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Organization, Consolidation and Presentation of Financial Statements
12 Months Ended
Dec. 31, 2014
Organization, Consolidation and Presentation of Financial Statements:  
Nature of Operations

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.   Since its inception in 1979, Astea has licensed applications to companies in a wide range of sectors including information technology, telecommunications, instruments and controls, business systems, and medical devices. 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.

Liquidity Disclosure

Operating Matters and Liquidity

The Company has a history of net losses.  In 2014, the Company generated a net loss of $3.4 million compared to a net loss of $3.0 million generated in 2013.  Further, at December 31, 2014, the Company had a working capital ratio of .56:1, with cash and cash equivalents and investments available for sale of $1,362,000.  Moreover, the Company expects to continue to incur additional operating expenses for research and development and invest in software development costs to achieve its projected revenue growth.  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.  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.  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. Accordingly, in June 2014, the Company entered into a new line of credit agreement, and has an existing line of credit from its Chief Executive Officer, both of which are described in Note 9. As of December 31, 2014 the Company owed $150,000 against the line of credit from its Chief Executive Officer and $1,004,000 against the new line of credit from Silicon Valley Bank (“SVB”).  In August 2014, the line of credit from the Company’s Chief Executive Officer was reduced from $3,000,000 to $1,000,000 and in December 2014 the availability under the line of credit from SVB was reduced from $3,000,000 to $2,000,000. The availability under the line of credit is tied to a borrowing base formula that is based on 80% of the Company’s eligible domestic accounts receivable, as of December 31, 2014 the availability under the line of credit was $1,612,000.  Subsequent to the expiration of the line of credit, the CEO has committed to support the Company financially for up to $1,000,000 through April 1, 2016.  The Company has projected revenues for 2015 that management believes will provide sufficient funds to sustain its continuing operations.

 

In December 2014, the Company signed an amended loan agreement with SVB to change the financial covenants in the old loan agreement to better reflect the financial results of the Company as it changes its delivery model from exclusively selling perpetual licenses to also including cloud-based hosted solutions. The Company was in compliance with the financial covenants for both lines of credit with the Chief Executive Officer and SVB as of December 31, 2014.   In the event the Company does not meet its financial covenants in 2015 and SVB does not extend a waiver or forbearance agreement, and the Company believes that it does not have adequate liquidity to operate, if necessary, the Company will implement a cost cutting plan that reduces all its expenditures to the appropriate level that matches its operating cash flows.

 

The Company does not plan any significant capital expenditures in 2015 other than to replace its existing capital equipment as it becomes obsolete. The Company’s plans for investment in product development are expected to be similar to prior years.