------------------------~~

_____________________________

ABOUT THIS PROSPECTUS ~~This prospectus is a part of a registration statement that we have filed with the Securities and Exchange Commission using a "shelf registration" process.~~

You should read this prospectus and any accompanying prospectus supplement, as well as any post-effective amendments to the registration statement of which this prospectus is a part, together with the additional information described under ~~"Available Information"~~“Available Information” before you make any investment decision.

The terms ~~"Level 8," "we," "our"~~“Cicero,” “we,” “our” and ~~"us"~~“us” refer to ~~Level 8 Systems,~~Cicero Inc. and its consolidated subsidiaries unless the context suggests otherwise. The term ~~"you"~~“you” refers to a prospective purchaser of our common stock. Unless otherwise indicated, all dollar amounts presented are in thousands, except per share amounts.

You should not rely ~~only~~ on ~~the~~any information other than contained in this prospectus or any accompanying prospectus supplement. We have not authorized anyone to provide you with information different from that contained in this prospectus or any accompanying prospectus supplement. These securities are being offered for sale and offers to buy these securities are only being solicited in jurisdictions where offers and sales are permitted. The information contained in this prospectus and any accompanying prospectus supplement is accurate only as of the date on their respective covers, regardless of the time of delivery of this prospectus or any accompanying prospectus supplement or any sale of the securities.

SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS

This prospectus contains certain forward-looking statements, ~~including~~made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, and do not relate solely to current or ~~related to~~historical facts but address our future results, including certain projections and business trends. Assumptions relating to forward-looking statements involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. When used in this prospectus, the words ~~"estimate," "project," "intend," "believe," "expect"~~“estimate,” “project,” “intend,” “believe,” “expect” and similar expressions are intended to identify forward- looking statements. Although we believe that assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate, and we may not realize the results contemplated by the forward-looking statement. Management decisions are subjective in many respects and susceptible to interpretations and periodic revisions based on actual experience and business developments, the impact of which may cause us to alter our business strategy or capital expenditure plans that may, in turn, affect our results of operations. In light of the significant uncertainties inherent in the forward-looking information included in this prospectus, you should not regard the inclusion of such information as our representation that we will achieve any strategy, objective or other ~~plans.~~plans, and are cautioned not to place undue reliance on these forward looking statements. The forward-looking statements contained in this prospectus speak only as of the date of this prospectus as stated on the front cover, and we have no obligation to update publicly or revise any of these forward-looking statements. These and other statements, which are not historical facts are based largely on ~~management's~~management’s current expectations and assumptions and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those contemplate by such forward-looking statements. These risk and uncertainties include, among others, the risks and uncertainties described in ~~"Risk Factors" (page 3).~~ “Risk Factors” and the following:

There is substantial doubt as to whether we can continue as a going concern;

We have a history of losses and expect that we will continue to experience losses at least through mid 2007;

We develop new and unproven technology and products;

We depend on an unproven strategy for ongoing revenue;

Economic conditions could adversely affect our revenue growth and cause us not to achieve desired revenue;

The so-called “penny stock rule” could make it cumbersome for brokers and dealers to trade in our common stock, making the market for our common stock less liquid which could cause the price of our stock to decline;

Because we cannot accurately predict the amount and timing of individual sales, our quarterly operating results may vary significantly, which could adversely impact our stock price;

Loss of key personnel associated with Cicero® development could adversely affect our business;

Different competitive approaches or internally developed solutions to the same business problem could delay or prevent adoption of Cicero®;

Our ability to compete may be subject to factors outside our control;

The markets for our products are characterized by rapidly changing technologies, evolving industry standards, and frequent new product introductions;

We may face damage to the reputation of our software and a loss of revenue if our software products fail to perform as intended or contain significant defects;

We may be unable to enforce or defend our ownership and use of proprietary and licensed technology;

Our business may be adversely impacted if we do not provide professional services to implement our solutions;

Because our software could interfere with the operations of customers, we may be subject to potential product liability and warranty claims by these customers;

We have not paid any cash dividends on our common stock and it is likely that no cash dividends will be paid in the future; and

Provisions of our charter and bylaws and Delaware law could deter takeover attempts.

iii

PROSPECTUS SUMMARY

This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our common stock. You should read the entire prospectus carefully, including ~~"Risk Factors"~~“Risk Factors” and the financial statements, before making an investment decision. References to ~~"we," "our," "Level 8"~~“we,” “our,” “Cicero” and the ~~"Company"~~“Company” generally refer to ~~Level 8 Systems,~~Cicero Inc., a Delaware corporation.

We provide ~~next generation application~~business integration ~~products~~software, which enables organizations to integrate new and services that are based on open technology standards and are licensed to a varied range of customers. Our software helps organizations leverage their extensive system and business process investments, increase operational efficiencies, reduce costs and strengthen valued customer relationships by uniting disparate applications, systems,existing information and processes at the desktop. Our business integration software addresses the emerging need for companies’ information systems to deliver enterprise-wide views of their business information processes.In addition to software products, the Company also provides technical support, training and consulting services as part of its commitment to providing its customers with industry-leading integration solutions. The Company’s consulting team has in-depth experience in developing successful enterprise-class solutions as well as valuable insight into the business information needs of customers in the largest 5000 corporations worldwide (the “Global 5000”).

Our focus is on the ~~emerging~~growing desktop integration and business process automation market with our ~~Cicero(R)~~Cicero® product. ~~Cicero~~Cicero® is a business application integration ~~software product~~platform that ~~maximizes~~enhances end-user productivity, streamlines business operations and integrates systems and applications that would not otherwise work together. ~~Cicero~~Cicero® software offers a proven, innovative departure from traditional, costly and labor-intensive ~~approaches to~~enterprise application integration, ~~that~~which occurs at the server level. Cicero® provides non-invasive application integration at the desktop level. Desktop level integration provides the user with a single environment with a consistent look and feel for diverse applications across multiple operating environments, reduces enterprise integration implementation cost and time, and supports a Service-Oriented Architecture (SOA).

By using Cicero® software, companies can decrease their customer management costs, improve their customer service 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® software enables ~~clients~~organizations to ~~transform~~reduce the business risks inherent in replacement or re-engineering of mission-critical applications and extend the productive life and functional reach of their application portfolio.

Cicero® software is engineered to integrate diverse business ~~processes~~applications and ~~human expertise into~~shape them to more effectively serve the people who use them. Cicero® provides an intuitive integration and development environment, which simplifies the integration of complex multi-platform applications. Cicero® can streamline end-user tasks by providing a single, seamless ~~cost effective business solution that provides~~user interface for simple access to multiple systems or be configured to display one or more composite applications to enhance productivity. Our software enables automatic information sharing among line-of-business applications and tools.

Cicero® software is ideal for deployment in contact centers where its highly productive, task-oriented user interface promotes user efficiency. By integrating diverse applications across multiple operating systems, Cicero® software is also ideal for the financial services, for which Cicero® was initially developed, insurance, telecommunications, intelligence, security, law enforcement, governmental and other industries requiring a ~~cohesive, task-oriented and role-centric interface that is designed to work the way people think. RECENT DEVELOPMENTS~~ cost-effective, proven application integration solution.

Recent Developments

In ~~April 2004,~~February 2007, we ~~entered into~~completed a ~~convertible loan agreement with Anthony Pizi, the Company's Chairman and Chief Executive Officer in the amount~~private sale of ~~$100,000. Under the terms of the agreement, the loan is convertible into 270,270~~ shares of our common stock ~~and warrants~~ to ~~purchase 270,270~~a group of investors, two of which are members of our Board of Directors. Under the terms of that agreement, we sold 3,723,008 shares of our common stock ~~exercisable~~for $0.1343 per share for a total of $0.5 million. Participating in this consortium were Mr. Mark Landis, who is our current Chairman and Mr. Bruce Miller, who is a Board member. Mr. Landis acquired 77,460 shares for a $10,000 investment and Mr. Miller acquired 148,920 shares for a $20,000 investment.

In December 2006, we completed our Plan of Recapitalization, approved by our stockholders at ~~$0.37.~~a Special Stockholders Meeting held on November 16, 2006. The warrants expire in three years. On March 1, 2004, we entered into a consulting services agreement with Mr. Ralph F. Martino. Under the terms of the agreement, the Company agreed to issue 66,667 shares per month, up to an aggregate of 200,001 shares of our common stock, as compensation for services rendered overPlan included the following ~~three month period. On March~~ elements:

1 2004, we entered into a reseller/consulting agreement with Pyxislink. Under the terms of the agreement, we agreed to issue warrants to purchase 25,000 shares of our common stock quarterly, over the next four quarters. The warrants are exercisable for five years from the issue date and the exercise price is $0.38 per share.

Provided our Board of Directors with discretionary authority, pursuant to the plan of recapitalization to effect a reverse stock at a ratio of 20:1 to 100:1, and on November 20, 2006 our Board of Directors fixed the ratio at 100:1;

Changed the name of the Company from Level 8 Systems, Inc. to Cicero Inc.;

Increased the authorized common stock of the Company from 85 million shares to 215 million shares;

Converted existing preferred shares into a new Series A-1 Preferred Stock;

Converted and cancelled senior reorganization debt in the aggregate principal amount of $2.3 million into 3,438,473 shares of common stock;

Converted the aggregate principal amount of $3.9 million of convertible bridge notes into 30,508,448 shares of our common stock;

Converted each share of Series A3 Preferred Stock into 4.489 shares of Series A-1 Preferred Stock;

Converted each share of Series B3 Preferred Stock into 75 shares of Series A-1 Preferred Stock;

Converted each share of Series C Preferred Stock into 39.64 shares of Series A-1 Preferred Stock;

Converted an aggregate principal amount of $1,060,562 of Series D Preferred Stock, recorded as mezzanine financing, into 53 Preferred Stock; and

Converted an aggregate principal amount of $992,000 of convertible promissory notes into 1,591 shares of Series A-1 Preferred Stock.

In March 2004, we entered into a convertible loan agreement with Mark and Carolyn Landis, who are related by marriage to Anthony Pizi, the Company's Chairman and Chief Executive Officer, in the amount of $125,000. Under the terms of the agreement, the loan is convertible into 446,429 shares of our common stock and warrants to purchase 446,429 shares of our common stock exercisable at $0.28. The warrants expire in three years. We also entered into convertible loan agreements with Frederick Mack and C. Glen Dugdale, each in the face amount of $50,000. Under the terms of the agreement, each loan is convertible into 135,135 shares of our common stock and warrants to purchase 135,135 shares of our common stock at $0.37 per share. The warrants expire in three years. In March 2004, pursuant to an existing agreement, we issued 150,000 shares of common stock to Liraz Systems Ltd. in consideration for extension of the debt guarantee to Bank Hapoalim. On January 9, 2004, we acquired substantially all of the assets and certain liabilities of Critical Mass Mail, Inc., d/b/a Ensuredmail(R). The acquisition was completed using our common stock. The aggregate purchase price of the assets and liabilities was seven hundred fifty thousand dollars ($750,000.00). We issued 2,027,027 common shares as consideration for the purchase. The primary assets acquired in the acquisition were Critical Mail, Inc.'s federally certified Ensuredmail(R) e-mail encryption technology and products. Concurrent with the acquisition of the assets of Critical Mass Mail, Inc., we completed a common stock financing round wherein we raised $1,247,000 of capital from several new investors as well as certain investors of Critical Mass Mail. We sold 3,369,192 shares of common stock at a price of $0.37 per share. As part of the financing, we also issued warrants to purchase 3,369,192 shares of our common stock at an exercise price of $0.37. The warrants expire three years from the date of grant. 1 On October 15, 2003, we completed a private placement of 1,894,444 shares of common stock and warrants to purchase 473,611 shares of common stock. The warrants are exercisable at $0.45 per share of common stock and have a three year term. We received $852,500 in aggregate proceeds and used $200,000 of the proceeds to pay down our term loan. On November ~~15, 2003,~~2006, we reached an agreement with Bank Hapoalim, the holder of our term loan and Liraz, ~~Systems Ltd. ("Liraz"),~~ the guarantor of the term loan, to extend the maturity date of the term loan until ~~November 14, 2004.~~October 31, 2007. In consideration for the extension of the guaranty, we issued ~~150,000~~to Liraz 60,000 shares of our common ~~stock to a designated subsidiary of Liraz and agreed to issue an additional 150,000 shares on March 31, 2004. ------------------------------~~ stock.

We were incorporated as Level 8 Systems, Inc. in New York in 1988 and re-incorporated in Delaware in 1999. ~~Effective January 2003,~~In November 2006, our stockholders approved the change of our name to Cicero Inc. Our principal executive offices ~~were relocated to 214 Carnegie Center, Suite 303, Princeton,~~are located at 1433 State Highway 34, Farmingdale, New Jersey ~~08540, and our~~07727. Our telephone number is ~~(609) 987-9001. Our~~(732) 380-9150 and our web site is ~~located at www.level8.com.~~www.ciceroinc.com. Information contained on our web site is not a part of this prospectus.

RISK FACTORS

An investment in our common stock involves a high degree of risk. You should carefully consider the specific risk factors listed below together with the other information included in this prospectus before you decide whether to purchase shares of our common stock. Additional risks and uncertainties not presently known to us, including those that are not yet identified or that we currently think are immaterial, may also adversely affect our business, results of operations and financial condition. The market price of our common stock could decline due to any of these risks, and you could lose all or part of your investment. ~~WE DEPEND ON AN UNPROVEN STRATEGY FOR ONGOING REVENUE. In 2001,~~

There is substantial doubt as to whether we ~~determined~~can continue as a going concern.

Because we incurred net operating losses of approximately $3.0 million for the year ended December 31, 2006 and losses from continuing operations of approximately $13.4 million for the previous two fiscal years, we experienced negative cash flows from operations, had significant working capital deficiencies as of December 31, 2006, and because we are relying on acceptance of a newly developed and marketed product, there is substantial doubt that ~~our best possibility of long- term success would be~~we can continue to concentrate our sales efforts into the customer contact centers of large companies, where the customer service representatives of our target market interact with their customers via telephone, facsimile, electronic mail and other means of communication.operate as a going concern. The ~~success of our strategy is highly~~Company’s future revenues are entirely dependent on ~~market~~ acceptance of ~~Cicero,~~a newly developed and marketed product, Cicero®, which ~~we have licensed from Merrill Lynch. Cicero~~ has ~~no track record~~had limited success in commercial markets to date. These factors among others raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time. The Company is experiencing difficulty increasing sales torevenue largely because of the inimitable nature of the product as well as customer concerns about the financial ~~services industry and there is no certainty that we will have strong market penetration with our Cicero offering. Cicero was officially launched in a general release version in June 2001.~~viability of the Company. While we have ~~limited significant sales of Cicero~~attracted some additional capital to ~~date, we have yet~~continue to establish a predictable revenue stream. A previous version of Cicero has been in use on over 30,000 workstations at Merrill Lynch for approximately five years. We have substantially modified the version of Cicero used at Merrill Lynch to introduce a commercial product that may be implemented in our target markets. Furthermore, we have ceased our sales and marketing efforts with respect to our historical revenue producing products, the Geneva Integration Suite line of products, and our historical business of Enterprise Application Integration at the server level. We have sold all assets associated with the Geneva AppBuilder software, which represented approximately 59% of our revenue in fiscal year 2001. We also sold our Geneva Message Queuing and XIPC products in the third quarter of 2001 and our Star/SQL and CTRC products in second quarter of 2002. In October 2002, we sold our Systems Integration business, which consisted of Geneva Enterprise Integrator, and Geneva Business Process Automator. These sales represent substantially all of the products in our Messaging and Application Engineering segment and all the products in our Systems Integration Segment. Our past performance and revenues therefore provide no indication of our future prospects and revenues. Our new strategy is subject to the following specialized risks that may adversely affect our long-term revenue and profitability prospects: o Cicero was originally developed internally by Merrill Lynch and has no track record of successful sales to organizations within the financial services industry and may not gain market acceptance; o We are approaching a different segment of the financial services industry, the customer contact center, compared to our sales and marketing efforts in the past andfund operations, there can be no assurance that we can ~~successfully sell~~obtain additional financing and ~~market into this industry; and o~~ if we do obtain financing that it will be on terms that are favorable to us or our stockholders.

We have ~~had very limited success because the financial condition~~a history of ~~the Company has caused concern for enterprise customers~~losses and expect that ~~would be dependent on Cicero for their long-term needs. WE HAVE A HISTORY OF LOSSES AND EXPECT THAT WE WILL CONTINUE TO EXPERIENCE LOSSES AT LEAST THROUGH 2004.~~ we will continue to experience losses at least through mid 2007.

We experienced operating losses and net losses infor each of the years from 1998 ~~1999, 2000, 2001, 2002, 2003 and for the three months ended March 31, 2004.~~through 2006. We incurred a net loss of $25.1 million for 1998, $15.5 million for 1999, $28.4 million for 2000, $105.1 million for 2001, $18.2 million for 2002, $10.0 million for 2003, $9.8 million in 2004, $3.7 million in 2005 and ~~$2.6~~$3.0 million ~~for the three months ending March 31, 2004.~~in 2006. As of ~~March~~December 31, ~~2004,~~2006, we had a working capital deficit of ~~$6.7~~$7.9 million and an accumulated deficit of ~~$215~~$234 million. Our ability to generate positive cash flow is dependent upon ~~achieving and~~ sustaining certain cost reductions and generating sufficient revenues.

Therefore, due to these and other factors, we expect that we will continue to experience net losses through the ~~end~~first half of ~~2004.~~2007. We have not generated sufficient revenues to pay for all of our operating costs or other expenses and have relied on financing transactions over the last ~~three~~several fiscal years to pay our operating costs and other expenses. We cannot predict with accuracy our future results of operations and believe that any period-to-period comparisons of our results of operations are not meaningful. Furthermore, there can be no assurance that if we are unable to generate sufficient revenue from operations that we will be able to continue to access the capital markets to fund our operations, or that if we are able to do so that it will be on satisfactory terms. 3 ~~THERE IS SUBSTANTIAL DOUBT AS TO WHETHER WE CAN CONTINUE AS A GOING CONCERN. Because~~

We develop new and unproven technology and products.

Historically, the Company has been a global provider of software solutions to help companies integrate new and existing applications as well as extends 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 ~~incurred net operating losses~~focused primarily on the development, sale and support of ~~$2.6 million~~EAI solutions through our Geneva product suite. After extensive strategic consultation with outside advisors and an internal analysis of our products and services, we decided to focus on the growing desktop and business process automation market with our Cicero® product. Our technology and our products are unproven and we have been actively marketing them since 2001. The markets for ~~the three months ended March 31, 2004~~our products are characterized by rapidly changing technologies, evolving industry standards, frequent new product introductions and ~~$10.0 million~~short product life cycles. Our future success will depend to a substantial degree upon our ability to market and enhance our existing products and to develop and introduce, on a timely and cost-effective basis, new products and features that meet changing customer requirements and emerging and evolving industry standards.

We depend on an unproven strategy for ~~the year ended December 31, 2003, we~~ongoing revenue.

Our future revenues are entirely dependent on acceptance of Cicero® which has had limited success in commercial markets to date. We have experienced negative cash flows from operations for the past three years. At December 31, 2006, we had ~~significant~~a working capital ~~deficiencies at March 31, 2004, and because we are relying on acceptance~~deficiency of ~~a newly developed and marketed product,~~approximately $7.9 million. Accordingly, there is substantial doubt that wethe Company can continue as a going concern, and the independent auditor’s report accompanying our financial statements raises doubt about our ability to ~~operate~~continue as a going concern. ~~While~~In order to address these issues and to obtain adequate financing for our operations for the next twelve months, we ~~have attracted some additional capital to~~are actively promoting and expanding our product line and continue to ~~fund operations,~~negotiate with significant customers who have demonstrated interest in the Cicero® technology. We are experiencing difficulty increasing sales revenue largely because of the inimitable nature of the product as well as customer concerns about our financial viability. Cicero® software is a new “category defining” product in that most EAI projects are performed at the server level and Cicero®’s integration occurs at the desktop level without the need to open and modify the underlying code for those applications being integrated. Many companies are not aware of this new technology or tend to look toward more traditional and accepted approaches. We are 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, we are seeking additional equity capital or other strategic transactions in the near term to provide additional liquidity.

Our new strategy is subject to the following specialized risks that may adversely affect our long-term revenue and profitability prospects:

Cicero® was originally developed internally by Merrill Lynch and has no track record of successful sales to organizations within the financial services industry and may not gain market acceptance;

We are approaching a different segment of the financial services industry, the customer contact center, compared to our sales and marketing efforts in the past and there can be no assurance that we can successfully sell and market into this industry; and

We have had very limited success because the financial condition of the Company has caused concern for enterprise customers that would be dependent on Cicero® for their long-term needs.

Economic conditions could adversely affect our revenue growth and cause us not to achieve desired revenue.

Our ability to generate revenue depends on the overall demand for desktop integration software and services. Our business depends on overall economic conditions, the economic and business conditions in our target markets and the spending environment for information technology projects, and specifically for desktop integration in those markets. A weakening of the economy in one or more of our geographic regions, unanticipated major events and economic uncertainties may make more challenging the spending environment for our software and services, reduce capital spending on information technology projects by our customers and prospective customers, result in longer sales cycles for our software and services or cause customers or prospective customers to be ~~no assurance that we can obtain~~more cautious in undertaking larger transactions. Those situations may cause an additional ~~financing~~decrease in our revenue. A decrease in demand for our software and ~~if we do obtain financing that~~services caused, in part, by an actual or anticipated weakening of the economy, may result in a decrease in our revenue rates.

The so-called “penny stock rule” could make it ~~will be~~cumbersome for brokers and dealers to trade in our common stock, making the market for our common stock less liquid which could cause the price of our stock to decline.

We were delisted from the NASDAQ SmallCap market effective January 23, 2003. Our common stock presently is quoted on terms that are favorable to us or our stockholders. THE SO-CALLED "PENNY STOCK RULE" COULD MAKE IT CUMBERSOME FOR BROKERS AND DEALERS TO TRADE IN OUR COMMON STOCK, MAKING THE MARKET FOR OUR COMMON STOCK LESS LIQUID WHICH COULD CAUSE THE PRICE OF OUR STOCK TO DECLINE. the Over-the-Counter Bulletin Board.

Trading of our common stock on the ~~OTC Bulletin Board~~OTCBB may be subject to certain provisions of the Securities Exchange Act of 1934, as amended, commonly referred to as the "penny stock" rule. A penny stock is generally defined to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. If our stock is deemed to be a penny stock, trading in our stock will be subject to additional sales practice requirements on broker-dealers. These may require a broker-dealer to: o make a special suitability determination for purchasers of our shares; o receive the purchaser's written consent to the transaction prior to the purchase; and o deliver to a prospective purchaser of our stock, prior to the first transaction, a risk disclosure document relating to the penny stock market.

make a special suitability determination for purchasers of our shares;

receive the purchaser's written consent to the transaction prior to the purchase; and

deliver to a prospective purchaser of our stock, prior to the first transaction, a risk disclosure document relating to the penny stock market.

Consequently, penny stock rules may restrict the ability of broker-dealers to trade and/or maintain a market in our common stock. Also, prospective investors may not want to get involved with the additional administrative requirements, which may have a material adverse effect on the trading of our shares. ~~FUNDS FROM OUR SERIES D PREFERRED STOCK FINANCING REMAIN IN ESCROW AND ARE NOT AVAILABLE TO THE COMPANY. In March 2003,~~

Because we ~~closed~~cannot accurately predict the ~~sale~~amount and timing of Series D Preferred Stock and warrants. Pursuant to the terms of the financing transaction, $2 million of the $3.5 million proceeds of the financing were placed in escrow. $775,900 of these proceeds remains in escrow. If we are unable to finalize arrangements for an Asian joint venture with the lead investors, the lead investors have the right to cause us to purchase $1 million of the Series D Preferred Stock with the funds that were placed in escrow and to the extent the escrow is insufficient, the Company would need to finance the rest of the repurchase right to the lead investor. BECAUSE WE CANNOT ACCURATELY PREDICT THE AMOUNT AND TIMING OF INDIVIDUAL SALES, OUR QUARTERLY OPERATING RESULTS MAY VARY SIGNIFICANTLY, WHICH COULD ADVERSELY IMPACT OUR STOCK PRICE. individual sales, our quarterly operating results may vary significantly, which could adversely impact our stock price.

Our quarterly operating results have varied significantly in the past, and we expect they will continue to do so in the future. We have derived, and expect to continue to derive in the near term, a significant portion of our revenue from relatively large customer contracts or arrangements. The timing of revenue recognition from those contracts and arrangements has caused and may continue to cause fluctuations in our operating results, particularly on a quarterly basis. Our quarterly revenues and operating results typically depend upon the volume and timing of customer contracts received during a given quarter and the percentage of each contract, which we are able to recognize as revenue during the quarter. Each of these factors is difficult to forecast. As is common in the software industry, the largest portion of software license revenues are typically recognized in the last month of each fiscal quarter and the third and fourth quarters of each fiscal year. We believe these patterns are partly attributable to budgeting and purchasing cycles of our customers and our sales commission policies, which compensate sales personnel for meeting or exceeding periodic quotas. 4

Furthermore, individual ~~Cicero~~Cicero® sales are large and each sale ~~can or~~ will account for a large percentage of our revenue and a single sale may have a significant impact on the results of a quarter. The sales of both our historical products and ~~Cicero~~Cicero® can be classified as generally large in size to a small discrete number of customers. Typically, the purchase of our products involves a significant technical evaluation by the customer and the delays frequently associated with customers’ internal procedures to approve large capital expenditures and to test, implement and accept new technologies that affect key operations. In addition, the substantial commitment of executive time and financial resources that have historically been required in connection with a ~~customer's~~customer’s decision to purchase ~~Cicero~~Cicero® and our historical products increases the risk of quarter-to-quarter fluctuations. ~~Cicero~~Cicero® sales require a significant commitment of time and financial resources because it is an enterprise product. Typically, the purchase of our products involves a significant technical evaluation by the customer and the delays frequently associated with customers' internal procedures to approve large capital expenditures and to test, implement and accept new technologies that affect key operations. This evaluation process frequently results in a ~~lengthy~~ sales process of several months. It also subjects the sales cycle for our products to a number of significant risks, including our ~~customers'~~customers’ budgetary constraints and internal acceptance reviews. The length of our sales cycle may vary substantially from customer to customer. We typically do not have any material backlog of unfilled software orders, and product revenue may fluctuate from quarter to quarter due to the completion or commencement of significant assignments, the number of working days in a quarter and the utilization rate of services personnel. As a result of these factors, we believe that a period-to-period comparison of our historical results of operations is not necessarily meaningful and should not be relied upon as indications of future performance.

In particular, our revenues in the third and fourth quarters of our fiscal years may not be indicative of the revenues for the first and second quarters. Moreover, if our quarterly results do not meet the expectations of our securities analysts and investors, the trading price of our common stock would likely decline. ~~LOSS OF KEY PERSONNEL ASSOCIATED WITH CICERO DEVELOPMENT COULD ADVERSELY AFFECT OUR BUSINESS.~~

Loss of key personnel associated with Cicero® development could adversely affect our business.

Loss of key executive personnel or the software engineers we have hired with specialized knowledge of the ~~Cicero~~Cicero® technology could have a significant impact on our execution of our new strategy ~~give~~given that they have specialized knowledge developed over a long period of time with respect to the ~~Cicero~~Cicero® technology. Furthermore, because of our restructuring and reduction in the number of employees, we may find it difficult to recruit new employees in the future. ~~DIFFERENT COMPETITIVE APPROACHES OR INTERNALLY DEVELOPED SOLUTIONS TO THE SAME BUSINESS PROBLEM COULD DELAY OR PREVENT ADOPTION OF CICERO.~~

Different competitive approaches or internally developed solutions to the same business problem could delay or prevent adoption of Cicero®.

Cicero® is designed to address in a novel way the problems that large companies face integrating the functionality of different software applications by integrating these applications at the desktop. To effectively penetrate the market for solutions to this disparate application problem, ~~Cicero~~Cicero® will compete with traditional Enterprise Application Integration, or EAI, solutions that attempt to solve this business problem at the server or back-office level. Server level EAI solutions are currently sold and marketed by companies such as NEON, Mercator, Vitria, and BEA. There can be no assurance that our potential customers will determine that ~~Cicero's~~Cicero®’s desktop integration methodology is superior to traditional middleware EAI solutions provided by ~~the~~our competitors described above in addressing this business problem. Moreover,

the information systems departments of our target customers, large financial institutions, are large and may elect to attempt to internally develop an internal solution to this business problem rather than to purchase the ~~Cicero~~Cicero® product. ~~Cicero~~Cicero® itself was originally developed internally by Merrill Lynch to solve these integration needs.

Accordingly, we may not be able to provide products and services that compare favorably with the products and services of our competitors or the internally developed solutions of our customers. These competitive pressures could delay or prevent adoption of ~~Cicero~~Cicero® or require us to reduce the price of our products, either of which could have a material adverse effect on our business, operating results and financial condition. ~~WE MAY BE UNABLE TO ENFORCE OR DEFEND OUR OWNERSHIP AND USE OF PROPRIETARY AND LICENSED TECHNOLOGY.~~

Our ability to compete may be subject to factors outside our control.

We believe that our ability to compete depends in part on a number of competitive factors outside our control, including the ability of our competitors to hire, retain and motivate senior project managers, the ownership by competitors of software used by potential clients, the development by others of software that is competitive with our products and services, the price at which others offer comparable services and the extent of our competitors’ responsiveness to customer needs.

The markets for our products are characterized by rapidly changing technologies, evolving industry standards, frequent new product introductions.

Our future success will depend to a substantial degree upon our ability to enhance our existing products and to develop and introduce, on a timely and cost-effective basis, new products and features that meet changing customer requirements and emerging and evolving industry standards.

The introduction of new or enhanced products also requires us to manage the transition from older products in order to minimize disruption in customer ordering patterns, as well as ensure that adequate supplies of new products can be delivered to meet customer demand. There can be no assurance that we will successfully develop, introduce or manage the transition to new products.

We have in the past, and may in the future, experience delays in the introduction of our products, due to factors internal and external to our business. Any future delays in the introduction or shipment of new or enhanced products, the inability of such products to gain market acceptance or problems associated with new product transitions could adversely affect our results of operations, particularly on a quarterly basis.

We may face damage to the reputation of our software and a loss of revenue if our software products fail to perform as intended or contain significant defects.

Our software products are complex, and significant defects may be found following introduction of new software or enhancements to existing software or in product implementations in varied information technology environments. Internal quality assurance testing and customer testing may reveal product performance issues or desirable feature enhancements that could lead us to reallocate product development resources or postpone the release of new versions of our software. The reallocation of resources or any postponement could cause delays in the development and release of future enhancements to our currently available software, require significant additional professional services work to address operational issues, damage the reputation of our software in the marketplace and result in potential loss of revenue. Although we attempt to resolve all errors that we believe would be considered serious by our customers, our software is not error-free. Undetected errors or performance problems may be discovered in the future, and known errors that we consider minor may be considered serious by our customers. This could result in lost revenue, delays in customer deployment or legal claims and would be detrimental to our reputation. If our software experiences performance problems or ceases to demonstrate technology leadership, we may have to increase our product development costs and divert our product development resources to address the problems.

We may be unable to enforce or defend our ownership and use of proprietary and licensed technology.

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. Consideration for the original Cicero® license consisted of 1,000,000 shares of our common stock. 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 the Company) and to grant us ownership rights in the Cicero® trademark. Merrill Lynch indemnifies us with regard to the rights granted to us by them. 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 million.

Our success depends to a significant degree upon our proprietary and licensed technology. We rely on a combination of patent, trademark, trade secret and copyright law, contractual restrictions and passwords to protect our proprietary technology. However, these measures provide only limited protection, and there is no guarantee that our protection of our proprietary rights will be adequate. Furthermore, the laws of some jurisdictions outside the United States do not protect proprietary rights as fully as in the United States. In addition, our competitors may independently develop similar technology; duplicate our products or design around our patents or our other intellectual property rights. We may not be able to detect or police the unauthorized use of our products or technology, and litigation may be required in the future to enforce our intellectual property rights, to protect our trade secrets or to determine the validity and scope of our proprietary rights. Additionally, with respect to the ~~Cicero~~Cicero® line of products, there can be no assurance that Merrill Lynch will protect its patents or that we will have the resources to successfully pursue infringers. Any litigation to enforce our intellectual property rights would be expensive and time-consuming, would divert management resources and may not be adequate to protect our business. 5

We do not believe that any of our products infringe the proprietary rights of third parties. However, companies in the software industry have experienced substantial litigation regarding intellectual property and third parties could assert claims that we have infringed their intellectual property rights. In addition, we may be required to indemnify our distribution partners and ~~end- users~~end-users for similar claims made against them. Any claims against us would divert management resources, and could require us to spend significant time and money in litigation, pay damages, develop new intellectual property or acquire licenses to intellectual property that is the subject of the infringement claims. These licenses, if required, may not be available on acceptable terms. As a result, intellectual property claims against us could have a material adverse effect on our business, operating results and financial condition. ~~WE HAVE NOT PAID ANY DIVIDENDS ON OUR COMMON STOCK AND IT IS LIKELY THAT NO DIVIDENDS WILL BE PAID IN THE FUTURE.~~

Our business may be adversely impacted if we do not provide professional services to implement our solutions.

Customers that license our software typically engage our professional services staff or third-party consultants to assist with product implementation, training and other professional consulting services. We believe that many of our software sales depend, in part, on our ability to provide our customers with these services and to attract and educate third-party consultants to provide similar services. New professional services personnel and service providers require training and education and take time and significant resources to reach full productivity. Competition for qualified personnel and service providers is intense within our industry. Our business may be harmed if we are unable to provide professional services to our customers to effectively implement our solutions of if we are unable to establish and maintain relationships with third-party implementation providers.

Because our software could interfere with the operations of customers, we may be subject to potential product liability and warranty claims by these customers.

Our software enables customers’ software applications to integrate and is often used for mission critical functions or applications. Errors, defects or other performance problems in our software or failure to provide technical support could result in financial or other damages to our customers. Customers could seek damages for losses from us. In addition, the failure of our software and solutions to perform to customers’ expectations could give rise to warranty claims. The integration of our software with our customer’s applications increase the risk that a customer may bring a lawsuit against us. Even if our software is not at fault, a product liability claim brought against us, even if not successful, could be time consuming and costly to defend and could harm our reputation.

We have not paid any cash dividends on our common stock and it is likely that no cash dividends will be paid in the future.

We have never declared or paid cash dividends on our common stock and we do not anticipate paying any cash dividends on our common stock in the foreseeable future. ~~PROVISIONS OF OUR CHARTER AND BYLAWS AND DELAWARE LAW COULD DETER TAKEOVER ATTEMPTS.~~

Provisions of our charter and Bylaws and Delaware law could deter takeover attempts.

Section 203 of the Delaware General Corporation Law ~~which prohibits certain persons from engaging in~~contains restrictions on mergers and other business combinations ~~with Level 8,~~between us and any holder of 15% of our common stock, may have anti-takeover effects and may delay, defer or prevent a takeover attempt that a stockholder may consider to be in the ~~holder's~~holder’s best interests. These provisions of Delaware law also may adversely affect the market price of our common stock. Our certificate of incorporation authorizes the issuance, without stockholder approval, of preferred stock, with such designations, rights and preferences as the board of directors may determine ~~preferences as~~ from time to time. Such designations, rights and preferences established by the board may adversely affect our stockholders. In the event of issuance, the preferred stock could be used, under certain circumstances, as a means of discouraging, delaying or preventing a change of control of ~~Level 8.~~the Company. Although we have no present intention to issue any shares of preferred stock in addition to the currently outstanding preferred stock, we may issue preferred stock in the future. OUR STOCKHOLDERS MAY BE DILUTED BY THE EXERCISE OF OPTIONS AND WARRANTS AND CONVERSION OF PREFERRED STOCK OR BY THE REGISTRATION OF ADDITIONAL SECURITIES FOR RESALE. We have reserved 10,900,000 shares of common stock for issuance under our employee incentive plans and 120,000 shares under our outside director incentive plan. As of March 31, 2004, options to purchase an aggregate of 7,650,870 shares of common stock were outstanding pursuant to our employee and director incentive plans. As of March 31, 2004, warrants to purchase an additional 19,046,879 shares of common stock are outstanding. We have also reserved 188,528 shares of common stock for issuance upon conversion of the outstanding Series A3 Preferred Stock, 2,394,063 shares of common stock for issuance upon conversion of the outstanding Series B3 Preferred Stock, 3,068,421 shares of common stock for issuance upon conversion of the outstanding Series C Preferred Stock, and 8,411,125, shares of common stock for issuance upon the conversion of the outstanding Series D Preferred Stock. The exercise of such options and warrants or conversion of preferred stock and the subsequent sale of the underlying common stock in the public market could adversely cause the market price of our common stock to decline. 6

USE OF ~~PROCEEDS~~ PROCEEDS

We will not receive any proceeds from the sale of shares by the selling stockholders in this offering but ~~will~~may receive proceeds from the exercise of warrants held by certain of the selling stockholders. We expect to use any proceeds we receive for working capital and for other general corporate purposes, including research and product development.

PRICE RANGE OF OUR COMMON STOCK

Our common stock ~~was~~had been traded on the Nasdaq National Market under the symbol ~~"LVEL"~~''LVEL” from 1996 until December 23, 2002. From December 24, 2002, until January 23, 2003, our common stock traded on the Nasdaq SmallCap Market. As of January ~~24,~~23, 2003, our common stock was delisted from the Nasdaq SmallCap Market and is currently quoted on the ~~OTC~~over-the-counter bulletin board. In January 2007 we formally changed our name to Cicero Inc and now trade under the ticker CICN. In accordance with Staff Accounting Bulletin ~~Board. The~~Topic 4(c), the chart below sets forth the high and low stock prices for the quarters of ~~2004 and for the quarters of~~ the fiscal years ended December 31, ~~2003, 2002~~2006 and 2001. 2004 2003 2002 2001 QUARTER High Low High Low High Low High Low First .... $0.45 $0.35 $0.40 $0.15 $3.19 $1.26 $6.38 $2.39 Second ... N/A N/A $0.35 $0.24 $1.70 $0.34 $3.25 $2.75 Third .... N/A N/A $0.77 $0.24 $0.71 $0.25 $4.99 $1.45 Fourth ... N/A N/A $0.48 $0.28 $0.56 $0.17 $3.10 $1.20 2005 as retroactively adjusted for the 100:1 reverse stock split.

	2006				2005
Quarter	High		Low		High		Low
First	$	3.00	$	1.80	$	16.00	$	7.00
Second	$	2.50	$	1.00	$	9.00	$	4.00
Third	$	2.10	$	1.10	$	5.00	$	2.00
Fourth	$	4.50	$	1.30	$	5.00	$	1.00

		2007
Quarter		High		Low
First	$	2.52	$	1.11

The closing price of the common stock on ~~May 10, 2004~~April 16, 2007 was ~~$0.29~~$1.11 per share. As of ~~May 10, 2004,~~April 13, 2007 we had ~~232~~228 registered shareholders of record.

DIVIDEND POLICY

We have never declared or paid any cash dividends on our common stock. We anticipate that all of our earnings will be retained for the operation and expansion of our business and do not anticipate paying any cash dividends for common stock in the foreseeable future. 7

SELLING STOCKHOLDERS

Our shares of common stock to which this prospectus relates are being registered for resale by the selling stockholders. The following shows the name and number of shares of our common stock owned by the selling stockholders who may sell shares covered by this Prospectus.

The selling stockholders may resell all, a portion or none of such shares of common stock from time to time. The table below sets forth, as of the date of this prospectus, with respect to each selling stockholder, based upon information made available to us ~~as of May 10, 2004,~~by each selling stockholder, the number of shares of common stock beneficially owned, the number of shares of common stock registered by this prospectus and the number and percent of outstanding common stock that will be owned after the sale of the registered shares of common stock assuming the sale of all of the registered shares of common stock under this prospectus and all other currently effective prospectuses. Because the selling stockholders may offer all, some or none of their respective shares of common stock, no definitive estimate as to the number of shares thereof that will be held by the selling stockholders after such offering can be provided.

	Number of Shares of
	Common Stock
Name	Owned (1)

Landis, Mark & Carolyn P.	5,143,613	(2)

QueeQueg Partners, L.P.(a)	4,732,333	(3)

Steffens, Launny	3,310,429	(4)

Kroll, Jules	1,586,237	(5)

Paneyko, Steve	1,557,159	(6)

Queequeg, Ltd.(a)	1,504,938	(7)

Pizi, Anthony	1,401,241	(8)

Ahab International, Ltd.(a)	1,120,000	(9)

Briggs, Jason	1,085,922	(10)

Percelay, Bruce	1,032,786	(11)

Mack, Fredric	1,018,194	(12)

Dugdale, Glen & Joan	1,017,395	(13)

Miller, Bruce	973,257	(14)

Lucas, Scott	939,034	(15)

Ahab Partners, LP (a)	880,000	(16)

Wagenhals, Fred	802,593	(17)

Casey, Kenneth	778,464	(18)

Lustgarten, Scott	682,193	(19)

Keates, Richard M.D.	558,988	(20)

	Number of Shares of
	Common Stock
Name	Owned (1)

Clement, Conrad	513,145	(21)

Delphi Partners Limited (b)	512,781	(22)

Stevens, Jim	456,699	(23)

The Landis Group (c )	402,134	(24)

The Sorgen Group (d)	376,221	(25)

Liraz Systems (e)	363,278	(26)

Nager , Richard	344,679	(27)

Dugdale, William C.	333,210	(28)

Lustgarten, Martin estate of (f)	293,155	(29)

Dugdale, CJ & JO CRT 1/17/96 (g)	265,870	(30)

Weitzman, Hervey	249,933	(31)

Dugdale, Glen B/D Trust FBO (h)	249,160	(32)

Sutro, Marina	230,842	(33)

Leavitt, Philip	227,300	(34)

Turner, William & Barbara	224,977	(35)

Miller, Jeanne	211,388	(36)

Nielsen, Kenneth	201,294	(37)

North Sound Legacy International Ltd.(i)	162,821	(38)

Grodko, Steven	162,187	(39)

Wittenbach, Roger	160,243	(40)

Mack, Earle	154,248	(41)

Atherton, John W. Jr.	148,784	(42)

Danko, Brett	141,625	(43)

Spain, Bernard	141,099	(44)

Dweck, Ike	140,040	(45)

Howard, Joan	136,640	(46)

	Number of Shares of
	Common Stock
Name	Owned (1)

Corwin, Leonard	120,275	(47)

Advanced Systems Europe, BV (j)	118,096	(48)

North Sound Legacy Institutnl. Fund LLC (i)	112,592	(49)

Bank, Marvin	111,522	(50)

Robinson, Jonathon	105,382	(51)

Spivak, David	101,914	(52)

Fields, John	100,499	(53)

Harwood, Chris	100,474	(54)

Wills, Maurice	100,000	(55)

Koitz, Martin	96,943	(56)

Weitzman, Hannah	95,279	(57)

Blanck, Richard	95,251	(58)

Haines Family Assoc LP (k)	93,101	(59)

Emerson, Alice	81,527	(60)

Morelli, Luciano	80,534	(61)

Miller, William R. FBO ROTH IRA (l)	80,415	(62)

Zinnert, William C. III	80,349	(63)

Signorino, Salvadore	80,326	(64)

Porciello, Charles	80,286	(65)

Baena, Douglas	67,842	(66)

Miller, Douglas & Anita E.	64,294	(67)

Thinkcentric (m)	60,829	(68)

Cohen, Jeffrey C.	50,335	(69)

Lemery-Greisler, LLC (n)	50,000	(70)

Cothren, Tony	49,523	(71)

Lerner, Arthur	48,952	(72)

Dugdale, William K	46,355	(73)

	Number of Shares of
	Common Stock
Name	Owned (1)

CGA Resources, LLC (o)	45,527	(74)

Lobada, Anna	43,365	(75)

McNamara, William E.	41,320	(76)

Mack, Fred Trust (Hailey Mack) (p)	40,874	(77)

Mack, Fred Trust (Jason Mack)(p)	40,874	(77)

Lorenzo, Val	40,227	(78)

Brooker, James	40,207	(79)

Sutro, Peter	40,192	(80)

Amchris Consulting Group ,LLC (q)	40,163	(81)

Mikroulis, Loula	40,153	(82)

Hathaway, Devon D.	39,798	(83)

Forman, Murray	38,923	(84)

Ganarche, James	37,621	(85)

Grodko, Sandra	36,145	(86)

Perl, Jeffrey	34,967	(87)

Levine, Robert A.	34,247	(88)

Hasenyager, Bruce	32,652	(89)

Seneca Capital, International (r)	32,248	(90)

Davis, Bob	28,675	(91)

Dalal, Pratik	28,291	(92)

Schneider, Steven	27,803	(93)

Seneca Capital, L.P (r)	25,798	(94)

The Rittenhouse Group (s)	24,793	(95)

Harwood, Brian	24,105	(96)

Kaliroff, Joseph	20,845	(97)

Tesker, Ron	20,089	(98)

Shelanski, Joseph	19,489	(99)

	Number of Shares of
	Common Stock
Name	Owned (1)

Critical Mass Mail (s)	18,243	(100)

Hatalski, Nick	17,018	(101)

Leppo, Robert D.	16,985	(102)

Mistretta, Joseph	16,076	(103)

Weitzman, Elizabeth	16,066	(104)

Broderick, John	3,248	(105)

Chugh, Narinder	15,555	(106)

Schwartz, Andrew Living Trust (t)	14,138	(107)

Ryan, Dennis	14,125	(108)

Weitzman, Hervey Trustee Blackrock (u)	14,118	(109)

Koch, June	14,090	(110)

Seidle, Jay	13,699	(111)

Haines, Roger	13,440	(112)

Nappi, Joe	13,434	(113)

Dugdale, Priscilla	13,422	(114)

Siracusa, Richard	12,363	(115)

Hillman, Brett	12,054	(116)

Mack, Fredric 4-30-92 Trust (p)	11,499	(117)

Grunstein, Leonard	10,741	(118)

Weiss, Michael	9,435	(119)

Leavitt, David	8,831	(120)

Leavitt, Diane R.	8,831	(120)

Forman, Irving	8,650	(121)

Spivak, Bradford	8,048	(122)

Spivak, Daniel	8,048	(122)

Spivak, Jonathon	8,048	(122)

Loebell, David K & Gina W	7,630	(123)

	Number of Shares of
	Common Stock
Name	Owned (1)

Diamond Investments II, LLC(v )	7,372	(124)

Phillips Giraud Naud ET Associes (w)	7,084	(125)

Bell, Joseph D. Jr.	7,061	(126)

Puggi, James A.	6,810	(127)

Calandra, Joseph A.	6,712	(128)

Grodko, Jeffrey	6,712	(128)

Shah, Natwar	6,521	(129)

Babcock, Clint	5,649	(130)

Freeman, Don	5,628	(131)

Betanov, Cemil	5,508	(132)

Simkovitz, Phillip	5,437	(133)

Brower, Lee	5,375	(134)

Rutstein, Larry	5,371	(135)

Friedman, Mark	5,034	(136)

Zelman, Roselyn	4,894	(137)

Martino, Ralph	4,666	(138)

DeFranco, Joseph	4,466	(139)

Gable, Sidney	4,324	(140)

Whelden, Larry	4,232	(141)

Hillman, Todd	4,018	(142)

Pena, Roland	3,813	(143)

Feder, Mark	3,656	(144)

Krubiner, Paul & Marjorie	3,481	(145)

Falik, Harold	3,357	(146)

Orlofsky, Martin Family Trust	3,356	(147)

Wenig, Hal	3,356	(147)

Vegh, Robert	3,326	(148)

	Number of Shares of
	Common Stock
Name	Owned (1)

Weiss, Joseph	675	(149)

Sobol, Tziporah	2,684	(150)

Vertical Ventures (x)	2,475	(151)

Simpson, James	2,145	(152)

Wolfe, Jack	2,120	(153)

Campbell, James V.	2,119	(154)

Roberts, John & Patricia	2,114	(155)

Whyte, Jacqueline	2,063	(156)

Grodko, Philip	2,013	(157)

Wilkins, James	1,789	(158)

Blisko, Larry	1,745	(159)

Tamberelli, Frank	1,730	(160)

Mack, Earl I Charitable Trust (y)	1,666	(161)

Orlofsky, Gary	1,611	(162)

Landis, Deborah	1,579	(163)

Landis, Jennifer	1,579	(163)

Landis, Jonathon	1,579	(163)

Berger, Jerald & Sara	1,342	(164)

Ditchek, Stuart	1,342	(164)

Friedman, Aaron	1,342	(164)

Garb, Eugene	1,342	(164)

Gertz, Anna	1,342	(164)

Husarsky, Leona	1,342	(164)

Huszcza, Joseph	1,342	(164)

Katz, David	1,342	(164)

Orlofsky, Bruce	1,342	(164)

Polin, Milton	1,342	(164)

	Number of Shares of
	Common Stock
Name	Owned (1)

Popack, Israel M.	1,342	(164)

Schwartz, Kenneth	1,342	(164)

Waintraub, Stanley	1,342	(164)

Gonosky, William	1,341	(165)

Urbanski, Patty	1,229	(166)

Landis, Meredith	1,079	(167)

PyxisLink (z)	1,000	(168)

Tsougarakis, Eva	550	(169)

Gordon, Allan H. Esquire	337	(170)

Kushner, Ron	337	(170)

Littman, Leslie	337	(170)

Rothbard, Norman	337	(170)

Lemery, Joan B.	337	(170)

SDS (aa)	93	(171)
Total	40,641,978

~~Number~~
(a)	Jonathan Gallen is an investment adviser for, and exercises sole voting and investment authority with respect to the securities held by, each of ~~Shares~~(i) Ahab Partners, L.P., (ii) Ahab International, Ltd., (iii) Queequeg Partners, L.P. and (iv) Queequeg, Ltd.

(b)	Bruce Miller, general partner of ~~Number~~Delphi Partners, Ltd., exercises sole or shared voting or dispositive power with respect to the securities held by Delphi Partners, Ltd.

(c)	Alan Landis, exercises sole or shared voting or dispositive power with respect to the securities held by The Landis Group.

(d)	Howard Sorgen, exercises sole or shared voting or dispositive power with respect to the securities held by The Sorgen Group.

(e)	Iris Yahal, representative of ~~Shares Number~~Liraz Systems, exercises sole or shared voting or dispositive power with respect to the securities held by Liraz Systems.

(f)

Richard Nager, trustee of ~~Shares Common Stock To Be~~Estate of ~~Common Stock~~Martin Lustgarten exercises sole or shared voting or dispositive power with respect to the securities held by Estate of Common Stock Which Owned After Offering Name Owned (1) May Be Offered (1) Number Percent ----------------------------------------------------------------------- --------------------------------- ~~~~Brown Simpson 5,936,921 5,936,921 (2) -- --~~Martin Lustgarten.~~

(g)	Matthew Yaakovian exercises sole or shared voting or dispositive power with respect to the securities held by C. Glen and Joan O. Dugdale CRT.

(h)	Glen Dugdale, trustee of BD Trust, FBO C. Glen Dugdale exercises sole or shared voting or dispositive power with respect to the securities held by BD Trust FBO C. Glen Dugdale.

(i)	Thomas McAuley, Chief Investment Officer of North Sound Legacy, exercises sole or shared voting or dispositive power with respect to the securities held by North Sound Legacy.

(j)	Adee Shafran, representative of Advanced Systems Europe, BV, exercises sole or shared voting or dispositive power with respect to the securities held by Advanced Systems Europe, BV.

(k)	John Haines, representative of Haines Family Associates, LP, exercises sole or shared voting or dispositive power with respect to the securities held by Haines Family Associates, LP.

(l)	Sterne Agee and Leach Inc. Custodian, exercises sole or shared voting or dispositive power with respect to the securities held by William R. Miller, ROTH IRA.

(m)	John Haines, exercises sole or shared voting or dispositive power with respect to the securities held by Thinkcentric LLC.

(n)	John Lemery, exercises sole or shared voting or dispositive power with respect to the securities held by Lemery Greisler.

(o)	Jason Edelman, exercises sole or shared voting or dispositive power with respect to the securities held by CGA Resources.

(p)	Fred Mack, trustee of 4-30-92 Trust, Fred Mack Trust - Hailey Mack, and Fred Mack Trust - Jason Mack, exercises sole or shared voting or dispositive power with respect to the securities held by 4-30-92 Trust, Fred Mack Trust - Hailey Mack, and Fred Mack Trust - Jason Mack.

(q)	Christine Sweet, owner of Amchris Consulting Group, LLC exercises sole or shared voting or dispositive power with respect to the securities held by Amchris Consulting Group, LLC.

(r)	Doug Hirsch, general partner of Seneca, exercises sole or shared voting or dispositive power with respect to the securities held by Seneca.

(s)	Joseph H. Weiss, exercises sole or shared voting or dispositive power with respect to the securities held by the Rittenhouse Group and Critical Mass Mail.

(t)	Andrew P. Schwartz exercises sole or shared voting or dispositive power with respect to the securities held by Andrew P. Schwartz Revocable Living Trust.

(u)	Hervey Weitzmen, Trustee of the Blackrock Turnpike Medical Group, exercises sole or shared voting or dispositive power with respect to the securities held by Blackrock Turnpike Medical Group.

(v)	Robert P. Williams, III Chief Executive Officer of Diamond Investments II, LLC, exercises sole or shared voting or dispositive power with respect to the securities held by Diamond Investments II, LLC.

(w)	Marc Giruad exercises sole or shared voting or dispositive power with respect to the securities held by Phillips Giraud Naud ET Associes.

(x)	Joshua Silverman, representative of Vertical Ventures Investments, LLC, exercises sole or shared voting or dispositive power with respect to the securities held by Vertical Ventures Investments, LLC.

(y)	Earle I. Mack, registered agent for Earle I Mack Charitable Trust A, exercises sole or shared voting or dispositive power with respect to the securities held by Earle I Mack Charitable Trust A.

(z)	Robin Pearce, representative of Pyxis Link Corp, exercises sole or shared voting or dispositive power with respect to the securities held by Pyxis Link Corp.

(aa)	Steve Derby, General Counsel of SDS Merchant Fund, LP, ~~4,869,659 4,869,659~~ exercises sole or shared voting or dispositive power with respect to the securities held by SDS Merchant Fund, LP.

(1)

The number of shares of common stock owned by each selling stockholder includes the aggregate number of shares of common stock which may be obtained by each stockholder upon conversion of all of the Series A1 Preferred Stock owned by the stockholder. It also includes the aggregate number of shares of common stock that may be obtained upon exercise of warrants to purchase common stock owned by such stockholder. The number of shares, if any, beneficially owned by each selling stockholder after each sale will vary depending upon the terms of the number of such shares sold.

(2)

Includes 1,326,136 shares of common stock issuable upon the conversion of Series A-1 Preferred Stock. Also owns and may offer from time to time under this prospectus 69,322 shares issuable upon the exercise of warrants. The exercise price of 18,750 warrants is $8 per share of common stock. The exercise price of 50,572 warrants is $10 per share of common stock. Also includes 3,748,155 shares of common stock. Mr. Landis is the Company’s Chairman of the Board.

(3) ~~-- --~~

Queequeg Partners, L.P. owns and may offer from time to time under this prospectus 9,643 shares of common stock issuable upon conversion of Series A-1 Preferred Stock. It also owns and may offer from time to time under this prospectus 12,761 shares of common stock issuable upon exercise of warrants. The exercise price of 9,318 warrants is $10 per share, the exercise price of 249 warrants is $38 per share, and the exercise price of 3,194 warrants is $40 per share. Also includes 4,709,929 shares of common stock.

(4)

Owns and may offer from time to time under this prospectus 14,832 shares of common stock issuable upon conversion of Series A-1 Preferred Stock. Also owns and may offer from time to time under this prospectus 19,628 shares of common stock issuable upon exercise of warrants. The exercise price of 14,332 warrants is $10 per share, the exercise price of 384 warrants is $38 per share, and the exercise price of 4,912 warrants is $40 per share. Also includes 3,275,969 shares of common stock.

(5)	Owns and may offer from time to time under this prospectus 1,586,237 shares of common stock.

(6)	Owns and may offer from time to time under this prospectus 1,557,159 shares of common stock.

(7)

Queequeg Limited owns and may offer from time to time under this prospectus 5,193 shares of common stock issuable upon conversion of Series A-1 Preferred Stock. It also owns and may offer from time to time under this prospectus 6,872 shares of common stock issuable upon exercise of warrants. The exercise price of 5,018 warrants is $10 per share, the exercise price of 134 warrants is $38 per share, and the exercise price of 1,720 warrants is $40 per share. Also includes 1,492,873 shares of common stock.

(8)

Includes 111,016 shares of common stock issuable upon the conversion of Series A-1 Preferred Stock. Also owns and may offer from time to time under this prospectus 15,274 shares of common stock issuable upon the exercise of warrants. The exercise price of 11,667 shares is $10 per share of common stock, 901 shares is $17 per share of common stock, and 2,706 shares exercisable at $20 per share of common stock. Also includes 1,274,951 shares of common stock. Mr. Pizi is the Chief Intelligence officer of the Company. Mr. Pizi also holds 15,000 shares of common stock which may be acquired upon the exercise of stock options exercisable within 60 days of this prospectus, which shares are not being registered for resale by means of this prospectus.

(9)	Ahab International Ltd. owns and may offer from time to time under this prospectus 1,120,000 shares of common stock.

(10)	Owns and may offer from time to time under this prospectus 1,085,922 shares of common stock

(11)	Owns and may offer from time to time under this prospectus 1,032,786 shares of common stock. Mr. Percelay is a member of the Company’s Board of Directors.

(12)

Owns and may offer from time to time under this prospectus 60,688 shares of common stock issuable upon conversion of Series A-1 Preferred Stock. Also owns and may offer from time to time under this prospectus 12,658 shares of common stock issuable upon exercise of warrants exercisable at $10 per share. Also includes 944,848 shares of common stock.

(13)

Owns and may offer from time to time under this prospectus 20,731 shares of common stock issuable upon conversion of Series A-1 Preferred Stock. Also owns and may offer from time to time under this prospectus 5,600 shares of common stock issuable upon exercise of warrants exercisable at $10 per share. Also includes 991,064 shares of common stock.

(14)

Owns and may offer from time to time under this prospectus 49,418 shares of common stock issuable upon conversion of Series A-1 Preferred Stock. Also owns and may offer from time to time under this prospectus 15,844 shares of common stock issuable upon exercise of warrants. The exercise price of 13,195 warrants is $10 per share, the exercise price of 192 warrants is $38 per share, and the exercise price of 2,457 warrants is $40 per share. Also includes 907,995 shares of common stock. Mr. Miller is a member of the Company’s Board of Directors.

(15)	Owns and may offer from time to time under this prospectus 939,034 shares of common stock.

(16)	Ahab Partners, L.P. owns and may offer from time to time under this prospectus 880,000 shares of common stock.

(17)	Owns and may offer from time to time under this prospectus 802,593 shares of common stock.

(18)	Owns and may offer from time to time under this prospectus 778,464 shares of common stock.

(19)

Owns and may offer from time to time under this prospectus 1,000 shares of common stock issuable upon conversion of Series A-1 Preferred Stock. Also owns and may offer from time to time under this prospectus 329 shares of common stock issuable upon exercise of warrants exercisable at $10 per share. Also includes 680,864 shares of common stock.

(20)

Owns and may offer from time to time under this prospectus 26,941 shares of common stock issuable upon exercise of warrants. The exercise price of 8,163 warrants is $7 per share, the exercise price of 16,796 warrants is $10 per share, and the exercise price of 1,982 warrants is $20 per share. Also includes 532,047 shares of common stock.

(21)	Owns and may offer from time to time under this prospectus 513,145 shares of common stock.

(22)

Delphi Partners, Ltd. owns and may offer from time to time under this prospectus 18,000 shares of common stock issuable upon conversion of Series A-1 Preferred Stock. It also owns and may offer from time to time under this prospectus 3,514 shares of common stock issuabl upon exercise of warrants exercisable at $10 per share. Also includes 491,267 shares of common stock.

(23)	Owns and may offer from time to time under this prospectus 6,031 shares of common stock issuable upon exercise of warrants exercisable at $10 per share. Also owns 450,668 shares of common stock.

(24)	The Landis Group owns and may offer from time to time under this prospectus 402,134 shares of common stock.

(25)	The Sorgen Group owns and may offer from time to time under this prospectus 376,221 shares of common stock.

(26)

Liraz Systems owns and may offer from time to time under this prospectus 40 shares of common stock issuable upon conversion of Series A-1 Preferred Stock. Also owns and may offer from time to time under this prospectus 1,645 shares of common stock issuable upon exercise of warrants exercisable at $10 per share. Also includes 361,593 shares of common stock.

(27)	Owns and may offer from time to time under this prospectus 658 shares of common stock issuable upon the exercise of warrants exercisable at $10 per share. Also includes 344,021 shares of common stock.

(28)	Owns and ay offer from time to time under this prospectus 556 shares of common stock issuable upon the exercise of warrants exercisable at $10 per share. Also includes 332,654 shares of common stock.

(29)	Owns and may offer from time to time under this prospectus 4,224 shares of common stock issuable upon the exercise of warrants exercisable at $10 per share. Also includes 288,931 shares of common stock.

(30)	Owns and may offer from time to time under this prospectus 265,870 shares of common stock.

(31)	Owns and may offer from time to time under this prospectus 278 shares of common stock issuable upon exercise of warrants exercisable at $10 per share. Also includes 249,655 shares of common stock.

(32)	Owns and may offer from time to time under this prospectus 249,160 shares of common stock.

(33)	Owns and may offer from time to time under this prospectus 230,842 shares of common stock.

(34)	Owns and may offer from time to time under this prospectus 227,300 shares of common stock.

(35)	Owns and may offer from time to time under this prospectus 400 shares of common stock issuable upon exercise of warrants exercisable at $10 per share. Also includes 224,577 shares of common stock.

(36)

Owns and may offer from time to time under this prospectus 7,414 shares of common stock issuable upon conversion of Series A-1 Preferred Stock. Also owns and may offer from time to time under this prospectus 9,811 shares of common stock issuable upon exercise of warrants. The exercise price of 7,164 warrants is $10 per share, the exercise price of 192 warrants is $38 per share, and the exercise price of 2,455 warrants is $40 per share. Also includes 194,163 shares of common stock.

(37)	Owns and may offer from time to time under this prospectus 201,294 shares of common stock.

(38)

North Sound Legacy International, ~~3,274,378 3,274,378 (4) -- --~~ Ltd. owns and may offer from time to time under this prospectus 17,488 shares of common stock issuable upon exercise of warrants. The exercise price of 4,999 warrants is $7 per share, the exercise price of 10,061 warrants is $10 per share, and the exercise price of 2,428 warrants is $20 per share. Also includes 145,333 shares of common stock.

(39)	Owns and may offer from time to time under this prospectus 250 shares of common stock issuable upon exercise of warrants exercisable at $10 per share. Also includes 161,937 shares of common stock.

(40)	Owns and may offer from time to time under this prospectus 160,243 shares of common stock.

(41)	Owns and may offer from time to time under this prospectus 833 shares of common stock issuable upon exercise of warrants exercisable at $10 per share. Also includes 153,415 shares of common stock.

(42)	Owns and may offer from time to time under this prospectus 148,784 shares of common stock. Mr. Atherton is a member of the Company’s Board of Directors.

(43)	Owns and may offer from time to time under this prospectus 141,625 shares of common stock.

(44)	Owns and may offer from time to time under this prospectus 141,099 shares of common stock.

(45)	Owns and may offer from time to time under this prospectus 1,154 shares of common stock issuable upon exercise of warrants exercisable at $10 per share. Also includes 138,886 shares of common stock.

(46)	Owns and may offer from time to time under this prospectus 136,640 shares of common stock.

(47)	Owns and may offer from time to time under this prospectus 222 shares of common stock issuable upon exercise of warrants exercisable at $10 per share. Also includes 120,053 shares of common stock.

(48)

Advanced Systems Europe, B.V. owns and may offer from time to time under this prospectus 3 shares of common stock issuable upon conversion of Series A-1 Preferred Stock. Owns and may offer from time to time under this prospectus 17,740 shares of common stock issuable upon exercise of warrants exercisable at $10 per share. Also includes 100,353 shares of common stock.

(49)

North Sound Legacy Institutional ~~3,122,596 3,122,596 (5) -- -- Landis, Mark & Carolyn P 2,092,075 2,092,075 (6) -- --~~Fund, L.L.C. owns and may offer from time to time under this prospectus 19,009 shares of common stock issuable upon exercise of warrants. The exercise price of 5,776 warrants is $7 per share, the exercise price of 10,661 warrants is $10 per share, and the exercise price of 2,572 warrants is $20 per share. Also includes 93,583 shares of common stock.

(50)

Owns and may offer from time to time under this prospectus 1,000 shares of common stock issuable upon conversion of Series A-1 Preferred Stock. Also owns and may offer from time to time under this prospectus 2,623 shares of common stock issuable upon exercise of warrants exercisable at $10 per share. Also includes 107,899 shares of common stock.

(51)	Owns and may offer from time to time under this prospectus 105,382 shares of common stock.

(52)	Owns and may offer from time to time under this prospectus 101,914 shares of common stock.

(53)	Owns and may offer from time to time under this prospectus 100,499 shares of common stock.

(54)	Owns and may offer from time to time under this prospectus 100,474 shares of common stock.

(55)	Owns and may offer from time to time under this prospectus 100,000 shares of common stock.

(56)	Owns and may offer from time to time under this prospectus 96,943 shares of common stock.

(57)	Owns and may offer from time to time under this prospectus 95,279 shares of common stock.

(58)	Owns and may offer from time to time under this prospectus 95,251 shares of common stock.

(59)

The Haines Family Associates, L.P. owns and may offer from time to time under this prospectus 2,000 shares of common stock issuable upon conversion of Series A-1 Preferred Stock. Also owns and may offer from time to time under this prospectus 2,858 shares of common stock issuable upon exercise of warrants exercisable at $10 per share. Also includes 88,243 shares of common stock.

(60)	Owns and may offer from time to time under this prospectus 81,527 shares of common stock.

(61)	Owns and may offer from time to time under this prospectus 80,534 shares of common stock.

(62)	Owns and may offer from time to time under this prospectus 80,415 shares of common stock.

(63)	Owns and may offer from time to time under this prospectus 80,349 shares of common stock.

(64)	Owns and may offer from time to time under this prospectus 80,326 shares of common stock.

(65)	Owns and may offer from time to time under this prospectus 80,286 shares of common stock. Mr. Porciello is a member of the Company’s Board of Directors.

(66)	Owns and may offer from time to time under this prospectus 67,842 shares of common stock.

(67)	Owns and may offer from time to time under this prospectus 64,294 shares of common stock.

(68)	Owns and may offer from time to time under this prospectus 60,829 shares of common stock.

(69)	Owns and may offer from time to time under this prospectus 50,355 shares of common stock.

(70)	Lemery Griesler, LLC owns and may offer from time to time under this prospectus 50,000 shares of common stock.

(71)

Owns and may offer from time to time under this prospectus 6,969 shares of common stock issuable upon exercise of warrants. The exercise price of 2,133 warrants is $7 per share, the exercise price of 4,318 warrants is $10 per share, and the exercise price of 518 warrants is $20 per share. Also includes 42,554 shares of common stock.

(72)	Owns and may offer from time to time under this prospectus 48,952 shares of common stock.

(73)	Owns and may offer from time to time under this prospectus 46,355 shares of common stock.

(74)	CGA Resources, LLC. owns and may offer from time to time under this prospectus 45,527 shares of common stock issuable upon conversion of Series A-1 Preferred Stock.

(75)	Owns and may offer from time to time under this prospectus 43,365 shares of common stock.

(76)	Owns and may offer from time to time under this prospectus 41,320 shares of common stock.

(77)	Owns and may offer from time to time under this prospectus 83 shares of common stock issuable upon exercise of warrants exercisable at $10 per share. Also includes 40,791 shares of common stock.

(78)	Owns and may offer from time to time under this prospectus 40,227 shares of common stock.

(79)	Owns and may offer from time to time under this prospectus 40,207 shares of common stock.

(80)	Owns and may offer from time to time under this prospectus 40,192 shares of common stock.

(81)	Owns and may offer from time to time under this prospectus 40,163 shares of common stock.

(82)	Owns and may offer from time to time under this prospectus 40,153 shares of common stock.

(83)	Owns and may offer from time to time under this prospectus 39,798 shares of common stock.

(84)	Owns and may offer from time to time under this prospectus 7,250 shares of common stock issuable upon conversion of Series A-1 Preferred Stock. Also includes 31,673 shares of common stock.

(85)	Owns and may offer from time to time under this prospectus 37,621 shares of common stock.

(86)	Owns and may offer from time to time under this prospectus 3,000 shares of common stock issuable upon the exercise of warrants exercisable at $10 per share. Also includes 33,145 shares of common stock.

(87)	Owns and may offer from time to time under this prospectus 34,967 shares of common stock.

(88)	Owns and may offer from time to time under this prospectus 34,247 shares of common stock.

(89)

Owns and may offer from time to time under this prospectus 32,652 shares of common stock. Mr. Hasenyager, who is a member of the Company’s Board of Directors, also holds 1,000 shares of common stock which may be acquired upon the exercise of stock options exercisable within 60 days of this prospectus, which shares are not being registered for resale by means of this prospectus.

(90)	Seneca Capital International owns and may offer from time to time under this prospectus 24,430 shares of common stock issuable upon conversion of Series A-1 Preferred Stock. Also includes 7,818 shares of common stock issuable upon exercise of warrants at $40 per share.

(91)	Owns and may offer from time to time under this prospectus 28,675 shares of common stock.

(92)	Owns and may offer from time to time under this prospectus 28,291 shares of common stock.

(93)	Owns and may offer from time to time under this prospectus 27,803 shares of common stock.

(94)	Seneca Capital L.P. owns and may offer from time to time under this prospectus 17,556 shares of common stock issuable upon conversion of Series A-1 Preferred Stock. Includes 5,540 shares of common stock issuable upon exercise of warrants at $40 per share. Also includes 2,702 shares of common stock.

(95)

The Rittenhouse Group, aka Critical Mass Mail 2,027,027 2,027,027 (7) -- -- Seneca Capital LP 1,936,235 1,936,235 (8) -- -- Seneca Capital International, LTD 1,902,771 1,902,771 (9) -- -- Advanced Systems Europe, BV 1,481,561 1,481,561 (10) -- -- Mack, Fred 1,113,937 1,113,937 (11) -- -- Miller, Bruce 977,639 977,639 (12) -- -- Stevens, Jim 797,014 797,014 (13) -- -- Forman, Murray 772,796 772,796 (14) -- -- Dugdale, Glen & Joan 687,545 687,545 (15) -- -- Chalfin, Stuart 560,810 560,810 (16) -- -- Weiss, Joseph 560,810 560,810 (16) -- -- Spain, Bernard 540,540 540,540 (17) -- -- Pizi, Anthony 1,991,489 803,691 (18) 1,187,798 3.3% Shah, Natwar 460,526 460,526 (19) -- -- Clement, Conrad 430,270 430,270 (20) -- -- Haines Family Assoc LP 424,474 424,474 (21) -- -- Vertical International Limited 400,000 400,000 (22) -- -- Mack, Fredrick 4-30-92 Trust 387,576 387,576 (23) -- -- Bank, Marvin 364,940 364,940 (24) -- -- North Sound Legacy 346,951 346,951 (25) -- -- owns and may offer from time to time under this prospectus 24,793 shares of common stock.

(96)	Owns and may offer from time to time under this prospectus 24,105 shares of common stock.

(97)	Owns and may offer from time to time under this prospectus 20,845 shares of common stock.

(98)	Owns and may offer from time to time under this prospectus 20,089 shares of common stock.

(99)	Owns and may offer from time to time under this prospectus 1,500 shares of common stock issuable upon conversion of Series A-1 Preferred Stock. Also includes 17,989 shares of common stock.

(100)

Owns and may offer from time to time under this prospectus 18,243 shares of common stock

(101)

Owns and may offer from time to time under this prospectus 10,938 shares of common stock issuable upon conversion of Series A-1 Preferred Stock. Also owns and may offer from time to time under this prospectus 781 warrants exercisable at $32 per share. Includes 5,299 shares of common stock.

(102)

Owns and may offer from time to time under this prospectus 10,938 shares of common stock issuable upon conversion of Series A-1 Preferred Stock. Also owns and may offer from time to time under this prospectus 781 shares of common stock issuable upon exercise of warrants exercisable at $32 per share. Includes 5,266 shares of common stock.

(103)

Owns and may offer from time to time under this prospectus 16,076 shares of common stock.

(104)

Owns and may offer from time to time under this prospectus 16,066 shares of common stock.

(105)

Owns and may offer from time to time under this prospectus 3,248 shares of common stock. Mr. Broderick, who is the Company’s Chief Executor Officer and Chief Financial Officer also holds 12,609 shares of common stock which may be acquired upon the exercise of stock options exercisable within 60 days of this prospectus, which shares are not being registered for resale by means of this prospectus.

(106)

Owns and may offer from time to time under this prospectus 15,555 shares of common stock.

(107)

Owns and may offer from time to time under this prospectus 14,138 shares of common stock.

(108)

Owns and may offer from time to time under this prospectus 14,125 shares of common stock.

(109)

Owns and may offer from time to time under this prospectus 14,118 shares of common stock.

(110)

Owns and may offer from time to time under this prospectus 14,090 shares of common stock.

(111)

Owns and may offer from time to time under this prospectus 13,699 shares of common stock.

(112)

Owns and may offer from time to time under this prospectus 13,440 shares of common stock.

(113)

Owns and may offer from time to time under this prospectus 13,434 shares of common stock.

(114)

Owns and may offer from time to time under this prospectus 13,422 shares of common stock.

(115)

Owns and may offer from time to time under this prospectus 12,363 shares of common stock.

(116)

Owns and may offer from time to time under this prospectus 12,054 shares of common stock.

(117)

Owns and may offer from time to time under this prospectus 3,250 shares of common stock issuable upon conversion of Series A-1 Preferred Stock. Also owns and may offer from time to time under this prospectus 800 shares of common stock issuable upon exercise of warrants exercisable at $10 per share. Includes 7,449 shares of common stock.

(118)

Owns and may offer from time to time under this prospectus 10,741 shares of common stock.

(119)

Owns and may offer from time to time under this prospectus 1,600 shares of common stock issuable upon conversion of Series A-1 Preferred Stock. Also owns and may offer from time to time under this prospectus 793 shares of common stock issuable upon exercise of warrants exercisable at $10 per share. Includes 7,042 shares of common stock.

(120)

Owns and may offer from time to time under this prospectus 8,831 shares of common stock.

(121)

Owns and may offer from time to time under this prospectus 2,000 shares of common stock issuable upon conversion of Series A-1 Preferred Stock. Also includes 6,650 shares of common stock.

(122)

Owns and may offer from time to time under this prospectus 8,048 shares of common stock.

(123)

Owns and may offer from time to time under this prospectus 7,630 shares of common stock.

(124)

Owns and may offer from time to time under this prospectus 7,372 shares of common stock.

(125)

Phillips Giraud Naud ET Associes owns and may offer from time to time under this prospectus 7,084 shares of common stock.

(126)

Owns and may offer from time to time under this prospectus 7,061 shares of common stock.

(127)

Owns and may offer from time to time under this prospectus 4,375 shares of common stock issuable upon conversion of Series A-1 Preferred Stock. Also owns and may offer from time to time under this prospectus 313 shares of common stock issuable upon exercise of warrants exercisable at $32 per share. Includes 2,122 shares of common stock.

(128)

Owns and may offer from time to time under this prospectus 6,712 shares of common stock.

(129)

Owns and may offer from time to time under this prospectus 5,600 shares of common stock issuable upon conversion of Series A-1 Preferred Stock. Also owns and may offer from time to time under this prospectus 921 shares of common stock issuable upon exercise of warrants exercisable at $38 per share.

(130)

Owns and may offer from time to time under this prospectus 5,649 shares of common stock.

(131)

Owns and may offer from time to time under this prospectus 5,628 shares of common stock.

(132)

Owns and may offer from time to time under this prospectus 5,508 shares of common stock.

(133)

Owns and may offer from time to time under this prospectus 5,437 shares of common stock.

(134)

Owns and may offer from time to time under this prospectus 5,375 shares of common stock.

(135)

Owns and may offer from time to time under this prospectus 676 shares of common stock issuable upon exercise of warrants at an exercise price of $10 per share. Also owns 4,695 shares of common stock.

(136)

Owns and may offer from time to time under this prospectus 676 shares of common stock issuable upon exercise of warrants at an exercise price of $10 per share. Also owns 4,358 shares of common stock.

(137)

Owns and may offer from time to time under this prospectus 4,894 shares of common stock.

(138)

Owns and may offer from time to time under this prospectus 4,666 shares of common stock.

(139)

Owns and may offer from time to time under this prospectus 4,466 shares of common stock.

(140)

Owns and may offer from time to time under this prospectus 1,000 shares of common stock issuable upon conversion of Series A-1 Preferred Stock. Also owns 3,324 shares of common stock.

(141)

Owns and may offer from time to time under this prospectus 4,232 shares of common stock.

(142)

Owns and may offer from time to time under this prospectus 4,018 shares of common stock.

(143)

Owns and may offer from time to time under this prospectus 3,813 shares of common stock.

(144)

Owns and may offer from time to time under this prospectus 329 shares of common stock issuable upon exercise of warrants at an exercise price of $10 per share. Also owns 3,327 shares of common stock.

(145)

Owns and may offer from time to time under this prospectus 3,481 shares of common stock.

(146)

Owns and may offer from time to time under this prospectus 3,357 shares of common stock.

(147)

Owns and may offer from time to time under this prospectus 3,356 shares of common stock.

(148)

Owns and may offer from time to time under this prospectus 3,326 shares of common stock.

(149)

Owns and may offer from time to time under this prospectus 675 shares of common stock.

(150)

Owns and may offer from time to time under this prospectus 2,684 shares of common stock.

(151)

Vertical Ventures Investments, LLC 340,557 340,557 (26) -- -- Delphi Partners Limited 309,367 309,367 (27) -- -- Grodko, Sandra 300,000 300,000 (28) -- -- Liraz Systems 234,869 234,869 (29) -- -- Weiss, Michael 211,579 211,579 (30) -- -- Mack, Earl 208,334 208,334 (31) -- -- Martino, Ralph 200,001 200,001 (32) -- -- Feldman, Michael 189,190 189,190 (33) -- -- Bank Hapoalim Warrants 172,751 172,751 (34) -- --

(152)

Owns and may offer from time to time under this prospectus 2,145 shares of ~~Common Stock~~common stock.

(153)

Owns and may offer from time to time under this prospectus 2,120 shares of Common Stock Which Owned After Offering Name Owned (1) May Be Offered (1) Number Percent ----------------------------------------------------------------------- --------------------------------- Forman, Irving 164,474 164,474 (35) -- -- Nager, Richard 164,474 164,474 (35) -- -- Shelanski, Joseph 143,250 143,250 (36) -- -- Whelden, Larry 138,889 138,889 (37) -- -- Yaakovian, Matthew (Trustee) 138,889 138,889 (37) -- -- Leavitt, Philip 135,136 135,136 (38) -- -- Turner, William & Barbara 120,000 120,000 (39) -- -- Baena, Douglas 108,108 108,108 (40) -- -- Pyxis Link Corp 100,000 100,000 (41) -- -- Simkovitz, Phillip 84,324 84,324 (42) -- -- Simpson, James 83,334 83,334 (43) -- -- Gable, Sidney 82,236 82,236 (44) -- -- Lustgarden, Scott 82,236 82,236 (44) -- -- Vegh, Robert 82,236 82,236 (44) -- -- Freeman, Don 81,082 81,082 (45) -- -- Diamond Investments II, LLC 80,000 80,000 (46) -- -- Keates, Richard M.D 80,000 80,000 (46) -- -- Emerson, Alice 69,445 69,445 (47) -- -- Robinson, John 69,445 69,445 (47) -- -- Weitzman, Hervey 69,445 69,445 (47) -- -- Wilkins, James 69,445 69,445 (47) -- -- Wittenbach, Roger 69,445 69,445 (47) -- -- Friedman, Mark 67,568 67,568 (48) -- -- Gordon, Allan 67,568 67,568 (48) -- -- Kushner, Ron 67,568 67,568 (48) -- -- Littman, Leslie 67,568 67,568 (48) -- -- Rothbard, Melvyn 67,568 67,568 (48) -- -- Rothbard, Norman 67,568 67,568 (48) -- -- Rutstein, Larry 67,568 67,568 (48) -- -- Dweck, Ike 57,697 57,697 (49) -- -- Corwin, Leonard 55,555 55,555 (50) -- -- Spivak, Virginia 55,555 55,555 (50) -- -- Blank, Richard 54,054 54,054 (51) -- -- Chugh, Narinder 54,054 54,054 (51) -- -- Krubiner, Paul & Marjorie 54,054 54,054 (51) -- -- Schneider, Steven 54,054 54,054 (51) -- -- Cleveland Overseas Ltd 53,333 53,333 (52) -- -- Lemery, John 41,666 41,666 (53) -- -- Wolfe, Jack 41,666 41,666 (53) -- -- Brooks, Marshall 37,838 37,838 (54) -- -- Tamberelli, Frank 32,895 32,895 (55) -- -- Whyte, Jacqueline 29,728 29,728 (56) -- -- Lerner, Arthur 27,028 27,028 (57) -- -- Mack, Fred Trust (Hailey Mack) 20,834 20,834 (58) -- -- Mack, Fred Trust (Jason Mack) 20,834 20,834 (58) -- -- Feder, Mark 16,447 16,447 (59) -- -- Grodko, Steven 12,500 12,500 (60) -- -- Kanevsky, Paul 100,000 100,000 -- -- DeFranco, Joseph 30,000 30,000 -- -- Seidle, Jay 30,000 30,000 -- -- Sandor, Patty 10,000 10,000 -- -- Totals 43,205,849 42,018,051 common stock.

9 - -------- (1) The number of shares of common stock owned by each selling stockholder includes the aggregate number of shares of common stock which may be obtained by each stockholder upon conversion of all of the Series A3 Preferred Stock, Series B3 Preferred Stock, Series C Preferred Stock and/or Series D Preferred Stock owned by the stockholder. It also includes the aggregate number of shares of common stock that may be obtained upon exercise of warrants to purchase common stock owned by such stockholder. The shares offered by this prospectus may be sold by the selling stockholder from time to time. The number of shares, if any, offered by each selling stockholder and the corresponding number of shares beneficially owned by each selling stockholder after each sale will vary depending upon the terms of the individual sales. (2) Brown Simpson Partners I, Ltd. owns and may offer from time to time under this prospectus 1,197,031 shares of common stock issuable upon the conversion of Series B3 Preferred Stock. It also owns and may offer from time to time under this prospectus 460,526 shares of common stock issuable upon the conversion of Series C Preferred Stock. It also owns and may offer from time to time under this prospectus 4,009,093 shares issuable upon the exercise of warrants. The exercise price of 115,132 warrants is $0.38 per share of common stock. The exercise price of 270,270 warrants is $0.37 per share of common stock. The exercise price of 3,623,691 warrants is $0.40 per share of common stock. Also includes 270,270 shares of common stock. Brown Simpson Partners I, Ltd. is not currently the beneficial owner of all of such shares of common stock. (3) SDS Merchant Fund, L.P. owns and may offer from time to time under this prospectus 2,848,625 shares of common stock issuable upon conversion of Series D Preferred Stock. It also owns and may offer from time to time under this prospectus 1,625,362 shares of common stock issuable upon exercise of Series D-1 Warrants at an exercise price of $0.07 per share. It also owns and may offer from time to time under this prospectus 457,813 shares of common stock issuable upon exercise of Series D-2 Warrants at an exercise price the lower of $0.20 or the trading price of Level 8's common stock at the time of exercise. The holders may not exercise the warrants into shares of our common stock or convert shares of Series D Preferred Stock, if after the exercise or conversion, such holder, together with any of its affiliates, would beneficially own over 4.99% of the outstanding shares of our common stock. This restriction may not be altered, amended, deleted or changed in any manner without the written approval of the holders of a majority of the outstanding shares of our common stock and, in the case of the Series D Preferred Stock, also the holders of a majority of the outstanding shares of Series D Preferred Stock, and in the case of any Series D-1 Warrant or Series D-2 Warrant, also the holder of such warrant. However, the 4.99% limitation would not prevent the holders from acquiring and selling in excess of 4.99% of our common stock through a series of exercises and conversions. Also includes 967,500 shares of common stock. (4) North Sound Legacy International Fund Ltd. owns and may offer from time to time under this prospectus 2,359,375 shares of common stock issuable upon conversion of Series D Preferred Stock. It also owns and may offer from time to time under this prospectus 889,484 shares of common stock issuable upon exercise of Series D-1 Warrants at an exercise price of $0.07 per share. It also owns and may offer from time to time under this prospectus 113,501 shares of common stock issuable upon exercise of Series D-2 Warrants at an exercise price the lower of $0.20 or the trading price of Level 8's common stock at the time of exercise. The holders may not exercise the warrants into shares of our common stock or convert shares of Series D Preferred Stock, if after the exercise or conversion, such holder, together with any of its affiliates, would beneficially own over 4.99% of the outstanding shares of our common stock. This restriction may not be altered, amended, deleted or changed in any manner without the written approval of the holders of a majority of the outstanding shares of our common stock and, in the case of the Series D Preferred Stock, also the holders of a majority of the outstanding shares of Series D Preferred Stock, and in the case of any Series D-1 Warrant or Series D-2 Warrant, also the holder of such warrant. However, the 4.99% limitation would not prevent the holders from acquiring and selling in excess of 4.99% of our common stock through a series of exercises and conversions. Also includes 411,940 shares of common stock. 10 (5) North Sound Legacy Institutional Fund LLC owns and may offer from time to time under this prospectus 2,250,000 shares of common stock issuable upon conversion of Series D Preferred Stock. It also owns and may offer from time to time under this prospectus 848,250 shares of common stock issuable upon exercise of Series D-1 Warrants at an exercise price of $0.07 per share. It also owns and may offer from time to time under this prospectus 108,239 shares of common stock issuable upon exercise of Series D-2 Warrants at an exercise price the lower of $0.20 or the trading price of Level 8's common stock at the time of exercise. The holders may not exercise the warrants into shares of our common stock or convert shares of Series D Preferred Stock, if after the exercise or conversion, such holder, together with any of its affiliates, would beneficially own over 4.99% of the outstanding shares of our common stock. This restriction may not be altered, amended, deleted or changed in any manner without the written approval of the holders of a majority of the outstanding shares of our common stock and, in the case of the Series D Preferred Stock, also the holders of a majority of the outstanding shares of Series D Preferred Stock, and in the case of any Series D-1 Warrant or Series D-2 Warrant, also the holder of such warrant. However, the 4.99% limitation would not prevent the holders from acquiring and selling in excess of 4.99% of our common stock through a series of exercises and conversions. Also includes 392,854 shares of common stock. (6) Includes 263,158 shares of common stock issuable upon the conversion of Series C Preferred Stock. Also owns and may offer from time to time under this prospectus 747,353 shares of common stock issuable upon the exercise of warrants. The exercise price of 446,429 shares is $0.28 per share of common stock, 65,789 shares exercisable at $0.38 per share of common stock, 135,135 shares exercisable at $0.37 per share of common stock, and 100,000 shares of common stock issuable upon the exercise of warrants at an exercise price of $0.60 per share of common stock. Also includes 1,081,564 shares of common stock. Currently not the beneficial owner of all such shares of common stock. (7) Critical Mass Mail owns and may offer from time to time under this prospectus 2,027,027 shares of common stock. (8) Seneca Capital, L.P. owns and may offer from time to time under this prospectus 417,205 shares of common stock issuable upon the conversion of Series B3 Preferred Stock. It also owns and may offer from time to time under this prospectus 188,408 shares of common stock issuable upon the conversion of Series A3 Preferred Stock. It also owns and may offer from time to time under this prospectus 1,060,352 shares issuable upon the exercise of warrants. The exercise price of 790,082 warrants is $0.40 per share of common stock. The exercise price of 270,270 warrants is $0.37 per share of common stock. Also includes 270,270 shares of common stock. Seneca Capital, L.P. is not currently the beneficial owner of all of such shares of common stock. (9) Seneca Capital International, Ltd. owns and may offer from time to time under this prospectus 779,826 shares of common stock issuable upon the conversion of Series B3 Preferred Stock. It also owns and may offer from time to time under this prospectus 1,122,945 shares issuable upon the exercise of warrants. The exercise price of the warrants is $0.40 per share of common stock. Seneca Capital International, Ltd. is not currently the beneficial owner of all of such shares of common stock. (10) Advanced Systems Europe owns and may offer from time to time under this prospectus 120 shares of common stock subject to adjustment, issuable upon conversion of 1 share of Series A3 Preferred Stock it currently owns. It also owns and may offer from time to time under this prospectus 886,997 shares issuable upon the exercise of warrants. The exercise price of 775,886 warrants is $0.40 per share of common stock. The exercise price of 111,111 warrants is $0.45 per share of common stock. Also includes 594,444 shares of common stock. Advanced Systems Europe B.V. is not currently the beneficial owner of all of such shares of common stock. (11) Includes 394,737 shares of common stock issuable upon conversion of Series C Preferred Stock and 242,258 shares of common stock issuable upon the exercise of warrants. The exercise price of 202,703 shares is $0.37 per share of common stock. 22,222 shares issuable upon the exercise of warrants at an exercise price of $0.45 per share of common stock and 17,333 shares of common stock issuable upon exercise of warrants at an exercise price of $0.60 per share. Also includes 476,942 shares of common stock. (12) Includes 23,594 shares of common stock issuable upon exercise of Series D-2 Warrants at an exercise price the lower of $0.20 or the trading price of Level 8's common stock at the time of exercise. Also includes 350,000 shares of common stock issuable upon the exercise of warrants at an exercise price of $0.37 per share. Also includes 27,778 shares of common stock issuable upon the exercise of warrants at an exercise price of $0.45 per share of common stock Also includes 576,267 shares of common stock. 11 (13) Includes 234,375 shares of common stock issuable upon conversion of Series D Preferred Stock, 88,359 shares of common stock issuable upon exercise of Series D-1 Warrants at an exercise price of $0.07 per share, 35,391shares of common stock issuable upon exercise of Series D-2 Warrants at an exercise price the lower of $0.20 or the trading price of Level 8's common stock at the time of exercise, 150,000 shares of common stock issuable upon exercise of warrants at an exercise price of $0.37 per share, and 27,778 shares of common stock issuable upon exercise of warrants at an exercise price of $0.45 per share. Also includes 261,111 shares of common stock. (14) Includes 78,125 shares of common stock issuable upon conversion of Series D Preferred Stock, 29,453 shares of common stock issuable upon exercise of Series D-1 Warrants at an exercise price of $0.07 per share, 11,797 shares of common stock issuable upon exercise of Series D-2 Warrants at an exercise price the lower of $0.20 or the trading price of Level 8's common stock at the time of exercise. Also includes 394,737 shares of common stock issuable upon conversion of Series C Preferred Stock, 98,684 shares of common stock issuable upon exercise of warrants at an exercise price of $0.38 and 26,667 shares of common stock issuable upon exercise of warrants at an exercise price of $0.60. Also includes 133,333 shares of common stock. (15) Includes 93,750 shares of common stock issuable upon conversion of Series D Preferred Stock, 35,344 shares of common stock upon exercise of Series D-1 Warrants at an exercise price of $0.07 and 14,156 shares of common stock issuable upon exercise of Series D-2 Warrants at an exercise price the lower of $0.20 or the trading price of Level 8's common stock at the time of exercise. Also includes 202,703 shares of common stock issuable upon exercise of warrants at an exercise price of $0.38 and 27,778 shares of common stock issuable upon exercise of warrants at an exercise price of $0.45. Also includes 313,814 shares of common stock. Currently is not the beneficial owner of all of such shares of common stock. (16) Owns and may offer from time to time under this prospectus 280,405 shares of common stock. Also includes 280,405 shares issuable upon the exercise of warrants at an exercise price of $0.37 per share. (17) Includes 270,270 shares of common stock and 270,270 shares of common stock issuable upon exercise of warrants at an exercise price of $0.37 per share. (18) Includes 394,737 shares of common stock issuable upon conversion of Series C Preferred Stock and 98,684 shares of common stock upon exercise of warrants at an exercise price of $0.38 and 270,270 shares of common stock upon exercise of warrants at an exercise price of $0.37. Also includes 40,000 shares of common stock. Mr. Pizi is the CEO and a director of the Company. He also holds common stock and 1,187,798 stock options exercisable within 60 days that are not being registered for resale by means of this prospectus. (19) Includes 368,421 shares of common stock issuable upon conversion of Series C Preferred Stock and 92,105 shares of common stock upon exercise of warrants at an exercise price of $0.38. (20) Includes 135,135 shares issuable upon the exercise of warrants at an exercise price of $0.37 per share and 26,667 shares issuable upon the exercise of warrants at an exercise price of $0.60 per share of common stock. Also includes 268,468 shares of common stock. (21) Includes 131,579 shares of common stock issuable upon conversion of Series C Preferred Stock and 32,895 shares of common stock upon exercise of warrants at an exercise price of $0.38. Also includes100,000 shares issuable upon the exercise of warrants at $0.37 per share and 10,000 shares issuable upon the exercise of warrants at a $0.60 exercise price per share. Also includes 150,000 shares of common stock. (22) Includes 66,667 shares issuable upon the exercise of warrants at an exercise price of $0.60 per share of common stock. Also includes 33,333 shares of common stock. (23) Includes 203,125 shares of common stock issuable upon conversion of Series D Preferred Stock, 30,672 shares of common stock issuable upon exercise of Series D-2 Warrants at an exercise price the lower of $0.20 or the trading price of Level 8's common stock at the time of exercise and 9,334 shares of common stock issuable upon exercise of warrants at an exercise price of $0.60 per share. Also includes 144,445 shares of common stock. 12 (24) Includes 65,789 shares of common stock issuable upon the conversion of Series C Preferred Stock and 16,447 shares of common stock issuable upon the exercise of warrants at an exercise price of $0.38 per share of common stock. Also includes 101,352 shares issuable upon the exercise of warrants at $0.37 per share and 13,333 shares issuable upon the exercise of warrants at a $0.60 exercise price. Also includes 168,019 shares of common stock. (25) North Sound Legacy Fund LLC owns and may offer from time to time under this prospectus 250,000 shares of common stock issuable upon conversion of Series D Preferred Stock. It also owns and may offer from time to time under this prospectus 94,250 shares of common stock issuable upon exercise of Series D-1 Warrants at an exercise price of $0.07 per share. It also owns and may offer from time to time under this prospectus 12,026 shares of common stock issuable upon exercise of Series D-2 Warrants at an exercise price the lower of $0.20 or the trading price of Level 8's common stock at the time of exercise. The holders may not exercise the warrants into shares of our common stock or convert shares of Series D Preferred Stock, if after the exercise or conversion, such holder, together with any of its affiliates, would beneficially own over 4.99% of the outstanding shares of our common stock. This restriction may not be altered, amended, deleted or changed in any manner without the written approval of the holders of a majority of the outstanding shares of our common stock and, in the case of the Series D Preferred Stock, also the holders of a majority of the outstanding shares of Series D Preferred Stock, and in the case of any Series D-1 Warrant or Series D-2 Warrant, also the holder of such warrant. However, the 4.99% limitation would not prevent the holders from acquiring and selling in excess of 4.99% of our common stock through a series of exercises and conversions. Also includes 43,647 shares of common stock. (26) Includes 176,719 shares of common stock issuable upon exercise of Series D-1 Warrants at an exercise price of $0.07 per share, 70,781 shares of common stock issuable upon exercise of Series D-2 Warrants at an exercise price the lower of $0.20 or the trading price of Level 8's common stock at the time of exercise and 93,057 shares of common stock issuable upon exercise of warrants at an exercise price of $0.60 per share. (27) Includes 11,797 shares of common stock issuable upon exercise of Series D-2 Warrants at an exercise price the lower of $0.20 or the trading price of Level 8's common stock at the time of exercise, 50,000 shares of common stock issuable upon exercise of warrants at an exercise price of $0.37 per share and 13,889 shares of common stock issuable upon exercise of warrants at an exercise price of $0.45 per share. Also includes 233,681 shares of common stock. (28) Includes 150,000 shares of common stock and 150,000 shares of common stock issuable upon exercise of warrants at an exercise price of $0.37 per share. (29) Liraz owns and may offer from time to time under this prospectus 2,632 shares of common stock (subject to adjustment) issuable upon conversion of 1 shares of Series C Preferred Stock it currently owns, and shares of common stock issuable upon warrants to purchase 82,237 shares of common stock (subject to adjustment) for $0.38 per share. Also includes 150,000 shares of common stock for its guaranty of Level 8's term loan effective to November 8, 2004. (30) Includes 105,263 shares of common stock issuable upon the conversion of Series C Preferred Stock and 26,316 shares of common stock issuable upon the exercise of warrants at an exercise price of $0.38 per share of common stock. Includes 13,333 shares issuable upon the exercise of warrants at an exercise price of $0.60 per share of common stock. Also includes 66,667 shares of common stock. (31) Includes 41,667 shares of common stock issuable upon exercise of warrants at an exercise price of $0.45 per share. Also includes 166,667 shares of common stock. (32) Includes 200,001 shares. (33) Includes 94,595 shares of common stock and 94,595 shares of common stock issuable upon exercise of warrants at an exercise price of $0.37 per share. (34) Includes 172,751 shares of common stock issuable upon the exercise of warrants at an exercise price of $4.342 per share. (35) Includes 131,579 shares of common stock issuable upon conversion of Series C Preferred Stock and 32,895 shares of common stock upon exercise of warrants at an exercise price of $0.38. (36) Includes 93,750 shares of common stock issuable upon conversion of Series D Preferred Stock, 35,344 shares of common stock issuable upon exercise of Series D-1 Warrants at an exercise price of $0.07 per share and 14,156 shares of common stock issuable upon exercise of Series D-2 Warrants at an exercise price the lower of $0.20 or the trading price of Level 8's common stock at the time of exercise. 13 (37) Includes 27,778 shares of common stock issuable upon exercise of warrants at an exercise price of $0.45 per share. Also includes 111,111 shares of common stock. (38) Includes 67,568 shares of common stock and 67,568 shares of common stock issuable upon exercise of warrants at an exercise price of $0.37 per share. (39) Includes 20,000 shares of common stock issuable upon exercise of warrants at an exercise price of $0.60 per share. Also includes 100,000 shares of common stock. (40) Includes 54,054 shares of common stock and 54,054 shares of common stock issuable upon exercise of warrants at an exercise price of $0.37 per share. (41) Includes 100,000 shares of common stock issuable upon exercise of warrants at an exercise price of $0.38 per share. Pyxis Link is not currently the beneficial owner of all of such shares of common stock. (42) Includes 42,162 shares of common stock and 42,162 shares of common stock issuable upon exercise of warrants at an exercise price of $0.37 per share. (43) Includes 16,667 shares of common stock issuable upon exercise of warrants at an exercise price of $0.45 per share. Also includes 66,667 shares of common stock. (44) Includes 65,789 shares of common stock issuable upon the conversion of Series C Preferred Stock and 16,447 shares of common stock issuable upon the exercise of warrants at an exercise price of $0.38 per share of common stock subject to adjustment. (45) Includes 40,541 shares of common stock and 40,541 shares of common stock issuable upon exercise of warrants at an exercise price of $0.37 per share. (46) Includes 13,333 shares issuable upon the exercise of warrants at an exercise price of $0.60 per share of common stock. Also includes 66,667 shares of common stock. (47) Includes 13,889 shares of common stock issuable upon exercise of warrants at an exercise price of $0.45 per share. Also includes 55,556 shares of common stock. (48) Includes 33,784 shares of common stock and 33,784 shares of common stock issuable upon exercise of warrants at an exercise price of $0.37 per share. (49) Includes 16,447 shares of common stock issuable upon the exercise of warrants at an exercise price of $0.38 per share of common stock subject to adjustment, 29,453 shares of common stock issuable upon exercise of Series D-1 Warrants at an exercise price of $0.07 per share, 11,797 shares of common stock issuable upon exercise of Series D-2 Warrants at an exercise price the lower of $0.20 or the trading price of Level 8's common stock at the time of exercise. (50) Includes 11,111 shares of common stock issuable upon exercise of warrants at an exercise price of $0.45 per share. Also include 44,444 shares of common stock. (51) Includes 27,027 shares of common stock and 27,027 shares of common stock issuable upon exercise of warrants at an exercise price of $0.37 per share. (52) Includes 53,333 shares of common stock issuable upon exercise of warrants at an exercise price of $0.60 per share. (53) Includes 8,333 shares of common stock issuable upon the exercise of warrants at an exercise price of $0.45 per share. Also include 33,000 shares of common stock. (54) Includes 18,919 shares of common stock and 18,919 shares of common stock issuable upon exercise of warrants at an exercise price of $0.37 per share. (55) Includes 26,316 shares of common stock issuable upon the conversion of Series C Preferred Stock and 6,579 shares of common stock issuable upon the exercise of warrants at an exercise price of $0.38 per share of common stock. (56) Includes 14,864 shares of common stock and 14,864 shares of common stock issuable upon exercise of warrants at an exercise price of $0.37 per share. (57) Includes 13,514 shares of common stock and 13,514 shares of common stock issuable upon exercise of warrants at an exercise price of $0.37 per share. 14 (58) Includes 4,167 shares of common stock issuable upon exercise of warrants at an exercise price of $0.45 per share. Also include 16,667 shares of common stock. (59) Includes 16,477 shares of common stock issuable upon the exercise of warrants at an exercise price of $0.38 per share of common stock subject to adjustment. (60) Includes 12,500 shares of common stock issuable upon exercise of warrants at an exercise price of $0.45 per share. 15

(154)

Owns and may offer from time to time under this prospectus 2,119 shares of common stock.

(155)

Owns and may offer from time to time under this prospectus 2,114 shares of common stock.

(156)

Owns and may offer from time to time under this prospectus 2,063 shares of common stock.

(157)

Owns and may offer from time to time under this prospectus 2,013 shares of common stock.

(158)

Owns and may offer from time to time under this prospectus 1,789 shares of common stock.

(159)

Owns and may offer from time to time under this prospectus 1,745 shares of common stock.

(160)

Owns and may offer from time to time under this prospectus 400 shares of common stock issuable upon conversion of Series A-1 Preferred Stock. Also owns 1,330 shares of common stock.

(161)

Owns and may offer from time to time under this prospectus 1,666 shares of common stock.

(162)

Owns and may offer from time to time under this prospectus 1,611 shares of common stock.

(163)

Owns and may offer from time to time under this prospectus 1,579 shares of common stock.

(164)

Owns and may offer from time to time under this prospectus 1,342 shares of common stock.

(165)

Owns and may offer from time to time under this prospectus 1,341 shares of common stock.

(166)

Owns and may offer from time to time under this prospectus 1,229 shares of common stock.

(167)

Owns and may offer from time to time under this prospectus 1,079 shares of common stock.

(168)

Owns and may offer from time to time under this prospectus 1,000 shares of common stock issuable upon exercise of warrants at an exercise price of $38 per share.

(169)

Owns and may offer from time to time under this prospectus 550 shares of common stock.

(170)

Owns and may offer from time to time under this prospectus 337 shares of common stock.

(171)

Owns and may offer from time to time under this prospectus 93 shares of common stock issuable upon exercise of warrants at an exercise price of $7 per share.

PLAN OF DISTRIBUTION

We are registering the shares of common stock on behalf of the selling stockholders. All costs, expenses and fees in connection with the registration of the shares offered by this prospectus will be borne by us, other than brokerage commissions and similar selling expenses, if any, attributable to the sale of shares which will be borne by the selling stockholders. We have agreed to indemnify the selling stockholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act. Sales of shares may be effected by selling stockholders ~~from time to time~~ in one or more types of transactions (which may include block transactions) ~~on the Nasdaq National Market, the Nasdaq SmallCap Market,~~, in the over-the-counter market, any exchange or quotation system, in negotiated transactions, through put or call options transactions relating to the shares, through short sales of shares, or a combination of any such methods of sale, and any other method permitted pursuant to applicable law, at market prices prevailing at the time of sale, or at negotiated prices. Such transactions may or may not involve brokers or dealers. The selling stockholders have advised us that they have not entered into any agreements, understandings or arrangements with any underwriters or broker-dealers regarding the sale of their securities, nor is there an underwriter or coordinated broker acting in connection with the proposed sale of shares by the selling stockholders.

The selling stockholders may enter into hedging transactions with broker-dealers or other financial institutions. In connection with such transactions, broker-dealers or other financial institutions may engage in short sales of the shares or of securities convertible into or exchangeable for the shares in the course of hedging positions they assume with selling stockholders. The selling stockholders may also enter into options or other transactions with broker-dealers or other financial institutions which require the delivery to such broker-dealers or other financial institutions of shares offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as amended or supplemented to reflect such transaction). The selling stockholders may pledge and/or loan these shares to broker-dealers who may borrow the shares against their hedging short position and in turn sell these shares under the prospectus to cover such short position.

The selling stockholders may make these transactions by selling shares directly to purchasers or to or through broker-dealers, which may act as agents or principals. Such broker-dealers may receive compensation in the form of discounts, concessions or commissions from selling stockholders and/or the purchasers of shares for whom such broker-dealers may act as agents or to whom they sell as principal, or both (which compensation as to a particular broker-dealer is not expected to be in excess of customary commissions).

The selling stockholders and any broker-dealers that act in connection with the sale of shares may be deemed to be ~~"underwriters"~~“underwriters” within the meaning of Section 2(11) of the Securities Act, and any commissions received by such broker-dealers or any profit on the resale of the shares sold by them while acting as principals might be deemed to be underwriting discounts or commissions under the Securities Act. The selling stockholders may agree to indemnify any agent, dealer or broker-dealer that participates in transactions involving sales of the shares against certain liabilities, including liabilities arising under the Securities Act.

Because selling stockholders may be deemed ~~"underwriters"~~“underwriters” within the meaning of Section 2(11) of the Securities Act, the selling stockholders may be subject to the prospectus delivery requirements of the Securities Act. We have informed the selling stockholders that the anti-manipulative provisions of Regulation M promulgated under the Exchange Act may apply to their sales in the market.

Selling stockholders also may resell all or a portion of the shares in open market transactions in reliance upon Rule 144 under the Securities Act provided they meet the criteria and conform to the requirements of Rule 144.

Upon our being notified by a selling stockholder that any material arrangement has been entered into with a broker-dealer for the sale of shares through a block trade, special offering, exchange distribution or secondary distribution or a purchase by a broker or dealer, a supplement to this prospectus will be filed, if required, pursuant to Rule 424(b) under the Securities Act, disclosing: o the name of each such selling stockholder and of the participating broker-dealer(s); o the number of shares involved; o the initial price at which such shares were sold; 16 o the commissions paid or discounts or concessions allowed to such broker-dealer(s), where applicable; o that such broker-dealer(s) did not conduct any investigation to verify the information set out or incorporated by reference in this prospectus; and o other facts material to the transactions.

the name of each such selling stockholder and of the participating broker-dealer(s);

the number of shares involved;

the initial price at which such shares were sold;

the commissions paid or discounts or concessions allowed to such broker-dealer(s), where applicable;

that such broker-dealer(s) did not conduct any investigation to verify the information set out or incorporated by reference in this prospectus; and

other facts material to the transactions.

In addition, upon our being notified by a selling stockholder that a donee or pledgee intends to sell more than 500 shares, a supplement to this prospectus will be filed. The selling stockholder may from time to time pledge or grant a security interest in some or all of the shares or common stock or warrants owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of common stock from time to time under this prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933 amending the list of selling stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus.

The selling stockholders also may transfer the shares of common stock in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus. 17

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected financial data is derived from the consolidated financial statements of the Company. The data should be read in conjunction with the consolidated financial statements, related notes, and other financial information included herein.

18 Weighted average shares outstanding have been restated retroactively to reflect the 100:1 reverse stock split.

	Year Ended December 31, (in thousands, except per share data)
	2002			2003			2004			2005			2006
SELECTED STATEMENT OF OPERATIONS DATA
Revenue	$	3,101		$	530		$	775		$	785		$	972
Loss from continuing operations	$	(13,142	)	$	(9,874	)	$	(9,731	)	$	(3,681	)	$	(2,997	)
Loss from continuing operations per common share - basic and diluted	$	(74.89	)	$	(54.00	)	$	(27.05	)	$	(8.27	)	$	(0.25	)
Weighted average common and common equivalent shares outstanding- basic and diluted		189			215			360			445			35,182

	December 31,
	2002			2003			2004			2005			2006
SELECTED BALANCE SHEET DATA
Working capital (deficiency)	$	(6,254	)	$	(6,555	)	$	(10,255	)	$	(13,894	)	$	(7,894	)
Total assets		11,852			5,362			530			241			597
Long-term debt, including current maturities		2,893			2,756			5,444			7,931			2,932
Senior convertible redeemable preferred stock		--			3,355			1,367			1,061			--
Stockholders' equity (deficiency)		1,653			(6,103	)		(11,857	)		(15,076	)		(7,912	)

BUSINESS ~~OVERVIEW We provide next generation application~~

Overview

Cicero Inc. is aprovider of business integration ~~products~~software, which enables organizations to integrate new and services that are based on open technology standards and are licensed to a wide range of customers. Our software helps organizations leverage their extensive system and business process investments, increase operational efficiencies, reduce costs and strengthen valued customer relationships by uniting disparate applications, systems,existing information and processes at the desktop. Our business integration software addresses the emerging need for companies’ information systems to deliver enterprise-wide views of their business information processes.In addition to software products, we also provide technical support, training and consulting services as part of its commitment to providing its customers with industry-leading integration solutions. Our consulting team has in-depth experience in developing successful enterprise-class solutions as well as valuable insight into the business information needs of customers in the Global 5000.

Our focus is on the ~~emerging~~growing desktop integration and business process automation market with our ~~Cicero(R)~~Cicero® product. ~~Cicero~~Cicero® is a business application integration ~~software product~~platform that ~~maximizes~~enhances end-user productivity, streamlines business operations and integrates systems and applications that would not otherwise work together. Cicero software offers a proven, innovative departure from traditional, costly and labor-intensive ~~approaches to~~enterprise application integration, ~~that~~which occurs at the server level. Cicero® provides non-invasive application integration at the desktop level. Desktop level integration provides the user with a single environment with a consistent look and feel for diverse applications across multiple operating environments, reduces enterprise integration implementation cost and time, and supports a Service-Oriented Architecture (SOA). Cicero’s desktop level integration also 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,~~Cicero® software, companies can decrease their customer management costs, ~~increase~~improve 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~~Cicero® software enables organizations to reduce the business risks inherent in replacement or re-engineering of mission-critical applications and extend the productive life and functional reach of their application portfolio. ~~Cicero~~

Cicero® software is engineered to ~~harness~~integrate diverse business applications and shape them to more effectively serve the people who use them. ~~Cicero~~Cicero® provides an intuitive integration and development environment, ~~that~~which simplifies the integration of complex multi-platform applications. ~~Cicero~~Cicero® provides a unique approach that allows companies to organize components of their existing applications to better align them with tasks and operational processes. In addition, Cicero ~~streamlines all activities~~can streamline end-user tasks by providing a single, seamless user interface for simple access to ~~all~~multiple systems ~~associated with a task. Cicero~~or be configured to display one or more composite applications to enhance productivity. Cicero® software enables automatic information sharing among line-of-business applications and tools. ~~Cicero~~It is ideal for deployment in contact centers where its highly productive, task-oriented user interface promotes user efficiency. ~~Until October 2002, we~~Finally, Cicero® software, by integrating diverse applications across multiple operating systems, is ideal for the financial services, for which Cicero® was initially developed, insurance, telecommunications, intelligence, security, law enforcement, governmental and other industries requiring a cost-effective, proven application integration solution. Cicero® is also ~~offered products under~~an integration solution for merger and acquisition events where the sharing of data and combining of systems is imperative.

Some of the companies and other users that have implemented or are implementing our ~~Geneva brand name to provide organizations with systems integration. Our systems integration products included Geneva Enterprise Integrator~~Cicero software product include Merrill Lynch, Nationwide Financial Services, IBM and ~~Geneva Business Process Automator. These products were~~N.E.W. Customer Service Companies. We have also sold to ~~EM Software Solutions~~intelligence, security, law enforcement and other government users.

In addition to our Cicero® product, our Ensuredmail email encryption products address information and security compliance requirements from the individual to the enterprise. The Ensuredmail suite of products includes the Enterprise Email Encryption Server, and Email Encryption Desktop for individual use. All of the Ensuredmail products use 3-DES or AES encryption technology and are tested and federally certified FIPS 140-1. Ensuredmail products are easy to install, use and administer. They also use rules and other utilities that allow users to flag messages including attachments for encryption. Unlike other secure email encryption software applications, Ensuredmail products do not require the recipient to install software or use special secure keys to open and read messages and attachments. In conjunction with Cicero software, Ensuredmail email encryption technology has been used to secure information shared in Cicero integration projects.

Some of the companies using Ensuredmail server products include the United Postal Service, E-Loan, the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives, Science Application International Association, Wilmington Trust, Delta Dental, Truog-Ryding Company, and hundreds of individual users with the Ensuredmail Email Desktop product. Ensuredmail customers use email encryption primarily to secure outbound messages with confidential information for compliance (e.g., HIPAA) and security purposes.

Cicero Inc. ~~in October 2002. We were~~was incorporated in New York in 1988 as Level 8 Systems, Inc. and re-incorporated in Delaware in 1999. ~~Effective January 2003, our~~Our principal executive offices ~~were relocated to 214 Carnegie Center, Suite 303, Princeton,~~are located at 1433 State Highway 34, Building C, Farmingdale, New Jersey ~~08540~~07727 and our telephone number is ~~(609) 987-9001.~~(732) 919-3150. Our web site is ~~located at www.level8.com. STRATEGIC REALIGNMENT~~ www.ciceroinc.com.

Strategic Realignment

Historically, we have 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~~“Enterprise Application ~~Integration"~~Integration” or ~~"EAI." Historically,~~“EAI.” 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. In addition, traditional EAI is often times too costly and time-consuming to implement. It also requires a group of programmers with the necessary skills and ongoing invasive changes to application software code throughout the enterprise. With ~~Cicero,~~Cicero® software, which non-invasively integrates the functionality of these disparate applications at the desktop, we believe that we have found a ~~novel~~unique solution to this disparate application problem. We believe that our existing experience in and understanding of the EAI marketplace coupled with the unique ~~Cicero~~Cicero® software 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. 19~~ contact centers, as well as our other target markets.

We originally licensed the ~~Cicero~~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~~Cicero® in perpetuity (subject to Merrill Lynch's rights to terminate in the event of bankruptcy or a change in control of ~~Level 8)~~the Company) and to grant ownership rights in the ~~Cicero~~Cicero® trademark. ~~We are indemnified by~~ Merrill Lynch indemnifies us with regard to the rights granted to us by them. Consideration for the original ~~Cicero~~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~~Cicero® or related maintenance services. The royalties over the life of the agreement are not payable in excess of $20,000,000. 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 Geneva Enterprise Integrator and Geneva Business Process Automator. In April 2001, management reassessed the methodology by which the Company would make operating decisions and allocate resources. Operating decisions and performance assessments were 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 (Geneva Integration Broker, Geneva Message Queuing, Geneva XIPC and Geneva AppBuilder).$20 million. We have ~~sold most of~~completely re-engineered the ~~assets comprising the Messaging~~Cicero® software to provide increased functionality 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 on the accompanying balance sheets for 2002 and 2003 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. Geneva Integration Broker is the only current software product represented in the Messaging and Application Engineering segment. much more powerful integration capabilities.

Our future revenues are entirely dependent on acceptance of ~~a newly developed and marketed product, Cicero,~~Cicero® which has limited success in commercial markets to date. We have experienced negative cash flows from operations for the past three years. At December 31, ~~2003, we~~2006, the Company had a working capital deficiency of approximately ~~$6,555.~~$7.9 million. Accordingly, there is substantial doubt that the Company can continue as a going concern, and the independent auditor’s report accompanying our financial statements raises doubt about our ability to continue as a going concern. In order to address these issues and to obtain adequate financing for our operations for the next twelve months, we are actively promoting and expanding ~~its~~our product line and ~~continues~~continue to negotiate with significant customers ~~that~~who have ~~begun or finalized~~demonstrated interest in the ~~"proof of concept" stage with the Cicero~~Cicero® technology. We ~~believe that we~~ are 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~~viability. Cicero® software is a new “category defining” product in that most EAI projects are performed at the server level and Cicero’s integration occurs at the desktop level without the need to open and modify the underlying code for those applications being integrated. Many companies are not aware of ~~the Company.~~this new technology or tend to look toward more traditional and accepted approaches. We

are attempting to solve the former problem by improving the ~~market's~~market’s knowledge and understanding of Cicero through increased marketing and leveraging its limited number of reference ~~accounts.~~accounts while enhancing its list of resellers and system integrators to assist in the sales and marketing process. Additionally, we are ~~continuously~~ seeking additional equity capital or other strategic transactions in the near term to provide additional liquidity. ~~We closed~~

Plan of Recapitalization

In December 2006, we completed our Plan of Recapitalization, approved by our stockholders at a Special Stockholders Meeting held on November 16, 2006. The Plan included the ~~strategic acquisition~~following elements: