Organization, Consolidation and Presentation of Financial Statements

9 Months Ended

Sep. 30, 2013

Organization, Consolidation and Presentation of Financial Statements:

Organization, Consolidation and Presentation of Financial Statements Disclosure

1.    BASIS OF PRESENTATION

The consolidated financial statements at September 30, 2013 and for the nine month periods ended September 30, 2013 and 2012 of Astea International Inc. and subsidiaries (“Astea” or the "Company") are unaudited and reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial position and operating results for the interim periods.  The following unaudited financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).  Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to the rules and regulations of the SEC for quarterly reports on Form 10-Q.  It is suggested that these financial statements be read in conjunction with the financial statements and the notes thereto, included in the Company’s latest annual report (Form 10-K) and our Form 10-Q’s for the quarters ended March 31, 2012, June 30, 2012, September 30, 2012, March 31, 2013 and June 30, 2013. The interim financial information presented is not necessarily indicative of results expected for the entire year ending December 31, 2013.

New Accounting Pronouncements, Policy

2.      RECENTLY ADOPTED ACCOUNTING GUIDANCE

In February 2013, the Financial Accounting Standards Board (“FASB”) issued guidance on disclosure requirements for items reclassified out of Accumulated Other Comprehensive Income (AOCI). This new guidance requires entities to present (either on the face of the income statement or in the notes) the effects on the line items of the income statement for amounts reclassified out of AOCI. The new guidance was effective for us beginning January 1, 2013. Other than requiring additional disclosures, this did not have material impacts on our financial statements.

Liquidity Disclosure

Operating Matters and Liquidity

At September 30, 2013, the Company had a working capital ratio of .67:1, with cash and investments available for sale of $963,000.  The Company believes that it has sufficient cash to meet its anticipated operating cash needs for at least the next 12 months. However,  projections of future cash needs and cash flows are subject to substantial uncertainty. We continually evaluate our operating cash flows which can vary subject to the actual timing of expected new sales compared to our expectations of those sales and are sensitive to many factors, including changes in working capital and our net (loss) income.  The Company has projected revenues for the remainderof   2013 and into 2014 that will provide sufficient funds to sustain its continuing operations.   However, due to  unanticipated delays in the signing of certain license agreements and the cash flow timing impact of the Company’s planned conversion to a subscription-based software delivery model it was determined that the Company needed additional liquidity in the near term and as a result entered into a line of credit (Note 6) for $2,000,000 with the CEO. As of September 30, 2013 the Company had borrowed $1,800,000 against the line of credit. In addition, in order to improve efficiencies and eliminate certain costs, the Company developed a restructuring plan to improve cash flows and improve profitability in the future. The plan was announced in June 2013 (Note 7).    The Company does not plan any significant capital expenditures during the fourth quarter of 2013 or the first quarter of 2014.  In addition, it does not anticipate that its operations or financial condition will be affected materially by inflation.