Delaware
|
23-2119058
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
incorporation
or organization)
|
Identification
No.)
|
240
Gibraltar Road, Horsham, PA
|
19044
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
·
|
Part
I - Item 1 - Financial Statements
|
·
|
Part
I - Item 2 - Management’s Discussion and Analysis of Financial Condition
and Results of Operations
|
Page
No.
|
||
Facing
Sheet
|
1
|
|
Explanatory
Note
|
2
|
|
Index
|
3
|
|
PART
I - FINANCIAL INFORMATION
|
||
Item
1.
|
Consolidated
Financial Statements
|
|
Consolidated
Balance Sheets (Unaudited)
|
4
|
|
Consolidated
Statements of Operations (Unaudited)
|
5
|
|
Consolidated
Statements of Cash Flows (Unaudited)
|
6
|
|
Notes
to Unaudited Consolidated Financial Statements
|
7
|
|
Item
2.
|
Management's
Discussion and Analysis of Financial
|
|
Condition
and Results of Operations
|
13
|
|
Item
3.
|
Quantitative
and Qualitative Disclosure About Market Risk
|
19
|
Item
4.
|
Controls
and Procedures
|
19
|
PART
II - OTHER INFORMATION
|
||
Item
1.
|
Legal
Proceedings
|
20
|
Item
2.
|
Changes
in Securities and Use of Proceeds
|
20
|
Item
3.
|
Defaults
upon Senior Securities
|
20
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
20
|
Item
5.
|
Other
Information
|
20
|
Item
6.
|
Exhibits
and Reports on Form 8-K
|
21
|
Signatures
|
22
|
|
Certificates
|
|
September
30, 2005
|
|||||||
(Unaudited)
(Restated)
|
December
31, 2004
|
||||||
ASSETS
|
|||||||
Current
assets:
|
|||||||
Cash
and cash equivalents
|
$
|
8,801,000
|
$
|
4,483,000
|
|||
Restricted
cash
|
225,000
|
300,000
|
|||||
Receivables,
net of reserves of $333,000 and $567,000
|
5,563,000
|
6,428,000
|
|||||
Prepaid
expenses and other
|
553,000
|
441,000
|
|||||
Total
current assets
|
15,142,000
|
11,652,000
|
|||||
Property
and equipment, net
|
1,902,000
|
548,000
|
|||||
Customer
relations, net
|
1,354,000
|
-
|
|||||
Capitalized
software, net
|
1,621,000
|
1,520,000
|
|||||
Goodwill
|
956,000
|
-
|
|||||
Other
assets
|
77,000
|
34,000
|
|||||
Total
assets
|
$
|
21,052,000
|
$
|
13,754,000
|
|||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|||||||
Current
liabilities:
|
|||||||
Accounts
payable and accrued expenses
|
$
|
4,479,000
|
$
|
3,194,000
|
|||
Deferred
revenues
|
4,770,000
|
4,489,000
|
|||||
Total
current liabilities
|
9,249,000
|
7,683,000
|
|||||
Stockholders’
equity:
|
|||||||
Preferred
stock, $.01 par value, 5,000,000 shares
authorized,
none issued
|
-
|
-
|
|||||
Common
stock, $.01 par value, 25,000,000 shares
authorized,
issued 3,433,000 and 3,002,000
|
34,000
|
30,000
|
|||||
Additional
paid-in capital
|
26,361,000
|
22,997,000
|
|||||
Cumulative
translation adjustment
|
(888,000
|
)
|
(779,000
|
)
|
|||
Accumulated
deficit
|
(13,496,000
|
)
|
(15,967,000
|
)
|
|||
Less:
treasury stock at cost, 42,000 and 43,000 shares
|
(208,000
|
)
|
(210,000
|
)
|
|||
Total
stockholders’ equity
|
11,803,000
|
6,071,000
|
|||||
Total
liabilities and stockholders’ equity
|
$
|
21,052,000
|
$
|
13,754,000
|
|||
Three
Months
Ended
September 30,
|
Nine
Months
Ended
September 30,
|
||||||||||||
2005
(Restated)
|
2004
|
2005
(Restated)
|
2004
|
||||||||||
Revenues:
|
|||||||||||||
Software
license fees
|
$
|
4,805,000
|
$
|
1,184,000
|
$
|
7,471,000
|
$
|
5,686,000
|
|||||
Services
and maintenance
|
3,444,000
|
2,820,000
|
9,906,000
|
8,619,000
|
|||||||||
Total
revenues
|
8,249,000
|
4,004,000
|
17,377,000
|
14,305,000
|
|||||||||
Costs
and expenses:
|
|||||||||||||
Cost
of software license fees
|
292,000
|
328,000
|
875,000
|
1,073,000
|
|||||||||
Cost
of services and maintenance
|
2,034,000
|
1,590,000
|
5,812,000
|
4,728,000
|
|||||||||
Product
development
|
460,000
|
290,000
|
1,735,000
|
1,012,000
|
|||||||||
Sales
and marketing
|
1,944,000
|
1,192,000
|
4,607,000
|
4,114,000
|
|||||||||
General
and administrative
|
771,000
|
467,000
|
1,967,000
|
1,467,000
|
|||||||||
Total
costs and expenses
|
5,501,000
|
3,867,000
|
14,996,000
|
12,394,000
|
|||||||||
Income
from operations
|
2,748,000
|
137,000
|
2,381,000
|
1,911,000
|
|||||||||
Interest
income, net
|
41,000
|
18,000
|
90,000
|
36,000
|
|||||||||
Income
before income taxes
|
2,789,000
|
155,000
|
2,471,000
|
1,947,000
|
|||||||||
Income
tax expense
|
-
|
-
|
-
|
-
|
|||||||||
Net
income
|
$
|
2,789,000
|
$
|
155,000
|
$
|
2,471,000
|
$
|
1,947,000
|
|||||
Basic
net income per share
|
$
|
0.94
|
$
|
0.05
|
$
|
0.84
|
$
|
0.66
|
|||||
Diluted
net income per share
|
$
|
0.90
|
$
|
0.05
|
$
|
0.80
|
$
|
0.66
|
|||||
Shares
outstanding used in
computing
basic income
per
share
|
2,968,000
|
2,954,000
|
2,976,000
|
2,940,000
|
|||||||||
Shares
outstanding used in
computing
diluted income
per
share
|
3,106,000
|
2,992,000
|
3,072,000
|
2,964,000
|
|||||||||
Nine
Months
Ended
September 30,
|
|||||||
2005
(Restated)
|
2004
|
||||||
Cash
flows from operating activities:
|
|||||||
Net
income
|
$
|
2,471,000
|
$
|
1,947,000
|
|||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|||||||
Depreciation
and amortization
|
1,032,000
|
961,000
|
|||||
Change
in allowance for doubtful accounts
|
387,000
|
-
|
|||||
Changes
in operating assets and liabilities:
|
|||||||
Receivables
|
666,000
|
(1,312,000
|
)
|
||||
Prepaid
expenses and other
|
(61,000
|
)
|
105,000
|
||||
Accounts
payable and accrued expenses
|
810,000
|
(438,000
|
)
|
||||
Deferred
revenues
|
(742,000
|
)
|
78,000
|
||||
Other
assets
|
(11,000
|
)
|
(10,000
|
)
|
|||
Net
cash provided by operating activities
|
4,552,000
|
1,331,000
|
|||||
Cash
flows from investing activities:
|
|||||||
Reduction
in restricted cash
|
75,000
|
-
|
|||||
Purchases
of property and equipment
|
(213,000
|
)
|
(123,000
|
)
|
|||
Net
cash from acquisition of FieldCentrix
|
616,000
|
-
|
|||||
Capitalized
software development costs
|
(826,000
|
)
|
(969,000
|
)
|
|||
Net
cash used in investing activities
|
(348,000
|
)
|
(1,092,000
|
)
|
|||
Cash
flows from financing activities:
|
|||||||
Proceeds
from exercise of stock options and employee stock purchase
plan
|
34,000
|
113,000
|
|||||
Cash
Flow from financing activities
|
34,000
|
113,000
|
|||||
Effect
of exchange rate changes on cash
|
80,000
|
39,000
|
|||||
Net
increase in cash and cash equivalents
|
4,318,000
|
391,000
|
|||||
Cash,
beginning of period
|
4,483,000
|
3,480,000
|
|||||
Cash
and cash equivalents balance, end of period
|
$
|
8,801,000
|
$
|
3,871,000
|
Three
Months Ended
|
Nine
Months Ended
|
|
September
30, 2005
|
||
Net
income, as previously reported
|
2,691,000
|
2,722,000
|
Adjustment
(pre-tax):
|
||
Development
costs
|
(98,000)
|
251,000
|
Tax
effect of restatement adjustment
|
-
|
-
|
Net
income restated
|
2,789,000
|
2,471,000
|
September
30, 2005
|
|||||||
As
previously reported
|
As
restated
|
||||||
ASSETS
|
|||||||
Current
assets:
|
|||||||
Cash
and cash equivalents
|
$
|
8,801,000
|
$
|
8,801,000
|
|||
Restricted
cash
|
225,000
|
225,000
|
|||||
Receivables,
net of reserves
|
5,563,000
|
5,563,000
|
|||||
Prepaid
expenses and other
|
553,000
|
553,000
|
|||||
Total
current assets
|
15,142,000
|
15,142,000
|
|||||
Property
and equipment, net
|
1,902,000
|
1,187,000
|
|||||
Intangibles,
net
|
1,354,000
|
2,069,000
|
|||||
Capitalized
software, net
|
1,872,000
|
1,621,000
|
|||||
Goodwill
|
956,000
|
956,000
|
|||||
Other
assets
|
77,000
|
77,000
|
|||||
Total
assets
|
$
|
21,303,000
|
$
|
21,052,000
|
|||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|||||||
Current
liabilities:
|
|||||||
Accounts
payable and accrued expenses
|
$
|
4,479,000
|
$
|
4,479,000
|
|||
Deferred
revenues
|
4,770,000
|
4,770,000
|
|||||
Total
current liabilities
|
9,249,000
|
9,249,000
|
|||||
Stockholders’
equity:
|
|||||||
Preferred
stock
|
-
|
-
|
|||||
Common
stock
|
34,000
|
34,000
|
|||||
Additional
paid-in capital
|
26,361,000
|
26,361,000
|
|||||
Cumulative
translation adjustment
|
(888,000
|
)
|
(888,000
|
)
|
|||
Accumulated
deficit
|
(13,245,000
|
)
|
(13,496,000
|
)
|
|||
Less:
Treasury stock
|
(208,000
|
)
|
(208,000
|
)
|
|||
Total
stockholders’ equity
|
12,054,000
|
11,803,000
|
|||||
Total
liabilities and stockholders’ equity
|
$
|
21,303,000
|
$
|
21,052,000
|
|||
Three
Months
Ended
September 30, 2005
|
Nine
Months
Ended
September 30, 2005
|
||||||||||||
As
previously
reported
|
As
restated
|
As
previously
reported
|
As
restated
|
||||||||||
Revenues:
|
|||||||||||||
Software
license fees
|
$
|
4,805,000
|
$
|
4,805,000
|
$
|
7,471,000
|
$
|
7,471,000
|
|||||
Services
and maintenance
|
3,444,000
|
3,444,000
|
9,906,000
|
9,906,000
|
|||||||||
Total
revenues
|
8,249,000
|
8,249,000
|
17,377,000
|
17,377,000
|
|||||||||
Costs
and expenses:
|
|||||||||||||
Cost
of software license fees
|
292,000
|
292,000
|
875,000
|
875,000
|
|||||||||
Cost
of services and
maintenance
|
2,034,000
|
2,034,000
|
5,812,000
|
5,812,000
|
|||||||||
Product
development
|
558,000
|
460,000
|
1,484,000
|
1,735,000
|
|||||||||
Sales
and marketing
|
1,944,000
|
1,944,000
|
4,607,000
|
4,607,000
|
|||||||||
General
and administrative
|
771,000
|
771,000
|
1,967,000
|
1,967,000
|
|||||||||
Total
costs and expenses
|
5,599,000
|
5,501,000
|
14,745,000
|
14,996,000
|
|||||||||
Income
from operations
|
2,650,000
|
2,748,000
|
2,632,000
|
2,381,000
|
|||||||||
Interest
income, net
|
41,000
|
41,000
|
90,000
|
90,000
|
|||||||||
Income
before income taxes
|
2,691,000
|
2,789,000
|
2,722,000
|
2,471,000
|
|||||||||
Income
tax expense
|
-
|
-
|
-
|
-
|
|||||||||
Net
income
|
$
|
2,691,000
|
$
|
2,789,000
|
$
|
2,722,000
|
$
|
2,471,000
|
Common
Stock
|
Additional
Paid-In
Capital
|
Cumulative
Currency Translation Adjustment
|
Accumulated
Deficit
|
Treasury
Stock
|
Comprehensive
Income
|
||||||||||||||
Balance
at December 31, 2004
|
$
|
30,000
|
$
|
22,997,000
|
$
|
(779,000
|
)
|
$
|
(15,967,000
|
)
|
$
|
(210,000
|
)
|
$
|
-
|
||||
Issuance
of common stock
under
Employee Stock
Purchase
Plan
|
-
|
-
|
2,000
|
-
|
|||||||||||||||
Exercise
of stock options
|
32,000
|
-
|
-
|
-
|
-
|
||||||||||||||
Stock
issued for FX acquisition
|
4,000
|
3,332,000
|
-
|
-
|
-
|
-
|
|||||||||||||
Cumulative
translation adjustment
|
-
|
-
|
(109,000
|
)
|
-
|
-
|
(109,000
|
)
|
|||||||||||
Net
income for the period
|
-
|
-
|
-
|
2,471,000
|
-
|
2,471,000
|
|||||||||||||
Balance
at September 30, 2005
|
$
|
34,000
|
$
|
26,361,000
|
$
|
(888,000
|
)
|
$
|
(13,496,000
|
)
|
$
|
(208,000
|
)
|
$
|
2,362,000
|
Three
months ended
September
30,
|
Nine
months ended
September
30,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
(Unaudited)
(Restated)
|
(Unaudited)
|
(Unaudited)
(Restated)
|
(Unaudited)
|
||||||||||
Net
income - as reported
|
$
|
2,789,000
|
$
|
155,000
|
$
|
2,471,000
|
$
|
1,947,000
|
|||||
Add:
Stock-based compensation
included
in net income as
reported,
net or related tax effects
|
-
|
-
|
-
|
-
|
|||||||||
Deduct
stock-based compensation
determined
under fair value
based
methods for all awards, net
of
related tax effects
|
(132,000
|
)
|
(76,000
|
)
|
(248,000
|
)
|
(180,000
|
)
|
|||||
Net
income - pro forma
|
$
|
2,657,000
|
$
|
79,000
|
$
|
2,223,000
|
$
|
1,767,000
|
|||||
Basic
income per share -
as
reported
|
$
|
0.94
|
$
|
0.05
|
$
|
0.84
|
$
|
0.66
|
|||||
Diluted
income per share as
Reported
|
$
|
0.90
|
$
|
0.05
|
$
|
0.80
|
$
|
0.66
|
|||||
Basic
income per share -
pro
forma
|
$
|
0.90
|
$
|
0.03
|
$
|
0.75
|
$
|
0.60
|
|||||
Diluted
income per share pro
forma
|
$
|
0.86
|
$
|
0.03
|
$
|
0.72
|
$
|
0.60
|
Assets
acquired:
|
||||
Cash
|
$
|
906,000
|
||
Accounts
receivable
|
354,000
|
|||
Prepaid
expenses
|
95,000
|
|||
Property
and equipment
|
1,451,000
|
|||
Customer
relations
|
1,360,000
|
|||
Other
assets
|
31,000
|
|||
Goodwill
|
956,000
|
|||
5,153,000
|
||||
Less
liabilities assumed:
|
||||
Accrued
expenses
|
492,000
|
|||
Deferred
revenue
|
1,035,000
|
|||
1,527,000
|
||||
Total
purchase price
|
$
|
3,626,000
|
Asset
|
Useful
life
|
|
Property
and equipment
|
1
to 4 years
|
|
Software
|
1
to 5 years
|
|
Customer
relationships
|
10
years
|
Three
months ended
September
30,
|
Nine
months ended
September
30,
|
||||||||||||
2005
(Restated)
|
2004
|
2005
(Restated)
|
2004
|
||||||||||
Revenues
|
$
|
9,581,000
|
$
|
6,128,000
|
$
|
22,145,000
|
$
|
19,963,000
|
|||||
Net
income (loss)
|
$
|
2,135,000
|
$
|
(801,000
|
)
|
$
|
(688,000
|
)
|
$
|
(1,390,000
|
)
|
||
Net
income (loss) per
common
share
|
|||||||||||||
Basic
|
$
|
.62
|
$
|
(.23
|
)
|
$
|
(.20
|
)
|
$
|
(.41
|
)
|
||
Diluted
|
$
|
.60
|
$
|
(.23
|
)
|
$
|
(.20
|
)
|
$
|
(.41
|
)
|
||
Weighted
shares outstanding
|
|||||||||||||
Basic
|
3,433,000
|
3,419,000
|
3,433,000
|
3,391,000
|
|||||||||
Diluted
|
3,571,000
|
3,457,000
|
3,433,000
|
3,415,000
|
Nine
Months
Ended
September 30,
|
|||||||
2005
|
2004
|
||||||
Acquisition
of FieldCentrix Net Assets:
|
|||||||
Purchase
Price
|
|||||||
Common
stock issued
|
$
|
3,336,000
|
$
|
-
|
|||
Assets
acquired:
|
|||||||
Accounts
receivable
|
(354,000
|
)
|
-
|
||||
Prepaid
Expenses
|
(95,000
|
)
|
-
|
||||
Property
and equipment
|
(1,451,000
|
)
|
-
|
||||
Customer
relations
|
(1,360,000
|
)
|
-
|
||||
Other
assets
|
(31,000
|
)
|
-
|
||||
Goodwill
|
(956,000
|
)
|
-
|
||||
Total
assets acquired:
|
(4,247,000
|
)
|
-
|
||||
Liabilities
assumed:
|
|||||||
Accrued
expenses
|
492,000
|
-
|
|||||
Deferred
revenue
|
1,035,000
|
-
|
|||||
Total
liabilities assumed
|
1,527,000
|
-
|
|||||
Net
assets acquired
|
(2,720,000
|
)
|
-
|
||||
Net
Cash received from FieldCentrix acquisition
|
$
|
616,000
|
$
|
-
|
Item
2.
|
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
·
|
The
Company’s quarterly operating results have in the past varied and may in
the future vary significantly depending on factors such as the size,
timing and recognition of revenue from significant orders, the timing
of
new product releases and product enhancements, and market acceptance
of
these new releases and enhancements, increases in operating expenses,
and
seasonality of its business.
|
·
|
The
Company’s future success will depend in part on its ability to increase
licenses of AllianceEnterprise and other new product offerings, and
to
develop new products and product enhancements to complement its existing
field service, sales automation and customer support offerings.
|
·
|
The
enterprise software market is intensely
competitive.
|
·
|
International
sales for the Company’s products and services, and the Company’s expenses
related to these sales, continue to be a substantial component of
the
Company’s operations. International sales are subject to a variety of
risks, including difficulties in establishing and managing international
operations and in translating products into foreign
languages.
|
·
|
The
market price of the common stock could be subject to significant
fluctuations in response to, and may be adversely affected by, variations
in quarterly operating results, changes in earnings estimates by
analysts,
developments in the software industry, adverse earnings or other
financial
announcements of the Company’s customers and general stock market
conditions, as well as other
factors.
|
1.
|
The
election of a board of directors to hold office until the next
annual
stockholders’ meeting or until their respective successors have been
elected or appointed.
|
Number
of Shares
|
||||
Voted
For
|
Withheld
|
|||
Zack
B. Bergreen
|
2,753,415
|
13,740
|
||
Adrian
A. Peters
|
2,752,059
|
15,096
|
||
Thomas
J. Reilly, Jr.
|
2,762,350
|
4,805
|
||
Eric
S. Siegel
|
2,762,350
|
4,805
|
2.
|
The
ratification of the appointment of BDO Seidman, LLP as independent
auditors for the Company for the fiscal year ending December
31,
2005.
|
Number
of Shares
|
||||
Voted
For
|
Voted
Against
|
Abstained
|
||
2,763,075
|
920
|
3,160
|
(A)
|
Exhibits
|
31.1
|
Certification
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - CEO and
Principal Executive Officer
|
31.2
|
Certification
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - CFO and
Principal Financial and Chief Accounting
Officer
|
32.1
|
Certification
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 - President
and
Principal Executive Officer
|
32.2
|
Certification
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 - CFO and
Principal Financial and Chief Accounting
Officer
|
(B)
|
Reports
on Form 8-K
|
ASTEA INTERNATIONAL INC. | |
By:
|
/s/Zack
Bergreen
|
Zack
Bergreen
|
|
Chief
Executive Officer
|
|
(Principal
Executive Officer)
|
|
By:
|
/s/Fredric
Etskovitz
|
Fredric
Etskovitz
|
|
Chief
Financial Officer
|
|
(Principal
Financial and Chief
|
|
Accounting
Officer)
|
|