Astea International (ATEA) 10-Q 15 May 14 2014 Q1 Quarterly report Financial data

Document_and_Entity_Informatio

Document and Entity Information (USD $)	3 Months Ended
	Mar. 31, 2014
Document and Entity Information:	'
Entity Registrant Name	'Astea International Inc.
Document Type	'10-Q
Document Period End Date	31-Mar-14
Amendment Flag	'false
Entity Central Index Key	'0000945989
Current Fiscal Year End Date	'--12-31
Entity Filer Category	'Smaller Reporting Company
Entity Current Reporting Status	'No
Entity Voluntary Filers	'Yes
Entity Well-known Seasoned Issuer	'Yes
Document Fiscal Year Focus	'2014
Document Fiscal Period Focus	'Q1
Entity Common Stock, Shares Outstanding	3,587,299
Entity Public Float	$1,587,299

Consolidated_Balance_Sheet

Consolidated Balance Sheet (USD $)	Mar. 31, 2014		Dec. 31, 2013
Current assets:	'		'
Cash and cash equivalents	$692,000		$1,111,000
Investments available for sale	29,000		34,000
Receivables, net	3,717,000	[1],[2]	4,239,000	[1],[2]
Prepaid expenses and other	684,000		558,000
Total current assets	5,122,000		5,942,000
Property and equipment, net	214,000		291,000
Intangibles, net	198,000		232,000
Capitalized software, net	5,528,000		5,667,000
Goodwill	1,538,000		1,538,000
Restricted cash	131,000		125,000
Other assets	107,000		105,000
Total Assets	12,838,000		13,900,000
Current liabilities:	'		'
Accounts payable and accrued expenses	2,783,000		2,951,000
Deferred revenues	7,205,000		6,781,000
Total current liabilities	9,988,000		9,732,000
Long-term liabilities:	'		'
Line of credit from director/ officer	2,000,000		2,000,000
Deferred tax liability	334,000		339,000
Total long-term liabilities	2,334,000		2,339,000
STOCKHOLDERS' EQUITY:	'		'
Convertible redeemable preferred stock	8,000	[3]	8,000	[3]
Common stock	36,000	[4]	36,000	[4]
Additional paid-in capital	30,911,000		30,938,000
Accumulated deficit	-30,231,000	[5],[6]	-28,945,000	[5],[6]
Treasury stock at cost	208,000	[7]	208,000	[7]
Total stockholders' equity	516,000		1,829,000
Total liabilities and stockholders' equity	$12,838,000		$13,900,000
[1]	net of allowance of $34,000
[2]	net of allowance of $112,000
[3]	$.01 par value, shares authorized 5,000,000; issued and outstanding 826,000
[4]	$.01 par value, 25,000,000 shares authorized; issued 3,629,000 and outstanding 3,587,000
[5]	including accumulated comprehensive loss of of $1,286,000
[6]	including accumulated comprehensive loss of $3,202,000
[7]	42,000 shares

Consolidated_Statements_of_Ope

Consolidated Statements of Operations (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Statement of Income	'	'
Software license fees	$463,000	$474,000
Services and maintenance	4,376,000	4,189,000
Total revenues	4,839,000	4,663,000
Cost of software license fees	856,000	374,000
Cost of services and maintenance	2,997,000	3,009,000
Total cost of revenues	3,853,000	3,383,000
Gross Profit	986,000	1,280,000
Product Development	373,000	271,000
Sales and marketing	1,018,000	1,078,000
General and administrative	812,000	934,000
Total operating expenses	2,203,000	2,283,000
(Loss) income from operations	-1,217,000	-1,003,000
Interest expnese (income)	37,000	-2,000
(Loss) income before income tax	-1,254,000	-1,001,000
Income tax expense (benefit)	7,000	18,000
Net (loss) income	-1,261,000	-1,019,000
Preferred Dividend	75,000	75,000
Net (loss) income allocable to common stockholders	($1,336,000)	($1,094,000)
Basic net (loss) earingings per share allocable to common stockholders	($0.37)	($0.31)
Diluted net (loss) earnings per share allocable to common stockholders	($0.37)	($0.31)
Weighted average shares outstanding used in computing basic net (loss) earnings per share	3,587,000	3,586,000
Weighted average shares outstanding used in computing diluted net (loss) earnings per share	3,587,000	3,586,000

Consolidated_Statements_of_Com

Consolidated Statements of Comprehensive Income (Loss) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Statement of Comprhensive Income (loss)	'	'
Net (loss) income	($1,261,000)	($1,019,000)
Foerighn currency translation adjustment	-25,000	-65,000
Change in unrealized gain on available for sale investments	'	2,000
Comprehensive income (loss)	($1,286,000)	($1,082,000)

Consolidated_Statement_of_Stoc

Consolidated Statement of Stockholders' Equity (USD $)	Convertible redeemable preferred stock	Common stock	Additional paid-in-capital	Accumulated deficit	Treasury Stock	Total
Stockholders' Equity at Dec. 31, 2012	'	'	'	'	'	'
Cash dividends: preferred stock	'	'	($300,000)	'	'	($300,000)
Stock based compensation expense	'	'	182,000	'	'	182,000
Comprehensive income (loss)	'	'	'	-3,202,000	'	-3,202,000
Stockholders' Equity at Dec. 31, 2013	8,000	36,000	30,938,000	-28,945,000	-208,000	1,829,000
Cash dividends: preferred stock	'	'	-75,000	'	'	-75,000
Stock based compensation expense	'	'	48,000	'	'	48,000
Comprehensive income (loss)	'	'	'	-1,286,000	'	-1,286,000
Stockholders' Equity at Mar. 31, 2014	$8,000	$36,000	$30,911,000	($30,231,000)	($208,000)	$516,000

CONSOLIDATED_STATEMENTS_OF_CAS

CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Cash flows from operating activities:	'	'
Net (loss) income	($1,261,000)	($1,019,000)
Depreciation and amortization	931,000	423,000
Decrease in allowance for doubtful accounts	-78,000	'
Stock-based compensation	48,000	27,000
Deferred income tax	-5,000	9,000
Changes in operating assets and liabilities:	'	'
Receivables	634,000	88,000
Prepaid expenses and other	-91,000	-19,000
Accounts payable and accrued expenses	-288,000	158,000
Deferred revenues	459,000	545,000
Other assets	-1,000	6,000
Net cash (used in) provided by operating activities	348,000	218,000
Cash flows from investing activities:	'	'
Sale of short term investments	5,000	'
Purchases of property and equipment	'	-2,000
Capitalized software development costs	-681,000	-954,000
Change in restricted cash	-6,000	5,000
Net cash used in investing activities	-682,000	-951,000
Cash flows from financing activities	'	'
Dividend payments on preferred stock	-75,000	-75,000
Deferred financing costs	-12,000	'
Net cash provided by (used in) financing activities	-87,000	-75,000
Effect of exchange rate changes on cash	2,000	38,000
Net decrease in cash and cash equivalents	-419,000	-770,000
Cash and cash equivalents, beginning of period	1,111,000	2,015,000
Cash and cash equivalents, end of period	$692,000	$1,245,000

Organization_Consolidation_and

Organization, Consolidation and Presentation of Financial Statements	3 Months Ended
	Mar. 31, 2014
Organization, Consolidation and Presentation of Financial Statements:	'
New Accounting Pronouncements, Policy	'
	2.      RECENTLY ADOPTED ACCOUNTING GUIDANCE
	In July 2013, the FASB issued guidance on, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. The new guidance requires an entity to present unrecognized tax benefits as a reduction of a deferred tax asset, except in certain circumstances. This guidance is effective for fiscal years and interim periods beginning after December 31, 2013, and early adoption is permitted. Based upon a preliminary review of the guidance, the Company does not anticipate that adoption will have a significant impact on our financial statements.
Liquidity Disclosure	'
	Operating Matters and Liquidity
	At March 31, 2014, the Company had a working capital ratio of .51:1, with cash and investments available for sale of $721,000.  The Company believes that it has sufficient cash to meet its anticipated operating cash needs for at least the next 12 months. However, projections of future cash needs and cash flows are subject to substantial uncertainty. We continually evaluate our operating cash flows which can vary subject to the actual timing of expected new sales compared to our expectations of those sales and are sensitive to many factors, including changes in working capital and our net (loss) income.  The Company has projected revenues for the remainder of 2014 that will provide sufficient funds to sustain its continuing operations.   However, due to unanticipated delays in the signing of certain license agreements and the cash flow timing impact of the Company’s planned conversion to a subscription-based software delivery model it was determined that the Company needed additional liquidity in the near term and as a result entered into an amended line of credit whereby the availability under the arrangement was increased from $2,000,000 to $3,000,000. It is described in Note 6. As of March 31, 2014 the Company had borrowed $2,000,000 against the line of credit. In April 2014, the Company borrowed an additional $400,000 against the line of credit.  The Company does not plan any significant capital expenditures in 2014 other than to replace its existing capital equipment as it becomes obsolete.    In addition, it does not anticipate that its operations or financial condition will be affected materially by inflation.

Accounting_Policies

Accounting Policies	3 Months Ended
	Mar. 31, 2014
Accounting Policies:	'
Fair Value of Financial Instruments, Policy	'
	3.     FAIR VALUE OF FINANCIAL INSTRUMENTS
	The Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
	The Company accounts for certain assets and liabilities at fair value.  The hierarchy below lists three levels of fair value based on the extent to which inputs in measuring fair value are observable in the market.  We categorize each of our fair value measurements in one of these three levels based on the lowest level input that is significant to the fair value measurement in its entirety.  These levels are:
	1.        Level 1 - Valuations based on quoted prices in active markets for identical assets that the Company has the ability to access.
	2.        Level 2 - Valuations based on inputs on other than quoted prices included within Level 1, for which all significant inputs are observable, either directly or indirectly.
	3.        Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement. The inputs reflect the Company’s assumptions about the assumptions a market participant would use in pricing the asset.
	The carrying amounts of cash and cash equivalents, trade accounts receivable, other assets, trade accounts payable and accrued expenses at face value approximate fair value because of the short maturity of these instruments.
	Investments classified as available for sale are measured using quoted market prices multiplied by the quantity held where quoted market prices were available.
	Investments are considered to be impaired when a decline in fair value is judged to be other-than-temporary. Fair value is calculated based on publicly available market information or other estimates determined by management. We employ a systematic methodology on a quarterly basis that considers available quantitative and qualitative evidence in evaluating potential impairment of our investments. If the cost of an investment exceeds its fair value, we evaluate, among other factors, general market conditions, credit quality, the duration and extent to which the fair value is less than cost, and for equity securities, our intent and ability to hold, or plans to sell, the investment. For fixed income securities, we also evaluate whether we have plans to sell the security or it is more likely than not that we will be required to sell the security before recovery. We also consider specific adverse conditions related to the financial health of and business outlook for the investee, including industry and sector performance, changes in technology, and operational and financing cash flow factors. Once a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded to other income (expense) and a new cost basis in the investment is established.
	The fair value of goodwill is determined by estimating the expected present value of future cash flows without reference to observable market transactions.
Basis of Presentation and Significant Accounting Policies	'
	1.    BASIS OF PRESENTATION
	The consolidated financial statements at March 31, 2014 and for the three month periods ended March 31, 2014 and 2013 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 following unaudited financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).  Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to the rules and regulations of the SEC for quarterly reports on Form 10-Q.  It is suggested that these financial statements be read in conjunction with the financial statements and the notes thereto, included in the Company’s latest annual report (Form 10-K) and our Form 10-Q’s for the quarters ended March 31, 2013, June 30, 2013, and September 30, 2013. The interim financial information presented is not necessarily indicative of results expected for the entire year ending December 31, 2014.
Concentration Risk, Credit Risk, Policy	'
	1.        CONCENTRATION OF CREDIT RISK
	Financial instruments, which potentially subject the Company to credit risk, consist of cash equivalents and accounts receivable.  The Company’s policy is to limit the amount of credit exposure to any one financial institution.  The Company places investments with financial institutions evaluated as being creditworthy or investing in short-term money market positions which are exposed to minimal interest rate and credit risk.  Cash balances are maintained with several banks.  Certain operating accounts may exceed the Federal Deposit Insurance Corporation (FDIC) limits.
	The Company sells its products to customers involved in a variety of industries including information technology, medical devices and diagnostic systems, industrial controls and instrumentation and retail systems.  While the Company does not require collateral from its customers, it does perform continuing credit evaluations of its customers’ financial condition.
Marketable Securities, Available-for-sale Securities, Policy	'
	5.     INVESTMENTS AVAILABLE FOR SALE
	Investments that the Company designated as available-for-sale are reported at fair value, with unrealized gains and losses, net of tax, recorded in accumulated other comprehensive (loss) income.  The Company bases the cost of the investment sold on the specific identification method.  The available-for-sale investments consist of mutual funds.  If an available-for-sale investment is other than temporarily impaired, the loss is charged to either earnings or stockholders’ equity depending on our intent and ability to retain the security until we recover the full cost basis and the extent of the loss attributable to the creditworthiness of the issuer.
	On March 31, 2014 and December 31, 2013 the fair value for all of the Company’s investments was determined based upon quoted prices in active markets for identical assets (Level 1).
	The carrying amount, gross unrealized holding gains, gross unrealized holding losses, and fair value of available-for-sale securities by major security type and class of security at March 31, 2014 and December 31, 2013 were as follows:
			Aggregate		Gross unrealized		Gross unrealized holding (losses)		Aggregate
			cost basis		holding gains				fair value
	At March 31, 2014
	Available-for-sale:
	Mutual Funds	$	29,000	$	—	$	—	$	29,000
	At December 31, 2013
	Available-for-sale:
	Mutual Funds	$	33,000	$	1,000	$	—	$	34,000
	The aggregate fair value of mutual funds as of March 31, 2014 was $29,000. As of March 31, 2014 and December 31, 2013 there were no mutual funds that had unrealized losses.  The mutual funds contain investments that seek a high level of current income. The funds normally invest at least 80% of net assets, plus the amount of any borrowings for investment purposes, in floating or adjustable rate senior loans of any maturity or credit quality, including those rated below investment grade or determined by the fund's advisor to be of comparable quality.
Share-based Compensation, Option and Incentive Plans Policy	'
	8.     STOCK-BASED COMPENSATION
	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.  Executive level employees who hold a majority of options outstanding, and non-executive level employees each 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 and places exclusive reliance on historical volatilities to estimate our stock volatility over the expected term of its awards.  The Company has historically not paid dividends to common stockholders 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.
	As of March 31, 2014, the total unrecognized compensation cost related to non-vested options amounted to $360,000, which is expected to be recognized over the options’ average remaining vesting period of 2.70 years.  No income tax benefit was realized by the Company in the three months ended March 31, 2014.
	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.
	There were 80,000 and 55,000 options granted during the first three months of 2014 and 2013, respectively.
	Activity under the Company’s stock option plans for the three months ended March 31, 2014 is as follows:
		OPTIONS OUTSTANDING
					Weighted Average Exercise Price Per Share
			Shares
	Balance, December 31, 2013		666,000		$	3.92
	Granted		80,000			3.01
	Balance, March 31, 2014	746,000	$	3.82
	The following table summarizes outstanding options under the Company’s stock option plans as of March 31, 2014:
			Weighted Average Exercise Price Per Share	Weighted Average Remaining Contractual Term (in years)
		Number of Shares			Aggregate Intrinsic Value
	Outstanding Options	746,000	$3.82	5.96	$66,000
	Ending Vested and Exercisable	501,000	$4.27	4.63	$39,000
	Options Expected to Vest	688,000	$3.86	5.78	$61,000
Income Tax, Policy	'
	7.     INCOME TAX
	The Company has identified its federal tax return and its state returns in Pennsylvania and California as “major” tax jurisdictions.  Based on the Company’s evaluation, it has been 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 2008 through 2013, 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.
	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 first three months of 2014, there was no interest or penalties related to the settlement of any audits.
	At March 31, 2014, the Company maintained a 100% valuation allowance for its remaining deferred tax assets, based on the uncertainty of the realization of future taxable income.
Earnings Per Share, Policy	'
	9.     LOSS PER SHARE
	Loss per share is computed on the basis of the weighted average number of shares and common stock equivalents outstanding during the period.  In the calculation of diluted loss per share, shares outstanding are adjusted to assume conversion of the Company’s non-interest bearing convertible stock and exercise of options as if they were dilutive.  In the calculation of basic loss per share, weighted average numbers of shares outstanding are used as the denominator.
	The Company had net loss allocable to common stockholders for the three months ended March 3, 2014 and 2013.  Loss per share is computed as follows:
		Three
		Months Ended
		March 31,
			2014			2013
	Numerator:
	Net loss available to common shareholders	$	(1,336,000	)	$	(1,094,000	)
	Denominator:
	Weighted average shares used to compute net loss available
	to common shareholders per  common share basic and dilutive		3,587,000			3,586,000
			(0.37	)	$		)
	Basic and dilutive net loss per share to common shareholder	$				(0.31
	All options outstanding to purchase shares of common stock and shares of common stock issued on the assumed conversion of the eligible preferred stock were excluded from the diluted loss per common share calculation for the three months ended March 31, 2014 and 2013, as the inclusion of these options would have been antidilutive.
Subsequent Events, Policy	'
	11.           SUBSEQUENT EVENT
	Failure to Satisfy a Continued NASDAQ Listing Rule or Standard
	On April 7, 2014 the Company received a notification letter from the NASDAQ Stock Market advising the Company of its failure to comply with the required minimum of $2,500,000 in stockholders’ equity for continued listing on the NASDAQ Capital Market, pursuant to NASDAQ listing rule 5550(b)(1).  The Company fell below the minimum requirement with reported stockholders’ equity of $1,829,000 in its Form 10-K for the year ended December 31, 2013.  The Company’s loss in the first three months of 2014 further reduced the reported stockholders’ equity to $516,000.
	NASDAQ stated in the letter that under the NASDAQ listing rules the Company has 45 calendar days to submit a plan to regain compliance. If the plan is accepted by NASDAQ, an extension of up to 180 calendar days from April 7, 2014 may be granted to the Company to provide evidence of compliance. If the plan is not accepted by NASDAQ, the Company will have the opportunity to appeal that decision to a Hearings Panel.
	The Company is presently evaluating various courses of action to regain compliance and intends to timely submit a plan to NASDAQ to regain compliance with the NASDAQ minimum stockholders’ equity standard.

Segment_Reporting

Segment Reporting	3 Months Ended
	Mar. 31, 2014
Segment Reporting:	'
Schedule of Revenue from External Customers and Long-Lived Assets, by Geographical Areas	'
	10.    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 the license of 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 March 31,
			2014			2013
	Revenues
	Software license fees
	United States	$	20,000		$	363,000
	Total United States software license fees		20,000			363,000
	Europe		443,000			101,000
	Asia Pacific		-			10,000
	Total foreign software license fees		443,000			111,000
	Total software license fees		463,000			474,000
	Services and maintenance
	United States		2,769,000			2,792,000
	Total United States services and maintenance revenue		2,769,000			2,792,000
	Europe		927,000			521,000
	Asia Pacific		680,000			876,000
	Total foreign services and maintenance revenue		1,607,000			1,397,000
	Total services and maintenance revenue		4,376,000			4,189,000
	Total revenue	$	4,839,000		$	4,663,000
	Net (loss) income:
	United States	$	(1,018,000	)	$	(292,000	)
	Europe		138,000			(378,000	)
	Asia Pacific		(381,000	)		(349,000	)
	Net (loss)	$	(1,261,000	)	$	(1,019,000	)

Related_Party_Disclosures

Related Party Disclosures	3 Months Ended
	Mar. 31, 2014
Related Party Disclosures:	'
Related Party Transactions Disclosure	'
	6.   LINE OF CREDIT FROM DIRECTOR/ OFFICER- RELATED PARTY TRANSACTION
	On May 29, 2013, the Company entered into a Revolving Loan Agreement and associated Revolving Promissory Note (collectively the “Loan Documents”) with Zack Bergreen, the Company’s Chief Executive Officer.  Pursuant to the Loan Documents, Mr. Bergreen provided an unsecured $2,000,000 revolving line of credit to the Company (Line of Credit).  Amounts outstanding under the Line of Credit bear interest at a rate of 7% per annum, with interest payable monthly.  The maturity date of the Line of Credit is May 29, 2015.   The Company may pay all amounts outstanding and terminate the Loan Documents prior to that time without any penalties.  The Loan Documents contain customary covenants, default and other provisions.  The Loan Documents were negotiated and approved by the Audit Committee of the Company’s Board of Directors.  Borrowings under the Line of Credit are subject to the Audit Committee’s approval.   On March 27, 2014 the Company amended its original Loan Documents with Mr. Bergreen.  Pursuant to the amended Loan Documents, Mr. Bergreen will provide an additional $1,000,000 unsecured revolving line of credit to the Company to increase the total available line of credit to $3,000,000.  No other terms or conditions to the original agreement have changed.  The proceeds from the borrowings will be used by the Company for working capital and general corporate purposes.   As of March 31, 2014 the Company borrowed $2,000,000 against the line of credit and incurred $37,000 of interest expense.  The Company was in compliance with the covenants of this agreement as of March 31, 2014.