astea10qa.htm
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
___________________________________________
FORM
10-Q/A
(Mark
One)
[X]
Quarterly
Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
For the
quarterly period ended September
30,
2007
or
[
] Transition Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934.
For the
transition period
from _______________ to _______________
Commission
File Number: 0-26330
ASTEA
INTERNATIONAL INC.
(Exact
name of registrant as specified in its charter)
Delaware
|
23-2119058
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
incorporation
or organization)
|
Identification
No.)
|
|
240 Gibraltar Road, Horsham,
PA
|
|
19044
|
|
(Address
of principal executive offices)
|
|
(Zip
Code)
|
Registrant’s
telephone number, including area code: (215)
682-2500
N/A
(Former
name, former address and former fiscal year, if changed since last
report)
Indicate
by check mark whether the registrant: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of
“accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange
Act. (Check One):
Large
accelerated filer __
|
|
Accelerated
filer __
|
|
Non-accelerated
filer X
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes No X
As of
November 7, 2007, 3,591,185 shares of the registrant’s Common Stock, par value
$.01 per share, were outstanding.
This Form
10-Q/A is being filed to amend the Astea International Inc. (the “Company”) Form
10-Q/A for the period ended September 30, 2007 in order to reflect the
restatement of the Company’s Consolidated Financial Statements and amendments to
related disclosures as of September 30, 2007 and for the three and nine month
periods ended September 30, 2007 and 2006. The restatement arose from
the determination of the Company’s Audit Committee as reported to them by
Management, that an error in the Company’s accounting for revenue recognition on
certain license contracts entered into at the end of 2005 (“the 2005 Contract”)
and in the second and third quarters of 2006 (“the 2006 contracts”) had
occurred. The contracts contained certain undeliverable
elements. Therefore, all revenues related to the contracts, including
license and service and maintenance revenue were deferred from the time the
contacts were signed, until the undelivered elements were
delivered. Delivery of the 2005 contract occurred in the quarter
ending March 31, 2007 and two of the four 2006 Contacts were also delivered in
the quarter ended March 31, 2007. Delivery of the other two contracts
occurred in the quarter ended June 30, 2007. All related revenue to
the contracts in which undelivered elements were delivered was recognized in the
quarter in which the delivery occurred.
In
addition the Company determined that a software implementation agreement signed
in the fourth quarter of 2007 contained a reference to an unreleased upgrade of
the software. The software licensing agreement was signed in the
third quarter of 2007. It was determined that the project
implementation plan should be considered as part of the original software
licensing agreement. Since the implementation plan referred to an
unreleased version of the Company’s software for which no VSOE exists, all
revenue related to the transaction, including license and services and
maintenance should be deferred until the specified upgrade is
delivered. Accordingly, license revenue and service and maintenance
revenue was deferred from the third quarter of 2007. The upgrade was
delivered to the customer in the first quarter of 2008.
The
impact of the restatements presented in this report is to decrease revenue and
increase deferred revenue in the quarter ended September 30, 2006 and for the
nine month period ended September 30, 2006. The impact of the
restatements presented for the quarter ended September 30, 2007 is to decrease
revenues and increase deferred revenues. For the nine months
ended September 30, 2007, the impact of the restatements is to increase revenues
and decrease deferred revenues.
Generally,
no attempt has been made in this Form 10-Q/A to modify or update other
disclosures presented in the original report on Form 10-Q except as required to
reflect the effects of the restatement. This Form 10-Q/A does not
reflect events occurring after the filing of the original Form 10-Q or modify or
update those disclosures. Information not affected by the restatement
is unchanged and reflects the disclosures made at the time of the original
filing of the Form 10-Q with the Securities and Exchange Commission on May XX,
2007. Accordingly, this Form 10-Q/A should be read in conjunction
with the Company’s filings made with the Securities and Exchange Commission
subsequent to the filing of the original Form 10-Q. The following
items have been amended as a result of the restatement:
|
·
|
Part
I – Item 1 – Financial Statements
|
|
·
|
Part
I – Item 2 – Management’s Discussion and Analysis of Financial Condition
and Results of Operations
|
FORM
10-Q
QUARTERLY
REPORT
INDEX
|
|
Page No.
|
|
|
|
Facing
Sheet
|
|
|
|
|
Explanatory
Note
|
|
|
|
|
Index
|
|
|
|
|
PART I – FINANCIAL
INFORMATION
|
|
|
|
|
Item
1.
|
Consolidated
Financial Statements
|
|
|
|
|
|
Consolidated
Balance Sheets
|
|
|
|
|
|
Consolidated
Statements of Operations (Unaudited)
|
|
|
|
|
|
Consolidated
Statements of Cash Flows (Unaudited)
|
|
|
|
|
|
Notes
to Unaudited Consolidated Financial Statements
|
|
|
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial
|
|
|
Condition
and Results of Operations
|
|
|
|
|
Item
3.
|
Quantitative
and Qualitative Disclosure About Market Risk
|
|
|
|
|
Item
4T.
|
Controls
and Procedures
|
|
|
|
|
PART II – OTHER
INFORMATION
|
|
|
|
|
Item
1.
|
Legal
Proceedings
|
|
|
|
|
Item
1A.
|
Risk
Factor
|
|
|
|
|
Item
6.
|
Exhibits
and Reports on Form 8-K
|
|
|
|
|
|
Signatures
|
|
PART I – FINANCIAL
INFORMATION
Item
1. CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE
SHEETS
|
|
September
30,
|
|
|
December
31,
|
|
|
|
2007
(Unaudited)
(Restated)
|
|
|
2006
(Restated)
|
|
ASSETS
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
2,100,000 |
|
|
$ |
3,120,000 |
|
Restricted cash
|
|
|
150,000 |
|
|
|
225,000 |
|
Receivables, net of reserves of $268,000 and $163,000
|
|
|
7,459,000 |
|
|
|
6,860,000 |
|
Prepaid expenses and other
|
|
|
422,000 |
|
|
|
423,000 |
|
Total current assets
|
|
|
10,131,000 |
|
|
|
10,628,000 |
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
484,000 |
|
|
|
648,000 |
|
Intangibles, net
|
|
|
1,509,000 |
|
|
|
1,719,000 |
|
Capitalized software, net
|
|
|
3,470,000 |
|
|
|
3,636,000 |
|
Goodwill
|
|
|
1,540,000 |
|
|
|
1,253,000 |
|
Other assets
|
|
|
171,000 |
|
|
|
175,000 |
|
Total assets
|
|
$ |
17,305,000 |
|
|
$ |
18,059,000 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$ |
4,022,000 |
|
|
$ |
3,930,000 |
|
Deferred revenues
|
|
|
6,082,000 |
|
|
|
10,278,000 |
|
Total current liabilities
|
|
|
10,104,000 |
|
|
|
14,208,000 |
|
|
|
|
|
|
|
|
|
|
Long-term
liabilities:
|
|
|
|
|
|
|
|
|
Deferred income tax
|
|
|
36,000 |
|
|
|
36,000 |
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity:
|
|
|
|
|
|
|
|
|
Common stock, $.01 par value, 25,000,000 shares
authorized,
issued 3,591,000 and 3,591,000
|
|
|
36,000 |
|
|
|
36,000 |
|
Additional paid-in capital
|
|
|
27,951,000 |
|
|
|
27,532,000 |
|
Cumulative translation adjustment
|
|
|
(825,000
|
) |
|
|
(911,000
|
) |
Accumulated deficit
|
|
|
(19,789,000
|
) |
|
|
(22,634,000
|
) |
Less: treasury stock at cost, 42,000 and 42,000 shares
|
|
|
(208,000
|
) |
|
|
(208,000
|
) |
Total stockholders’ equity
|
|
|
7,165,000 |
|
|
|
3,815,000 |
|
Total liabilities and stockholders’ equity
|
|
$ |
17,305,000 |
|
|
$ |
18,059,000 |
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to the consolidated financial statements.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
|
|
Three
Months
Ended
September 30,
|
|
|
Nine
Months
Ended
September 30,
|
|
|
|
2007
(Restated)
|
|
|
2006
(Restated)
|
|
|
2007
(Restated)
|
|
|
2006
(Restated)
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Software license fees
|
|
$ |
2,119,000 |
|
|
$ |
1,177,000 |
|
|
$ |
6,247,000 |
|
|
$ |
2,095,000 |
|
Services and maintenance
|
|
|
5,034,000 |
|
|
|
3,709,000 |
|
|
|
17,300,000 |
|
|
|
10,708,000 |
|
Total revenues
|
|
|
7,153,000 |
|
|
|
4,886,000 |
|
|
|
23,547,000 |
|
|
|
12,803,000 |
|
Costs
and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of software license fees
|
|
|
861,000 |
|
|
|
422,000 |
|
|
|
1,967,000 |
|
|
|
1,172,000 |
|
Cost of services and maintenance
|
|
|
3,140,000 |
|
|
|
2,418,000 |
|
|
|
8,771,000 |
|
|
|
7,721,000 |
|
Product development
|
|
|
823,000 |
|
|
|
896,000 |
|
|
|
3,364,000 |
|
|
|
2,761,000 |
|
Sales and marketing
|
|
|
1,368,000 |
|
|
|
1,881,000 |
|
|
|
3,951,000 |
|
|
|
4,496,000 |
|
General and administrative
|
|
|
791,000 |
|
|
|
735,000 |
|
|
|
2,736,000 |
|
|
|
2,893,000 |
|
Total costs and expenses
|
|
|
6,983,000 |
|
|
|
6,352,000 |
|
|
|
20,789,000 |
|
|
|
19,043,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations
|
|
|
170,000 |
|
|
|
(1,466,000
|
) |
|
|
2,758,000 |
|
|
|
(6,240,000
|
) |
Interest
income, net
|
|
|
22,000 |
|
|
|
48,000 |
|
|
|
87,000 |
|
|
|
183,000 |
|
Income
(loss) before income taxes
|
|
|
192,000 |
|
|
|
(1,418,000
|
) |
|
|
2,845,000 |
|
|
|
(6,057,000
|
) |
Income
tax expense
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Net
income (loss)
|
|
$ |
192,000 |
|
|
$ |
(1,418,000 |
) |
|
$ |
2,845,000 |
|
|
$ |
(6,057,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$ |
192,000 |
|
|
$ |
(1,418,000 |
) |
|
$ |
2,845,000 |
|
|
$ |
(6,057,000 |
) |
Cumulative
translation adjustment
|
|
|
41,000 |
|
|
|
(1,000
|
) |
|
|
86,000 |
|
|
|
(59,000
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income (loss)
|
|
$ |
233,000 |
|
|
$ |
(1,419,000 |
) |
|
$ |
2,931,000 |
|
|
$ |
(6,116,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
income (loss) per share
|
|
$ |
.05 |
|
|
$ |
(0.40 |
) |
|
$ |
0.80 |
|
|
$ |
(1.71 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
income (loss) per share
|
|
$ |
.05 |
|
|
$ |
(0.40 |
) |
|
$ |
0.80 |
|
|
$ |
(1.71 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
outstanding used in computing
basic
income (loss) per share
|
|
|
3,549,000 |
|
|
|
3,549,000 |
|
|
|
3,549,000 |
|
|
|
3,546,000 |
|
Shares
outstanding used in computing
diluted
income (loss) per share
|
|
|
3,551,000 |
|
|
|
3,549,000 |
|
|
|
3,559,000 |
|
|
|
3,546,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to the consolidated financial statements.
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Unaudited)
|
|
Nine
Months
Ended
September 30,
|
|
|
|
2007
(Restated)
|
|
|
2006
(Restated)
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Net income (loss)
|
|
$ |
2,845,000 |
|
|
$ |
(6,057,000 |
) |
Adjustments to reconcile net income (loss) to net cash
provided
(used)
by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
2,149,000 |
|
|
|
1,737,000 |
|
Increase
in allowance for doubtful accounts
|
|
|
182,000 |
|
|
|
209,000 |
|
Stock based compensation
|
|
|
419,000 |
|
|
|
233,000 |
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
(643,000
|
) |
|
|
(955,000
|
) |
Prepaid
expenses and other
|
|
|
- |
|
|
|
- |
|
Accounts payable and accrued expenses
|
|
|
106,000 |
|
|
|
(77,000
|
) |
Deferred revenues
|
|
|
(4,194,000
|
) |
|
|
2,270,000 |
|
Other assets
|
|
|
5,000 |
|
|
|
2,000 |
|
Net
cash provided (used) by operating activities
|
|
|
869,000 |
|
|
|
(2,638,000
|
) |
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Reduction in restricted cash
|
|
|
75,000 |
|
|
|
- |
|
Purchases of property and equipment
|
|
|
(153,000
|
) |
|
|
(106,000
|
) |
Purchase of short term investments
|
|
|
(500,000
|
) |
|
|
- |
|
Sale
of short term investments
|
|
|
500,000 |
|
|
|
- |
|
Capitalized software development costs
|
|
|
(1,450,000
|
) |
|
|
(2,139,000
|
) |
Earnout payment
|
|
|
(287,000
|
) |
|
|
(133,00
|
) |
Net
cash used in investing activities
|
|
|
(1,815,000
|
) |
|
|
(2,378,000
|
) |
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from exercise of stock options and employee
stock
purchase plan
|
|
|
- |
|
|
|
19,000 |
|
Cash flow from financing activities
|
|
|
- |
|
|
|
19,000 |
|
Effect of exchange rate changes on cash
|
|
|
(74,000
|
) |
|
|
(126,000
|
) |
Net (decrease) in cash and cash equivalents
|
|
|
(1,020,000
|
) |
|
|
(5,123,000
|
) |
Cash, beginning of period
|
|
|
3,120,000 |
|
|
|
9,484,000 |
|
Cash and cash equivalents balance, end of period
|
|
$ |
2,100,000 |
|
|
$ |
4,361,000 |
|
See
accompanying notes to the consolidated financial statements.
Item
1. CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
ASTEA INTERNATIONAL
INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
The
consolidated financial statements at September 30, 2007 and for the three and
nine month periods ended September 30, 2007 and 2006 of Astea International Inc.
and subsidiaries (“Astea” or the "Company") are unaudited and reflect all
adjustments (consisting only of normal recurring adjustments) which are, in the
opinion of management, necessary for a fair presentation of the financial
position and operating results for the interim periods. The
consolidated financial statements should be read in conjunction with the notes
thereto, together with Management’s Discussion and Analysis of Financial
Condition and Results of Operations, contained in this Form 10-Q/A and in the
Company’s 2006 and 2007 Annual Report on Form 10-K which are hereby incorporated
by reference in this quarterly report on Form 10-Q/A. Results of
operations and cash flows for the nine months ended September 30, 2007 are not
necessarily indicative of the results that may be expected for the full
year.
In
conjunction with the preparation of the 2007 Form 10-K, management identified
errors in accounting for certain license contracts which were executed in 2006
(the “2006 Contacts”) and 2005 (the “2005 Contact). In addition,
management identified an error with a contract executed in the quarter ended
September 30, 2007 (the “2007 Contract”).
In regard
to the 2005 Contract, the customer had been promised a specified
upgrade. At the time the contract was signed, the Company estimated a
value for the specified upgrade and deferred that revenue until the upgrade was
delivered. At the time the Company filed its 2006 and 2005 Forms 10-K
and its quarterly financial statements in 2006, it recognized the license
revenue as well as service and maintenance revenue as services were
provided.
The 2006
Contracts (four in total) included add-on analytical modules that had not, at
that time, been released. The 2006 Contracts contained numerous
licenses and modules that were purchased and delivered to the customers in the
quarters in which the Company recognized the revenues related to the
Contracts. 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. In addition, the Company recognized service
and maintenance revenue related to these contracts as services were
performed.
Notwithstanding
the preceding, during the 2007 audit it was determined that the Company does not
have vendor specific objective evidence (“VSOE”) for the specified upgrade nor
the undelivered analytical module software licenses. According to
AICPA SOP 97-2 “Software Revenue Recognition” and related statements,
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. 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, including license, service and maintenance revenues, must be
deferred until the delivery and acceptance of the final undelivered
element. Therefore, the Company restated its consolidated financial
statements for 2005 and 2006 to defer all license revenues and service and
maintenance revenues recognized in 2005 and 2006 in relation to the
Contracts. The undelivered modules were delivered in the first and
second quarters of 2007. Upon the final delivery, all deferred
revenues were recognized.
In regard
to the 2007 Contract, the Company determined that a software implementation
agreement contained a reference to an unreleased upgrade of the
software. The software licensing agreement and the software
implementation agreement were signed in the third and fourth quarter of 2007,
respectively. Based on AICPA Technical Practice Aid 5100.39, Software Recognition for Multiple
Element Arrangements, under certain conditions, multiple agreements
between a vendor and customer should be considered as one
agreement. In this case, it was determined that the project
implementation plan should be considered as part of the original software
licensing agreement. Since the implementation plan referred to an
unreleased version of the Company’s software for which no VSOE exists, all
revenue related to the transaction, including license and services and
maintenance should be deferred until the specified upgrade is
delivered. The upgrade was delivered to the customer in the first
quarter of 2008. It is expected that all of the deferred revenue
related to this contract will be recognized at that time.
The
impact of the adjustment on the quarter ended September 30, 2007 contained in
this Form 10-Q/A is to decrease license revenue by $674,000 and service and
maintenance revenue by $26,000 on the Consolidated Statements of Operations and
to increase deferred revenues by $700,000 on the Consolidated Balance
Sheets. The impact of the restatement on the quarter ended
September 30, 2006 contained in this Form 10-Q/A is to decrease license revenue
by $1,035,000 and decrease service and maintenance revenue by $428,000 on the
Consolidated Statements of Operations and to increase deferred revenues by
$1,463,000 on the Consolidated Balance Sheets. For the
nine months ended September 30, 2007, the impact of the restatement is to
increase license revenue by $748,000 and increase service and maintenance
revenue by $843,000 on the Consolidated Statements of Operations and to decrease
deferred revenues by $1,591,000 on the Consolidated Balance
Sheets For the nine months ended September 30, 2006, the impact
of the restatement is to decrease license revenue by $1,239,000 and decrease
service and maintenance revenue by $548,000 on the Consolidated Statements of
Operations and to increase deferred revenues by $1,787,000 on the Consolidated
Balance Sheets. The Consolidated Statements of Cash Flows and Notes
to Unaudited Financial Statements have been restated where applicable to reflect
the adjustments.
The
adjustment to net income (loss) for the three and nine months ended September
30, 2007 and 2006 is summarized below:
|
|
Three
Months Ended
September
30,
|
|
|
Nine
Months Ended
September
30,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss), as previously
reported
|
|
$ |
892,000 |
|
|
$ |
45,000 |
|
|
$ |
1,254,000 |
|
|
$ |
(4,270,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment
(pre-tax):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
License
revenue
|
|
|
(674,000
|
) |
|
|
(1,035,000
|
) |
|
|
748,000 |
|
|
|
(1,239,000
|
) |
Service
and maintenance revenue
|
|
|
(26,000
|
) |
|
|
(428,000
|
) |
|
|
843,000 |
|
|
|
(548,000
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax
effect of restatement adjustment
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss), as restated
|
|
$ |
192,000 |
|
|
$ |
(1,418,000 |
) |
|
$ |
2,845,000 |
|
|
$ |
(6,057,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
income (loss) per share-as
restated
|
|
$ |
0.05 |
|
|
$ |
(0.40 |
) |
|
$ |
0.80 |
|
|
$ |
(1.71 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
income (loss) per share-as restated
|
|
$ |
0.05 |
|
|
$ |
(0.40 |
) |
|
$ |
0.80 |
|
|
$ |
(1.71 |
) |
The
Consolidated Balance Sheets as of September 30, 2007 and December 31, 2006,
included in the Form 10-Q/A have been restated to include the effect of this
adjustment as follows:
PART I - FINANCIAL
INFORMATION
Item
1. CONSOLIDATED FINANCIAL STATEMENTS
ASTEA INTERNATIONAL
INC.
CONSOLIDATED BALANCE
SHEETS
|
|
September
30, 2007
(Unaudited)
|
|
|
December
31, 2006
|
|
|
|
As
previously
reported
|
|
|
As
restated
|
|
|
As
previously
reported
|
|
|
As
restated
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
2,100,000 |
|
|
$ |
2,100,000 |
|
|
$ |
3,120,000 |
|
|
$ |
3,120,000 |
|
Restricted cash
|
|
|
150,000 |
|
|
|
150,000 |
|
|
|
225,000 |
|
|
|
225,000 |
|
Receivables, net of reserves of $268,000 and
$163,000
|
|
|
7,459,000 |
|
|
|
7,459,000 |
|
|
|
6,860,000 |
|
|
|
6,860,000 |
|
Prepaid expenses and other
|
|
|
422,000 |
|
|
|
422,000 |
|
|
|
423,000 |
|
|
|
423,000 |
|
Total current assets
|
|
|
10,131,000 |
|
|
|
10,131,000 |
|
|
|
10,628,000 |
|
|
|
10,628,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
484,000 |
|
|
|
484,000 |
|
|
|
648,000 |
|
|
|
648,000 |
|
Intangibles, net
|
|
|
1,509,000 |
|
|
|
1,509,000 |
|
|
|
1,719,000 |
|
|
|
1,719,000 |
|
Capitalized software, net
|
|
|
3,470,000 |
|
|
|
3,470,000 |
|
|
|
3,636,000 |
|
|
|
3,636,000 |
|
Goodwill
|
|
|
1,540,000 |
|
|
|
1,540,000 |
|
|
|
1,253,000 |
|
|
|
1,253,000 |
|
Other assets
|
|
|
171,000 |
|
|
|
171,000 |
|
|
|
175,000 |
|
|
|
175,000 |
|
Total assets
|
|
$ |
17,305,000 |
|
|
$ |
17,305,000 |
|
|
$ |
18,059,000 |
|
|
$ |
18,059,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$ |
4,022,000 |
|
|
$ |
4,022,000 |
|
|
$ |
3,930,000 |
|
|
$ |
3,930,000 |
|
Deferred revenues
|
|
|
5,382,000 |
|
|
|
6,082,000 |
|
|
|
7,987,000 |
|
|
|
10,278,000 |
|
Total current liabilities
|
|
|
9,404,000 |
|
|
|
10,104,000 |
|
|
|
11,917,000 |
|
|
|
14,208,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes
|
|
|
36,000 |
|
|
|
36,000 |
|
|
|
36,000 |
|
|
|
36,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $.01 par value, 25,000,000
shares authorized, issued 3,591,000 and
3,591,000
|
|
|
36,000 |
|
|
|
36,000 |
|
|
|
36,000 |
|
|
|
36,000 |
|
Additional paid-in capital
|
|
|
27,951,000 |
|
|
|
27,951,000 |
|
|
|
27,532,000 |
|
|
|
27,532,000 |
|
Cumulative translation adjustment
|
|
|
(825,000
|
) |
|
|
(825,000
|
) |
|
|
(911,000
|
) |
|
|
(911,000
|
) |
Accumulated deficit
|
|
|
(19,089,000
|
) |
|
|
(19,789,000
|
) |
|
|
(20,343,000
|
) |
|
|
(22,634,000
|
) |
Less: treasury stock at cost, 42,000 and 42,000
shares
|
|
|
(208,000
|
) |
|
|
(208,000
|
) |
|
|
(208,000
|
) |
|
|
(208,000
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders’ equity
|
|
|
7,865,000 |
|
|
|
7,165,000 |
|
|
|
6,106,000 |
|
|
|
3,815,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity
|
|
$ |
17,305,000 |
|
|
$ |
17,305,000 |
|
|
$ |
18,059,000 |
|
|
$ |
18,059,000 |
|
See
accompanying notes to the consolidated financial statements.
The
Consolidated Statements of Operations for the Three Months Ended September 30,
2007 and 2006, included in the Form 10-Q/A have been restated to include the
effects of the adjustment as follows:
ASTEA INTERNATIONAL
INC.
CONSOLIDATED STATEMENTS OF
OPERATIONS
|
|
Three
Months
Ended
September 30,
|
|
|
|
2007
(Unaudited)
|
|
|
2006
(Unaudited)
|
|
|
|
As
previously
reported
|
|
|
As
restated
|
|
|
As
previously
reported
|
|
|
As
restated
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Software license fees
|
|
$ |
2,793,000 |
|
|
$ |
2,119,000 |
|
|
$ |
2,212,000 |
|
|
$ |
1,177,000 |
|
Services and maintenance
|
|
|
5,060,000 |
|
|
|
5,034,000 |
|
|
|
4,137,000 |
|
|
|
3,709,000 |
|
Total revenues
|
|
|
7,853,000 |
|
|
|
7,153,000 |
|
|
|
6,349,000 |
|
|
|
4,886,000 |
|
Costs
and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of software license fees
|
|
|
861,000 |
|
|
|
861,000 |
|
|
|
422,000 |
|
|
|
422,000 |
|
Cost of services and maintenance
|
|
|
3,140,000 |
|
|
|
3,140,000 |
|
|
|
2,418,000 |
|
|
|
2,418,000 |
|
Product development
|
|
|
823,000 |
|
|
|
823,000 |
|
|
|
896,000 |
|
|
|
896,000 |
|
Sales and marketing
|
|
|
1,368,000 |
|
|
|
1,368,000 |
|
|
|
1,881,000 |
|
|
|
1,881,000 |
|
General and administrative
|
|
|
791,000 |
|
|
|
791,000 |
|
|
|
735,000 |
|
|
|
735,000 |
|
Total costs and expenses
|
|
|
6,983,000 |
|
|
|
6,983,000 |
|
|
|
6,352,000 |
|
|
|
6,352,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from operations
|
|
|
870,000 |
|
|
|
170,000 |
|
|
|
(3,000
|
) |
|
|
(1,466,000
|
) |
Interest
income, net
|
|
|
22,000 |
|
|
|
22,000 |
|
|
|
48,000 |
|
|
|
48,000 |
|
Income
(loss) before income taxes
|
|
|
892,000 |
|
|
|
192,000 |
|
|
|
45,000 |
|
|
|
(1,418,000
|
) |
Income
tax expense
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Net
income (loss)
|
|
$ |
892,000 |
|
|
$ |
192,000 |
|
|
$ |
45,000 |
|
|
$ |
(1,418,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share
|
|
$ |
0.25 |
|
|
$ |
0.05 |
|
|
$ |
0.01 |
|
|
$ |
(0.40 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
outstanding used in computing
basic
income (loss) per share
|
|
|
3,549,000 |
|
|
|
3,549,000 |
|
|
|
3,549,000 |
|
|
|
3,549,000 |
|
Shares
outstanding used in computing
diluted
income (loss) per share
|
|
|
3,551,000 |
|
|
|
3,551,000 |
|
|
|
3,559,000 |
|
|
|
3,559,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to the consolidated financial statements.
The
Consolidated Statements of Operations for the Nine Months Ended September 30,
2007 and 2006, included in the Form 10-Q/A have been restated to include the
effects of the adjustment as follows:
ASTEA INTERNATIONAL
INC.
CONSOLIDATED STATEMENTS OF
OPERATIONS
|
|
Nine
Months Ended
|
|
|
|
September
30,
|
|
|
|
2007
(Unaudited)
|
|
|
2006
(Unaudited)
|
|
|
|
As
previously
reported
|
|
|
As
restated
|
|
|
As
previously
reported
|
|
|
As
restated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Software license fees
|
|
$ |
5,499,000 |
|
|
$ |
6,247,000 |
|
|
$ |
3,334,000 |
|
|
$ |
2,095,000 |
|
Services and maintenance
|
|
|
16,457,000 |
|
|
|
17,300,000 |
|
|
|
11,256,000 |
|
|
|
10,708,000 |
|
Total revenues
|
|
|
21,956,000 |
|
|
|
23,547,000 |
|
|
|
14,590,000 |
|
|
|
12,803,000 |
|
Costs
and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of software license fees
|
|
|
1,967,000 |
|
|
|
1,967,000 |
|
|
|
1,172,000 |
|
|
|
1,172,000 |
|
Cost of services and maintenance
|
|
|
8,771,000 |
|
|
|
8,771,000 |
|
|
|
7,721,000 |
|
|
|
7,721,000 |
|
Product development
|
|
|
3,364,000 |
|
|
|
3,364,000 |
|
|
|
2,761,000 |
|
|
|
2,761,000 |
|
Sales and marketing
|
|
|
3,951,000 |
|
|
|
3,951,000 |
|
|
|
4,496,000 |
|
|
|
4,496,000 |
|
General and administrative
|
|
|
2,736,000 |
|
|
|
2,736,000 |
|
|
|
2,893,000 |
|
|
|
2,893,000 |
|
Total costs and expenses
|
|
|
20,789,000 |
|
|
|
20,789,000 |
|
|
|
19,043,000 |
|
|
|
19,043,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)
income from operations
|
|
|
1,167,000 |
|
|
|
2,758,000 |
|
|
|
(4,453,000
|
) |
|
|
(6,240,000
|
) |
Interest
income, net
|
|
|
87,000 |
|
|
|
87,000 |
|
|
|
183,000 |
|
|
|
183,000 |
|
(Loss)
income before income taxes
|
|
|
1,254,000 |
|
|
|
2,845,000 |
|
|
|
(4,270,000
|
) |
|
|
(6,057,000
|
) |
Income
tax expense
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Net
(loss) income
|
|
$ |
1,254,000 |
|
|
$ |
2,845,000 |
|
|
$ |
(4,270,000 |
) |
|
$ |
(6,057,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted income (loss) income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) income per share
|
|
$ |
0.35 |
|
|
$ |
0.80 |
|
|
$ |
(1.20 |
) |
|
$ |
(1.71 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income (loss) income per share
|
|
$ |
0.35 |
|
|
$ |
0.80 |
|
|
$ |
(1.20 |
) |
|
$ |
(1.71 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
outstanding used in computing
basic
income (loss) per
share
|
|
|
3,549,000 |
|
|
|
3,549,000 |
|
|
|
3,546,000 |
|
|
|
3,546,000 |
|
Shares
outstanding used in computing
diluted
income (loss) per
share
|
|
|
3,559,000 |
|
|
|
3,559,000 |
|
|
|
3,546,000 |
|
|
|
3,546,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to the consolidated financial statements.
2.
RECENT ACCOUNTING
STANDARDS OR ACCOUNTING PRONOUNCEMENTS
In
September 2006, the FASB issued SFAS No. 157, “Fair Value
Measurements.” SFAS No. 157 clarifies the principle that
fair value should be based on the assumptions that market participants would use
when pricing an asset or liability. It establishes a fair-value
hierarchy that prioritizes the information used to develop those
assumptions. Under SFAS No. 157, fair-value measurements would be
separately disclosed by level within the fair-value hierarchy. SFAS
No. 157 is effective for fiscal years beginning after November 15,
2007. We do not believe that the adoption of SFAS will have a
material impact on our consolidated financial position, results of operations or
cash flows.
In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities.” SFAS No. 159
provides an option to irrevocably elect to report recognized financial assets
and liabilities at fair value, on an instrument by instrument
basis. It is applied to an entire financial instrument, not only to
specific risks, cash flows or portions of the instrument. Subsequent
to the initial adoption, an entity may elect the fair value option only in
limited circumstances. SFAS No. 159 is effective for fiscal years
beginning after November 15, 2007. Earlier application is permitted,
but requires concurrent adoption of SFAS No. 157, “Fair Value
Measurements.” We do not believe that the adoption of
SFAS will have a material impact on our consolidated financial position, results
of operations or cash flows.
The
Company adopted the provisions of Financial Standards Board (“FASB”)
Interpretation No. 48, “Accounting for Uncertainty in Income taxes – an
interpretation of FASB Statement 109” (“FIN 48”), on January 1,
2007. FIN 48 clarifies the accounting for uncertainty in income taxes
recognized in an enterprise’s financial statements in accordance with FASB
Statement 109, “Accounting for Income Taxes”, and prescribes a recognition
threshold and measurement process for financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax
return. FIN 48 also provides guidance on derecognition,
classification, interest and penalties, accounting in interim period, disclosure
and transition.
The
Company has identified its federal tax return and its state returns in
Pennsylvania and California as “major” tax jurisdictions, as
defined. Based on the Company’s evaluation, it has concluded that
there are no significant uncertain tax positions requiring recognition in the
Company’s financial statements. The Company’s evaluation was
performed for tax years ended 2002 through 2006, the only periods subject to
examination. The Company believes that its income tax positions
and deductions will be sustained on audit and does not anticipate any
adjustments that will result in a material change to its financial
position. Accordingly, the Company did not record a cumulative effect
adjustment related to the adoption of FIN 48.
The
Company’s policy for recording interest and penalties associated with audits is
to record such items as a component of income before income
taxes. Penalties are recorded in general and administrative expenses
and interest paid or received is recorded in interest expense or interest
income, respectively, in the statement of operations. For the nine
months ended September 30, 2007 and 2006 there were no interest or penalties
related to the settlement of audits.
At
September 30, 2007, the Company maintains a 100% valuation allowance for its
remaining net deferred tax assets based on the uncertainty of the realization of
future taxable income.
4. STOCK BASED
COMPENSATION
On
January 1, 2006, the Company adopted the fair value recognition provisions of
SFAS 123(R) using the modified prospective transition
method. Under this method, compensation costs recognized in the
nine months ended September 30, 2007 and 2006 include (a) compensation costs for
all share-based payments granted to employees and directors prior to, but not
yet vested as of January 1, 2006, based on the grant date value estimated in
accordance with the original provisions of SFAS 123 and (b) compensation cost
for all share-based payments granted subsequent to January 1, 2006, based on the
grant date fair value estimated in accordance with the provisions of SFAS
123(R).
The
Company had a choice of two attribution methods of allocating compensation costs
under SFAS No. 123(R): the “straight-line” method, which allocates expense on a
straight-line basis over the requisite service period of the last separately
vesting portion of an award, or the “graded vesting attribution method”, an
accelerated amortization method, which allocates expense on a straight-line
basis over the requisite service period for each separately vesting portion of
the award as if the award was in-substance, multiple awards. We chose
the graded vesting attribution method and accordingly, amortized the fair value
of each option tranche over the respective tranche’s requisite service
period.
The
Company estimates the fair value of stock options granted using the
Black-Scholes-Merton (Black-Scholes) option-pricing formula and amortizes the
estimated option value using an accelerated amortization method where each
option grant is split into tranches based on vesting periods. The
Company’s expected term represents the period that the Company’s
share-based awards are expected to be outstanding and was determined based on
historical experience regarding similar awards, giving consideration to the
contractual terms of the share-based awards and employee termination data and
guidance provided by the U.S. Securities and Exchange Commission’s Staff
Accounting Bulletin 107 (“SAB 107”). Executive level employees who
hold a majority of options outstanding, and non-executive level employees were
each found to have similar historical option exercise and termination behavior
and thus were grouped for valuation purposes. The Company’s expected
volatility is based on the historical volatility of its traded common stock in
accordance with the guidance provided by SAB 107 to place exclusive reliance on
historical volatilities to estimate our stock volatility over the expected term
of its awards. The Company has historically not paid dividends and
has no foreseeable plans to issue dividends. The risk-free interest
rate is based on the yield from the U.S. Treasury zero-coupon bonds with an
equivalent term. Results for prior periods have not been
restated.
As of
September 30, 2007, the total unrecognized compensation cost related to
non-vested options amounted to $569,000, which is expected to be recognized over
the options’ average remaining vesting period of 1.54 years. No
income tax benefit was realized by the Company in the period ended September 30,
2007. As of September 30, 2007, 204,000 shares were available for
grant.
Under the
Company’s stock option plans, option awards generally vest over a four year
period of continuous service and have a 10 year contractual term. The
fair value of each option is amortized on a straight-line basis over the
option’s vesting period. The fair value of each option is estimated
on the date of grant using the Black-Scholes option valuation model and the
following weighted average assumptions for the nine months ended September 30,
2007 and 2006.
|
|
Three
Months
Ended
September 30,
|
|
Nine
Months
Ended
September 30,
|
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
|
Risk
free interest rate
|
|
4.74%
|
|
4.86%
|
|
4.67%
|
|
4.86%
|
Expected
life (in years)
|
|
6.15
|
|
6.15
|
|
5.91
|
|
6.15
|
Volatility
|
|
101%
|
|
113%
|
|
103%
|
|
113%
|
Expected
dividends
|
|
-
|
|
-
|
|
-
|
|
-
|
The
weighted-average fair value of options granted during the nine months ended
September 30, 2007 and 2006 is estimated at $4.40 and $7.17
respectively. For the three months ended September 30, 2007 and 2006,
the weighted-average fair value of options granted is estimated at $3.60 and
$6.40 respectively.
Activity
under the Company’s stock option plans for the nine months ended September 30,
2007 is as follows:
|
|
OPTIONS
OUTSTANDING
|
|
|
|
Shares
|
|
Wtd.
Avg. Exercise Price
|
|
Balance,
December 31, 2006
|
|
427,000
|
|
$
6.71
|
|
Authorized
|
|
-
|
|
-
|
|
Granted
|
|
113,000
|
|
5.44
|
|
Cancelled
|
|
(108,000
|
)
|
7.33
|
|
Exercised
|
|
-
|
|
-
|
|
Expired
|
|
(5,000
|
)
|
11.09
|
|
Balance,
September 30, 2007
|
|
427,000
|
|
$
6.17
|
|
As of
September 30, 2007, the Company had 204,000 shares available for grant compared
to 209,000 at of December 31, 2006.
The
following table summarizes outstanding options that are vested and expected to
vest and options under the Company’s stock options plans as of September 30,
2007.
|
Number
of Shares
|
Weighted
Average Exercise Price Per
Share
|
Weighted
Average Remaining Contractual Term (in years)
|
Aggregate
Intrinsic Value
|
Outstanding
Options
|
427,000
|
$6.17
|
7.64
|
$55,000
|
|
|
|
|
|
Ending
Vested and Expected to Vest
|
336,000
|
$6.22
|
7.27
|
$53,000
|
|
|
|
|
|
Options
Exercisable
|
167,000
|
$6.63
|
5.60
|
$42,000
|
|
|
|
|
|
5. EARNINGS PER
SHARE
The
Company follows SFAS 128 “Earnings Per Share,” Under SFAS 128, companies that
are publicly held or have complex capital structures are required to present
basic and diluted earnings per share on the face of the statement of
operations. Earnings per share are based on the weighted average
number of shares and common stock equivalents outstanding during the
period. In the calculation of diluted earnings per share, shares
outstanding are adjusted to assume conversion of the Company’s exercise of
options as if they were dilutive. In the calculation of basic
earnings per share, weighted average numbers of shares outstanding are used as
the denominator. The Company had a net income available to the common
shareholders for the nine months ended September 30, 2007 and a net loss for the
nine months ended September 30, 2006. Income (loss) per share is
computed as follows:
|
|
Three
Months
Ended
September 30,
|
|
|
Nine
Months
Ended
September 30,
|
|
|
|
2007
(Restated)
|
|
|
2006
(Restated)
|
|
|
2007
(Restated)
|
|
|
2006
(Restated)
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) available to common shareholders
|
|
$ |
192,000 |
|
|
$ |
(1,418,000 |
) |
|
$ |
2,845,000 |
|
|
$ |
(6,057,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares used to compute net
income
available to common shareholders per
common
share-basic
|
|
|
3,549,000 |
|
|
|
3,549,000 |
|
|
|
3,549,000 |
|
|
|
3,546,000 |
|
Effect
of dilutive stock options
|
|
|
2,000 |
|
|
|
18,000 |
|
|
|
20,000 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares used to compute net
income
available to common shareholders per
common
share-dilutive
|
|
|
3,551,000 |
|
|
|
3,567,000 |
|
|
|
3,559,000 |
|
|
|
3,546,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
net income (loss) per share to common
shareholder
|
|
$ |
.05 |
|
|
$ |
(.40 |
) |
|
$ |
.35 |
|
|
$ |
(1.71 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive
net income (loss) per share to common
shareholder
|
|
$ |
.05 |
|
|
$ |
(.40 |
) |
|
$ |
.35 |
|
|
$ |
(1.71 |
) |
6. MAJOR
CUSTOMERS
In the
three months ended September 30, 2007, one customer accounted for 12% of total
revenues and another accounted for 13% of total revenue. In the three
months ended September 30, 2006 one customer accounted for 10% of total
revenue. For the first nine months of 2007, one customer accounted
for more than 11% of total revenues, however during the same period of 2006, no
customer accounted for at least 10% of total revenues.
7. RECOGNITION OF DEFERRED
REVENUE
For the
quarter ended September 30, 2007 the Company deferred $700,000 of revenue
related to a contract signed in the quarter, but related to an implementation
plan signed in the fourth quarter of 2007 that referenced a specified
upgrade. The deferred revenue consisted of $674,000 of license
revenue and $26,000 of service and maintenance revenue.
For the
nine months ended September 30, 2007, the Company recognized $3,225,000 of
revenue which had been deferred from contracts signed in 2006, 2005 and 2004
that had certain undelivered elements that were not delivered until
2007. This revenue is comprised of $1,132,000 of license revenue and
$2,093,000 of service and maintenance revenue. All costs
related to generating these revenues were expensed in the periods in which they
were incurred during the years ended December 31, 2006, 2005 and
2004.
8. GEOGRAPHIC SEGMENT
DATA
The
Company and its subsidiaries are engaged in the design, development, marketing
and support of its service management software
solutions. Substantially all revenues result from licensing the
Company’s software products and related professional services and customer
support services. The Company’s chief executive officer reviews
financial information presented on a consolidated basis, accompanied by
disaggregated information about revenues by geographic region for purposes of
making operating decisions and assessing financial
performance. Accordingly, the Company considers itself to have three
reporting segments as follows:
|
|
Three
Months
Ended
September 30,
|
|
|
Nine
Months
Ended
September 30,
|
|
|
|
2007
Restated
|
|
|
2006
Restated
|
|
|
2007
Restated
|
|
|
2006
Restated
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Software license fees
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
$ |
1,846,000 |
|
|
$ |
1,159,000 |
|
|
$ |
5,009,000 |
|
|
$ |
1,615,000 |
|
Export
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Total
United States
software
license fees
|
|
|
1,846,000 |
|
|
|
1,159,000 |
|
|
|
5,009,000 |
|
|
|
1,615,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe
|
|
|
- |
|
|
|
- |
|
|
|
711,000 |
|
|
|
93,000 |
|
Other
Foreign
|
|
|
273,000 |
|
|
|
18,000 |
|
|
|
527,000 |
|
|
|
387,000 |
|
Total
foreign software
license
fees
|
|
|
273,000 |
|
|
|
18,000 |
|
|
|
1,238,000 |
|
|
|
480,000 |
|
Total
software license fees
|
|
|
2,119,000 |
|
|
|
1,177,000 |
|
|
|
6,247,000 |
|
|
|
2,095,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service
and maintenance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United
States
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
|
3,264,000 |
|
|
|
2,445,000 |
|
|
|
10,833,000 |
|
|
|
7,023,000 |
|
Export
|
|
|
48,000 |
|
|
|
152,000 |
|
|
|
149,000 |
|
|
|
503,000 |
|
Total
United States service
and
maintenance revenue
|
|
|
3,312,000 |
|
|
|
2,597,000 |
|
|
|
10,982,000 |
|
|
|
7,526,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe
|
|
|
1,295,000 |
|
|
|
436,000 |
|
|
|
5,140,000 |
|
|
|
2,077,000 |
|
Other
foreign
|
|
|
427,000 |
|
|
|
676,000 |
|
|
|
1,178,000 |
|
|
|
1,105,000 |
|
Total
foreign service and
maintenance
revenue
|
|
|
1,722,000 |
|
|
|
1,112,000 |
|
|
|
6,318,000 |
|
|
|
3,182,000 |
|
Total
service and
maintenance
revenue
|
|
|
5,034,000 |
|
|
|
3,709,000 |
|
|
|
17,300,000 |
|
|
|
10,708,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$ |
7,153,000 |
|
|
$ |
4,886,000 |
|
|
$ |
23,547,000 |
|
|
$ |
12,803,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income(loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United
States
|
|
$ |
(153,000 |
) |
|
$ |
(1,154,000 |
) |
|
$ |
173,000 |
|
|
$ |
(4,992,000 |
) |
Europe
|
|
|
115,000 |
|
|
|
(355,000 |
) |
|
|
2,229,000 |
|
|
|
(1,351,000 |
) |
Other
foreign
|
|
|
230,000 |
|
|
|
91,000 |
|
|
|
443,000 |
|
|
|
286,000 |
|
Net
income(loss)
|
|
$ |
192,000 |
|
|
$ |
(1,418,000 |
) |
|
$ |
2,845,000 |
|
|
$ |
(6,057,000 |
) |
9. LEGAL
PROCEEDINGS
On and
shortly after April 6, 2006, certain purported shareholder class action and
derivative lawsuits were filed in the United States District Court for the
Eastern District of Pennsylvania against the Company and certain of its
directors and officers. The lawsuits, alleging that the Company and
certain of its officers and directors violated federal securities laws and state
laws, related to the Company’s March 31, 2006 announcement of the accounting
restatement for overcapitalized software development costs during the first two
quarters of 2005 and the undercapitalized software development costs during the
third quarter of 2005. The Company believed these lawsuits were without
merit and defended them vigorously. On
August 9, 2007, the court dismissed the Consolidated Amended Complaint, without
prejudice, and granted plaintiffs leave to file an amended Consolidated Amended
Complaint. The plaintiffs did not file an Amended Complaint, and
instead agreed to a joint stipulation for dismissal provided Astea did not seek
a recovery of costs against the plaintiffs. On August
21, 2007, the court dismissed the Consolidated Amended Complaint with prejudice,
and on September 4, 2007, the Court also dismissed the related derivative
lawsuit with prejudice. Therefore, this matter is now
concluded.
Item
2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Overview
This
document contains various forward-looking statements and information that are
based on management's beliefs, assumptions made by management and information
currently available to management. Such statements are subject to
various risks and uncertainties, which could cause actual results to vary
materially from those contained in such forward-looking
statements. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results
may vary materially from those anticipated, estimated, expected or
projected. Certain of these, as well as other risks and
uncertainties are described in more detail herein and in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2006.
Astea is
a global provider of service management software that addresses the unique needs
of companies who manage capital equipment, mission critical assets and human
capital. Clients include Fortune 500 to mid-size companies, which
Astea services through company facilities in the United States, United Kingdom,
Australia, The Netherlands, and Israel. Since its inception in 1979,
Astea has licensed applications to companies in a wide range of sectors
including information technology, telecommunications, instruments and controls,
business systems, and medical devices.
Astea
Alliance, the Company’s service management suite of solutions, supports the
complete service lifecycle, from lead generation and project quotation to
service and billing through asset retirement. It integrates and
optimizes critical business processes for Contact Center, Field Service, Depot
Repair, Logistics, Professional Services and Sales and
Marketing. Astea extends its application with portal, analytics and
mobile solutions. Astea Alliance provides service organizations with
technology-enabled business solutions that improve profitability, stabilize
cash-flows, and reduce operational costs through automating and integrating key
service, sales and marketing processes.
Marketing
and sales of licenses, service and maintenance related to the Company’s legacy
system DISPATCH-1® products are limited to existing DISPATCH-1
customers.
FieldCentrix
On
September 21, 2005, the Company, through a wholly owned subsidiary, FC
Acquisition Corp., acquired substantially all of the assets of FieldCentrix
Inc., the industry’s leading mobile field force automation company. FieldCentrix
develops and markets mobile field service automation (FSA) systems, which
include the wireless dispatch and support of mobile field technicians using
portable, hand-held computing devices. The FieldCentrix offering has
evolved into a leading complementary service management solution that runs on a
wide range of mobile devices (handheld computers, laptops and PC’s, and Pocket
PC devices), and integrates seamlessly with popular CRM and ERP
applications. FieldCentrix has licensed applications to Fortune 500
and mid-sized companies in a wide range of sectors including HVAC, building and
real estate services, manufacturing, process instruments and controls, and
medical equipment.
Critical Accounting Policies
and Estimates
The
Company’s significant accounting policies are more fully described in its
Summary of Accounting Policies, Note 3 to the Company’s year-end consolidated
financial statements. The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions in certain
circumstances that affect amounts reported in the accompanying financial
statements and related notes. In preparing these financial
statements, management has made its best estimates and judgments of certain
amounts included in the financial statements, giving due consideration to
materiality. The Company does not believe there is a great likelihood
that materially different amounts would be reported related to the accounting
policies described below; however, application of these accounting policies
involves the exercise of judgments and the use of assumptions as to future
uncertainties and, as a result, actual results could differ from these
estimates.
Revenue
Recognition
Astea’s
revenue is principally recognized from two sources: (i) software licensing
arrangements and (ii) services and maintenance.
The
Company markets its products primarily through its direct sales force and
resellers. Software license agreements do not provide for a right of return, and
historically, product returns have not been significant.
The
Company recognizes revenue on its software products in accordance with AICPA
Statement of Position (“SOP”) 97-2, Software Revenue Recognition,
SOP 98-9, Modification of SOP
97-2, Software Revenue
Recognition with Respect to Certain Transactions, Accounting for Performance of
Construction-Type and Certain Production-Type Contracts; and SEC Staff
Accounting Bulletin (“SAB”) 104, Revenue
Recognition.
The
Company recognizes revenue from license sales when all of the following criteria
are met: persuasive evidence of an arrangement exists, delivery has occurred,
the license fee is fixed and determinable and the collection of the fee is
probable. The Company utilizes written contracts as a means to
establish the terms and conditions by which our products, support and services
are sold to our customers. Delivery is considered to have occurred
when title and risk of loss have been transferred to the customer, which
generally occurs after a license key has been delivered electronically to the
customer. Revenue for arrangements with extended payment terms in
excess of one year is recognized when the payments become due, provided all
other recognition criteria are satisfied. If collectibility is not
considered probable, revenue is recognized when the fee is
collected. Our typical end user license agreements do not contain
acceptance clauses. However, if acceptance criteria are required,
revenues are deferred until customer acceptance has occurred.
Astea
allocates revenue to each element in a multiple-element arrangement based on the
elements’ respective fair value, determined by the price charged when the
element is sold separately. Specifically, Astea determines the fair
value of the maintenance portion of the arrangement based on the price, at the
date of sale, if sold separately, which is generally a fixed percentage of the
software license selling price. The professional services portion of
the arrangement is based on hourly rates which the Company charges for those
services when sold separately from software. If evidence of fair
value of all undelivered elements exists, but evidence does not exist for one or
more delivered elements, then revenue is recognized using the residual
method. If an undelivered element for which evidence of fair value
does not exist, all revenue in an arrangement is deferred until the undelivered
element is delivered or fair value can be determined. Under the
residual method, the fair value of the undelivered elements is deferred and the
remaining portion of the arrangement fee is recognized as
revenue. The proportion of the revenue recognized upon delivery can
vary from quarter-to-quarter depending upon the determination of vendor-specific
objective evidence (“VSOE”) of fair value of undelivered
elements. The residual value, after allocation of the fee to the
undelivered elements based on VSOE of fair value, is then allocated to the
perpetual software license for the software products being sold.
When
appropriate, the Company may allocate a portion of its software revenue to
post-contract support activities or to other services or products provided to
the customer free of charge or at non-standard rates when provided in
conjunction with the licensing arrangement. Amounts allocated are
based upon standard prices charged for those services or products which, in the
Company’s opinion, approximate fair value. Software license fees for
resellers or other members of the indirect sales channel are based on a fixed
percentage of the Company’s standard prices. The Company recognizes
software license revenue for such contracts based upon the terms and conditions
provided by the reseller to its customer.
Revenue
from post-contract support is recognized ratably over the term of the contract,
which is generally twelve months on a straight-line basis. Consulting
and training service revenue is generally unbundled and recognized at the time
the service is performed. Fees from licenses sold together with
consulting services are generally recognized upon shipment, provided that the
contract has been executed, delivery of the software has occurred, fees are
fixed and determinable and collection is probable.
Deferred
Revenue
Deferred
revenue includes amounts billed to or received from customers for which revenue
has not been recognized. This generally results from post-contract
support, software installation, consulting and training services not yet
rendered or license revenue which has been deferred until all revenue
requirements have been met or as services are performed. Unbilled
receivables are established when revenue is deemed to be recognized based on the
Company’s revenue recognition policy, but due to contractual restraints, the
Company does not have the right to invoice the customer.
Accounts
Receivable
The
Company evaluates the adequacy of its allowance for doubtful accounts at the end
of each quarter. In performing this evaluation, the Company analyzes
the payment history of its significant past due accounts, subsequent cash
collections on these accounts and comparative accounts receivable aging
statistics. Based on this information, along with consideration of
the general strength of the economy, the Company develops what it considers to
be a reasonable estimate of the uncollectible amounts included in accounts
receivable. This estimate involves significant judgment by the
management of the Company. Actual uncollectible amounts may differ
from the Company’s estimate.
Capitalized
Software Research and Development Costs
The
Company accounts for its internal software development costs in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 86, "Accounting for the
Costs of Computer Software to be Sold, Leased or Otherwise
Marketed." The Company capitalizes software development costs
subsequent to the establishment of technological feasibility through the
product’s availability for general release. Costs incurred prior to the
establishment of technological feasibility are charged to product development
expense. Product development expense includes payroll, employee benefits, and
other headcount-related costs associated with product development.
Software
development costs are amortized on a product-by-product basis over the greater
of the ratio of current revenues to total anticipated revenues or on a
straight-line basis over the estimated useful lives of the products (usually two
years), beginning with the initial release to customers. The
Company’s estimated life for its capitalized software products is two years
based on current sales trends and the rate of product release. The
Company continually evaluates whether events or circumstances had occurred that
indicate that the remaining useful life of the capitalized software development
costs should be revised or that the remaining balance of such assets may not be
recoverable. The Company evaluates the recoverability of capitalized software
based on the estimated future revenues of each product.
Goodwill
On
September 21, 2005, the Company acquired the assets and certain liabilities of
FieldCentrix, Inc. through its wholly-owned subsidiary, FC Acquisition
Corp. Included in the allocation of the purchase price was goodwill
valued at $1,100,000 at December 31, 2005. The Company tests goodwill
for impairment annually during the first day of the fourth quarter of each
fiscal year at the reporting unit level using a fair value approach, in
accordance with the provision SFAS No. 142, Goodwill and Other Intangible
Assets. If an event occurs or circumstances change that would
more likely than not reduce the fair value of a reporting unit below its
carrying value, goodwill will be evaluated for impairment between annual
tests.
The
purchase agreement to acquire the assets of FieldCentrix included earnout
provisions to pay the sellers a percentage of certain future license sales and
professional service revenue through June 30, 2007. In the quarter
ended September 30, 2007, there was no change in goodwill. For the
nine months ended September 30, 2007, goodwill increased $287,000 to $1,540,000
from $1,253,000 at December 31, 2006.
Earnings
Per Share
The
Company follows SFAS 128 “Earnings Per Share,” Under SFAS 128, companies that
are publicly held or have complex capital structures are required to present
basic and diluted earnings per share on the face of the statement of
operations. Earnings per share are based on the weighted average
number of shares and common stock equivalents outstanding during the
period. In the calculation of diluted earnings per share, shares
outstanding are adjusted to assume conversion of the Company’s exercise of
options as if they were dilutive. In the calculation of basic
earnings per share, weighted average numbers of shares outstanding are used as
the denominator. The Company had a net income available to the common
shareholders for the nine months ended September 30, 2007 and a net loss for the
nine months ended September 30, 2006. Income (loss) per share is
computed as follows:
|
|
Three
Months Ended
September
30,
|
|
|
Nine
Months Ended
September
30,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income(loss) available to common shareholders
|
|
$ |
192,000 |
|
|
$ |
(1,418,000 |
) |
|
$ |
2,845,000 |
|
|
$ |
(6,057,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares used to compute net income
available
to common shareholders per common share-
basic
|
|
|
3,549,000 |
|
|
|
3,549,000 |
|
|
|
3,549,000 |
|
|
|
3,546,000 |
|
Effect
of dilutive stock options
|
|
|
2,000 |
|
|
|
18,000 |
|
|
|
20,000 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares used to compute net income
available
to common shareholders per common share-
dilutive
|
|
|
3,551,000 |
|
|
|
3,567,000 |
|
|
|
3,559,000 |
|
|
|
3,546,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
net income (loss) per share to common shareholder
|
|
$ |
.05 |
|
|
$ |
(.40 |
) |
|
$ |
.80 |
|
|
$ |
(1.71 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive
net income (loss) per share to common
shareholder
|
|
$ |
.05 |
|
|
$ |
(.40 |
) |
|
$ |
.80 |
|
|
$ |
(1.71 |
) |
Results of
Operations
Comparison of Three Months
Ended September 30, 2007 and 2006 (restated)
Revenues
increased $2,267,000 or 46%, to $7,153,000 for the three months ended September
30, 2007 from $4,886,000 for the three months ended September 30,
2006. Software license fee revenues increased $942,000, or 80%, from
the same period last year. Services and maintenance fees for the
three months ended September 30, 2007 amounted to $5,034,000, a 36% increase
from the same quarter in 2006.
The
Company’s international operations contributed $1,995,000 of revenues in the
third quarter of 2007, which is a 77% increase compared to revenues generated
during the third quarter of 2006. The Company’s revenues from
international operations amounted to 28% of the total revenue for the third
quarter in 2007, compared to 23% of total revenues for the same quarter in
2006.
Software
license fee revenues increased 80% to $2,119,000 in the third quarter of 2007
from $1,177,000 in the third quarter of 2006. Astea Alliance license
revenues increased $1,436,000 to $1,883,000 in the third quarter of 2007 from
$447,000 in the third quarter of 2006. The increase is primarily
attributable to an increase in license sales in the United States and Asia
Pacific during the third quarter. The Company sold $236,000 of software licenses
from its FieldCentrix subsidiary in the third quarter of 2007, a decrease of 68%
over the same quarter of 2006.
Services
and maintenance revenues increased to $5,034,000 in the third quarter of 2007
from $3,709,000 in the third quarter of 2006, an increase of
36%. Astea Alliance service and maintenance revenues increased by
$731,000 or 26% compared to the third quarter of 2006. The increase
resulted from increased demand for professional services in
Europe. Service and maintenance revenue from FieldCentrix increased
by $665,000 or 97% to $1,352,000 compared to the same period in 2006. The
increase in revenue resulted from an increase in both headcount as well as
utilization in both implementations and pilot projects. Partially
offsetting these increases, DISPATCH-1 service and maintenance revenues
decreased $111,000 to $144,000 from $255,000 in the prior year. The
decline in service and maintenance revenue for DISPATCH-1 is expected as the
Company discontinued development of DISPATCH-1 at the end of 1999.
Costs
of Revenues
Cost of
software license fees increased 104% to $861,000 in the third quarter of 2007
from $422,000 in the third quarter of 2006. Included in the cost of
software license fees is the fixed cost of capitalized software amortization,
amortization of software acquired from FieldCentrix and any third party software
embedded in the Company’s software licenses sold to customers. The
principal cause of the increase is the additional amortization of capitalized
software development costs related to our most recently released version of
Astea Alliance, version 8.0 which was released in the first quarter of 2007 and
the latest version of the FieldCentrix software. Amortization of
capitalized software development costs was $650,000 for the quarter ended
September 30, 2007 compared to $276,000 for the same quarter in
2006. The software license gross margin percentage was 69% in the
third quarter of 2007 compared to 81% in the third quarter of
2006. The decline in margin resulted primarily from the increase in
costs related to capitalized software amortization.
Cost of
services and maintenance increased 30% to $3,140,000 in the third quarter of
2007 from $2,418,000 in the third quarter of 2006 The increase in
cost of service is due to a 14% increase in headcount compared to the same
quarter in 2006 as well as subcontracting with certain professional service
providers. The services and maintenance gross margin percentage was
38% in the third quarter of 2007 compared to 42% in the third quarter of
2006. The decrease in services and maintenance gross margin was
primarily due to the ramp-up time for newly hired personnel to be fully trained
and utilized.
Product
Development
Product
development expense decreased 8% to $823,000 in the third quarter of 2007 from
$896,000 in the third quarter of 2006. The decrease results from a decrease in
headcount of 11% from the same quarter in 2006. The Company excludes
the capitalization of software costs from product
development. Development costs of $527,000 were capitalized in the
third quarter of 2007 compared to $737,000 during the same period in
2006. The decrease in capitalized software development costs results
from the release of version 8.0 of Astea Alliance in the first quarter of 2007,
in which a greater percentage of development costs were
capitalized. Subsequent to the release, there has been an increased
effort dedicated to quality improvement, in which costs are directly expensed
instead of capitalized. Gross product development expense was
$1,350,000 in the quarter which is 17% less than the same quarter in
2006. Product development expense as a percentage of revenues
decreased to 12% in the third quarter of 2007 compared with 18% in the third
quarter of 2006. The decrease in costs relative to revenues is due to
both the overall increase in revenues and reductions in the Company’s
development expense compared to the same quarter in 2006.
Sales
and Marketing
Sales and
marketing expense decreased 27% to $1,368,000 in the third quarter of 2007 from
$1,881,000 in the third quarter of 2006. The decrease in sales and marketing is
attributable to a reduction in salaries due to lower headcount, costs associated
with a customer dispute in 2006, and higher recruiting costs in
2006. As a percentage of revenues, sales and marketing expenses
decreased to 19% in 2007 from 38% in the third quarter of
2006. The reduction results from both the increase in total
revenue and the decrease in expense.
General
and Administrative
General
and administrative expenses increased 8% to $791,000 during the third quarter of
2007 from $735,000 in the third quarter of 2006. The increase in
general and administrative expenses is principally attributable to costs
associated with Section 404 compliance. As a percentage of revenue,
general and administrative expenses decreased to 11% in the third quarter of
2007 from 15% in the third quarter of 2006.
Interest
Income, Net
Net
interest income decreased $26,000 to $22,000 in the third quarter of 2007 from
the third quarter of 2006. The decrease resulted primarily from a
decline in the level of investments.
International
Operations
Total
revenue from the Company’s international operations increased by 77% during the
third quarter of 2007 to $1,995,000 compared to $1,130,000 for the third quarter
of 2006. The increase in revenue from international operations was
primarily attributable to an increase in license revenue in the Asia/Pacific
region and an increase in professional services revenue in
Europe. International operations generated a net profit of $345,000
for the third quarter ended September 30, 2007 compared to a net loss of
$264,000 in the same period in 2006.
Net
income for the three months ended September 30, 2007 was $192,000 compared to
net loss of $1,418,000 for the three months ended September 30,
2006. The improvement results from an increase in revenues of
$2,267,000 slightly offset by an increase in expense of $631,000 during the
three months ended September 30, 2007 compared to the same period in
2006.
Comparison of Nine Months
Ended September 30, 2007 and 2006 (restated)
Recognition
of Deferred Revenue:
For the
nine months ended September 30, 2007, the Company recognized $3,925,000 of
revenue which had been deferred from contracts signed in 2006, 2005 and 2004
that had certain undelivered elements that were not delivered until
2007. This revenue is comprised of $1,806,000 of license revenue and
$2,119,000 of service and maintenance revenue. All costs
related to generating these revenues were expensed in the periods in which they
were incurred during the years ended December 31, 2006, 2005 and
2004. Therefore, the gross profit on revenue this period appears
higher than other periods. Such operating results are not typical for
the Company and are not expected to recur.
Revenues
increased $10,744,000, or 84%, to $23,547,000 for the nine months ended
September 30, 2007 from $12,803,000 for the nine months ended September 30,
2006. The increase in revenues includes recognition of $1,806,000 of
license and $2,119,000 of service and maintenance revenues that had been
deferred from contracts from the years ended December 31, 2006, 2005, and 2004
as disclosed in our Form 10K for years ended December 31, 2007 and December 31,
2006. Excluding the revenue recognized from the customer
contracts that had been previously deferred, total revenue for the nine month
period ended September 30, 2007 would be $19,622,000, an increase of
53% over the same period in 2006. Software license fee revenues
increased $4,152,000, or 198%, from the same period last
year. Excluding the license revenue from the customer contracts which
were recognized in 2007, license revenue would be $4,441,000, an increase of
112% over the same period in 2006. Services and maintenance revenues
for the nine months ended September 30, 2007 amounted to $17,300,000, a 62%
increase from the same period in 2006. Excluding the service and
maintenance revenues recognized in 2007 from previously deferred contracts,
total service and maintenance revenue is $15,181,000, an increase of 42% over
the same period in 2006.
The
Company’s international operations contributed $7,556,000 of revenues in the
first nine months of 2007 compared to $3,662,000 in the first nine months of
2006. This represents a 106% increase from the same period last year
and 32% of total Company revenues in the first nine months of
2007. Excluding the revenue recognized in 2007 from the U.K. customer
that had been deferred from previous years, total revenue from international
operations is $5,922,000, which is an increase of 62% over the same period in
2006. The increase in revenues is due to the increase in license
sales in Asia Pacific and an increase in professional services in
Europe.
Software
license revenues increased 198% to $6,247,000 in the first nine months of 2007
from $2,095,000 in the first nine months of 2006. Included in 2007
license sales is the license revenue recognized from customer contracts of
$1,806,000 that was deferred from 2006, 2005 and 2004. Excluding that
revenue, license revenue was $4,441,000, an increase of 112% over the first nine
months of 2006. The increase is primarily attributable to improved
sales execution in 2007. Astea Alliance license revenues increased
$3,998,000 to $5,069,000 or 373% in the first nine months of 2007 from
$1,071,000 in the first nine months of 2006. License revenue from the
FieldCentrix subsidiary increased by $79,000 or 8% to $1,101,000. In
addition, there were sales of $77,000 of DISPATCH-1 licenses to existing
customers. There were no DISPATCH-1 license sales during the first
nine months of 2006.
Services
and maintenance revenues increased 61% to $17,300,000 in the first nine months
of 2007 from $10,708,000 in the first nine months of 2006. Astea Alliance
service and maintenance revenue was $12,892,000, an increase of 65%, or
$5,083,000 over the nine months ended September 30, 2006. Part of the
increase in Astea Alliance revenues is the result of recognizing $2,119,000 in
service and maintenance revenue that had been deferred from the years 2006, 2005
and 2004 as well as an increase in the demand for professional services in
Europe. Also contributing to the revenue increase is an additional $1,644,000 of
revenue from FieldCentrix which contributed $3,767,000 in the first nine months
of 2007 compared to $2,123,000 for the first nine months of 2006. The
additional service and maintenance revenue is partially offset by a decrease of
$255,000 in DISPATCH-1 service and maintenance revenues, which decreased to
$521,000 from $776,000 in the prior year. The decline in service and
maintenance revenue for DISPATCH-1 was expected as the Company discontinued
development of DISPATCH-1 at the end of 1999.
Costs
of Revenues
Cost of
software license fees increased 68% to $1,967,000 in the first nine months of
2007 from $1,172,000 in the first nine months of 2006. Included in
the cost of software license fees is the fixed cost of capitalized software
amortization. The increase in cost of license fees can be attributed
to the additional amortization of capitalized software resulting from the
release of version 8.0 in the first quarter of 2007. Amortization of
capitalized software was $1,616,000 for the nine months ended September 30, 2007
compared to $881,000 for the same period in 2006. The software
licenses gross margin percentage was 69% in the first nine months of 2007
compared to 44% in the first nine months of 2006. The decrease in
gross margin was attributable to the net effect of increased license sales
offset by increased cost of license sales. In addition, by
eliminating the increase in license sales resulting from the recognition of
previously deferred license revenue discussed above, the gross margin on license
sales would be reduced to 64% for the nine months ended September 30,
2007.
Cost of
services and maintenance increased 14% to $8,771,000 in the first nine months of
2007 from $7,721,000 in the first nine months of 2006. The increase
in cost of service and maintenance is primarily attributed to an increase in
headcount from last year to this year. The services and maintenance
gross margin percentage was 49% in the first nine months of 2007 compared to 28%
in the first nine months of 2006. The increase in services and
maintenance gross margin was primarily an increase utilization of Astea Alliance
service professionals in Europe and FieldCentrix professionals in the U.S.
during the first nine months of 2007.
Product
Development
Product
development expense increased 22% to $3,364,000 in the first nine months of 2007
from $2,761,000 in the first nine months of 2006. The increase
results from the Company’s ongoing program of improving product quality and
increasing product functionality. Software development costs of
$1,450,000 were capitalized in the first nine months of 2007 compared to
$2,139,000 during the same period in 2006. The decrease results from
the release of Astea’s current version, 8.0 during the first quarter of 2007, at
which time the capitalization of development costs for version 8.0
stopped. Gross development expense was $4,814,000 during the first
nine months of 2007 compared to $4,900,000 during the same period in
2006. Product development as a percentage of revenues was 14% in the
first nine months of 2007 compared with 22% in the first nine months of
2006. The decrease in percentage of revenues is the result of
increased revenues in 2007.
Sales
and Marketing
Sales and
marketing expense decreased 12% to $3,951,000 in the first nine months of 2007
from $4,496,000 in the first nine months of 2006. The decrease in sales and
marketing expense is attributable to a lower headcount in international
sales. Marketing expense remained about the same as last
year. As a percentage of revenues, sales and marketing expenses
decreased to 17% from 35% in the first nine months of 2006.
General
and Administrative
General
and administrative expenses decreased 5% to $2,736,000 in the first nine months
of 2007 from $2,893,000 in the first nine months of 2007. The
decrease in general and administrative expenses is principally attributable to
$200,000 associated with the insurance retention in the class action lawsuit in
2006. As a percentage of revenues, general and administrative
expenses increased to 12% from 23% in the first nine months of
2006.
Interest
Income, Net
Net
interest income decreased $96,000 to $87,000 from $183,000 in the first nine
months of 2007. The decrease resulted primarily from a decrease in
the amount of the Company’s investments.
International
Operations
Total
revenue from the Company’s international operations increased by $3,894,000, or
106%, to $7,556,000 in the first nine months of 2007 compared to $3,662,000 in
the first nine months in 2006. This represents 32% of total Company revenues in
the first nine months of 2007. Excluding the revenue recognized in
2007 from the U.K. customer that had been deferred from previous years, total
revenue from international operations is $5,922,000, which is an increase of 62%
over the same period in 2006. The increase in revenues is due to the
increase in professional services in Europe and increases in licenses sales in
Asia Pacific. International operations generated a net profit
of $2,672,000 for the first nine months ended September 30, 2007 compared to net
loss of $1,064,000 in the same period in 2006. Excluding the income
recognized from the U.K. customer that had been deferred and has no related
cost, net income from international operations was $1,038,000 for the nine
months ended September 30, 2007.
Net Income
(Loss)
Net
income for the nine months ended September 30, 2007 was $2,845,000 compared to a
loss of $6,057,000 for the nine months ended September 30, 2006. The
improvement in income of $8,902,000 is the direct result of an increase in
revenues of $10,744,000 of which $3,925,000 of license and service and
maintenance revenues was recognized from the customer contracts that had been
deferred for years ended December 31, 2006, 2005 and 2004.
Liquidity
and Capital Resources
Operating
Activities
Net cash
provided by operating activities was $869,000 for the nine months ended
September 30, 2007 compared to cash used by operations of $2,638,000 for the
nine months ended September 30, 2006, an improvement of
$3,507,000. The improvement results from an increase in net income of
$8,902,000 over last year, an increase in depreciation and amortization of
$412,000, an increase in stock based compensation of $186,000, a lower increase
in accounts receivable by $312,000 and a change in accounts payable of
$183,000. Offsetting these increases in inflows were a change
in the decrease in deferred revenues of $6,464,000 and a decrease in the
allowance for doubtful accounts of $27,000. The large change in
deferred revenues was the deferral of revenues from customer contracts signed
during year end December 31, 2006 and December 31, 2004 that resulted from the
license and service and maintenance revenue of $3.9 million being deferred over
18 months.
Investing
Activities
The
Company used $1,815,000 for investing activities in the first nine months of
2007 compared to using $2,378,000 in the first nine months of 2006, a decrease
of cash used of $563,000. The decrease in cash used is primarily
attributable to a decrease of $689,000 in capitalized software development costs
and the release of $75,000 from restricted cash. Partially offsetting
these decreases were increases of $47,000 for the purchase of property and
equipment and higher earnout payments related to the purchase of FieldCentrix of
$154,000.
Financing
Activities
The
Company did not generate any cash from financing activities during the nine
months ended September 30, 2007, compared to $19,000 for the same period in
2006. In 2006, the cash was generated by the exercise of stock
options.
On May
23, 2007 the Company renewed its secured revolving line of credit with a bank to
borrow up to $2.0 million. The line of credit is secured by accounts
receivable. Interest is payable monthly based on the prime rate of
interest charged by the bank. The Company has not made any loans
through September 30, 2007. At September 30, 2007 the total
outstanding loan under the line of credit agreement was $0. The
maturity date on the line of credit is June 30, 2008.
At
September 30, 2007, the Company had a working capital ratio of 1:1, with cash,
cash equivalents and restricted cash of $2,250,000. The Company
believes that it has adequate cash resources to make the investments necessary
to maintain or improve its current position and to sustain its continuing
operations for the next twelve months. The Board of Directors from
time to time reviews the Company’s forecasted operations and financial condition
to determine whether and when payment of a dividend or dividends is
appropriate. The Company does not anticipate that its operations or
financial condition will be affected materially by inflation.
Variability of Quarterly
Results and Potential Risks Inherent in the Business
The
Company’s operations are subject to a number of risks, which are described in
more detail in the Company’s prior SEC filings, including in its annual report
on Form 10-K for fiscal year ended December 31, 2006. Risks which are
peculiar to the Company on a quarterly basis, and which may vary from quarter to
quarter, include but are not limited to the following:
·
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The
Company’s quarterly operating results have in the past varied and may in
the future vary significantly depending on factors such as the size,
timing and recognition of revenue from significant orders, the timing of
new product releases and product enhancements, and market acceptance of
these new releases and enhancements, increases in operating expenses, and
seasonality of its business.
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·
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The
market price of the Company’s common stock could be subject to significant
fluctuations in response to, and may be adversely affected by, variations
in quarterly operating results, changes in earnings estimates by analysts,
developments in the software industry, adverse earnings or other financial
announcements of the Company’s customers and general stock market
conditions, as well as other
factors.
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Item
3. QUANTITATIVE AND QUALITATIVE
DISCLOSURE ABOUT MARKET RISK
Market
risk represents the risk of loss that may impact the Company’s financial
position due to adverse changes in financial market prices and
rates. The Company’s market risk exposure is primarily a result
of fluctuations in interest rates and foreign currency exchange
rates. The Company does not hold or issue financial instruments
for trading purposes.
Interest Rate Risk. The Company’s exposure
to market risk for changes in interest rates relate primarily to the Company’s
investment portfolio. The Company does not have any derivative
financial instruments in its portfolio. The Company places its
investments in instruments that meet high credit quality
standards. The Company is adverse to principal loss and ensures the
safety and preservation of its invested funds by limiting default risk, market
risk and reinvestment risk. As of June 30, 2007, the Company’s
investments consisted of U.S. government commercial paper. The
Company does not expect any material loss with respect to its investment
portfolio. In addition, the Company does not believe that a 10%
change in interest rates would have a significant effect on its interest
income.
Foreign Currency
Risk. The Company does not use foreign currency forward
exchange contracts or purchased currency options to hedge local currency cash
flows or for trading purposes. All sales arrangements with
international customers are denominated in foreign currency. For the
three month period ending June 30, 2007, approximately 28% of the Company’s
overall revenue resulted from sales to customers outside the United
States. A 10% change in the value of the U.S. dollar relative to each
of the currencies of the Company’s non-U.S.-generated sales would not have
resulted in a material change to its results of operations. The
Company does not expect any material loss with respect to foreign currency
risk.
Item
4T. CONTROLS AND
PROCEDURES
The
Company’s management team, under the supervision and with the participation of
the Company’s principal executive officer and principal financial officer,
evaluated the effectiveness of the design and operation of the Company’s
disclosure controls and procedures pursuant to Rule 13a-15(b) of the Securities
Exchange Act of 1934 (“Exchange Act”), as of the last day of the period covered
by this report, September 30, 2007. The term disclosure controls and
procedures means the Company’s controls and other procedures that are designed
to ensure that information required to be disclosed by the Company in the
reports that the Company files or submits under the Exchange Act is recorded,
processed, summarized and reported, within the time periods specified in the
Securities and Exchange Commission’s rules and forms. Disclosure
controls and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed by the Company in
the reports that the Company files or submits under the Exchange Act is
accumulated and communicated to management, including the Company’s principal
executive and principal financial officers, or persons performing similar
functions, as appropriate to allow timely decisions regarding required
disclosure. Based on this evaluation, the Company’s principal
executive officer and principal financial officer concluded that, because of the
material weaknesses in the Company’s internal control over financial reporting
described below, the Company’s disclosure controls and procedures were not
effective as of September 30, 2007. To address the material weaknesses in the
Company’s internal control over financial reporting described below, we
performed additional manual procedures and analysis and other post-closing
procedures in order to prepare the consolidated financial statements included in
this report. As a result of these expanded procedures, the Company believes that
the condensed consolidated financial statements contained in this report present
fairly, in all material respects, our financial condition, results of operations
and cash flows for the periods covered thereby in conformity with generally
accepted accounting principles in the United States (“GAAP”).
In
connection with the preparation of the 2006 Form 10-K, an error in the Company’s
accounting for revenue recognition relating to a particular contract from 2004
was identified. In the fourth quarter of 2004, our U.K. subsidiary
entered into a contract with a new customer. In 2004, the Company
recognized all of the license revenue. In 2005 and the first three
quarters of 2006, the Company recognized services and maintenance revenue based
on work performed for the customer. However, the contract contained a
specified upgrade right, which was delivered in the first quarter of
2005. According to accounting requirements, a specified upgrade right
must be valued using vendor specific objective evidence (VSOE). The
Company uses the residual method for recognizing revenue on its software
licenses. In such instances, the accounting rules state that VSOE for
a specified upgrade right cannot be determined and therefore, revenue must be
deferred until all elements of the arrangement (which would include the
specified upgrade) are delivered. Although the specified upgrade was
delivered in the first quarter of 2005, changes in the customer’s requirements
and subsequent concessions granted by the Company in October 2005 (which
included an additional specified upgrade right), further delayed our ability to
establish that delivery and acceptance of the license had
occurred. This additional specified upgrade was delivered in the
first quarter of 2007. Accordingly all revenue, including license,
service and maintenance should have been deferred until the delivery and
acceptance of the final element. Therefore in 2006, the Company
restated its financial statements to defer all license, service and maintenance
revenue recognized in relation to this contract in 2004, 2005 and the first
three quarters of 2006, which was $610,000, $611,000 and $457,000,
respectively.
In connection with
the completion of its audit of and the issuance
of an unqualified report on the Company's consolidated financial
statements for the fiscal year ended December 31, 2006, the Company's
independent registered public accounting firm,
BDO Seidman, LLP ("BDO"), communicated to the Company's Audit Committee that the
following matter involving the Company's internal controls and operations was
considered to be a material weakness, as defined under standards established by
the Public Company Accounting Oversight Board:
The
Company does not maintain sufficiently detailed documentation regarding how
modifications to its standard software license terms (and the related accounting
impact, if any) comply with provisions in US GAAP, namely SOP 97-2 Software
Revenue Recognition and SOP 98-9 Modification of SOP 97-2 Software Revenue
Recognition with Respect to Certain Transactions and related practice aids
issued by the American Institute of Certified Public Accountants
(AICPA).
A
material weakness is a significant deficiency, or combination of significant
deficiencies, that results in more than a remote likelihood that a material
misstatement of the financial statements will not be prevented or detected by
the entity’s internal control.
The
Company expanded its internal contract documentation procedures during the
accounting close of the quarter ended June 30, 2007 and continues to implement
additional documentation procedures, in order to correct the material weakness
identified. However, the Company will need to complete additional quarterly
closings in order to adequately evaluate the effectiveness of the remediations
made to its material weakness in internal controls, before it can state that the
identified weakness has been corrected.
Restatement
In
conjunction with the preparation of the 2007 Form 10-K, management identified
errors in accounting for certain license contracts which were executed in 2006
(the “2006 Contacts”) and 2005 (the “2005 Contact). In addition,
management identified an error with a contract executed in the quarter ended
September 30, 2007 (the “2007 Contract”).
In regard
to the 2005 Contract, the customer had been promised a specified
upgrade. At the time the contract was signed, the Company estimated a
value for the specified upgrade and deferred that revenue until the upgrade was
delivered. At the time the Company filed its 2006 and 2005 Forms 10-K
and its quarterly financial statements in 2006, it recognized the license
revenue as well as service and maintenance revenue as services were
provided.
The 2006
Contracts (four in total) included add-on analytical modules that had not, at
that time, been released. The 2006 Contracts contained numerous
licenses and modules that were purchased and delivered to the customers in the
quarters in which the Company recognized the revenues related to the
Contracts. 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. In addition, the Company recognized service
and maintenance revenue related to these contracts as services were
performed.
Notwithstanding
the preceding, during the 2007 audit it was determined that the Company does not
have vendor specific objective evidence (“VSOE”) for the specified upgrade nor
the undelivered analytical module software licenses. According to
AICPA SOP 97-2 “Software Revenue Recognition” and related statements,
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. 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, including license, service and maintenance revenues, must be
deferred until the delivery and acceptance of the final undelivered
element. Therefore, the Company restated its consolidated financial
statements for 2005 and 2006 to defer all license revenues and service and
maintenance revenues recognized in 2005 and 2006 in relation to the
Contracts. The undelivered modules were delivered in the first and
second quarters of 2007. Upon the final delivery, all deferred
revenues were recognized.
In regard
to the 2007 Contract, the Company determined that a software implementation
agreement contained a reference to an unreleased upgrade of the
software. The software licensing agreement and the software
implementation agreement were signed in the third and fourth quarter of 2007,
respectively. Based on AICPA Technical Practice Aid 5100.39, Software Recognition for Multiple
Element Arrangements, under certain conditions, multiple agreements
between a vendor and customer should be considered as one
agreement. In this case, it was determined that the project
implementation plan should be considered as part of the original software
licensing agreement. Since the implementation plan referred to an
unreleased version of the Company’s software for which no VSOE exists, all
revenue related to the transaction, including license and services and
maintenance should be deferred until the specified upgrade is
delivered. The upgrade was delivered to the customer in the first
quarter of 2008. It is expected that all of the deferred revenue
related to this contract will be recognized at that time.
The
impact of the adjustment on the quarter ended September 30, 2007 contained in
this Form 10-Q/A is to decrease license revenue by $674,000 and service and
maintenance revenue by $26,000 on the Consolidated Statements of Operations and
to increase deferred revenues by $700,000 on the Consolidated Balance
Sheets. The impact of the restatement on the quarter ended
September 30, 2006 contained in this Form 10-Q/A is to decrease license revenue
by $1,035,000 and decrease service and maintenance revenue by $428,000 on the
Consolidated Statements of Operations and to increase deferred revenues by
$1,463,000 on the Consolidated Balance Sheets. For the
nine months ended September 30, 2007, the impact of the restatement is to
increase license revenue by $748,000 and increase service and maintenance
revenue by $843,000 on the Consolidated Statements of Operations and to decrease
deferred revenues by $1,591,000 on the Consolidated Balance
Sheets For the nine months ended September 30, 2006, the impact
of the restatement is to decrease license revenue by $1,239,000 and decrease
service and maintenance revenue by $548,000 on the Consolidated Statements of
Operations and to increase deferred revenues by $1,787,000 on the Consolidated
Balance Sheets. The Consolidated Statements of Cash Flows and Notes
to Unaudited Financial Statements have been restated where applicable to reflect
the adjustments.
In connection with
the completion of its audit of and the issuance
of an unqualified report on the Company's consolidated financial
statements for the fiscal year ended December 31, 2007, the Company's
independent registered public accounting firm,
Grant Thornton LLP("Grant Thornton"), communicated to the Company's Audit
Committee that the following matters involving the Company's internal controls
and operations was considered to be a material weakness, as defined under
standards established by the Public Company Accounting Oversight
Board.
The
Company does not maintain sufficiently detailed documentation regarding how
modifications to its standard software license terms (and the related accounting
impact, if any) comply with provisions in US GAAP, namely SOP 97-2 Software
Revenue Recognition and SOP 98-9 Modification of SOP 97-2 Software Revenue
Recognition with Respect to Certain Transactions and related practice aids
issued by the American Institute of Certified Public Accountants
(AICPA).
In
addition, the Company did not correctly estimate certain variables related to
the calculation of stock based compensation in accordance with SFAS 123R, which
resulted in a significant deficiency. Accounting adjustments were
recorded in the Company’s financial results for 2007 to correct for the improper
estimate. A similar significant deficiency was also identified during
2006. According to the rules of COSO, if the same item is identified
as a significant deficiency in two consecutive years, it must be considered as a
material weakness. This material weakness had no impact on the
restatements contained in this Form 10-Q/A.
A
material weakness is a significant deficiency, or combination of significant
deficiencies, that results in more than a remote likelihood that a material
misstatement of the financial statements will not be prevented or detected by
the entity’s internal control.
The
Company intends to immediately expand its internal contract documentation
procedures and stock based compensation variables calculations in order to fully
comply with all provisions of US GAAP, in order to completely correct the
material weaknesses identified.
PART II - OTHER
INFORMATION
Item
1. Legal
Proceedings
Purported
Shareholder Class Action and Derivative Lawsuit
On and
shortly after April 6, 2006, certain purported shareholder class action and
derivative lawsuits were filed in the United States District Court for the
Eastern District of Pennsylvania against the Company and certain of its
directors and officers. The lawsuits, alleging that the Company and
certain of its officers and directors violated federal securities laws and state
laws, related to the Company’s March 31, 2006 announcement of the accounting
restatement for overcapitalized software development costs during the first two
quarters of 2005 and the undercapitalized software development costs during the
third quarter of 2005. The Company believed these lawsuits were without
merit and defended them vigorously. On
August 9, 2007, the court dismissed the Consolidated Amended Complaint, without
prejudice, and granted plaintiffs leave to file an amended Consolidated Amended
Complaint. The plaintiffs did not file an Amended Complaint, and
instead agreed to a joint stipulation for dismissal provided Astea did not seek
a recovery of costs against the plaintiffs. On August
21, 2007, the court dismissed the Consolidated Amended Complaint with prejudice,
and on September 4, 2007, the Court also dismissed the related derivative
lawsuit with prejudice. Therefore, this matter is now
concluded.
In
addition to the other information set forth in this report, you should carefully
consider the factors discussed in Part I, “Item 1A. Risk Factors” in the
Company’s Annual Report on Form 10-K for the year ended December 31, 2006, which
could materially affect the Company’s business, financial condition or future
results. The risks described in this report and in the Company’s Annual Report
on Form 10-K for the year ended December 31, 2006 are not the only risks facing
the Company. Additional risks and uncertainties not currently known to the
Company or that the Company currently deems to be immaterial also may materially
adversely affect the Company’s business, financial condition and/or operating
results.
Item
6. Exhibits and Reports on Form
8-K
(B) Reports
on Form 8-K
On August
11, 2006, the Company filed a report on Form 8-K with respect to the press
release issued as of that date reporting the results for the six months ended
June 30, 2006.
Pursuant to the requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized this 16th day of May 2008.
ASTEA
INTERNATIONAL INC.
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By:
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/s/Zack
Bergreen
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Zack
Bergreen
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Chief
Executive Officer
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(Principal
Executive Officer)
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By:
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/s/Fredric
Etskovitz
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Fredric
Etskovitz
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Chief
Financial Officer
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(Principal
Financial and Chief
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Accounting
Officer)
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Exhibit
Descriptions
30