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  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; border-top: Black 2.25pt double">UNITED STATES</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">SECURITIES AND EXCHANGE COMMISSION</P>
  
  <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">WASHINGTON, D.C. 20549</P>
  
  <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">___________________________________________</P>
  
  <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 14pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>FORM 10-Q</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">(Mark One)</P>
  
  <TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
  <TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">[X]</TD><TD>Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934</TD></TR></TABLE>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-indent: -0.25in"><FONT STYLE="font-variant: small-caps">&nbsp;</FONT></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-indent: -0.25in">For the quarterly period ended
  <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;September 30, 2019 </U></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">or</P>
  
  <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">[ &nbsp; ] Transition Report Pursuant to Section
  13 or 15(d) of The Securities Exchange Act of 1934.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">For the transition period from&#9; _________________&nbsp;&nbsp;to&#9;_____________________</P>
  
  <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Commission File Number: <B><U>0-26330</U></B></P>
  
  <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>ASTEA INTERNATIONAL INC.</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">(Exact name of registrant as specified in its
  charter)</P>
  
  <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
  <TR STYLE="vertical-align: top">
      <TD STYLE="width: 54%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><B><U>Delaware</U></B></TD>
      <TD STYLE="width: 46%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><B><U>23-2119058</U></B></TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">(State or other jurisdiction of</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">(I.R.S. Employer</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">incorporation or organization)</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">Identification No.)</TD></TR>
  </TABLE>
  <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><U>240 Gibraltar Road, Horsham, PA</U>&#9;
  <U>&nbsp;&nbsp;&nbsp;&nbsp;19044</U></B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">(Address of principal executive offices)&#9;
  (Zip Code)</P>
  
  <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Registrant&rsquo;s telephone number, including
  area code: <B><U>(215) 682-2500 </U></B></P>
  
  <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><U>N/A</U></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">(Former name, former address and former fiscal
  year, if changed since last report)</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Securities registered pursuant to Section
  12(b) of the act:</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>
  
  <TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
  <TR STYLE="vertical-align: top">
      <TD STYLE="width: 36%; padding-right: 0.05in; padding-left: 5.4pt; text-align: center"><B>Title of Each Class</B></TD>
      <TD STYLE="width: 26%; padding-right: 0.05in; padding-left: 5.4pt; text-align: center"><B>Trading Symbol</B></TD>
      <TD STYLE="width: 38%; padding-right: 0.05in; padding-left: 5.4pt; text-align: center"><B>Name of Exchange on Which Registered</B></TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: 0.05in; padding-left: 5.4pt; text-align: center">Common Stock, par value $0.01 per share</TD>
      <TD STYLE="padding-right: 0.05in; padding-left: 5.4pt; text-align: center">ATEA</TD>
      <TD STYLE="padding-right: 0.05in; padding-left: 5.4pt; text-align: center">OTCQB</TD></TR>
  </TABLE>
  <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Indicate by check mark whether the registrant:
  (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
  12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
  filing requirements for the past 90 days.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Yes <U>&nbsp;X&nbsp;</U> No&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;</U></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Indicate by check mark whether the registrant
  has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
  and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant
  was required to submit and post such files).</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Yes <U>&nbsp;&nbsp;X&nbsp;&nbsp;</U> No&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U></P>
  
  <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 2pt 0 0">Indicate by check mark whether the registrant is a large accelerated
  filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of &ldquo;large accelerated
  filer,&rdquo; &ldquo;accelerated filer,&rdquo; &ldquo;smaller reporting company&rdquo; and &quot;emerging growth company&quot;
  in Rule 12b-2 of the Exchange Act. (Check one):</P>
  
  <TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 0.05pt">&nbsp;</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 0.05pt">&nbsp;</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 0.05pt">&nbsp;</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 0.05pt">&nbsp;</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 0.05pt">&nbsp;</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 0.05pt">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="padding-right: 5.4pt; padding-left: 5.4pt; line-height: 0.05pt">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: 5.4pt; padding-left: 1.5pt; text-align: right"><FONT STYLE="font-size: 9pt">Large accelerated filer</FONT></TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
          <P STYLE="font: 11pt Wingdings; margin: 0; text-align: center">q</P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 0 0 1.5pt; text-align: center">&nbsp;</P></TD>
      <TD COLSPAN="3" STYLE="padding-right: 5.4pt; padding-left: 1.5pt; text-align: right"><FONT STYLE="font-size: 9pt">Accelerated filer</FONT></TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
          <P STYLE="font: 11pt Wingdings; margin: 0">q</P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 0 0 1.5pt">&nbsp;</P></TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 1.5pt; text-align: right"><FONT STYLE="font-size: 9pt">Non-accelerated filer</FONT></TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
          <P STYLE="font: 11pt Wingdings; margin: 0; text-align: right">q</P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 0 0 1.5pt; text-align: right">&nbsp;</P></TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: 1.5pt; padding-left: 1.5pt; text-align: right"><FONT STYLE="font-size: 9pt">Smaller reporting company</FONT></TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
          <P STYLE="font: 11pt Wingdings; margin: 0">x</P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P></TD>
      <TD COLSPAN="3" STYLE="padding-right: 5.4pt; padding-left: 1.5pt; text-align: right"><FONT STYLE="font-size: 9pt">Emerging growth company</FONT></TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
          <P STYLE="font: 11pt Wingdings; margin: 0">q</P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 0 0 1.5pt">&nbsp;</P></TD>
      <TD COLSPAN="2" STYLE="padding-right: 5.4pt; padding-left: 1.5pt"><FONT STYLE="font-size: 9pt">(Do not check if a smaller reporting company)</FONT></TD></TR>
  </TABLE>
  <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 3.75pt 0 0; text-align: justify">If an emerging growth company, indicate
  by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
  accounting standards provided pursuant to Section 13(a) of the Exchange Act. <FONT STYLE="font-family: Wingdings">o</FONT></P>
  
  <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 3.75pt 0 0; text-align: justify; text-indent: 13.5pt">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Indicate by check mark whether the registrant is a shell company
  (as defined in Rule 12b-2 of the Exchange Act).</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Yes <U>&nbsp; &nbsp;</U> No&nbsp;<U>&nbsp;&nbsp;X&nbsp;&nbsp;</U></P>
  
  <P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As of November 11, 2019, 3,883,299 shares of
  the registrant&rsquo;s Common Stock, par value $.01 per share, were outstanding.</P>
  
  
  <!-- Field: Page; Sequence: 1 -->
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  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 13pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>ASTEA INTERNATIONAL INC. AND SUBSIDIARIES</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>FORM 10-Q</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>QUARTERLY REPORT</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>INDEX</B></P>
  
  <TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
  <TR STYLE="vertical-align: top">
      <TD STYLE="width: 16%; padding-right: -0.5in; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="width: 66%; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="width: 18%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><B><U>Page No.</U></B></TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: -0.5in; padding-left: 5.4pt"><B>&nbsp;</B></TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><B>&nbsp;</B></TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><B>&nbsp;</B></TD></TR>
  <TR STYLE="vertical-align: top">
      <TD COLSPAN="2" STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Facing Sheet</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">1</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: -0.5in; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD COLSPAN="2" STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Index</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">2</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: -0.5in; padding-left: 5.4pt"><B>&nbsp;</B></TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><B>&nbsp;</B></TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><B>&nbsp;</B></TD></TR>
  <TR STYLE="vertical-align: top">
      <TD COLSPAN="2" STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><B><U>PART I - FINANCIAL INFORMATION</U></B></TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: -0.5in; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: -0.5in; padding-left: 5.4pt"><B>Item 1.</B></TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><B>Financial Statements&nbsp;&nbsp;</B></TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: -0.5in; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: -0.5in; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Condensed Consolidated Balance Sheets as of September 30, 2019 (unaudited)</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: -0.5in; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">and December 31, 2018</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">3</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: -0.5in; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: -0.5in; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Condensed Consolidated Statements of Operations (unaudited)</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">4</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: -0.5in; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: -0.5in; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Condensed Consolidated Statements of Comprehensive (Loss) Income (unaudited)</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">5</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: -0.5in; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: -0.5in; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Condensed Consolidated Statements of Stockholders&rsquo; Deficit for
      the Three and Nine Months</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: -0.5in; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Ended September 30, 2019 (unaudited)</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">6</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: -0.5in; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: -0.5in; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Condensed Consolidated Statements of Stockholders&rsquo; Deficit for
      the Three and Nine Months</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: -0.5in; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Ended September 30, 2018 (unaudited)</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">7</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: -0.5in; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: -0.5in; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Condensed Consolidated Statements of Cash Flows (unaudited)</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">8</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: -0.5in; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: -0.5in; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Notes to Unaudited Condensed Consolidated Financial Statements</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">9</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: -0.5in; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: -0.5in; padding-left: 5.4pt"><B>Item 2.</B></TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><B>Management's Discussion and Analysis of Financial</B></TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: -0.5in; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><B>Condition and Results of Operations</B></TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">23</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: -0.5in; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: -0.5in; padding-left: 5.4pt"><B>Item 3.</B></TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><B>Quantitative and Qualitative Disclosure About Market Risk</B></TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">33</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: -0.5in; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: -0.5in; padding-left: 5.4pt"><B>Item 4.</B></TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><B>Controls and Procedures</B></TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">33</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: -0.5in; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD COLSPAN="2" STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><B><U>PART II - OTHER INFORMATION</U></B></TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: -0.5in; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: -0.5in; padding-left: 5.4pt"><B>Item 1A.</B></TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><B>Risk Factors</B></TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">34</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: -0.5in; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: -0.5in; padding-left: 5.4pt"><B>Item 6.</B></TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><B>Exhibits</B></TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">36</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: -0.5in; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: -0.5in; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><B>Signatures</B></TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">37</TD></TR>
  </TABLE>
  
  <!-- Field: Page; Sequence: 2 -->
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      <DIV STYLE="page-break-before: always; margin-top: 6pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
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  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><U>PART I - FINANCIAL INFORMATION</U></B></P>
  
  <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><U>Item 1. FINANCIAL STATEMENTS</U></B></P>
  
  <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><U>ASTEA INTERNATIONAL INC. AND SUBSIDIARIES</U></B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><U>CONDENSED CONSOLIDATED BALANCE SHEETS
  </U></B>&nbsp;</P>
  
  <TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <TR STYLE="vertical-align: top">
      <TD STYLE="width: 64%">&nbsp;</TD>
      <TD STYLE="width: 2%; text-align: center">&nbsp;</TD>
      <TD STYLE="width: 15%">
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>September 30, </B></P></TD>
      <TD STYLE="width: 1%; padding-left: 3.75pt; text-align: center; text-indent: -3.75pt">&nbsp;</TD>
      <TD STYLE="width: 2%; padding-left: 3.75pt; text-align: center; text-indent: -3.75pt"></TD>
      <TD STYLE="width: 14%">
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 0 0 3.75pt; text-align: center; text-indent: -3.75pt"><B>December
          31, </B></P></TD>
      <TD STYLE="width: 2%; padding-left: 3.75pt; text-align: center; text-indent: -3.75pt">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD>&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: center">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>2019</B></P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>(Unaudited)</B></P></TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: center">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: center">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 9pt"><B>2018*</B></FONT></TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: center">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="text-align: center"><B>ASSETS</B></TD>
      <TD STYLE="text-align: center">&nbsp;</TD>
      <TD STYLE="text-align: center">&nbsp;</TD>
      <TD STYLE="text-align: center">&nbsp;</TD>
      <TD STYLE="text-align: center">&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: center">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD><FONT STYLE="font-size: 9pt">Current assets:</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-left: 10pt"><FONT STYLE="font-size: 9pt">Cash and cash equivalents</FONT></TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 9pt">$</FONT></TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 9pt">400,000</FONT></TD>
      <TD STYLE="text-align: center">&nbsp;</TD>
      <TD STYLE="text-align: center"><FONT STYLE="font-size: 9pt">$</FONT></TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 9pt">1,276,000</FONT></TD>
      <TD STYLE="text-align: right">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: top; padding-left: 10pt">
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0">Accounts receivables, net of reserves allowance of $91,000 (unaudited)</P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in">and $92,000, respectively</P></TD>
      <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">4,973,000</FONT></TD>
      <TD STYLE="vertical-align: top; text-align: center">&nbsp;</TD>
      <TD STYLE="vertical-align: top; text-align: center">&nbsp;</TD>
      <TD STYLE="vertical-align: top">
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: right">&nbsp;</P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: right">6,294,000</P></TD>
      <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-left: 10pt"><FONT STYLE="font-size: 9pt">Prepaid expenses and other current assets</FONT></TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 9pt">432,000</FONT></TD>
      <TD STYLE="text-align: center">&nbsp;</TD>
      <TD STYLE="text-align: center">&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 9pt">429,000</FONT></TD>
      <TD STYLE="text-align: right">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: top; padding-left: 10pt"><FONT STYLE="font-size: 9pt">Deferred hosting costs</FONT></TD>
      <TD STYLE="vertical-align: top; border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">1,602,000</FONT></TD>
      <TD STYLE="vertical-align: top; border-bottom: Black 1pt solid; text-align: center">&nbsp;</TD>
      <TD STYLE="vertical-align: top; border-bottom: Black 1pt solid; text-align: center">&nbsp;</TD>
      <TD STYLE="vertical-align: top; border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">992,000</FONT></TD>
      <TD STYLE="vertical-align: top; border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: top">
          <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in">Total current assets</P></TD>
      <TD STYLE="vertical-align: top; border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">7,407,000</FONT></TD>
      <TD STYLE="vertical-align: top; border-bottom: Black 1pt solid; text-align: center">&nbsp;</TD>
      <TD STYLE="vertical-align: top; border-bottom: Black 1pt solid; text-align: center">&nbsp;</TD>
      <TD STYLE="vertical-align: top; border-bottom: Black 1pt solid">
          <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: right">&nbsp;</P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: right">8,991,000</P></TD>
      <TD STYLE="vertical-align: top; border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD><FONT STYLE="font-size: 8pt">&#9;</FONT></TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD><FONT STYLE="font-size: 9pt">Property and equipment, net</FONT></TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 9pt">171,000</FONT></TD>
      <TD STYLE="text-align: center">&nbsp;</TD>
      <TD STYLE="text-align: center">&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 9pt">89,000</FONT></TD>
      <TD STYLE="text-align: right">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD><FONT STYLE="font-size: 9pt">Capitalized software development costs, net</FONT></TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 9pt">4,437,000</FONT></TD>
      <TD STYLE="text-align: center">&nbsp;</TD>
      <TD STYLE="text-align: center">&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 9pt">4,599,000</FONT></TD>
      <TD STYLE="text-align: right">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD><FONT STYLE="font-size: 9pt">Restricted cash</FONT></TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 9pt">70,000</FONT></TD>
      <TD STYLE="text-align: center">&nbsp;</TD>
      <TD STYLE="text-align: center">&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 9pt">72,000</FONT></TD>
      <TD STYLE="text-align: right">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD><FONT STYLE="font-size: 9pt">Other long-term assets</FONT></TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 9pt">540,000</FONT></TD>
      <TD STYLE="text-align: center">&nbsp;</TD>
      <TD STYLE="text-align: center">&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 9pt">517,000</FONT></TD>
      <TD STYLE="text-align: right">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD><FONT STYLE="font-size: 9pt">Right-of-use assets</FONT></TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">2,284,000</FONT></TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: center">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">-</FONT></TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 9pt">Total assets</FONT></TD>
      <TD STYLE="vertical-align: top; border-bottom: Black 2.25pt double">
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: right">&nbsp;</P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: right">$</P></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 2.25pt double; text-align: right"><FONT STYLE="font-size: 9pt">14,909,000</FONT></TD>
      <TD STYLE="vertical-align: top; border-bottom: Black 2.25pt double">&nbsp;</TD>
      <TD STYLE="vertical-align: top; border-bottom: Black 2.25pt double">
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: right">$</P></TD>
      <TD STYLE="vertical-align: top; border-bottom: Black 2.25pt double">
          <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: right">&nbsp;</P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: right">14,268,000</P></TD>
      <TD STYLE="vertical-align: top; border-bottom: Black 2.25pt double; text-align: right">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="text-align: center">&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="text-align: center"><FONT STYLE="font-size: 9pt"><B>LIABILITIES AND STOCKHOLDERS&rsquo; DEFICIT</B></FONT></TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD><FONT STYLE="font-size: 9pt">Current liabilities:</FONT></TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: top; padding-left: 10pt"><FONT STYLE="font-size: 9pt">Accounts payable and accrued expenses</FONT></TD>
      <TD STYLE="vertical-align: top; text-align: right"><FONT STYLE="font-size: 9pt">$</FONT></TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">4,842,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">$</FONT></TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">4,137,000</FONT></TD>
      <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: top; padding-left: 10pt"><FONT STYLE="font-size: 9pt">Current lease liabilities</FONT></TD>
      <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">961,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">-</FONT></TD>
      <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-left: 10pt"><FONT STYLE="font-size: 9pt">Deferred revenues</FONT></TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">9,872,000</FONT></TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">10,521,000</FONT></TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: top">
          <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in">Total current liabilities</P></TD>
      <TD STYLE="vertical-align: top; border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: right">&nbsp;</P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: right">15,675,000</P></TD>
      <TD STYLE="vertical-align: top; border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: top; border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: top; border-bottom: Black 1pt solid">
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: right">&nbsp;</P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: right">14,658,000</P></TD>
      <TD STYLE="vertical-align: top; border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 9pt">Long-term liabilities:</FONT></TD>
      <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="padding-left: 10pt"><FONT STYLE="font-size: 9pt">Borrowings under line of credit </FONT></TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 9pt">2,588,000</FONT></TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 9pt">2,669,000</FONT></TD>
      <TD STYLE="text-align: right">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: top; padding-left: 10pt"><FONT STYLE="font-size: 9pt">Long-term accrued expenses</FONT></TD>
      <TD STYLE="vertical-align: top">&nbsp;</TD>
      <TD STYLE="vertical-align: top; text-align: right"><FONT STYLE="font-size: 9pt">368,000</FONT></TD>
      <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">323,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: top; padding-left: 10pt"><FONT STYLE="font-size: 9pt">Deferred tax liability</FONT></TD>
      <TD STYLE="vertical-align: top">&nbsp;</TD>
      <TD STYLE="vertical-align: top; text-align: right"><FONT STYLE="font-size: 9pt">49,000</FONT></TD>
      <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: top; text-align: right"><FONT STYLE="font-size: 9pt">49,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: top; padding-left: 10pt"><FONT STYLE="font-size: 9pt">Deferred revenues, net of current portion</FONT></TD>
      <TD STYLE="vertical-align: top">&nbsp;</TD>
      <TD STYLE="vertical-align: top; text-align: right"><FONT STYLE="font-size: 9pt">1,351,000</FONT></TD>
      <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: top; text-align: right"><FONT STYLE="font-size: 9pt">763,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: top; padding-left: 10pt"><FONT STYLE="font-size: 9pt">Lease liabilities, net of current portion</FONT></TD>
      <TD STYLE="vertical-align: top">&nbsp;</TD>
      <TD STYLE="vertical-align: top; text-align: right"><FONT STYLE="font-size: 9pt">1,323,000</FONT></TD>
      <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: top; text-align: right"><FONT STYLE="font-size: 9pt">-</FONT></TD>
      <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: top">
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in">Total long-term liabilities</P></TD>
      <TD STYLE="vertical-align: top; border-top: Black 1pt solid; border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-top: Black 1pt solid; border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">5,679,000</FONT></TD>
      <TD STYLE="vertical-align: top; border-top: Black 1pt solid; border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: top; border-top: Black 1pt solid; border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: top; border-top: Black 1pt solid; border-bottom: Black 1pt solid">
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: right">&nbsp;</P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: right">3,804,000</P></TD>
      <TD STYLE="vertical-align: top; border-top: Black 1pt solid; border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD><FONT STYLE="font-size: 9pt">Commitments and contingencies </FONT></TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD><FONT STYLE="font-size: 9pt">Stockholders&rsquo; deficit:</FONT></TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: top">
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 0 0 10pt">Convertible preferred stock, $.01 par value, shares
  authorized 5,000,000:</P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 0 0 20pt">Series A issued and outstanding 826,000 shares</P></TD>
      <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">8,000</FONT></TD>
      <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: top">
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: right">&nbsp;</P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: right">8,000</P></TD>
      <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD></TR>
  <TR STYLE="background-color: White">
      <TD STYLE="vertical-align: top; padding-left: 20pt"><FONT STYLE="font-size: 9pt">Series B issued and outstanding 797,000 shares</FONT></TD>
      <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">8,000</FONT></TD>
      <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: top; text-align: right"><FONT STYLE="font-size: 9pt">8,000</FONT></TD>
      <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: top">
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 0 0 10">Common stock $.01 par value, 25,000,000 shares authorized;</P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 0 0 20pt">issued 3,731,000 and 3,659,000 shares; outstanding
  3,689,000 and 3,617,000 shares, respectively</P></TD>
      <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">37,000</FONT></TD>
      <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">
          <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: right">&nbsp;</P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: right">37,000</P></TD>
      <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD></TR>
  <TR STYLE="background-color: White">
      <TD STYLE="vertical-align: top; padding-left: 10pt"><FONT STYLE="font-size: 9pt">Additional paid-in-capital</FONT></TD>
      <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">31,342,000</FONT></TD>
      <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: top; text-align: right"><FONT STYLE="font-size: 9pt">31,455,000</FONT></TD>
      <TD STYLE="vertical-align: top; text-align: center">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: top; padding-left: 10pt"><FONT STYLE="font-size: 9pt">Accumulated deficit </FONT></TD>
      <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">(36,364,000</FONT></TD>
      <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 9pt">)</FONT></TD>
      <TD STYLE="vertical-align: top">&nbsp;</TD>
      <TD STYLE="vertical-align: top; text-align: right"><FONT STYLE="font-size: 9pt">&nbsp;(34,344,000</FONT></TD>
      <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 9pt">)</FONT></TD></TR>
  <TR STYLE="background-color: White">
      <TD STYLE="vertical-align: top; padding-left: 10pt"><FONT STYLE="font-size: 9pt">Accumulated other comprehensive loss</FONT></TD>
      <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">(1,268,000</FONT></TD>
      <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 9pt">)</FONT></TD>
      <TD STYLE="vertical-align: top">&nbsp;</TD>
      <TD STYLE="vertical-align: top; text-align: right"><FONT STYLE="font-size: 9pt">(1,150,000</FONT></TD>
      <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 9pt">)</FONT></TD></TR>
  <TR>
      <TD STYLE="vertical-align: top; padding-left: 10pt"><FONT STYLE="font-size: 9pt">Treasury stock at cost, 42,000 common shares</FONT></TD>
      <TD STYLE="vertical-align: top; border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">(208,000</FONT></TD>
      <TD STYLE="vertical-align: top; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 9pt">)</FONT></TD>
      <TD STYLE="vertical-align: top; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: top; border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">&nbsp;(208,000</FONT></TD>
      <TD STYLE="vertical-align: top; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 9pt">)</FONT></TD></TR>
  <TR STYLE="background-color: White">
      <TD STYLE="vertical-align: top">
          <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 1in">&nbsp;</P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in">Total stockholders&rsquo; deficit</P></TD>
      <TD STYLE="vertical-align: top; border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">(6,445,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 9pt">)</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: top; border-bottom: Black 1pt solid">
          <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: right">&nbsp;</P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: right">(4,194,000</P></TD>
      <TD STYLE="vertical-align: top; border-bottom: Black 1pt solid">
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0">)</P></TD></TR>
  <TR>
      <TD STYLE="vertical-align: top">
          <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in">&nbsp;</P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in">Total liabilities and stockholders&rsquo; deficit</P></TD>
      <TD STYLE="vertical-align: top; border-bottom: Black 2.25pt double">
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: right">&nbsp;</P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: right">$</P></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 2.25pt double; text-align: right"><FONT STYLE="font-size: 9pt">14,909,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 2.25pt double; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: top; border-bottom: Black 2.25pt double">
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: right">&nbsp;</P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: right">$</P></TD>
      <TD STYLE="vertical-align: top; border-bottom: Black 2.25pt double">
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: right">&nbsp;</P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: right">14,268,000</P></TD>
      <TD STYLE="vertical-align: top; border-bottom: Black 2.25pt double">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top; background-color: White">
      <TD COLSPAN="7">
          <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B>*<FONT STYLE="font-size: 9pt">Derived from
  audited financial statements</FONT>&nbsp;</P>
          <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>See accompanying notes to the unaudited condensed
          consolidated financial statements.</B></P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P></TD></TR>
  </TABLE>
  
  <!-- Field: Page; Sequence: 3 -->
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      <DIV STYLE="page-break-before: always; margin-top: 6pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
      <!-- Field: /Page -->
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><U>ASTEA INTERNATIONAL INC. AND SUBSIDIARIES</U></B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><U>CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS</U></B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>(Unaudited)</B></P>
  
  <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>
  
  <TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <TR>
      <TD STYLE="vertical-align: bottom; padding-left: 9.9pt; text-indent: -9.9pt">&nbsp;</TD>
      <TD COLSPAN="5" STYLE="vertical-align: bottom; text-align: center"><FONT STYLE="font-size: 9pt"><B>Three Months</B></FONT></TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD COLSPAN="5" STYLE="vertical-align: bottom; text-align: center"><FONT STYLE="font-size: 9pt"><B>Nine Months</B></FONT></TD>
      <TD STYLE="vertical-align: top">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: bottom; padding-left: 9.9pt; text-indent: -9.9pt">&nbsp;</TD>
      <TD COLSPAN="5" STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 9pt"><B>Ended September 30</B>,</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="5" STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 9pt"><B>Ended September 30,</B></FONT></TD>
      <TD STYLE="vertical-align: top; border-bottom: Black 1pt solid">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: bottom; padding-left: 9.9pt; text-indent: -9.9pt">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 9pt"><B>2019</B></FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 9pt"><B>2018</B></FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 9pt"><B>2019</B></FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 9pt"><B>2018</B></FONT></TD>
      <TD STYLE="vertical-align: top; border-bottom: Black 1pt solid">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: bottom; padding-left: 9.9pt; text-indent: -9.9pt"><FONT STYLE="font-size: 9pt">Revenues:</FONT></TD>
      <TD COLSPAN="2" STYLE="vertical-align: bottom; text-align: center">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: top">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: bottom; width: 43%; padding-left: 19.8pt; text-indent: -9.9pt"><FONT STYLE="font-size: 9pt">Software license fees</FONT></TD>
      <TD STYLE="vertical-align: bottom; width: 2%; text-align: right"><FONT STYLE="font-size: 9pt">$</FONT></TD>
      <TD STYLE="vertical-align: bottom; width: 12%; text-align: right"><FONT STYLE="font-size: 9pt">140,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; width: 2%">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; width: 2%; text-align: right"><FONT STYLE="font-size: 9pt">$</FONT></TD>
      <TD STYLE="vertical-align: bottom; width: 10%; text-align: right"><FONT STYLE="font-size: 9pt">765,000 </FONT></TD>
      <TD STYLE="vertical-align: bottom; width: 2%">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; width: 2%; text-align: right"><FONT STYLE="font-size: 9pt">$</FONT></TD>
      <TD STYLE="vertical-align: bottom; width: 11%; text-align: right"><FONT STYLE="font-size: 9pt">1,302,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; width: 2%">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; width: 2%; text-align: right"><FONT STYLE="font-size: 9pt">$</FONT></TD>
      <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"><FONT STYLE="font-size: 9pt">2,076,000</FONT></TD>
      <TD STYLE="vertical-align: top; width: 1%; text-align: right">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: bottom; padding-bottom: 1.1pt; padding-left: 19.8pt; text-indent: -9.9pt"><FONT STYLE="font-size: 9pt">Subscriptions</FONT></TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">1,278,000</FONT></TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">1,412,000</FONT></TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">3,737,000</FONT></TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">3,104,000</FONT></TD>
      <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: bottom; padding-bottom: 1.1pt; padding-left: 19.8pt; text-indent: -9.9pt"><FONT STYLE="font-size: 9pt">Services and maintenance</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">4,542,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">4,948,000 </FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">13,956,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">15,273,000</FONT></TD>
      <TD STYLE="vertical-align: top; border-bottom: black 1pt solid; text-align: right">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: bottom">
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 0 1.1pt">&nbsp;</P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 0 1.1pt 40pt; text-indent: -9.9pt">Total revenues</P></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">5,960,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">7,125,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">18,995,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">20,453,000</FONT></TD>
      <TD STYLE="vertical-align: top; border-bottom: black 1pt solid; text-align: right">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: bottom">
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 0 0 9.9pt; text-indent: -9.9pt">Costs of revenues:</P></TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: bottom; padding-left: 19.8pt; text-indent: -9.9pt"><FONT STYLE="font-size: 9pt">Cost of software license fees</FONT></TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">908,000</FONT></TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">750,000 </FONT></TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">2,532,000</FONT></TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">1,976,000</FONT></TD>
      <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: bottom; padding-right: -5.5pt; padding-bottom: 1.1pt; padding-left: 19.8pt; text-indent: -9.9pt"><FONT STYLE="font-size: 9pt">Cost of subscriptions</FONT></TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">325,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">369,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">884,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">794,000</FONT></TD>
      <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: bottom; padding-right: -5.5pt; padding-bottom: 1.1pt; padding-left: 19.8pt; text-indent: -9.9pt"><FONT STYLE="font-size: 9pt">Cost of services and maintenance</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">3,292,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">3,696,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">9,802,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">&nbsp;10,705,000</FONT></TD>
      <TD STYLE="vertical-align: top; border-bottom: black 1pt solid; text-align: right">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: bottom">
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0 0 1.1pt 40pt; text-indent: -9.9pt">&nbsp;</P>
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0 0 1.1pt 40pt; text-indent: -9.9pt">Total cost of&nbsp;&nbsp;revenues</P></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">4,525,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">4,815,000 </FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">13,218,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">13,475,000</FONT></TD>
      <TD STYLE="vertical-align: top; border-bottom: black 1pt solid; text-align: right">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: bottom">
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0 0 1.1pt 9.9pt; text-indent: -9.9pt">&nbsp;</P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 0 1.1pt 9.9pt; text-indent: -9.9pt">Gross profit</P></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">1,435,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">2,310,000 </FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">5,777,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">6,978,000</FONT></TD>
      <TD STYLE="vertical-align: top; border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: bottom">
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 0 0 9.9pt; text-indent: -9.9pt">Operating Expenses:</P></TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: bottom; padding-left: 19.8pt; text-indent: -9.9pt"><FONT STYLE="font-size: 9pt">Product development</FONT></TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">251,000</FONT></TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">330,000 </FONT></TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">857,000</FONT></TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">697,000</FONT></TD>
      <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: bottom; padding-left: 19.8pt; text-indent: -9.9pt"><FONT STYLE="font-size: 9pt">Sales and marketing</FONT></TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">1,156,000</FONT></TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">1,013,000 </FONT></TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">3,122,000</FONT></TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">2,991,000</FONT></TD>
      <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: bottom; padding-bottom: 1.1pt; padding-left: 19.8pt; text-indent: -9.9pt"><FONT STYLE="font-size: 9pt">General and administrative</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">1,355,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">972,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">3,479,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">2,868,000</FONT></TD>
      <TD STYLE="vertical-align: top; border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: bottom">
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0 0 1.1pt 40pt; text-indent: -9.9pt">&nbsp;</P>
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0 0 1.1pt 40pt; text-indent: -9.9pt">Total operating
  expenses</P></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">2,762,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">2,315,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">7,458,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">6,556,000</FONT></TD>
      <TD STYLE="vertical-align: top; border-bottom: black 1pt solid; text-align: right">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: bottom">
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0">(Loss) income from operations</P></TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">(1,327,000</FONT></TD>
      <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 9pt">)</FONT></TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">(5,000</FONT></TD>
      <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 9pt">)</FONT></TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">(1,681,000</FONT></TD>
      <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 9pt">)</FONT></TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">422,000</FONT></TD>
      <TD STYLE="vertical-align: top">
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: right">&nbsp;</P>
          <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P></TD></TR>
  <TR>
      <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 9pt">Interest expense, net</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">78,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">64,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">217,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">163,000</FONT></TD>
      <TD STYLE="vertical-align: top; border-bottom: Black 1pt solid">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: bottom">
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0 0 0 9.9pt; text-indent: -9.9pt">&nbsp;</P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 0 0 9.9pt; text-indent: -9.9pt">(Loss) income before income taxes</P></TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">(1,405,000</FONT></TD>
      <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 9pt">)</FONT></TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">(69,000</FONT></TD>
      <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 9pt">) </FONT></TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">(1,898,000</FONT></TD>
      <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 9pt">)</FONT></TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">259,000 </FONT></TD>
      <TD STYLE="vertical-align: top">
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: right">&nbsp;</P>
          <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P></TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="padding-bottom: 1.1pt"><FONT STYLE="font-size: 9pt">Income tax expense</FONT></TD>
      <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">84,000</FONT></TD>
      <TD STYLE="border-bottom: black 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;&nbsp;</FONT></TD>
      <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">1,000</FONT></TD>
      <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">122,000</FONT></TD>
      <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">19,000</FONT></TD>
      <TD STYLE="border-bottom: black 1pt solid; text-align: right">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: bottom">
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 0 0 9.9pt; text-indent: -9.9pt">Net (loss) income</P></TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">(1,489,000</FONT></TD>
      <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 9pt">)</FONT></TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">(70,000</FONT></TD>
      <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 9pt">) </FONT></TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">(2,020,000</FONT></TD>
      <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 9pt">)</FONT></TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">240,000&nbsp;&nbsp;</FONT></TD>
      <TD STYLE="vertical-align: top">
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: right">&nbsp;</P>
          <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P></TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="padding-bottom: 1.1pt; padding-left: 9.9pt; text-indent: -9.9pt"><FONT STYLE="font-size: 9pt">Preferred dividend</FONT></TD>
      <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">125,000</FONT></TD>
      <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">125,000</FONT></TD>
      <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">375,000</FONT></TD>
      <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">&nbsp;&nbsp;&nbsp;375,000</FONT></TD>
      <TD STYLE="border-bottom: black 1pt solid; text-align: right">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: bottom">
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 0 3.3pt">&nbsp;</P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 0 3.3pt 9.9pt; text-indent: -9.9pt">Net loss allocable to&nbsp;common&nbsp;stockholders</P></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 9pt">$</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 9pt">(1,614,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double"><FONT STYLE="font-size: 9pt">)</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 9pt">$</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 9pt">(195,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double"><FONT STYLE="font-size: 9pt">) </FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 9pt">$</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 9pt">(2,395,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double"><FONT STYLE="font-size: 9pt">)</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 9pt">$</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 9pt">&nbsp;(135,000 </FONT></TD>
      <TD STYLE="vertical-align: top; border-bottom: black 2.25pt double">
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: right">&nbsp;</P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: right">&nbsp;</P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0">)</P></TD></TR>
  <TR>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: bottom; padding-bottom: 3.3pt; padding-left: 9.9pt; text-indent: -9.9pt"><FONT STYLE="font-size: 9pt">Basic and diluted &nbsp;loss per share&nbsp;allocable to common stockholders</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 9pt">$</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 9pt">(0.44</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double"><FONT STYLE="font-size: 9pt">)</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 9pt">$</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 9pt">(0.05</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double"><FONT STYLE="font-size: 9pt">)</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 9pt">$</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 9pt">(0.66</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double"><FONT STYLE="font-size: 9pt">)</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 9pt">$</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 9pt">(0.04</FONT></TD>
      <TD STYLE="vertical-align: top; border-bottom: black 2.25pt double">
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: right">&nbsp;</P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: right">&nbsp;</P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0">)</P></TD></TR>
  <TR>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: bottom; padding-bottom: 3.3pt; padding-left: 9.9pt; text-indent: -9.9pt"><FONT STYLE="font-size: 9pt">Weighted average shares outstanding&nbsp;used in computing basic and diluted loss per common share</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 9pt">3,642,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 9pt">3,607,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 9pt">3,627,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 9pt">3,600,000</FONT></TD>
      <TD STYLE="vertical-align: top; border-bottom: black 2.25pt double; text-align: right">&nbsp;</TD></TR>
  </TABLE>
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>
  
  <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>See accompanying notes to the unaudited condensed
  consolidated financial statements.</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.25in 0 0; text-align: center"><B>&nbsp;</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>
  
  <!-- Field: Page; Sequence: 4 -->
      <DIV STYLE="margin-bottom: 6pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR STYLE="font-size: 10pt"><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->4<!-- Field: /Sequence -->&nbsp;</TD></TR></TABLE></DIV>
      <DIV STYLE="page-break-before: always; margin-top: 6pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
      <!-- Field: /Page -->
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;<B>&nbsp;</B></P>
  
  <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>
  
  <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><U>ASTEA INTERNATIONAL INC. AND SUBSIDIARIES</U></B></P>
  
  <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><U>CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE
  (LOSS) INCOME </U></B></P>
  
  <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>(Unaudited)</B></P>
  
  <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 0.25in 0 0">&nbsp;&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.25in 0 0">&nbsp;</P>
  
  <TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="padding-bottom: 1.1pt">&nbsp;</TD>
      <TD COLSPAN="6" STYLE="border-bottom: black 1pt solid">
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Three Months Ended</B></P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>September 30,</B></P></TD>
      <TD COLSPAN="7" STYLE="border-bottom: black 1pt solid">
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Nine Months Ended</B></P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>September 30,</B></P></TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="padding-bottom: 1.1pt">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 9pt"><B>2019</B></FONT></TD>
      <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 9pt"><B>2018</B></FONT></TD>
      <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 9pt"><B>2019</B></FONT></TD>
      <TD STYLE="border-bottom: black 1pt solid; padding-bottom: 1.1pt">&nbsp;</TD>
      <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="3" STYLE="border-bottom: black 1pt solid; padding-right: 18.7pt; text-align: center"><FONT STYLE="font-size: 9pt"><B>2018</B></FONT></TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD>&nbsp;</TD>
      <TD COLSPAN="2">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD COLSPAN="2">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD COLSPAN="2">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD COLSPAN="3">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="width: 43%"><FONT STYLE="font-size: 9pt">Net (loss) income </FONT></TD>
      <TD STYLE="width: 1%; text-align: right"><FONT STYLE="font-size: 9pt">$</FONT></TD>
      <TD STYLE="width: 11%; text-align: right"><FONT STYLE="font-size: 9pt">(1,489,000</FONT></TD>
      <TD STYLE="width: 3%"><FONT STYLE="font-size: 9pt">)</FONT></TD>
      <TD STYLE="width: 2%; text-align: right"><FONT STYLE="font-size: 9pt">$</FONT></TD>
      <TD STYLE="width: 9%; text-align: right"><FONT STYLE="font-size: 9pt">(70,000</FONT></TD>
      <TD STYLE="width: 3%"><FONT STYLE="font-size: 9pt">) </FONT></TD>
      <TD STYLE="width: 2%; text-align: right"><FONT STYLE="font-size: 9pt">$</FONT></TD>
      <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 9pt">(2,020,000</FONT></TD>
      <TD STYLE="width: 2%"><FONT STYLE="font-size: 9pt">)</FONT></TD>
      <TD STYLE="width: 2%">&nbsp;</TD>
      <TD STYLE="width: 1%; text-align: right"><FONT STYLE="font-size: 9pt">$</FONT></TD>
      <TD STYLE="width: 9%; text-align: right"><FONT STYLE="font-size: 9pt">240,000</FONT></TD>
      <TD STYLE="width: 2%"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD><FONT STYLE="font-size: 9pt">Other comprehensive income (loss):</FONT></TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD><FONT STYLE="font-size: 9pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Foreign currency translation adjustment</FONT></TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 9pt">44,000</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 9pt">(23,000</FONT></TD>
      <TD STYLE="text-align: justify"><FONT STYLE="font-size: 9pt">) &nbsp;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 9pt">(118,000</FONT></TD>
      <TD><FONT STYLE="font-size: 9pt">)</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 9pt">&nbsp;(33,000</FONT></TD>
      <TD><FONT STYLE="font-size: 9pt">) &nbsp;</FONT></TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="padding-bottom: 1.1pt"><FONT STYLE="font-size: 9pt">Comprehensive (loss) income </FONT></TD>
      <TD STYLE="border-top: Black 1pt solid; border-bottom: Black 1.5pt double; text-align: right"><FONT STYLE="font-size: 9pt">$ </FONT></TD>
      <TD STYLE="border-top: Black 1pt solid; border-bottom: Black 1.5pt double; text-align: right"><FONT STYLE="font-size: 9pt">(1,445,000</FONT></TD>
      <TD STYLE="border-top: Black 1pt solid; border-bottom: Black 1.5pt double"><FONT STYLE="font-size: 9pt">)</FONT></TD>
      <TD STYLE="border-top: Black 1pt solid; border-bottom: Black 1.5pt double; text-align: right"><FONT STYLE="font-size: 9pt">$</FONT></TD>
      <TD STYLE="border-top: Black 1pt solid; border-bottom: Black 1.5pt double; text-align: right"><FONT STYLE="font-size: 9pt">(93,000</FONT></TD>
      <TD STYLE="border-top: Black 1pt solid; border-bottom: Black 1.5pt double"><FONT STYLE="font-size: 9pt">) </FONT></TD>
      <TD STYLE="border-top: Black 1pt solid; border-bottom: Black 1.5pt double; text-align: right"><FONT STYLE="font-size: 9pt">$</FONT></TD>
      <TD STYLE="border-top: Black 1pt solid; border-bottom: Black 1.5pt double; text-align: right"><FONT STYLE="font-size: 9pt">(2,138,000</FONT></TD>
      <TD STYLE="border-top: Black 1pt solid; border-bottom: Black 1.5pt double"><FONT STYLE="font-size: 9pt">)</FONT></TD>
      <TD STYLE="border-top: Black 1pt solid; border-bottom: Black 1.5pt double">&nbsp;</TD>
      <TD STYLE="border-top: Black 1pt solid; border-bottom: Black 1.5pt double; text-align: right"><FONT STYLE="font-size: 9pt">$</FONT></TD>
      <TD STYLE="border-top: Black 1pt solid; border-bottom: Black 1.5pt double; text-align: right"><FONT STYLE="font-size: 9pt">207,000</FONT></TD>
      <TD STYLE="border-top: Black 1pt solid; border-bottom: Black 1.5pt double; padding-bottom: 1.1pt">&nbsp;</TD></TR>
  </TABLE>
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.25in 0 0">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.25in 0 0">&nbsp;</P>
  
  <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 0.25in 0 0">&nbsp;</P>
  
  <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 0.25in 0 0; text-align: center"><B>See accompanying notes to the unaudited
  condensed consolidated financial statements.</B></P>
  
  <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 0.25in 0 0">&nbsp;</P>
  
  <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 0.25in 0 0">&nbsp;</P>
  
  <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 0.25in 0 0">&nbsp;</P>
  
  <!-- Field: Page; Sequence: 5 -->
      <DIV STYLE="margin-bottom: 6pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR STYLE="font-size: 10pt"><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->5<!-- Field: /Sequence -->&nbsp;</TD></TR></TABLE></DIV>
      <DIV STYLE="page-break-before: always; margin-top: 6pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
      <!-- Field: /Page -->
  
  <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 0.25in 0 0"></P>
  
  <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 0.25in 0 0">&nbsp;</P>
  
  <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 0.25in 0 0">&nbsp;&nbsp;</P>
  
  <TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <TR>
      <TD COLSPAN="33" STYLE="white-space: nowrap; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">
          <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><U>ASTEA INTERNATIONAL INC. AND SUBSIDIARIES</U></B></P>
          <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><U>CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS&rsquo;
          DEFICIT</U></B></P>
          <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><U>Nine Months Ended September 30, 2019</U></B></P>
          <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>(Unaudited)</B></P></TD></TR>
  <TR>
      <TD>&nbsp;</TD>
      <TD COLSPAN="33" STYLE="white-space: nowrap; vertical-align: bottom; padding-right: -5.4pt; padding-left: 5.4pt; text-align: center"><P STYLE="margin-top: 0; margin-bottom: 0"><B></B></P>
                                                                                  <P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>
                                                                                  <P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>
                                                                                  <P STYLE="margin-top: 0; margin-bottom: 0"></P></TD></TR>
  </TABLE>
  
  <P STYLE="margin: 0">&nbsp;</P>
  
  <TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <TR STYLE="vertical-align: bottom">
      <TD>&nbsp;</TD><TD STYLE="font-size: 8pt; padding-bottom: 1pt">&nbsp;</TD>
      <TD COLSPAN="3" STYLE="font-size: 8pt; text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Series A</B></P> <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>convertible</B></P> <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>preferred</B></P> <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>stock at par value</B></P></TD><TD STYLE="font-size: 8pt; padding-bottom: 1pt; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="3" STYLE="font-size: 8pt; text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Series B</B></P> <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>convertible</B></P> <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>preferred</B></P> <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>stock at par value</B></P></TD><TD STYLE="font-size: 8pt; padding-bottom: 1pt; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="3" STYLE="font-size: 8pt; text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Common</B></P> <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>stock</B></P></TD><TD STYLE="font-size: 8pt; padding-bottom: 1pt; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="3" STYLE="font-size: 8pt; text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Additional</B></P> <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>paid-in-</B></P> <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>capital</B></P></TD><TD STYLE="font-size: 8pt; padding-bottom: 1pt; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="3" STYLE="font-size: 8pt; text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Accumulated</B></P> <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>other</B></P> <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>compre-</B></P> <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>hensive</B></P> <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>loss</B></P></TD><TD STYLE="font-size: 8pt; padding-bottom: 1pt; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="3" STYLE="font-size: 8pt; text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Accumulated</B></P> <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>deficit</B></P></TD><TD STYLE="font-size: 8pt; padding-bottom: 1pt; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="3" STYLE="font-size: 8pt; text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Treasury</B></P> <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>stock</B></P></TD><TD STYLE="padding-bottom: 1pt; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="3" STYLE="text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P><P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Total</B></P> <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>stockholders&rsquo;</B></P> <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>deficit</B></P></TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD>&nbsp;</TD><TD>&nbsp;</TD>
      <TD COLSPAN="3" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD>
      <TD COLSPAN="3" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD>
      <TD COLSPAN="3" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD>
      <TD COLSPAN="3" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD>
      <TD COLSPAN="3" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD>
      <TD COLSPAN="3" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD>
      <TD COLSPAN="3" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD>
      <TD COLSPAN="3" STYLE="text-align: right">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: transparent">
      <TD STYLE="width: 28%; font-size: 8pt; font-weight: bold">Balances at December 31, 2018</TD><TD STYLE="width: 2%; font-size: 8pt; font-weight: bold">&nbsp;</TD>
      <TD STYLE="width: 1%; font-size: 8pt; font-weight: bold; text-align: left">$</TD><TD STYLE="width: 5%; font-size: 8pt; font-weight: bold; text-align: right">8,000</TD><TD STYLE="width: 1%; font-size: 8pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 8pt; font-weight: bold">&nbsp;</TD>
      <TD STYLE="width: 1%; font-size: 8pt; font-weight: bold; text-align: left">$</TD><TD STYLE="width: 5%; font-size: 8pt; font-weight: bold; text-align: right">8,000</TD><TD STYLE="width: 1%; font-size: 8pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 8pt; font-weight: bold">&nbsp;</TD>
      <TD STYLE="width: 1%; font-size: 8pt; font-weight: bold; text-align: left">$</TD><TD STYLE="width: 5%; font-size: 8pt; font-weight: bold; text-align: right">37,000</TD><TD STYLE="width: 1%; font-size: 8pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 8pt; font-weight: bold">&nbsp;</TD>
      <TD STYLE="width: 1%; font-size: 8pt; font-weight: bold; text-align: left">$</TD><TD STYLE="width: 5%; font-size: 8pt; font-weight: bold; text-align: right">31,455,000</TD><TD STYLE="width: 1%; font-size: 8pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 8pt; font-weight: bold">&nbsp;</TD>
      <TD STYLE="width: 1%; font-size: 8pt; font-weight: bold; text-align: left">$</TD><TD STYLE="width: 5%; font-size: 8pt; font-weight: bold; text-align: right">(1,150,000</TD><TD STYLE="width: 1%; font-size: 8pt; font-weight: bold; text-align: left">)</TD><TD STYLE="width: 2%; font-size: 8pt; font-weight: bold">&nbsp;</TD>
      <TD STYLE="width: 1%; font-size: 8pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 5%; font-size: 8pt; font-weight: bold; text-align: right">(34,344,000</TD><TD STYLE="width: 1%; font-size: 8pt; font-weight: bold; text-align: left">)</TD><TD STYLE="width: 2%; font-size: 8pt; font-weight: bold">&nbsp;</TD>
      <TD STYLE="width: 1%; font-size: 8pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 5%; font-size: 8pt; font-weight: bold; text-align: right">(208,000</TD><TD STYLE="width: 1%; font-size: 8pt; font-weight: bold; text-align: left">)</TD><TD STYLE="width: 2%; font-size: 8pt; font-weight: bold">&nbsp;</TD>
      <TD STYLE="width: 1%; font-size: 8pt; font-weight: bold; text-align: left">$</TD><TD STYLE="width: 5%; font-size: 8pt; font-weight: bold; text-align: right">(4,194,000</TD><TD STYLE="width: 1%; font-size: 8pt; font-weight: bold; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
      <TD STYLE="font-size: 8pt; text-align: left">Net income</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">55,000</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">55,000</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: transparent">
      <TD>&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
      <TD STYLE="font-size: 8pt; text-align: left">Series A and B preferred stock <BR>dividends</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">(125,000</TD><TD STYLE="font-size: 8pt; text-align: left">)</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">(125,000</TD><TD STYLE="font-size: 8pt; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: transparent">
      <TD>&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
      <TD STYLE="font-size: 8pt; text-align: left">Stock-based compensation</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">17,000</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">17,000</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: transparent">
      <TD>&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
      <TD STYLE="font-size: 8pt; text-align: left; padding-bottom: 1pt">Other comprehensive loss</TD><TD STYLE="font-size: 8pt; padding-bottom: 1pt">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 8pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 8pt; padding-bottom: 1pt; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 8pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 8pt; padding-bottom: 1pt; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 8pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 8pt; padding-bottom: 1pt; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 8pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 8pt; padding-bottom: 1pt; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 8pt; text-align: right">(46,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 8pt; text-align: left; border-bottom: Black 1pt solid">)</TD><TD STYLE="font-size: 8pt; padding-bottom: 1pt; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 8pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 8pt; padding-bottom: 1pt; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 8pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 8pt; padding-bottom: 1pt; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 8pt; text-align: right">(46,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 8pt; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: transparent">
      <TD>&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
      <TD STYLE="font-size: 8pt; font-weight: bold">Balances at March 31, 2019</TD><TD STYLE="font-size: 8pt; font-weight: bold">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; font-weight: bold; text-align: left">$</TD><TD STYLE="font-size: 8pt; font-weight: bold; text-align: right">8,000</TD><TD STYLE="font-size: 8pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; font-weight: bold">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; font-weight: bold; text-align: left">$</TD><TD STYLE="font-size: 8pt; font-weight: bold; text-align: right">8,000</TD><TD STYLE="font-size: 8pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; font-weight: bold">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; font-weight: bold; text-align: left">$</TD><TD STYLE="font-size: 8pt; font-weight: bold; text-align: right">37,000</TD><TD STYLE="font-size: 8pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; font-weight: bold">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; font-weight: bold; text-align: left">$</TD><TD STYLE="font-size: 8pt; font-weight: bold; text-align: right">31,347,000</TD><TD STYLE="font-size: 8pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; font-weight: bold">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; font-weight: bold; text-align: left">$</TD><TD STYLE="font-size: 8pt; font-weight: bold; text-align: right">(1,196,000</TD><TD STYLE="font-size: 8pt; font-weight: bold; text-align: left">)</TD><TD STYLE="font-size: 8pt; font-weight: bold">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; font-weight: bold; text-align: right">(34,289,000</TD><TD STYLE="font-size: 8pt; font-weight: bold; text-align: left">)</TD><TD STYLE="font-size: 8pt; font-weight: bold">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; font-weight: bold; text-align: right">(208,000</TD><TD STYLE="font-size: 8pt; font-weight: bold; text-align: left">)</TD><TD STYLE="font-size: 8pt; font-weight: bold">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; font-weight: bold; text-align: left">$</TD><TD STYLE="font-size: 8pt; font-weight: bold; text-align: right">(4,293,000</TD><TD STYLE="font-size: 8pt; font-weight: bold; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: transparent">
      <TD STYLE="font-size: 8pt; text-align: left">Net loss</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">(586,000</TD><TD STYLE="font-size: 8pt; text-align: left">)</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">(586,000</TD><TD STYLE="font-size: 8pt; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
      <TD>&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: transparent">
      <TD STYLE="font-size: 8pt">Exercise of stock options</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">59,000</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">59,000</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
      <TD>&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: transparent">
      <TD STYLE="font-size: 8pt; text-align: left">Series A and B preferred stock <BR>Dividends</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">(125,000</TD><TD STYLE="font-size: 8pt; text-align: left">)</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">(125,000</TD><TD STYLE="font-size: 8pt; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
      <TD>&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: transparent">
      <TD STYLE="font-size: 8pt; text-align: left">Stock-based compensation</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">52,000</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">52,000</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
      <TD>&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: transparent">
      <TD STYLE="font-size: 8pt; text-align: left; padding-bottom: 1pt">Other comprehensive loss</TD><TD STYLE="font-size: 8pt; padding-bottom: 1pt">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 8pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 8pt; padding-bottom: 1pt; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 8pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 8pt; padding-bottom: 1pt; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 8pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 8pt; padding-bottom: 1pt; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 8pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 8pt; padding-bottom: 1pt; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 8pt; text-align: right">(116,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 8pt; text-align: left; border-bottom: Black 1pt solid">)</TD><TD STYLE="font-size: 8pt; padding-bottom: 1pt; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 8pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 8pt; padding-bottom: 1pt; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 8pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 8pt; padding-bottom: 1pt; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 8pt; text-align: right">(116,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 8pt; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
      <TD>&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: transparent">
      <TD STYLE="font-size: 8pt; font-weight: bold">Balances at June 30, 2019</TD><TD STYLE="font-size: 8pt; font-weight: bold">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; font-weight: bold; text-align: left">$</TD><TD STYLE="font-size: 8pt; font-weight: bold; text-align: right">8,000</TD><TD STYLE="font-size: 8pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; font-weight: bold">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; font-weight: bold; text-align: left">$</TD><TD STYLE="font-size: 8pt; font-weight: bold; text-align: right">8,000</TD><TD STYLE="font-size: 8pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; font-weight: bold">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; font-weight: bold; text-align: left">$</TD><TD STYLE="font-size: 8pt; font-weight: bold; text-align: right">37,000</TD><TD STYLE="font-size: 8pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; font-weight: bold">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; font-weight: bold; text-align: left">$</TD><TD STYLE="font-size: 8pt; font-weight: bold; text-align: right">31,333,000</TD><TD STYLE="font-size: 8pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; font-weight: bold">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; font-weight: bold; text-align: left">$</TD><TD STYLE="font-size: 8pt; font-weight: bold; text-align: right">(1,312,000</TD><TD STYLE="font-size: 8pt; font-weight: bold; text-align: left">)</TD><TD STYLE="font-size: 8pt; font-weight: bold">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; font-weight: bold; text-align: right">(34,875,000</TD><TD STYLE="font-size: 8pt; font-weight: bold; text-align: left">)</TD><TD STYLE="font-size: 8pt; font-weight: bold">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; font-weight: bold; text-align: right">(208,000</TD><TD STYLE="font-size: 8pt; font-weight: bold; text-align: left">)</TD><TD STYLE="font-size: 8pt; font-weight: bold">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; font-weight: bold; text-align: left">$</TD><TD STYLE="font-size: 8pt; font-weight: bold; text-align: right">(5,009,000</TD><TD STYLE="font-size: 8pt; font-weight: bold; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
      <TD STYLE="font-size: 8pt; text-align: left">Net loss</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">(1,489,000</TD><TD STYLE="font-size: 8pt; text-align: left">)</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">(1,489,000</TD><TD STYLE="font-size: 8pt; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: transparent">
      <TD>&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
      <TD STYLE="font-size: 8pt">Exercise of stock options</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">85,000</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">85,000</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: transparent">
      <TD>&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
      <TD STYLE="font-size: 8pt; text-align: left">Series A and B preferred stock <BR>Dividends</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">(125,000</TD><TD STYLE="font-size: 8pt; text-align: left">)</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">(125,000</TD><TD STYLE="font-size: 8pt; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: transparent">
      <TD>&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
      <TD STYLE="font-size: 8pt; text-align: left">Stock-based compensation</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">49,000</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
      <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">49,000</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: transparent">
      <TD>&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
      <TD STYLE="font-size: 8pt; text-align: left; padding-bottom: 1pt">Other comprehensive income</TD><TD STYLE="font-size: 8pt; padding-bottom: 1pt">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 8pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 8pt; padding-bottom: 1pt; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 8pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 8pt; padding-bottom: 1pt; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 8pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 8pt; padding-bottom: 1pt; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 8pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 8pt; padding-bottom: 1pt; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 8pt; text-align: right">44,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 8pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 8pt; padding-bottom: 1pt; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 8pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 8pt; padding-bottom: 1pt; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 8pt; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 8pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 8pt; padding-bottom: 1pt; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 8pt; text-align: right">44,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 8pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: transparent">
      <TD>&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
      <TD STYLE="font-size: 8pt; font-weight: bold; padding-bottom: 2.5pt">Balances at September 30, 2019</TD><TD STYLE="font-size: 8pt; font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 2pt double; font-size: 8pt; font-weight: bold; text-align: right; vertical-align: bottom">$</TD><TD STYLE="border-bottom: Black 2pt double; font-size: 8pt; font-weight: bold; text-align: right; vertical-align: bottom">8,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 8pt; font-weight: bold; text-align: right; border-bottom: Black 2pt double; vertical-align: bottom">&nbsp;</TD><TD STYLE="font-size: 8pt; font-weight: bold; padding-bottom: 2.5pt; border-bottom: Black 2pt double; text-align: right; vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 2pt double; font-size: 8pt; font-weight: bold; text-align: right; vertical-align: bottom">$</TD><TD STYLE="border-bottom: Black 2pt double; font-size: 8pt; font-weight: bold; text-align: right; vertical-align: bottom">8,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 8pt; font-weight: bold; text-align: right; border-bottom: Black 2pt double; vertical-align: bottom">&nbsp;</TD><TD STYLE="font-size: 8pt; font-weight: bold; padding-bottom: 2.5pt; border-bottom: Black 2pt double; text-align: right; vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 2pt double; font-size: 8pt; font-weight: bold; text-align: right; vertical-align: bottom">$</TD><TD STYLE="border-bottom: Black 2pt double; font-size: 8pt; font-weight: bold; text-align: right; vertical-align: bottom">37,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 8pt; font-weight: bold; text-align: right; border-bottom: Black 2pt double; vertical-align: bottom">&nbsp;</TD><TD STYLE="font-size: 8pt; font-weight: bold; padding-bottom: 2.5pt; border-bottom: Black 2pt double; text-align: right; vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 2pt double; font-size: 8pt; font-weight: bold; text-align: right; vertical-align: bottom">$</TD><TD STYLE="border-bottom: Black 2pt double; font-size: 8pt; font-weight: bold; text-align: right; vertical-align: bottom">31,342,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 8pt; font-weight: bold; text-align: right; border-bottom: Black 2pt double; vertical-align: bottom">&nbsp;</TD><TD STYLE="font-size: 8pt; font-weight: bold; padding-bottom: 2.5pt; border-bottom: Black 2pt double; text-align: right; vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 2pt double; font-size: 8pt; font-weight: bold; text-align: right; vertical-align: bottom">$</TD><TD STYLE="border-bottom: Black 2pt double; font-size: 8pt; font-weight: bold; text-align: right; vertical-align: bottom">(1,268,000</TD><TD STYLE="padding-bottom: 0; font-size: 8pt; font-weight: bold; text-align: right; border-bottom: Black 2pt double; vertical-align: bottom">)</TD><TD STYLE="font-size: 8pt; font-weight: bold; padding-bottom: 2.5pt; border-bottom: Black 2pt double; text-align: right; vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 2pt double; font-size: 8pt; font-weight: bold; text-align: right; vertical-align: bottom">&nbsp;</TD><TD STYLE="border-bottom: Black 2pt double; font-size: 8pt; font-weight: bold; text-align: right; vertical-align: bottom">(36,364,000</TD><TD STYLE="padding-bottom: 0; font-size: 8pt; font-weight: bold; text-align: right; border-bottom: Black 2pt double; vertical-align: bottom">)</TD><TD STYLE="font-size: 8pt; font-weight: bold; padding-bottom: 2.5pt; border-bottom: Black 2pt double; text-align: right; vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 2pt double; font-size: 8pt; font-weight: bold; text-align: right; vertical-align: bottom">&nbsp;</TD><TD STYLE="border-bottom: Black 2pt double; font-size: 8pt; font-weight: bold; text-align: right; vertical-align: bottom">(208,000</TD><TD STYLE="padding-bottom: 0; font-size: 8pt; font-weight: bold; text-align: right; border-bottom: Black 2pt double; vertical-align: bottom">)</TD><TD STYLE="font-size: 8pt; font-weight: bold; padding-bottom: 2.5pt; border-bottom: Black 2pt double; text-align: right; vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 2pt double; font-size: 8pt; font-weight: bold; text-align: right; vertical-align: bottom">$</TD><TD STYLE="border-bottom: Black 2pt double; font-size: 8pt; font-weight: bold; text-align: right; vertical-align: bottom">(6,445,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 8pt; font-weight: bold; text-align: left; vertical-align: bottom">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: transparent">
      <TD>&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  </TABLE>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>
  
  <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>See accompanying notes to the unaudited condensed
  consolidated financial statements.</B></P>
  
  <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>
  
  <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B></B></P>
  
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  <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>
  
  <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>
  
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      <TD>&nbsp;</TD>
      <TD COLSPAN="2" STYLE="white-space: nowrap; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">
          <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><U>ASTEA INTERNATIONAL INC. AND SUBSIDIARIES</U></B></P>
          <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><U>CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS&rsquo;
          DEFICIT</U></B></P>
          <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><U>Nine Months Ended September 30, 2018 </U></B></P></TD></TR>
  <TR>
      <TD COLSPAN="2" STYLE="white-space: nowrap; vertical-align: bottom; padding-right: -5.4pt; padding-left: 5.4pt; text-align: center"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Unaudited)</B></TD>
      <TD>&nbsp;</TD></TR>
  <TR>
      <TD STYLE="width: 4%">&nbsp;</TD>
      <TD STYLE="width: 90%">&nbsp;</TD>
      <TD STYLE="width: 6%">&nbsp;</TD></TR>
  </TABLE>
  <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>
  
  <TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="width: 26%">&nbsp;</TD>
      <TD STYLE="width: 1%; border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="width: 7%; border-bottom: black 1pt solid">
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Series A</B></P>
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>convertible</B></P>
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>preferred</B></P>
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>stock at par value</B></P></TD>
      <TD STYLE="width: 1%; border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="width: 8%; border-bottom: black 1pt solid">
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Series B</B></P>
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>convertible</B></P>
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>preferred</B></P>
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>stock at par value</B></P></TD>
      <TD STYLE="width: 1%; border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="width: 7%; border-bottom: black 1pt solid">
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Common</B></P>
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>stock</B></P></TD>
      <TD STYLE="width: 1%; border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="width: 8%; border-bottom: black 1pt solid">
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Additional</B></P>
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>paid-in-</B></P>
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>capital</B></P></TD>
      <TD STYLE="width: 1%; border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="width: 8%; border-bottom: black 1pt solid">
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Accumulated</B></P>
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>other</B></P>
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>compre-</B></P>
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>hensive</B></P>
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>loss</B></P></TD>
      <TD STYLE="width: 1%; border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="width: 9%; border-bottom: black 1pt solid">
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Accumulated</B></P>
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>deficit</B></P></TD>
      <TD STYLE="width: 1%; border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="width: 8%; border-bottom: black 1pt solid">
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Treasury</B></P>
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>stock</B></P></TD>
      <TD STYLE="width: 1%; border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="width: 11%; border-bottom: black 1pt solid">
          <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Total</B></P>
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>stockholders&rsquo;</B></P>
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>deficit</B></P></TD></TR>
  </TABLE>
  <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>
  
  <TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="width: 28%">
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0"><B>Balances at December 31, 2017</B></P></TD>
      <TD STYLE="width: 1%; text-align: right">&nbsp;</TD>
      <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt"><B>$</B></FONT></TD>
      <TD STYLE="width: 6%; text-align: right"><FONT STYLE="font-size: 8pt"><B>8,000</B></FONT></TD>
      <TD STYLE="width: 1%">&nbsp;</TD>
      <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt"><B>$</B></FONT></TD>
      <TD STYLE="width: 6%; text-align: right"><FONT STYLE="font-size: 8pt"><B>8,000</B></FONT></TD>
      <TD STYLE="width: 1%">&nbsp;</TD>
      <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt"><B>$</B></FONT></TD>
      <TD STYLE="width: 6%; text-align: right"><FONT STYLE="font-size: 8pt"><B>36,000</B></FONT></TD>
      <TD STYLE="width: 1%">&nbsp;</TD>
      <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt"><B>$</B></FONT></TD>
      <TD STYLE="width: 7%; text-align: right"><FONT STYLE="font-size: 8pt"><B>31,710,000</B></FONT></TD>
      <TD STYLE="width: 1%">&nbsp;</TD>
      <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt"><B>$</B></FONT></TD>
      <TD STYLE="width: 7%; text-align: right"><FONT STYLE="font-size: 8pt"><B>(1,055,000</B></FONT></TD>
      <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt"><B>)</B></FONT></TD>
      <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt"><B>$</B></FONT></TD>
      <TD STYLE="width: 7%; text-align: right"><FONT STYLE="font-size: 8pt"><B>(35,338,000</B></FONT></TD>
      <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt"><B>)</B></FONT></TD>
      <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt"><B>$</B></FONT></TD>
      <TD STYLE="width: 7%; text-align: right"><FONT STYLE="font-size: 8pt"><B>(208,000</B></FONT></TD>
      <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt"><B>)</B></FONT></TD>
      <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt"><B>$</B></FONT></TD>
      <TD STYLE="width: 9%; padding-right: 0.1pt; text-align: right"><FONT STYLE="font-size: 8pt"><B>(4,839,000</B></FONT></TD>
      <TD STYLE="width: 1%"><B>)</B>&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD>
          <P STYLE="font: 6pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0">Cumulative effect</P>
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0">from change in accounting</P></TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">630,000</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="padding-right: 0.1pt; text-align: right"><FONT STYLE="font-size: 8pt">630,000</FONT></TD>
      <TD>&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="padding-right: 0.1pt; text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD><FONT STYLE="font-size: 8pt">Net income </FONT></TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">6,000</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="padding-right: 0.1pt; text-align: right"><FONT STYLE="font-size: 8pt">6,000</FONT></TD>
      <TD>&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="padding-right: 0.1pt; text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD>
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0">Series A and B preferred stock</P>
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0">dividends</P></TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">(125,000</FONT></TD>
      <TD><FONT STYLE="font-size: 8pt">)</FONT></TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="padding-right: 0.1pt; text-align: right"><FONT STYLE="font-size: 8pt">(125,000</FONT></TD>
      <TD><FONT STYLE="font-size: 8pt">)</FONT></TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="padding-right: 0.1pt; text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD><FONT STYLE="font-size: 8pt">Stock-based compensation</FONT></TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">31,000</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="padding-right: 0.1pt; text-align: right"><FONT STYLE="font-size: 8pt">31,000&nbsp; </FONT></TD>
      <TD>&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="padding-right: 0.1pt; text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="padding-bottom: 1.5pt"><FONT STYLE="font-size: 8pt">Other comprehensive loss</FONT></TD>
      <TD STYLE="padding-bottom: 1.5pt; text-align: right">&nbsp;</TD>
      <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">(104,000</FONT></TD>
      <TD STYLE="border-bottom: black 1pt solid"><FONT STYLE="font-size: 8pt">)</FONT></TD>
      <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">(104,000</FONT></TD>
      <TD STYLE="border-bottom: black 1pt solid"><FONT STYLE="font-size: 8pt">)</FONT></TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="padding-right: 0.1pt; text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="padding-bottom: 3pt"><FONT STYLE="font-size: 8pt"><B>Balances at March 31, 2018</B></FONT></TD>
      <TD STYLE="padding-bottom: 3pt; text-align: right">&nbsp;</TD>
      <TD><FONT STYLE="font-size: 8pt"><B>&nbsp;$</B></FONT></TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt"><B>8,000</B></FONT></TD>
      <TD>&nbsp;</TD>
      <TD><FONT STYLE="font-size: 8pt"><B>&nbsp;$</B></FONT></TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt"><B>8,000</B></FONT></TD>
      <TD>&nbsp;</TD>
      <TD><FONT STYLE="font-size: 8pt"><B>&nbsp;$</B></FONT></TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt"><B>36,000</B></FONT></TD>
      <TD>&nbsp;</TD>
      <TD><FONT STYLE="font-size: 8pt"><B>&nbsp;$ </B></FONT></TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt"><B>31,616,000</B></FONT></TD>
      <TD>&nbsp;</TD>
      <TD><FONT STYLE="font-size: 8pt"><B>&nbsp;$</B></FONT></TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt"><B>(1,159,000</B></FONT></TD>
      <TD><FONT STYLE="font-size: 8pt"><B>)</B></FONT></TD>
      <TD><FONT STYLE="font-size: 8pt"><B>&nbsp;$</B></FONT></TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt"><B>(34,702,000</B></FONT></TD>
      <TD><FONT STYLE="font-size: 8pt"><B>)</B></FONT></TD>
      <TD><FONT STYLE="font-size: 8pt"><B>$ </B></FONT></TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt"><B>(208,000</B></FONT></TD>
      <TD><FONT STYLE="font-size: 8pt"><B>)</B></FONT></TD>
      <TD><FONT STYLE="font-size: 8pt"><B>$ </B></FONT></TD>
      <TD STYLE="padding-right: 0.1pt; text-align: right"><FONT STYLE="font-size: 8pt"><B>(4,401,000</B></FONT></TD>
      <TD><FONT STYLE="font-size: 8pt"><B>)</B></FONT></TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD><FONT STYLE="font-size: 8pt">Net income </FONT></TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">304,000</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="padding-right: 0.1pt; text-align: right"><FONT STYLE="font-size: 8pt">304,000</FONT></TD>
      <TD>&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="padding-right: 0.1pt; text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD>
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0">Series A and B preferred stock</P>
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0">dividends</P></TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">(125,000</FONT></TD>
      <TD><FONT STYLE="font-size: 8pt">)</FONT></TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="padding-right: 0.1pt; text-align: right"><FONT STYLE="font-size: 8pt">(125,000</FONT></TD>
      <TD>)</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="padding-right: 0.1pt; text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD><FONT STYLE="font-size: 8pt">Stock-based compensation</FONT></TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">41,000</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="padding-right: 0.1pt; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;&nbsp;41,000&nbsp; </FONT></TD>
      <TD>&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="padding-right: 0.1pt; text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD><FONT STYLE="font-size: 8pt">Other comprehensive income</FONT></TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">92,000</FONT></TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">92,000</FONT></TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD><FONT STYLE="font-size: 8pt"><B>Balances at June 30, 2018</B></FONT></TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD><FONT STYLE="font-size: 8pt"><B>$</B></FONT></TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt"><B>8,000</B></FONT></TD>
      <TD>&nbsp;</TD>
      <TD><FONT STYLE="font-size: 8pt"><B>$</B></FONT></TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt"><B>8,000</B></FONT></TD>
      <TD>&nbsp;</TD>
      <TD><FONT STYLE="font-size: 8pt"><B>$</B></FONT></TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt"><B>36,000</B></FONT></TD>
      <TD>&nbsp;</TD>
      <TD><FONT STYLE="font-size: 8pt"><B>$</B></FONT></TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt"><B>31,532,000</B></FONT></TD>
      <TD>&nbsp;</TD>
      <TD><FONT STYLE="font-size: 8pt"><B>$</B></FONT></TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt"><B>(1,067,000</B></FONT></TD>
      <TD><FONT STYLE="font-size: 8pt"><B>)</B></FONT></TD>
      <TD><FONT STYLE="font-size: 8pt"><B>$</B></FONT></TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt"><B>(34,398,000</B></FONT></TD>
      <TD><FONT STYLE="font-size: 8pt"><B>)</B></FONT></TD>
      <TD><FONT STYLE="font-size: 8pt"><B>$</B></FONT></TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt"><B>(208,000</B></FONT></TD>
      <TD><FONT STYLE="font-size: 8pt"><B>)</B></FONT></TD>
      <TD><FONT STYLE="font-size: 8pt"><B>$</B></FONT></TD>
      <TD STYLE="padding-right: 0.1pt; text-align: right"><FONT STYLE="font-size: 8pt"><B>(4,089,000</B></FONT></TD>
      <TD><B>)</B></TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD><FONT STYLE="font-size: 8pt">Net loss</FONT></TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">(70,000</FONT></TD>
      <TD><FONT STYLE="font-size: 8pt">)</FONT></TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="padding-right: 0.1pt; text-align: right"><FONT STYLE="font-size: 8pt">(70,000</FONT></TD>
      <TD>)</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="padding-right: 0.1pt; text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD><FONT STYLE="font-size: 8pt">Exercise of stock options</FONT></TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">1,000</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">84,000</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="padding-right: 0.1pt; text-align: right"><FONT STYLE="font-size: 8pt">85,000</FONT></TD>
      <TD>&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="padding-right: 0.1pt; text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD>
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0">Series A and B preferred stock</P>
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0">dividends</P></TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">(125,000</FONT></TD>
      <TD><FONT STYLE="font-size: 8pt">)</FONT></TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="padding-right: 0.1pt; text-align: right"><FONT STYLE="font-size: 8pt">(125,000</FONT></TD>
      <TD>)</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="padding-right: 0.1pt; text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD><FONT STYLE="font-size: 8pt">Stock-based compensation</FONT></TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">45,000</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="padding-right: 0.1pt; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;&nbsp;45,000&nbsp; </FONT></TD>
      <TD>&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="padding-right: 0.1pt; text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD><FONT STYLE="font-size: 8pt">Other comprehensive loss</FONT></TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">(23,000</FONT></TD>
      <TD STYLE="border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">)</FONT></TD>
      <TD STYLE="border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">&mdash;</FONT></TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">(23,000</FONT></TD>
      <TD STYLE="border-bottom: Black 1pt solid">)</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="padding-right: 0.1pt; text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD><FONT STYLE="font-size: 8pt"><B>Balances at September 30, 2018</B></FONT></TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD><FONT STYLE="font-size: 8pt"><B>$</B></FONT></TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt"><B>8,000</B></FONT></TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt"><B>$</B></FONT></TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt"><B>8,000</B></FONT></TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt"><B>$</B></FONT></TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt"><B>37,000</B></FONT></TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt"><B>$</B></FONT></TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt"><B>31,536,000</B></FONT></TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt"><B>$</B></FONT></TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt"><B>(1,090,000</B></FONT></TD>
      <TD STYLE="border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt"><B>)</B></FONT></TD>
      <TD STYLE="border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt"><B>$</B></FONT></TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt"><B>(34,468,000</B></FONT></TD>
      <TD STYLE="border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt"><B>)</B></FONT></TD>
      <TD STYLE="border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt"><B>$</B></FONT></TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt"><B>(208,000</B></FONT></TD>
      <TD STYLE="border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt"><B>)</B></FONT></TD>
      <TD STYLE="border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt"><B>$</B></FONT></TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt"><B>(4,177,000</B></FONT></TD>
      <TD STYLE="border-bottom: Black 1pt solid"><B>)</B></TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="padding-right: 0.1pt; text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD></TR>
  </TABLE>
  <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>
  
  <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>
  
  <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>See accompanying notes to the unaudited condensed
  consolidated financial statements.</B></P>
  
  <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: center"></P>
  
  <!-- Field: Page; Sequence: 7 -->
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  <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>
  
  <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>
  
  <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0"><B></B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><U>ASTEA INTERNATIONAL INC. AND SUBSIDIARIES</U></B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><U>CONDENSED CONSOLIDATED STATEMENTS OF CASH
  FLOWS</U></B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>(Unaudited)</B></P>
  
  <TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <TR STYLE="vertical-align: bottom">
      <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
      <TD COLSPAN="7" STYLE="font-weight: bold; text-align: center">Nine Months Ended</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
      <TD COLSPAN="7" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">September 30,</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
      <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2019</TD><TD STYLE="font-weight: bold; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2018</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="font-weight: bold; text-align: left">Cash flows from operating activities:</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
      <TD STYLE="width: 56%; text-align: left; padding-left: 10pt">Net (loss) income</TD><TD STYLE="width: 8%">&nbsp;</TD>
      <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">(2,020,000</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 8%">&nbsp;</TD>
      <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">240,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="text-align: left; padding-left: 10pt">Adjustments to reconcile net (loss) income to net cash provided by operating activities: </TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
      <TD STYLE="text-align: left; padding-left: 20pt">Depreciation and amortization</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,527,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,993,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="text-align: left; padding-left: 20pt">Non cash lease expense</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">848,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
      <TD STYLE="text-align: left; padding-left: 20pt">Amortization of deferred financing costs</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">35,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">32,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="text-align: left; padding-left: 20pt">Amortization of deferred hosting costs</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">311,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">786,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
      <TD STYLE="text-align: left; padding-left: 20pt">Decrease in provision for doubtful accounts</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(148,000</TD><TD STYLE="text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="text-align: left; padding-left: 20pt">Stock-based compensation</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">118,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">116,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
      <TD STYLE="text-align: left; padding-left: 20pt">Changes in operating assets and liabilities:</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="padding-left: 30pt">Receivables</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,362,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(18,000</TD><TD STYLE="text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
      <TD STYLE="text-align: left; padding-left: 30pt">Prepaid expenses and other</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(45,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(188,000</TD><TD STYLE="text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="text-align: left; padding-left: 30pt">Deferred hosting costs</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(921,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(936,000</TD><TD STYLE="text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
      <TD STYLE="text-align: left; padding-left: 30pt">Other assets</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(23,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(6,000</TD><TD STYLE="text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="text-align: left; padding-left: 30pt">Accounts payable and accrued expenses</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">401,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">47,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
      <TD STYLE="text-align: left; padding-left: 30pt">Deferred revenues</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(51,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(196,000</TD><TD STYLE="text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 30pt">Lease liabilities</TD><TD>&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(848,000</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: left">)</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
      <TD STYLE="text-align: left; padding-left: 10pt">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
      <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 10pt">Net cash provided by operating activities</TD><TD>&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,693,000</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,722,000</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="text-align: left"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; padding: 0"><B>&nbsp;</B></P><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; padding: 0"><B>Cash flows from investing activities:</B></P></TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
      <TD STYLE="text-align: left; padding-left: 10pt">Purchases of property and equipment</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(145,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(42,000</TD><TD STYLE="text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 10pt">Capitalized software development costs</TD><TD>&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2,301,000</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: left">)</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2,430,000</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
      <TD STYLE="text-align: left; padding-left: 10pt">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
      <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 10pt">Net cash used in investing activities</TD><TD>&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2,446,000</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: left">)</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2,472,000</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="font-weight: bold; text-align: left">Cash flows from financing activities:</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
      <TD STYLE="text-align: left; padding-left: 10pt">Dividend payments on preferred stock</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(200,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(105,000</TD><TD STYLE="text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="text-align: left; padding-left: 10pt">Payment on the term note from Bridge Bank</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(225,000</TD><TD STYLE="text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
      <TD STYLE="text-align: left; padding-left: 10pt">Payment on line of credit from Bridge Bank</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(12,524,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(7,975,000</TD><TD STYLE="text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="text-align: left; padding-left: 10pt">Proceeds on line of credit from Bridge Bank</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">12,443,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">8,367,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
      <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 10pt">Proceeds from exercise of stock options</TD><TD>&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">144,000</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">84,000</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 10pt"><P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>
                                                                            <P STYLE="margin-top: 0; margin-bottom: 0">Net cash (used) provided by financing activities</P></TD><TD>&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(137,000</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: left">)</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">146,000</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
      <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0"><P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>
                                                                            <P STYLE="margin-top: 0; margin-bottom: 0; margin-left: 0pt">Effect of exchange rate changes on cash</P></TD><TD>&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">12,000</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: left"></TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">19,000</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="text-align: left">Net decrease in cash, cash equivalents and <BR>restricted cash</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(878,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(585,000</TD><TD STYLE="text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
      <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 10pt">Cash, cash equivalents and restricted cash, beginning of period</TD><TD>&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,348,000</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,001,000</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="text-align: left; padding-left: 10pt">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 10pt">Cash, cash equivalents and restricted cash, end of period</TD><TD>&nbsp;</TD>
      <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">470,000</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,416,000</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
      <TD STYLE="text-align: left"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; padding: 0"><B>&nbsp;</B></P><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; padding: 0"><B>Supplemental disclosure of cash flows information:</B></P></TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="text-align: left; padding-left: 10pt">Cash paid for taxes</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">110,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;&nbsp;&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
      <TD STYLE="text-align: left; padding-left: 10pt">Cash paid for interest</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">182,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">107,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="font-weight: bold; text-align: left; padding-left: 0">Supplemental disclosure of non-cash flows information:</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
      <TD STYLE="text-align: left; padding-left: 10pt">Accrued preferred dividends</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">375,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">375,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD COLSPAN="9" STYLE="text-align: center"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in"><B>See accompanying notes to the unaudited condensed consolidated financial statements.</B></P>
  
  </TD></TR>
  </TABLE>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B></B></P>
  
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  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><U>Item 1. FINANCIAL STATEMENTS (Continued)</U></B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><U>ASTEA INTERNATIONAL INC. AND SUBSIDIARIES</U></B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.25in; text-align: center"><B><U>NOTES TO CONDENSED CONSOLIDATED
  FINANCIAL STATEMENTS</U></B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.25in; text-align: center"><B><U>(Unaudited)</U></B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 2.15pt 0 20pt; text-align: justify; text-indent: -20pt">&nbsp;</P>
  
  <TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
  <TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">1.</TD><TD STYLE="text-align: justify; padding-right: 2.15pt"><U>BASIS OF PRESENTATION </U></TD></TR></TABLE>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 2.15pt 0 0.25in; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The condensed consolidated financial statements
  at September 30, 2019 and for the three and nine month periods ended September 30, 2019 and 2018 of Astea International Inc. and
  subsidiaries (&ldquo;Astea&rdquo; or the &quot;Company&quot;) 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 accompanying unaudited financial statements have been prepared pursuant to the rules
  and regulations of the Securities and Exchange Commission (&ldquo;SEC&rdquo;). 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&rsquo;s latest annual report
  (Form 10-K) and our Form 10-Q&rsquo;s for the quarters ended September 30, 2018, March 31, 2019 and June 30, 2019. The interim
  financial information presented is not necessarily indicative of results expected for the entire year ending December 31, 2019.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Comparability</I></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>&nbsp;</I></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The condensed consolidated financial statements
  as of and for the periods ended September 30, 2019 are presented under the new Lease standard, while the comparative period presented
  has not been adjusted and continues to be reported in accordance with the previous standard. The Lease standard requires lessees
  to recognize a right-of-use (&quot;ROU&quot;) asset and lease liability for all leases on the condensed consolidated balance sheet
  beginning January 1, 2019 with no modification to prior periods.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><I>&nbsp;</I></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><I>Recently Adopted Accounting Standards - Leases</I></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><I>&nbsp;</I></P>
  
  <P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT STYLE="color: #222222; background-color: white">In
  February 2016, 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
  was effective for the Company on January 1, 2019. The guidance was adopted on a modified retrospective basis and provides for certain
  practical expedients. The adoption of this guidance changed the way we account for our operating leases, which resulted in the
  Company recording the future benefits of those leases as an asset and the related minimum lease payments as a liability on our
  condensed consolidated balance sheets. </FONT>The Company reported a significant balance sheet gross-up for the right-of-use assets
  and corresponding liabilities, with no impact to its debt covenant. <FONT STYLE="background-color: white">The Company does not
  finance purchases of equipment, but it does have operating leases for office space and equipment in all locations. The Company
  has identified all material operating lease agreements. It has also reviewed all significant contracts for embedded leases. No
  embedded leases were identified during this process. </FONT></P>
  
  <P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT STYLE="background-color: white">We
  determine if an arrangement is a lease at inception. All leases to which the Company is a party are operating leases. Beginning
  January 1, 2019, the operating leases are being reported on our condensed consolidated balance sheet as operating lease ROU assets
  and current and noncurrent operating lease liabilities. The ROU assets represent our right to use an underlying asset for the lease
  term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and
  liabilities will be recognized at the commencement date based on the present value of the lease payments over the lease term. As
  none of our leases provide an implicit interest rate, we used our incremental borrowing rate based on the information available
  at the commencement date in calculating the present value of lease payments. The operating lease ROU asset also includes any lease
  payments made and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably
  certain that we will exercise the option. </FONT></P>
  
  <P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The new guidance provides a number of optional
  practical expedients in transition. The Company elected the package of practical expedients which permitted us under the new guidance
  not to reassess our prior conclusions about lease identification, lease classification and initial direct costs. Astea did not
  elect the use-of hindsight or the practical expedient pertaining to land easements; the latter not being applicable to us. On adoption,
  we recognized operating liabilities of $3,132,000, with corresponding ROU assets of the same amount based on the present value
  of the remaining minimum rental payments under current leasing standards for existing operating leases.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>
  
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  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0in">The new guidance also provides
  practical expedients for an entity&rsquo;s ongoing accounting. We elected the short-term lease recognition exemption for one of
  our office equipment leases. This means, for those leases that qualify, we will not recognize ROU assets or lease liabilities.
  This includes not recognizing ROU assets or lease liabilities for existing short-term leases on those assets in transition. We
  elected the practical expedient to not separate lease and non-lease components for all of our leases. As expected, the adoption
  of this guidance resulted in additional&nbsp;lease-related disclosures in the footnotes to our condensed consolidated financial
  statements (see Note 5).&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0in">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Cash, cash equivalents and restricted cash</I></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><I>&nbsp;</I></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following table provides a reconciliation
  of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheet that sum to the total of
  the same such amounts presented on the condensed consolidated statement of cash flows:</P>
  
  <TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="white-space: nowrap; width: 59%; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="white-space: nowrap; width: 19%; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="white-space: nowrap; width: 3%; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="white-space: nowrap; width: 19%; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="white-space: nowrap; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="white-space: nowrap; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-size: 9pt"><B>September 30, 2019</B></FONT></TD>
      <TD STYLE="white-space: nowrap; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="white-space: nowrap; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-size: 9pt"><B>December 31, 2018</B></FONT></TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="white-space: nowrap; padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 9pt">Cash and cash equivalents</FONT></TD>
      <TD STYLE="white-space: nowrap; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 9pt">$&nbsp;&nbsp;&nbsp;400,000</FONT></TD>
      <TD STYLE="white-space: nowrap; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="white-space: nowrap; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 9pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;1,276,000 </FONT></TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="white-space: nowrap; padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 9pt">Restricted cash</FONT></TD>
      <TD STYLE="white-space: nowrap; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 9pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;70,000 </FONT></TD>
      <TD STYLE="white-space: nowrap; padding-right: 5.4pt; padding-left: 5.4pt; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="white-space: nowrap; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 9pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;72,000 </FONT></TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0">Total cash, cash equivalents, and restricted cash reported</P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0">on the condensed consolidated statements of cash flows</P></TD>
      <TD STYLE="white-space: nowrap; border-bottom: Black 2.25pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 9pt">$&nbsp;&nbsp;&nbsp;470,000</FONT></TD>
      <TD STYLE="white-space: nowrap; border-bottom: Black 2.25pt double; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="white-space: nowrap; border-bottom: Black 2.25pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 9pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;1,348,000</FONT></TD></TR>
  </TABLE>
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Amounts included in restricted cash represent
  funds required to be set aside by a contractual agreement with the building leasing companies in Europe. The restrictions will
  lapse when the building leases expire.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>&nbsp;</I></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Operating Matters and Liquidity </I></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><I>&nbsp;</I></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">The Company has a
  history of net losses and an accumulated deficit of $36,364,000 as of September 30, 2019. In the first nine months of 2019, the
  Company had a net loss of $2,020,000 compared to income of $240,000 generated in the first nine months of 2018. Further, at September
  30, 2019, the Company had a working capital ratio of .47:1, with cash and cash equivalents of $400,000 compared to December 31,
  2018 when the Company had cash and cash equivalents of $1,276,000. The decrease in cash and cash equivalents for the first nine
  months of 2019 was primarily driven by a decrease in cash provided by operations in 2019 compared to 2018 and a decrease in cash
  provided by financing activities.</P>
  
  <P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>&nbsp;</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As of September 30, 2019, the Company owed
  $2,588,000 against the line of credit from Western Alliance Bank (&ldquo;WAB&rdquo;).&nbsp;&nbsp; As of September 30, 2019, the
  availability under the line of credit was $262,000. The Company has projected revenues that management believes will provide sufficient
  funds along with the additional borrowings available under its line of credit to sustain its continuing operations through at least
  November 15, 2020. The Agreement with WAB is set to expire November 2020. It is the Company&rsquo;s intention to either renew or
  replace the line of credit prior to its expiration.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company was in compliance with the WAB
  financial and liquidity covenant as of September 30, 2019 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 amount due to WAB under the line of credit as
  of September 30, 2019 were classified in the accompanying condensed consolidated balance sheet in accordance with the repayment
  terms stipulated in the agreement with WAB.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT STYLE="color: #222222; background-color: white">Our
  primary cash requirements are to fund operations</FONT> 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.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Management&rsquo;s current operating plan is
  to maintain and/or reduce operating expenses in order to be aligned with expected revenues.&nbsp; The primary area of focus will
  continue to be headcount and costs from outside consultants.&nbsp; 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.&nbsp; The Company has a substantial professional services backlog that resulted from new customers added
  in 2019 as well as upgrade projects from our existing customers as they move to the latest version of Astea Alliance.&nbsp;&nbsp;
  In 2020, the Company will continue to consider ways to reduce operating expenses in certain areas of the Company in order to maintain
  its liquidity. However, management has implemented new marketing initiatives which have increased our spending in this area in
  2019. We believe the new initiatives will directly contribute to increasing new business, which is essential to our growth.&nbsp;
  Operations will generate enough cash to meet obligations at least <FONT STYLE="color: #222222; background-color: white">through
  November 15, 2020. As noted above, if the Company&rsquo;s actual results fall short of expectations, the Company will make cost
  adjustments to improve the Company&rsquo;s operating cash flows. </FONT>In addition,&nbsp;we plan to maintain the same level of
  investment in software development and we do not expect to increase capital expenditures.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>
  
  <!-- Field: Page; Sequence: 10 -->
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  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; color: #222222"><FONT STYLE="background-color: white">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.</FONT></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; color: #222222">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Revenue from Contracts with Customers</I></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><I>&nbsp;</I></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.9pt 0 0; text-align: justify">Astea&rsquo;s revenue is principally
  recognized from three sources: (i) licensing arrangements, (ii) subscription services and (iii) services and maintenance.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.9pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.9pt 0 0; text-align: justify">The Company markets its products
  primarily through its direct sales force and resellers. License agreements do not provide for a right of return, and historically,
  product returns have not been significant.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.9pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Revenue from Contracts with Customers</I>&nbsp;outlines
  a comprehensive five-step revenue recognition model based on the principle that an entity should recognize revenue to depict the
  transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to
  be entitled in exchange for those goods or services. The five steps are:</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt/115% Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 10pt"><TR STYLE="vertical-align: top">
  <TD STYLE="width: 63pt"></TD><TD STYLE="width: 18pt">1.</TD><TD STYLE="text-align: justify">Identify the contract with a customer.</TD></TR></TABLE>
  
  <TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt/115% Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 10pt"><TR STYLE="vertical-align: top">
  <TD STYLE="width: 63pt"></TD><TD STYLE="width: 18pt">2.</TD><TD STYLE="text-align: justify">Identify the performance obligations in the contract.</TD></TR></TABLE>
  
  <TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt/115% Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 10pt"><TR STYLE="vertical-align: top">
  <TD STYLE="width: 63pt"></TD><TD STYLE="width: 18pt">3.</TD><TD STYLE="text-align: justify">Determine the transaction price.</TD></TR></TABLE>
  
  <TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt/115% Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 10pt"><TR STYLE="vertical-align: top">
  <TD STYLE="width: 63pt"></TD><TD STYLE="width: 18pt">4.</TD><TD STYLE="text-align: justify">Allocate the transaction price to performance obligations in the contract.</TD></TR></TABLE>
  
  <TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt/normal Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 10pt"><TR STYLE="vertical-align: top">
  <TD STYLE="width: 63pt"></TD><TD STYLE="width: 18pt">5.</TD><TD STYLE="text-align: justify">Recognize revenue when or as the Company satisfies a performance obligation.</TD></TR></TABLE>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 13.2pt 0 0; text-align: justify">The Company satisfies performance
  obligations as discussed in further detail below. Revenue is recognized at the time the related performance obligation is satisfied
  by transferring a promised good or service to a customer.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company recognizes revenue from license
  sales when the above criteria are met. The Company generally uses written contracts as a means to establish the terms and conditions
  by which our products, services and maintenance support are sold to our customers. The Company satisfies the performance obligation
  when the license key has been delivered electronically to the customer. If these criteria are not met, then revenue is deferred
  until such criteria are met or until the period(s) over which the last performance obligation is delivered.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">The Company recognizes
  revenues from maintenance ratably over the term of the underlying maintenance contract term. The term of the maintenance contract
  is usually one year. Renewals of maintenance contracts create new performance obligations that are satisfied over the contract
  term.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">Revenues from professional
  services mostly consist of time and material services. Certain professional service contracts are performed on a fixed price basis
  and revenue is recognized using the percentage of completion method. However, fixed price contracts are only utilized on rare occasions.
  Performance obligations are satisfied, and revenues are recognized, when the services are provided or when the service term has
  expired.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">In subscription-based arrangements,
  even though customers use the software element, they generally do not have a contractual right to take possession of the software
  at any time during the hosting period without significant penalty to either run the software on its own hardware or contract with
  an unrelated third party to host the software. Accordingly, these software as a service (&ldquo;SaaS&rdquo;) arrangements, including
  the software license fees within the arrangements, are accounted for as subscription services provided all other revenue recognition
  criteria have been met. The subscription revenue is recognized on a straight-line basis over the performance obligation. The Company
  recognizes subscription revenue once a customer goes-live ratably over the remaining contract period or customer life whichever
  is longer. The contract period is typically 1 to 3 years. The average expected life of a customer is 2 years. The average customer
  takes about 8 to 10 months to go live. The Company expects the average life of a customer to increase as more customers begin to
  renew their subscription contracts. When implementation, consulting and training services are bundled with the subscription-based
  arrangement, these services are recognized over the life of the initial contract (performance obligation), once the project goes
  live.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"></P>
  
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  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><FONT STYLE="background-color: white">In
  contracts with multiple performance obligations, the Company accounts for individual performance obligations separately, if they
  are distinct. The Company allocates the transaction price to each performance obligation based on its relative standalone selling
  price out of total consideration of the contract. For maintenance and support, the Company determines the standalone selling price
  based on the price at which the Company separately sells a renewal contract. The Company determines the standalone selling price
  for sales of licenses using the residual approach. For professional services, the Company determines the standalone selling prices
  based on the price at which the Company separately sells those services. </FONT></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The guidance prefers that revenue in a contract
  with multiple performance obligations use the adjusted market approach which includes SSP or TPE or expected cost plus margin approach
  as the methodology for allocating revenues to software. The Company uses the Residual Approach for allocating the revenues from
  a contract to the license component of the sale. Due to competition, highly variable pricing, customer demographics, varying size
  of our customers, and other such factors, the Company&rsquo;s selling prices are considered uncertain for each perpetual license
  sale. Therefore, SSP is not an appropriate methodology as it relates to our license revenue. In terms of TPE as a basis to price
  our software, our product is unique and expansive in terms of the system&rsquo;s inherent functionality. There are no directly
  comparable products in the marketplace today which we could use as the basis to set our standard license pricing based on a comparison
  with other vendors. In addition, most of the companies with whom we compete, are privately owned, which prevents us from obtaining
  reliable TPE. Accordingly, the guidance permits the Company to use the Residual Method for allocating selling price if the first
  two preferable choices cannot be used. The residual between the total transaction price and the observable standalone selling prices
  of those performance obligations with observable standalone selling prices is considered to be the estimated standalone selling
  price of the goods or services underlying the performance obligation.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Astea commonly sells its software products
  bundled with maintenance and professional services. As noted above, the guidance requires an entity to allocate the transaction
  price to the distinct performance obligations in a contract on a relative SSP basis. Under the guidance, &ldquo;&hellip;an entity
  shall determine the standalone selling price at contract inception of the distinct good or service underlying each performance
  obligation in the contract and allocate the transaction price in proportion to those standalone selling prices.&rdquo; SSP is defined
  as the price at which an entity would sell a promised good or service separately to a customer. Astea has a history of selling
  maintenance renewals and professional services on a standalone basis. Therefore, the Company utilizes SSP for its performance obligations
  as it relates to service and maintenance revenue. In addition, due to the Company having different maintenance and service rates
  in other parts of the world in which it operates, the Company has developed a reasonable range for its SSP for maintenance and
  services rather than a single point.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The incremental costs of obtaining a customer
  contract (i.e., those costs related to obtaining the customer contract that would not have been incurred if the customer contract
  was not obtained), such as a sales commission, should be capitalized if the Company expects to recover those costs (based on net
  future cash flows from the contract and expected contract renewals). The Company may expense the incremental costs of obtaining
  a contract if the amortization period would otherwise be one year or less. Since sales commissions are costs that are incremental
  and the amortization of sales commissions would be one year or less, the Company will continue to expense these items as incurred.
  Costs of obtaining a customer contract that are not incremental (i.e., costs related to obtaining the customer contract that would
  have been incurred regardless of whether the customer contract had been obtained), such as travel costs incurred to present the
  customer proposal, should only be capitalized if those costs are explicitly chargeable to the customer regardless of whether the
  entity enters into a contract with the customer. Otherwise, such costs are expensed as incurred. The Company will continue to expense
  these costs as they are incurred.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Once live, we recognize the deferred implementation
  costs related to that customer ratably over the remaining expected life of the customer contract or two years, whichever is longer.
  At this point, based on the Company&rsquo;s relatively short time-span as a provider of a hosted solution, our analysis shows that
  the average lifespan of an Astea hosted customer is 2 years. Therefore, we amortize the deferred cost over 2 years or the remaining
  life of the contract, whichever is longer. This is consistent with the revenue recognition methodology used for the subscription
  service revenue for that customer. The Company satisfies performance obligations as discussed in further detail below. Revenue
  is recognized at the time the related performance obligation is satisfied by transferring a promised service to a customer.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>
  
  <!-- Field: Page; Sequence: 12 -->
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  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We believe that our accounting estimates used
  in applying our revenue recognition are critical because:</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
  <TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&#183;</FONT></TD><TD STYLE="text-align: justify">the determination that it is probable that the customer will pay for the products and services
  purchased is inherently judgmental and includes credit risk;</TD></TR></TABLE>
  
  <TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
  <TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&#183;</FONT></TD><TD STYLE="text-align: justify">determining the performance obligations and transaction price to certain elements in multiple-element
  arrangements is complex;</TD></TR></TABLE>
  
  <TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
  <TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&#183;</FONT></TD><TD STYLE="text-align: justify">the determination of whether a service is essential to the functionality of the software is complex
  and could potentially create a new performance obligation; and</TD></TR></TABLE>
  
  <TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
  <TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&#183;</FONT></TD><TD STYLE="text-align: justify">the estimated customer life of subscription services.</TD></TR></TABLE>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: -0.25in">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Changes in the aforementioned items could have
  a material effect on the type and timing of revenue recognized. In addition, Company&rsquo;s payment terms and conditions vary
  by contract and size of customer, although terms generally include a requirement of payment within 30 to 60 days. In instances
  where the timing of revenue recognition differs from the timing of invoicing, the Company has determined that its contracts generally
  do not include a significant financing component. The primary purpose of invoicing terms is to provide customers with simplified
  and predictable ways of purchasing our products and services, and not to facilitate financing arrangements. The Company generally
  has not experienced any material losses related to receivables from individual customers, or groups of customers. Due to these
  factors, no additional credit risk beyond amounts provided by the allowance for doubtful accounts is believed by management to
  be probable in the Company&rsquo;s accounts receivable. The Company has not adjusted revenues for customers related to credit risk.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">For the three and nine months ended September
  30, 2019, there was no individual customer that accounted for 10% of total revenue. For the three months ended September 30, 2018,
  no individual customer accounted for 10% or more of total revenue. For the nine months ended September 30, 2018, one customer accounted
  for 10% of total revenue.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We present taxes assessed by a governmental
  authority including sales, use, value added and excise taxes on a net basis and therefore the presentation of these taxes is excluded
  from our revenues and is included in accrued expenses in the accompanying condensed consolidated balance sheets until such amounts
  are remitted to the taxing authority.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">The Company is engaged in the design,
  development, marketing and support of its service management software solutions. All revenues result from selling of license (perpetual
  and subscription) software products and related professional services and customer support services. Accordingly, the Company considers
  itself to have one reporting segment. The Company&rsquo;s chief decision maker further reviews financial information presented
  on a consolidated basis to determine if revenue can be further disaggregated in order to make operating decisions and assessing
  financial performance. It was determined that all revenue recognized in our consolidated statements of operations is considered
  to be revenue from contracts with customers, which can be disaggregated by both the timing of revenue recognition and geographic
  regions (see Note 9 of the condensed consolidated financial statements for disaggregated revenues by geographic regions).</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">The following tables depicts the
  Company&rsquo;s disaggregation of revenue:</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <TR>
      <TD STYLE="vertical-align: bottom; padding-left: 9.9pt; text-indent: -9.9pt">&nbsp;</TD>
      <TD COLSPAN="5" STYLE="vertical-align: bottom; text-align: center"><FONT STYLE="font-size: 9pt"><B>Three months ended </B></FONT></TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD COLSPAN="5" STYLE="vertical-align: bottom; text-align: center"><FONT STYLE="font-size: 9pt"><B>Nine months ended</B></FONT></TD>
      <TD STYLE="vertical-align: top">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: bottom; padding-left: 9.9pt; text-indent: -9.9pt">&nbsp;</TD>
      <TD COLSPAN="5" STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 9pt"><B>&nbsp;&nbsp;September 30</B>,</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="5" STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 9pt"><B>&nbsp;&nbsp;September 30,</B></FONT></TD>
      <TD STYLE="vertical-align: top; border-bottom: Black 1pt solid">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: bottom; padding-left: 9.9pt; text-indent: -9.9pt"><FONT STYLE="font-size: 9pt"><B>Timing of Revenue Recognition</B></FONT></TD>
      <TD COLSPAN="2" STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 9pt"><B>2019</B></FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 9pt"><B>2018</B></FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 9pt"><B>2019</B></FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 9pt"><B>2018</B></FONT></TD>
      <TD STYLE="vertical-align: top; border-bottom: Black 1pt solid">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: bottom; width: 49%">
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 0 0 19.8pt; text-indent: -9.9pt">&nbsp;</P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0">Performance obligations transferred at a point in time</P></TD>
      <TD STYLE="vertical-align: bottom; width: 1%; text-align: right"><FONT STYLE="font-size: 9pt">$</FONT></TD>
      <TD STYLE="vertical-align: bottom; width: 10%; text-align: right"><FONT STYLE="font-size: 9pt">140,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; width: 2%; text-align: right"><FONT STYLE="font-size: 9pt">$</FONT></TD>
      <TD STYLE="vertical-align: bottom; width: 8%; text-align: right"><FONT STYLE="font-size: 9pt">765,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; width: 1%">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; width: 1%; text-align: right"><FONT STYLE="font-size: 9pt">$</FONT></TD>
      <TD STYLE="vertical-align: bottom; width: 11%; text-align: right"><FONT STYLE="font-size: 9pt">1,302,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; width: 1%"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
      <TD STYLE="vertical-align: bottom; width: 1%; text-align: right"><FONT STYLE="font-size: 9pt">$</FONT></TD>
      <TD STYLE="vertical-align: bottom; width: 13%; text-align: right"><FONT STYLE="font-size: 9pt">2,076,000</FONT></TD>
      <TD STYLE="vertical-align: top; width: 1%; text-align: right">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: bottom; padding-bottom: 1.1pt"><FONT STYLE="font-size: 9pt">Performance obligations transferred over time</FONT></TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">4,380,000</FONT></TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">4,720,000</FONT></TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">13,266,000</FONT></TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">14,657,000</FONT></TD>
      <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: bottom">
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 0 1.1pt">Performance obligations transferred over time initiated at</P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 0 1.1pt">go-live</P></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">1,440,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">1,640,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">4,427,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">3,720,000</FONT></TD>
      <TD STYLE="vertical-align: top; border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: bottom">
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0 0 1.1pt 19.8pt; text-indent: -9.9pt">&nbsp;</P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 0 1.1pt 19.8pt; text-indent: -9.9pt">Total revenues</P></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1.5pt double; text-align: right"><FONT STYLE="font-size: 9pt">&nbsp;$</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1.5pt double; text-align: right"><FONT STYLE="font-size: 9pt">5,960,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1.5pt double; text-align: justify">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1.5pt double; text-align: right"><FONT STYLE="font-size: 9pt">&nbsp;$</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1.5pt double; text-align: right"><FONT STYLE="font-size: 9pt">7,125,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1.5pt double">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1.5pt double; text-align: right"><FONT STYLE="font-size: 9pt">&nbsp;$</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1.5pt double; text-align: right"><FONT STYLE="font-size: 9pt">18,995,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1.5pt double">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1.5pt double; text-align: right"><FONT STYLE="font-size: 9pt">&nbsp;$</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1.5pt double; text-align: right"><FONT STYLE="font-size: 9pt">20,453,000</FONT></TD>
      <TD STYLE="vertical-align: top; border-bottom: Black 1.5pt double; text-align: right">&nbsp;</TD></TR>
  </TABLE>
  <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">The performance obligations transferred
  at a point in time relate to perpetual license revenue for which there is no deferred revenue as of September 30, 2019 or 2018.
  The performance obligations transferred over time consist of professional services that are recognized based on time and materials,
  as the services are performed. The performance obligations for support services are recognized ratably over time based on the contract
  life, except for a few fixed price contracts which are recognized based on the achievement of certain milestones. If the customer
  pays in advance, service revenue is deferred until the performance obligations are met. For support services, the fee is paid in
  advance of the performance obligation. Accordingly, the Company has recorded deferred revenue from fixed price contracts and support
  services of $6,557,000 and $7,067,000 as of September 30, 2019 and 2018, respectively. Performance obligations transferred over
  time, initiated at go-live, relate to our subscription hosting and our subscription professional services for the implementation.
  No performance obligation is recognized until the customer is live and has access to the subscription services. Once live, the
  performance obligations are recognized over time, which is either 2 years, the average customer life, or the remaining contract
  life of the customer, whichever is longer. Because subscription fees are paid in advance, and professional services fees are paid
  as the services are performed, the revenue from both are deferred until the date in which the customer goes live. The Company has
  deferred revenue recorded for performance obligations transferred over time, initiated at go-live for hosting and hosting services
  for $4,656,000 and $4,221,000 as of September 30, 2019 and 2018, respectively.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"></P>
  
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  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The long-term deferred revenue reported as
  $1,351,000 and $1,474,000 as of September 30, 2019 and 2018, respectively, consists of the portion of revenue that will be recognized
  beyond one year of the balance sheet date for hosting implementation services.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
  <TD STYLE="width: 0%"></TD><TD STYLE="width: 5%">2.</TD><TD STYLE="width: 95%"><U>NEW ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED </U></TD></TR></TABLE>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In August 2018, the FASB issued guidance that
  requires a customer in a cloud computing arrangement (i.e. hosting arrangement) that is a service contract to follow the internal-use
  software guidance to determine which implementation costs to capitalize as assets or expense as incurred. This guidance requires
  that certain costs incurred during the application development stage be capitalized and other costs incurred during the preliminary
  project and post-implementation stages be expensed as incurred. The guidance is effective for annual periods beginning after December
  15, 2019 with early adoption permitted. The adoption of this guidance is not expected to have a material impact on our condensed
  consolidated financial statements.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In August 2018, the FASB issued guidance modifying
  the disclosure requirements on fair value measurements. The amendments add, modify, and eliminate certain disclosure requirements
  on fair value measurements. The guidance is effective for reporting periods beginning after December 15, 2019, including interim
  periods within that fiscal year. Early adoption is permitted, including adoption in an interim period. We are currently evaluating
  the impact, if any, that the adoption of this guidance will have on our condensed consolidated financial statements.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In June 2016, the FASB issued an accounting
  standard update that requires measurement and recognition of expected credit losses for financial assets held based on historical
  experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount.
  The accounting standard update will be effective for us beginning January 1, 2020. We expect to adopt this accounting standard
  update on a modified retrospective basis and we are currently evaluating the impact of this accounting standard update on our condensed
  consolidated financial statements.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 11pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
  <TD STYLE="width: 0pt"></TD><TD STYLE="width: 5%"><FONT STYLE="font-size: 10pt">3.</FONT></TD><TD STYLE="text-align: justify; width: 95%"><FONT STYLE="font-size: 10pt"><U>CONCENTRATION OF CREDIT RISK</U></FONT></TD></TR></TABLE>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.9pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.9pt 0 0; text-align: justify">Financial instruments, which potentially
  subject the Company to credit risk, consist of cash, cash equivalents and accounts receivable. The Company&rsquo;s policy is to
  limit the amount of credit exposure to any one financial institution. The Company places investments with financial institutions
  evaluated as being creditworthy, or investing in short-term money market funds which are exposed to minimal interest rate and credit
  risk. Cash balances are maintained with several banks. Certain operating accounts may exceed insured limits.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.9pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.9pt 0 0; text-align: justify">The Company sells its products to
  customers involved in a variety of industries including information technology, medical devices and diagnostic systems, industrial
  controls and instrumentation and retail systems. While the Company does not require collateral from its customers, it does perform
  continuing credit evaluations of its customers&rsquo; financial condition.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>
  
  <TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 11pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
  <TD STYLE="width: 0pt"></TD><TD STYLE="width: 5%"><FONT STYLE="font-size: 10pt">4.</FONT></TD><TD STYLE="text-align: justify; width: 95%"><FONT STYLE="font-size: 10pt"><U>LINE
  OF CREDIT and TERM NOTE</U></FONT></TD></TR></TABLE>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.9pt 0 0; text-align: justify">&nbsp;</P>
  
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><I>Line of Credit and Term Loan with
  Western Alliance Bank</I></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><I>&nbsp;</I></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On August 11, 2017, <FONT STYLE="background-color: white">the
  Company entered into a Business Financing Agreement (the &ldquo;Financing Agreement&rdquo;) with Bridge Bank, a division of WAB,
  which included a revolving line of credit and a term loan. The agreement was to mature on September 1, 2019. </FONT></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Financing Agreement with WAB, established
  a revolving credit line for the Company in the principal amount of up to $2,400,000 (the &ldquo;Revolving Credit Line&rdquo;) and
  a Term Loan of $400,000 (the &ldquo;Term Loan&rdquo;).&nbsp;&nbsp;Availability under the Revolving Credit Line is tied to a borrowing
  base formula that is based on 80% of the Company&rsquo;s eligible domestic accounts receivable.&nbsp;&nbsp;Advances under the Revolving
  Credit Line (the &ldquo;Advances&rdquo;) may be repaid and reborrowed in accordance with the Loan Agreement.&nbsp;&nbsp;Pursuant
  to the Financing Agreement, the Company originally agreed to pay to WAB the outstanding principal amount of all Advances, the unpaid
  interest thereon, and all other obligations incurred with respect to the Loan Agreement on September 1, 2019. Interest accrues
  and is paid monthly at the Wall Street Journal Prime Rate plus 1.5%. At September 30, 2019, the interest rate was 6.5%.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>
  
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  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The original Term Loan provided proceeds of
  $400,000 to the Company. Beginning in August 2017, for the first six months of the term loan the Company was only required to pay
  interest. Then for the next 18 months, the Term Loan was to be amortized into monthly payments of principal and interest. The interest
  rate on the original Term Loan was the Wall Street Journal Prime Rate plus 1.75%. The Term Loan was modified in November 2017 by
  the First Modification to Business Financing Agreement (&ldquo;First Modification&rdquo;), and as a result, the Company fully repaid
  the Term Loan by April 30, 2018. The Company repaid $150,000 of the Term Loan in December 2017, $125,000 in January 2018 and the
  balance of $125,000 in April 2018.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On July 24, 2018, the Company entered into
  a Second Modification to Business Financing Agreement (&ldquo;Loan Modification&rdquo;) with WAB which amended the First Modification,
  dated November 22, 2017. The Loan Modification increased the credit limit under Company&rsquo;s credit facility to $2,850,000,
  extended the maturity date of the credit facility through November 15, 2020 and revised and clarified certain covenants and other
  terms of the credit facility. No other terms or conditions were modified.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company expects to be able to continue
  to comply with the required covenants contained in the 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 September 30, 2019 are classified in the accompanying condensed consolidated
  balance sheet in accordance with the repayment terms stipulated in the agreement.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As of September 30, 2019, the Company owed
  $2,588,000 under the revolving line of credit. The Company incurred $54,000 and $64,000 of interest expense to WAB for the three-month
  period ended September 30, 2019 and 2018, respectively and $152,000 and $119,000 of interest expense to WAB for the nine-month
  period ended September 30, 2019 and 2018, respectively. As of September 30, 2019, there was availability of $262,000 under the
  line of credit. The Company was in compliance with the financial and liquidity covenants of the Loan Modification as of September
  30, 2019.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Subject to certain exceptions, the amended
  Financing Agreement contains covenants prohibiting the Company from, among other things: (a) conveying, selling, leasing, transferring
  or otherwise disposing of their properties or assets; (b) liquidating or dissolving; (c) engaging in any business other than the
  business currently engaged in or reasonably related thereto; (d) entering into any merger or consolidation, or acquiring all or
  substantially all of the capital stock or property of another entity; (e) becoming liable for any indebtedness; (f) allowing any
  lien or encumbrance on any of their property; and (g) paying any dividends (other than dividends on outstanding convertible preferred
  stock); and (i) making payment on subordinated debt. In addition, actual EBITDA, as defined in the Financing Agreement for the
  trailing 6-month period must be at least $1 as tested quarterly.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The amended Financing Agreement is secured
  by a first priority perfected security interest in substantially all of the assets of the Company, excluding the intellectual property
  of the Company.&nbsp;&nbsp;The Loan Modification contains a negative covenant prohibiting the Company from granting a security
  interest in their intellectual property to any party.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">5. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>LEASES
  </U></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company adopted the new lease standard
  on January 1, 2019 using the modified retrospective transition method. Prior periods were not retrospectively adjusted and continue
  to be reported under the accounting standards in effect for those periods. The Company elected the package of practical expedients
  permitted under the transition guidance within the new lease standard, which among other things, allowed the Company to continue
  to account for existing leases based on the historical lease classification. The Company also elected the practical expedients
  to combine lease and non-lease components for its office leases, which primarily relate to ancillary expenses such as common area
  maintenance charges and management fees.</P>
  
  <P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>
  
  <P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company determines if an arrangement
  is a lease at inception by assessing whether it conveys the right to control the use of an identified asset for a period of time
  in exchange for consideration. The Company&rsquo;s leases are primarily related to operating leases for its corporate office and
  subsidiaries, office equipment and cars. The Company's leases have remaining lease terms of&nbsp;less than 1&nbsp;to&nbsp;4&nbsp;years,
  and sometimes include options to renew. Renewal and termination options are included in the lease term when it is reasonably certain
  that the Company will exercise the option. However, it has been the Company&rsquo;s experience to renegotiate a lease and not
  renew based on the terms of the lease.&nbsp;</P>
  
  <P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>
  
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  <P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;&nbsp;</P>
  
  <P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0; text-align: justify">ROU assets and lease liabilities are recognized
  at the lease commencement date based on the present value of lease payments over the lease term. As all of the Company's leases
  do not provide an implicit rate, the Company uses its incremental borrowing rate plus some additional considerations for the term
  of the lease, based on the information available at the lease commencement date, to determine the present value of lease payments.
  Based on the present value of lease payments for the Company's existing leases, the Company recorded ROU assets and lease liabilities
  of approximately&nbsp;$3,132,000 upon adoption on January 1, 2019. There was one lease at one of our subsidiaries that was renewed
  for 2 years effective at January 1, 2019 that is included in the lease liability. The Company had no finance leases.</P>
  
  <P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>
  
  <P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0">The impact of the new lease standard on the September 30, 2019
  condensed consolidated balance sheet was as follows:</P>
  
  <P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>
  
  <TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="white-space: nowrap; width: 74%; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="white-space: nowrap; width: 26%; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">September 30, 2019</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="white-space: nowrap; padding-right: 5.4pt; padding-left: 5.4pt">
          <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
          <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Right-of-use assets</P></TD>
      <TD STYLE="white-space: nowrap; border-bottom: Black 1.5pt double; padding-right: 0; padding-left: 5.4pt; text-align: right">$&nbsp;&nbsp;2,284,000</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="white-space: nowrap; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify">Current lease liabilities</TD>
      <TD STYLE="white-space: nowrap; padding-right: 0; padding-left: 5.4pt; text-align: right; vertical-align: bottom">$&nbsp;&nbsp;961,000</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="white-space: nowrap; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify">Noncurrent lease liabilities</TD>
      <TD STYLE="white-space: nowrap; border-bottom: Black 1pt solid; padding-right: 0; padding-left: 5.4pt; text-align: right">1,323,000</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify">&nbsp;</TD>
      <TD STYLE="white-space: nowrap; padding-right: 0; padding-left: 5.4pt; text-align: right">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify">Total lease liabilities</TD>
      <TD STYLE="white-space: nowrap; border-bottom: Black 1.5pt double; padding-right: 0; padding-left: 5.4pt; text-align: right">&nbsp;$&nbsp;&nbsp;2,284,000</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify">Weighted average remaining lease term</TD>
      <TD STYLE="white-space: nowrap; padding-right: 0; padding-left: 5.4pt; text-align: right">1.9 years</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify">Weighted average discount rate</TD>
      <TD STYLE="white-space: nowrap; padding-right: 0; padding-left: 5.4pt; text-align: right">7.17%</TD></TR>
  </TABLE>
  <P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>
  
  <P STYLE="font: 10pt/12pt inherit,serif; margin: 0; text-align: justify">Total operating lease costs for the three and nine months
  ended September 30, 2019 were $283,000 and $848,000, respectively, while the total operating lease costs for the three and nine
  months ended September 30, 2018 were $326,000 and $978,000, respectively, which is included in operating costs on the condensed
  consolidated statements of operation.</P>
  
  <P STYLE="font: 10pt/106% inherit,serif; margin: 1.1pt 1.1pt 1.1pt 0">&nbsp;</P>
  
  <P STYLE="font: 10pt/106% Times New Roman, Times, Serif; margin: 1.1pt 0">The following table provides supplemental cash flow information
  related to our operating leases at September 30, 2019:</P>
  
  <P STYLE="font: 8pt/106% Times New Roman, Times, Serif; margin: 1.1pt 1.1pt 1.1pt 0">&nbsp;</P>
  
  <TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
  <TR STYLE="vertical-align: top">
      <TD STYLE="width: 74%; padding-top: 1.1pt; padding-right: 1.1pt; padding-bottom: 1.1pt; line-height: 106%">&nbsp;</TD>
      <TD STYLE="width: 26%; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">
          <P STYLE="font: 10pt/106% Times New Roman, Times, Serif; margin: 1.1pt 1.1pt 1.1pt 0; text-align: center">Nine Months Ended</P>
          <P STYLE="font: 10pt/106% Times New Roman, Times, Serif; margin: 1.1pt 1.1pt 1.1pt 0; text-align: center">September 30, 2019</P></TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
          <P STYLE="font: 10pt/106% Times New Roman, Times, Serif; margin: 1.1pt 1.1pt 1.1pt 0">Cash paid for amounts included in the</P>
          <P STYLE="font: 10pt/106% Times New Roman, Times, Serif; margin: 1.1pt 1.1pt 1.1pt 0">measurement of operating lease liabilities</P></TD>
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
          <P STYLE="font: 10pt/106% Times New Roman, Times, Serif; margin: 1.1pt 1.1pt 1.1pt 0; text-align: center">&nbsp;</P>
          <P STYLE="font: 10pt/106% Times New Roman, Times, Serif; margin: 1.1pt 1.1pt 1.1pt 0; text-align: center">$960,000</P></TD></TR>
  </TABLE>
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.9pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.9pt 0 0; text-align: justify">The following table shows the future
  maturities of lease liabilities for leases in effect as of September 30, 2019:</P>
  
  <P STYLE="font: 6pt Times New Roman, Times, Serif; margin: 0 0.9pt 0 0; text-align: justify">&nbsp;</P>
  
  <TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <TR STYLE="vertical-align: bottom">
      <TD COLSPAN="3" STYLE="text-align: left; vertical-align: bottom">&nbsp;</TD><TD>&nbsp;</TD>
      <TD COLSPAN="3" STYLE="border-bottom: Black 1pt solid; text-align: center; vertical-align: bottom">Lease Liabilities</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: transparent">
      <TD STYLE="width: 1%; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="width: 43%; text-align: left; vertical-align: bottom"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.25in 0 0">&nbsp;</P><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.25in 0 0">2019 (excluding the nine months ended September 30, 2019)</P></TD><TD STYLE="width: 1%; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="width: 29%">&nbsp;</TD>
      <TD STYLE="width: 6%; text-align: left">$</TD><TD STYLE="width: 19%; text-align: right">320,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
      <TD STYLE="text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="text-align: left; vertical-align: bottom">2020</TD><TD STYLE="text-align: left; vertical-align: bottom">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,049,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: transparent">
      <TD STYLE="text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="text-align: left; vertical-align: bottom">2021</TD><TD STYLE="text-align: left; vertical-align: bottom">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">837,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
      <TD STYLE="text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="text-align: left; vertical-align: bottom">2022</TD><TD STYLE="text-align: left; vertical-align: bottom">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">452,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: transparent">
      <TD STYLE="text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="text-align: left; vertical-align: bottom">2023</TD><TD STYLE="text-align: left; vertical-align: bottom">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,000</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
      <TD STYLE="text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="text-align: left; vertical-align: bottom">Total lease payments</TD><TD STYLE="text-align: left; vertical-align: bottom">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,659,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: transparent">
      <TD STYLE="text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="text-align: left; vertical-align: bottom">Less: imputed interest</TD><TD STYLE="text-align: left; vertical-align: bottom">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(375,000</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
      <TD STYLE="text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="text-align: left; vertical-align: bottom"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.25in 0 0">&nbsp;</P><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.25in 0 0">Total</P></TD><TD STYLE="text-align: left; vertical-align: bottom">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,284,000</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD></TR>
  </TABLE>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">6. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>INCOME
  TAXES </U></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has identified its federal tax
  return and its state returns in Pennsylvania and California as &ldquo;major&rdquo; tax jurisdictions. Based on the Company&rsquo;s
  evaluation, it concluded that there are no significant uncertain tax positions requiring recognition in the Company&rsquo;s financial
  statements. The Company&rsquo;s evaluation was performed for tax years ended 2014 through 2018, the only periods subject to examination.
  The Company believes that its income tax positions and deductions will be sustained on a tax authority audit and does not anticipate
  any adjustments that will result in a material change to its financial position.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>
  
  <!-- Field: Page; Sequence: 16 -->
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  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company&rsquo;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 accrued is recorded in interest expense or interest income, respectively, in
  the condensed consolidated statement of operations. For the three and nine months ended September 30, 2019 and 2018, there were
  no interest or penalties related to uncertain tax positions.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Deferred tax assets and liabilities are determined
  based on differences between financial reporting and tax bases of assets and liabilities and operating loss and tax credit carryforwards
  and are measured using the enacted tax rates and laws that will be in effect when the difference and carryforwards are expected
  to be recovered or settled. A valuation allowance for deferred tax assets is provided when we estimate that it is more likely than
  not that all or a portion of the deferred tax assets may not be realized through future operations. This assessment is based upon
  consideration of available positive and negative evidence which includes, among other things, our most recent results of operations
  and expected future profitability. We consider our actual historical results to have a stronger weight than other more subjective
  indicators when considering whether to establish or reduce a valuation allowance on deferred tax assets.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As of September 30, 2019, we had approximately
  $10.9 million of net deferred tax assets, against which we provided a 100% valuation allowance. Our net deferred tax assets were
  generated primarily by operating losses. Accordingly, it is more likely than not, that we will not realize these assets through
  future operations.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The tax provision for the period consisted
  primarily of income taxes paid to Australia due to income generated by our Australian operation. The remainder of the tax provision
  was for taxes accrued on our Israeli operation.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 2.15pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  <U>EQUITY </U></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><I>Share-Based Awards </I></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Compensation costs include share-based payments
  granted to employees and directors based on the estimated grant date fair value. The Company estimates the fair value of stock
  options granted using the Black-Scholes-Merton (&ldquo;Black-Scholes&rdquo;) 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&rsquo;s expected term represents the period that the Company&rsquo;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&rsquo;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.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.9pt 0 0; text-align: justify">As of September 30, 2019, the total
  unrecognized compensation cost related to non-vested options amounted to $513,000, which is expected to be recognized over the
  options&rsquo; weighted average remaining vesting period of 3.24 years.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.9pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.9pt 0 0; text-align: justify">The Company has Stock Option Plans
  (the &ldquo;Plans&rdquo;) under which incentive and non-qualified stock options may be granted to its employees, officers, directors
  and others. Generally, incentive stock options are granted at fair value, become exercisable over a four-year period, have a 10-year
  contractual term and are subject to the employee&rsquo;s continued employment. Non-qualified options are granted at exercise prices
  determined by the Board of Directors and vest over varying periods.&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>
  
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  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;&nbsp;Activity under the Company&rsquo;s stock option plans
  for the nine months ended September 30, 2019 is as follows:</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 8pt Times New Roman, Times, Serif">
  <TR STYLE="vertical-align: bottom; background-color: transparent">
      <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
      <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD COLSPAN="6" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center; vertical-align: bottom"><FONT STYLE="font-size: 8pt"><B>OPTIONS OUTSTANDING</B></FONT></TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
      <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: center; vertical-align: bottom"><P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0 0.25in 0 0"><B>&nbsp;</B></P><P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><B>Shares</B></P></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center; vertical-align: bottom"><FONT STYLE="font-size: 8pt"><B>Weighted Average Exercise Price Per Share</B></FONT></TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: transparent">
      <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 26%; text-align: right"><FONT STYLE="font-size: 8pt">Balance, December 31, 2018</FONT></TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%">&nbsp;</TD>
      <TD STYLE="width: 14%; text-align: left">&nbsp;</TD><TD STYLE="width: 13%; text-align: right">762,000</TD><TD STYLE="width: 5%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%">&nbsp;</TD>
      <TD STYLE="width: 4%; text-align: left"></TD><TD STYLE="width: 15%; text-align: center; vertical-align: bottom">$2.54</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;&nbsp;&nbsp;&nbsp;Granted&nbsp;&nbsp;</FONT></TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">245,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left"></TD><TD STYLE="text-align: center; vertical-align: bottom">$5.83</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: transparent">
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;&nbsp;&nbsp;&nbsp;Exercised</FONT></TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(73,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left"></TD><TD STYLE="text-align: center; vertical-align: bottom">$1.99</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;&nbsp;&nbsp;&nbsp;Forfeited</FONT></TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(129,000</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: left">)</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: left"></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: center; vertical-align: bottom">$3.86</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: transparent">
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right"><P STYLE="font: 8pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: right">Balance,
  September 30, 2019</P></TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
      <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">805,000</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: center; vertical-align: bottom">$3.42</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD></TR>
  </TABLE>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.9pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.7pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.7pt 0 0; text-align: justify">There are 280,000 shares available
  for granting future options as of September 30, 2019. It is the Company&rsquo;s policy to issue shares from authorized but unissued
  common stock when stock options are exercised.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following table summarizes outstanding
  options under the Company&rsquo;s stock option plans as of September 30, 2019:</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <TR STYLE="vertical-align: top">
      <TD STYLE="width: 38%; padding-right: 1.8pt; padding-left: 5.4pt; text-align: justify">&nbsp;</TD>
      <TD STYLE="width: 11%; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; vertical-align: bottom">
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><B>&nbsp;</B></P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: center"><B>Number of Shares</B></P></TD>
      <TD STYLE="width: 17%; border-bottom: Black 1pt solid; padding-right: 1.8pt; padding-left: 5.4pt; text-align: center; vertical-align: bottom"><FONT STYLE="font-size: 9pt"><B>Weighted Average Exercise Price Per Share</B></FONT></TD>
      <TD STYLE="width: 21%; border-bottom: Black 1pt solid; padding-right: 1.8pt; padding-left: 5.4pt; text-align: center; vertical-align: bottom"><FONT STYLE="font-size: 9pt"><B>Weighted Average Remaining Contractual Term (in years)</B></FONT></TD>
      <TD STYLE="width: 13%; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; vertical-align: bottom">
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><B>&nbsp;</B></P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: center"><B>Aggregate Intrinsic Value</B></P></TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: left">&nbsp;</P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: left">Outstanding Options</P></TD>
      <TD STYLE="border-bottom: Black 2.25pt double; padding-right: 5.4pt; padding-left: 5.4pt">
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: center">&nbsp;</P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: center">805,000</P></TD>
      <TD STYLE="border-bottom: Black 2.25pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; vertical-align: bottom">
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0">&nbsp;</P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0">$3.42</P></TD>
      <TD STYLE="border-bottom: Black 2.25pt double; padding-right: 5.4pt; padding-left: 5.4pt">
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: center">&nbsp;</P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: center">6.05</P></TD>
      <TD STYLE="border-bottom: Black 2.25pt double; padding-right: 0; padding-left: 5.4pt; text-align: right; vertical-align: bottom">
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0">&nbsp;</P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0">$1,469,000</P></TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: 1.8pt; padding-left: 5.4pt; text-align: justify"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
      <TD STYLE="padding-right: 1.8pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
      <TD STYLE="padding-right: 1.8pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
      <TD STYLE="padding-right: 1.8pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
      <TD STYLE="padding-right: 1.8pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: 1.8pt; padding-left: 5.4pt; text-align: justify"><FONT STYLE="font-size: 9pt">Ending Vested and Exercisable</FONT></TD>
      <TD STYLE="border-bottom: Black 2.25pt double; padding-right: 1.8pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-size: 9pt">475,000</FONT></TD>
      <TD STYLE="border-bottom: Black 2.25pt double; padding-right: 1.8pt; padding-left: 5.4pt; text-align: center; vertical-align: bottom"><FONT STYLE="font-size: 9pt">$2.48</FONT></TD>
      <TD STYLE="border-bottom: Black 2.25pt double; padding-right: 1.8pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-size: 9pt">4.04</FONT></TD>
      <TD STYLE="border-bottom: Black 2.25pt double; padding-right: 1.8pt; padding-left: 5.4pt; text-align: right; vertical-align: bottom"><FONT STYLE="font-size: 9pt">&nbsp;$1,223,000</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: 1.8pt; padding-left: 5.4pt; text-align: justify">&nbsp;</TD>
      <TD STYLE="padding-right: 1.8pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
      <TD STYLE="padding-right: 1.8pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
      <TD STYLE="padding-right: 1.8pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
      <TD STYLE="padding-right: 1.8pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: 1.8pt; padding-left: 5.4pt; text-align: justify"><FONT STYLE="font-size: 9pt">Options Vested and Expected to Vest</FONT></TD>
      <TD STYLE="border-bottom: Black 2.25pt double; padding-right: 1.8pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-size: 9pt">710,000</FONT></TD>
      <TD STYLE="border-bottom: Black 2.25pt double; padding-right: 1.8pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-size: 9pt">$3.19</FONT></TD>
      <TD STYLE="border-bottom: Black 2.25pt double; padding-right: 1.8pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-size: 9pt">5.63</FONT></TD>
      <TD STYLE="border-bottom: Black 2.25pt double; padding-right: 1.8pt; padding-left: 5.4pt; text-align: right; vertical-align: bottom"><FONT STYLE="font-size: 9pt">$1,423,000</FONT></TD></TR>
  </TABLE>
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><I>&nbsp;</I></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><I>Convertible Preferred Stock</I></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0.25in; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.1pt 0 0; text-align: justify"><B>Series A</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.1pt 0 0; text-align: justify">On September 24, 2008, the Company
  issued 826,000 shares of Series-A Convertible Preferred Stock (&ldquo;Series A Preferred Stock&rdquo;) to its Chief Executive Officer
  at a price of $3.63 per share for a total of $3,000,000.&nbsp;&nbsp;Dividends accrue daily on the Series A Preferred at a rate
  of 10% and are payable only when, and if, declared by the Company&rsquo;s Board of Directors, quarterly in arrears. At September
  30, 2019 and December 31, 2018, there were accrued dividends of $654,000 and $541,000, included in accounts payable and accrued
  expenses on the accompanying condensed consolidated balance sheet.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.1pt 0 0; text-align: justify">The Series A Preferred Stock may
  be converted into common stock at the rate of one share of common for each share of Series A Preferred Stock. The Company has rights
  to cause conversion of all of the shares of Series A Preferred Stock outstanding.&nbsp;The Company may redeem, subject to board
  approval, all of the shares of Series A Preferred Stock then outstanding at a price equal to the greater of (i) 130% of the purchase
  price plus all accrued and unpaid dividends and (ii) the fair market value of such number of shares of common stock which the holder
  of the Series A Preferred Stock would be entitled to receive had the redeemed Series A Preferred Stock been converted immediately
  prior to the redemption. Each and every outstanding share of Series A Preferred Stock is subject to mandatory and automatic conversion
  into shares of common stock if the closing price of the common stock as reported by the principal exchange or quotation system
  on which such common stock is traded or reported exceeds 300% of the then current conversion price for 30 consecutive trading days.&nbsp;&nbsp;
  In the event of a liquidation of the Company, the holder of the Series A and Series B preferred stock shall be entitled to receive
  in preference to the holders of the common stock, the original amount invested in the preferred stock plus any unpaid and accrued
  dividends. Preferred stock dividends on the Series A are declared quarterly by the Board of Directors.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.1pt 0 0; text-align: justify"><B>&nbsp;</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.1pt 0 0; text-align: justify">The Company reports the Series A
  Preferred Stock on the Company&rsquo;s condensed consolidated balance sheet within stockholders&rsquo; deficit.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.1pt 0 0; text-align: justify"><B>&nbsp;</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.1pt 0 0; text-align: justify"><B>Series </B>B</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.1pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On June 20, 2014, the Company&nbsp;issued 797,000
  of Series-B Convertible Preferred Stock (&ldquo;Series B Preferred Stock&rdquo;)&nbsp;to&nbsp;its Chief Executive Officer at a
  price of $2.51 per share in exchange for the cancellation of&nbsp;$2,000,000 of outstanding principal owed to its Chief Executive
  Officer under a Revolving Promissory Note dated&nbsp;March 26, 2014.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>
  
  <!-- Field: Page; Sequence: 18 -->
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  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Series B Preferred Stock may be converted
  into shares of common stock on a one-to-one ratio, subject to customary anti-dilution provisions.&nbsp;&nbsp;The Series B Preferred
  Stock is entitled to a quarterly dividend, which accrues at an annual rate of 10%.&nbsp;&nbsp;The Company&rsquo;s Chief Executive
  Officer may convert 100% of his shares of the Series B Preferred Stock into shares of common stock. Each and every outstanding
  share of Series B Preferred Stock is subject to mandatory and automatic conversion into shares of common stock if the closing price
  of the common stock as reported by the principal exchange or quotation system on which such common stock is traded or reported
  exceeds 300% of the then current conversion price for 30 consecutive trading days.&nbsp;&nbsp;The Company may redeem all of the
  outstanding shares of the Series B Preferred Stock issued at a price per share equal to 300% of the purchase price. The Series
  B Preferred Stock ranks senior to the common stock and on parity with the Company&rsquo;s Series A Preferred Stock. In the event
  of a liquidation of the Company, the holder of the Series B and Series A Preferred Stock shall be entitled to receive in preference
  to the holders of the common stock, the original amount invested in the preferred stock plus any unpaid and accrued dividends.
  Preferred stock dividends on the Series B are declared quarterly by the Board of Directors. At September 30, 2019 and December
  31, 2018, there were accrued dividends of $416,000 and $354,000, included in accounts payable and accrued expenses on the accompanying
  condensed consolidated balance sheet.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">The Company reports the Series B
  Preferred Stock on the Company&rsquo;s condensed consolidated balance sheet within stockholders&rsquo; deficit.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 2.15pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">8.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>LOSS
  PER SHARE</U></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.9pt 0 0; text-align: justify">Loss 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&rsquo;s non-interest bearing convertible
  stock and exercise of options as if they were dilutive. In the calculation of basic loss per share, weighted average numbers of
  shares outstanding are used as the denominator.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.9pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.9pt 0 0; text-align: justify">The Company had net loss allowable
  to the common stockholders for the three and nine months ended September 30, 2019 and 2018. In the nine months ended September
  30, 2018, there were 179,000 of net additional dilutive stock options assumed to be converted into common stock shares but were
  excluded from the diluted earnings per common shares calculation as the inclusion of these shares would have been antidilutive.
  In addition, as of three and nine months ended September 30, 2019 and as of the three months ended September 30, 2018, the outstanding
  stock options would have been antidilutive due to the net loss incurred during those periods. In addition, 100% of the outstanding
  convertible preferred stock, 1,623,000 shares, were eligible to be converted into common stock. For purpose of this calculation,
  if converted, it was assumed that upon conversion, the related dividends were not paid. However, as of the three and nine months
  ended September 30, 2019 and 2018 shares of common stock issuable on the assumed conversion of the eligible preferred stock were
  excluded from the diluted earnings per common shares calculation as the inclusion of these shares would have been antidilutive.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.9pt 0 0; text-align: justify">&nbsp;</P>
  
  <TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <TR>
      <TD STYLE="vertical-align: bottom; padding-left: 9.9pt; text-indent: -9.9pt">&nbsp;</TD>
      <TD COLSPAN="5" STYLE="vertical-align: bottom; text-align: center"><FONT STYLE="font-size: 8pt"><B>Three Months Ended</B></FONT></TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD COLSPAN="5" STYLE="vertical-align: bottom; text-align: center"><FONT STYLE="font-size: 8pt"><B>Nine Months Ended</B></FONT></TD>
      <TD STYLE="vertical-align: top">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: bottom; padding-left: 9.9pt; text-indent: -9.9pt">&nbsp;</TD>
      <TD COLSPAN="5" STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 8pt"><B>Ended September 30</B>,</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="5" STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 8pt"><B>Ended September 30,</B></FONT></TD>
      <TD STYLE="vertical-align: top; border-bottom: Black 1pt solid">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: bottom; padding-left: 9.9pt; text-indent: -9.9pt">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 8pt"><B>2019</B></FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 8pt"><B>2018</B></FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 8pt"><B>2019</B></FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 8pt"><B>2018</B></FONT></TD>
      <TD STYLE="vertical-align: top; border-bottom: Black 1pt solid">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: bottom; padding-left: 9.9pt; text-indent: -9.9pt"><FONT STYLE="font-size: 8pt"><B>Numerator:</B></FONT></TD>
      <TD COLSPAN="2" STYLE="vertical-align: bottom; text-align: center">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: top">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: bottom; width: 41%; padding-left: 19.8pt; text-indent: -9.9pt"><FONT STYLE="font-size: 8pt">Net (loss) income</FONT></TD>
      <TD STYLE="vertical-align: bottom; width: 2%; text-align: right"><FONT STYLE="font-size: 8pt">$</FONT></TD>
      <TD STYLE="vertical-align: bottom; width: 13%; text-align: right"><FONT STYLE="font-size: 8pt">(1,489,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; width: 2%; text-align: justify"><FONT STYLE="font-size: 8pt">)</FONT></TD>
      <TD STYLE="vertical-align: bottom; width: 2%; text-align: right"><FONT STYLE="font-size: 8pt">$</FONT></TD>
      <TD STYLE="vertical-align: bottom; width: 10%; text-align: right"><FONT STYLE="font-size: 8pt">(70,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; width: 2%"><FONT STYLE="font-size: 8pt">)&nbsp;</FONT></TD>
      <TD STYLE="vertical-align: bottom; width: 2%; text-align: right"><FONT STYLE="font-size: 8pt">$</FONT></TD>
      <TD STYLE="vertical-align: bottom; width: 11%; text-align: right"><FONT STYLE="font-size: 8pt">(2,020,000</FONT></TD>
      <TD STYLE="text-align: left; width: 1%; vertical-align: bottom"><FONT STYLE="font-size: 8pt">)</FONT></TD>
      <TD STYLE="vertical-align: bottom; width: 3%; text-align: right"><FONT STYLE="font-size: 8pt">$</FONT></TD>
      <TD STYLE="vertical-align: bottom; width: 9%">
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: right">&nbsp;</P>
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: right">240,000</P></TD>
      <TD STYLE="vertical-align: top; width: 2%; text-align: right">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: bottom; padding-bottom: 1.1pt; padding-left: 19.8pt; text-indent: -9.9pt"><FONT STYLE="font-size: 8pt">Preferred dividend</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">125,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">125,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">375,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">375,000</FONT></TD>
      <TD STYLE="vertical-align: top; border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: bottom">
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0 0 1.1pt 19.8pt; text-indent: -9.9pt">Net loss available to</P>
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0 0 1.1pt 19.8pt; text-indent: -9.9pt">common stockholders</P></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;$</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">(1,614,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1.5pt double; text-align: justify"><FONT STYLE="font-size: 8pt">)</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;$</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">(195,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1.5pt double"><FONT STYLE="font-size: 8pt">)&nbsp;</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;$</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">(2,395,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1.5pt double"><FONT STYLE="font-size: 8pt">)</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;$</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">(135,000</FONT></TD>
      <TD STYLE="vertical-align: top; border-bottom: Black 1.5pt double">
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: right">&nbsp;</P>
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: right">&nbsp;</P>
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0">)</P></TD></TR>
  <TR>
      <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 8pt"><B>Denominator:</B></FONT></TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: top">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: bottom">
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0 0 0 19.8pt; text-indent: -9.9pt">Basic weighted average number of
          common</P>
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0 0 0 19.8pt; text-indent: -9.9pt">shares outstanding</P></TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 8pt">3,642,000</FONT></TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: right">&nbsp;</P>
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: right">3,607,000</P></TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 8pt">3,627,000</FONT></TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 8pt">3,600,000</FONT></TD>
      <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: bottom">
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0 0 1.1pt 19.8pt; text-indent: -9.9pt">Diluted weighted average number
          of</P>
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0 0 1.1pt 19.8pt; text-indent: -9.9pt">common shares outstanding</P></TD>
      <TD STYLE="vertical-align: bottom; border-top: Black 1pt solid; border-bottom: Black 2.25pt double">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-top: Black 1pt solid; border-bottom: Black 2.25pt double; text-align: right"><FONT STYLE="font-size: 8pt">3,642,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-top: Black 1pt solid; border-bottom: Black 2.25pt double">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-top: Black 1pt solid; border-bottom: Black 2.25pt double">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-top: Black 1pt solid; border-bottom: Black 2.25pt double; text-align: right"><FONT STYLE="font-size: 8pt">3,607,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-top: Black 1pt solid; border-bottom: Black 2.25pt double">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-top: Black 1pt solid; border-bottom: Black 2.25pt double">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-top: Black 1pt solid; border-bottom: Black 2.25pt double; text-align: right"><FONT STYLE="font-size: 8pt">3,627,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-top: Black 1pt solid; border-bottom: Black 2.25pt double">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-top: Black 1pt solid; border-bottom: Black 2.25pt double">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-top: Black 1pt solid; border-bottom: Black 2.25pt double; text-align: right"><FONT STYLE="font-size: 8pt">3,600,000</FONT></TD>
      <TD STYLE="vertical-align: top; border-top: Black 1pt solid; border-bottom: Black 2.25pt double; text-align: right">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;&nbsp;&nbsp;&nbsp;Basic (loss) earnings per common
      share</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 2.25pt double; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;$</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 2.25pt double; text-align: right"><FONT STYLE="font-size: 8pt">(0.44</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 2.25pt double"><FONT STYLE="font-size: 8pt">)</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 2.25pt double; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;$</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 2.25pt double; text-align: right"><FONT STYLE="font-size: 8pt">(0.05</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 2.25pt double"><FONT STYLE="font-size: 8pt">)</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 2.25pt double; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;$</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 2.25pt double; text-align: right"><FONT STYLE="font-size: 8pt">(0.66</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 2.25pt double"><FONT STYLE="font-size: 8pt">)</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 2.25pt double; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;$</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 2.25pt double; text-align: right"><FONT STYLE="font-size: 8pt">(0.04</FONT></TD>
      <TD STYLE="vertical-align: top; border-bottom: Black 2.25pt double">
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0">)</P></TD></TR>
  <TR>
      <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;&nbsp;&nbsp;&nbsp;Diluted (loss) earnings per common
      share</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 2.25pt double; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;$</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 2.25pt double; text-align: right"><FONT STYLE="font-size: 8pt">(0.44</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 2.25pt double"><FONT STYLE="font-size: 8pt">)</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 2.25pt double; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;$</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 2.25pt double; text-align: right"><FONT STYLE="font-size: 8pt">(0.05</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 2.25pt double"><FONT STYLE="font-size: 8pt">)</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 2.25pt double; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;$</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 2.25pt double; text-align: right"><FONT STYLE="font-size: 8pt">(0.66 </FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 2.25pt double"><FONT STYLE="font-size: 8pt">)</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 2.25pt double; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;$</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 2.25pt double; text-align: right"><FONT STYLE="font-size: 8pt">(0.04</FONT></TD>
      <TD STYLE="vertical-align: top; border-bottom: Black 2.25pt double">
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0">)</P></TD></TR>
  </TABLE>
  
  <!-- Field: Page; Sequence: 19 -->
      <DIV STYLE="margin-bottom: 6pt"><P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>
  
  <TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR STYLE="font-size: 10pt"><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->19<!-- Field: /Sequence -->&nbsp;</TD></TR></TABLE></DIV>
      <DIV STYLE="page-break-before: always; margin-top: 6pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
      <!-- Field: /Page -->
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">9. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>GEOGRAPHIC REGION
  DATA</U></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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&rsquo;s software products and related professional services and customer support services. The
  Company&rsquo;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 geographic segments as follows:</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <TR>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD COLSPAN="6" STYLE="vertical-align: bottom; border-bottom: black 1pt solid">
          <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Three Months</B></P>
          <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Ended September 30,</B></P></TD>
      <TD COLSPAN="2" STYLE="vertical-align: bottom; border-bottom: black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD COLSPAN="7" STYLE="vertical-align: bottom; border-bottom: black 1pt solid">
          <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Nine Months</B></P>
          <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Ended September 30,</B></P></TD>
      <TD COLSPAN="2" STYLE="vertical-align: bottom; border-bottom: black 1pt solid">&nbsp;</TD>
      <TD>&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD>&nbsp;</TD>
      <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><B>2019</B></TD>
      <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD COLSPAN="3" STYLE="border-bottom: black 1pt solid; text-align: center"><B>2018</B></TD>
      <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><B>2019</B></TD>
      <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD COLSPAN="3" STYLE="border-bottom: black 1pt solid; text-align: center"><B>2018</B></TD>
      <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD>Revenues</TD>
      <TD COLSPAN="2">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD COLSPAN="3">&nbsp;</TD>
      <TD COLSPAN="2">&nbsp;</TD>
      <TD COLSPAN="2">&nbsp;</TD>
      <TD COLSPAN="2">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD COLSPAN="3">&nbsp;</TD>
      <TD COLSPAN="2">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="padding-left: 19.8pt">Software license fees</TD>
      <TD COLSPAN="2">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD COLSPAN="3">&nbsp;</TD>
      <TD COLSPAN="2">&nbsp;</TD>
      <TD COLSPAN="2">&nbsp;</TD>
      <TD COLSPAN="2">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD COLSPAN="3">&nbsp;</TD>
      <TD COLSPAN="2">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="padding-bottom: 1.1pt; padding-left: 29.7pt">United States</TD>
      <TD STYLE="border-bottom: Black 1pt solid">$</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right">112,000</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">$</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; text-align: right">504,000</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">$</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right">707,000</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">$</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; text-align: right">951,000</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="padding-left: 29.7pt">Europe</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">21,000</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD COLSPAN="2" STYLE="text-align: right">176,000</TD>
      <TD COLSPAN="2">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">129,000</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD COLSPAN="2" STYLE="text-align: right">328,000</TD>
      <TD COLSPAN="2">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="padding-bottom: 1.1pt; padding-left: 29.7pt">Asia Pacific</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right">7,000</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; text-align: right">85,000</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right">466,000</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; text-align: right">797,000</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="padding-left: 0.55in">Total foreign software license fees revenue</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right">28,000</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; text-align: right">261,000</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right">595,000</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; text-align: right">1,125,000</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="padding-bottom: 1.1pt; padding-left: 0.55in">&nbsp;&nbsp;&nbsp;&nbsp;Total software license fees</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right">140,000</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; text-align: right">765,000</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,302,000</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; text-align: right">2,076,000</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subscriptions</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD>
      <TD COLSPAN="2">&nbsp;</TD>
      <TD COLSPAN="2">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD>
      <TD COLSPAN="2">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="padding-bottom: 1.1pt; padding-left: 29.7pt">United States</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right">678,000</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; text-align: right">443,000</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,035,000</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; text-align: right">1,268,000</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="padding-left: 29.7pt">Europe</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">341,000</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD COLSPAN="2" STYLE="text-align: right">327,000</TD>
      <TD COLSPAN="2">&nbsp;</TD>
      <TD COLSPAN="2">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">882,000</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD COLSPAN="2" STYLE="text-align: right">914,000</TD>
      <TD COLSPAN="2">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="padding-bottom: 1.1pt; padding-left: 29.7pt">Asia Pacific</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right">259,000</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; text-align: right">642,000</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right">820,000</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; text-align: right">922,000</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="padding-left: 0.55in">Total foreign subscriptions</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right">600,000</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; text-align: right">969,000</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,702,000</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; text-align: right">1,836,000</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="padding-bottom: 1.1pt; padding-left: 0.55in">&nbsp;&nbsp;&nbsp;&nbsp;Total subscription revenue</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;1,278,000</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; text-align: right">1,412,000</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,737,000</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; text-align: right">3,104,000</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Services and maintenance</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD>
      <TD COLSPAN="2">&nbsp;</TD>
      <TD COLSPAN="2">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD>
      <TD COLSPAN="2">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="padding-bottom: 1.1pt; padding-left: 29.7pt">&nbsp;United States</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,790,000</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; text-align: right">2,649,000</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right">8,789,000</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; text-align: right">9,030,000</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="padding-left: 29.7pt">Europe</TD>
      <TD>
          <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>
          <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P></TD>
      <TD STYLE="text-align: right">586,000</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD COLSPAN="2" STYLE="text-align: right">591,000</TD>
      <TD COLSPAN="2">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">1,821,000</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD COLSPAN="2" STYLE="text-align: right">1,776,000</TD>
      <TD COLSPAN="2">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="padding-bottom: 1.1pt; padding-left: 29.7pt">Asia Pacific</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,166,000</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; text-align: right">1,708,000</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,346,000</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; text-align: right">4,467,000</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="padding-left: 0.55in">Total foreign services and</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD>
      <TD COLSPAN="2">&nbsp;</TD>
      <TD COLSPAN="2">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD>
      <TD COLSPAN="2">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="padding-bottom: 1.1pt; padding-left: 49.5pt">maintenance revenue</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,752,000</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; text-align: right">2,299,000</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right">5,167,000</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; text-align: right">6,243,000</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD>
          <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 1.1pt">&nbsp;</P>
          <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 1.1pt 60pt; text-indent: 0">Total services and maintenance revenue</P></TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,542,000</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; text-align: right">4,948,000</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right">13,956,000</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; text-align: right">15,273,000</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="padding-bottom: 1.1pt; padding-left: 49.5pt">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD>
      <TD COLSPAN="2">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD>
      <TD COLSPAN="2">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="padding-bottom: 3.3pt">Total revenue</TD>
      <TD STYLE="border-bottom: Black 1.5pt double">$</TD>
      <TD STYLE="border-bottom: Black 1.5pt double; text-align: right">5,960,000</TD>
      <TD STYLE="border-bottom: Black 1.5pt double">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1.5pt double; text-align: right">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1.5pt double">$</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1.5pt double; text-align: right">7,125,000</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1.5pt double">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1.5pt double; text-align: right">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1.5pt double">$</TD>
      <TD STYLE="border-bottom: Black 1.5pt double; text-align: right">18,995,000</TD>
      <TD STYLE="border-bottom: Black 1.5pt double">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1.5pt double; text-align: right">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1.5pt double">$</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1.5pt double; text-align: right">20,453,000</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1.5pt double">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD>
      <TD COLSPAN="2">&nbsp;</TD>
      <TD COLSPAN="2">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD>
      <TD COLSPAN="2">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD>Net (loss) income </TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD>
      <TD COLSPAN="2">&nbsp;</TD>
      <TD COLSPAN="2">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD>
      <TD COLSPAN="2">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;United States</TD>
      <TD>$</TD>
      <TD STYLE="text-align: right">(1,178,000</TD>
      <TD>)</TD>
      <TD STYLE="padding-right: -1.5pt">&nbsp;</TD>
      <TD>$</TD>
      <TD COLSPAN="2" STYLE="text-align: right">(437,000</TD>
      <TD COLSPAN="2">) </TD>
      <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD>
      <TD>$</TD>
      <TD STYLE="text-align: right">(1,251,000</TD>
      <TD>)</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>$</TD>
      <TD COLSPAN="2" STYLE="text-align: right">(328,000</TD>
      <TD COLSPAN="2">)</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="padding-left: 29.7pt">Europe</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">(247,000</TD>
      <TD>)</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD COLSPAN="2" STYLE="text-align: right">(60,000</TD>
      <TD COLSPAN="2">) </TD>
      <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">(760,000</TD>
      <TD>)</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD COLSPAN="2" STYLE="text-align: right">(275,000</TD>
      <TD COLSPAN="2">) </TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="padding-bottom: 1.1pt; padding-left: 29.7pt">Asia Pacific</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(64,000</TD>
      <TD STYLE="border-bottom: Black 1pt solid">)</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; text-align: right">427,000</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(9,000</TD>
      <TD STYLE="border-bottom: Black 1pt solid">)</TD>
      <TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; text-align: right">843,000</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD>
      <TD COLSPAN="2">&nbsp;</TD>
      <TD COLSPAN="2">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD STYLE="text-align: right">&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD>&nbsp;</TD>
      <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD>
      <TD COLSPAN="2">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
      <TD STYLE="padding-bottom: 3.3pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net (loss) income</TD>
      <TD STYLE="border-bottom: Black 1.5pt double">$</TD>
      <TD STYLE="border-bottom: Black 1.5pt double; text-align: right">(1,489,000</TD>
      <TD STYLE="border-bottom: Black 1.5pt double">)</TD>
      <TD STYLE="border-bottom: Black 1.5pt double; padding-right: -0.25pt">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1.5pt double">$</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1.5pt double; text-align: right">(70,000</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1.5pt double">) </TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1.5pt double">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1.5pt double">$</TD>
      <TD STYLE="border-bottom: Black 1.5pt double; text-align: right">(2,020,000</TD>
      <TD STYLE="border-bottom: Black 1.5pt double">)</TD>
      <TD STYLE="border-bottom: Black 1.5pt double">&nbsp;</TD>
      <TD STYLE="border-bottom: Black 1.5pt double">$</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1.5pt double; text-align: right">240,000</TD>
      <TD COLSPAN="2" STYLE="border-bottom: Black 1.5pt double">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="width: 41%">&nbsp;</TD>
      <TD STYLE="width: 1%">&nbsp;</TD>
      <TD STYLE="width: 9%">&nbsp;</TD>
      <TD STYLE="width: 1%">&nbsp;</TD>
      <TD STYLE="width: 1%">&nbsp;</TD>
      <TD STYLE="width: 1%">&nbsp;</TD>
      <TD STYLE="width: 11%">&nbsp;</TD>
      <TD STYLE="width: 1%">&nbsp;</TD>
      <TD STYLE="width: 1%">&nbsp;</TD>
      <TD STYLE="width: 1%">&nbsp;</TD>
      <TD STYLE="width: 1%">&nbsp;</TD>
      <TD STYLE="width: 1%">&nbsp;</TD>
      <TD STYLE="width: 1%">&nbsp;</TD>
      <TD STYLE="width: 11%">&nbsp;</TD>
      <TD STYLE="width: 1%">&nbsp;</TD>
      <TD STYLE="width: 1%">&nbsp;</TD>
      <TD STYLE="width: 1%">&nbsp;</TD>
      <TD STYLE="width: 12%">&nbsp;</TD>
      <TD STYLE="width: 1%">&nbsp;</TD>
      <TD STYLE="width: 1%">&nbsp;</TD>
      <TD STYLE="width: 1%">&nbsp;</TD></TR>
  </TABLE>
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">10. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>SUBSEQUENT EVENT</U></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><I>Summary of Merger Agreement</I></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On October 7, 2019, the Company
  entered into an Agreement and Plan of Merger (&ldquo;Merger Agreement&rdquo;) with IFS Americas, Inc. (&ldquo;Parent&rdquo;) and
  IFS Amber, Inc. (&ldquo;Merger Sub&rdquo;), a wholly owned subsidiary of Parent. Subject to the terms and conditions of the Agreement,
  Merger Sub will merge with the Company and then become a subsidiary of Parent (&ldquo;the Merger&rdquo;). It is expected for the
  merger to close before the end of calendar year 2019.</P>
  
  <!-- Field: Page; Sequence: 20 -->
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      <!-- Field: /Page -->
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The transaction will result
  in the acquisition of all outstanding shares of the Company by Parent for cash. Each outstanding share of common stock, par value
  $0.01 per share, excluding shares held in treasury, will be purchased for $12.00 per share. Furthermore, each option to purchase
  shares of the Company common stock immediately prior to the effective time of the transaction, whether vested or unvested, will
  be cancelled and converted into the right to receive an amount in cash equal to the product of the total number of shares of common
  stock subject to the option, multiplied by the excess, if any, of the merger consideration, $12.00, over the applicable exercise
  price of each option.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Merger Agreement contains various
  representations, warranties and covenants by the Company, Parent and Merger Sub. The Merger Agreement requires the Company to call
  and hold a special stockholders meeting and requires the board of directors of the Company to recommend that the Company&rsquo;s
  stockholders approve the Merger Agreement and the merger.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Merger Agreement requires the
  Company and Parent to use reasonable best efforts to take all reasonable actions necessary under applicable law to consummate the
  transactions contemplated by the Merger Agreement.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Merger Agreement contains certain
  termination rights for each of the Company and Parent, including the right of each party to terminate the Merger Agreement if the
  merger has not been consummated by the end of January 31, 2020.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Merger Agreement provides for
  a payment by the Company to Parent a termination fee in the amount of $2,569,746 in the case of a termination of the Merger Agreement
  under certain circumstances described in the Merger Agreement. Parent shall pay a termination fee of $2,936,852 to the Company
  in the event the Merger Agreement is terminated by Parent subject to certain conditions contained in the Merger Agreement.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company board of directors
  has unanimously determined that the transactions contemplated by the Merger Agreement are fair to, and in the best interest of,
  the Company and its stockholders, and has unanimously recommended that the Company board of directors approve the Merger Agreement
  and the transactions contemplated therein. The obligations of the parties to consummate the merger are subject to customary closing
  conditions.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt/107% Times New Roman, Times, Serif; margin: 0 0 8pt; text-align: justify"><I>Closing Compensation Agreement</I></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Following the Company&rsquo;s agreement
  upon the terms of the proposed merger with Parent and in consideration of Mr. Etskovitz&rsquo;s role as the Chief Financial Officer
  of the Company and the importance of his participation in the due diligence and closing of the proposed transaction, the Company
  entered into an agreement with him on September 17, 2019, pursuant to which he will be entitled to a bonus of $100,000 (less applicable
  withholding taxes) on the condition that he remain employed by the Company in good standing through the closing of the merger and
  perform any additional duties related to the proposed merger (&ldquo;Closing Compensation Agreement&rdquo;). If Mr. Etskovitz voluntarily
  resigns his employment or is terminated for cause before the closing of the merger, he will forfeit the entire amount of the bonus.
  If the merger is not consummated for any reason, he will be entitled to receive a bonus equal to $50,000 (less applicable withholding
  taxes) if he remains employed in good standing with the Company through such event.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>
  
  <P STYLE="font: 10pt/107% Times New Roman, Times, Serif; margin: 0 0 8pt; text-align: justify"><I>Conversion of Preferred Stock
  </I></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Effective November 12, 2019, Zack
  Bergreen, the Chairman and Chief Executive Officer of Astea International Inc., converted to common stock, par value $0.01 per
  share of the Company (&ldquo;<U>Common Stock</U>&rdquo;), all of the 826,446 outstanding shares of the Series A Convertible Preferred
  Stock, par value $0.01 per share, and all of the 797,448 outstanding shares of the Series B Convertible Preferred Stock, par value
  $0.01 per share, of the Company that he held as of such date (the &ldquo;<U>Convertible Preferred Stock</U>&rdquo;). The Convertible
  Preferred Stock was convertible on a 1 for 1 basis, resulting in the issuance of 1,623,894 shares of Common Stock to Mr. Bergreen.
  Following the conversion, Mr. Bergreen beneficially owns 2,992,287 shares of Common Stock, or approximately 54.3% of the outstanding
  Common Stock. As described in the Company&rsquo;s Current Report on Form 8-K filed on October 8, 2019, conversion of the Convertible
  Preferred Stock was required by the Voting Agreement among IFS Americas, Inc., a Delaware corporation (&ldquo;<U>Parent</U>&rdquo;),
  Mr. Bergreen and the limited partnership that he controls, in connection with the Agreement and Plan of Merger dated October 7,
  2019 among the Company, Parent and a subsidiary of Parent.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
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  <P STYLE="font: 10pt/107% Times New Roman, Times, Serif; margin: 0 0 8pt; text-align: justify">&nbsp;<I>Date, Time, Location and
  Record Date of Special Meeting of Stockholders</I></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company&rsquo;s Board of Directors has
  fixed the date, time, location and record date for the special meeting of the stockholders of the Company to consider and vote
  upon the adoption of the Merger Agreement, which provides for the merger of IFS Amber, Inc., subsidiary of Parent, with and into
  the Company, with the Company surviving as a wholly owned subsidiary of Parent. The Board of Directors determined that the special
  meeting of the Company&rsquo;s stockholders will be held on Monday, December 9, 2019 at 11:00 a.m. (local time), at the Company&rsquo;s
  headquarters at 240 Gibraltar Road, Horsham, Pennsylvania 19044. The Board of Directors also established the close of business
  on November 12, 2019 as the record date for the determination of stockholders entitled to receive notice of, and to vote at, the
  special meeting and any adjournment or postponement thereof.</P>
  
  <P STYLE="font: 10pt/107% Times New Roman, Times, Serif; margin: 0 0 8pt; text-align: justify">&nbsp;</P>
  
  
  <!-- Field: Page; Sequence: 22 -->
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      <DIV STYLE="page-break-before: always; margin-top: 6pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
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  <TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
  <TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in"><B><U>Item 2.</U></B></TD><TD><B><U>MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</U></B></TD></TR></TABLE>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-indent: -0.5in"><B>&nbsp;</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><U>Overview </U></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">This document contains various forward-looking
  statements and information that are based on management's beliefs, assumptions made by management and information currently available
  to management. Such statements are subject to various risks and uncertainties, which could cause actual results to vary materially
  from those contained in such forward-looking statements. Should one or more of these risks or uncertainties materialize, or should
  underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, expected or projected.
  Certain of these, as well as other risks and uncertainties are described in more detail herein and in Astea International Inc.&rsquo;s
  (&ldquo;Astea&rdquo; or &ldquo;the Company&rdquo;) Annual Report on Form 10-K for the fiscal year ended December 31, 2018.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">Astea is 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. 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.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">Astea Alliance, the Company&rsquo;s
  service management suite of solutions, supports the complete service lifecycle, from lead generation and project quotation to service
  and billing through asset retirement. It integrates and optimizes critical business processes for Campaigns, Call Center, Depot
  Repair, Field Service, Logistics, Projects and Sales, and Order Processing applications. Astea extends its application suite with
  mobile workforce management, dynamic scheduling optimization, third party vendor and customer self-service portals, and business
  intelligence. In order to ensure customer satisfaction, Astea also offers infrastructure tools and services. Astea Alliance provides
  service organizations with technology-enabled business solutions that improve profitability, stabilize cash flows, and reduce operational
  costs through automating and integrating key service, sales and marketing processes.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">The FieldCentrix Enterprise is a
  service management solution that runs on a wide range of mobile devices (handheld computers, laptops and PCs, and Pocket PC devices),
  and integrates seamlessly with popular customer relationship management (&ldquo;CRM&rdquo;) and ERP applications. Add-on features
  include a web-based customer self-service portal, workforce optimization capabilities, and equipment-centric functionality. FieldCentrix
  has licensed applications to companies in a wide range of sectors including HVAC, building and real estate services, manufacturing
  and process instruments and controls, and medical equipment.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">The Company&rsquo;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.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><U>Critical Accounting Policies and
  Estimates</U></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">The Company&rsquo;s significant accounting
  policies are described in its &ldquo;Summary of Accounting Policies,&rdquo; Note 2, in the Company&rsquo;s 2018 Annual Report on
  Form 10-K. The preparation of financial statements in conformity with accounting principles generally accepted within the United
  States requires management to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying
  financial statements and related notes. In preparing these financial statements, management has made its best estimates and judgments
  of certain amounts included in the financial statements, giving due consideration to materiality. The Company does not believe
  there is a great likelihood that materially different amounts would be reported related to the accounting policies described below;
  however, application of these accounting policies involves the exercise of judgments and the use of assumptions as to future uncertainties
  and, as a result, actual results could differ from these estimates.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.9pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Revenue from Contracts with Customers</I></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><I>&nbsp;</I></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.9pt 0 0; text-align: justify">Astea&rsquo;s revenue is principally
  recognized from three sources: (i) licensing arrangements, (ii) subscription services and (iii) services and maintenance.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.9pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.9pt 0 0; text-align: justify">The Company markets its products
  primarily through its direct sales force and resellers. License agreements do not provide for a right of return, and historically,
  product returns have not been significant.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.9pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.9pt 0 0; text-align: justify"></P>
  
  <!-- Field: Page; Sequence: 23 -->
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  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.9pt 0 0; text-align: justify"></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.9pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Revenue from Contracts with Customers</I>&nbsp;outlines
  a comprehensive five-step revenue recognition model based on the principle that an entity should recognize revenue to depict the
  transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to
  be entitled in exchange for those goods or services. The five steps are:</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt/115% Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 10pt"><TR STYLE="vertical-align: top">
  <TD STYLE="width: 63pt"></TD><TD STYLE="width: 18pt">1.</TD><TD STYLE="text-align: justify">Identify the contract with a customer.</TD></TR></TABLE>
  
  <TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt/115% Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 10pt"><TR STYLE="vertical-align: top">
  <TD STYLE="width: 63pt"></TD><TD STYLE="width: 18pt">2.</TD><TD STYLE="text-align: justify">Identify the performance obligations in the contract.</TD></TR></TABLE>
  
  <TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt/115% Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 10pt"><TR STYLE="vertical-align: top">
  <TD STYLE="width: 63pt"></TD><TD STYLE="width: 18pt">3.</TD><TD STYLE="text-align: justify">Determine the transaction price.</TD></TR></TABLE>
  
  <TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt/115% Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 10pt"><TR STYLE="vertical-align: top">
  <TD STYLE="width: 63pt"></TD><TD STYLE="width: 18pt">4.</TD><TD STYLE="text-align: justify">Allocate the transaction price to performance obligations in the contract.</TD></TR></TABLE>
  
  <TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt/normal Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 10pt"><TR STYLE="vertical-align: top">
  <TD STYLE="width: 63pt"></TD><TD STYLE="width: 18pt">5.</TD><TD STYLE="text-align: justify">Recognize revenue when or as the Company satisfies a performance obligation.</TD></TR></TABLE>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 13.2pt 0 0; text-align: justify">The Company satisfies performance
  obligations as discussed in further detail below. Revenue is recognized at the time the related performance obligation is satisfied
  by transferring a promised good or service to a customer.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company recognizes revenue from license
  sales when the above criteria are met. The Company generally uses written contracts as a means to establish the terms and conditions
  by which our products, services and maintenance support are sold to our customers. The Company satisfies the performance obligation
  when the license key has been delivered electronically to the customer. If these criteria are not met, then revenue is deferred
  until such criteria are met or until the period(s) over which the last performance obligation is delivered.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">The Company recognizes
  revenues from maintenance ratably over the term of the underlying maintenance contract term. The term of the maintenance contract
  is usually one year. Renewals of maintenance contracts create new performance obligations that are satisfied over the contract
  term.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">Revenues from professional
  services mostly consist of time and material services. Certain professional service contracts are performed on a fixed price basis
  and revenue is recognized using the percentage of completion method. However, fixed price contracts are only utilized on rare occasions.
  Performance obligations are satisfied, and revenues are recognized, when the services are provided or when the service term has
  expired.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">In subscription based arrangements,
  even though customers use the software element, they generally do not have a contractual right to take possession of the software
  at any time during the hosting period without significant penalty to either run the software on its own hardware or contract with
  an unrelated third party to host the software. Accordingly, these software as a service (&ldquo;SaaS&rdquo;) arrangements, including
  the software license fees within the arrangements, are accounted for as subscription services provided all other revenue recognition
  criteria have been met. The subscription revenue is recognized on a straight-line basis over the performance obligation. The Company
  recognizes subscription revenue once a customer goes-live ratably over the remaining contract period or customer life whichever
  is longer. The contract period is typically 1 to 3 years. The average expected life of a customer is 2 years. The average customer
  takes about 8 to 10 months to go live. The Company expects the average life of a customer to increase as more customers begin to
  renew their subscription contracts. When implementation, consulting and training services are bundled with the subscription based
  arrangement, these services are recognized over the life of the initial contract (performance obligation), once the project goes
  live.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><FONT STYLE="background-color: white">In
  contracts with multiple performance obligations, the Company accounts for individual performance obligations separately, if they
  are distinct. The Company allocates the transaction price to each performance obligation based on its relative standalone selling
  price out of total consideration of the contract. For maintenance and support, the Company determines the standalone selling price
  based on the price at which the Company separately sells a renewal contract. The Company determines the standalone selling price
  for sales of licenses using the residual approach. For professional services, the Company determines the standalone selling prices
  based on the price at which the Company separately sells those services. </FONT></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The guidance prefers that revenue in a contract
  with multiple performance obligations use the adjusted market approach which includes SSP or TPE or expected cost plus margin approach
  as the methodology for allocating revenues to software. The Company uses the Residual Approach for allocating the revenues from
  a contract to the license component of the sale. Due to competition, highly variable pricing, customer demographics, varying size
  of our customers, and other such factors, the Company&rsquo;s selling prices are considered uncertain for each perpetual license
  sale. Therefore, SSP is not an appropriate methodology as it relates to our license revenue. In terms of TPE as a basis to price
  our software, our product is unique and expansive in terms of the system&rsquo;s inherent functionality. There are no directly
  comparable products in the marketplace today which we could use as the basis to set our standard license pricing based on a comparison
  with other vendors. In addition, most of the companies with whom we compete, are privately owned, which prevents us from obtaining
  reliable TPE. Accordingly, the guidance permits the Company to use the Residual Method for allocating selling price if the first
  two preferable choices cannot be used. The residual between the total transaction price and the observable standalone selling prices
  of those performance obligations with observable standalone selling prices is considered to be the estimated standalone selling
  price of the goods or services underlying the performance obligation.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>
  
  <!-- Field: Page; Sequence: 24 -->
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  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Astea commonly sells its software products
  bundled with maintenance and professional services. As noted above, the guidance requires an entity to allocate the transaction
  price to the distinct performance obligations in a contract on a relative SSP basis. Under the guidance, &ldquo;&hellip;an entity
  shall determine the standalone selling price at contract inception of the distinct good or service underlying each performance
  obligation in the contract and allocate the transaction price in proportion to those standalone selling prices.&rdquo; SSP is defined
  as the price at which an entity would sell a promised good or service separately to a customer. Astea has a history of selling
  maintenance renewals and professional services on a standalone basis. Therefore, the Company utilizes SSP for its performance obligations
  as it relates to service and maintenance revenue. In addition, due to the Company having different maintenance and service rates
  in other parts of the world in which it operates, the Company has developed a reasonable range for its SSP for maintenance and
  services rather than a single point.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The incremental costs of obtaining a customer
  contract (i.e., those costs related to obtaining the customer contract that would not have been incurred if the customer contract
  was not obtained), such as a sales commission, should be capitalized if the Company expects to recover those costs (based on net
  future cash flows from the contract and expected contract renewals). The Company may expense the incremental costs of obtaining
  a contract if the amortization period would otherwise be one year or less. Since sales commissions are costs that are incremental
  and the amortization of sales commissions would be one year or less, the Company will continue to expense these items as incurred.
  Costs of obtaining a customer contract that are not incremental (i.e., costs related to obtaining the customer contract that would
  have been incurred regardless of whether the customer contract had been obtained), such as travel costs incurred to present the
  customer proposal, should only be capitalized if those costs are explicitly chargeable to the customer regardless of whether the
  entity enters into a contract with the customer. Otherwise, such costs are expensed as incurred. The Company will continue to expense
  these costs as they are incurred.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Once live, we recognize the deferred implementation
  costs related to that customer ratably over the remaining expected life of the customer contract or two years, whichever is longer.
  At this point, based on the Company&rsquo;s relatively short time-span as a provider of a hosted solution, our analysis shows that
  the average lifespan of an Astea hosted customer is 2 years. Therefore, we amortize the deferred cost over 2 years or the remaining
  life of the contract, whichever is longer. This is consistent with the revenue recognition methodology used for the subscription
  service revenue for that customer. The Company satisfies performance obligations as discussed in further detail below. Revenue
  is recognized at the time the related performance obligation is satisfied by transferring a promised service to a customer.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><FONT STYLE="letter-spacing: -0.1pt">&nbsp;</FONT></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We believe that our accounting estimates used
  in applying our revenue recognition are critical because:</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
  <TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&#183;</FONT></TD><TD STYLE="text-align: justify">the determination that it is probable that the customer will pay for the products and services
  purchased is inherently judgmental and includes credit risk;</TD></TR></TABLE>
  
  <TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
  <TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&#183;</FONT></TD><TD STYLE="text-align: justify">determining the performance obligations and transaction price to certain elements in multiple-element
  arrangements is complex;</TD></TR></TABLE>
  
  <TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
  <TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&#183;</FONT></TD><TD STYLE="text-align: justify">the determination of whether a service is essential to the functionality of the software is complex
  and could potentially create a new performance obligation; and</TD></TR></TABLE>
  
  <TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
  <TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&#183;</FONT></TD><TD STYLE="text-align: justify">the estimated customer life of subscription services.</TD></TR></TABLE>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: -0.25in">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Changes in the aforementioned items could have
  a material effect on the type and timing of revenue recognized. In addition, Company&rsquo;s payment terms and conditions vary
  by contract and size of customer, although terms generally include a requirement of payment within 30 to 60 days. In instances
  where the timing of revenue recognition differs from the timing of invoicing, the Company has determined that its contracts generally
  do not include a significant financing component. The primary purpose of invoicing terms is to provide customers with simplified
  and predictable ways of purchasing our products and services, and not to facilitate financing arrangements. The Company generally
  has not experienced any material losses related to receivables from individual customers, or groups of customers. Due to these
  factors, no additional credit risk beyond amounts provided by the allowance for doubtful accounts is believed by management to
  be probable in the Company&rsquo;s accounts receivable. The Company has not adjusted revenues for customers related to credit risk.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">For the three and nine months ended September
  30, 2019, there was no individual customer that accounted for 10% of total revenue. For the three months ended September 30, 2018,
  no individual customer accounted for 10% or more of total revenue. For the nine months ended September 30, 2018, one customer accounted
  for 10% of total revenue.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>
  
  <!-- Field: Page; Sequence: 25 -->
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      <DIV STYLE="page-break-before: always; margin-top: 6pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
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  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We present taxes assessed by a governmental
  authority including sales, use, value added and excise taxes on a net basis and therefore the presentation of these taxes is excluded
  from our revenues and is included in accrued expenses in the accompanying condensed consolidated balance sheets until such amounts
  are remitted to the taxing authority.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">The Company is engaged in the design,
  development, marketing and support of its service management software solutions. All revenues result from selling of license (perpetual
  and subscription) software products and related professional services and customer support services. Accordingly, the Company considers
  itself to have one reporting segment. The Company&rsquo;s chief decision maker further reviews financial information presented
  on a consolidated basis to determine if revenue can be further disaggregated in order to make operating decisions and assessing
  financial performance. It was determined that all revenue recognized in our consolidated statements of operations is considered
  to be revenue from contracts with customers, which can be disaggregated by both the timing of revenue recognition and geographic
  regions (see Note 9 of the condensed consolidated financial statements for disaggregated revenues by geographic regions).</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">The following tables depicts the
  Company&rsquo;s disaggregation of revenue:</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <TR>
      <TD STYLE="vertical-align: bottom; padding-left: 9.9pt; text-indent: -9.9pt">&nbsp;</TD>
      <TD COLSPAN="5" STYLE="vertical-align: bottom; text-align: center"><FONT STYLE="font-size: 9pt"><B>Three months ended </B></FONT></TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD COLSPAN="5" STYLE="vertical-align: bottom; text-align: center"><FONT STYLE="font-size: 9pt"><B>Nine months ended</B></FONT></TD>
      <TD STYLE="vertical-align: top">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: bottom; padding-left: 9.9pt; text-indent: -9.9pt">&nbsp;</TD>
      <TD COLSPAN="5" STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 9pt"><B>&nbsp;&nbsp;September 30</B>,</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="5" STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 9pt"><B>&nbsp;&nbsp;September 30,</B></FONT></TD>
      <TD STYLE="vertical-align: top; border-bottom: Black 1pt solid">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: bottom; padding-left: 9.9pt; text-indent: -9.9pt"><FONT STYLE="font-size: 9pt"><B>Timing of Revenue Recognition</B></FONT></TD>
      <TD COLSPAN="2" STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 9pt"><B>2019</B></FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 9pt"><B>2018</B></FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 9pt"><B>2019</B></FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD COLSPAN="2" STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 9pt"><B>2018</B></FONT></TD>
      <TD STYLE="vertical-align: top; border-bottom: Black 1pt solid">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: bottom; width: 49%">
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 0 0 19.8pt; text-indent: -9.9pt">&nbsp;</P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0">Performance obligations transferred at a point in time</P></TD>
      <TD STYLE="vertical-align: bottom; width: 1%; text-align: right"><FONT STYLE="font-size: 9pt">$</FONT></TD>
      <TD STYLE="vertical-align: bottom; width: 10%; text-align: right"><FONT STYLE="font-size: 9pt">140,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; width: 2%; text-align: right"><FONT STYLE="font-size: 9pt">$</FONT></TD>
      <TD STYLE="vertical-align: bottom; width: 8%; text-align: right"><FONT STYLE="font-size: 9pt">765,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; width: 1%">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; width: 1%; text-align: right"><FONT STYLE="font-size: 9pt">$</FONT></TD>
      <TD STYLE="vertical-align: bottom; width: 11%; text-align: right"><FONT STYLE="font-size: 9pt">1,302,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; width: 1%"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
      <TD STYLE="vertical-align: bottom; width: 1%; text-align: right"><FONT STYLE="font-size: 9pt">$</FONT></TD>
      <TD STYLE="vertical-align: bottom; width: 13%; text-align: right"><FONT STYLE="font-size: 9pt">2,076,000</FONT></TD>
      <TD STYLE="vertical-align: top; width: 1%; text-align: right">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: bottom; padding-bottom: 1.1pt"><FONT STYLE="font-size: 9pt">Performance obligations transferred over time</FONT></TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">4,380,000</FONT></TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">4,720,000</FONT></TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">13,266,000</FONT></TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 9pt">14,657,000</FONT></TD>
      <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: bottom">
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 0 1.1pt">Performance obligations transferred over time initiated at</P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 0 1.1pt">go-live</P></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">1,440,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">1,640,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">4,427,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 9pt">3,720,000</FONT></TD>
      <TD STYLE="vertical-align: top; border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: bottom">
          <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0 0 1.1pt 19.8pt; text-indent: -9.9pt">&nbsp;</P>
          <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 0 1.1pt 19.8pt; text-indent: -9.9pt">Total revenues</P></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1.5pt double; text-align: right"><FONT STYLE="font-size: 9pt">&nbsp;$</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1.5pt double; text-align: right"><FONT STYLE="font-size: 9pt">5,960,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1.5pt double; text-align: justify">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1.5pt double; text-align: right"><FONT STYLE="font-size: 9pt">&nbsp;$</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1.5pt double; text-align: right"><FONT STYLE="font-size: 9pt">7,125,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1.5pt double">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1.5pt double; text-align: right"><FONT STYLE="font-size: 9pt">&nbsp;$</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1.5pt double; text-align: right"><FONT STYLE="font-size: 9pt">18,995,000</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1.5pt double">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1.5pt double; text-align: right"><FONT STYLE="font-size: 9pt">&nbsp;$</FONT></TD>
      <TD STYLE="vertical-align: bottom; border-bottom: Black 1.5pt double; text-align: right"><FONT STYLE="font-size: 9pt">20,453,000</FONT></TD>
      <TD STYLE="vertical-align: top; border-bottom: Black 1.5pt double; text-align: right">&nbsp;</TD></TR>
  </TABLE>
  <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">The performance obligations transferred
  at a point in time relate to perpetual license revenue for which there is no deferred revenue as of September 30, 2019 or 2018.
  The performance obligations transferred over time consist of professional services that are recognized based on time and materials,
  as the services are performed. The performance obligations for support services are recognized ratably over time based on the contract
  life, except for a few fixed price contracts which are recognized based on the achievement of certain milestones. If the customer
  pays in advance, service revenue is deferred until the performance obligations are met. For support services, the fee is paid in
  advance of the performance obligation. Accordingly, the Company has recorded deferred revenue from fixed price contracts and support
  services of $6,557,000 and $7,067,000 as of September 30, 2019 and 2018, respectively. Performance obligations transferred over
  time, initiated at go-live, relate to our subscription hosting and our subscription professional services for the implementation.
  No performance obligation is recognized until the customer is live and has access to the subscription services. Once live, the
  performance obligations are recognized over time, which is either 2 years, the average customer life, or the remaining contract
  life of the customer, whichever is longer. Because subscription fees are paid in advance, and professional services fees are paid
  as the services are performed, the revenue from both are deferred until the date in which the customer goes live. The Company has
  deferred revenue recorded for performance obligations transferred over time, initiated at go-live for hosting and hosting services
  for $4,656,000 and $4,221,000 as of September 30, 2019 and 2018, respectively.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">The long term deferred revenue reported
  as $1,351,000 and $1,474,000 as of September 30, 2019 and 2018, respectively, consists of the portion of revenue that will be recognized
  beyond one year of the balance sheet date for hosting implementation services.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>&nbsp;</I></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Capitalized Software Research and Development
  Costs</I></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>&nbsp;</I></P>
  
  <P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company capitalizes software development
  costs incurred during the period subsequent to the establishment of technological feasibility through the product's availability
  for general release. Costs incurred prior to the establishment of technological feasibility are charged to product development
  expense as they are incurred. Product development expense includes payroll, employee benefits, other headcount-related costs associated
  with product development and any related costs to third parties under sub-contracting or net of any collaborative arrangements.</P>
  
  <P STYLE="font: 8pt/12pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Capitalized software development costs are
  amortized on a product-by-product basis over the greater of the ratio of current revenues to total anticipated revenues or on a
  straight-line basis over the estimated useful lives of the products beginning with the initial release to customers.&nbsp; The
  Company's estimated life for its capitalized software products is two years based on current sales trends and the rate of product
  release.&nbsp; The Company continually evaluates whether events or circumstances have occurred that indicate that the remaining
  useful life of the capitalized software development costs should be revised or that the remaining balance of such assets may not
  be recoverable. The Company evaluates the recoverability of capitalized software based on the net realizable value of each product,
  which includes the estimated future gross revenues from that product reduced by the estimated future costs of completing and disposing
  of that product, including the costs of performing maintenance and customer support required to satisfy the Company's responsibility
  set forth at the time of sale. As of September 30, 2019, management believes that no revisions to the remaining useful lives or
  write-downs of capitalized software development costs are required.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>
  
  <!-- Field: Page; Sequence: 26 -->
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  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.9pt 0 0; text-align: justify"><I>Currency Translation </I></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.9pt 0 0.25in; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.9pt 0 0; text-align: justify">The international subsidiaries and
  foreign branch operations translate their assets and liabilities from international operations by using the exchange rate in effect
  at the balance sheet date. The results of operations are translated at average exchange rates during the period. The effects of
  exchange rate fluctuations in translating assets and liabilities of international operations into U.S. dollars are accumulated
  and reflected as a currency translation adjustment as a component of other comprehensive loss in the accompanying condensed consolidated
  statements of changes in stockholders&rsquo; deficit. Foreign exchange transaction gains and losses are included in general and
  administrative expenses in the condensed consolidated statements of operations. General and administrative expenses include a foreign
  exchange transaction loss of $24,000 for the nine months ended September 30, 2019 and a $15,000 gain for the nine months ended
  September 30, 2018.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><B>&nbsp;</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><B><U>Results of Operations</U></B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 13.5pt; text-align: justify; text-indent: -13.5pt"><B><I>&nbsp;</I></B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 13.5pt; text-align: justify; text-indent: -13.5pt"><B><I>Comparison
  of Three Months Ended September 30, 2019 and 2019</I></B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><B>Revenues</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">Total revenues decreased by $1,165,000
  or 16%, to $5,960,000 for the three months ended September 30, 2019 from $7,125,000 for the three months ended September 30, 2018.
  Software license fee revenues decreased $625,000, or 82%, from the same quarter in 2018. Subscription revenues decreased $134,000
  or 9% to $1,278,000 from $1,412,000 for the same period last year. Services and maintenance revenues for the three months ended
  September 30, 2019 decreased $406,000 or 8% from the same quarter in 2018.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 2.15pt 0 0; text-align: justify">Software license fee revenue decreased
  82% to $140,000 in the third quarter of 2019 from $765,000 in the third quarter of 2018. This is primarily due to Astea Alliance
  license revenues decreasing by $467,000 or 80% to $120,000 in the third quarter of 2019 from $587,000 in the third quarter of 2018.
  The decrease was primarily due to lower perpetual license sales in all regions resulting from the Company&rsquo;s policy of focusing
  its sales efforts on subscription based opportunities and only selling perpetual licenses to its existing customers. We expect
  license sales to continue to decrease in the future due to this strategic shift in the sales process. FieldCentrix license sales
  were $20,000 in the third quarter of 2019 compared to $178,000 in the third quarter of 2018. The decrease was due to lower license
  sales to existing customers in the third quarter of 2019 compared to the same quarter in 2018.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 2.15pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">Subscription revenue decreased 9%
  to $1,278,000 in the third quarter of 2019 from $1,412,000 in the third quarter of 2018. The primary reason for the decrease resulted
  from the recognition of subscription revenue from a Japanese customer that went live in the third quarter of 2018 for which 2 years
  of subscription revenue had previously been deferred, partially offset by the recognition of subscription revenue from additional
  hosted customers going live in the U.S. in 2019, which had previously been deferred. Previously deferred hosting revenues were
  recognized as the service periods for those hosting services had lapsed. The Company continues to sell Software as a Service (SaaS)
  for which hosting revenue may not be recognized until the customers go-live. In addition, the Company&rsquo;s focus going forward
  will be exclusively on selling subscription licenses to new customers. As such, we expect deferred revenues and subscription revenues
  to increase going forward.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">Services and maintenance revenues
  decreased by 8% to $4,542,000 in the third quarter of 2019 compared to $4,948,000 in the third quarter of 2018. This is primarily
  due to a Japanese hosted customer that went live in the third quarter of 2018 for which 2 years of subscription service revenue
  had previously been deferred and recognized in full, partially offset by Astea Alliance service revenues in the U.S increasing
  by $142,000 or 5% compared to the third quarter of 2018. The increase was mainly attributable to a strong backlog of professional
  services required by new customer implementations and upgrades of current customers. Service and maintenance revenues generated
  by FieldCentrix decreased by $38,000 or 7% to $513,000 in the third quarter of 2019 compared to $551,000 during the same period
  in 2018. The decrease in maintenance is due to cancellation of maintenance by a few small customers offset by an increase in service
  revenue resulting from upgrade projects.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"></P>
  
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  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><B>Costs of Revenues</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">Cost of software license fees increased
  21% to $908,000 in the third quarter of 2019 from $750,000 in the third quarter of 2018. Included in the cost of software license
  fees is the amortization of capitalized software costs and the third party software embedded in the Company&rsquo;s software licenses
  sold to customers. Amortization of capitalized software development costs was $894,000 for the quarter ended September 30, 2019
  compared to $739,000 for the same quarter in 2018. The increase was due to the amortization of both Alliance Version 15 that was
  released in September 2018 and Version 15.1, released in March 2019. Amortization of both versions did not occur during the quarter
  ended September 30, 2018. The gross margin percentage on software license sales was (550%) in the third quarter of 2019 compared
  to 2% in the third quarter of 2018. The decline in the 2019 license margin resulted from the combination of lower revenues and
  higher cost of sales.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">Cost of subscriptions decreased 12%
  to $325,000 in the third quarter of 2019 from $369,000 in the third quarter of 2018. The decrease in cost of subscriptions is mainly
  attributed the Company transitioning to a lower cost SaaS cloud service provider in 2019 offset by adding more live hosted customers
  and increased hosting compliance costs in the third quarter of 2019 compared to the same period in 2018. The gross margin percentage
  on hosting was 75% in the third quarter of 2019 compared to 74% in the same quarter last year.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">Cost of services and maintenance
  decreased 11% to $3,292,000 in the third quarter of 2019 from $3,696,000 in the third quarter of 2018. The decrease in cost of
  service and maintenance is mainly attributed to a decrease in headcount in the U.S., the reduced use of contractors in Japan and
  decreases in travel expenses in all regions, partially offset by an increase in recruiting costs. The gross margin percentage was
  28% in the third quarter of 2019 compared to 25% in 2018. The growth in the services and maintenance gross margin was mainly due
  to lower service and maintenance costs in the third quarter of 2019.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><B>&nbsp;</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><B>Gross Profit</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">Total gross profit decreased 38%
  to $1,435,000 in the third quarter of 2019 from $2,310,000 in the third quarter of 2018 primarily due to decreases in all revenue
  streams as well as increases in costs of license fees. As a percentage of revenue, gross profit in the third quarter of 2019 was
  24% compared to 32% in the third quarter of 2018.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><B>Operating Expenses</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><I>Product Development</I></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Product development expenses decreased 24%
  to $251,000 in the third quarter of 2019 from $330,000 in the third quarter of 2018.&nbsp; Fluctuations in product development
  expense from period to period result from the amount of product development expense that is capitalized. Development costs of $797,000
  were capitalized in the third quarter of 2019 compared to $645,000 during the same period in 2018 due to the increase in resources
  working on the development of the latest version of Alliance. Gross product development expense was $1,048,000 in the third quarter
  of September 30, 2019 which is 7% higher than $975,000 during the same quarter in 2018. &nbsp;The increase was due to increases
  in salary and benefits and an unfavorable exchange rate on the Israeli shekel relative to the U.S. dollar, as the majority of development
  work is performed in Israel. Product development expense as a percentage of revenues was 4% in the third quarter of 2019 and 5%
  in the third quarter of 2018.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><I>Sales and Marketing</I></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">Sales and marketing expense increased
  14% to $1,156,000 in the third quarter of 2019 from $1,013,000 in the third quarter of 2018. The increase in sales and marketing
  expense resulted from higher third party marketing costs and increased sales force headcount in the U.S., offset by lower sales
  commissions due to a decrease in license revenue. The increase in third party marketing costs is due to the Company&rsquo;s strategy
  of expanding its marketing presence through additional efforts to increase awareness of our products in order to improve lead generation
  and sales opportunities. Increased awareness occurs through additional webinars in all regions focused on the vertical industries
  in which the Company operates, attendance at more trade shows, and new strategies to improve lead generation for the Company&rsquo;s
  sales force.&nbsp; As a percentage of revenues, sales and marketing expense was 19% in the third quarter of 2019 and 14% in the
  third quarter of 2018.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"></P>
  
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  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><I>General and Administrative</I></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">General and administrative expenses
  consist of salaries, benefits and related costs for the Company&rsquo;s finance, administrative and executive management personnel,
  legal costs, accounting costs, bad debt expense and various costs associated with the Company&rsquo;s status as a public company.
  General and administrative expenses increased 39% to $1,355,000 during the third quarter of 2019 from $972,000 in the third quarter
  of 2018 due to increased professional fees which we did not incur during the same period in 2018. As a percentage of revenue, general
  and administrative expenses were 23% in the third quarter of 2019 compared to 14% in the third quarter of 2018.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><B>&nbsp;</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><B>Net Interest Expense</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">Net interest expense was $78,000
  in the third quarter of 2019 compared to $64,000 in the third quarter of 2018. The increase in interest expense is mainly due to
  interest paid on accrued, but unpaid preferred dividends compared to the same period in 2018 offset by a slight decrease in the
  interest rate charged by Bridge Bank on the Company&rsquo;s line of credit due to a decrease in the prime rate and by a lower average
  line of credit during the third quarter of 2019 compared to the same period in 2018 which resulted in a small decline in the interest
  paid to Bride bank for the quarter. Per the preferred stock agreements, unpaid accrued preferred dividends incur an interest charge
  calculated at 10% per annum.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><B>&nbsp;</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><B>Income Tax Expense</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">The Company recorded a provision
  for income tax of $84,000 for the third quarter of 2019 compared to $1,000 during the third quarter of 2018. The tax expense increase
  resulted from income taxes paid in the Asia Pacific region during the third quarter of 2019 compared to no tax provision payment
  in the same period in 2018. In the past, there has been no tax expense in this region due to the carryforward of operating losses
  from prior periods that have now been fully utilized and no longer available. We expect to pay taxes in the future in the APAC
  region as long as operations remain profitable.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><B>International Operations</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">The Company&rsquo;s international
  operations generated revenues of $2,378,000 in the third quarter of 2019, a decrease of 33% from the same quarter in 2018. Revenues
  from international operations comprised 40% of the Company&rsquo;s total revenue for the third quarter in 2019, compared to 50%
  of total revenues for the same quarter in 2018. The decrease in international revenues in the third quarter of 2019 compared to
  the same period in 2018 is primarily due to decreases in subscription revenue and subscription service revenue in Japan due to
  a customer that went live in the third quarter of 2018 that had previously been deferred for 2 years. When the customer went live,
  all of the deferred hosting and services revenue was recognized in the period.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>Comparison of Nine Months Ended September 30, 2019 and 2018</I></B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><B>Revenues</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">Total
  revenues decreased by $1,458,000 or 7%, to $18,995,000 for the nine months ended September 30, 2019 from $20,453,000 for the nine
  months ended September 30, 2018. Software license fee revenues decreased $774,000, or 37%, from the same period in 2018. Subscription
  revenues increased $633,000 or 20% to $3,737,000 from the same period last year. Services and maintenance revenue for the nine
  months ended September 30, 2019 decreased $1,317,000 or 9% from the same period in 2018.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 2.15pt 0 0; text-align: justify">Software license fee revenues decreased
  37% to $1,302,000 in the first nine months of 2019 compared to $2,076,000 in the same period in 2018. This is primarily due to
  Astea Alliance license revenue decreasing by $694,000 or 38%, to $1,138,000 in the first nine months of 2019 from $1,832,000 in
  the first nine months of 2018. The decrease was primarily due to lower perpetual license sales in the U.S., Japan and EMEA and
  partially offset by slightly higher sales in the Asia Pacific region.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 2.15pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">Subscription revenue increased 20%
  to $3,737,000 in the first nine months of 2019 from $3,104,000 in the first nine months of 2018. The increase resulted from a number
  of hosted customers who went live in late 2018 and the first nine months of 2019 as well as the addition of new user licenses by
  certain customers. The Company continues to add new hosting customers. Even though the Company signed new Software as a Service
  (SaaS) customers in the first nine months of 2019, most of the associated hosting revenue may not be recognized until the new customers
  go-live.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"></P>
  
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  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">Services and maintenance revenues
  decreased by 9% to $13,956,000 in the first nine months of 2019 compared to $15,273,000 in the first nine months of 2018. This
  is primarily due to Astea Alliance service and maintenance decreasing by $1,082,000 or 8% compared to the first nine months of
  2018. The decrease was mainly attributable to a larger than usual amount of service revenue recognized in the 2018 period when
  a hosted customer in Japan went live in the first nine months of 2018 for which a substantial amount of the hosting service revenue,
  which had previously been deferred for three years, was recognized. In the nine months ended September 30, 2019, there was no remaining
  revenue to be recognized for this customer in Japan. In addition, there was a decrease in maintenance revenue in 2019 in the U.S.
  for a few customers that transitioned from on-premise to subscription services. Service and maintenance revenues generated by FieldCentrix
  decreased by $234,000 or 14% to $1,488,000 in the first nine months of 2019 compared to $1,722,000 during the same period in 2018.
  The decrease in service revenue is due to a reduction in upgrade projects for existing customers and decreases in maintenance due
  to cancelation by a few small customers.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><B>&nbsp;</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><B>Costs of Revenues</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">Cost of software license fees increased
  by 28% to $2,532,000 in the first nine months of 2019 from $1,976,000 in the first nine months of 2018. Included in the cost of
  software license fees are the costs of capitalized software amortization and the cost of all third party software embedded in the
  Company&rsquo;s software licenses which are sold to customers. Amortization of capitalized software development costs was $2,463,000
  for the first nine months in 2019 compared to $1,940,000 for the same period in 2018. The increase in amortization was due to the
  amortization of Alliance Version 15 that began being amortized during the 4th quarter of 2018 that will continue for 2 years as
  well as amortization of Version 15.1 that was released in March 2019. The gross margin percentage on software license sales was
  (94%) in the first nine months of 2019 compared to 5% in the first nine months of 2018. The decline in the license margin resulted
  from a decrease in software license fees and an increase in amortization of software license fees in the first nine months of 2019.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">Cost of subscriptions increased by
  11% to $884,000 in the first nine months of 2019 from $794,000 in the first nine months of 2018. The increase in cost of subscriptions
  is mainly attributed to the addition of more customers to the SaaS environment and increased hosting compliance costs in the first
  nine months of 2019 compared to the same period in 2018. The gross margin percentage on hosting was 76% in the first nine months
  of 2019 compared to 74% in the first nine months of 2018. The growth in the subscription margin was primarily due to the increase
  in subscription revenues as customers continue to go live.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">Cost of services and maintenance
  decreased 8% to $9,802,000 in the first nine months of 2019 from $10,705,000 in the first nine months of 2018. The decrease in
  cost of service and maintenance is mainly attributed to a decrease in headcount in the U.S., a decrease in subcontractor cost in
  Japan, and decreases in travel expenses in all regions partially offset by an increase in recruiting costs. The gross margin percentage
  was 30% in the first nine months of 2019 and 2018.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><B>&nbsp;</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><B>Gross Profit </B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">Gross profit decreased 17% to $5,777,000
  in the first nine months of 2019 from $6,978,000 in the first nine months of 2018 primarily due to a decrease of license and service
  and maintenance revenues and an increase in software license and subscription costs partially offset by an increase in subscription
  revenue and decrease in service and maintenance costs. As a percentage of revenue, gross profit in the first nine months of 2019
  was 30% compared to 34% in the first nine months of 2018.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><B>&nbsp;</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><B>Operating Expenses</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><I>Product Development</I></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Product development expenses increased 23%
  to $857,000 in the first nine months of 2019 from $697,000 in the first nine months of 2018.&nbsp; Fluctuations in product development
  expense from period to period result from the amount of product development expense that is capitalized. Development costs of $2,301,000
  were capitalized in the first nine months of 2019 compared to $2,430,000 during the same period in 2018 due to additional resources
  working on Version 15 in 2018. In 2018, there had been extra time and resources allocated to Version 15 due to all the additional
  functionality and upgrades being made to this version. Gross product development expense was $3,158,000 in the first nine months
  of 2019 compared to $3,127,000 during the same period in 2018. The slight increase of 1% in gross product development expense was
  primarily due to general inflationary cost increases. The majority of development work is performed in Israel. Product development
  expense as a percentage of revenues was 5% in the first nine months of 2019 and 3% in the first nine months of 2018.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>
  
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  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><I>Sales and Marketing</I></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">Sales and marketing expense increased
  by 4% to $3,122,000 in the first nine months of 2019 from $2,991,000 in the first nine months of 2018. The increase in sales and
  marketing expense resulted from an increase in third party marketing costs and increased headcount in the U.S., partially offset
  by lower sales commissions due to a decrease in commissionable sales. The increase in third party marketing costs is due to the
  Company&rsquo;s strategy of expanding its marketing presence through additional efforts to increase awareness of our products in
  order to improve lead generation and sales opportunities. Increased awareness occurs through additional webinars in all regions
  focused on the vertical industries in which the Company operates, attendance at more trade shows, and new strategies to improve
  lead generation for the Company&rsquo;s sales force.&nbsp; As a percentage of revenues, sales and marketing expense was 16% in
  the first nine months of 2019 and 15% in the first nine months of 2018.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><I>General and Administrative</I></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">General and administrative expenses
  consist of salaries, benefits and related costs for the Company&rsquo;s finance, administrative and executive management personnel,
  legal costs, accounting costs, and various costs associated with the Company&rsquo;s status as a public company. General and administrative
  expenses increased 21% to $3,479,000 during the first nine months of 2019 from $2,868,000 in the first nine months of 2018 mainly
  due to increased professional fees which we did not incur during the same period in 2018. As a percentage of revenue, general and
  administrative expenses were 18% in the first nine months of 2019 compared to 14% in the first nine months of 2018.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><B>&nbsp;</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><B>Net Interest Expense</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">Net interest expense was $217,000
  in the first nine months of 2019 compared to $163,000 in the first nine months of 2018. The increase in interest expense is mainly
  due to interest paid on accrued, but unpaid preferred dividends compared to the same period in 2018offset by a slight decrease
  in the interest rate charged by Bridge Bank on the Company&rsquo;s line of credit due to a decrease in the prime rate and by a
  lower average line of credit during the first nine months of 2019 compared to the same period in 2018 which resulted in a small
  decline in the interest paid to Bride bank for the period. Per the preferred stock agreements, unpaid accrued preferred dividends
  incur an interest charge calculated at 10% per annum.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><B>&nbsp;</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><B>Income Tax Expense</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">The Company recorded a provision
  for income tax of $122,000 for first nine months of 2019 compared to $19,000 for the same quarter in 2018. The tax expense increase
  resulted from income tax paid in Australia during the first nine months of 2019 compared to no tax provision paid in the same period
  in 2018. In the past, there has been no tax expense in the region due to the complete utilization of operating losses from prior
  periods which have been fully utilized. We expect to pay taxes in the future in the APAC region, as long as they remain profitable.
  The effective tax rate in the APAC region is 30%.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><B>&nbsp;</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><B>International Operations</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">The Company&rsquo;s international
  operations generated revenues of $7,464,000 in the first nine months of 2019, a decrease of 19% compared to the same period in
  2018. Revenues from international operations comprised 39% of the Company&rsquo;s total revenue for the first nine months in 2019
  compared to 45% in the first nine months of 2018. The decrease in international revenues is primarily due to a decrease revenues
  in all international regions, primarily Japan.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><B>&nbsp;</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><B><U>Liquidity and Capital Resources
  </U></B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><B>&nbsp;</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 10; text-align: justify"><I>Operating Activities</I></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 480pt">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company generated $1,693,000 of cash from
  operating activities in the first nine months of 2019 compared to $1,722,000 in the first nine months of 2018.&nbsp; The slight
  decrease in operating cash flows of $29,000 was primarily due to a decrease in income of $2,260,000, offset by an increase in noncash
  charges of $211,000, partially offset by an increase in collections of $1,380,000 from accounts receivable, a decrease in prepaid
  expenses of $143,000, and increases in accounts payable and accrued expenses of $354,000 and deferred revenue of $145,000.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><I>&nbsp;</I></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><I>&nbsp;</I></P>
  
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  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><I></I></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><I>&nbsp;</I></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><I>&nbsp;</I></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify; text-indent: 10pt"><I>Investing Activities</I></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company used $2,446,000 for investing activities
  in the first nine months of 2019 compared to $2,472,000 for the first nine months of 2018. The slight increase in cash used for
  investing activities is primarily attributable to a decrease of $129,000 in capitalized software development costs partially offset
  by an increase of $103,000 for the acquisition of property and equipment.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><I>&nbsp;</I></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 13.5pt; text-align: justify; text-indent: -4.5pt"><I>Financing
  Activities</I></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">The Company used $137,000 in cash
  for financing activities in the first nine months of 2019, compared to generating $146,000 from financing activities during the
  first nine months in 2018.&nbsp;&nbsp;The additional use of $283,000 of cash for financing activities resulted from the payment
  of $200,000 of preferred stock dividend payments in the first nine months of 2019 compared to $105,000 payments in the first nine
  months of 2018.&nbsp; In addition, the Company borrowed $12,443,000 and repaid $12,524,000 on its line of credit from WAB in the
  first nine months of 2019 compared to borrowing $8,367,000 and repaying $7,975,000 on its line of credit in 2018. The Company repaid
  $225,000 on the term loan with WAB in 2018. In addition, the Company received $144,000 from the exercise of stock options in the
  first nine months of 2019 compared to $84,000 in the same period in 2018.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">The effect of exchange rates on cash
  related to the U.S. dollar exchange rates for most other currencies in which the Company operates, primarily the Australian dollar,
  Japanese yen, the Euro, the British pound sterling and Israel shekel, provided an increase in cash of $12,000 in the first nine
  months of 2019 compared to $19,000 in the first nine months of 2018.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 10; text-align: justify"><I>Operating Matters and Liquidity</I></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">The Company has a
  history of net losses and an accumulated deficit of $36,364,000 as of September 30, 2019. In the first nine months of 2019, the
  Company had a net loss of $2,020,000 compared to income of $240,000 generated in the first nine months of 2018. Further, at September
  30, 2019, the Company had a working capital ratio of .57:1, with cash and cash equivalents of $1,839,000 compared to December 31,
  2018 when the Company had cash and cash equivalents of $1,276,000. The increase in cash and cash equivalents for the first nine
  months 2019 was primarily driven by an increase in cash provided by operations in 2019 compared to 2018 and a decrease in capitalized
  software development costs, partially offset by an increase in the dividend payment.</P>
  
  <P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>&nbsp;</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As of September 30, 2019, the Company owed
  $2,588,000 against the line of credit from Western Alliance Bank (&ldquo;WAB&rdquo;).&nbsp;&nbsp; As of September 30, 2019, the
  availability under the line of credit was $262,000. The Company has projected revenues that management believes will provide sufficient
  funds along with the additional borrowings available under its line of credit to sustain its continuing operations through at least
  November 15, 2020. The Second Loan Agreement increased the availability under the line of credit from $2,400,000 to $2,850,000
  (see Note 4).</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company was in compliance with the WAB
  financial and liquidity covenant as of September 30, 2019 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 amount due to WAB under the line of credit as
  of September 30, 2019 were classified in the accompanying condensed consolidated balance sheet in accordance with the repayment
  terms stipulated in the agreement with WAB.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT STYLE="color: #222222; background-color: white">Our
  primary cash requirements are to fund operations</FONT> 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.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Management&rsquo;s current operating plan is
  to maintain and/or reduce operating expenses in order to be aligned with expected revenues.&nbsp; The primary area of focus will
  continue to be headcount and costs from outside consultants.&nbsp; 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.&nbsp; The Company has a substantial professional services backlog that resulted from new customers added
  in 2019 as well as upgrade projects from our existing customers as they move to the latest version of Astea Alliance.&nbsp;&nbsp;
  In 2020, the Company will continue to consider ways to reduce operating expenses in certain areas of the Company in order to maintain
  its liquidity. However, management has implemented new marketing initiatives which have increased our spending in this area in
  2019. We believe the new initiatives will directly contribute to increasing new business, which is essential to our growth.&nbsp;
  Operations will generate enough cash to meet obligations at least <FONT STYLE="color: #222222; background-color: white">through
  November 15, 2020. As noted above, if the Company&rsquo;s actual results fall short of expectations, the Company will make cost
  adjustments to improve the Company&rsquo;s operating cash flows. </FONT>In addition,&nbsp;we plan to maintain the same level of
  investment in software development and we do not expect to increase capital expenditures.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>
  
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  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; color: #222222"><FONT STYLE="background-color: white">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.</FONT></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; color: #222222">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 10; text-align: justify"><I>Off-Balance Sheet Arrangement
  Transactions</I></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><I>&nbsp;</I></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">The Company is not involved in off-balance
  sheet arrangements that have or are reasonably likely to have a material current or future impact on our financial condition, changes
  in financial condition, revenues or expenses result in operations, liquidity, capital expenditures or capital resources.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><B>&nbsp;</B></P>
  
  <TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
  <TD STYLE="width: 0%"></TD><TD STYLE="width: 8%"><B><U>Item 3.</U></B></TD><TD STYLE="padding-right: 1.8pt; width: 92%"><B><U>QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK</U></B></TD></TR></TABLE>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 13.5pt; text-indent: -13.5pt"><B>&nbsp;</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">Market risk represents the risk of
  loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure
  is primarily a result of fluctuations in interest rates and foreign currency. We do not hold financial instruments for trading
  purposes.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Interest Rate Risk.</I> Our exposure to
  market risk for changes in interest rates relates primarily to our balances outstanding on our revolving line of credit with WAB,
  as the interest rate is variable. At September 30, 2019, the outstanding balances on our line of credit under the revolving credit
  facility with WAB was $2,588,000.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Foreign Currency Risk.</I> All costs associated
  with the Company&rsquo;s foreign operations in the United Kingdom, Australia, Japan and Israel are denominated in their respective
  local currencies and translated into U.S. dollars for financial reporting. As a result, the Company is exposed to risks to the
  extent that the rate of inflation in many of itws foreign operating regions differs from the rate of revaluation of their related
  currencies in relation to the U.S. dollar of if the timing of such revaluations lags behind inflation in these regions. In such
  an event, the costs of the Company&rsquo;s operations in these regions, measured in U.S. dollars, will change and the U.S. dollar
  measured results of operations will be affected.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company does not use foreign currency forward
  exchange contracts or purchased currency options to hedge local currency cash flows or for trading purposes. All sales arrangements
  with international customers are denominated in foreign currency. For the nine months ended September 30, 2019, approximately 39%
  of the Company&rsquo;s overall revenue resulted from sales to customers outside the United States. A 10% change in the value of
  the U.S. dollar relative to each of the currencies of the Company&rsquo;s non-U.S.-generated sales would not have resulted in a
  material change to its results of operations. The Company does not expect any material loss with respect to foreign currency risk.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0"><B>&nbsp;</B></P>
  
  <TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
  <TD STYLE="width: 0%"></TD><TD STYLE="width: 8%"><B><U>Item 4.</U></B></TD><TD STYLE="padding-right: 1.8pt; width: 92%"><B><U>CONTROLS AND PROCEDURES</U></B></TD></TR></TABLE>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0"><B>&nbsp;</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Our management has evaluated the effectiveness
  of our disclosure controls and procedures as required by Exchange Act Rules 13a-15 as of the end of the period covered by this
  report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure
  controls and procedures are effective.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>Changes in Internal Control Over Financial Reporting</B></P>
  
  <P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the quarter ended March 31, 2019, we
  implemented internal controls for the new accounting standard adopted during the period, Leases, but there were no changes in
  our internal control over financial reporting during the fiscal quarter ended September 30, 2019 that materially affected, or
  are reasonably likely to materially affect, our internal control over financial reporting.<B>&nbsp;</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>
  
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  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B></B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B></B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><U>PART II - OTHER INFORMATION</U></B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><B>&nbsp;</B></P>
  
  <TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
  <TD STYLE="width: 8%"><B><U>Item 1A.</U></B></TD><TD STYLE="text-align: justify; padding-right: 1.8pt; padding-left: 20pt; width: 92%"><B><U>RISK FACTORS</U></B></TD></TR></TABLE>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0.9pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In addition to the risk factors set forth in
  this report, you should carefully consider the factors discussed in Part I, &ldquo;Item 1A. Risk Factors&rdquo; in the Company&rsquo;s
  Annual Report on Form 10-K for the year ended December 31, 2018, which could materially affect the Company&rsquo;s business, financial
  condition or future results. The risks described in this report and in the Company&rsquo;s Annual Report on Form 10-K for the year
  ended December 31, 2018 are not the only risks facing the Company. Additional risks and uncertainties not currently known to the
  Company or that the Company currently deems to be immaterial also may materially adversely affect the Company&rsquo;s business,
  financial condition and/or operating results.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><B><I>&nbsp;</I></B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify"><B><I>Variability of Quarterly Results
  </I></B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">Risks to the Company on a quarterly
  basis, and which may vary from quarter to quarter, include but are not limited to the following:</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify">&nbsp;</P>
  
  <TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
  <TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&#183;</FONT></TD><TD STYLE="text-align: justify; padding-right: 1.8pt">The Company&rsquo;s quarterly operating results have varied in the past,
  and may vary significantly in the future depending on factors such as the size, timing and recognition of revenue from significant
  orders, the timing of new product releases and product enhancements, and market acceptance of these new releases and enhancements,
  increases in operating expenses, and seasonality of its business.</TD></TR></TABLE>
  
  <TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
  <TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&#183;</FONT></TD><TD STYLE="text-align: justify; padding-right: 1.8pt">The market price of the Company&rsquo;s common stock could be subject to
  significant fluctuations in response to, and may be adversely affected by, variations in quarterly operating results, changes in
  earnings estimates by analysts, developments in the software industry, adverse earnings or other financial announcements of the
  Company&rsquo;s customers and general stock market conditions, as well as other factors.</TD></TR></TABLE>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><I>Merger Agreement</I></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>
  
  <P STYLE="font: 10pt/107% Times New Roman, Times, Serif; margin: 0 0 8pt; text-align: justify">On October 7, 2019, the Company
  entered into an Agreement and Plan of Merger (&ldquo;Merger Agreement&rdquo;) with IFS Americas, Inc. (&ldquo;Parent&rdquo;) and
  IFS Amber, Inc. (&ldquo;Merger Sub&rdquo;), a wholly owned subsidiary of Parent. Subject to the terms and conditions of the Agreement,
  Merger Sub will merge with the Company and then become a subsidiary of Parent (&ldquo;the Merger&rdquo;). It is expected for the
  merger to close before the end of calendar year 2019.</P>
  
  <P STYLE="font: 10pt/107% Times New Roman, Times, Serif; margin: 0 0 8pt; text-align: justify">The transaction will result in the
  acquisition of all outstanding shares of the Company by Parent for cash. Each outstanding share of common stock, par value $0.01
  per share, excluding shares held in treasury, will be purchased for $12.00 per share. Furthermore, each option to purchase shares
  of the Company common stock immediately prior to the effective time of the transaction, whether vested or unvested, will be cancelled
  and converted into the right to receive an amount in cash equal to the product of the total number of shares of common stock subject
  to the option, multiplied by the excess, if any, of the merger consideration, $12.00, over the applicable exercise price of each
  option.</P>
  
  <P STYLE="font: 10pt/107% Times New Roman, Times, Serif; margin: 0 0 8pt; text-align: justify">The Merger Agreement contains various
  representations, warranties and covenants by the Company, Parent and Merger Sub. The Merger Agreement requires the Company to call
  and hold a special stockholders meeting and requires the board of directors of the Company to recommend that the Company&rsquo;s
  stockholders approve the Merger Agreement and the merger.</P>
  
  <P STYLE="font: 10pt/107% Times New Roman, Times, Serif; margin: 0 0 8pt; text-align: justify">The Merger Agreement requires the
  Company and Parent to use reasonable best efforts to take all reasonable actions necessary under applicable law to consummate the
  transactions contemplated by the Merger Agreement.</P>
  
  <P STYLE="font: 10pt/107% Times New Roman, Times, Serif; margin: 0 0 8pt; text-align: justify">The Merger Agreement contains certain
  termination rights for each of the Company and Parent, including the right of each party to terminate the Merger Agreement if the
  merger has not been consummated by the end of January 31, 2020.</P>
  
  <P STYLE="font: 10pt/107% Times New Roman, Times, Serif; margin: 0 0 8pt; text-align: justify">The Merger Agreement provides for
  a payment by the Company to Parent a termination fee in the amount of $2,569,746 in the case of a termination of the Merger Agreement
  under certain circumstances described in the Merger Agreement. Parent shall pay a termination fee of $2,936,852 to the Company
  in the event the Merger Agreement is terminated by Parent subject to certain conditions contained in the Merger Agreement.</P>
  
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  <P STYLE="font: 10pt/107% Times New Roman, Times, Serif; margin: 0 0 8pt; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt/107% Times New Roman, Times, Serif; margin: 0 0 8pt; text-align: justify">The Company board of directors has
  unanimously determined that the transactions contemplated by the Merger Agreement are fair to, and in the best interest of, the
  Company and its stockholders, and has unanimously recommended that the Company board of directors approve the Merger Agreement
  and the transactions contemplated therein. The obligations of the parties to consummate the merger are subject to customary closing
  conditions.</P>
  
  <P STYLE="font: 10pt/107% Times New Roman, Times, Serif; margin: 0 0 8pt; text-align: justify">This description of the Merger Agreement,
  the transactions contemplated by the Merger Agreement, and the background to the signing same of does not purport to be complete
  and is qualified in its entirety by reference to the Merger Agreement, which was filed with the SEC by the Company on October 8,
  2019 and is incorporated herein by reference, and attached hereto as Exhibit 2.1, reference.</P>
  
  
  
  <P STYLE="font: 10pt/107% Times New Roman, Times, Serif; margin: 0 0 8pt; text-align: justify"><B><I>Risks Associated with a Failure
  to Consummate the Merger</I>&nbsp;&nbsp;</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The fact that there can be no assurance that
  all conditions to the parties&rsquo; obligations to consummate the Merger will be satisfied and as a result the possibility that
  the Merger might not be completed. If the Merger is not completed, (i)&nbsp;the Company will have incurred significant risk, transaction
  expenses and opportunity costs, including the possibility of disruption to its operations, diversion of management and employee
  attention, employee attrition and a potentially negative effect on its business and client relationships, (ii)&nbsp;depending on
  the circumstances that caused the Merger not to be completed, it is likely that the price of the Company&rsquo;s common stock will
  decline, potentially significantly and (iii) the market&rsquo;s perception of the Company&rsquo;s prospects could be adversely
  affected.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>
  
  
  <!-- Field: Page; Sequence: 35 -->
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      <DIV STYLE="page-break-before: always; margin-top: 6pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
      <!-- Field: /Page -->
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><U>Item 6</U>. <U>EXHIBITS</U></B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0">&nbsp;</P>
  
  <TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
  <TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">2.1</TD><TD STYLE="text-align: justify; padding-right: 1.8pt">Agreement and Plan of Merger among Astea International Inc., IFS
                                                                 Americas, Inc., and IFS Amber, Inc., dated October 7, 2019 (<A HREF="http://www.sec.gov/Archives/edgar/data/945989/000095015919000163/ex2-1.htm">Incorporated herein by reference to Exhibit 2.1 to the Company&rsquo;s Registration Statement on Form 8-K filed on October 8, 2019</A>)</TD></TR>                                                           <TR STYLE="vertical-align: top">
  <TD>&nbsp;</TD><TD>10.27</TD><TD STYLE="text-align: justify; padding-right: 1.8pt"><A HREF="ex10-27.htm">Closing Compensation Agreement between Rick
                               Etskovitz and Astea International Inc. dated September 17, 2019</A></TD></TR>
  </TABLE>
  
  <TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
  <TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">31.1</TD><TD STYLE="text-align: justify; padding-right: 1.8pt"><A HREF="ex31-1.htm">Certification Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002</A></TD></TR></TABLE>
  
  <TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
  <TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">31.2</TD><TD STYLE="text-align: justify"><A HREF="ex31-2.htm">Certification Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002</A></TD></TR></TABLE>
  
  <TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
  <TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">32.1</TD><TD STYLE="text-align: justify"><A HREF="ex32-1.htm">Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 &ndash; Chief Executive Officer</A></TD></TR></TABLE>
  
  <TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
  <TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">32.2</TD><TD STYLE="text-align: justify"><A HREF="ex32-2.htm">Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 &ndash; Chief Financial Officer</A></TD></TR></TABLE>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0"><B>&nbsp;</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0"><B>&nbsp;</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0"><B>&nbsp;</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0"><B>&nbsp;</B></P>
  
  <!-- Field: Page; Sequence: 36 -->
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      <DIV STYLE="page-break-before: always; margin-top: 6pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
      <!-- Field: /Page -->
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0"><B></B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0"><B>&nbsp;</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0"><B>&nbsp;</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: center"><B>SIGNATURES</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: justify; text-indent: 0.5in">Pursuant to the
  requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
  undersigned thereunto duly authorized.</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0"></P>
  
  <TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
  <TR STYLE="vertical-align: top">
      <TD STYLE="width: 43%; padding-right: 1.8pt; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="width: 57%; padding-right: 1.8pt; padding-left: 5.4pt">ASTEA INTERNATIONAL INC.</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: 1.8pt; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 1.8pt; padding-left: 5.4pt">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: 1.8pt; padding-left: 5.4pt">Date:&nbsp;&nbsp;November 14, 2019</TD>
      <TD STYLE="padding-right: 1.8pt; padding-left: 5.4pt"><U>/s/Zack Bergreen</U></TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: 1.8pt; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 1.8pt; padding-left: 5.4pt">Zack Bergreen</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: 1.8pt; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 1.8pt; padding-left: 5.4pt">Chief Executive Officer</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: 1.8pt; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 1.8pt; padding-left: 5.4pt">(Principal Executive Officer)</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: 1.8pt; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 1.8pt; padding-left: 5.4pt">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: 1.8pt; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 1.8pt; padding-left: 5.4pt">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: 1.8pt; padding-left: 5.4pt">Date:&nbsp;&nbsp;November 14, 2019</TD>
      <TD STYLE="padding-right: 1.8pt; padding-left: 5.4pt"><U>/s/Rick Etskovitz</U></TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: 1.8pt; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 1.8pt; padding-left: 5.4pt">Rick Etskovitz</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: 1.8pt; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 1.8pt; padding-left: 5.4pt">Chief Financial Officer</TD></TR>
  <TR STYLE="vertical-align: top">
      <TD STYLE="padding-right: 1.8pt; padding-left: 5.4pt">&nbsp;</TD>
      <TD STYLE="padding-right: 1.8pt; padding-left: 5.4pt">(Principal Financial and Chief Accounting Officer)</TD></TR>
  </TABLE>
  
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0"></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-indent: 3in">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-indent: 3in"></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 1in; text-align: justify; text-indent: -0.5in">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0">&nbsp;</P>
  
  <!-- Field: Page; Sequence: 37 -->
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      <DIV STYLE="page-break-before: always; margin-top: 6pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
      <!-- Field: /Page -->
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0"></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0"><B>&nbsp;</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: center"><B><U>EXHIBIT INDEX</U></B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: center">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0; text-align: center"><B>&nbsp;</B></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0"><U>No.</U>&#9;<U>Description</U></P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0">&nbsp;</P>
  
  <TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <TR>
      <TD STYLE="vertical-align: top; width: 10%; padding-right: 0.8pt">2.1</TD>
      <TD STYLE="vertical-align: bottom; width: 4%; padding-right: 0.8pt">&nbsp;</TD>
      <TD STYLE="vertical-align: top; width: 86%; padding-right: 0.8pt">Agreement and Plan of Merger among Astea International
      Inc., IFS Americas, Inc., and IFS Amber, Inc., dated October 7, 2019 (<A HREF="http://www.sec.gov/Archives/edgar/data/945989/000095015919000163/ex2-1.htm">Incorporated herein by reference to Exhibit 2.1 to the Company&rsquo;s Registration Statement on Form 8-K filed on October 8, 2019</A>)</TD></TR>
  <TR>
      <TD STYLE="vertical-align: top; padding-right: 0.8pt">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; padding-right: 0.8pt">&nbsp;</TD>
      <TD STYLE="vertical-align: top; padding-right: 0.8pt">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: top; padding-right: 0.8pt">10.27</TD>
      <TD STYLE="vertical-align: bottom; padding-right: 0.8pt">&nbsp;</TD>
      <TD STYLE="vertical-align: top; padding-right: 0.8pt"><A HREF="ex10-27.htm">Closing Compensation Agreement between Rick Etskovitz and Astea International Inc. dated September 17, 2019</A></TD></TR>
  <TR>
      <TD STYLE="vertical-align: top; padding-right: 0.8pt">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; padding-right: 0.8pt">&nbsp;</TD>
      <TD STYLE="vertical-align: top; padding-right: 0.8pt">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: top; padding-right: 0.8pt">31.1</TD>
      <TD STYLE="vertical-align: bottom; padding-right: 0.8pt">&nbsp;</TD>
      <TD STYLE="vertical-align: top; padding-right: 0.8pt"><A HREF="ex31-1.htm">Certification Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002</A></TD></TR>
  <TR>
      <TD STYLE="vertical-align: top; padding-right: 0.8pt">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; padding-right: 0.8pt">&nbsp;</TD>
      <TD STYLE="vertical-align: top; padding-right: 0.8pt">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: top; padding-right: 0.8pt">31.2</TD>
      <TD STYLE="vertical-align: bottom; padding-right: 0.8pt">&nbsp;</TD>
      <TD STYLE="vertical-align: top; padding-right: 0.8pt"><A HREF="ex31-2.htm">Certification Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of&nbsp;&nbsp;the Sarbanes-Oxley Act of 2002</A></TD></TR>
  <TR>
      <TD STYLE="vertical-align: top; padding-right: 0.8pt">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; padding-right: 0.8pt">&nbsp;</TD>
      <TD STYLE="vertical-align: top; padding-right: 0.8pt">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: top; padding-right: 0.8pt">32.1</TD>
      <TD STYLE="vertical-align: bottom; padding-right: 0.8pt">&nbsp;</TD>
      <TD STYLE="vertical-align: top; padding-right: 0.8pt"><A HREF="ex32-1.htm">Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 &ndash; Chief Executive Officer</A></TD></TR>
  <TR>
      <TD STYLE="vertical-align: top; padding-right: 0.8pt">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; padding-right: 0.8pt">&nbsp;</TD>
      <TD STYLE="vertical-align: top; padding-right: 0.8pt">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: top; padding-right: 0.8pt">32.2</TD>
      <TD STYLE="vertical-align: bottom; padding-right: 0.8pt">&nbsp;</TD>
      <TD STYLE="vertical-align: top; padding-right: 0.8pt"><A HREF="ex32-2.htm">Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 &ndash; Chief Financial Officer</A></TD></TR>
  <TR>
      <TD STYLE="vertical-align: top; padding-right: 0.8pt">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; padding-right: 0.8pt">&nbsp;</TD>
      <TD STYLE="vertical-align: top; padding-right: 0.8pt">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: top; padding-right: 0.8pt">101.INS</TD>
      <TD STYLE="vertical-align: bottom; padding-right: 0.8pt">&nbsp;</TD>
      <TD STYLE="vertical-align: top; padding-right: 0.8pt">XBRL Instance Document</TD></TR>
  <TR>
      <TD STYLE="vertical-align: top; padding-right: 0.8pt">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; padding-right: 0.8pt">&nbsp;</TD>
      <TD STYLE="vertical-align: top; padding-right: 0.8pt">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: top; padding-right: 0.8pt">101.SCH</TD>
      <TD STYLE="vertical-align: bottom; padding-right: 0.8pt">&nbsp;</TD>
      <TD STYLE="vertical-align: top; padding-right: 0.8pt">XBRL Taxonomy Extension Schema</TD></TR>
  <TR>
      <TD STYLE="vertical-align: top; padding-right: 0.8pt">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; padding-right: 0.8pt">&nbsp;</TD>
      <TD STYLE="vertical-align: top; padding-right: 0.8pt">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: top; padding-right: 0.8pt">101.CAL</TD>
      <TD STYLE="vertical-align: bottom; padding-right: 0.8pt">&nbsp;</TD>
      <TD STYLE="vertical-align: top; padding-right: 0.8pt">XBRL Taxonomy Extension Calculation Linkbase</TD></TR>
  <TR>
      <TD STYLE="vertical-align: top; padding-right: 0.8pt">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; padding-right: 0.8pt">&nbsp;</TD>
      <TD STYLE="vertical-align: top; padding-right: 0.8pt">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: top; padding-right: 0.8pt">101.DEF</TD>
      <TD STYLE="vertical-align: bottom; padding-right: 0.8pt">&nbsp;</TD>
      <TD STYLE="vertical-align: top; padding-right: 0.8pt">XBRL Taxonomy Extension Definition Linkbase</TD></TR>
  <TR>
      <TD STYLE="vertical-align: top; padding-right: 0.8pt">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; padding-right: 0.8pt">&nbsp;</TD>
      <TD STYLE="vertical-align: top; padding-right: 0.8pt">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: top; padding-right: 0.8pt">101.LAB</TD>
      <TD STYLE="vertical-align: bottom; padding-right: 0.8pt">&nbsp;</TD>
      <TD STYLE="vertical-align: top; padding-right: 0.8pt">XBRL Taxonomy Extension Label Linkbase</TD></TR>
  <TR>
      <TD STYLE="vertical-align: top; padding-right: 0.8pt">&nbsp;</TD>
      <TD STYLE="vertical-align: bottom; padding-right: 0.8pt">&nbsp;</TD>
      <TD STYLE="vertical-align: top; padding-right: 0.8pt">&nbsp;</TD></TR>
  <TR>
      <TD STYLE="vertical-align: top; padding-right: 0.8pt">101.PRE</TD>
      <TD STYLE="vertical-align: bottom; padding-right: 0.8pt">&nbsp;</TD>
      <TD STYLE="vertical-align: top; padding-right: 0.8pt">XBRL Taxonomy Extension Presentation Linkbase</TD></TR>
  </TABLE>
  <P STYLE="font: 7.5pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>
  
  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 1.8pt 0 0">&nbsp;</P>
  
  <!-- Field: Page; Sequence: 38; Options: Last -->
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metadata_filer: {"company-data": {"conformed-name": "ASTEA INTERNATIONAL INC", "cik": "0000945989", "assigned-sic": "7372", "irs-number": "232119058", "state-of-incorporation": "DE", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "10-Q", "act": "34", "file-number": "000-26330", "film-number": "191220262"}, "business-address": {"street1": "240 GIBRALTAR ROAD", "street2": "SUITE 300", "city": "HORSHAM", "state": "PA", "zip": "19044", "phone": "2156822500"}, "mail-address": {"street1": "240 GIBRALTAR ROAD", "street2": "SUITE 300", "city": "HORSHAM", "state": "PA", "zip": "19044"}}
text: UNITED STATES
  SECURITIES AND EXCHANGE COMMISSION
  WASHINGTON, D.C. 20549
  ___________________________________________
  FORM 10-Q
  (Mark One)
  [X]
  Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
  For the quarterly period ended
  September 30, 2019
  or
  [   ] Transition Report Pursuant to Section
  13 or 15(d) of The Securities Exchange Act of 1934.
  For the transition period from	 _________________  to	_____________________
  Commission File Number:
  0-26330
  ASTEA INTERNATIONAL INC.
  (Exact name of registrant as specified in its
  charter)
  Delaware
  23-2119058
  (State or other jurisdiction of
  (I.R.S. Employer
  incorporation or organization)
  Identification No.)
  240 Gibraltar Road, Horsham, PA
  19044
  (Address of principal executive offices)	
  (Zip Code)
  Registrant's telephone number, including
  area code:
  (215) 682-2500
  N/A
  (Former name, former address and former fiscal
  year, if changed since last report)
  Securities registered pursuant to Section
  12(b) of the act:
  Title of Each Class
  Trading Symbol
  Name of Exchange on Which Registered
  Common Stock, par value $0.01 per share
  ATEA
  OTCQB
  Indicate by check mark whether the registrant:
  (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
  12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
  filing requirements for the past 90 days.
  Yes
  X
  No
  Indicate by check mark whether the registrant
  has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
  and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant
  was required to submit and post such files).
  Yes
  X
  No
  Indicate by check mark whether the registrant is a large accelerated
  filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated
  filer," "accelerated filer," "smaller reporting company" and "emerging growth company"
  in Rule 12b-2 of the Exchange Act. (Check one):
  Large accelerated filer
  q
  Accelerated filer
  q
  Non-accelerated filer
  q
  Smaller reporting company
  x
  Emerging growth company
  q
  (Do not check if a smaller reporting company)
  If an emerging growth company, indicate
  by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
  accounting standards provided pursuant to Section 13(a) of the Exchange Act.
  o
  Indicate by check mark whether the registrant is a shell company
  (as defined in Rule 12b-2 of the Exchange Act).
  Yes
  No
  X
  As of November 11, 2019, 3,883,299 shares of
  the registrant's Common Stock, par value $.01 per share, were outstanding.
  1
  ASTEA INTERNATIONAL INC. AND SUBSIDIARIES
  FORM 10-Q
  QUARTERLY REPORT
  INDEX
  Page No.
  Facing Sheet
  1
  Index
  2
  PART I - FINANCIAL INFORMATION
  Item 1.
  Financial Statements
  Condensed Consolidated Balance Sheets as of September 30, 2019 (unaudited)
  and December 31, 2018
  3
  Condensed Consolidated Statements of Operations (unaudited)
  4
  Condensed Consolidated Statements of Comprehensive (Loss) Income (unaudited)
  5
  Condensed Consolidated Statements of Stockholders' Deficit for
      the Three and Nine Months
  Ended September 30, 2019 (unaudited)
  6
  Condensed Consolidated Statements of Stockholders' Deficit for
      the Three and Nine Months
  Ended September 30, 2018 (unaudited)
  7
  Condensed Consolidated Statements of Cash Flows (unaudited)
  8
  Notes to Unaudited Condensed Consolidated Financial Statements
  9
  Item 2.
  Management's Discussion and Analysis of Financial
  Condition and Results of Operations
  23
  Item 3.
  Quantitative and Qualitative Disclosure About Market Risk
  33
  Item 4.
  Controls and Procedures
  33
  PART II - OTHER INFORMATION
  Item 1A.
  Risk Factors
  34
  Item 6.
  Exhibits
  36
  Signatures
  37
  2
  PART I - FINANCIAL INFORMATION
  Item 1. FINANCIAL STATEMENTS
  ASTEA INTERNATIONAL INC. AND SUBSIDIARIES
  CONDENSED CONSOLIDATED BALANCE SHEETS
  September 30,
  December
          31,
  2019
  (Unaudited)
  2018*
  ASSETS
  Current assets:
  Cash and cash equivalents
  $
  400,000
  $
  1,276,000
  Accounts receivables, net of reserves allowance of $91,000 (unaudited)
  and $92,000, respectively
  4,973,000
  6,294,000
  Prepaid expenses and other current assets
  432,000
  429,000
  Deferred hosting costs
  1,602,000
  992,000
  Total current assets
  7,407,000
  8,991,000
  Property and equipment, net
  171,000
  89,000
  Capitalized software development costs, net
  4,437,000
  4,599,000
  Restricted cash
  70,000
  72,000
  Other long-term assets
  540,000
  517,000
  Right-of-use assets
  2,284,000
  -
  Total assets
  $
  14,909,000
  $
  14,268,000
  LIABILITIES AND STOCKHOLDERS' DEFICIT
  Current liabilities:
  Accounts payable and accrued expenses
  $
  4,842,000
  $
  4,137,000
  Current lease liabilities
  961,000
  -
  Deferred revenues
  9,872,000
  10,521,000
  Total current liabilities
  15,675,000
  14,658,000
  Long-term liabilities:
  Borrowings under line of credit
  2,588,000
  2,669,000
  Long-term accrued expenses
  368,000
  323,000
  Deferred tax liability
  49,000
  49,000
  Deferred revenues, net of current portion
  1,351,000
  763,000
  Lease liabilities, net of current portion
  1,323,000
  -
  Total long-term liabilities
  5,679,000
  3,804,000
  Commitments and contingencies
  Stockholders' deficit:
  Convertible preferred stock, $.01 par value, shares
  authorized 5,000,000:
  Series A issued and outstanding 826,000 shares
  8,000
  8,000
  Series B issued and outstanding 797,000 shares
  8,000
  8,000
  Common stock $.01 par value, 25,000,000 shares authorized;
  issued 3,731,000 and 3,659,000 shares; outstanding
  3,689,000 and 3,617,000 shares, respectively
  37,000
  37,000
  Additional paid-in-capital
  31,342,000
  31,455,000
  Accumulated deficit
  (36,364,000
  )
  (34,344,000
  )
  Accumulated other comprehensive loss
  (1,268,000
  )
  (1,150,000
  )
  Treasury stock at cost, 42,000 common shares
  (208,000
  )
  (208,000
  )
  Total stockholders' deficit
  (6,445,000
  )
  (4,194,000
  )
  Total liabilities and stockholders' deficit
  $
  14,909,000
  $
  14,268,000
  *
  Derived from
  audited financial statements
  See accompanying notes to the unaudited condensed
          consolidated financial statements.
  3
  ASTEA INTERNATIONAL INC. AND SUBSIDIARIES
  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
  (Unaudited)
  Three Months
  Nine Months
  Ended September 30
  ,
  Ended September 30,
  2019
  2018
  2019
  2018
  Revenues:
  Software license fees
  $
  140,000
  $
  765,000
  $
  1,302,000
  $
  2,076,000
  Subscriptions
  1,278,000
  1,412,000
  3,737,000
  3,104,000
  Services and maintenance
  4,542,000
  4,948,000
  13,956,000
  15,273,000
  Total revenues
  5,960,000
  7,125,000
  18,995,000
  20,453,000
  Costs of revenues:
  Cost of software license fees
  908,000
  750,000
  2,532,000
  1,976,000
  Cost of subscriptions
  325,000
  369,000
  884,000
  794,000
  Cost of services and maintenance
  3,292,000
  3,696,000
  9,802,000
  10,705,000
  Total cost of  revenues
  4,525,000
  4,815,000
  13,218,000
  13,475,000
  Gross profit
  1,435,000
  2,310,000
  5,777,000
  6,978,000
  Operating Expenses:
  Product development
  251,000
  330,000
  857,000
  697,000
  Sales and marketing
  1,156,000
  1,013,000
  3,122,000
  2,991,000
  General and administrative
  1,355,000
  972,000
  3,479,000
  2,868,000
  Total operating
  expenses
  2,762,000
  2,315,000
  7,458,000
  6,556,000
  (Loss) income from operations
  (1,327,000
  )
  (5,000
  )
  (1,681,000
  )
  422,000
  Interest expense, net
  78,000
  64,000
  217,000
  163,000
  (Loss) income before income taxes
  (1,405,000
  )
  (69,000
  )
  (1,898,000
  )
  259,000
  Income tax expense
  84,000
  1,000
  122,000
  19,000
  Net (loss) income
  (1,489,000
  )
  (70,000
  )
  (2,020,000
  )
  240,000
  Preferred dividend
  125,000
  125,000
  375,000
  375,000
  Net loss allocable to common stockholders
  $
  (1,614,000
  )
  $
  (195,000
  )
  $
  (2,395,000
  )
  $
  (135,000
  )
  Basic and diluted  loss per share allocable to common stockholders
  $
  (0.44
  )
  $
  (0.05
  )
  $
  (0.66
  )
  $
  (0.04
  )
  Weighted average shares outstanding used in computing basic and diluted loss per common share
  3,642,000
  3,607,000
  3,627,000
  3,600,000
  See accompanying notes to the unaudited condensed
  consolidated financial statements.
  4
  ASTEA INTERNATIONAL INC. AND SUBSIDIARIES
  CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE
  (LOSS) INCOME
  (Unaudited)
  Three Months Ended
  September 30,
  Nine Months Ended
  September 30,
  2019
  2018
  2019
  2018
  Net (loss) income
  $
  (1,489,000
  )
  $
  (70,000
  )
  $
  (2,020,000
  )
  $
  240,000
  Other comprehensive income (loss):
  Foreign currency translation adjustment
  44,000
  (23,000
  )
  (118,000
  )
  (33,000
  )
  Comprehensive (loss) income
  $
  (1,445,000
  )
  $
  (93,000
  )
  $
  (2,138,000
  )
  $
  207,000
  See accompanying notes to the unaudited
  condensed consolidated financial statements.
  5
  ASTEA INTERNATIONAL INC. AND SUBSIDIARIES
  CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
          DEFICIT
  Nine Months Ended September 30, 2019
  (Unaudited)
  Series A
  convertible
  preferred
  stock at par value
  Series B
  convertible
  preferred
  stock at par value
  Common
  stock
  Additional
  paid-in-
  capital
  Accumulated
  other
  compre-
  hensive
  loss
  Accumulated
  deficit
  Treasury
  stock
  Total
  stockholders'
  deficit
  Balances at December 31, 2018
  $
  8,000
  $
  8,000
  $
  37,000
  $
  31,455,000
  $
  (1,150,000
  )
  (34,344,000
  )
  (208,000
  )
  $
  (4,194,000
  )
  Net income
  —
  —
  —
  —
  —
  55,000
  —
  55,000
  Series A and B preferred stock
  dividends
  —
  —
  —
  (125,000
  )
  —
  —
  —
  (125,000
  )
  Stock-based compensation
  —
  —
  —
  17,000
  —
  —
  —
  17,000
  Other comprehensive loss
  —
  —
  —
  —
  (46,000
  )
  —
  —
  (46,000
  )
  Balances at March 31, 2019
  $
  8,000
  $
  8,000
  $
  37,000
  $
  31,347,000
  $
  (1,196,000
  )
  (34,289,000
  )
  (208,000
  )
  $
  (4,293,000
  )
  Net loss
  —
  —
  —
  —
  —
  (586,000
  )
  —
  (586,000
  )
  Exercise of stock options
  —
  —
  —
  59,000
  —
  —
  —
  59,000
  Series A and B preferred stock
  Dividends
  —
  —
  —
  (125,000
  )
  —
  —
  —
  (125,000
  )
  Stock-based compensation
  —
  —
  —
  52,000
  —
  —
  —
  52,000
  Other comprehensive loss
  —
  —
  —
  —
  (116,000
  )
  —
  —
  (116,000
  )
  Balances at June 30, 2019
  $
  8,000
  $
  8,000
  $
  37,000
  $
  31,333,000
  $
  (1,312,000
  )
  (34,875,000
  )
  (208,000
  )
  $
  (5,009,000
  )
  Net loss
  —
  —
  —
  —
  —
  (1,489,000
  )
  —
  (1,489,000
  )
  Exercise of stock options
  —
  —
  —
  85,000
  —
  —
  —
  85,000
  Series A and B preferred stock
  Dividends
  —
  —
  —
  (125,000
  )
  —
  —
  —
  (125,000
  )
  Stock-based compensation
  —
  —
  —
  49,000
  —
  —
  —
  49,000
  Other comprehensive income
  —
  —
  —
  —
  44,000
  —
  —
  44,000
  Balances at September 30, 2019
  $
  8,000
  $
  8,000
  $
  37,000
  $
  31,342,000
  $
  (1,268,000
  )
  (36,364,000
  )
  (208,000
  )
  $
  (6,445,000
  )
  See accompanying notes to the unaudited condensed
  consolidated financial statements.
  6
  ASTEA INTERNATIONAL INC. AND SUBSIDIARIES
  CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
          DEFICIT
  Nine Months Ended September 30, 2018
  (Unaudited)
  Series A
  convertible
  preferred
  stock at par value
  Series B
  convertible
  preferred
  stock at par value
  Common
  stock
  Additional
  paid-in-
  capital
  Accumulated
  other
  compre-
  hensive
  loss
  Accumulated
  deficit
  Treasury
  stock
  Total
  stockholders'
  deficit
  Balances at December 31, 2017
  $
  8,000
  $
  8,000
  $
  36,000
  $
  31,710,000
  $
  (1,055,000
  )
  $
  (35,338,000
  )
  $
  (208,000
  )
  $
  (4,839,000
  )
  Cumulative effect
  from change in accounting
  —
  —
  —
  —
  —
  630,000
  —
  630,000
  Net income
  —
  —
  —
  —
  —
  6,000
  —
  6,000
  Series A and B preferred stock
  dividends
  —
  —
  —
  (125,000
  )
  —
  —
  —
  (125,000
  )
  Stock-based compensation
  —
  —
  —
  31,000
  —
  —
  —
  31,000
  Other comprehensive loss
  —
  —
  —
  —
  (104,000
  )
  —
  —
  (104,000
  )
  Balances at March 31, 2018
  $
  8,000
  $
  8,000
  $
  36,000
  $
  31,616,000
  $
  (1,159,000
  )
  $
  (34,702,000
  )
  $
  (208,000
  )
  $
  (4,401,000
  )
  Net income
  —
  —
  —
  —
  —
  304,000
  —
  304,000
  Series A and B preferred stock
  dividends
  —
  —
  —
  (125,000
  )
  —
  —
  —
  (125,000
  )
  Stock-based compensation
  —
  —
  —
  41,000
  —
  —
  —
  41,000
  Other comprehensive income
  —
  —
  —
  —
  92,000
  —
  —
  92,000
  Balances at June 30, 2018
  $
  8,000
  $
  8,000
  $
  36,000
  $
  31,532,000
  $
  (1,067,000
  )
  $
  (34,398,000
  )
  $
  (208,000
  )
  $
  (4,089,000
  )
  Net loss
  —
  —
  —
  —
  —
  (70,000
  )
  —
  (70,000
  )
  Exercise of stock options
  —
  —
  1,000
  84,000
  —
  —
  —
  85,000
  Series A and B preferred stock
  dividends
  —
  —
  —
  (125,000
  )
  —
  —
  —
  (125,000
  )
  Stock-based compensation
  —
  —
  —
  45,000
  —
  —
  —
  45,000
  Other comprehensive loss
  —
  —
  —
  —
  (23,000
  )
  —
  —
  (23,000
  )
  Balances at September 30, 2018
  $
  8,000
  $
  8,000
  $
  37,000
  $
  31,536,000
  $
  (1,090,000
  )
  $
  (34,468,000
  )
  $
  (208,000
  )
  $
  (4,177,000
  )
  See accompanying notes to the unaudited condensed
  consolidated financial statements.
  7
  ASTEA INTERNATIONAL INC. AND SUBSIDIARIES
  CONDENSED CONSOLIDATED STATEMENTS OF CASH
  FLOWS
  (Unaudited)
  Nine Months Ended
  September 30,
  2019
  2018
  Cash flows from operating activities:
  Net (loss) income
  $
  (2,020,000
  )
  $
  240,000
  Adjustments to reconcile net (loss) income to net cash provided by operating activities:
  Depreciation and amortization
  2,527,000
  1,993,000
  Non cash lease expense
  848,000
  —
  Amortization of deferred financing costs
  35,000
  32,000
  Amortization of deferred hosting costs
  311,000
  786,000
  Decrease in provision for doubtful accounts
  (1,000
  )
  (148,000
  )
  Stock-based compensation
  118,000
  116,000
  Changes in operating assets and liabilities:
  Receivables
  1,362,000
  (18,000
  )
  Prepaid expenses and other
  (45,000
  )
  (188,000
  )
  Deferred hosting costs
  (921,000
  )
  (936,000
  )
  Other assets
  (23,000
  )
  (6,000
  )
  Accounts payable and accrued expenses
  401,000
  47,000
  Deferred revenues
  (51,000
  )
  (196,000
  )
  Lease liabilities
  (848,000
  )
  —
  Net cash provided by operating activities
  1,693,000
  1,722,000
  Cash flows from investing activities:
  Purchases of property and equipment
  (145,000
  )
  (42,000
  )
  Capitalized software development costs
  (2,301,000
  )
  (2,430,000
  )
  Net cash used in investing activities
  (2,446,000
  )
  (2,472,000
  )
  Cash flows from financing activities:
  Dividend payments on preferred stock
  (200,000
  )
  (105,000
  )
  Payment on the term note from Bridge Bank
  —
  (225,000
  )
  Payment on line of credit from Bridge Bank
  (12,524,000
  )
  (7,975,000
  )
  Proceeds on line of credit from Bridge Bank
  12,443,000
  8,367,000
  Proceeds from exercise of stock options
  144,000
  84,000
  Net cash (used) provided by financing activities
  (137,000
  )
  146,000
  Effect of exchange rate changes on cash
  12,000
  19,000
  Net decrease in cash, cash equivalents and
  restricted cash
  (878,000
  )
  (585,000
  )
  Cash, cash equivalents and restricted cash, beginning of period
  1,348,000
  2,001,000
  Cash, cash equivalents and restricted cash, end of period
  $
  470,000
  $
  1,416,000
  Supplemental disclosure of cash flows information:
  Cash paid for taxes
  $
  110,000
  —
  Cash paid for interest
  $
  182,000
  $
  107,000
  Supplemental disclosure of non-cash flows information:
  Accrued preferred dividends
  $
  375,000
  $
  375,000
  See accompanying notes to the unaudited condensed consolidated financial statements.
  8
  Item 1. FINANCIAL STATEMENTS (Continued)
  ASTEA INTERNATIONAL INC. AND SUBSIDIARIES
  NOTES TO CONDENSED CONSOLIDATED
  FINANCIAL STATEMENTS
  (Unaudited)
  1.
  BASIS OF PRESENTATION
  The condensed consolidated financial statements
  at September 30, 2019 and for the three and nine month periods ended September 30, 2019 and 2018 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 accompanying 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 September 30, 2018, March 31, 2019 and June 30, 2019. The interim
  financial information presented is not necessarily indicative of results expected for the entire year ending December 31, 2019.
  Comparability
  The condensed consolidated financial statements
  as of and for the periods ended September 30, 2019 are presented under the new Lease standard, while the comparative period presented
  has not been adjusted and continues to be reported in accordance with the previous standard. The Lease standard requires lessees
  to recognize a right-of-use ("ROU") asset and lease liability for all leases on the condensed consolidated balance sheet
  beginning January 1, 2019 with no modification to prior periods.
  Recently Adopted Accounting Standards - Leases
  In
  February 2016, 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
  was effective for the Company on January 1, 2019. The guidance was adopted on a modified retrospective basis and provides for certain
  practical expedients. The adoption of this guidance changed the way we account for our operating leases, which resulted in the
  Company recording the future benefits of those leases as an asset and the related minimum lease payments as a liability on our
  condensed consolidated balance sheets.
  The Company reported 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 of equipment, but it does have operating leases for office space and equipment in all locations. The Company
  has identified all material operating lease agreements. It has also reviewed all significant contracts for embedded leases. No
  embedded leases were identified during this process.
  We
  determine if an arrangement is a lease at inception. All leases to which the Company is a party are operating leases. Beginning
  January 1, 2019, the operating leases are being reported on our condensed consolidated balance sheet as operating lease ROU assets
  and current and noncurrent operating lease liabilities. The ROU assets represent our right to use an underlying asset for the lease
  term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and
  liabilities will be recognized at the commencement date based on the present value of the lease payments over the lease term. As
  none of our leases provide an implicit interest rate, we used our incremental borrowing rate based on the information available
  at the commencement date in calculating the present value of lease payments. The operating lease ROU asset also includes any lease
  payments made and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably
  certain that we will exercise the option.
  The new guidance provides a number of optional
  practical expedients in transition. The Company elected the package of practical expedients which permitted us under the new guidance
  not to reassess our prior conclusions about lease identification, lease classification and initial direct costs. Astea did not
  elect the use-of hindsight or the practical expedient pertaining to land easements; the latter not being applicable to us. On adoption,
  we recognized operating liabilities of $3,132,000, with corresponding ROU assets of the same amount based on the present value
  of the remaining minimum rental payments under current leasing standards for existing operating leases.
  9
  The new guidance also provides
  practical expedients for an entity's ongoing accounting. We elected the short-term lease recognition exemption for one of
  our office equipment leases. This means, for those leases that qualify, we will not recognize ROU assets or lease liabilities.
  This includes not recognizing ROU assets or lease liabilities for existing short-term leases on those assets in transition. We
  elected the practical expedient to not separate lease and non-lease components for all of our leases. As expected, the adoption
  of this guidance resulted in additional lease-related disclosures in the footnotes to our condensed consolidated financial
  statements (see Note 5).
  Cash, cash equivalents and restricted cash
  The following table provides a reconciliation
  of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheet that sum to the total of
  the same such amounts presented on the condensed consolidated statement of cash flows:
  September 30, 2019
  December 31, 2018
  Cash and cash equivalents
  $   400,000
  $    1,276,000
  Restricted cash
  70,000
  72,000
  Total cash, cash equivalents, and restricted cash reported
  on the condensed consolidated statements of cash flows
  $   470,000
  $    1,348,000
  Amounts included in restricted cash represent
  funds required to be set aside by a contractual agreement with the building leasing companies in Europe. The restrictions will
  lapse when the building leases expire.
  Operating Matters and Liquidity
  The Company has a
  history of net losses and an accumulated deficit of $36,364,000 as of September 30, 2019. In the first nine months of 2019, the
  Company had a net loss of $2,020,000 compared to income of $240,000 generated in the first nine months of 2018. Further, at September
  30, 2019, the Company had a working capital ratio of .47:1, with cash and cash equivalents of $400,000 compared to December 31,
  2018 when the Company had cash and cash equivalents of $1,276,000. The decrease in cash and cash equivalents for the first nine
  months of 2019 was primarily driven by a decrease in cash provided by operations in 2019 compared to 2018 and a decrease in cash
  provided by financing activities.
  As of September 30, 2019, the Company owed
  $2,588,000 against the line of credit from Western Alliance Bank ("WAB").   As of September 30, 2019, the
  availability under the line of credit was $262,000. The Company has projected revenues that management believes will provide sufficient
  funds along with the additional borrowings available under its line of credit to sustain its continuing operations through at least
  November 15, 2020. The Agreement with WAB is set to expire November 2020. It is the Company's intention to either renew or
  replace the line of credit prior to its expiration.
  The Company was in compliance with the WAB
  financial and liquidity covenant as of September 30, 2019 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 amount due to WAB under the line of credit as
  of September 30, 2019 were classified in the accompanying condensed 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 2019 as well as upgrade projects from our existing customers as they move to the latest version of Astea Alliance.  
  In 2020, the Company will continue to consider ways to reduce operating expenses in certain areas of the Company in order to maintain
  its liquidity. However, management has implemented new marketing initiatives which have increased our spending in this area in
  2019. 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
  November 15, 2020. 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.
  10
  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.
  Revenue from Contracts with Customers
  Astea's revenue is principally
  recognized from three sources: (i) licensing arrangements, (ii) subscription services and (iii) services and maintenance.
  The Company markets its products
  primarily through its direct sales force and resellers. License agreements do not provide for a right of return, and historically,
  product returns have not been significant.
  Revenue from Contracts with Customers
  outlines
  a comprehensive five-step revenue recognition model based on the principle that an entity should recognize revenue to depict the
  transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to
  be entitled in exchange for those goods or services. The five steps are:
  1.
  Identify the contract with a customer.
  2.
  Identify the performance obligations in the contract.
  3.
  Determine the transaction price.
  4.
  Allocate the transaction price to performance obligations in the contract.
  5.
  Recognize revenue when or as the Company satisfies a performance obligation.
  The Company satisfies performance
  obligations as discussed in further detail below. Revenue is recognized at the time the related performance obligation is satisfied
  by transferring a promised good or service to a customer.
  The Company recognizes revenue from license
  sales when the above criteria are met. The Company generally uses written contracts as a means to establish the terms and conditions
  by which our products, services and maintenance support are sold to our customers. The Company satisfies the performance obligation
  when the license key has been delivered electronically to the customer. If these criteria are not met, then revenue is deferred
  until such criteria are met or until the period(s) over which the last performance obligation is delivered.
  The Company recognizes
  revenues from maintenance ratably over the term of the underlying maintenance contract term. The term of the maintenance contract
  is usually one year. Renewals of maintenance contracts create new performance obligations that are satisfied over the contract
  term.
  Revenues from professional
  services mostly consist of time and material services. Certain professional service contracts are performed on a fixed price basis
  and revenue is recognized using the percentage of completion method. However, fixed price contracts are only utilized on rare occasions.
  Performance obligations are satisfied, and revenues are recognized, when the services are provided or when the service term has
  expired.
  In subscription-based arrangements,
  even though customers use the software element, they generally do not have a contractual right to take possession of the software
  at any time during the hosting period without significant penalty to either run the software on its own hardware or contract with
  an unrelated third party to host the software. Accordingly, these software as a service ("SaaS") arrangements, including
  the software license fees within the arrangements, are accounted for as subscription services provided all other revenue recognition
  criteria have been met. The subscription revenue is recognized on a straight-line basis over the performance obligation. The Company
  recognizes subscription revenue once a customer goes-live ratably over the remaining contract period or customer life whichever
  is longer. The contract period is typically 1 to 3 years. The average expected life of a customer is 2 years. The average customer
  takes about 8 to 10 months to go live. The Company expects the average life of a customer to increase as more customers begin to
  renew their subscription contracts. When implementation, consulting and training services are bundled with the subscription-based
  arrangement, these services are recognized over the life of the initial contract (performance obligation), once the project goes
  live.
  11
  In
  contracts with multiple performance obligations, the Company accounts for individual performance obligations separately, if they
  are distinct. The Company allocates the transaction price to each performance obligation based on its relative standalone selling
  price out of total consideration of the contract. For maintenance and support, the Company determines the standalone selling price
  based on the price at which the Company separately sells a renewal contract. The Company determines the standalone selling price
  for sales of licenses using the residual approach. For professional services, the Company determines the standalone selling prices
  based on the price at which the Company separately sells those services.
  The guidance prefers that revenue in a contract
  with multiple performance obligations use the adjusted market approach which includes SSP or TPE or expected cost plus margin approach
  as the methodology for allocating revenues to software. The Company uses the Residual Approach for allocating the revenues from
  a contract to the license component of the sale. Due to competition, highly variable pricing, customer demographics, varying size
  of our customers, and other such factors, the Company's selling prices are considered uncertain for each perpetual license
  sale. Therefore, SSP is not an appropriate methodology as it relates to our license revenue. In terms of TPE as a basis to price
  our software, our product is unique and expansive in terms of the system's inherent functionality. There are no directly
  comparable products in the marketplace today which we could use as the basis to set our standard license pricing based on a comparison
  with other vendors. In addition, most of the companies with whom we compete, are privately owned, which prevents us from obtaining
  reliable TPE. Accordingly, the guidance permits the Company to use the Residual Method for allocating selling price if the first
  two preferable choices cannot be used. The residual between the total transaction price and the observable standalone selling prices
  of those performance obligations with observable standalone selling prices is considered to be the estimated standalone selling
  price of the goods or services underlying the performance obligation.
  Astea commonly sells its software products
  bundled with maintenance and professional services. As noted above, the guidance requires an entity to allocate the transaction
  price to the distinct performance obligations in a contract on a relative SSP basis. Under the guidance, "…an entity
  shall determine the standalone selling price at contract inception of the distinct good or service underlying each performance
  obligation in the contract and allocate the transaction price in proportion to those standalone selling prices." SSP is defined
  as the price at which an entity would sell a promised good or service separately to a customer. Astea has a history of selling
  maintenance renewals and professional services on a standalone basis. Therefore, the Company utilizes SSP for its performance obligations
  as it relates to service and maintenance revenue. In addition, due to the Company having different maintenance and service rates
  in other parts of the world in which it operates, the Company has developed a reasonable range for its SSP for maintenance and
  services rather than a single point.
  The incremental costs of obtaining a customer
  contract (i.e., those costs related to obtaining the customer contract that would not have been incurred if the customer contract
  was not obtained), such as a sales commission, should be capitalized if the Company expects to recover those costs (based on net
  future cash flows from the contract and expected contract renewals). The Company may expense the incremental costs of obtaining
  a contract if the amortization period would otherwise be one year or less. Since sales commissions are costs that are incremental
  and the amortization of sales commissions would be one year or less, the Company will continue to expense these items as incurred.
  Costs of obtaining a customer contract that are not incremental (i.e., costs related to obtaining the customer contract that would
  have been incurred regardless of whether the customer contract had been obtained), such as travel costs incurred to present the
  customer proposal, should only be capitalized if those costs are explicitly chargeable to the customer regardless of whether the
  entity enters into a contract with the customer. Otherwise, such costs are expensed as incurred. The Company will continue to expense
  these costs as they are incurred.
  Once live, we recognize the deferred implementation
  costs related to that customer ratably over the remaining expected life of the customer contract or two years, whichever is longer.
  At this point, based on the Company's relatively short time-span as a provider of a hosted solution, our analysis shows that
  the average lifespan of an Astea hosted customer is 2 years. Therefore, we amortize the deferred cost over 2 years or the remaining
  life of the contract, whichever is longer. This is consistent with the revenue recognition methodology used for the subscription
  service revenue for that customer. The Company satisfies performance obligations as discussed in further detail below. Revenue
  is recognized at the time the related performance obligation is satisfied by transferring a promised service to a customer.
  12
  We believe that our accounting estimates used
  in applying our revenue recognition are critical because:
  ·
  the determination that it is probable that the customer will pay for the products and services
  purchased is inherently judgmental and includes credit risk;
  ·
  determining the performance obligations and transaction price to certain elements in multiple-element
  arrangements is complex;
  ·
  the determination of whether a service is essential to the functionality of the software is complex
  and could potentially create a new performance obligation; and
  ·
  the estimated customer life of subscription services.
  Changes in the aforementioned items could have
  a material effect on the type and timing of revenue recognized. In addition, Company's payment terms and conditions vary
  by contract and size of customer, although terms generally include a requirement of payment within 30 to 60 days. In instances
  where the timing of revenue recognition differs from the timing of invoicing, the Company has determined that its contracts generally
  do not include a significant financing component. The primary purpose of invoicing terms is to provide customers with simplified
  and predictable ways of purchasing our products and services, and not to facilitate financing arrangements. The Company generally
  has not experienced any material losses related to receivables from individual customers, or groups of customers. Due to these
  factors, no additional credit risk beyond amounts provided by the allowance for doubtful accounts is believed by management to
  be probable in the Company's accounts receivable. The Company has not adjusted revenues for customers related to credit risk.
  For the three and nine months ended September
  30, 2019, there was no individual customer that accounted for 10% of total revenue. For the three months ended September 30, 2018,
  no individual customer accounted for 10% or more of total revenue. For the nine months ended September 30, 2018, one customer accounted
  for 10% of total revenue.
  We present taxes assessed by a governmental
  authority including sales, use, value added and excise taxes on a net basis and therefore the presentation of these taxes is excluded
  from our revenues and is included in accrued expenses in the accompanying condensed consolidated balance sheets until such amounts
  are remitted to the taxing authority.
  The Company is engaged in the design,
  development, marketing and support of its service management software solutions. All revenues result from selling of license (perpetual
  and subscription) software products and related professional services and customer support services. Accordingly, the Company considers
  itself to have one reporting segment. The Company's chief decision maker further reviews financial information presented
  on a consolidated basis to determine if revenue can be further disaggregated in order to make operating decisions and assessing
  financial performance. It was determined that all revenue recognized in our consolidated statements of operations is considered
  to be revenue from contracts with customers, which can be disaggregated by both the timing of revenue recognition and geographic
  regions (see Note 9 of the condensed consolidated financial statements for disaggregated revenues by geographic regions).
  The following tables depicts the
  Company's disaggregation of revenue:
  Three months ended
  Nine months ended
  September 30
  ,
  September 30,
  Timing of Revenue Recognition
  2019
  2018
  2019
  2018
  Performance obligations transferred at a point in time
  $
  140,000
  $
  765,000
  $
  1,302,000
  $
  2,076,000
  Performance obligations transferred over time
  4,380,000
  4,720,000
  13,266,000
  14,657,000
  Performance obligations transferred over time initiated at
  go-live
  1,440,000
  1,640,000
  4,427,000
  3,720,000
  Total revenues
  $
  5,960,000
  $
  7,125,000
  $
  18,995,000
  $
  20,453,000
  The performance obligations transferred
  at a point in time relate to perpetual license revenue for which there is no deferred revenue as of September 30, 2019 or 2018.
  The performance obligations transferred over time consist of professional services that are recognized based on time and materials,
  as the services are performed. The performance obligations for support services are recognized ratably over time based on the contract
  life, except for a few fixed price contracts which are recognized based on the achievement of certain milestones. If the customer
  pays in advance, service revenue is deferred until the performance obligations are met. For support services, the fee is paid in
  advance of the performance obligation. Accordingly, the Company has recorded deferred revenue from fixed price contracts and support
  services of $6,557,000 and $7,067,000 as of September 30, 2019 and 2018, respectively. Performance obligations transferred over
  time, initiated at go-live, relate to our subscription hosting and our subscription professional services for the implementation.
  No performance obligation is recognized until the customer is live and has access to the subscription services. Once live, the
  performance obligations are recognized over time, which is either 2 years, the average customer life, or the remaining contract
  life of the customer, whichever is longer. Because subscription fees are paid in advance, and professional services fees are paid
  as the services are performed, the revenue from both are deferred until the date in which the customer goes live. The Company has
  deferred revenue recorded for performance obligations transferred over time, initiated at go-live for hosting and hosting services
  for $4,656,000 and $4,221,000 as of September 30, 2019 and 2018, respectively.
  13
  The long-term deferred revenue reported as
  $1,351,000 and $1,474,000 as of September 30, 2019 and 2018, respectively, consists of the portion of revenue that will be recognized
  beyond one year of the balance sheet date for hosting implementation services.
  2.
  NEW ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED
  In August 2018, the FASB issued guidance that
  requires a customer in a cloud computing arrangement (i.e. hosting arrangement) that is a service contract to follow the internal-use
  software guidance to determine which implementation costs to capitalize as assets or expense as incurred. This guidance requires
  that certain costs incurred during the application development stage be capitalized and other costs incurred during the preliminary
  project and post-implementation stages be expensed as incurred. The guidance is effective for annual periods beginning after December
  15, 2019 with early adoption permitted. The adoption of this guidance is not expected to have a material impact on our condensed
  consolidated financial statements.
  In August 2018, the FASB issued guidance modifying
  the disclosure requirements on fair value measurements. The amendments add, modify, and eliminate certain disclosure requirements
  on fair value measurements. The guidance is effective for reporting periods beginning after December 15, 2019, including interim
  periods within that fiscal year. Early adoption is permitted, including adoption in an interim period. We are currently evaluating
  the impact, if any, that the adoption of this guidance will have on our condensed consolidated financial statements.
  In June 2016, the FASB issued an accounting
  standard update that requires measurement and recognition of expected credit losses for financial assets held based on historical
  experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount.
  The accounting standard update will be effective for us beginning January 1, 2020. We expect to adopt this accounting standard
  update on a modified retrospective basis and we are currently evaluating the impact of this accounting standard update on our condensed
  consolidated financial statements.
  3.
  CONCENTRATION OF CREDIT RISK
  Financial instruments, which potentially
  subject the Company to credit risk, consist of cash, cash equivalents and accounts receivable. The Company's policy is to
  limit the amount of credit exposure to any one financial institution. The Company places investments with financial institutions
  evaluated as being creditworthy, or investing in short-term money market funds which are exposed to minimal interest rate and credit
  risk. Cash balances are maintained with several banks. Certain operating accounts may exceed insured limits.
  The Company sells its products to
  customers involved in a variety of industries including information technology, medical devices and diagnostic systems, industrial
  controls and instrumentation and retail systems. While the Company does not require collateral from its customers, it does perform
  continuing credit evaluations of its customers' financial condition.
  4.
  LINE
  OF CREDIT and TERM NOTE
  Line of Credit and Term Loan with
  Western Alliance Bank
  On August 11, 2017,
  the
  Company entered into a Business Financing Agreement (the "Financing Agreement") with Bridge Bank, a division of WAB,
  which included a revolving line of credit and a term loan. The agreement was to mature on September 1, 2019.
  The Financing Agreement with WAB, established
  a revolving credit line for the Company in the principal amount of up to $2,400,000 (the "Revolving Credit Line") and
  a Term Loan of $400,000 (the "Term Loan").  Availability under the Revolving Credit Line is tied to a borrowing
  base formula that is based on 80% of the Company's eligible domestic accounts receivable.  Advances under the Revolving
  Credit Line (the "Advances") may be repaid and reborrowed in accordance with the Loan Agreement.  Pursuant
  to the Financing Agreement, the Company originally agreed to pay to WAB the outstanding principal amount of all Advances, the unpaid
  interest thereon, and all other obligations incurred with respect to the Loan Agreement on September 1, 2019. Interest accrues
  and is paid monthly at the Wall Street Journal Prime Rate plus 1.5%. At September 30, 2019, the interest rate was 6.5%.
  14
  The original Term Loan provided proceeds of
  $400,000 to the Company. Beginning in August 2017, for the first six months of the term loan the Company was only required to pay
  interest. Then for the next 18 months, the Term Loan was to be amortized into monthly payments of principal and interest. The interest
  rate on the original Term Loan was the Wall Street Journal Prime Rate plus 1.75%. The Term Loan was modified in November 2017 by
  the First Modification to Business Financing Agreement ("First Modification"), and as a result, the Company fully repaid
  the Term Loan by April 30, 2018. The Company repaid $150,000 of the Term Loan in December 2017, $125,000 in January 2018 and the
  balance of $125,000 in April 2018.
  On July 24, 2018, the Company entered into
  a Second Modification to Business Financing Agreement ("Loan Modification") with WAB which amended the First Modification,
  dated November 22, 2017. The Loan Modification increased the credit limit under Company's credit facility to $2,850,000,
  extended the maturity date of the credit facility through November 15, 2020 and revised and clarified certain covenants and other
  terms of the credit facility. No other terms or conditions were modified.
  The Company expects to be able to continue
  to comply with the required covenants contained in the 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 September 30, 2019 are classified in the accompanying condensed consolidated
  balance sheet in accordance with the repayment terms stipulated in the agreement.
  As of September 30, 2019, the Company owed
  $2,588,000 under the revolving line of credit. The Company incurred $54,000 and $64,000 of interest expense to WAB for the three-month
  period ended September 30, 2019 and 2018, respectively and $152,000 and $119,000 of interest expense to WAB for the nine-month
  period ended September 30, 2019 and 2018, respectively. As of September 30, 2019, there was availability of $262,000 under the
  line of credit. The Company was in compliance with the financial and liquidity covenants of the Loan Modification as of September
  30, 2019.
  Subject to certain exceptions, the amended
  Financing Agreement contains covenants prohibiting the Company from, among other things: (a) conveying, selling, leasing, transferring
  or otherwise disposing of their properties or assets; (b) liquidating or dissolving; (c) engaging in any business other than the
  business currently engaged in or reasonably related thereto; (d) entering into any merger or consolidation, or acquiring all or
  substantially all of the capital stock or property of another entity; (e) becoming liable for any indebtedness; (f) allowing any
  lien or encumbrance on any of their property; and (g) paying any dividends (other than dividends on outstanding convertible preferred
  stock); and (i) making payment on subordinated debt. In addition, actual EBITDA, as defined in the Financing Agreement for the
  trailing 6-month period must be at least $1 as tested quarterly.
  The amended Financing Agreement is secured
  by a first priority perfected security interest in substantially all of the assets of the Company, excluding the intellectual property
  of the Company.  The Loan Modification contains a negative covenant prohibiting the Company from granting a security
  interest in their intellectual property to any party.
  5.
  LEASES
  The Company adopted the new lease standard
  on January 1, 2019 using the modified retrospective transition method. Prior periods were not retrospectively adjusted and continue
  to be reported under the accounting standards in effect for those periods. The Company elected the package of practical expedients
  permitted under the transition guidance within the new lease standard, which among other things, allowed the Company to continue
  to account for existing leases based on the historical lease classification. The Company also elected the practical expedients
  to combine lease and non-lease components for its office leases, which primarily relate to ancillary expenses such as common area
  maintenance charges and management fees.
  The Company determines if an arrangement
  is a lease at inception by assessing whether it conveys the right to control the use of an identified asset for a period of time
  in exchange for consideration. The Company's leases are primarily related to operating leases for its corporate office and
  subsidiaries, office equipment and cars. The Company's leases have remaining lease terms of less than 1 to 4 years,
  and sometimes include options to renew. Renewal and termination options are included in the lease term when it is reasonably certain
  that the Company will exercise the option. However, it has been the Company's experience to renegotiate a lease and not
  renew based on the terms of the lease.
  15
  ROU assets and lease liabilities are recognized
  at the lease commencement date based on the present value of lease payments over the lease term. As all of the Company's leases
  do not provide an implicit rate, the Company uses its incremental borrowing rate plus some additional considerations for the term
  of the lease, based on the information available at the lease commencement date, to determine the present value of lease payments.
  Based on the present value of lease payments for the Company's existing leases, the Company recorded ROU assets and lease liabilities
  of approximately $3,132,000 upon adoption on January 1, 2019. There was one lease at one of our subsidiaries that was renewed
  for 2 years effective at January 1, 2019 that is included in the lease liability. The Company had no finance leases.
  The impact of the new lease standard on the September 30, 2019
  condensed consolidated balance sheet was as follows:
  September 30, 2019
  Right-of-use assets
  $  2,284,000
  Current lease liabilities
  $  961,000
  Noncurrent lease liabilities
  1,323,000
  Total lease liabilities
  $  2,284,000
  Weighted average remaining lease term
  1.9 years
  Weighted average discount rate
  7.17%
  Total operating lease costs for the three and nine months
  ended September 30, 2019 were $283,000 and $848,000, respectively, while the total operating lease costs for the three and nine
  months ended September 30, 2018 were $326,000 and $978,000, respectively, which is included in operating costs on the condensed
  consolidated statements of operation.
  The following table provides supplemental cash flow information
  related to our operating leases at September 30, 2019:
  Nine Months Ended
  September 30, 2019
  Cash paid for amounts included in the
  measurement of operating lease liabilities
  $960,000
  The following table shows the future
  maturities of lease liabilities for leases in effect as of September 30, 2019:
  Lease Liabilities
  2019 (excluding the nine months ended September 30, 2019)
  $
  320,000
  2020
  1,049,000
  2021
  837,000
  2022
  452,000
  2023
  1,000
  Total lease payments
  2,659,000
  Less: imputed interest
  (375,000
  )
  Total
  $
  2,284,000
  6.
  INCOME
  TAXES
  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 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 2014 through 2018, the only periods subject to examination.
  The Company believes that its income tax positions and deductions will be sustained on a tax authority audit and does not anticipate
  any adjustments that will result in a material change to its financial position.
  16
  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 accrued is recorded in interest expense or interest income, respectively, in
  the condensed consolidated statement of operations. For the three and nine months ended September 30, 2019 and 2018, there were
  no interest or penalties related to uncertain tax positions.
  Deferred tax assets and liabilities are determined
  based on differences between financial reporting and tax bases of assets and liabilities and operating loss and tax credit carryforwards
  and are measured using the enacted tax rates and laws that will be in effect when the difference and carryforwards are expected
  to be recovered or settled. A valuation allowance for deferred tax assets is provided when we estimate that it is more likely than
  not that all or a portion of the deferred tax assets may not be realized through future operations. This assessment is based upon
  consideration of available positive and negative evidence which includes, among other things, our most recent results of operations
  and expected future profitability. We consider our actual historical results to have a stronger weight than other more subjective
  indicators when considering whether to establish or reduce a valuation allowance on deferred tax assets.
  As of September 30, 2019, we had approximately
  $10.9 million of net deferred tax assets, against which we provided a 100% valuation allowance. Our net deferred tax assets were
  generated primarily by operating losses. Accordingly, it is more likely than not, that we will not realize these assets through
  future operations.
  The tax provision for the period consisted
  primarily of income taxes paid to Australia due to income generated by our Australian operation. The remainder of the tax provision
  was for taxes accrued on our Israeli operation.
  7.
  EQUITY
  Share-Based Awards
  Compensation costs include share-based payments
  granted to employees and directors based on the estimated 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 September 30, 2019, the total
  unrecognized compensation cost related to non-vested options amounted to $513,000, which is expected to be recognized over the
  options' weighted average remaining vesting period of 3.24 years.
  The Company has Stock Option Plans
  (the "Plans") under which incentive and non-qualified stock options may be granted to its employees, officers, directors
  and others. Generally, incentive stock options are granted at fair value, become exercisable over a four-year period, have a 10-year
  contractual term and are subject to the employee's continued employment. Non-qualified options are granted at exercise prices
  determined by the Board of Directors and vest over varying periods.
  17
  Activity under the Company's stock option plans
  for the nine months ended September 30, 2019 is as follows:
  OPTIONS OUTSTANDING
  Shares
  Weighted Average Exercise Price Per Share
  Balance, December 31, 2018
  762,000
  $2.54
  Granted
  245,000
  $5.83
  Exercised
  (73,000
  )
  $1.99
  Forfeited
  (129,000
  )
  $3.86
  Balance,
  September 30, 2019
  805,000
  $3.42
  There are 280,000 shares available
  for granting future options as of September 30, 2019. It is the Company's policy to issue shares from authorized but unissued
  common stock when stock options are exercised.
  The following table summarizes outstanding
  options under the Company's stock option plans as of September 30, 2019:
  Number of Shares
  Weighted Average Exercise Price Per Share
  Weighted Average Remaining Contractual Term (in years)
  Aggregate Intrinsic Value
  Outstanding Options
  805,000
  $3.42
  6.05
  $1,469,000
  Ending Vested and Exercisable
  475,000
  $2.48
  4.04
  $1,223,000
  Options Vested and Expected to Vest
  710,000
  $3.19
  5.63
  $1,423,000
  Convertible Preferred Stock
  Series A
  On September 24, 2008, the Company
  issued 826,000 shares of Series-A Convertible Preferred Stock ("Series A Preferred Stock") to its Chief Executive Officer
  at a price of $3.63 per share for a total of $3,000,000.  Dividends accrue daily on the Series A Preferred at a rate
  of 10% and are payable only when, and if, declared by the Company's Board of Directors, quarterly in arrears. At September
  30, 2019 and December 31, 2018, there were accrued dividends of $654,000 and $541,000, included in accounts payable and accrued
  expenses on the accompanying condensed consolidated balance sheet.
  The Series A Preferred Stock may
  be converted into common stock at the rate of one share of common for each share of Series A Preferred Stock. The Company has rights
  to cause conversion of all of the shares of Series A Preferred Stock outstanding. The Company may redeem, subject to board
  approval, all of the shares of Series A Preferred Stock then outstanding at a price equal to the greater of (i) 130% of the purchase
  price plus all accrued and unpaid dividends and (ii) the fair market value of such number of shares of common stock which the holder
  of the Series A Preferred Stock would be entitled to receive had the redeemed Series A Preferred Stock been converted immediately
  prior to the redemption. Each and every outstanding share of Series A Preferred Stock is subject to mandatory and automatic conversion
  into shares of common stock if the closing price of the common stock as reported by the principal exchange or quotation system
  on which such common stock is traded or reported exceeds 300% of the then current conversion price for 30 consecutive trading days.  
  In the event of a liquidation of the Company, the holder of the Series A and Series B preferred stock shall be entitled to receive
  in preference to the holders of the common stock, the original amount invested in the preferred stock plus any unpaid and accrued
  dividends. Preferred stock dividends on the Series A are declared quarterly by the Board of Directors.
  The Company reports the Series A
  Preferred Stock on the Company's condensed consolidated balance sheet within stockholders' deficit.
  Series
  B
  On June 20, 2014, the Company issued 797,000
  of Series-B Convertible Preferred Stock ("Series B Preferred Stock") to its Chief Executive Officer at a
  price of $2.51 per share in exchange for the cancellation of $2,000,000 of outstanding principal owed to its Chief Executive
  Officer under a Revolving Promissory Note dated March 26, 2014.
  18
  The Series B Preferred Stock may be converted
  into shares of common stock on a one-to-one ratio, subject to customary anti-dilution provisions.  The Series B Preferred
  Stock is entitled to a quarterly dividend, which accrues at an annual rate of 10%.  The Company's Chief Executive
  Officer may convert 100% of his shares of the Series B Preferred Stock into shares of common stock. Each and every outstanding
  share of Series B Preferred Stock is subject to mandatory and automatic conversion into shares of common stock if the closing price
  of the common stock as reported by the principal exchange or quotation system on which such common stock is traded or reported
  exceeds 300% of the then current conversion price for 30 consecutive trading days.  The Company may redeem all of the
  outstanding shares of the Series B Preferred Stock issued at a price per share equal to 300% of the purchase price. The Series
  B Preferred Stock ranks senior to the common stock and on parity with the Company's Series A Preferred Stock. In the event
  of a liquidation of the Company, the holder of the Series B and Series A Preferred Stock shall be entitled to receive in preference
  to the holders of the common stock, the original amount invested in the preferred stock plus any unpaid and accrued dividends.
  Preferred stock dividends on the Series B are declared quarterly by the Board of Directors. At September 30, 2019 and December
  31, 2018, there were accrued dividends of $416,000 and $354,000, included in accounts payable and accrued expenses on the accompanying
  condensed consolidated balance sheet.
  The Company reports the Series B
  Preferred Stock on the Company's condensed consolidated balance sheet within stockholders' deficit.
  8.
  LOSS
  PER SHARE
  Loss 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 per share, weighted average numbers of
  shares outstanding are used as the denominator.
  The Company had net loss allowable
  to the common stockholders for the three and nine months ended September 30, 2019 and 2018. In the nine months ended September
  30, 2018, there were 179,000 of net additional dilutive stock options assumed to be converted into common stock shares but were
  excluded from the diluted earnings per common shares calculation as the inclusion of these shares would have been antidilutive.
  In addition, as of three and nine months ended September 30, 2019 and as of the three months ended September 30, 2018, the outstanding
  stock options would have been antidilutive due to the net loss incurred during those periods. In addition, 100% of the outstanding
  convertible preferred stock, 1,623,000 shares, were eligible to be converted into common stock. For purpose of this calculation,
  if converted, it was assumed that upon conversion, the related dividends were not paid. However, as of the three and nine months
  ended September 30, 2019 and 2018 shares of common stock issuable on the assumed conversion of the eligible preferred stock were
  excluded from the diluted earnings per common shares calculation as the inclusion of these shares would have been antidilutive.
  Three Months Ended
  Nine Months Ended
  Ended September 30
  ,
  Ended September 30,
  2019
  2018
  2019
  2018
  Numerator:
  Net (loss) income
  $
  (1,489,000
  )
  $
  (70,000
  )
  $
  (2,020,000
  )
  $
  240,000
  Preferred dividend
  125,000
  125,000
  375,000
  375,000
  Net loss available to
  common stockholders
  $
  (1,614,000
  )
  $
  (195,000
  )
  $
  (2,395,000
  )
  $
  (135,000
  )
  Denominator:
  Basic weighted average number of
          common
  shares outstanding
  3,642,000
  3,607,000
  3,627,000
  3,600,000
  Diluted weighted average number
          of
  common shares outstanding
  3,642,000
  3,607,000
  3,627,000
  3,600,000
  Basic (loss) earnings per common
      share
  $
  (0.44
  )
  $
  (0.05
  )
  $
  (0.66
  )
  $
  (0.04
  )
  Diluted (loss) earnings per common
      share
  $
  (0.44
  )
  $
  (0.05
  )
  $
  (0.66
  )
  $
  (0.04
  )
  19
  9.
  GEOGRAPHIC REGION
  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 geographic segments as follows:
  Three Months
  Ended September 30,
  Nine Months
  Ended September 30,
  2019
  2018
  2019
  2018
  Revenues
  Software license fees
  United States
  $
  112,000
  $
  504,000
  $
  707,000
  $
  951,000
  Europe
  21,000
  176,000
  129,000
  328,000
  Asia Pacific
  7,000
  85,000
  466,000
  797,000
  Total foreign software license fees revenue
  28,000
  261,000
  595,000
  1,125,000
  Total software license fees
  140,000
  765,000
  1,302,000
  2,076,000
  Subscriptions
  United States
  678,000
  443,000
  2,035,000
  1,268,000
  Europe
  341,000
  327,000
  882,000
  914,000
  Asia Pacific
  259,000
  642,000
  820,000
  922,000
  Total foreign subscriptions
  600,000
  969,000
  1,702,000
  1,836,000
  Total subscription revenue
  1,278,000
  1,412,000
  3,737,000
  3,104,000
  Services and maintenance
  United States
  2,790,000
  2,649,000
  8,789,000
  9,030,000
  Europe
  586,000
  591,000
  1,821,000
  1,776,000
  Asia Pacific
  1,166,000
  1,708,000
  3,346,000
  4,467,000
  Total foreign services and
  maintenance revenue
  1,752,000
  2,299,000
  5,167,000
  6,243,000
  Total services and maintenance revenue
  4,542,000
  4,948,000
  13,956,000
  15,273,000
  Total revenue
  $
  5,960,000
  $
  7,125,000
  $
  18,995,000
  $
  20,453,000
  Net (loss) income
  United States
  $
  (1,178,000
  )
  $
  (437,000
  )
  $
  (1,251,000
  )
  $
  (328,000
  )
  Europe
  (247,000
  )
  (60,000
  )
  (760,000
  )
  (275,000
  )
  Asia Pacific
  (64,000
  )
  427,000
  (9,000
  )
  843,000
  Net (loss) income
  $
  (1,489,000
  )
  $
  (70,000
  )
  $
  (2,020,000
  )
  $
  240,000
  10.
  SUBSEQUENT EVENT
  Summary of Merger Agreement
  On October 7, 2019, the Company
  entered into an Agreement and Plan of Merger ("Merger Agreement") with IFS Americas, Inc. ("Parent") and
  IFS Amber, Inc. ("Merger Sub"), a wholly owned subsidiary of Parent. Subject to the terms and conditions of the Agreement,
  Merger Sub will merge with the Company and then become a subsidiary of Parent ("the Merger"). It is expected for the
  merger to close before the end of calendar year 2019.
  20
  The transaction will result
  in the acquisition of all outstanding shares of the Company by Parent for cash. Each outstanding share of common stock, par value
  $0.01 per share, excluding shares held in treasury, will be purchased for $12.00 per share. Furthermore, each option to purchase
  shares of the Company common stock immediately prior to the effective time of the transaction, whether vested or unvested, will
  be cancelled and converted into the right to receive an amount in cash equal to the product of the total number of shares of common
  stock subject to the option, multiplied by the excess, if any, of the merger consideration, $12.00, over the applicable exercise
  price of each option.
  The Merger Agreement contains various
  representations, warranties and covenants by the Company, Parent and Merger Sub. The Merger Agreement requires the Company to call
  and hold a special stockholders meeting and requires the board of directors of the Company to recommend that the Company's
  stockholders approve the Merger Agreement and the merger.
  The Merger Agreement requires the
  Company and Parent to use reasonable best efforts to take all reasonable actions necessary under applicable law to consummate the
  transactions contemplated by the Merger Agreement.
  The Merger Agreement contains certain
  termination rights for each of the Company and Parent, including the right of each party to terminate the Merger Agreement if the
  merger has not been consummated by the end of January 31, 2020.
  The Merger Agreement provides for
  a payment by the Company to Parent a termination fee in the amount of $2,569,746 in the case of a termination of the Merger Agreement
  under certain circumstances described in the Merger Agreement. Parent shall pay a termination fee of $2,936,852 to the Company
  in the event the Merger Agreement is terminated by Parent subject to certain conditions contained in the Merger Agreement.
  The Company board of directors
  has unanimously determined that the transactions contemplated by the Merger Agreement are fair to, and in the best interest of,
  the Company and its stockholders, and has unanimously recommended that the Company board of directors approve the Merger Agreement
  and the transactions contemplated therein. The obligations of the parties to consummate the merger are subject to customary closing
  conditions.
  Closing Compensation Agreement
  Following the Company's agreement
  upon the terms of the proposed merger with Parent and in consideration of Mr. Etskovitz's role as the Chief Financial Officer
  of the Company and the importance of his participation in the due diligence and closing of the proposed transaction, the Company
  entered into an agreement with him on September 17, 2019, pursuant to which he will be entitled to a bonus of $100,000 (less applicable
  withholding taxes) on the condition that he remain employed by the Company in good standing through the closing of the merger and
  perform any additional duties related to the proposed merger ("Closing Compensation Agreement"). If Mr. Etskovitz voluntarily
  resigns his employment or is terminated for cause before the closing of the merger, he will forfeit the entire amount of the bonus.
  If the merger is not consummated for any reason, he will be entitled to receive a bonus equal to $50,000 (less applicable withholding
  taxes) if he remains employed in good standing with the Company through such event.
  Conversion of Preferred Stock
  Effective November 12, 2019, Zack
  Bergreen, the Chairman and Chief Executive Officer of Astea International Inc., converted to common stock, par value $0.01 per
  share of the Company ("
  Common Stock
  "), all of the 826,446 outstanding shares of the Series A Convertible Preferred
  Stock, par value $0.01 per share, and all of the 797,448 outstanding shares of the Series B Convertible Preferred Stock, par value
  $0.01 per share, of the Company that he held as of such date (the "
  Convertible Preferred Stock
  "). The Convertible
  Preferred Stock was convertible on a 1 for 1 basis, resulting in the issuance of 1,623,894 shares of Common Stock to Mr. Bergreen.
  Following the conversion, Mr. Bergreen beneficially owns 2,992,287 shares of Common Stock, or approximately 54.3% of the outstanding
  Common Stock. As described in the Company's Current Report on Form 8-K filed on October 8, 2019, conversion of the Convertible
  Preferred Stock was required by the Voting Agreement among IFS Americas, Inc., a Delaware corporation ("
  Parent
  "),
  Mr. Bergreen and the limited partnership that he controls, in connection with the Agreement and Plan of Merger dated October 7,
  2019 among the Company, Parent and a subsidiary of Parent.
  21
  Date, Time, Location and
  Record Date of Special Meeting of Stockholders
  The Company's Board of Directors has
  fixed the date, time, location and record date for the special meeting of the stockholders of the Company to consider and vote
  upon the adoption of the Merger Agreement, which provides for the merger of IFS Amber, Inc., subsidiary of Parent, with and into
  the Company, with the Company surviving as a wholly owned subsidiary of Parent. The Board of Directors determined that the special
  meeting of the Company's stockholders will be held on Monday, December 9, 2019 at 11:00 a.m. (local time), at the Company's
  headquarters at 240 Gibraltar Road, Horsham, Pennsylvania 19044. The Board of Directors also established the close of business
  on November 12, 2019 as the record date for the determination of stockholders entitled to receive notice of, and to vote at, the
  special meeting and any adjournment or postponement thereof.
  22
  Item 2.
  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Overview
  This document contains various forward-looking
  statements and information that are based on management's beliefs, assumptions made by management and information currently available
  to management. Such statements are subject to various risks and uncertainties, which could cause actual results to vary materially
  from those contained in such forward-looking statements. Should one or more of these risks or uncertainties materialize, or should
  underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, expected or projected.
  Certain of these, as well as other risks and uncertainties are described in more detail herein and in Astea International Inc.'s
  ("Astea" or "the Company") Annual Report on Form 10-K for the fiscal year ended December 31, 2018.
  Astea is 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. 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.
  Astea Alliance, the Company's
  service management suite of solutions, supports the complete service lifecycle, from lead generation and project quotation to service
  and billing through asset retirement. It integrates and optimizes critical business processes for Campaigns, Call Center, Depot
  Repair, Field Service, Logistics, Projects and Sales, and Order Processing applications. Astea extends its application suite with
  mobile workforce management, dynamic scheduling optimization, third party vendor and customer self-service portals, and business
  intelligence. In order to ensure customer satisfaction, Astea also offers infrastructure tools and services. Astea Alliance provides
  service organizations with technology-enabled business solutions that improve profitability, stabilize cash flows, and reduce operational
  costs through automating and integrating key service, sales and marketing processes.
  The FieldCentrix Enterprise is a
  service management solution that runs on a wide range of mobile devices (handheld computers, laptops and PCs, and Pocket PC devices),
  and integrates seamlessly with popular customer relationship management ("CRM") and ERP applications. Add-on features
  include a web-based customer self-service portal, workforce optimization capabilities, and equipment-centric functionality. FieldCentrix
  has licensed applications to companies in a wide range of sectors including HVAC, building and real estate services, manufacturing
  and process instruments and controls, and medical equipment.
  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.
  Critical Accounting Policies and
  Estimates
  The Company's significant accounting
  policies are described in its "Summary of Accounting Policies," Note 2, in the Company's 2018 Annual Report on
  Form 10-K. The preparation of financial statements in conformity with accounting principles generally accepted within the United
  States requires management to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying
  financial statements and related notes. In preparing these financial statements, management has made its best estimates and judgments
  of certain amounts included in the financial statements, giving due consideration to materiality. The Company does not believe
  there is a great likelihood that materially different amounts would be reported related to the accounting policies described below;
  however, application of these accounting policies involves the exercise of judgments and the use of assumptions as to future uncertainties
  and, as a result, actual results could differ from these estimates.
  Revenue from Contracts with Customers
  Astea's revenue is principally
  recognized from three sources: (i) licensing arrangements, (ii) subscription services and (iii) services and maintenance.
  The Company markets its products
  primarily through its direct sales force and resellers. License agreements do not provide for a right of return, and historically,
  product returns have not been significant.
  23
  Revenue from Contracts with Customers
  outlines
  a comprehensive five-step revenue recognition model based on the principle that an entity should recognize revenue to depict the
  transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to
  be entitled in exchange for those goods or services. The five steps are:
  1.
  Identify the contract with a customer.
  2.
  Identify the performance obligations in the contract.
  3.
  Determine the transaction price.
  4.
  Allocate the transaction price to performance obligations in the contract.
  5.
  Recognize revenue when or as the Company satisfies a performance obligation.
  The Company satisfies performance
  obligations as discussed in further detail below. Revenue is recognized at the time the related performance obligation is satisfied
  by transferring a promised good or service to a customer.
  The Company recognizes revenue from license
  sales when the above criteria are met. The Company generally uses written contracts as a means to establish the terms and conditions
  by which our products, services and maintenance support are sold to our customers. The Company satisfies the performance obligation
  when the license key has been delivered electronically to the customer. If these criteria are not met, then revenue is deferred
  until such criteria are met or until the period(s) over which the last performance obligation is delivered.
  The Company recognizes
  revenues from maintenance ratably over the term of the underlying maintenance contract term. The term of the maintenance contract
  is usually one year. Renewals of maintenance contracts create new performance obligations that are satisfied over the contract
  term.
  Revenues from professional
  services mostly consist of time and material services. Certain professional service contracts are performed on a fixed price basis
  and revenue is recognized using the percentage of completion method. However, fixed price contracts are only utilized on rare occasions.
  Performance obligations are satisfied, and revenues are recognized, when the services are provided or when the service term has
  expired.
  In subscription based arrangements,
  even though customers use the software element, they generally do not have a contractual right to take possession of the software
  at any time during the hosting period without significant penalty to either run the software on its own hardware or contract with
  an unrelated third party to host the software. Accordingly, these software as a service ("SaaS") arrangements, including
  the software license fees within the arrangements, are accounted for as subscription services provided all other revenue recognition
  criteria have been met. The subscription revenue is recognized on a straight-line basis over the performance obligation. The Company
  recognizes subscription revenue once a customer goes-live ratably over the remaining contract period or customer life whichever
  is longer. The contract period is typically 1 to 3 years. The average expected life of a customer is 2 years. The average customer
  takes about 8 to 10 months to go live. The Company expects the average life of a customer to increase as more customers begin to
  renew their subscription contracts. When implementation, consulting and training services are bundled with the subscription based
  arrangement, these services are recognized over the life of the initial contract (performance obligation), once the project goes
  live.
  In
  contracts with multiple performance obligations, the Company accounts for individual performance obligations separately, if they
  are distinct. The Company allocates the transaction price to each performance obligation based on its relative standalone selling
  price out of total consideration of the contract. For maintenance and support, the Company determines the standalone selling price
  based on the price at which the Company separately sells a renewal contract. The Company determines the standalone selling price
  for sales of licenses using the residual approach. For professional services, the Company determines the standalone selling prices
  based on the price at which the Company separately sells those services.
  The guidance prefers that revenue in a contract
  with multiple performance obligations use the adjusted market approach which includes SSP or TPE or expected cost plus margin approach
  as the methodology for allocating revenues to software. The Company uses the Residual Approach for allocating the revenues from
  a contract to the license component of the sale. Due to competition, highly variable pricing, customer demographics, varying size
  of our customers, and other such factors, the Company's selling prices are considered uncertain for each perpetual license
  sale. Therefore, SSP is not an appropriate methodology as it relates to our license revenue. In terms of TPE as a basis to price
  our software, our product is unique and expansive in terms of the system's inherent functionality. There are no directly
  comparable products in the marketplace today which we could use as the basis to set our standard license pricing based on a comparison
  with other vendors. In addition, most of the companies with whom we compete, are privately owned, which prevents us from obtaining
  reliable TPE. Accordingly, the guidance permits the Company to use the Residual Method for allocating selling price if the first
  two preferable choices cannot be used. The residual between the total transaction price and the observable standalone selling prices
  of those performance obligations with observable standalone selling prices is considered to be the estimated standalone selling
  price of the goods or services underlying the performance obligation.
  24
  Astea commonly sells its software products
  bundled with maintenance and professional services. As noted above, the guidance requires an entity to allocate the transaction
  price to the distinct performance obligations in a contract on a relative SSP basis. Under the guidance, "…an entity
  shall determine the standalone selling price at contract inception of the distinct good or service underlying each performance
  obligation in the contract and allocate the transaction price in proportion to those standalone selling prices." SSP is defined
  as the price at which an entity would sell a promised good or service separately to a customer. Astea has a history of selling
  maintenance renewals and professional services on a standalone basis. Therefore, the Company utilizes SSP for its performance obligations
  as it relates to service and maintenance revenue. In addition, due to the Company having different maintenance and service rates
  in other parts of the world in which it operates, the Company has developed a reasonable range for its SSP for maintenance and
  services rather than a single point.
  The incremental costs of obtaining a customer
  contract (i.e., those costs related to obtaining the customer contract that would not have been incurred if the customer contract
  was not obtained), such as a sales commission, should be capitalized if the Company expects to recover those costs (based on net
  future cash flows from the contract and expected contract renewals). The Company may expense the incremental costs of obtaining
  a contract if the amortization period would otherwise be one year or less. Since sales commissions are costs that are incremental
  and the amortization of sales commissions would be one year or less, the Company will continue to expense these items as incurred.
  Costs of obtaining a customer contract that are not incremental (i.e., costs related to obtaining the customer contract that would
  have been incurred regardless of whether the customer contract had been obtained), such as travel costs incurred to present the
  customer proposal, should only be capitalized if those costs are explicitly chargeable to the customer regardless of whether the
  entity enters into a contract with the customer. Otherwise, such costs are expensed as incurred. The Company will continue to expense
  these costs as they are incurred.
  Once live, we recognize the deferred implementation
  costs related to that customer ratably over the remaining expected life of the customer contract or two years, whichever is longer.
  At this point, based on the Company's relatively short time-span as a provider of a hosted solution, our analysis shows that
  the average lifespan of an Astea hosted customer is 2 years. Therefore, we amortize the deferred cost over 2 years or the remaining
  life of the contract, whichever is longer. This is consistent with the revenue recognition methodology used for the subscription
  service revenue for that customer. The Company satisfies performance obligations as discussed in further detail below. Revenue
  is recognized at the time the related performance obligation is satisfied by transferring a promised service to a customer.
  We believe that our accounting estimates used
  in applying our revenue recognition are critical because:
  ·
  the determination that it is probable that the customer will pay for the products and services
  purchased is inherently judgmental and includes credit risk;
  ·
  determining the performance obligations and transaction price to certain elements in multiple-element
  arrangements is complex;
  ·
  the determination of whether a service is essential to the functionality of the software is complex
  and could potentially create a new performance obligation; and
  ·
  the estimated customer life of subscription services.
  Changes in the aforementioned items could have
  a material effect on the type and timing of revenue recognized. In addition, Company's payment terms and conditions vary
  by contract and size of customer, although terms generally include a requirement of payment within 30 to 60 days. In instances
  where the timing of revenue recognition differs from the timing of invoicing, the Company has determined that its contracts generally
  do not include a significant financing component. The primary purpose of invoicing terms is to provide customers with simplified
  and predictable ways of purchasing our products and services, and not to facilitate financing arrangements. The Company generally
  has not experienced any material losses related to receivables from individual customers, or groups of customers. Due to these
  factors, no additional credit risk beyond amounts provided by the allowance for doubtful accounts is believed by management to
  be probable in the Company's accounts receivable. The Company has not adjusted revenues for customers related to credit risk.
  For the three and nine months ended September
  30, 2019, there was no individual customer that accounted for 10% of total revenue. For the three months ended September 30, 2018,
  no individual customer accounted for 10% or more of total revenue. For the nine months ended September 30, 2018, one customer accounted
  for 10% of total revenue.
  25
  We present taxes assessed by a governmental
  authority including sales, use, value added and excise taxes on a net basis and therefore the presentation of these taxes is excluded
  from our revenues and is included in accrued expenses in the accompanying condensed consolidated balance sheets until such amounts
  are remitted to the taxing authority.
  The Company is engaged in the design,
  development, marketing and support of its service management software solutions. All revenues result from selling of license (perpetual
  and subscription) software products and related professional services and customer support services. Accordingly, the Company considers
  itself to have one reporting segment. The Company's chief decision maker further reviews financial information presented
  on a consolidated basis to determine if revenue can be further disaggregated in order to make operating decisions and assessing
  financial performance. It was determined that all revenue recognized in our consolidated statements of operations is considered
  to be revenue from contracts with customers, which can be disaggregated by both the timing of revenue recognition and geographic
  regions (see Note 9 of the condensed consolidated financial statements for disaggregated revenues by geographic regions).
  The following tables depicts the
  Company's disaggregation of revenue:
  Three months ended
  Nine months ended
  September 30
  ,
  September 30,
  Timing of Revenue Recognition
  2019
  2018
  2019
  2018
  Performance obligations transferred at a point in time
  $
  140,000
  $
  765,000
  $
  1,302,000
  $
  2,076,000
  Performance obligations transferred over time
  4,380,000
  4,720,000
  13,266,000
  14,657,000
  Performance obligations transferred over time initiated at
  go-live
  1,440,000
  1,640,000
  4,427,000
  3,720,000
  Total revenues
  $
  5,960,000
  $
  7,125,000
  $
  18,995,000
  $
  20,453,000
  The performance obligations transferred
  at a point in time relate to perpetual license revenue for which there is no deferred revenue as of September 30, 2019 or 2018.
  The performance obligations transferred over time consist of professional services that are recognized based on time and materials,
  as the services are performed. The performance obligations for support services are recognized ratably over time based on the contract
  life, except for a few fixed price contracts which are recognized based on the achievement of certain milestones. If the customer
  pays in advance, service revenue is deferred until the performance obligations are met. For support services, the fee is paid in
  advance of the performance obligation. Accordingly, the Company has recorded deferred revenue from fixed price contracts and support
  services of $6,557,000 and $7,067,000 as of September 30, 2019 and 2018, respectively. Performance obligations transferred over
  time, initiated at go-live, relate to our subscription hosting and our subscription professional services for the implementation.
  No performance obligation is recognized until the customer is live and has access to the subscription services. Once live, the
  performance obligations are recognized over time, which is either 2 years, the average customer life, or the remaining contract
  life of the customer, whichever is longer. Because subscription fees are paid in advance, and professional services fees are paid
  as the services are performed, the revenue from both are deferred until the date in which the customer goes live. The Company has
  deferred revenue recorded for performance obligations transferred over time, initiated at go-live for hosting and hosting services
  for $4,656,000 and $4,221,000 as of September 30, 2019 and 2018, respectively.
  The long term deferred revenue reported
  as $1,351,000 and $1,474,000 as of September 30, 2019 and 2018, respectively, consists of the portion of revenue that will be recognized
  beyond one year of the balance sheet date for hosting implementation services.
  Capitalized Software Research and Development
  Costs
  The Company capitalizes software development
  costs incurred during the period subsequent to the establishment of technological feasibility through the product's availability
  for general release. Costs incurred prior to the establishment of technological feasibility are charged to product development
  expense as they are incurred. Product development expense includes payroll, employee benefits, other headcount-related costs associated
  with product development and any related costs to third parties under sub-contracting or net of any collaborative arrangements.
  Capitalized software development costs are
  amortized on a product-by-product basis over the greater of the ratio of current revenues to total anticipated revenues or on a
  straight-line basis over the estimated useful lives of the products beginning with the initial release to customers.  The
  Company's estimated life for its capitalized software products is two years based on current sales trends and the rate of product
  release.  The Company continually evaluates whether events or circumstances have occurred that indicate that the remaining
  useful life of the capitalized software development costs should be revised or that the remaining balance of such assets may not
  be recoverable. The Company evaluates the recoverability of capitalized software based on the net realizable value of each product,
  which includes the estimated future gross revenues from that product reduced by the estimated future costs of completing and disposing
  of that product, including the costs of performing maintenance and customer support required to satisfy the Company's responsibility
  set forth at the time of sale. As of September 30, 2019, management believes that no revisions to the remaining useful lives or
  write-downs of capitalized software development costs are required.
  26
  Currency Translation
  The international subsidiaries and
  foreign branch operations translate their assets and liabilities from international operations by using the exchange rate in effect
  at the balance sheet date. The results of operations are translated at average exchange rates during the period. The effects of
  exchange rate fluctuations in translating assets and liabilities of international operations into U.S. dollars are accumulated
  and reflected as a currency translation adjustment as a component of other comprehensive loss in the accompanying condensed consolidated
  statements of changes in stockholders' deficit. Foreign exchange transaction gains and losses are included in general and
  administrative expenses in the condensed consolidated statements of operations. General and administrative expenses include a foreign
  exchange transaction loss of $24,000 for the nine months ended September 30, 2019 and a $15,000 gain for the nine months ended
  September 30, 2018.
  Results of Operations
  Comparison
  of Three Months Ended September 30, 2019 and 2019
  Revenues
  Total revenues decreased by $1,165,000
  or 16%, to $5,960,000 for the three months ended September 30, 2019 from $7,125,000 for the three months ended September 30, 2018.
  Software license fee revenues decreased $625,000, or 82%, from the same quarter in 2018. Subscription revenues decreased $134,000
  or 9% to $1,278,000 from $1,412,000 for the same period last year. Services and maintenance revenues for the three months ended
  September 30, 2019 decreased $406,000 or 8% from the same quarter in 2018.
  Software license fee revenue decreased
  82% to $140,000 in the third quarter of 2019 from $765,000 in the third quarter of 2018. This is primarily due to Astea Alliance
  license revenues decreasing by $467,000 or 80% to $120,000 in the third quarter of 2019 from $587,000 in the third quarter of 2018.
  The decrease was primarily due to lower perpetual license sales in all regions resulting from the Company's policy of focusing
  its sales efforts on subscription based opportunities and only selling perpetual licenses to its existing customers. We expect
  license sales to continue to decrease in the future due to this strategic shift in the sales process. FieldCentrix license sales
  were $20,000 in the third quarter of 2019 compared to $178,000 in the third quarter of 2018. The decrease was due to lower license
  sales to existing customers in the third quarter of 2019 compared to the same quarter in 2018.
  Subscription revenue decreased 9%
  to $1,278,000 in the third quarter of 2019 from $1,412,000 in the third quarter of 2018. The primary reason for the decrease resulted
  from the recognition of subscription revenue from a Japanese customer that went live in the third quarter of 2018 for which 2 years
  of subscription revenue had previously been deferred, partially offset by the recognition of subscription revenue from additional
  hosted customers going live in the U.S. in 2019, which had previously been deferred. Previously deferred hosting revenues were
  recognized as the service periods for those hosting services had lapsed. The Company continues to sell Software as a Service (SaaS)
  for which hosting revenue may not be recognized until the customers go-live. In addition, the Company's focus going forward
  will be exclusively on selling subscription licenses to new customers. As such, we expect deferred revenues and subscription revenues
  to increase going forward.
  Services and maintenance revenues
  decreased by 8% to $4,542,000 in the third quarter of 2019 compared to $4,948,000 in the third quarter of 2018. This is primarily
  due to a Japanese hosted customer that went live in the third quarter of 2018 for which 2 years of subscription service revenue
  had previously been deferred and recognized in full, partially offset by Astea Alliance service revenues in the U.S increasing
  by $142,000 or 5% compared to the third quarter of 2018. The increase was mainly attributable to a strong backlog of professional
  services required by new customer implementations and upgrades of current customers. Service and maintenance revenues generated
  by FieldCentrix decreased by $38,000 or 7% to $513,000 in the third quarter of 2019 compared to $551,000 during the same period
  in 2018. The decrease in maintenance is due to cancellation of maintenance by a few small customers offset by an increase in service
  revenue resulting from upgrade projects.
  27
  Costs of Revenues
  Cost of software license fees increased
  21% to $908,000 in the third quarter of 2019 from $750,000 in the third quarter of 2018. Included in the cost of software license
  fees is the amortization of capitalized software costs and the third party software embedded in the Company's software licenses
  sold to customers. Amortization of capitalized software development costs was $894,000 for the quarter ended September 30, 2019
  compared to $739,000 for the same quarter in 2018. The increase was due to the amortization of both Alliance Version 15 that was
  released in September 2018 and Version 15.1, released in March 2019. Amortization of both versions did not occur during the quarter
  ended September 30, 2018. The gross margin percentage on software license sales was (550%) in the third quarter of 2019 compared
  to 2% in the third quarter of 2018. The decline in the 2019 license margin resulted from the combination of lower revenues and
  higher cost of sales.
  Cost of subscriptions decreased 12%
  to $325,000 in the third quarter of 2019 from $369,000 in the third quarter of 2018. The decrease in cost of subscriptions is mainly
  attributed the Company transitioning to a lower cost SaaS cloud service provider in 2019 offset by adding more live hosted customers
  and increased hosting compliance costs in the third quarter of 2019 compared to the same period in 2018. The gross margin percentage
  on hosting was 75% in the third quarter of 2019 compared to 74% in the same quarter last year.
  Cost of services and maintenance
  decreased 11% to $3,292,000 in the third quarter of 2019 from $3,696,000 in the third quarter of 2018. The decrease in cost of
  service and maintenance is mainly attributed to a decrease in headcount in the U.S., the reduced use of contractors in Japan and
  decreases in travel expenses in all regions, partially offset by an increase in recruiting costs. The gross margin percentage was
  28% in the third quarter of 2019 compared to 25% in 2018. The growth in the services and maintenance gross margin was mainly due
  to lower service and maintenance costs in the third quarter of 2019.
  Gross Profit
  Total gross profit decreased 38%
  to $1,435,000 in the third quarter of 2019 from $2,310,000 in the third quarter of 2018 primarily due to decreases in all revenue
  streams as well as increases in costs of license fees. As a percentage of revenue, gross profit in the third quarter of 2019 was
  24% compared to 32% in the third quarter of 2018.
  Operating Expenses
  Product Development
  Product development expenses decreased 24%
  to $251,000 in the third quarter of 2019 from $330,000 in the third quarter of 2018.  Fluctuations in product development
  expense from period to period result from the amount of product development expense that is capitalized. Development costs of $797,000
  were capitalized in the third quarter of 2019 compared to $645,000 during the same period in 2018 due to the increase in resources
  working on the development of the latest version of Alliance. Gross product development expense was $1,048,000 in the third quarter
  of September 30, 2019 which is 7% higher than $975,000 during the same quarter in 2018.  The increase was due to increases
  in salary and benefits and an unfavorable exchange rate on the Israeli shekel relative to the U.S. dollar, as the majority of development
  work is performed in Israel. Product development expense as a percentage of revenues was 4% in the third quarter of 2019 and 5%
  in the third quarter of 2018.
  Sales and Marketing
  Sales and marketing expense increased
  14% to $1,156,000 in the third quarter of 2019 from $1,013,000 in the third quarter of 2018. The increase in sales and marketing
  expense resulted from higher third party marketing costs and increased sales force headcount in the U.S., offset by lower sales
  commissions due to a decrease in license revenue. The increase in third party marketing costs is due to the Company's strategy
  of expanding its marketing presence through additional efforts to increase awareness of our products in order to improve lead generation
  and sales opportunities. Increased awareness occurs through additional webinars in all regions focused on the vertical industries
  in which the Company operates, attendance at more trade shows, and new strategies to improve lead generation for the Company's
  sales force.  As a percentage of revenues, sales and marketing expense was 19% in the third quarter of 2019 and 14% in the
  third quarter of 2018.
  28
  General and Administrative
  General and administrative expenses
  consist of salaries, benefits and related costs for the Company's finance, administrative and executive management personnel,
  legal costs, accounting costs, bad debt expense and various costs associated with the Company's status as a public company.
  General and administrative expenses increased 39% to $1,355,000 during the third quarter of 2019 from $972,000 in the third quarter
  of 2018 due to increased professional fees which we did not incur during the same period in 2018. As a percentage of revenue, general
  and administrative expenses were 23% in the third quarter of 2019 compared to 14% in the third quarter of 2018.
  Net Interest Expense
  Net interest expense was $78,000
  in the third quarter of 2019 compared to $64,000 in the third quarter of 2018. The increase in interest expense is mainly due to
  interest paid on accrued, but unpaid preferred dividends compared to the same period in 2018 offset by a slight decrease in the
  interest rate charged by Bridge Bank on the Company's line of credit due to a decrease in the prime rate and by a lower average
  line of credit during the third quarter of 2019 compared to the same period in 2018 which resulted in a small decline in the interest
  paid to Bride bank for the quarter. Per the preferred stock agreements, unpaid accrued preferred dividends incur an interest charge
  calculated at 10% per annum.
  Income Tax Expense
  The Company recorded a provision
  for income tax of $84,000 for the third quarter of 2019 compared to $1,000 during the third quarter of 2018. The tax expense increase
  resulted from income taxes paid in the Asia Pacific region during the third quarter of 2019 compared to no tax provision payment
  in the same period in 2018. In the past, there has been no tax expense in this region due to the carryforward of operating losses
  from prior periods that have now been fully utilized and no longer available. We expect to pay taxes in the future in the APAC
  region as long as operations remain profitable.
  International Operations
  The Company's international
  operations generated revenues of $2,378,000 in the third quarter of 2019, a decrease of 33% from the same quarter in 2018. Revenues
  from international operations comprised 40% of the Company's total revenue for the third quarter in 2019, compared to 50%
  of total revenues for the same quarter in 2018. The decrease in international revenues in the third quarter of 2019 compared to
  the same period in 2018 is primarily due to decreases in subscription revenue and subscription service revenue in Japan due to
  a customer that went live in the third quarter of 2018 that had previously been deferred for 2 years. When the customer went live,
  all of the deferred hosting and services revenue was recognized in the period.
  Comparison of Nine Months Ended September 30, 2019 and 2018
  Revenues
  Total
  revenues decreased by $1,458,000 or 7%, to $18,995,000 for the nine months ended September 30, 2019 from $20,453,000 for the nine
  months ended September 30, 2018. Software license fee revenues decreased $774,000, or 37%, from the same period in 2018. Subscription
  revenues increased $633,000 or 20% to $3,737,000 from the same period last year. Services and maintenance revenue for the nine
  months ended September 30, 2019 decreased $1,317,000 or 9% from the same period in 2018.
  Software license fee revenues decreased
  37% to $1,302,000 in the first nine months of 2019 compared to $2,076,000 in the same period in 2018. This is primarily due to
  Astea Alliance license revenue decreasing by $694,000 or 38%, to $1,138,000 in the first nine months of 2019 from $1,832,000 in
  the first nine months of 2018. The decrease was primarily due to lower perpetual license sales in the U.S., Japan and EMEA and
  partially offset by slightly higher sales in the Asia Pacific region.
  Subscription revenue increased 20%
  to $3,737,000 in the first nine months of 2019 from $3,104,000 in the first nine months of 2018. The increase resulted from a number
  of hosted customers who went live in late 2018 and the first nine months of 2019 as well as the addition of new user licenses by
  certain customers. The Company continues to add new hosting customers. Even though the Company signed new Software as a Service
  (SaaS) customers in the first nine months of 2019, most of the associated hosting revenue may not be recognized until the new customers
  go-live.
  29
  Services and maintenance revenues
  decreased by 9% to $13,956,000 in the first nine months of 2019 compared to $15,273,000 in the first nine months of 2018. This
  is primarily due to Astea Alliance service and maintenance decreasing by $1,082,000 or 8% compared to the first nine months of
  2018. The decrease was mainly attributable to a larger than usual amount of service revenue recognized in the 2018 period when
  a hosted customer in Japan went live in the first nine months of 2018 for which a substantial amount of the hosting service revenue,
  which had previously been deferred for three years, was recognized. In the nine months ended September 30, 2019, there was no remaining
  revenue to be recognized for this customer in Japan. In addition, there was a decrease in maintenance revenue in 2019 in the U.S.
  for a few customers that transitioned from on-premise to subscription services. Service and maintenance revenues generated by FieldCentrix
  decreased by $234,000 or 14% to $1,488,000 in the first nine months of 2019 compared to $1,722,000 during the same period in 2018.
  The decrease in service revenue is due to a reduction in upgrade projects for existing customers and decreases in maintenance due
  to cancelation by a few small customers.
  Costs of Revenues
  Cost of software license fees increased
  by 28% to $2,532,000 in the first nine months of 2019 from $1,976,000 in the first nine months of 2018. Included in the cost of
  software license fees are the costs of capitalized software amortization and the cost of all third party software embedded in the
  Company's software licenses which are sold to customers. Amortization of capitalized software development costs was $2,463,000
  for the first nine months in 2019 compared to $1,940,000 for the same period in 2018. The increase in amortization was due to the
  amortization of Alliance Version 15 that began being amortized during the 4th quarter of 2018 that will continue for 2 years as
  well as amortization of Version 15.1 that was released in March 2019. The gross margin percentage on software license sales was
  (94%) in the first nine months of 2019 compared to 5% in the first nine months of 2018. The decline in the license margin resulted
  from a decrease in software license fees and an increase in amortization of software license fees in the first nine months of 2019.
  Cost of subscriptions increased by
  11% to $884,000 in the first nine months of 2019 from $794,000 in the first nine months of 2018. The increase in cost of subscriptions
  is mainly attributed to the addition of more customers to the SaaS environment and increased hosting compliance costs in the first
  nine months of 2019 compared to the same period in 2018. The gross margin percentage on hosting was 76% in the first nine months
  of 2019 compared to 74% in the first nine months of 2018. The growth in the subscription margin was primarily due to the increase
  in subscription revenues as customers continue to go live.
  Cost of services and maintenance
  decreased 8% to $9,802,000 in the first nine months of 2019 from $10,705,000 in the first nine months of 2018. The decrease in
  cost of service and maintenance is mainly attributed to a decrease in headcount in the U.S., a decrease in subcontractor cost in
  Japan, and decreases in travel expenses in all regions partially offset by an increase in recruiting costs. The gross margin percentage
  was 30% in the first nine months of 2019 and 2018.
  Gross Profit
  Gross profit decreased 17% to $5,777,000
  in the first nine months of 2019 from $6,978,000 in the first nine months of 2018 primarily due to a decrease of license and service
  and maintenance revenues and an increase in software license and subscription costs partially offset by an increase in subscription
  revenue and decrease in service and maintenance costs. As a percentage of revenue, gross profit in the first nine months of 2019
  was 30% compared to 34% in the first nine months of 2018.
  Operating Expenses
  Product Development
  Product development expenses increased 23%
  to $857,000 in the first nine months of 2019 from $697,000 in the first nine months of 2018.  Fluctuations in product development
  expense from period to period result from the amount of product development expense that is capitalized. Development costs of $2,301,000
  were capitalized in the first nine months of 2019 compared to $2,430,000 during the same period in 2018 due to additional resources
  working on Version 15 in 2018. In 2018, there had been extra time and resources allocated to Version 15 due to all the additional
  functionality and upgrades being made to this version. Gross product development expense was $3,158,000 in the first nine months
  of 2019 compared to $3,127,000 during the same period in 2018. The slight increase of 1% in gross product development expense was
  primarily due to general inflationary cost increases. The majority of development work is performed in Israel. Product development
  expense as a percentage of revenues was 5% in the first nine months of 2019 and 3% in the first nine months of 2018.
  30
  Sales and Marketing
  Sales and marketing expense increased
  by 4% to $3,122,000 in the first nine months of 2019 from $2,991,000 in the first nine months of 2018. The increase in sales and
  marketing expense resulted from an increase in third party marketing costs and increased headcount in the U.S., partially offset
  by lower sales commissions due to a decrease in commissionable sales. The increase in third party marketing costs is due to the
  Company's strategy of expanding its marketing presence through additional efforts to increase awareness of our products in
  order to improve lead generation and sales opportunities. Increased awareness occurs through additional webinars in all regions
  focused on the vertical industries in which the Company operates, attendance at more trade shows, and new strategies to improve
  lead generation for the Company's sales force.  As a percentage of revenues, sales and marketing expense was 16% in
  the first nine months of 2019 and 15% in the first nine months of 2018.
  General and Administrative
  General and administrative expenses
  consist of salaries, benefits and related costs for the Company's finance, administrative and executive management personnel,
  legal costs, accounting costs, and various costs associated with the Company's status as a public company. General and administrative
  expenses increased 21% to $3,479,000 during the first nine months of 2019 from $2,868,000 in the first nine months of 2018 mainly
  due to increased professional fees which we did not incur during the same period in 2018. As a percentage of revenue, general and
  administrative expenses were 18% in the first nine months of 2019 compared to 14% in the first nine months of 2018.
  Net Interest Expense
  Net interest expense was $217,000
  in the first nine months of 2019 compared to $163,000 in the first nine months of 2018. The increase in interest expense is mainly
  due to interest paid on accrued, but unpaid preferred dividends compared to the same period in 2018offset by a slight decrease
  in the interest rate charged by Bridge Bank on the Company's line of credit due to a decrease in the prime rate and by a
  lower average line of credit during the first nine months of 2019 compared to the same period in 2018 which resulted in a small
  decline in the interest paid to Bride bank for the period. Per the preferred stock agreements, unpaid accrued preferred dividends
  incur an interest charge calculated at 10% per annum.
  Income Tax Expense
  The Company recorded a provision
  for income tax of $122,000 for first nine months of 2019 compared to $19,000 for the same quarter in 2018. The tax expense increase
  resulted from income tax paid in Australia during the first nine months of 2019 compared to no tax provision paid in the same period
  in 2018. In the past, there has been no tax expense in the region due to the complete utilization of operating losses from prior
  periods which have been fully utilized. We expect to pay taxes in the future in the APAC region, as long as they remain profitable.
  The effective tax rate in the APAC region is 30%.
  International Operations
  The Company's international
  operations generated revenues of $7,464,000 in the first nine months of 2019, a decrease of 19% compared to the same period in
  2018. Revenues from international operations comprised 39% of the Company's total revenue for the first nine months in 2019
  compared to 45% in the first nine months of 2018. The decrease in international revenues is primarily due to a decrease revenues
  in all international regions, primarily Japan.
  Liquidity and Capital Resources
  Operating Activities
  The Company generated $1,693,000 of cash from
  operating activities in the first nine months of 2019 compared to $1,722,000 in the first nine months of 2018.  The slight
  decrease in operating cash flows of $29,000 was primarily due to a decrease in income of $2,260,000, offset by an increase in noncash
  charges of $211,000, partially offset by an increase in collections of $1,380,000 from accounts receivable, a decrease in prepaid
  expenses of $143,000, and increases in accounts payable and accrued expenses of $354,000 and deferred revenue of $145,000.
  31
  Investing Activities
  The Company used $2,446,000 for investing activities
  in the first nine months of 2019 compared to $2,472,000 for the first nine months of 2018. The slight increase in cash used for
  investing activities is primarily attributable to a decrease of $129,000 in capitalized software development costs partially offset
  by an increase of $103,000 for the acquisition of property and equipment.
  Financing
  Activities
  The Company used $137,000 in cash
  for financing activities in the first nine months of 2019, compared to generating $146,000 from financing activities during the
  first nine months in 2018.  The additional use of $283,000 of cash for financing activities resulted from the payment
  of $200,000 of preferred stock dividend payments in the first nine months of 2019 compared to $105,000 payments in the first nine
  months of 2018.  In addition, the Company borrowed $12,443,000 and repaid $12,524,000 on its line of credit from WAB in the
  first nine months of 2019 compared to borrowing $8,367,000 and repaying $7,975,000 on its line of credit in 2018. The Company repaid
  $225,000 on the term loan with WAB in 2018. In addition, the Company received $144,000 from the exercise of stock options in the
  first nine months of 2019 compared to $84,000 in the same period in 2018.
  The effect of exchange rates on cash
  related to the U.S. dollar exchange rates for most other currencies in which the Company operates, primarily the Australian dollar,
  Japanese yen, the Euro, the British pound sterling and Israel shekel, provided an increase in cash of $12,000 in the first nine
  months of 2019 compared to $19,000 in the first nine months of 2018.
  Operating Matters and Liquidity
  The Company has a
  history of net losses and an accumulated deficit of $36,364,000 as of September 30, 2019. In the first nine months of 2019, the
  Company had a net loss of $2,020,000 compared to income of $240,000 generated in the first nine months of 2018. Further, at September
  30, 2019, the Company had a working capital ratio of .57:1, with cash and cash equivalents of $1,839,000 compared to December 31,
  2018 when the Company had cash and cash equivalents of $1,276,000. The increase in cash and cash equivalents for the first nine
  months 2019 was primarily driven by an increase in cash provided by operations in 2019 compared to 2018 and a decrease in capitalized
  software development costs, partially offset by an increase in the dividend payment.
  As of September 30, 2019, the Company owed
  $2,588,000 against the line of credit from Western Alliance Bank ("WAB").   As of September 30, 2019, the
  availability under the line of credit was $262,000. The Company has projected revenues that management believes will provide sufficient
  funds along with the additional borrowings available under its line of credit to sustain its continuing operations through at least
  November 15, 2020. The Second Loan Agreement increased the availability under the line of credit from $2,400,000 to $2,850,000
  (see Note 4).
  The Company was in compliance with the WAB
  financial and liquidity covenant as of September 30, 2019 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 amount due to WAB under the line of credit as
  of September 30, 2019 were classified in the accompanying condensed 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 2019 as well as upgrade projects from our existing customers as they move to the latest version of Astea Alliance.  
  In 2020, the Company will continue to consider ways to reduce operating expenses in certain areas of the Company in order to maintain
  its liquidity. However, management has implemented new marketing initiatives which have increased our spending in this area in
  2019. 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
  November 15, 2020. 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.
  32
  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.
  Off-Balance Sheet Arrangement
  Transactions
  The Company is not involved in off-balance
  sheet arrangements that have or are reasonably likely to have a material current or future impact on our financial condition, changes
  in financial condition, revenues or expenses result in operations, liquidity, capital expenditures or capital resources.
  Item 3.
  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
  Market risk represents the risk of
  loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure
  is primarily a result of fluctuations in interest rates and foreign currency. We do not hold financial instruments for trading
  purposes.
  Interest Rate Risk.
  Our exposure to
  market risk for changes in interest rates relates primarily to our balances outstanding on our revolving line of credit with WAB,
  as the interest rate is variable. At September 30, 2019, the outstanding balances on our line of credit under the revolving credit
  facility with WAB was $2,588,000.
  Foreign Currency Risk.
  All costs associated
  with the Company's foreign operations in the United Kingdom, Australia, Japan and Israel are denominated in their respective
  local currencies and translated into U.S. dollars for financial reporting. As a result, the Company is exposed to risks to the
  extent that the rate of inflation in many of itws foreign operating regions differs from the rate of revaluation of their related
  currencies in relation to the U.S. dollar of if the timing of such revaluations lags behind inflation in these regions. In such
  an event, the costs of the Company's operations in these regions, measured in U.S. dollars, will change and the U.S. dollar
  measured results of operations will be affected.
  The Company does not use foreign currency forward
  exchange contracts or purchased currency options to hedge local currency cash flows or for trading purposes. All sales arrangements
  with international customers are denominated in foreign currency. For the nine months ended September 30, 2019, approximately 39%
  of the Company's overall revenue resulted from sales to customers outside the United States. A 10% change in the value of
  the U.S. dollar relative to each of the currencies of the Company's non-U.S.-generated sales would not have resulted in a
  material change to its results of operations. The Company does not expect any material loss with respect to foreign currency risk.
  Item 4.
  CONTROLS AND PROCEDURES
  Our management has evaluated the effectiveness
  of our disclosure controls and procedures as required by Exchange Act Rules 13a-15 as of the end of the period covered by this
  report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure
  controls and procedures are effective.
  Changes in Internal Control Over Financial Reporting
  During the quarter ended March 31, 2019, we
  implemented internal controls for the new accounting standard adopted during the period, Leases, but there were no changes in
  our internal control over financial reporting during the fiscal quarter ended September 30, 2019 that materially affected, or
  are reasonably likely to materially affect, our internal control over financial reporting.
  33
  PART II - OTHER INFORMATION
  Item 1A.
  RISK FACTORS
  In addition to the risk factors set forth in
  this report, you should carefully consider the factors discussed in Part I, "Item 1A. Risk Factors" in the Company's
  Annual Report on Form 10-K for the year ended December 31, 2018, which could materially affect the Company's business, financial
  condition or future results. The risks described in this report and in the Company's Annual Report on Form 10-K for the year
  ended December 31, 2018 are not the only risks facing the Company. Additional risks and uncertainties not currently known to the
  Company or that the Company currently deems to be immaterial also may materially adversely affect the Company's business,
  financial condition and/or operating results.
  Variability of Quarterly Results
  Risks to the Company on a quarterly
  basis, and which may vary from quarter to quarter, include but are not limited to the following:
  ·
  The Company's quarterly operating results have varied in the past,
  and may vary significantly in the future depending on factors such as the size, timing and recognition of revenue from significant
  orders, the timing of new product releases and product enhancements, and market acceptance of these new releases and enhancements,
  increases in operating expenses, and seasonality of its business.
  ·
  The market price of the Company's common stock could be subject to
  significant fluctuations in response to, and may be adversely affected by, variations in quarterly operating results, changes in
  earnings estimates by analysts, developments in the software industry, adverse earnings or other financial announcements of the
  Company's customers and general stock market conditions, as well as other factors.
  Merger Agreement
  On October 7, 2019, the Company
  entered into an Agreement and Plan of Merger ("Merger Agreement") with IFS Americas, Inc. ("Parent") and
  IFS Amber, Inc. ("Merger Sub"), a wholly owned subsidiary of Parent. Subject to the terms and conditions of the Agreement,
  Merger Sub will merge with the Company and then become a subsidiary of Parent ("the Merger"). It is expected for the
  merger to close before the end of calendar year 2019.
  The transaction will result in the
  acquisition of all outstanding shares of the Company by Parent for cash. Each outstanding share of common stock, par value $0.01
  per share, excluding shares held in treasury, will be purchased for $12.00 per share. Furthermore, each option to purchase shares
  of the Company common stock immediately prior to the effective time of the transaction, whether vested or unvested, will be cancelled
  and converted into the right to receive an amount in cash equal to the product of the total number of shares of common stock subject
  to the option, multiplied by the excess, if any, of the merger consideration, $12.00, over the applicable exercise price of each
  option.
  The Merger Agreement contains various
  representations, warranties and covenants by the Company, Parent and Merger Sub. The Merger Agreement requires the Company to call
  and hold a special stockholders meeting and requires the board of directors of the Company to recommend that the Company's
  stockholders approve the Merger Agreement and the merger.
  The Merger Agreement requires the
  Company and Parent to use reasonable best efforts to take all reasonable actions necessary under applicable law to consummate the
  transactions contemplated by the Merger Agreement.
  The Merger Agreement contains certain
  termination rights for each of the Company and Parent, including the right of each party to terminate the Merger Agreement if the
  merger has not been consummated by the end of January 31, 2020.
  The Merger Agreement provides for
  a payment by the Company to Parent a termination fee in the amount of $2,569,746 in the case of a termination of the Merger Agreement
  under certain circumstances described in the Merger Agreement. Parent shall pay a termination fee of $2,936,852 to the Company
  in the event the Merger Agreement is terminated by Parent subject to certain conditions contained in the Merger Agreement.
  34
  The Company board of directors has
  unanimously determined that the transactions contemplated by the Merger Agreement are fair to, and in the best interest of, the
  Company and its stockholders, and has unanimously recommended that the Company board of directors approve the Merger Agreement
  and the transactions contemplated therein. The obligations of the parties to consummate the merger are subject to customary closing
  conditions.
  This description of the Merger Agreement,
  the transactions contemplated by the Merger Agreement, and the background to the signing same of does not purport to be complete
  and is qualified in its entirety by reference to the Merger Agreement, which was filed with the SEC by the Company on October 8,
  2019 and is incorporated herein by reference, and attached hereto as Exhibit 2.1, reference.
  Risks Associated with a Failure
  to Consummate the Merger
  The fact that there can be no assurance that
  all conditions to the parties' obligations to consummate the Merger will be satisfied and as a result the possibility that
  the Merger might not be completed. If the Merger is not completed, (i) the Company will have incurred significant risk, transaction
  expenses and opportunity costs, including the possibility of disruption to its operations, diversion of management and employee
  attention, employee attrition and a potentially negative effect on its business and client relationships, (ii) depending on
  the circumstances that caused the Merger not to be completed, it is likely that the price of the Company's common stock will
  decline, potentially significantly and (iii) the market's perception of the Company's prospects could be adversely
  affected.
  35
  Item 6
  .
  EXHIBITS
  2.1
  Agreement and Plan of Merger among Astea International Inc., IFS
                                                                 Americas, Inc., and IFS Amber, Inc., dated October 7, 2019 (
  Incorporated herein by reference to Exhibit 2.1 to the Company's Registration Statement on Form 8-K filed on October 8, 2019
  )
  10.27
  Closing Compensation Agreement between Rick
                               Etskovitz and Astea International Inc. dated September 17, 2019
  31.1
  Certification Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
  31.2
  Certification Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
  32.1
  Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – Chief Executive Officer
  32.2
  Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – Chief Financial Officer
  36
  SIGNATURES
  Pursuant to the
  requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
  undersigned thereunto duly authorized.
  ASTEA INTERNATIONAL INC.
  Date:  November 14, 2019
  /s/Zack Bergreen
  Zack Bergreen
  Chief Executive Officer
  (Principal Executive Officer)
  Date:  November 14, 2019
  /s/Rick Etskovitz
  Rick Etskovitz
  Chief Financial Officer
  (Principal Financial and Chief Accounting Officer)
  37
  EXHIBIT INDEX
  No.
  Description
  2.1
  Agreement and Plan of Merger among Astea International
      Inc., IFS Americas, Inc., and IFS Amber, Inc., dated October 7, 2019 (
  Incorporated herein by reference to Exhibit 2.1 to the Company's Registration Statement on Form 8-K filed on October 8, 2019
  )
  10.27
  Closing Compensation Agreement between Rick Etskovitz and Astea International Inc. dated September 17, 2019
  31.1
  Certification Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
  31.2
  Certification Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of  the Sarbanes-Oxley Act of 2002
  32.1
  Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – Chief Executive Officer
  32.2
  Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – Chief Financial Officer
  101.INS
  XBRL Instance Document
  101.SCH
  XBRL Taxonomy Extension Schema
  101.CAL
  XBRL Taxonomy Extension Calculation Linkbase
  101.DEF
  XBRL Taxonomy Extension Definition Linkbase
  101.LAB
  XBRL Taxonomy Extension Label Linkbase
  101.PRE
  XBRL Taxonomy Extension Presentation Linkbase
  38