Astea International (ATEA) 10-K 1 Apr 19 2018 FY Annual report Financial data

Document and Entity Information

Document and Entity Information - USD ($)	12 Months Ended
	Dec. 31, 2018	Jun. 30, 2018
Document and Entity Information:
Entity Registrant Name	Astea International Inc.
Document Type	10-K
Document Period End Date	Dec. 31, 2018
Trading Symbol	atea
Amendment Flag	false
Entity Central Index Key	0000945989
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding	3,616,549
Entity Public Float		$ 1,778,080
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	No
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	FY

Consolidated Balance Sheet

Consolidated Balance Sheet - USD ($)		Dec. 31, 2018		Dec. 31, 2017
Current assets:
Cash and cash equivalents		$ 1,276,000		$ 1,924,000
Receivables, net		6,294,000		6,589,000
Deferred Hosting Costs		429,000
Prepaid expenses and other		992,000		295,000
Total current assets		8,991,000		8,808,000
Property and equipment, net		89,000		105,000
Capitalized software, net		4,599,000		4,073,000
Restricted cash		72,000		77,000
Other assets		517,000		506,000
Total noncurrent assets		5,277,000		4,761,000
Total Assets		14,268,000		13,569,000
Current liabilities:
Term Note current portion				225,000
Accounts payable and accrued expenses		4,137,000		3,988,000
Deferred revenues		10,521,000		11,025,000
Total current liabilities		14,658,000		15,238,000
Long-term liabilities:
Borowings under line of credit - long term		2,669,000		2,305,000
Long-term accrued expenses		323,000		312,000
Deferred tax liability		49,000		49,000
Non current deferred revenue		763,000		504,000
Total noncurrent liabilities		3,804,000		3,170,000
Total Liabilities		18,462,000		18,408,000
STOCKHOLDERS' EQUITY:
Convertible redeemable preferred stock,	[1]	16,000		16,000
Common stock		37,000	[2]	36,000	[3]
Additional paid-in capital		31,455,000		31,710,000
Accumulated deficit		(34,344,000)		(35,338,000)
Accumulated other comprehensive loss		(1,150,000)		(1,055,000)
Treasury stock at cost	[4]	208,000		208,000
Total stockholders' equity		(4,194,000)		(4,839,000)
Total liabilities and stockholders' equity		$ 14,268,000		$ 13,569,000
[1]	$.01 par value, shares authorized 5,000,000; issued and outstanding Series A 826,000 and outstanding Series B 797,000
[2]	$.01 par value, 25,000,000 shares authorized; issued 3,659,000 and outstanding $3,617,000
[3]	$.01 par value, 25,000,000 shares authorized; issued 3,636,000 and outstanding $3,594,000
[4]	42,000 shares

Consolidated Statements of Oper

Consolidated Statements of Operations - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Revenues:
Software license fees	$ 2,790,000	$ 2,533,000
Subscriptions	4,615,000	2,736,000
Services and maintenance	20,063,000	21,065,000
Total revenues	27,468,000	26,334,000
Costs of Revenue:
Cost of software license fees	2,667,000	2,631,000
Cost of subscriptions	1,303,000	852,000
Cost of services and maintenance	13,943,000	14,956,000
Total cost of revenues	17,913,000	18,439,000
Gross Profit	9,555,000	7,895,000
Operating Expenses:
Product Development	1,067,000	1,303,000
Sales and marketing	3,790,000	3,575,000
General and administrative	4,062,000	2,994,000
Total operating expenses	8,919,000	7,872,000
Income (Loss) from operations	636,000	23,000
Interest expense, net	251,000	225,000
Loss before income tax	385,000	(202,000)
Income tax expense	21,000	(301,000)
Net Income (loss)	364,000	99,000
Preferred Dividend	500,000	500,000
Net loss allocable to common stockholders	$ (136,000)	$ (401,000)
Basic net (loss) earingings per share allocable to common stockholders	$ (0.04)	$ (0.11)
Diluted net (loss) earnings per share allocable to common stockholders	$ (0.04)	$ (0.11)
Weighted average shares outstanding used in computing basic net (loss) earnings per share	3,608,000	3,594,000
Weighted average shares outstanding used in computing diluted net (loss) earnings per share	3,608,000	3,594,000

Consolidated Statements of Comp

Consolidated Statements of Comprehensive Income (Loss) - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Statement of Comprehensive Income (loss)
Net Income (loss)	$ 364,000	$ 99,000
Other comprehensive income (loss) :
Foreign currency translation adjustment	(95,000)	(363,000)
Comprehensive income (loss)	$ 269,000	$ (264,000)

Consolidated Statement of Stock

Consolidated Statement of Stockholders' Equity - 12 months ended Dec. 31, 2018 - USD ($)	Convertible redeemable preferred stock	Common stock	Additional paid-in-capital	Accumulated deficit	Accumulated other comprehensive income	Treasury Stock	Total
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Beginning Balance at Dec. 31, 2017	$ 16,000	$ 36,000	$ 31,710,000	$ (1,055,000)	$ (35,338,000)	$ (208,000)	$ (4,839,000)
Cumulative effect for accounting change at Dec. 31, 2018					630,000		630,000
Proceeds from excersise of stock options		1,000	83,000				84,000
Preferred Dividend			(500,000)				(500,000)
Stock-based compensation			162,000				162,000
Other Comprehensive income (loss)				(95,000)			(95,000)
Net Income (loss)					364,000		364,000
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Ending Balance at Dec. 31, 2018	$ 16,000	$ 37,000	$ 31,455,000	$ (1,150,000)	$ (34,344,000)	$ (208,000)	$ (4,194,000)

CONSOLIDATED STATEMENTS OF CASH

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Cash flows from operating activities:
Net Income (loss)	$ 364,000	$ 99,000
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	2,679,000	2,653,000
Amortization of deferred financing cost	40,000	113,000
Amortization of deferred hosting costs	964,000
Allowance for doubtful accounts	(147,000)	174,000
Deferred tax asset		8,000
Stock-based compensation	162,000	135,000
Changes in operating assets and liabilities:
Receivables	371,000	(1,228,000)
Prepaid expenses and other	(220,000)	(34,000)
Deferred Hosting costs	(1,326,000)
Accounts payable and accrued expenses	(147,000)	618,000
Deferred revenues	(328,000)	1,493,000
Other assets	(10,000)	(355,000)
Net cash provided by operating activities	2,402,000	3,676,000
Cash flows from investing activities:
Purchases of property and equipment	(45,000)	(47,000)
Capitalized software development costs	(3,144,000)	(2,633,000)
Net cash used in investing activities	(3,189,000)	(2,680,000)
Cash flows from financing activities
Proceeds from excersise of stock options	84,000
Payment of term note from Bridge Bank	(225,000)	(175,000)
Proceeds on term note from Bridge Bank		400,000
Proceeds from debt from Silicon Valley Bank		6,734,000
Payment on debt from Silcon Valley Bank		(8,661,000)
Proceeds on line of credit from Bridge Bank	11,992,000	3,843,000
Payment line of credit from Bridge Bank	(11,628,000)	(1,538,000)
Deferred financing cost		(77,000)
Dividend payments on preferred stock	(105,000)	(250,000)
Net cash provided by financing activities	118,000	276,000
Effect of exchange rate changes on cash	17,000	(1,000)
Net increase in cash, cash equivalents and restricted cash	(652,000)	1,271,000
Cash, cash equivalents and restricted cash, beginning of period	2,001,000	730,000
Cash,cash equivalents and restricted, end of period	$ 1,349,000	$ 2,001,000

Organization, Consolidation and

Organization, Consolidation and Presentation of Financial Statements	12 Months Ended
	Dec. 31, 2018
Organization, Consolidation and Presentation of Financial Statements:
Comparability of Prior Year Financial Data, Policy	Comparability Effective January 1, 2018, the Company adopted a new accounting standard. Prior periods were not retrospectively restated, so the consolidated balance sheet as of December 31, 2017 and results of operations for the year ended December 31, 2017 were prepared using an accounting standard that is different than the one in effect for the year ended December 31, 2018. Therefore, the consolidated balance sheets as of December 31, 2018 and December 31, 2017 are not directly comparable, nor are the results of operations for the twelve months ended December 31, 2018 and December 31, 2017. Accumulated Deficit The following table presents the cumulative effect adjustment to the beginning accumulated deficit for the new accounting standard adopted by the Company on January 1, 2018: Accumulated Deficit Balance, December 31, 2017, as previously reported $ (35,338,000 ) Cumulative effect adjustment from the adoption of new accounting standard: Revenue from Contracts with Customers 630,000 Balance, January 1, 2018, as adjusted (34,708,000 ) Net income 364,000 Balance, December 31, 2018 $ (35,072,000 )
Additional Financial Information Disclosure	Operating Matters and Liquidity The Company has a history of net losses and an accumulated deficit of $34,344,000 as of December 31, 2018. In the year ended December 31, 2018, the Company generated net income of $364,000 compared to a net income of $99,000 generated in the year ended 2017. Further, at December 31, 2018, the Company had a working capital ratio of .61:1, with cash and cash equivalents of $1,276,000 compared to December 31, 2017 when the Company had cash and cash equivalents of $1,924,000. The decrease in cash and cash equivalents in 2018 was primarily driven by a decrease of cash provided by operations in 2018 compared to 2017, the repayment of the Company’s term loan for $225,000 and an increase in capitalized software development costs of $511,000 in 2018. As of December 31, 2018, the Company owed $2,669,000 against the line of credit from Western Alliance Bank (“WAB”). As of December 31, 2018, there was $181,000 available under the line of credit. The Company had a $400,000 term loan with WAB through April 2018. As of April 2018 the Company repaid the term loan in full. The Company has projected revenues that management believes will provide sufficient funds along with the additional borrowings available under its lines of credit to sustain its continuing operations through at least April 1, 2020. The Second Loan Agreement increased the availability under the line of credit from $2,400,000 to $2,850,000 (see Note 7). The Company was in compliance with the WAB financial and liquidity covenant as of December 31, 2018 and expects to be able to continue to comply with the required covenants under the modified agreement with WAB for at least the next year. As a result, the amount due to WAB under the line of credit as of December 31, 2018 were classified in the accompanying consolidated balance sheet in accordance with the repayment terms stipulated in the agreement with WAB. Our primary cash requirements are to fund operations Management’s current operating plan is to maintain and/or reduce operating expenses in order to be aligned with expected revenues. The primary area of focus will continue to be headcount and costs from outside consultants. The Company remains focused on maximizing revenue from its revenue generating resources and will continue to repurpose, if necessary, certain personnel to become billable so the Company can continue to improve its liquidity. The Company has a substantial professional services backlog that resulted from new customers added in 2018 as well as upgrade projects from our existing customers as they move to the latest version of Astea Alliance. In 2019, the Company will continue to consider ways to reduce operating expenses in certain areas of the Company in order to maintain our liquidity. However, management has implemented new marketing initiatives which will increase our spending in this area in 2019. We believe the new initiatives will directly contribute to increasing new business, which is essential to our growth. Operations will generate enough cash to meet obligations at least through April 1, 2020. As noted above, if the Company’s actual results fall short of expectations, the Company will make cost adjustments to improve the Company’s operating cash flows. Our operations are subject to certain risks and uncertainties including, among others, current and potential competitors with greater resources, dependence on our significant and existing customer base, closing license and subscription sales in a timely manner, lack of a history of consistently generating net income and uncertainty of future profitability, and possible fluctuations in financial results.

Accounting Changes and Error Co

Accounting Changes and Error Corrections	12 Months Ended
	Dec. 31, 2018
Accounting Changes and Error Corrections:
New Accounting Pronouncements and Changes in Accounting Principles	New Accounting Pronouncements In February 2016, the FASB issued guidance for accounting for leases. The guidance requires lessees to recognize assets and liabilities related to long-term leases on the balance sheet and expands disclosure requirements regarding leasing arrangements. The guidance is effective for the Company beginning January 1, 2019. The guidance must be adopted on a modified retrospective basis and provides for certain practical expedients. The adoption of this guidance will change the way we account for our operating leases and will result in recording the future benefits of those leases as an asset and the related minimum lease payments as a liability on our consolidated balance sheets. The Company does not finance purchases of equipment, but it does have operating leases for office space and equipment in all locations. The Company has identified all material operating lease agreements. It has also reviewed all significant contracts for embedded leases. No embedded leases were identified during this process. We determine if an arrangement is a lease at inception. All leases to which the Company is a party are operating leases. Beginning January 1, 2019, the operating leases will be reported on our consolidated balance sheet as operating lease right-of-use (ROU) assets and operating lease liabilities. The ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities will be recognized at the commencement date based on the present value of the lease payments over the lease term. As none of our leases provide an implicit interest rate, we will use our incremental borrowing rate based on the information available at the commencement date in calculating the present value of lease payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise the option. Lease expense for lease payments will be recognized on a straight-line basis over the lease term. The new guidance provides a number of optional practical expedients in transition. The Company expects to elect the ‘package of practical expedients’, which permits us under the new guidance not to reassess our prior conclusions about lease identification, lease classification and initial direct costs. Astea does not expect to elect the use-of hindsight or the practical expedient pertaining to land easements; the latter not being applicable to us. Astea expects that this guidance will have a material effect on our financial statements. While we continue to assess all of the effects of adoption, we currently believe the most significant effects relate to the recognition of new ROU assets and lease liabilities on our balance sheet for our office and equipment operating leases and providing significant new disclosures about our leasing activities. We do not expect a significant change in our leasing activities between now and adoption. On adoption, we currently expect to recognize operating liabilities in the range of $2,600,000 to $3,200,000, with corresponding ROU assets of the same amount based on the present value of the remaining minimum rental payments under current leasing standards for existing operating leases. The new guidance also provides practical expedients for an entity’s ongoing accounting. We currently expect to elect the short-term lease recognition exemption for one of our office equipment leases. This means, for those leases that qualify, we will not recognize ROU assets or lease liabilities. This includes not recognizing ROU assets or lease liabilities for existing short-term leases on those assets in transition. We also currently expect to elect the practical expedient to not separate lease and non-lease components for all of our leases. We also expect that the adoption of this guidance will result in additional lease-related disclosures in the footnotes to our future consolidated financial statements.

Accounting Policies

Accounting Policies	12 Months Ended
	Dec. 31, 2018
Accounting Policies:
Significant Accounting Policies	Summary of Significant Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of Astea International Inc. and its wholly owned subsidiaries and branches. All significant intercompany accounts and transactions have been eliminated upon consolidation. Use of Estimates 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 that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant assets and liabilities that are subject to estimates include allowances for doubtful accounts and other intangible assets, valuation of deferred tax assets, certain accrued liabilities, share-based awards and expected customer life on SaaS contracts. Revenue Recognition Astea’s revenue is principally recognized from three sources: (i) licensing arrangements, (ii) subscription services and (iii) services and maintenance. The Company markets its products primarily through its direct sales force and resellers. License agreements do not provide for a right of return, and historically, product returns have not been significant. In May 2014, the FASB issued the new guidance. The Company adopted the new guidance on January 1, 2018 and applied the modified retrospective method of adoption with a cumulative catch-up adjustment to the opening balance of accumulated deficit at January 1, 2018. Under this method, the Company applied the revised guidance in the year of adoption and applied the old guidance, Revenue Recognition 1. Identify the contract with a customer. 2. Identify the performance obligations in the contract. 3. Determine the transaction price. 4. Allocate the transaction price to performance obligations in the contract. 5. Recognize revenue when or as the Company satisfies a performance obligation. The Company satisfies performance obligations as discussed in further detail below. Revenue is recognized at the time the related performance obligation is satisfied by transferring a promised good or service to a customer. The Company recognizes revenue from license sales when the above criteria are met. The Company generally uses written contracts as a means to establish the terms and conditions by which our products, services and maintenance support are sold to our customers. The Company satisfies the performance obligation when the license key has been delivered electronically to the customer. If these criteria are not met, then revenue is deferred until such criteria are met or until the period(s) over which the last performance obligation is delivered. The Company recognizes revenues from maintenance ratably over the term of the underlying maintenance contract term. The term of the maintenance contract is usually one year. Renewals of maintenance contracts create new performance obligations that are satisfied over the contract term. Revenues from professional services mostly consist of time and material services. Certain professional service contracts are performed on a fixed price basis and revenue is recognized using the percentage of completion method. However, fixed price contracts are only utilized on rare occasions. Performance obligations are satisfied, and revenues are recognized, when the services are provided or when the service term has expired. In subscription based arrangements, even though customers use the software element, they generally do not have a contractual right to take possession of the software at any time during the hosting period without significant penalty to either run the software on its own hardware or contract with an unrelated third party to host the software. Accordingly, these software as a service (“SaaS”) arrangements, including the software license fees within the arrangements, are accounted for as subscription services provided all other revenue recognition criteria have been met. The subscription revenue is recognized on a straight-line basis over the performance obligation. The Company recognize subscription revenue once a customer goes-live ratably over the remaining contract period or customer life whichever is longer. The contract period is typically 1 to 3 years. The average expected life of a customer is 2 years. The average customer takes about 8 to 10 months to go live. The Company expects the average life of a customer to increase as more customers begin to renew their subscription contracts. When implementation, consulting and training services are bundled with the subscription based arrangement, these services are recognized over the life of the initial contract (performance obligation), once the project goes live. In contracts with multiple performance obligations, the Company accounts for individual performance obligations separately, if they are distinct. The Company allocates the transaction price to each performance obligation based on its relative standalone selling price out of total consideration of the contract. For maintenance and support, the Company determines the standalone selling price based on the price at which the Company separately sells a renewal contract. The Company determines the standalone selling price for sales of licenses using the residual approach. For professional services, the Company determines the standalone selling prices based on the price at which the Company separately sells those services. The new guidance prefers that revenue in a contract with multiple performance obligations use the adjusted market approach which includes SSP or TPE or expected cost plus margin approach as the methodology for allocating revenues to software. The Company uses the Residual Approach for allocating the revenues from a contract to the license component of the sale. Due to competition, highly variable pricing, customer demographics, varying size of our customers, and other such factors, the Company’s selling prices are considered uncertain for each perpetual license sale. Therefore, SSP is not an appropriate methodology as it relates to our license revenue. In terms of TPE as a basis to price our software, our product is unique and expansive in terms of the system’s inherent functionality. There are no directly comparable products in the marketplace today which we could use as the basis to set our standard license pricing based on a comparison with other vendors. In addition, most of the companies with whom we compete, are privately owned, which prevents us from obtaining reliable TPE. Accordingly, the new guidance permits the Company to use the Residual Method for allocating selling price if the first two preferable choices cannot be used. The residual between the total transaction price and the observable standalone selling prices of those performance obligations with observable standalone selling prices is considered to be the estimated standalone selling price of the goods or services underlying the performance obligation. Astea commonly sells its software products bundled with maintenance and professional services. As noted above, the new standard requires an entity to allocate the transaction price to the distinct performance obligations in a contract on a relative SSP basis. Under the new guidance, “ an entity shall determine the standalone selling price at contract inception of the distinct good or service underlying each performance obligation in the contract and allocate the transaction price in proportion to those standalone selling prices.” SSP is defined as the price at which an entity would sell a promised good or service separately to a customer. Astea has a history of selling maintenance renewals and professional services on a standalone basis. Therefore, the Company will utilize SSP for its performance obligations as it relates to service and maintenance revenue. In addition, due to the Company having different maintenance and service rates in other parts of the world in which it operates, the Company has developed a reasonable range for its SSP for maintenance and services rather than a single point. The incremental costs of obtaining a customer contract (i.e., those costs related to obtaining the customer contract that would not have been incurred if the customer contract was not obtained), such as a sales commission, should be capitalized if the Company expects to recover those costs (based on net future cash flows from the contract and expected contract renewals). The Company may expense the incremental costs of obtaining a contract if the amortization period would otherwise be one year or less. Since sales commissions are costs that are incremental and the amortization of sales commissions would be one year or less, the Company will continue to expense these items as incurred. Costs of obtaining a customer contract that are not incremental (i.e., costs related to obtaining the customer contract that would have been incurred regardless of whether the customer contract had been obtained), such as travel costs incurred to present the customer proposal, should only be capitalized if those costs are explicitly chargeable to the customer regardless of whether the entity enters into a contract with the customer. Otherwise, such costs are expensed as incurred. The Company will continue to expense these costs as they are incurred. The primary change in how we report revenues and expenses under the new guidance will be in the way we report expenses related to our subscription business. In the past, we deferred all hosting revenue until the customer went live. This practice will continue. The purpose of this practice is to only recognize subscription revenue over the period in which the customer receives the benefit of using the system (performance obligation is satisfied). The major change resulting from the adoption of the new guidance will relate to costs incurred in getting a hosted customer live. Through the end of 2017, the Company charged all implementation costs to expense in the period incurred. Starting January 1, 2018, we are deferring all implementation related costs on the balance sheet (primarily labor costs and hosting costs) until the customer goes live. Once live, we recognize the deferred implementation costs related to that customer ratably over the remaining expected life of the customer contract or two years, whichever is longer. At this point, based on the Company’s relatively short time-span as a provider of a hosted solution, our analysis shows that the average lifespan of an Astea hosted customer is 2 years. Therefore, we will amortize the deferred cost over 2 years or the remaining life of the contract, whichever is longer. This is consistent with the revenue recognition methodology used for the subscription service revenue for that customer. The Company satisfies performance obligations as discussed in further detail below. Revenue is recognized at the time the related performance obligation is satisfied by transferring a promised service to a customer. We believe that our accounting estimates used in applying our revenue recognition are critical because: · · · · Changes in the aforementioned items could have a material effect on the type and timing of revenue recognized. In addition, Company’s payment terms and conditions vary by contract and size of customer, although terms generally include a requirement of payment within 30 to 60 days. In instances where the timing of revenue recognition differs from the timing of invoicing, the Company has determined that its contracts generally do not include a significant financing component. The primary purpose of invoicing terms is to provide customers with simplified and predictable ways of purchasing our products and services, and not to facilitate financing arrangements. The Company generally has not experienced any material losses related to receivables from individual customers, or groups of customers. Due to these factors, no additional credit risk beyond amounts provided by the allowance for doubtful accounts is believed by management to be probable in the Company’s accounts receivable. The Company has not adjusted revenues for customers related to credit risk. For the years ended December 31, 2018 and 2017, the Company recognized $27,468,000 and $26,334,000, respectively, of revenue related to software license fees, subscription revenue, and services and maintenance. We present taxes assessed by a governmental authority including sales, use, value added and excise taxes on a net basis and therefore the presentation of these taxes is excluded from our revenues and is included in accrued expenses in the accompanying consolidated balance sheets until such amounts are remitted to the taxing authority. The Company is engaged in the design, development, marketing and support of its service management software solutions. All revenues result from selling of license (perpetual and subscription) software products and related professional services and customer support services. Accordingly, the Company considers itself to have one reporting segment. The Company’s chief decision maker further reviews financial information presented on a consolidated basis to determine if revenue can be further disaggregated in order to make operating decisions and assessing financial performance. It was determined that all revenue recognized in our consolidated statements of operations is considered to be revenue from contracts with customers, which can be disaggregated by both the timing of revenue recognition and geographic regions (see Note 12 in the notes to the Consolidated Financial Statements for disaggregated revenues by geographic regions). The following table depicts the Company’s disaggregation of revenue: Years ended December 31, 2018 2017 Timing of Revenue Recognition Performance obligations transferred at a point in time $ 2,790,000 $ 2,533,000 Performance obligations transferred over time 18,417,000 19,172,000 Performance obligations transferred over time, initiated at go-live 6,261,000 4,629,000 Total revenues 27,468,000 26,334,000 The performance obligations transferred at a point in time relates to perpetual license revenue for which there is no deferred revenue as of December 31, 2018 or 2017. The performance obligations transferred over time consist of professional services that are recognized based on time and materials, as the services are performed. The performance obligation for support services is recognized ratably over time based on the contract life, except for a few fixed price contracts are recognized based on certain milestones. If the customer pays in advance then the services are deferred until the performance obligation can be met. For support services, the fee is paid in advance of the performance obligation. Accordingly, the Company has recorded deferred revenue fixed price contracts and support services for $7,308,000 and $7,424,000 as of December 31, 2018 and 2017, respectively. Performance obligations transferred over time, intiated at go-live, relates to our subscription hosting and our subscription professional services for the implementation. No performance obligation is recognized until the customer is live and has access to the subscription services. Once live, the performance obligation is recognized over time, which is 2 years, the average customer life, or the contract life of a customer, whichever is longer. Because subscription fees are paid in advance, and professional services fees are paid as the services are performed, the revenue from both are deferred until the date in which the customer goes live. The Company has deferred revenue recorded for performance obligations transferred over time, intiated at go-live for hosting and hosting services for $3,211,000 and $3,595,000 as of December 31, 2018 and 2017, respectively. The long term deferred revenue recorded for $763,000 and $504,000 as of December 31, 2018 and 2017, respectively, relates to the portion of revenue that will be realized greater than one year for hosting implemnation services. Reimbursable Expenses The Company charges customers for out-of-pocket expenses incurred by its employees during the performance of professional services in the normal course of business. Billings for out-of-pocket expenses that are reimbursed by the customer are included in revenues with the corresponding expense included in cost of services and maintenance. During the years ended December 31, 2018 and 2017, the Company billed $377,000 and $463,000, respectively, of reimbursable expenses to customers. Allowance for Doubtful Accounts The Company records an allowance for doubtful accounts based on specifically identified amounts that management believes to be uncollectible. The Company also records an additional allowance based on certain percentages of aged accounts receivables, which are determined based on historical experience and management’s assessment of the general financial conditions affecting the Company’s customer base. Once management determines that an account will not be collected, the account is written off against the allowance for doubtful accounts. If actual collections experience changes, revisions to the allowance may be required. Activity in the allowance for doubtful accounts is as follows: Year Ended December 31 Balance at beginning of year Reductions Bad Debt Expense Balance at end of year 2018 $ 239,000 $ (173,000) $ 26,000 $ 92,000 2017 $ 66,000 $ (1,000) $ 174,000 $ 239,000 The Company reviews accounts receivable on a monthly basis to determine if any accounts receivables will potentially be uncollectible. The Company’s bad debt expense decreased due to a receivable balance deemed to be uncollectible and written off as of December 31, 2018. Based on a review and the increase in the allowance for doubtful accounts at December 31, 2018, the Company believes its allowance for doubtful accounts as of December 31, 2018 and 2017 is adequate. Property and Equipment Property and equipment are recorded at cost. Depreciation and amortization are provided using the straight-line method over the estimated useful lives of the related assets or the lease term, whichever is shorter. When property and equipment are sold or otherwise disposed of, the fixed asset account and related accumulated depreciation account are relieved and any gain or loss is included in operations. Expenditures for repairs and maintenance are charged to expense as incurred and significant renewals and betterments are capitalized. Capitalized Software Development Costs The Company capitalizes software development costs incurred during the period from 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, allocation of indirect costs such as rent, other headcount-related costs associated with product development and any related costs to third parties under sub-contracting. Capitalized software development costs are amortized on a product-by-product basis over the greater of the ratio of current revenues to total anticipated revenues (current and future revenues) or on a straight-line basis over the estimated useful lives of the products 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 net realizable value of each product, which includes the estimated future gross revenues from that product reduced by the estimated future costs of completing and disposing of that product, including the costs of performing maintenance and customer support required to satisfy the Company’s responsibility set forth at the time of sale. As of December 31, 2018 and 2017, management believes that no revisions to the remaining useful lives or write-downs of capitalized software development costs were required. Research and Development Costs The Company reports research and development costs as Product Development expense in its consolidated statement of operations. These costs include the costs incurred prior to the establishment of technological feasibility for new product development. In addition, research and development costs also include costs related to improving the quality of the Company’s released software products and any costs incurred by third party companies that may be engaged from time to time, to assist the Company in its product development efforts that are not considered to be significant enhancements to the software products. 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 cash and cash equivalents with financial institutions evaluated as being creditworthy, or investing in short-term money market funds which are exposed to minimal interest rate and credit risk. Cash balances are maintained with several banks. Certain operating accounts may exceed insured 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 throughout the world. While the Company does not require collateral from its customers, it does perform continuing credit evaluations of its customers’ financial condition. Income Taxes Deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and operating loss and tax credit carryforwards and are measured using the enacted tax rates and laws that will be in effect when the difference and carryforwards are expected to be recovered or settled. A valuation allowance for deferred tax assets is provided when we estimate that it is more likely than not that all or a portion of the deferred tax assets may not be realized through future operations. This assessment is based upon consideration of available positive and negative evidence which included, among other things, our most recent results of operations and expected future profitability. We consider our actual historical results to have a stronger weight than other more subjective indicators when considering whether to establish or reduce a valuation allowance on deferred tax assets. The Company prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Estimated interest is recorded as a component of interest expense and penalties are recorded as a component of general and administrative expenses. Advertising Advertising costs are expensed when incurred. Advertising costs for the years ended December 31, 2018 and 2017 were $356,000 and $325,000, respectively, and are included in sales and marketing expenses. Currency Translation The international subsidiaries and foreign branch operations translate their assets and liabilities from international operations by using the exchange rate in effect at the balance sheet date. The results of operations are translated at average exchange rates during the period. The effects of exchange rate fluctuations in translating assets and liabilities of international operations into U.S. dollars are accumulated and reflected as a currency translation adjustment as a component of other comprehensive loss in the accompanying consolidated statements of changes in stockholders’ deficit. Foreign exchange transaction gains and losses are included in general and administrative expenses in the consolidated statements of operations. General and administrative expenses include exchange losses of $23,000 and $28,000 for the years ended December 31, 2018 and 2017, respectively. Income (Loss) Per Share Income (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 earnings 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 income (loss) per share, weighted average numbers of shares outstanding are used as the denominator. The Company had net losses allocable to the common stockholders for the years ended December 31, 2018 and 2017. All options outstanding at December 31, 2018 and 2017 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 as the inclusion of these options and shares would have been antidilutive. Years ended December 31, 2018 2017 Net income $ 364,000 $ 99,000 Preferred dividend 500,000 500,000 Net loss available to common shareholders (136,000 ) (401,000 ) Basic and diluted weighted average number of common shares outstanding 3,608,000 3,594,000 Basic and diluted loss per common share $ (0.04 ) $ (0.11 ) Comprehensive Income (Loss) Comprehensive income (loss) consists of net income (loss), foreign currency translation adjustments. The effects are presented in the accompanying consolidated statements of comprehensive income (loss). Stock Compensation The Company estimates the fair value of stock options granted using the 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 common stock dividends. The risk-free interest rate is based on the yield from the U.S. Treasury zero-coupon bonds with an equivalent term. 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. For the year ended For the year ended December 31, 2018 December 31, 2017 Weighted Average Weighted Average Risk-free interest rate 2.63 % 1.96 % Expected life (in years) 5.28 4.98 Volatility 77.78 % 77.26 % Expected dividends - - Annual forfeiture rate 17.63 % 20.98 % The weighted-average fair value of options granted during the years ended December 31, 2018 and 2017 was estimated as $2.54 and $1.17, respectively.
Receivables, Policy	3. Accounts Receivable Billed accounts receivable represent billings for the Company’s products and services to end users and value added resellers. Unbilled accounts receivable represents contractual amounts due within one year under software licenses that have been delivered or statements of work for professional services, for work performed but not yet invoiced. Billed accounts receivable are shown net of reserves for estimated uncollectible amounts. Accounts receivable, net of allowance for doubtful accounts, consist of the following: December 31, 2018 2017 Billed accounts receivable, net $ 5,862,000 $ 5,815,000 Unbilled accounts receivable 432,000 774,000 $ 6,294,000 $ 6,589,000
Business Description and Accounting Policies	1. Company Background Astea International Inc. and Subsidiaries (collectively the “Company” or “Astea”) are 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, Japan, the Netherlands and Israel. The Company’s principal products are Astea Alliance, FX Service Center and FX Mobile. Astea Alliance supports the complete service lifecycle, from lead generation and project quotation to service and billing through asset retirement. FX Service Center is a service management and dispatch solution system that gives organizations command over their field service operations. FX Mobile offerings include mobile field service automation (“FSA”) systems, which include the wireless devices and support of mobile field technicians using portable, hand-held computing devices. Astea Alliance is also offered as a cloud solution. By leveraging the cloud delivery model, companies can access a solution that has robust and proven functionality at a lower, more predictable cost, with seamless upgrades and a quicker return on investment. The Company’s sales and marketing efforts are primarily focused on new software licensing (on premise and cloud solutions) and support services for its latest generation of Astea Alliance and FieldCentrix products.

Cash and Cash Equivalents

Cash and Cash Equivalents	12 Months Ended
	Dec. 31, 2018
Cash and Cash Equivalents:
Cash and Cash Equivalents Disclosure	Cash, cash equivalents and restricted cash The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheet that sum to the total of the same such amounts presented on consolidated statement of cash flows: December 31, 2018 December 31, 2017 Cash and cash equivalents $ 1,276,000 $ 1,924,000 Restricted cash 72,000 77,000 Total cash, cash equivalents, and restricted cash reported on the consolidated statement of cash flows $ 1,348,000 $ 2,001,000 Amounts included in restricted cash represent funds required to be set aside by a contractual agreement with the office leasing companies in Europe. The restrictions will lapse when the building leases expires.

Property, Plant, and Equipment

Property, Plant, and Equipment	12 Months Ended
	Dec. 31, 2018
Property, Plant, and Equipment:
Property, Plant and Equipment Disclosure	Property and Equipment Property and equipment consist of: December 31, Useful Life (Years) 2018 2017 Computers and related equipment 3 $ 4,610,000 $ 4,564,000 Furniture and fixtures 10 606,000 606,000 Leasehold improvements The lesser of lease term or 10 477,000 477,000 Software 3 1,088,000 1,089,000 Office equipment 3-7 813,000 813,000 7,594,000 7,549,000 Less: Accumulated depreciation and amortization (7,505,000) (7,444,000) $ 89,000 $ 105,000 Depreciation and amortization expense for the years ended December 31,

Intangible Assets, Goodwill and

Intangible Assets, Goodwill and Other	12 Months Ended
	Dec. 31, 2018
Intangible Assets, Goodwill and Other:
Intangible Assets Disclosure	Capitalized Software Development Costs Capitalized software development costs consist of: Remaining Weighted December 31, Average Life 2018 2017 Capitalized software development costs 19.9 months $ 35,005,000 $ 31,861,000 Less: Accumulated amortization (30,406,000) (27,788,000) $ 4,599,000 $ 4,073,000 The Company capitalized software development costs of $3,144,000 and $2,633,000 for the years ended December 31, 2018 and 2017, respectively. Amortization of capitalized software development costs for the years ended December 31, 2018 and 2017 was $2,618,000 and $2,581,000, respectively, and is reflected in cost of software license fees in the consolidated statements of operations. The Company amortizes software developments costs using the greater of the straight-line basis over the estimated useful lives of the product (two years) or the revenue forecast method.

Payables and Accruals

Payables and Accruals	12 Months Ended
	Dec. 31, 2018
Payables and Accruals:
Accounts Payable and Accrued Liabilities Disclosure	Accounts Payable and Accrued Expenses Accounts payable and accrued expenses consist of: December 31, 2018 2017 Accounts payable $ 648,000 $ 839,000 Accrued compensation and related benefits 1,755,000 1,788,000 Sales and payroll taxes 694,000 605,000 Preferred dividends 895,000 500,000 Income tax payable 74,000 123,000 Third party software costs 8,000 57,000 Accrued professional services 58,000 58,000 Other accrued liabilities 5,000 18,000 $ 4,137,000 $ 3,988,000

Commitment and Contingencies

Commitment and Contingencies	12 Months Ended
	Dec. 31, 2018
Commitment and Contingencies:
Commitments Contingencies and Guarantees	Commitments and Contingencies Leases The Company leases facilities and equipment under non-cancelable operating leases which may include escalation clauses. Rent expense for facility leases for the years ended December 31, 2018 and 2017 was $1,148,000 and $922,000, respectively. Equipment and vehicle lease expense for the years ended December 31, 2018 and 2017 was $156,000 and $131,000, respectively. Future minimum lease payments under the Company’s operating leases as of December 31, 2018 are as follows: 2019 1,252,000 2020 932,000 2021 768,000 2022 452,000 2023 1,000 Litigation From time to time, the Company may be involved in certain legal actions and customer disputes arising in the ordinary course of business. In the Company’s opinion, the outcome of such actions will not have a material adverse effect on the Company’s financial position, results of operations or cash flows.

Debt

Debt	12 Months Ended
	Dec. 31, 2018
Debt:
Debt Disclosure	Lines of Credit and Term Note Line of Credit and Term Loan with Western Alliance Bank On August 11, 2017, the Company entered into a Business Financing Agreement (the “Financing Agreement”) with Bridge Bank, a division of WAB, which included a revolving line of credit and a term loan. The agreement was to mature on September 1, 2019. The Financing Agreement with WAB, established a revolving credit line for the Company in the principal amount of up to $2,400,000 (the “Revolving Credit Line”) and a Term Loan of $400,000 (the “Term Loan”). Availability under the Revolving Credit Line is tied to a borrowing base formula that is based on 80% of the Company’s eligible domestic accounts receivable. Advances under the Revolving Credit Line (the “Advances”) may be repaid and reborrowed in accordance with the Loan Agreement. Pursuant to the Financing Agreement, the Company agreed to pay to WAB the outstanding principal amount of all Advances, the unpaid interest thereon, and all other obligations incurred with respect to the Loan Agreement on September 1, 2019. Interest accrues and is paid monthly at the Wall Street Journal Prime Rate plus 1.5%. At December 31, 2018, the interest rate was 7%. The original Term Loan provided proceeds of $400,000 to the Company. Beginning in August 2017, for the first six months of the term loan the Company was only required to pay interest. Then for the next 18 months, the Term Loan was to be amortized into monthly payments of principal and interest. The interest rate on the original Term Loan was the Wall Street Journal Prime Rate plus 1.75%. The Term Loan was modified in November 2017 by the First Modification to Business Financing Agreement (“First Modification”), and as a result, the Company fully repaid the Term Loan by April 30, 2018. The Company repaid $150,000 of the Term Loan in December 2017, $125,000 in January 2018 and the balance of $125,000 in April 2018. ` On July 24, 2018, the Company entered into a Second Modification to Business Financing Agreement (“Loan Modification”) with WAB which amended the First Modification, dated November 22, 2017. The Loan Modification increased the credit limit under Company’s credit facility to $2,850,000, extended the maturity date of the credit facility through November 15, 2020 and revised and clarified certain covenants and other terms of the credit facility. No other terms or conditions were modified. The Company expects to be able to continue to comply with the required covenants contained in the agreement with WAB for at least the next year. As a result, the amounts due to WAB under the line of credit and term loan as of December 31, 2018 are classified in the accompanying consolidated balance sheet in accordance with the repayment terms stipulated in the agreement.. As of December 31, 2018 the Company owed $2,669,000 under the revolving line of credit. The Company incurred $186,000 of interest expense to WAB in 2018. As of December 31, 2018, there was availability of $181,000 under the line of credit. The Company was in compliance with the financial and liquidity covenants of the Loan Modification as of December 31, 2018. Subject to certain exceptions, the Financing Agreement and Loan contains covenants prohibiting the Company from, among other things: (a) conveying, selling, leasing, transferring or otherwise disposing of their properties or assets; (b) liquidating or dissolving; (c) engaging in any business other than the business currently engaged in or reasonably related thereto; (d) entering into any merger or consolidation, or acquiring all or substantially all of the capital stock or property of another entity; (e) becoming liable for any indebtedness; (f) allowing any lien or encumbrance on any of their property; and (g) paying any dividends (other than dividends on outstanding convertible preferred stock); and (i) making payment on subordinated debt. In addition, actual EBITDA, as defined in the Financing Agreement for the trailing 6-month period must be at least $1 as tested quarterly. The Loan Modification is secured by a first priority perfected security interest in substantially all of the assets of the Company, excluding the intellectual property of the Company. The Loan Modification contains a negative covenant prohibiting the Company from granting a security interest in their intellectual property to any party. Line of Credit with Silicon Valley Bank (SVB) In August 2017 at the closing of the Financing Agreement with WAB, the Company repaid all outstanding amounts owed to SVB under the Revolving Facility and terminated the Revolving Facility. The Company incurred $74,000 of interest expense to SVB for the year ended December 31, 2017. Line of Credit with Chief Executive Officer/Director In April 2017, the Company extended its Revolving Loan Agreement and associated Revolving Promissory Note with its Chief Executive Officer/Director. This loan agreement provided an unsecured $1,000,000 revolving line of credit to the Company. The line of credit matured on May 1, 2018 and was not renewed.

Equity

Equity	12 Months Ended
	Dec. 31, 2018
Equity:
Shareholders' Equity and Share-based Payments	Equity Plans Share-Based Awards Compensation costs in 2018 and 2017 include compensation costs for share-based payments granted to employees and directors based on the estimated grant date fair value. As of December 31, 2018, the total unrecognized compensation cost related to non-vested options amounted to $266,000, which is expected to be recognized over the options’ weighted average remaining vesting period of 2.71 years. The Company has Stock Option Plans (the “Plans”) under which incentive and non-qualified stock options may be granted to its employees, officers, directors and others. Generally, incentive stock options are granted at fair value, become exercisable over a four-year period, and are subject to the employee’s continued employment. Non-qualified options are granted at exercise prices determined by the Board of Directors and vest over varying periods. A summary of the status of the Company’s stock options as of December 31, 2018 and 2017 and changes during the years then ended are as follows: OPTIONS OUTSTANDING OPTIONS EXERCISABLE Shares Wtd. Avg. Exercise Price Per Share Shares Wtd. Avg. Exercise Price Per Share Balance, December 31, 2016 710,000 $ 2.73 485,000 $ 3.12 Granted 135,000 1.86 Forfeited (99,000 ) 3.23 Expired (43,000 ) 4.50 Balance, December 31, 2017 703,000 $ 2.39 426,000 $ 2.74 Granted 125,000 3.90 Exercised (23,000 ) 3.65 Forfeited (18,000 ) 2.11 Expired (25,000 ) 4.10 Balance, December 31, 2018 762,000 $ 2.54 478,000 $ 2.45 There are 453,000 shares available for granting future options as of December 31, 2018. It is the Company’s policy to issue shares from authorized but unissued common stock when stock options are exercised. There are 25,000,000 shares authorized as of December 31, 2018. The following table summarizes outstanding options that are vested and expected to vest under the Company’s stock option plans as of December 31, 2018: Number of Shares Weighted Average Exercise Price Per Share Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value Outstanding Options 762,000 $2.54 5.84 $2,511,000 Vested and Expected to Vest 701,000 $2.51 5.60 $2,334,000 Options Exercisable 478,000 $2.45 4.38 $1,620,000 Options Excersied 23,000 3.65 - $34,600 The following table shows total share-based compensation expense included in the consolidated statements of operations: Years Ended December 31, 2018 December 31, 2017 Cost of services and maintenance $ 24,000 $ 21,000 Sales and marketing 4,000 2,000 General and administrative 134,000 112,000 Stock-based compensation expense $ 162,000 $ 135,000 Convertible Preferred Stock Series A On September 24, 2008, the Company issued 826,000 shares of Series-A Convertible Preferred Stock (“Series A Preferred Stock”) to its Chief Executive Officer at a price of $3.63 per share for a total of $3,000,000. Dividends accrue daily on the Series A Preferred at a rate of 10% and are payable only when, and if, declared by the Company’s Board of Directors, quarterly in arrears. At December 31, 2018, there were accrued dividends of $541,000. The Series A Preferred Stock may be converted into common stock at the rate of one share of common for each share of Series A Preferred Stock. The Company has rights to cause conversion of all of the shares of Series A Preferred Stock outstanding. The Company may redeem, subject to board approval, all of the shares of Series A Preferred Stock then outstanding at a price equal to the greater of (i) 130% of the purchase price plus all accrued and unpaid dividends and (ii) the fair market value of such number of shares of common stock which the holder of the Series A Preferred Stock would be entitled to receive had the redeemed Series A Preferred Stock been converted immediately prior to the redemption. Each and every outstanding share of Series A Preferred Stock is subject to mandatory and automatic conversion into shares of common stock if the closing price of the common stock as reported by the principal exchange or quotation system on which such common stock is traded or reported exceeds 300% of the then current conversion price for 30 consecutive trading days. In the event of a liquidation of the Company, the holder of the Series A and (Series B) preferred stock shall be entitled to receive in preference to the holders of the common stock, the original amount invested in the preferred stock plus any unpaid and accrued dividends. Preferred stock dividends on the Series A are declared quarterly by the Board of Directors. The Company reports the Series A Preferred Stock on the Company’s consolidated balance sheet within stockholders’ deficit. Series B On June 20, 2014, the Company issued 797,000 of Series-B Convertible Preferred Stock (“Series B Preferred Stock”) to its Chief Executive Officer at a price of $2.51 per share in exchange for the cancellation of $2,000,000 of outstanding principal owed to its Chief Executive Officer under a Revolving Promissory Note dated March 26, 2014. The Series B Preferred Stock may be converted into shares of common stock on a one-to-one ratio, subject to customary anti-dilution provisions. The Series B Preferred Stock is entitled to a quarterly dividend, which accrues at an annual rate of 10%. The Company’s Chief Executive Officer may convert 100% of his shares of the Series B Preferred Stock into shares of common stock. Each and every outstanding share of Series B Preferred Stock is subject to mandatory and automatic conversion into shares of common stock if the closing price of the common stock as reported by the principal exchange or quotation system on which such common stock is traded or reported exceeds 300% of the then current conversion price for 30 consecutive trading days. The Company may redeem all of the outstanding shares of the Series B Preferred Stock issued at a price per share equal to 300% of the purchase price. The Series B Preferred Stock ranks senior to the common stock and on parity with the Company’s Series A Preferred Stock. In the event of a liquidation of the Company, the holder of the Series B and Series A Preferred Stock shall be entitled to receive in preference to the holders of the common stock, the original amount invested in the preferred stock plus any unpaid and accrued dividends. Preferred stock dividends on the Series B are declared quarterly by the Board of Directors. At December 31, 2018, there were accrued dividends of $354,000. The Company reports the Series B Preferred Stock on the Company’s consolidated balance sheet within stockholders’ deficit.

Compensation Related Costs, Ret

Compensation Related Costs, Retirement Benefits	12 Months Ended
	Dec. 31, 2018
Compensation Related Costs, Retirement Benefits:
Pension and Other Postretirement Benefits Disclosure	Profit Sharing Plan/Savings Plan The Company maintains a discretionary profit sharing plan, including a voluntary Section 401(k) feature, covering all qualified and eligible employees. Company contributions to the profit sharing plan are determined at the discretion of the Board of Directors. The Company may match 25% of eligible employees’ contributions to the 401(k) plan up to a maximum of 1.5% of each employee’s compensation. It was determined by the Board of Directors that there would be a match in 2018 and 2017. The Company elected to match 25% of 6% of compensation for each eligible employee’s contributions to the 401(k) plans in 2018 and 2017 for a total match of $96,000 and $78,000, respectively.

Income Taxes

Income Taxes	12 Months Ended
	Dec. 31, 2018
Income Taxes:
Income Tax Disclosure	Income Taxes Pre-tax income (loss) for domestic locations for the years ended December 31, 2018 and 2017 was $1,090,000 and ($610,000), respectively. Foreign locations had pre-tax (loss) income of ($705,000) and $408,000 in 2018 and 2017, respectively. The provision (benefit) for income taxes is as follows: Years ended December 31, 2018 2017 Current: Federal $ 8,000 $ (354,000 ) State - - Foreign 13,000 45,000 21,000 (309,000 ) Deferred: Federal $ - $ - State - - Foreign - 8,000 $ 21,000 $ (301,000 ) The effective tax rate differed from the statutory U.S. federal income tax rate as follows: Year ended December 31, 2018 2017 Statutory tax rate (21.0 %) (34.0 %) Effect of tax reform - % 1,964.8 % Permanent differences (7.4 %) 29.7 % Difference between statutory and foreign rates (0.4 %) (91.4 %) Other (14.7 %) (107.5 %) Valuation allowance 38.0 % (1,910.6 %) (5.5 %) (149.0 %) Deferred tax assets and liabilities represent the future tax consequences of the differences between the financial statement carrying amounts for assets and liabilities versus the tax bases of assets and liabilities. Under this method, deferred tax assets are recognized for deductible temporary differences, operating loss and tax credit carryforwards. Deferred liabilities are recognized for taxable temporary differences. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The impact of tax rate changes on deferred tax assets and liabilities is recognized in the year that the change is enacted. The approximate income tax effect of each type of temporary difference is as follows: December 31, 2018 2017 Deferred tax assets: Timing of revenue recognition $ 1,180,000 $ 1,000,000 Accruals and reserves not currently deductible for tax 249,000 248,000 Domestic net operating loss carryforwards 8,023,000 8,485,000 Foreign net operating loss carryforwards 2,380,000 3,559,000 Depreciation and amortization 27,000 69,000 Non-qualified stock options 250,000 230,000 Amortization of deductible goodwill 56,000 83,000 Other 18,000 20,000 Total deferred tax assets 12,183,000 13,694,000 Deferred tax liabilities: Capitalized software development costs (1,204,000 ))) (1,061,000 ) Israel deferred tax liability (49,000 )) (49,000 ) Total deferred tax liabilities (1,377,000 ))) (1,110,000 ) Net deferred tax asset before valuation allowance 10,930,000 12,584,000 Valuation allowance (10,979,000 ))) (12,633,000 ) Net deferred tax liabilities $ (49,000 ))) $ (49,000 ) Realization of deferred tax assets is primarily dependent on future taxable income, the amount and timing of which is uncertain. The valuation allowance is adjusted on a periodic basis to reflect management’s estimate of the realizable value of the net deferred tax assets. A valuation allowance has been recorded for the net deferred tax asset for all jurisdictions with the exception of a $49,000 deferred tax liability recorded for the Company’s subsidiary located in Israel. Taxable income for the Israeli subsidiary was $268,000 and $595,000 for the years ended December 31, 2018 and 2017, respectively. The Israeli subsidiary has a tax provision of $14,000 and $53,000 for the years ended December 31, 2018 and 2017, respectively. As of December 31, 2018, the Company had net operating loss carryforwards for United States federal income tax purposes of approximately 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 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 2014 and subsequent years through 2018, the only periods subject to examination. The Company believes that its income tax positions and deductions will be sustained on a tax authority 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 consolidated statement of operations. For the years ended December 31, 2018 and 2017, there were no interest or penalties related to uncertain tax positions. On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Act”) was signed into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a federal corporate tax rate decrease from 35% to 21% for tax years beginning after December 31, 2017, the transition of U.S international taxation from a worldwide tax system to a territorial system, and a one-time transition tax on the mandatory deemed repatriation of foreign earnings. The Act repeals the Alternative Minimum Tax (“AMT”) for years beginning after December 31, 2017 and allows Companies with existing AMT credit carryforwards to receive future refunds of the credit. As a result, the Company has recorded an AMT credit benefit of $362,000 and recorded a corresponding long term receivable as of December 31, 2017. The Company believes that the most significant impact on its consolidated financial statements was the reduction of approximately $3,900,000 for the deferred tax assets related to net operating losses and other assets, which was recorded as of December 31, 2017. Such reduction was offset by changes to the Company’s valuation allowance. Additionally, the Company has investments in various foreign subsidiaries for which at December 31, 2018 and 2017, the cumulative earnings and profits of these entities was estimated to be negative. Accordingly, the Company has not recorded any amount for the transition tax enacted under the Act. On December 22, 2017, the Securities and Exchange Commission issued Staff Accounting Bulletin 118, which allows a measurement period, not to exceed one year, to finalize the accounting for the income tax impacts of the Tax Act. The Company determined that there were no changes to its tax accounts required due to the Tax Act. As of December 31, 2018 and 2017 the Company maintained a 100% valuation allowance for its non-Israeli deferred tax assets, based on the uncertainty of the realization of the deferred tax assets due to the uncertainty of future taxable income.

Segment Reporting

Segment Reporting	12 Months Ended
	Dec. 31, 2018
Segment Reporting:
Segment Reporting Disclosure	Geographic Region 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 decision maker 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 geographic regions as follows: Year ended December 31, 2018 2017 Revenues Software license fees United States $ 1,258,000 $ 1,188,000 Europe 602,000 239,000 Asia/Pacific 930,000 1,106,000 Total foreign software license fees 1,532,000 1,345,000 Total software license fees 2,790,000 2,533,000 Subscriptions United States 2,182,000 1,522,000 Europe 1,299,000 787,000 Asia/Pacific 1,134,000 427,000 Total foreign subscriptions 2,433,000 1,214,000 Total subscriptions 4,615,000 2,736,000 Services and maintenance United States 11,933,000 11,292,000 Europe 2,394,000 3,580,000 Asia/Pacific 5,736,000 6,193,000 Total foreign services and maintenance revenue 8,130,000 9,773,000 Total services and maintenance revenue 20,063,000 21,065,000 Total revenue $ 27,468,000 $ 26,334,000 Net income (loss) United States $ 1,011,000 $ (262,000 ) Europe (998,000 ) 65,000 Asia/Pacific 351,000 296,000 Net income (loss) $ 364,000 $ 99,000 Long-lived assets United States $ 5,126,000 $ 4,605,000 Europe 82,000 88,000 Asia/Pacific 69,000 68,000 Total long-lived assets $ 5,277,000 $ 4,761,000 Total assets United States $ 11,572,000 $ 9,890,000 Europe 1,008,000 967,000 Asia/Pacific 1,688,000 2,712,000 Total assets $ 14,268,000 $ 13,569,000

Uncategorized Items - atea-2018

Label	Element	Value
Other Comprehensive income (loss)	us-gaap_OtherComprehensiveIncomeLossTax	$ (264,000)