HORSHAM, Pa., March 28 /PRNewswire-FirstCall/ — Astea International Inc. a global provider of service lifecycle management, today announced that on March 25, 2008, the Company’s Audit Committee concluded that the Company’s financial statements for 2006, the interim periods contained in 2006, and the interim periods for the first nine months of 2007, should no longer be relied upon because of errors in such financial statements. As a result of these errors, the Company will restate the financial statements described above to correct its accounting for revenue recognition.The details of the restatement are described in the Form 8-K filed today. To summarize, however, at present it involves certain contracts that were executed in the second and third quarters of 2006. Each contract contained numerous licenses and modules that were purchased by each customer and delivered to them in the quarter in which the Company recognized the revenue. Included in these contracts were one or two add-on modules for an analytical tool. The main component of the tool and one of the analytical modules was included in the delivery of software to these customers. However, there were one or two analytical modules that could not be delivered. The Company had originally estimated a value for the undelivered modules and deferred recognition of the related revenue on them until they were delivered, which occurred in the first and second quarters of 2007. At the time the Company filed its 2006 Form 10-K, which included audited financial statements for the year ended December 31, 2006, it believed that the license revenue on the contracts was properly recognized and the deferral of revenue on the undelivered modules was properly reported. In addition, the Company believed that the maintenance and service revenue related to the contracts were properly recognized as revenue in 2006.Notwithstanding the preceding, in conjunction with the 2007 audit, management determined that the Company does not have vendor specific objective evidence (”VSOE”) for the undelivered analytical module software licenses. According to AICPA SOP 97-2 “Software Revenue Recognition” and related statements, undelivered elements to a sale must have VSOE in order to recognize revenue for the delivered elements that do not have VSOE. The Company uses the residual method for recognizing revenue on its software licenses. In such instances, the accounting rules state that if VSOE for undelivered software modules cannot be determined, then all revenue related to that sale must be deferred until the undelivered elements are delivered. Accordingly, all revenue, including license, service and maintenance must be deferred until the delivery and acceptance of the final undelivered element. Therefore, the Company will be restating its financial statements to defer all license revenue and service and maintenance revenue recognized in relation to the contracts at issue in 2006. Since the undelivered elements were all delivered in 2007, all revenue deferred from 2006 as a result of this restatement will be recognized in 2007. The net effect of the above will be to decrease revenues and increase the net loss in 2006, and, by an equal amount, to increase the revenues and net income for 2007.The Company anticipates filing amendments to its Forms 10-Q for the affected quarterly periods to reflect the corrections to its quarterly consolidated financial statements in the near future. The Company’s Annual Report on Form 10-K for fiscal 2007 will reflect these adjustments and contain additional information regarding this matter. The Company anticipates that it will need additional time to make the necessary adjustments to the 2007 Form 10-K, and will likely file a Form 12b-25 to request a fifteen day extension of the March 31, 2008 filing deadline for the Form 10-K.About Astea InternationalAstea International is a global provider of service management software solutions that address the unique needs of companies who manage capital equipment, mission critical assets and human capital. With the acquisition of FieldCentrix, Astea complements its existing portfolio with the industry’s leading mobile field service execution solutions. Astea is helping companies drive even higher levels of customer satisfaction with faster response times and proactive communication, creating a seamless, consistent and highly personalized experience at every customer relationship touch point. Since its inception in 1979, Astea has licensed applications to companies, around the world, in a wide range of sectors including information technology, telecommunications, instruments and controls, business systems, HVAC, gaming/leisure, imaging, industrial equipment, and medical devices.. Service Smart. Enterprise Proven. Astea and Astea Alliance are trademarks of Astea International Inc. Forward-Looking StatementsForward-looking statements in this press release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include the statements regarding potential errors in previously issued financial statements; the nature, magnitude and scope of potential errors and the Company’s investigation and analysis of such potential errors. These statements are just predictions reflecting management’s current judgment and involve risks and uncertainties, such that actual results may differ significantly. These risks include, but are not limited to, additional actions resulting from the Company’s continuing internal review, as well as the review and audit by the Company’s independent auditors of restated financial statements, if any, and actions resulting from discussions with or required by the Securities and Exchange Commission, along with other risks and uncertainties discussed in the Company’s Annual Report on Form 10-K for the fiscal 2006 and the Company’s Quarterly Reports on Form 10-Q for subsequent quarters. The Company disclaims any obligation to update any forward-looking statements. Astea International Inc.
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