Organization, Consolidation and Presentation of Financial Statements	6 Months Ended
Jun. 30, 2018
Organization, Consolidation and Presentation of Financial Statements:
New Accounting Pronouncements, Policy	2. NEW ACCOUNTING PRONOUNCEMENTS In February 2016 as amended, 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 reporting periods beginning after December 15, 2018 and early adoption is permitted. The guidance must be adopted on a modified retrospective basis and provides for certain practical expedients. The Company expects to adopt this guidance in the first quarter of 2019 and we currently expect that 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 anticipates a significant balance sheet gross-up for the right-of-use assets and corresponding liabilities, with no impact to its debt covenant. The Company does not finance purchases on equipment, but it does have operating leases for office space and copiers in all locations. There are also a few car leases. The Company has identified all material operating lease agreements. Changes to processes and internal controls to meet the standard’s reporting and disclosure requirements have been identified and are being implemented. The Company is in the process of evaluating the effect that this guidance will have on its financial statements and related disclosures as the majority of our operating leases will be recorded on the balance sheet under the new guidance. While we do not anticipate the adoption of this accounting standard to have a material impact on our condensed consolidated statements of operations at this time, this conclusion may change as we finalize our assessment. In January 2018, the FASB released guidance on the accounting for tax on the global intangible low-taxed income ("GILTI") provisions of the Tax Cuts and Jobs Act (the "Act"). The GILTI provisions impose a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. The guidance indicates that either accounting for deferred taxes related to GILTI inclusions or to treat any taxes on GILTI inclusions as a period cost are both acceptable methods subject to an accounting policy election. Effective the first quarter of 2018, the Company elected to treat any potential GILTI inclusions as a period cost since we are not projecting any material impact from GILTI inclusions and any deferred taxes related to any inclusion would be immaterial.
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 six months ended June 30, 2017 were prepared using an accounting standard that was different than the one in effect for the six months ended June 30, 2018. Therefore, the condensed consolidated balance sheets as of June 30, 2018 and December 31, 2017 are not directly comparable, nor are the results of operations for the six months ended June 30, 2018 and June 30, 2017.
Liquidation Basis of Accounting	Operating Matters and Liquidity The Company has a history of net losses and an accumulated deficit of $34,398,000 as of June 30, 2018. In the first six months of 2018, the Company generated net income of $310,000 compared to a net loss of $906,000 generated in the first six months of 2017. Further, at June 30, 2018, the Company had a working capital ratio of .64:1, with cash and cash equivalents of $1,365,000 compared to December 31, 2017 when the Company had cash and cash equivalents of $1,924,000. The decrease in cash and cash equivalents for the first six months of 2018 was primarily driven by a decrease of cash provided by operations in 2018 compared to 2017 and the repayment of the Company’s term loan for $225,000 in the first six months of 2018. As of June 30, 2018, the Company owed $2,396,000 against the line of credit from Western Alliance Bank (“WAB”). As of June 30, 2018, there was no availability 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 August 14, 2019. The Second Loan Agreement modified the availability under the line of credit from $2,400,000 to $2,850,000 (see footnote #9). The Company was in compliance with the WAB financial and liquidity covenant as of June 30, 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 amounts due to WAB under the line of credit and term loan as of June 30, 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 which mainly include personnel-related costs, marketing costs, third party costs related to hosting and software, general and administrative costs associated with being a public company, travel costs, and quarterly preferred stock dividends. The Company expects to continue to incur operating expenses for research and development and investment 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 results of operations. However, projections of future cash needs and cash flows are subject to risks and uncertainty. 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 2018, the Company continues 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 have increased our spending in this area in 2018. 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 August 14, 2019. 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. In addition, we plan to maintain the same level of investment in software development and we do not expect to increase capital expenditures. 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.

Organization, Consolidation and Presentation of Financial Statements

6 Months Ended

Jun. 30, 2018

Organization, Consolidation and Presentation of Financial Statements:

2. NEW ACCOUNTING PRONOUNCEMENTS

In February 2016 as amended, 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 reporting periods beginning after December 15, 2018 and early adoption is permitted. The guidance must be adopted on a modified retrospective basis and provides for certain practical expedients. The Company expects to adopt this guidance in the first quarter of 2019 and we currently expect that 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 anticipates a significant balance sheet gross-up for the right-of-use assets and corresponding liabilities, with no impact to its debt covenant. The Company does not finance purchases on equipment, but it does have operating leases for office space and copiers in all locations. There are also a few car leases. The Company has identified all material operating lease agreements. Changes to processes and internal controls to meet the standard’s reporting and disclosure requirements have been identified and are being implemented. The Company is in the process of evaluating the effect that this guidance will have on its financial statements and related disclosures as the majority of our operating leases will be recorded on the balance sheet under the new guidance. While we do not anticipate the adoption of this accounting standard to have a material impact on our condensed consolidated statements of operations at this time, this conclusion may change as we finalize our assessment.

In January 2018, the FASB released guidance on the accounting for tax on the global intangible low-taxed income ("GILTI") provisions of the Tax Cuts and Jobs Act (the "Act"). The GILTI provisions impose a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. The guidance indicates that either accounting for deferred taxes related to GILTI inclusions or to treat any taxes on GILTI inclusions as a period cost are both acceptable methods subject to an accounting policy election. Effective the first quarter of 2018, the Company elected to treat any potential GILTI inclusions as a period cost since we are not projecting any material impact from GILTI inclusions and any deferred taxes related to any inclusion would be immaterial.

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 six months ended June 30, 2017 were prepared using an accounting standard that was different than the one in effect for the six months ended June 30, 2018. Therefore, the condensed consolidated balance sheets as of June 30, 2018 and December 31, 2017 are not directly comparable, nor are the results of operations for the six months ended June 30, 2018 and June 30, 2017.

Liquidation Basis of Accounting

Operating Matters and Liquidity

The Company has a history of net losses and an accumulated deficit of $34,398,000 as of June 30, 2018. In the first six months of 2018, the Company generated net income of $310,000 compared to a net loss of $906,000 generated in the first six months of 2017. Further, at June 30, 2018, the Company had a working capital ratio of .64:1, with cash and cash equivalents of $1,365,000 compared to December 31, 2017 when the Company had cash and cash equivalents of $1,924,000. The decrease in cash and cash equivalents for the first six months of 2018 was primarily driven by a decrease of cash provided by operations in 2018 compared to 2017 and the repayment of the Company’s term loan for $225,000 in the first six months of 2018.

As of June 30, 2018, the Company owed $2,396,000 against the line of credit from Western Alliance Bank (“WAB”). As of June 30, 2018, there was no availability 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 August 14, 2019. The Second Loan Agreement modified the availability under the line of credit from $2,400,000 to $2,850,000 (see footnote #9).

The Company was in compliance with the WAB financial and liquidity covenant as of June 30, 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 amounts due to WAB under the line of credit and term loan as of June 30, 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 which mainly include personnel-related costs, marketing costs, third party costs related to hosting and software, general and administrative costs associated with being a public company, travel costs, and quarterly preferred stock dividends. The Company expects to continue to incur operating expenses for research and development and investment 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 results of operations. However, projections of future cash needs and cash flows are subject to risks and uncertainty.

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 2018, the Company continues 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 have increased our spending in this area in 2018. 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 August 14, 2019. 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. In addition, we plan to maintain the same level of investment in software development and we do not expect to increase capital expenditures.

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.