astea8k.htm
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Date of
Report (Date of earliest event reported): March 25, 2008
ASTEA INTERNATIONAL
INC.
(Exact
name of registrant as specified in its charter)
Delaware
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0-26330
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23-2119058
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(State
or Other Jurisdiction
of
Incorporation)
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(Commission
File
Number)
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(I.R.S.
Employer
Identification
No.)
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240
Gibraltar Road
Horsham,
Pennsylvania 19044
(Address
of principal executive offices, including zip code)
(215)
682-2500
(Registrant's
telephone number, including area code)
Not
Applicable
(Former
name or former address, if changed since last report)
Check the
appropriate box below if the form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
o Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
o Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13-4(c))
ITEM
4.02(a)
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Non-Reliance
on Previously Issued Financial Statements or a Related Audit Report or
Completed Interim Review.
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In
conjunction with the audit of the consolidated financial statements of Astea
International Inc. (the “Company”) for the year ended December 31, 2007 (the
“2007 audit”) by the Company’s independent registered public accounting firm,
Grant Thornton LLP (“Grant Thornton”), the Company reviewed its accounting for
certain license contracts entered into during the second and third quarters of
2006 (the “Contracts”). During this review, management identified a possible
error in the Company’s accounting for revenue recognition relating to the
Contracts and notified Grant Thornton and the Audit Committee of the Company’s
Board of Directors. The Audit Committee and Grant Thornton discussed
the matter and management continued working to resolve the issue. On
March 25th, 2008,
the Audit Committee concluded, based on recommendations from management, that
the Company’s unaudited interim consolidated financial statements for the
quarterly periods ended June 30, 2006, September 30, 2006, December 31, 2006,
March 31, 2007, June 30, 2007 and September 30, 2007, as well as its audited
consolidated financial statements for the year ended December 31, 2006, should
no longer be relied on and should be restated. In addition,
management notified its previous independent registered public accounting firm,
BDO Seidman, LLP, which had rendered an audit report on the financial statements
for fiscal 2006, of the matters discussed in this Form 8-K. All
revenues related to the Contracts, including license, service and maintenance
revenues, will be recognized in 2007 rather than 2006 as previously
reported. The Company has already received all the cash related to
the Contracts.
The
modifications to the restated consolidated financial statements relate to
revenues and deferred revenues. These changes affect two of the
elements of cash flow from operations, the effect of which will be to increase
net loss in 2006 and increase net income in 2007 by an equal amount, as well as
increase deferred revenues in 2006 and decrease deferred revenues in 2007 by an
equal amount. The modifications will not have any impact to net cash
flow from operations as reported in the consolidated statements of cash
flows. Management is still in the process of quantifying the full
impact of this restatement and cannot accurately disclose the total reduction of
revenues in 2006 and the related increase in revenues in 2007 at this time, nor
can management currently provide any assurance that further analysis will not
reveal additional errors which impact the Company’s previously issued financial
statements. The impact of the changes on the results of operations
for the interim quarters of 2006 and 2007 cannot be accurately determined at
this time.
The
Contracts contained numerous licenses and modules that were purchased by
customers and delivered to them in the quarters in which the Company recognized
the revenues related to the Contracts. Included in the Contracts were
two or three add-on modules for an analytical tool. The main
component of the tool and one of the analytical modules was included in the
delivery of the software to the customers. However, there were one or
two analytical modules that could not be delivered with the
software. The Company originally estimated a value for the
undelivered modules and deferred the revenues related to these modules until
they were delivered, which occurred in the first and second quarters of
2007. At the time the Company filed its 2006 Form 10-K, which
included audited consolidated financial statements for the year ended December
31, 2006, it believed that the license revenues on the Contracts were properly
recognized and the deferral of revenues on the undelivered modules was properly
reported. In addition, the
Company
believed that the maintenance and service revenues related to the contracts were
properly recognized as revenues in 2006.
Notwithstanding
the foregoing, in conjunction with the 2007 audit it was determined that the
Company does not have vendor specific objective evidence (“VSOE”) for the
undelivered analytical module software licenses. According to AICPA
SOP 97-2 “Software Revenue
Recognition” and related accounting guidance, undelivered elements to a
sale must have VSOE in order to recognize revenue for the delivered elements
that do not have VSOE. The Company uses the residual method for
recognizing revenues on its software licenses, including the
Contracts. In such instances, the accounting rules state that if VSOE
for undelivered software modules cannot be determined, then all revenue related
to that sale must be deferred until the undelivered elements are
delivered. Accordingly, all revenues for each Contract, including
license, service and maintenance revenues, must be deferred until the delivery
and acceptance of the final undelivered element. Therefore, the
Company will be restating its consolidated financial statements to defer all
license revenues and service and maintenance revenues previously reflected as
having been recognized in 2006 in relation to the Contracts.
The
Company anticipates filing amendments to its Forms 10-Q for the affected
quarterly periods to reflect the corrections to its quarterly consolidated
financial statements in the near future. The Company’s Annual Report
on Form 10-K for fiscal 2007 will reflect these adjustments and contain
additional information regarding this matter. The Company anticipates that it
will need additional time to make the necessary adjustments to the 2007 Form
10-K, and will likely file a Form 12b-25 to request a fifteen day extension of
the March 31, 2008 filing deadline for the Form 10-K.
Forward-Looking
Statements
Forward-looking
statements in this 8-K are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements include the statements regarding potential errors in previously
issued financial statements; the nature, magnitude and scope of potential errors
and the Company's investigation and analysis of such potential errors. These
statements are just predictions reflecting management’s current judgment and
involve risks and uncertainties, such that actual results may differ
significantly. These risks include, but are not limited to, additional actions
resulting from the Company's continuing internal review, as well as the review
and audit by the Company's independent auditors of restated financial
statements, if any, and actions resulting from discussions with or required by
the Securities and Exchange Commission, along with other risks and uncertainties
discussed in the Company’s Annual Report on Form 10-K for the fiscal 2006 and
the Company’s Quarterly Reports on Form 10-Q for subsequent quarters. The
Company disclaims any obligation to update any forward-looking
statements.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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Astea
International Inc.
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Date: March
25, 2008
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By: _______________________________
Name:
Title:
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