Accounting Policies

3 Months Ended

Mar. 31, 2012

Accounting Policies

Marketable Securities, Available-for-sale Securities, Policy [Policy Text Block]

4.     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 income (loss).  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, 2012 and December 31, 2011 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 debt securities by major security type and class of security at March 31, 2012 and December 31, 2011 were as follows:

		Aggregate cost basis		Gross unrealized holding gains		Gross unrealized holding (losses)		Aggregate fair value
At March 31, 2012
Available-for-sale:
Mutual Funds	$	326,000	$	4,000	$	(1,000)	$	329,000
	$	326,000	$	4,000	$	(1,000)	$	329,000
At December 31, 2011
Available-for-sale:
Mutual Funds	$	631,000	$	—	$	(5,000)	$	626,000
	$	631,000	$	—	$	(5,000)	$	626,000

The aggregate fair value of mutual funds as of March 31, 2012 was $329,000. Included in this total were $80,000 of mutual funds which contained an unrealized loss of $1,000.  These 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. The unrealized loss on the mutual funds is due to the credit quality of the senior loans in the portfolio.   Based upon the Company’s ability and intent to hold these investments for a reasonable period of time sufficient for a forecasted recovery of fair value, the Company does not consider those investments to be other-than-temporarily impaired at March 31, 2012.

Fair Value of Financial Instruments, Policy [Policy Text Block]

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.

Share-based Compensation, Option and Incentive Plans, Director Policy [Policy Text Block]

6.     STOCK-BASED COMPENSATION

The Company records stock-based compensation using the modified prospective transition method.   Under this method, compensation costs recognized in 2012 include (a) compensation costs for all share-based payments granted to employees and directors prior to, but not yet vested as of January 1, 2006, based on the grant date value estimated and (b) compensation cost for all share-based payments granted subsequent to January 1, 2006, based on the grant date fair value.

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, 2012, the total unrecognized compensation cost related to non-vested options amounted to $445,000, which is expected to be recognized over the options’ average remaining vesting period of 2.84 years.  No income tax benefit was realized by the Company in the three months ended March 31, 2012.

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 40,000 and 10,000 options granted during the first three months of 2012 and 2011, respectively. 

Activity under the Company’s stock option plans is as follows:

	OPTIONS OUTSTANDING
		Shares		Weighted Average Exercise Price Per Share
Balance, December 31, 2011		698,000		$	4.22
Granted		40,000			4.79
Canceled		(25,000	)		5.74
Balance, March 31, 2012		713,000		$	4.20

The following table summarizes outstanding options under the Company’s stock option plans as of March 31, 2012.

	Number of Shares	Weighted Average Exercise Price Per Share	Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding Options	713,000	$4.20	6.49	$134,000
Ending Vested and Exercisable	424,000	$4.84	4.87	$32,000
Options Expected to Vest	586,000	$4.30	6.79	$108,000

Income Tax, Policy [Policy Text Block]

5.     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 2006 through 2011, 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 quarter 2012, there was no interest or penalties related to the settlement of any audits.

At March 31, 2012, the Company maintained a 100% valuation allowance for its remaining deferred tax assets, based on the uncertainty of the realization of future taxable income.

In 2008, the Israel Taxing Authority “ITA” notified the Company that it intended to re-examine a 2002 transaction that it had previously approved. During the course of the examination, the ITA also reviewed the years 2003 through 2010.  In January 2012, a comprehensive settlement covering the tax years 2002 through 2010 was completed for a total settlement of $131,000.  The settlement was reported in the 2011 operating results.

Earnings Per Share, Policy [Policy Text Block]

7.     (LOSS) EARNINGS PER SHARE

(Loss) earnings 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 (loss) earnings per share, weighted average numbers of shares outstanding are used as the denominator.

In the calculation of basic earnings 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 31, 2012 and  net income allocable to the common stockholders for the three months ended March 31, 2011.  (Loss) earnings per share is computed as follows:

	Three Months Ended March 31,
		2012					2011
Numerator:
Net (loss) income allocable to common stockholders  (A)	$	(708,000	)		$		558,000
Denominator:
Weighted average shares used to compute net (loss) earnings         allocable to common stockholders per common share-basic  (B)		3,567,000					3,555,000
Conversion of preferred shares to common stock		-					826,000
Effect of dilutive stock options		-					66,000
Weighted average shares used to compute net (loss) earnings         allocable to common stockholders per common share-dilutive (C)		3,567,000					4,447,000
Basic net (loss) earnings per share to common stockholders  (A/B)	$	(0.20	)		$		0.16
Dilutive net (loss) earnings  per share to common stockholders (A/C)	$	(0.20	))	$		0.13

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, 2012 as the inclusion of these options would have been antidilutive.

Segment Reporting, Policy [Policy Text Block]

8.     MAJOR CUSTOMERS

For the three months ended March 31, 2012 there were no customers that accounted for 10% or more of total revenues and for the three months ended March 31, 2011 there was one customer that accounted for 17% of total revenues.  At March 31, 2012 and December 31, 2011, there was one customer that accounted for 15% and 10% of total accounts receivable, respectively.

9.      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:

For the Three Months Ended,			March 31, 2012			March 31, 2011
Revenues:
Software license fees
United States	$	126,000			$		794,000
Total United States software license fees		126,000					794,000
Europe		67,000					210,000
Asia Pacific		-					1,282,000
Total international software license fees		67,000					1,492,000
Total software license fees		193,000					2,286,000
Services and maintenance
United States		3,338,000					2,589,000
Total United States services and maintenance revenue		3,338,000					2,589,000
Europe		975,000					920,000
Asia Pacific		1,958,000					1,164,000
Total international services and maintenance revenue		2,933,000					2,084,000
Total services and  maintenance revenue		6,271,000					4,673,000
Total  revenue	$	6,464,000			$		6,959,000
Net (loss) income
United States	$	81,000			$		665,000
Europe		(294,000		)			(183,000	)
Asia Pacific		(420,000		)			151,000
Net (loss) income	$	(633,000		)	$		633,000