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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: center">UNITED STATES</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: center">SECURITIES AND EXCHANGE COMMISSION</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: center">WASHINGTON, D.C. 20549</div>
  
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  <div style="FONT-SIZE: 14pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: center">FORM 10-Q</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify">(Mark One)</div>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">[X]</div>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934</div>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">For the quarterly period ended <font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">&#160;&#160;&#160;&#160;&#160;<font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-VARIANT: normal; FONT-WEIGHT: normal; FONT-STYLE: normal"><u>&#160;&#160;&#160;&#160;June 30, 2017</u></font></font></div>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: center">or</div>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify">[ &#160;&#160; ]</div>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify">Transition Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934.</div>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">For the transition period from&#160; &#160; &#160; &#160; &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-VARIANT: normal; FONT-WEIGHT: normal; FONT-STYLE: normal"><u>&#160;&#160;&#160; &#160;&#160; &#160; &#160; &#160; &#160;&#160;</u></font> to&#160;<u>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</u></div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: center">Commission File Number: <font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold"><u>0-26330</u></font></div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: center">ASTEA INTERNATIONAL INC.</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: center">(Exact name of registrant as specified in its charter)</div>
  
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  <div><u>Delaware</u></div>
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  <div><u>23-2119058&#160;&#160;&#160;&#160;&#160;</u></div>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">&#160;(State or other jurisdiction of</div>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">(I.R.S. Employer</div>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">incorporation or organization)</div>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">Identification No.)</div>
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  <div><u>240 Gibraltar Road, Horsham,&#160; PA</u></div>
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  <div><u>19044</u></div>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">(Zip Code)</div>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: center">Registrant's telephone number, including area code: <font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold"><u>(215) 682-2500</u></font></div>
  
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  <div style="TEXT-ALIGN: center">&#160;</div>
  
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  <div>N/A</div>
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  (Former name, former address and former fiscal year, if changed since last report)</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; 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.</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify">Yes <font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif"><u>&#160;X&#160;</u></font>&#160; &#160; No&#160;<font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif"><u>&#160;&#160;&#160;&#160;</u></font></div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; 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).</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify">&#160;Yes <font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif"><u>&#160;&#160;X&#160;&#160;</u></font>&#160; &#160; No&#160;<font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif"><u>&#160;&#160;&#160;&#160;&#160;&#160;&#160;</u></font></div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify">Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.&#160; See definition of "accelerated filer", "large accelerated filer", "non-accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange act.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify">&#160;Large Accelerated filer __&#160; &#160; &#160; Accelerated Filer __&#160; &#160; &#160; Non-accelerated Filer&#160; &#160; &#160;&#160; Smaller Reporting Company <font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif"><u>X&#160;&#160;</u></font></div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">Yes <font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif"><u>&#160;&#160; &#160; &#160;</u></font>&#160; &#160; No&#160;<font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif"><u>&#160;&#160;X&#160;&#160;</u></font></div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify">As of August 8, 2017, 3,594,549 shares of the registrant's Common Stock, par value $.01 per share, were outstanding.</div>
  
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  <div>&#160;</div>
  
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   &#160;</div>
  
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  <div style="FONT-SIZE: 14pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: center">ASTEA INTERNATIONAL INC.<font style="FONT-SIZE: 14pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000"> AND SUBSIDIARIES</font></div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: center">FORM 10-Q</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: center">QUARTERLY REPORT</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: center">INDEX</div>
  
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  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: center; WIDTH: 13.69%"><u>Page No.</u></td>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">Facing Sheet</div>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: center">1</div>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">Index</div>
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  <div style="TEXT-ALIGN: left"><u>PART I - FINANCIAL INFORMATION</u></div>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: left">Item 1.</div>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: left">Financial Statements</div>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">Consolidated Statements of Operations (unaudited)</div>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">Consolidated Statements of Comprehensive Loss (unaudited)</div>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">Consolidated Statements of Stockholders' Deficit (unaudited)</div>
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  <td style="VERTICAL-ALIGN: top; WIDTH: 6.89%">&#160;</td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 80.05%">&#160;</td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 13.69%">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; WIDTH: 6.89%">&#160;</td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 80.05%">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">Consolidated Statements of Cash Flows (unaudited)</div>
  </td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 13.69%">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: center">7</div>
  </td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; WIDTH: 6.89%">&#160;</td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 80.05%">&#160;</td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 13.69%">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; WIDTH: 6.89%">&#160;</td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 80.05%">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">Notes to Unaudited Consolidated Financial Statements</div>
  </td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 13.69%">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: center">8</div>
  </td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; WIDTH: 6.89%">&#160;</td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 80.05%">&#160;</td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 13.69%">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; WIDTH: 6.89%">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: left">Item 2.</div>
  </td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 80.05%">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: left">Management's Discussion and Analysis of Financial</div>
  </td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 13.69%">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; WIDTH: 6.89%">&#160;</td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 80.05%">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: left">Condition and Results of Operations</div>
  </td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 13.69%">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: center">16</div>
  </td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; WIDTH: 6.89%">&#160;</td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 80.05%">&#160;</td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 13.69%">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; WIDTH: 6.89%">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: left">Item 3.</div>
  </td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 80.05%">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: left">Quantitative and Qualitative Disclosure About Market Risk</div>
  </td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 13.69%">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: center">24</div>
  </td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; WIDTH: 6.89%">&#160;</td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 80.05%">&#160;</td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 13.69%">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; WIDTH: 6.89%">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: left">Item 4.</div>
  </td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 80.05%">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: left">Controls and Procedures</div>
  </td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 13.69%">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: center">25</div>
  </td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; WIDTH: 6.89%">&#160;</td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 80.05%">&#160;</td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 13.69%">&#160;</td>
  </tr>
  
  <tr>
  <td style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-VARIANT: normal; VERTICAL-ALIGN: top; FONT-WEIGHT: bold; FONT-STYLE: normal; WIDTH: 86.31%" colspan="2">
  <div style="TEXT-ALIGN: left"><u>PART II - OTHER INFORMATION</u></div>
  </td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 13.69%">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; WIDTH: 6.89%">&#160;</td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 80.05%">&#160;</td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 13.69%">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; WIDTH: 6.89%">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: left">Item 1A.</div>
  </td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 80.05%">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: left">Risk Factors</div>
  </td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 13.69%">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: center">25</div>
  </td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; WIDTH: 6.89%">&#160;</td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 80.05%">&#160;</td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 13.69%">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; WIDTH: 6.89%">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: left">Item 5.</div>
  </td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 80.05%">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: left">Other Information</div>
  </td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 13.69%">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: center">25</div>
  </td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; WIDTH: 6.89%">&#160;</td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 80.05%">&#160;</td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 13.69%">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; WIDTH: 6.89%">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: left">Item 6.</div>
  </td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 80.05%">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: left">Exhibits</div>
  </td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 13.69%">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: center">27</div>
  </td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; WIDTH: 6.89%">&#160;</td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 80.05%">&#160;</td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 13.69%">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; WIDTH: 6.89%">&#160;</td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 80.05%">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: left">Signatures</div>
  </td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 13.69%">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: center">28</div>
  </td>
  </tr>
  </table>
  </div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">&#160;</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">&#160;</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">&#160;</div>
  
  <div id="DSPFPageBreakArea" style="MARGIN-BOTTOM: 10pt; CLEAR: both; MARGIN-TOP: 10pt">
  <div id="DSPFPageNumberArea" style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: center"><font id="DSPFPageNumber" style="FONT-SIZE: 8pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: normal; FONT-STYLE: normal">2</font></div>
  
  <div id="DSPFPageBreak" style="PAGE-BREAK-AFTER: always">
  <hr style="BORDER-LEFT-WIDTH: 0px; HEIGHT: 2px; BORDER-RIGHT-WIDTH: 0px; BORDER-BOTTOM-WIDTH: 0px; COLOR: #000000; CLEAR: both; MARGIN: 4px 0px; BORDER-TOP-WIDTH: 0px; WIDTH: 100%; BACKGROUND-COLOR: #000000" noshade="noshade">
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  <div>&#160;</div>
  
  <div>
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: left"><u>PART I - FINANCIAL INFORMATION</u></div>
  
  <div><br>
  </div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: left"><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif"><u>Item 1.</u></font>&#160; <font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif"><u>FINANCIAL STATEMENTS</u></font></div>
  
  <br>
  </div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: center"><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif"><u>ASTEA INTERNATIONAL INC</u></font><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000"><u>. AND SUBSIDIARIES</u></font></div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: center"><u>CONSOLIDATED BALANCE SHEETS</u></div>
  
  <table id="z408de65a861e496fbf197d05c0998c86" style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; WIDTH: 100%" cellspacing="0" cellpadding="0">
  <tr>
  <td style="VERTICAL-ALIGN: top" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: top" valign="bottom" colspan="2">
  <div></div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: center">June 30,</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: top" valign="bottom" colspan="2">
  <div></div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: center; TEXT-INDENT: -3pt">December 31,</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; PADDING-BOTTOM: 2px" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: top; BORDER-BOTTOM: #000000 2px solid" valign="bottom" colspan="2">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: center">2017</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: center">(Unaudited)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: top; BORDER-BOTTOM: #000000 2px solid" valign="bottom" colspan="2">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: center">2016</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: center">ASSETS</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: top" valign="bottom" colspan="2">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: top" valign="bottom" colspan="2">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">Current assets:</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: top" valign="bottom" colspan="2">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: top" valign="bottom" colspan="2">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">&#160;&#160;Cash and cash equivalents</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">1,277,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">661,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">&#160;&#160;Accounts receivables, net of reserves allowance of $66,000 (unaudited)</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">&#160;&#160;&#160;&#160;&#160;and $66,000, respectively</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">5,356,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div></div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">5,596,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; PADDING-BOTTOM: 2px; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">&#160;&#160;Prepaid expenses and other current assets</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">298,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">304,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; PADDING-BOTTOM: 2px; WIDTH: 76%" valign="bottom">
  <div style="TEXT-ALIGN: left">&#160;</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">&#160;&#160;&#160;&#160;&#160;&#160;&#160;Total current assets</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">6,931,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div></div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">6,561,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; WIDTH: 76%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
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  <tr>
  <td style="VERTICAL-ALIGN: top; WIDTH: 76%" valign="bottom">
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  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">114,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">131,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">Capitalized software development costs, net</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">3,995,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">4,021,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">Restricted cash</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">73,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">69,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; PADDING-BOTTOM: 2px; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">Other long-term assets</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">162,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">152,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 76%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 4px; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">Total assets</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 4px; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">11,275,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div>$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">10,934,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; WIDTH: 76%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: center">LIABILITIES AND STOCKHOLDERS' DEFICIT</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">Current liabilities:</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">&#160;&#160;Borrowings under line of credit from CEO/Director</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">450,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">-</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">&#160;&#160;Borrowings under line of credit from Silicon Valley Bank</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">1,555,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">-</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">&#160;&#160;Accounts payable and accrued expenses</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">3,196,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">2,904,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; PADDING-BOTTOM: 2px; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">&#160;&#160;Deferred revenues</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">10,353,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">9,556,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; PADDING-BOTTOM: 2px; WIDTH: 76%" valign="bottom">
  <div style="TEXT-ALIGN: left">&#160;</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Total current liabilities</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div></div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">15,554,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div></div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">12,460,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr style="HEIGHT: 14px">
  <td style="VERTICAL-ALIGN: top; WIDTH: 76%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">Long-term liabilities:</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">&#160;&#160;Borrowings under line of credit from Silicon Valley Bank</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">-</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">1,927,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">&#160;&#160;Long-term accrued expenses</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">458,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">332,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">&#160;&#160;Deferred tax liability</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">41,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">41,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; PADDING-BOTTOM: 2px; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">&#160;&#160;Deferred revenues, net of current portion</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">690,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">384,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; PADDING-BOTTOM: 2px; WIDTH: 76%" valign="bottom">
  <div>&#160;</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Total long-term liabilities</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">1,189,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div></div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">2,684,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; WIDTH: 76%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">Commitments and contingencies</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; WIDTH: 76%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">Stockholders' deficit:</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">&#160;&#160;&#160;Convertible preferred stock, $.01 par value, shares authorized 5,000,000:</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">&#160;&#160;&#160;&#160;&#160;&#160;&#160;Series A issued and outstanding 826,000 shares</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">8,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div></div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">8,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">&#160;&#160;&#160;&#160;&#160;&#160;&#160;Series B issued and outstanding 797,000 shares</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">8,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">8,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">&#160;&#160;&#160;Common stock $.01 par value, 25,000,000 shares authorized; issued</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">&#160;&#160;&#160;&#160;&#160;&#160;&#160;3,636,000 shares; shares outstanding 3,594,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">36,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div></div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">36,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">&#160;&#160;&#160;Additional paid-in-capital</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">31,888,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">32,075,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">&#160;&#160;&#160;Accumulated deficit</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">(36,343,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">(35,437,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">)</div>
  </td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">&#160;&#160;&#160;Accumulated other comprehensive loss</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">(857,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">(692,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">)</div>
  </td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; PADDING-BOTTOM: 2px; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">&#160;&#160;&#160;Treasury stock at cost, 42,000 common shares</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">(208,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">(208,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">)</div>
  </td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; PADDING-BOTTOM: 2px; WIDTH: 76%" valign="bottom">
  <div style="TEXT-ALIGN: left">&#160;</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Total stockholders' deficit</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">(5,468,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">(4,210,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">)</div>
  </td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; PADDING-BOTTOM: 4px; WIDTH: 76%" valign="bottom">
  <div style="TEXT-ALIGN: left">&#160;</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Total liabilities and stockholders' deficit</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 4px; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">11,275,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
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  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
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  <tr>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: center">See accompanying notes to the unaudited consolidated financial statements.</div>
  
  <div></div>
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  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
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  <div>&#160;</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: center"><u>CONSOLIDATED STATEMENTS OF OPERATIONS</u></div>
  
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  <div><br>
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  <tr>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom">&#160;</td>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">Three Months</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom">&#160;</td>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">Six Months</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid" valign="bottom" colspan="6">
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  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid" valign="bottom" colspan="6">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">Ended June 30,</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid" valign="bottom" colspan="2">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">2017</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid" valign="bottom" colspan="2">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">2016</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid" valign="bottom" colspan="2">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">2017</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid" valign="bottom" colspan="2">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">2016</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 9.9pt; TEXT-INDENT: -9.9pt">Revenues:</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom" colspan="2">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom" colspan="2">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom" colspan="2">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom" colspan="2">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 52%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 19.8pt; TEXT-INDENT: -9.9pt">Software license fees</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">402,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">248,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">645,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">1,092,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 52%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 19.8pt; TEXT-INDENT: -9.9pt">Subscriptions</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">504,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">1,066,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">1,271,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">1,568,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 52%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 19.8pt; TEXT-INDENT: -9.9pt">Services and maintenance</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">5,050,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">4,372,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">10,041,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">8,374,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 52%" valign="bottom">
  <div>&#160;</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 19.8pt; TEXT-INDENT: -9.9pt">&#160;&#160;&#160;&#160;Total revenues</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">5,956,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">5,686,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">11,957,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">11,034,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 52%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left">&#160;</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 9.9pt; TEXT-INDENT: -9.9pt">Costs of revenues:</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 52%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 19.8pt; TEXT-INDENT: -9.9pt">Cost of software license fees</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">573,000</div>
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  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">585,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">1,290,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">1,168,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 52%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 19.8pt; TEXT-INDENT: -9.9pt">Cost of subscriptions</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">225,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">242,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">433,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">469,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 52%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 19.8pt; TEXT-INDENT: -9.9pt">Cost of services and maintenance</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">3,599,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">3,712,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">7,153,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">6,903,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 52%" valign="bottom">
  <div>&#160;</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 29.7pt; TEXT-INDENT: -9.9pt">Total cost of&#160;&#160;revenues</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">4,397,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">4,539,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">8,876,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">8,540,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 52%" valign="bottom">
  <div>&#160;</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 9.9pt; TEXT-INDENT: -9.9pt">Gross profit</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">1,559,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">1,147,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">3,081,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">2,494,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 52%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left">&#160;</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 9.9pt; TEXT-INDENT: -9.9pt">Operating Expenses:</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 52%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 19.8pt; TEXT-INDENT: -9.9pt">Product development</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">235,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">267,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">797,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">394,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 52%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 19.8pt; TEXT-INDENT: -9.9pt">Sales and marketing</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">807,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">1,178,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">1,734,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">2,218,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 52%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 19.8pt; TEXT-INDENT: -9.9pt">General and administrative</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">705,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">717,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">1,368,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">1,557,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 52%" valign="bottom">
  <div>&#160;</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 29.7pt; TEXT-INDENT: -9.9pt">Total operating expenses</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">1,747,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">2,162,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">3,899,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">4,169,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 52%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left">&#160;</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left">Loss from operations</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(188,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(1,015,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(818,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(1,675,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 52%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left">Interest expense, net</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">32,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">21,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">74,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">46,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 52%" valign="bottom">
  <div>&#160;</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 9.9pt; TEXT-INDENT: -9.9pt">Loss before income taxes</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(220,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(1,036,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(892,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(1,721,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 52%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left">Income tax expense</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">7,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">12,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">14,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">24,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 52%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left">&#160;</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 9.9pt; TEXT-INDENT: -9.9pt">Net loss</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(227,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(1,048,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(906,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(1,745,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 52%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 9.9pt; TEXT-INDENT: -9.9pt">Preferred dividend</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">125,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">125,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">250,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">250,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 4px; WIDTH: 52%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left">&#160;</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 9.9pt; TEXT-INDENT: -9.9pt">Net loss available to&#160;common&#160;stockholders</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 4px; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(352,000</div>
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  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
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  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">$</div>
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  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(1,173,000</div>
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  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
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  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">$</div>
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  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(1,156,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
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  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">$</div>
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  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(1,995,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 52%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left">&#160;</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 4px; WIDTH: 52%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 9.9pt; TEXT-INDENT: -9.9pt">Basic and diluted loss per share&#160;available to common stockholders</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 4px; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(0.10</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(0.33</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(0.32</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(0.56</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 52%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left">&#160;</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 4px; WIDTH: 52%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 9.9pt; TEXT-INDENT: -9.9pt">Weighted average shares outstanding&#160;used in computing basic and diluted loss per common share</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 4px; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">3,594,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">3,587,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">3,594,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">3,587,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  </table>
  
  <div><br>
  </div>
  
  <div><br>
  </div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: center">See accompanying notes to the unaudited consolidated financial statements.</div>
  
  <div><br>
  </div>
  
  <div><br>
  </div>
  
  <div id="DSPFPageBreakArea" style="MARGIN-BOTTOM: 10pt; CLEAR: both; MARGIN-TOP: 10pt">
  <div id="DSPFPageNumberArea" style="TEXT-ALIGN: center"><font id="DSPFPageNumber" style="FONT-SIZE: 8pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: normal; FONT-STYLE: normal">4</font></div>
  
  <div id="DSPFPageBreak" style="PAGE-BREAK-AFTER: always">
  <hr style="BORDER-LEFT-WIDTH: 0px; HEIGHT: 2px; BORDER-RIGHT-WIDTH: 0px; BORDER-BOTTOM-WIDTH: 0px; COLOR: #000000; CLEAR: both; MARGIN: 4px 0px; BORDER-TOP-WIDTH: 0px; WIDTH: 100%; BACKGROUND-COLOR: #000000" noshade="noshade">
  </div>
  </div>
  
  <div><br>
  </div>
  
  <div>&#160;</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: center"><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif"><u>ASTEA INTERNATIONAL INC</u></font><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000"><u>. AND SUBSIDIARIES</u></font></div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: center"><u>CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS</u></div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: center">(Unaudited)</div>
  
  <div><br>
  </div>
  
  <div><br>
  </div>
  
  <div><br>
  </div>
  
  <div><br>
  </div>
  
  <div><br>
  </div>
  
  <div><br>
  </div>
  
  <table id="zd90503b4b50c4503aa00c54e53598b22" style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; WIDTH: 100%" cellspacing="0" cellpadding="0">
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left">&#160;</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid" valign="bottom" colspan="7">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">Three Months Ended</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">June 30,</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid" valign="bottom" colspan="7">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">Six Months Ended</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">June 30,</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left">&#160;</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid" valign="bottom" colspan="3">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">2017</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid" valign="bottom" colspan="3">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">2016</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid" valign="bottom" colspan="3">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">2017</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid" valign="bottom" colspan="3">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">2016</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left">&#160;</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom" colspan="3">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom" colspan="3">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom" colspan="3">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom" colspan="3">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 52%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left">Net loss</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(227,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(1,048,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(906,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(1,745,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 52%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left">Other comprehensive income (loss):</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 52%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left">&#160;&#160;&#160;&#160;&#160;Foreign currency translation adjustment</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(154,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">266,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(165,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">161,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 52%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 4px; WIDTH: 52%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left">Comprehensive loss</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 4px; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(381,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(782,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(1,071,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(1,584,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  </tr>
  </table>
  
  <div><br>
  </div>
  
  <div><br>
  </div>
  
  <div><br>
  </div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: center; MARGIN-RIGHT: 18pt">See accompanying notes to the unaudited consolidated financial statements.</div>
  
  <div><br>
  </div>
  
  <div><br>
  </div>
  
  <div><br>
  </div>
  
  <div id="DSPFPageBreakArea" style="MARGIN-BOTTOM: 10pt; CLEAR: both; MARGIN-TOP: 10pt">
  <div id="DSPFPageNumberArea" style="TEXT-ALIGN: center"><font id="DSPFPageNumber" style="FONT-SIZE: 8pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: normal; FONT-STYLE: normal">5</font></div>
  
  <div id="DSPFPageBreak" style="PAGE-BREAK-AFTER: always">
  <hr style="BORDER-LEFT-WIDTH: 0px; HEIGHT: 2px; BORDER-RIGHT-WIDTH: 0px; BORDER-BOTTOM-WIDTH: 0px; COLOR: #000000; CLEAR: both; MARGIN: 4px 0px; BORDER-TOP-WIDTH: 0px; WIDTH: 100%; BACKGROUND-COLOR: #000000" noshade="noshade">
  </div>
  </div>
  
  <div>&#160;</div>
  
  <div><br>
  </div>
  
  <div><br>
  </div>
  
  <div><br>
  </div>
  
  <table id="zf0f95d535a9f4ceabfc2c996ec626e19" style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; WIDTH: 100%" cellspacing="0" cellpadding="0">
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 100%">
  <div>&#160;</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">ASTEA INTERNATIONAL INC. AND SUBSIDIARIES</div>
  </td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 100%">
  <div>&#160;</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT</div>
  </td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 100%">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">(Unaudited)</div>
  </td>
  </tr>
  </table>
  
  <div><br>
  </div>
  
  <div><br>
  </div>
  
  <div><br>
  </div>
  
  <div>&#160;</div>
  
  <table id="z71aadc239fe64f8db63548eb9ded2296" style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; WIDTH: 100%" cellspacing="0" cellpadding="0">
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; TEXT-ALIGN: right" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right" valign="bottom" colspan="2">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">Series A</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">convertible</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">preferred</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">stock at par value</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right" valign="bottom" colspan="2">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">Series B</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">convertible</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">preferred</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">stock at par value</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right" valign="bottom" colspan="2">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">Common</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">stock</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right" valign="bottom" colspan="2">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">Additional</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">paid-in-</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">capital</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right" valign="bottom" colspan="2">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">Accumulated</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">other</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">compre-</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">hensive</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">loss</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right" valign="bottom" colspan="2">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">Accumulated</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">deficit</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right" valign="bottom" colspan="2">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">Treasury</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">stock</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right" valign="bottom" colspan="2">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">Total</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">stockholders'</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">deficit</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 20%" valign="bottom">
  <div>&#160;</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: left">Balances at December 31, 2016</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000">8,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000">8,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000">36,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000">32,075,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000">(692,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000">(35,437,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000">(208,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000">(4,210,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000">)</div>
  </td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 20%" valign="bottom">
  <div>&#160;</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left">Net loss</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">&#8212;</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">&#8212;</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">&#8212;</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">&#8212;</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">&#8212;</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(906,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">&#8212;</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(906,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 20%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left">&#160;</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 20%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left">Series A and B preferred</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left">&#160;&#160;&#160;dividends</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">&#8212;</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">&#8212;</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">&#8212;</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(250,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">&#8212;</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">&#8212;</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">&#8212;</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(250,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 20%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left">&#160;</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
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  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 20%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left">Stock-based compensation</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">&#8212;</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">&#8212;</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">&#8212;</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">63,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">&#8212;</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">&#8212;</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">&#8212;</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">63,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 20%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left">&#160;</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 20%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left">Other comprehensive income</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">&#8212;</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">&#8212;</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">&#8212;</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">&#8212;</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(165,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">&#8212;</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">&#8212;</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(165,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 20%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: left">&#160;</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 4px; WIDTH: 20%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: left">Balances at June 30, 2017</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 4px; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000">8,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000">8,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000">36,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000">31,888,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000">$</div>
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  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000">(857,000</div>
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  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
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  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000">$</div>
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  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000">(36,343,000</div>
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  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000">$</div>
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  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000">(208,000</div>
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  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000">)</div>
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  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000">$</div>
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  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000">(5,468,000</div>
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  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000">)</div>
  </td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 20%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left">&#160;</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 7%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  </table>
  
  <div><br>
  </div>
  
  <div><br>
  </div>
  
  <div><br>
  </div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">See accompanying notes to the unaudited consolidated financial statements.</div>
  
  <div><br>
  </div>
  
  <div><br>
  </div>
  
  <div><br>
  </div>
  
  <div><br>
  </div>
  
  <div id="DSPFPageBreakArea" style="MARGIN-BOTTOM: 10pt; CLEAR: both; MARGIN-TOP: 10pt">
  <div id="DSPFPageNumberArea" style="TEXT-ALIGN: center"><font id="DSPFPageNumber" style="FONT-SIZE: 8pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: normal; FONT-STYLE: normal">6</font></div>
  
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  <hr style="BORDER-LEFT-WIDTH: 0px; HEIGHT: 2px; BORDER-RIGHT-WIDTH: 0px; BORDER-BOTTOM-WIDTH: 0px; COLOR: #000000; CLEAR: both; MARGIN: 4px 0px; BORDER-TOP-WIDTH: 0px; WIDTH: 100%; BACKGROUND-COLOR: #000000" noshade="noshade">
  </div>
  </div>
  
  <div>&#160;</div>
  
  <div><br>
  </div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: center"><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif"><u>ASTEA INTERNATIONAL INC</u></font><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000"><u>. AND SUBSIDIARIES</u></font></div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: center"><u>CONSOLIDATED STATEMENTS OF CASH FLOWS</u></div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: center">(Unaudited)</div>
  
  <div>
  <table id="zd725352b5d6d4b5ab565922e7853b488" style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; WIDTH: 100%" cellspacing="0" cellpadding="0">
  <tr>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom" colspan="6">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">Six Months Ended</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid" valign="bottom" colspan="6">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: center"><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold">June 30,</font> </div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid" valign="bottom" colspan="2">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">2017</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid" valign="bottom" colspan="2">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">2016</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 36pt">Cash flows from operating activities:</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom" colspan="2">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom" colspan="2">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 36pt">&#160;&#160;&#160;Net loss</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(906,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(1,745,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 36pt">&#160;&#160;&#160;Adjustments to reconcile net loss to net cash</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 36pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;provided by operating activities:</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 36pt; TEXT-INDENT: -25pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; &#160; &#160; &#160; &#160; Depreciation and amortization</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">1,288,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">1,177,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 36pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Amortization of deferred financing costs</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">23,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">12,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 36pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Stock-based compensation</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">63,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">66,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 36pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Deferred income tax</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">-</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">12,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 36pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Changes in operating assets and liabilities:</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 36pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Receivables</div>
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  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">194,000</div>
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  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">1,137,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 36pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Prepaid expenses and other</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(23,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(85,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
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  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 36pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Other assets</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(10,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(45,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 36pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Accounts payable and accrued expenses</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">366,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">70,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 36pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Deferred revenues</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">1,057,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">763,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 36pt">&#160;</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 36pt">&#160;&#160;&#160;Net cash&#160; provided by operating activities</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">2,052,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">1,362,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 36pt">&#160;</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 36pt">Cash flows from investing activities:</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 36pt">&#160;&#160;Purchases of property and equipment</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">-</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(32,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 36pt">&#160;&#160;Capitalized software development costs</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(1,246,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(1,592,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 36pt">&#160;</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 36pt">&#160;&#160;&#160;Net cash used in investing activities</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(1,246,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(1,624,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 76%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: left">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Cash flows from financing activities:</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 36pt">&#160;&#160;&#160;Dividend payments on preferred stock</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(250,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(220,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 36pt">&#160;&#160;&#160;Proceeds on line of credit CEO/Director</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">450,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">-</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr style="HEIGHT: 18px">
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 36pt">&#160;&#160;&#160;Payment on line of credit from Silicon Valley Bank</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(5,434,000</div>
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  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(48,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
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  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Proceeds on line of credit from Silicon Valley Bank</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">5,062,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">200,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 76%" valign="bottom">
  <div>&#160;</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 36pt">Net cash (used in) provided by financing activities</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(172,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(68,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 36pt">&#160;</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 36pt">&#160;&#160;&#160;Effect of exchange rate changes on cash</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(14,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">20,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 36pt">&#160;</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 40.5pt; TEXT-INDENT: -4.5pt">&#160;&#160;Net increase (decrease) increase in cash, cash equivalents and&#160;restricted cash</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">620,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(310,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 36pt">&#160;&#160;Cash, cash equivalents and restricted cash, beginning of period</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">730,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">1,791,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 4px; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 36pt">&#160;</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 36pt">&#160;&#160;&#160;Cash, cash equivalents and restricted cash, end of period</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 4px; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">1,350,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">1,481,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 36pt">Supplemental disclosure of cash flows information:&#160;</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr style="HEIGHT: 11px">
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 36pt">&#160;&#160;Cash paid for interest&#160;</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">$&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;51,000</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">$&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;34,000</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 36pt">Supplemental disclosure of non-cash flows information:</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 76%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 36pt">&#160;&#160;Accrued dividends</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">250,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">110,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom" colspan="8">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom" colspan="8">
  <div></div>
  
  <div></div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">See accompanying notes to the unaudited consolidated financial statements.</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  </table>
  
  <br>
  </div>
  
  <div><br>
  </div>
  
  <div><br>
  </div>
  
  <div id="DSPFPageBreakArea" style="MARGIN-BOTTOM: 10pt; CLEAR: both; MARGIN-TOP: 10pt">
  <div id="DSPFPageNumberArea" style="TEXT-ALIGN: center"><font id="DSPFPageNumber" style="FONT-SIZE: 8pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: normal; FONT-STYLE: normal">7</font></div>
  
  <div id="DSPFPageBreak" style="PAGE-BREAK-AFTER: always">
  <hr style="BORDER-LEFT-WIDTH: 0px; HEIGHT: 2px; BORDER-RIGHT-WIDTH: 0px; BORDER-BOTTOM-WIDTH: 0px; COLOR: #000000; CLEAR: both; MARGIN: 4px 0px; BORDER-TOP-WIDTH: 0px; WIDTH: 100%; BACKGROUND-COLOR: #000000" noshade="noshade">
  </div>
  </div>
  
  <div><br>
  </div>
  
  <div><br>
  </div>
  
  <div><br>
  </div>
  
  <div><br>
  </div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: left"><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif"><u>Item 1.</u></font>&#160;&#160; <font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif"><u>FINANCIAL STATEMENTS (Continued)</u></font></div>
  
  <div><br>
  </div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: center"><u>ASTEA INTERNATIONAL INC. AND SUBSIDIARIES</u></div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: center; MARGIN-LEFT: 18pt; MARGIN-RIGHT: 18pt"><u>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</u></div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: center; MARGIN-LEFT: 18pt; MARGIN-RIGHT: 18pt"><u>(Unaudited)</u></div>
  
  <div><br>
  </div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify; MARGIN-RIGHT: 2.15pt">1.&#160; &#160; <font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif"><u>BASIS OF PRESENTATION</u></font></div>
  
  <div style="TEXT-ALIGN: justify; MARGIN-LEFT: 13.5pt; MARGIN-RIGHT: 2.15pt; TEXT-INDENT: -13.5pt"><br>
  </div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify">The consolidated financial statements at June 30, 2017 and for the three and six month periods ended June 30, 2017 and 2016 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.&#160; The accompanying unaudited financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC").&#160; 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.&#160; It is suggested that these financial statements be read in conjunction with the financial statements and the notes thereto, included in the Company's latest annual report (Form 10-K) and our Form 10-Q's for the quarters ended March 31, 2016, June 30, 2016, September 30, 2016 and March 31, 2017. The interim financial information presented is not necessarily indicative of results expected for the entire year ending December 31, 2017.</div>
  
  <div><br>
  </div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-STYLE: italic; TEXT-ALIGN: justify">Cash, cash equivalents and restricted cash</div>
  
  <div><br>
  </div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #222222; TEXT-ALIGN: justify"><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; BACKGROUND-COLOR: #ffffff">In November 2016, the Financial Accounting Standards Board issued guidance to reduce diversity in practice that exists in the classification and presentation of changes in restricted cash on the statement of cash flows. The guidance requires that amounts generally described as restricted cash and restricted cash equivalents be included in with cash and cash equivalents when reconciling the beginning of period and end of period total amounts shown on the statement of cash flows. The Company early adopted this guidance as of January 1, 2017, on a retrospective basis, and all periods are presented under this guidance. The adoption of this new guidance resulted in the inclusion of $73,000 and $69,000, respectively in June 30, 2017 and December 31, 2016 in restricted cash in the cash and cash equivalents balance in its consolidated statements of cash flows.</font></div>
  
  <div><br>
  </div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify">The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheet that sum to the total of the same such amounts shown on the consolidated cash flows:</div>
  
  <div><br>
  </div>
  
  <table id="z1537d42b16a7430ca2845061bad83606" style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; WIDTH: 60%" cellspacing="0" cellpadding="0" align="left" border="0">
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  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
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  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom" colspan="2">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
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  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 64%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 1%" valign="bottom">&#160;</td>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">June 30,</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">2017</div>
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  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; WIDTH: 1%" valign="bottom">&#160;</td>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">December 31, 2016</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 64%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left">Cash and cash equivalents</div>
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  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 15%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">1,277,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">$</div>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">661,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 64%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left">Restricted cash</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 15%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">73,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 15%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">69,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 4px; WIDTH: 64%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left">Total cash, cash equivalents, and</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left">&#160;&#160;&#160;restricted cash reported on the</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left">&#160;&#160;&#160;consolidated cash flows</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 4px; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 15%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">1,350,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 15%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">730,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  </table>
  
  <div style="CLEAR: both"><br>
  </div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify">Amounts included in restricted cash represent funds required to be set aside by a contractual agreement with the&#160;&#160; building leasing companies in Europe. The restrictions will lapse when the building lease expires.</div>
  
  <div><br>
  </div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-STYLE: italic; TEXT-ALIGN: justify">Operating Matters and Liquidity</div>
  
  <div><br>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify">The Company has a history of net losses and an accumulated deficit of $36,343,000 as of June 30, 2017.&#160; In the first six months of 2017, the Company generated a net loss of $906,000 compared to a net loss of $1,745,000 generated in the first six months of 2016.&#160; Further, at June 30, 2017, the Company had a working capital ratio of 0.45:1, with cash and cash equivalents of $1,277,000 compared to December 31, 2016 when the Company had cash and cash equivalents of $661,000.&#160; The increase in cash and cash equivalents for the first six months of 2017 was primarily driven by increases in cash provided by operations offset by cash used for the Company's capitalized software development costs. The increase in cash provided by operating activities was primarily due to a decrease in the net loss as well as increased collections of accounts receivable and an increase in deferred revenues.</div>
  
  <div>&#160;</div>
  
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  <div id="DSPFPageNumberArea" style="TEXT-ALIGN: center"><font id="DSPFPageNumber" style="FONT-SIZE: 8pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: normal; FONT-STYLE: normal">8</font></div>
  
  <div id="DSPFPageBreak" style="PAGE-BREAK-AFTER: always">
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  <div><br>
   &#160;</div>
  
  <div>
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify"><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">As of June 30, 2017 the Company owed $1,555,000 against the line of credit from Silicon Valley Bank ("SVB").&#160;&#160; The availability under the SVB line of credit is tied to a borrowing base formula that is based on 80% of the Company's eligible domestic accounts receivable. As of June 30, 2017, the availability under the line of credit was $445,000.&#160; In April 2017, </font><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; BACKGROUND-COLOR: #ffffff">the Company extended its Revolving Loan Agreement and associated Revolving Promissory Note with its Chief Executive Officer/Director.&#160;&#160;The loan provides an unsecured $1,000,000 revolving line of credit to the Company.&#160;&#160;&#160;&#160;The proceeds of the borrowings, if needed, will be used by the Company for operating activities. If an extension of the line of credit is appropriate and agreed to by the Chief Executive Officer/Director, we will then obtain the necessary approvals from </font>Western Alliance Bank ("WAB") <font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; BACKGROUND-COLOR: #ffffff">. </font><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">The SVB line of credit was to expire in April 2018.&#160; In August 2017, the Company obtained a new line of credit and term loan from</font> WAB and repaid its outstanding borrowings with SVB. The term of the WAB line of credit and term loan extend through August 2019. <font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">The Company has projected revenues that management believes will provide sufficient funds along with available borrowings under its lines of credit to sustain its continuing operations through at least September 30, 2018.</font></div>
  
  <div><br>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: justify">The Company was in compliance with the financial covenants for the line of credit with SVB as of June 30, 2017. &#160;&#160;In the event the Company does not meet its financial covenants in the future under the WAB financing and WAB does not extend a waiver or forbearance agreement, and the Company does not believe that it has adequate liquidity to operate, the Company will implement additional cost adjustments, as necessary, that will reduce its expenditures to the appropriate level that matches its operating cash flows.</div>
  
  <div><br>
  </div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify"><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #222222; BACKGROUND-COLOR: #ffffff">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.&#160; 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.&#160; 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.&#160; <font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">However, projections of future cash needs and cash flows are subject to risks and uncertainty.&#160;</font></div>
  
  <div><br>
  </div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify">Management's current operating plan reflects a reduction in operating expenses which occurred at the end of the first quarter of 2017 in order to align its expenditures with its expected revenues.&#160; The primary area of cost reduction, which occurred at the end of the first quarter of 2017, was to reduce company headcount by eliminating non-revenue generating personnel throughout the Company.&#160; The Company remains focused on maximizing revenue from its revenue generating resources, including repurposing certain personnel to become revenue generators to help the Company improve its liquidity.&#160; The Company has a substantial professional services backlog that resulted from the acquisition of new customers in the second half of 2016 as well as upgrade projects for existing customers as they move to the latest version of Alliance.&#160; Management also initiated cost containment programs in other areas including the elimination or reduction of non-essential marketing activities, space reduction in areas in which the Company has excess office capacity, focusing marketing activities only on those programs that directly drive new business and eliminating contractors who are not essential to growth.&#160; In addition, we do not expect to spend a significant amount on capital expenditures.&#160; Overall, we have already implemented steps to reduce total operating expenses without impairing our ability to grow the business by obtaining new customers and increasing sales to existing customers.&#160; <font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">We expect our revenues and cost reductions to </font><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #222222; BACKGROUND-COLOR: #ffffff">generate sufficient cash from operations.</font>&#160;<font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #222222; BACKGROUND-COLOR: #ffffff">As noted above, if the Company's actual results fall short of expectations, the Company will make further cost adjustments to improve the Company's operating cash flows.</font></div>
  
  <div><br>
  </div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #222222; TEXT-ALIGN: justify"><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; BACKGROUND-COLOR: #ffffff">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></div>
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  <div>&#160;</div>
  
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  <div style="TEXT-ALIGN: left"><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">2.</font><font id="TRGRRTFtoHTMLTab" style="FONT-SIZE: 1px; DISPLAY: inline-block; WIDTH: 15pt">&#160;</font><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif"><u>NEW ACCOUNTING PRONOUNCEMENTS</u></font></div>
  
  <div><br>
  </div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify"><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">In May 2014, as part of its ongoing efforts to assist in the convergence of U.S. GAAP and International Financial Reporting Standards, the Financial Accounting Standards Board (FASB) issued a new standard related to revenue recognition. Under the new standard, recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to receive in exchange for those goods or services. The standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. </font>Additionally, under the new guidance, expenses incurred, will be deferred as an asset and will be amortized<font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000"> over the period that services or goods are transferred to the customer.</font> Hence, the new guidance will result in the Company recognizing deferred costs (asset) on our consolidated balance sheet. <font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">The new standard will be effective for the Company beginning January&#160;1, 2018 </font>at which point we plan to adopt the standard using the "modified retrospective method." Under that method, we will apply the rules to all contracts existing as of January 1, 2018, recognizing in beginning retained earnings an adjustment for the cumulative effect of the change and providing additional disclosures comparing results to previous accounting standards.</div>
  
  <div><br>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify">We believe our notes to the consolidated financial statements related to revenue recognition will be expanded and are still assessing the quantitative impact to our consolidated financial statements. Also, we are in process of implementing changes to our accounting system, accounting policies, business processes, license contract management processes, systems and financial controls to support the new accounting and disclosure requirements. Once our evaluation is complete, we will disclose the quantitative impact of adopting the updated guidance.</div>
  
  <div><br>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify"><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #222222; BACKGROUND-COLOR: #ffffff">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 is effective for reporting periods beginning after December 15, 2018 and early adoption is permitted. The guidance must be adopted on a modified retrospective basis and provides for certain practical expedients. The Company expects to adopt this guidance in the first quarter of 2019 and we currently expect that the adoption of this guidance will likely change the way we account for our operating leases and will likely result in recording the future benefits of those leases as an asset and the related minimum lease payments as a liability on our consolidated balance sheets. The Company has not yet begun to quantify the specific impacts of this guidance.</font></div>
  
  <div><br>
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  <div style="MARGIN-BOTTOM: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify; MARGIN-LEFT: 18pt; TEXT-INDENT: -18pt">3.&#160; <font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif"><u>CONCENTRATION OF CREDIT RISK</u></font></div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify; MARGIN-RIGHT: 0.9pt">Financial instruments, which potentially subject the Company to credit risk, consist of cash equivalents and accounts receivable.&#160; The Company's policy is to limit the amount of credit exposure to any one financial institution.&#160; 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.&#160; Cash balances are maintained with several banks.&#160; Certain operating accounts may exceed insured limits.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify; MARGIN-RIGHT: 0.9pt">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.&#160; While the Company does not require collateral from its customers, it does perform continuing credit evaluations of its customers' financial condition.</div>
  
  <div><br>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt"><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">4.&#160;&#160;&#160;</font><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif"><u>LINES OF CREDIT</u></font></div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-STYLE: italic; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt">Line of Credit Silicon Valley Bank</div>
  
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  <div>
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: justify">The Loan Agreement with Silicon Valley Bank ("SVB") as amended on January 14, 2016, established a revolving credit facility for the Company in the principal amount of up to $2,000,000 (the "Revolving Facility").&#160;&#160;Availability under the Revolving Facility was tied to a borrowing base formula that is based on 80% of the Company's eligible domestic accounts receivable.&#160;&#160;Advances under the Revolving Facility (the "Advances") could have been repaid and reborrowed in accordance with the Loan Agreement.&#160;&#160;Pursuant to the Loan Agreement, the Company agreed to pay to SVB the outstanding principal amount of all Advances, the unpaid interest thereon, and all other obligations incurred with respect to the Loan Agreement in April 2018. The Company terminated the Loan Agreement in August 2017. Interest was payable monthly on the unpaid principal balance of the Advances at a floating per annum rate equal to the greater of: (i) 2.25% above the prime rate (which may be reduced to 2.00% above the prime rate for every month in which the Company maintains an "adjusted quick ratio" of at least 1.50:1) or (ii) 5.25%; provided, that the minimum interest amount due per month shall not be less than $2,000.&#160;&#160;</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: justify">The Revolving Facility was secured by a first priority perfected security interest in substantially all of the assets of the Company, excluding the intellectual property of the Company.&#160;&#160;The Loan Agreement contained a negative covenant prohibiting the Company from granting a security interest in their intellectual property to any party.</div>
  
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  <div><br>
   &#160;</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: justify">As of June 30, 2017 and December 31, 2016, the Company owed $1,555,000 and $1,927,000, respectively, under the Revolving Facility.&#160; The Company incurred $72,000 and $46,000 of interest expense to SVB for the six months ended June 30, 2017 and 2016, respectively.&#160; As of June 30, 2017, the availability under the line of credit was $445,000. The Company was in compliance with the covenants of the Loan Agreement as of June 30, 2017.&#160; The Revolving Facility was repaid in August 2017 with the proceeds of a new financing agreement (See Note 9).</div>
  
  <div><br>
  </div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; FONT-STYLE: italic; TEXT-ALIGN: justify">Line of Credit <font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; BACKGROUND-COLOR: #ffffff">Chief Executive Officer/Director</font></div>
  
  <div><br>
  </div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: justify">In April 2017, <font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; BACKGROUND-COLOR: #ffffff">the Company extended its Revolving Loan Agreement and associated Revolving Promissory Note with its Chief Executive Officer/Director.&#160;&#160;This loan agreement provides an unsecured $1,000,000 revolving line of credit to the Company.&#160;&#160;Amounts outstanding under the line of credit will bear interest at a rate of 7% per annum, payable monthly.&#160;&#160;The maturity date of the line of credit is May 1, 2018. The Company may pay all amounts outstanding and terminate the agreement prior to that time with no penalties.&#160;&#160;The loan agreement contains customary covenants, default provisions and other provisions.&#160;&#160;The loan agreement was negotiated by the Audit Committee of the Company's Board of Directors, and borrowings under the Line of Credit will be subject to the Audit Committee's approval.&#160;&#160;The proceeds of the borrowings, if needed, will be used by the Company for working capital and other general corporate purposes. If an extension of the line of credit is appropriate and agreed to by the Chief Executive Officer/Director, we will then obtain the necessary approvals from WAB.</font></div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: justify">&#160;</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: justify">As of June 30, 2017 the Company owed $450,000 against the line of credit with its Chief Executive Officer/Director. The Company incurred $2,000 of interest expense to its Chief Executive Officer/Director for the six months ended June 30, 2017. The Company was in compliance with the covenants of the loan agreement as of June 30, 2017.</div>
  
  <div><br>
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  <div style="TEXT-ALIGN: justify"><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">5.</font><font id="TRGRRTFtoHTMLTab" style="FONT-SIZE: 1px; DISPLAY: inline-block; WIDTH: 18pt">&#160;</font><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif"><u>INCOME TAXES</u></font></div>
  
  <div><br>
  </div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify">The Company has identified its federal tax return and its state returns in Pennsylvania and California as "major" tax jurisdictions.&#160; Based on the Company's evaluation, it concluded that there are no significant uncertain tax positions requiring recognition in the Company's financial statements.&#160; The Company's evaluation was performed for tax years ended 2013 through 2016, 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, results of operations or cash flows.</div>
  
  <div><br>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify">The Company's policy for recording interest and penalties associated with uncertain tax positions is to record such items as a component of income before income taxes.&#160; Penalties are recorded in general and administrative expenses and interest paid or received is recorded in interest expense or interest income, respectively, in the statement of operations.&#160; For the first three months of 2017 and 2016, there was no interest or penalties related to uncertain tax positions.</div>
  
  <div><br>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify">At June 30, 2017, the Company maintained a 100% valuation allowance for its remaining deferred tax assets, based on the uncertainty of the realization of the deferred tax assets due to the uncertainty of future taxable income.</div>
  
  <div><br>
  </div>
  
  <div style="TEXT-ALIGN: justify"><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">6.</font><font id="TRGRRTFtoHTMLTab" style="FONT-SIZE: 1px; DISPLAY: inline-block; WIDTH: 18pt">&#160;</font><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">&#160;<font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif"><u>EQUITY PLANS</u></font></font></div>
  
  <div><br>
  </div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; FONT-STYLE: italic; TEXT-ALIGN: left">Share-Based Awards</div>
  
  <div><br>
  </div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt">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.&#160; 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.&#160; 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.&#160; 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.&#160; The Company has historically not paid dividends to common stockholders and has no foreseeable plans to issue dividends.&#160; The risk-free interest rate is based on the yield from the U.S. Treasury zero-coupon bonds with an equivalent term.</div>
  
  <div><br>
  </div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify; MARGIN-RIGHT: 0.9pt">Under the Company's stock option plans, options awards generally vest over a four-year period of continuous service and have a 10-year contractual term.</div>
  
  <div><br>
  </div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify">As of June 30, 2017, the total unrecognized compensation cost related to non-vested options amounted to $200,000, which is expected to be recognized over the options' average remaining vesting period of 2.64years.</div>
  
  <div><br>
   &#160;</div>
  
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  </div>
  
  <div><br>
  </div>
  
  <div><br>
  </div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">Activity under the Company's stock option plans for the six months ended June 30, 2017 is as follows:</div>
  
  <div><br>
  </div>
  
  <table id="z8a9e3150cd09481c97b19b9b2e6af0ff" style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; WIDTH: 70%" cellspacing="0" cellpadding="0" align="center" border="0">
  <tr>
  <td style="VERTICAL-ALIGN: top; PADDING-BOTTOM: 2px; WIDTH: 64%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 1%" valign="bottom">&#160;</td>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: center">OPTIONS OUTSTANDING</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; PADDING-BOTTOM: 2px; WIDTH: 64%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: center" colspan="2">
  <div></div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold">Shares</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: top; BORDER-BOTTOM: #000000 2px solid" valign="bottom" colspan="2">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: center">Weighted Average Exercise Price Per Share</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; WIDTH: 64%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left; MARGIN-RIGHT: 18pt">Balance, December 31, 2016</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 15%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">710,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 15%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">2.73</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; WIDTH: 64%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left; MARGIN-RIGHT: 18pt">&#160;&#160;&#160;Granted</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 15%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">125,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 15%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">1.81</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; PADDING-BOTTOM: 2px; WIDTH: 64%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left; MARGIN-RIGHT: 18pt">&#160;&#160;&#160;Forfeited</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 15%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">(99,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 15%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">3.23</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; PADDING-BOTTOM: 4px; WIDTH: 64%" valign="bottom">
  <div>&#160;</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left; MARGIN-RIGHT: 18pt">Balance, June 30, 2017</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 4px; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 15%" valign="bottom">
  <div></div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">736,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div>$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 15%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">2.51</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  </table>
  
  <div><br>
  </div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify">The following table summarizes outstanding options under the Company's stock option plans as of June 30, 2017:</div>
  
  <div><br>
  </div>
  
  <table id="z7a39262f94804940a286f8baf3b86c6d" style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; WIDTH: 100%" cellspacing="0" cellpadding="0">
  <tr>
  <td style="VERTICAL-ALIGN: top; PADDING-BOTTOM: 2px" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: middle; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: center" colspan="2">
  <div></div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold">Number</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold">of Shares</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: top; BORDER-BOTTOM: #000000 2px solid" valign="bottom" colspan="2">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: center">Weighted</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: center">Average</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: center">Exercise Price</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: center">Per Share</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: top; BORDER-BOTTOM: #000000 2px solid" valign="bottom" colspan="2">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: center">Weighted Average Remaining Contractual Term (in years)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: center" colspan="2">
  <div></div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold">Aggregate</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold">Intrinsic</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold">Value</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; PADDING-BOTTOM: 4px; WIDTH: 52%" valign="bottom">
  <div>&#160;</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left; MARGIN-RIGHT: 1.8pt">Outstanding Options</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 4px; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div></div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">736,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">2.51</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div></div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">5.96</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">189,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; WIDTH: 52%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
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  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 4px; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
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  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; WIDTH: 1%" valign="bottom">&#160;</td>
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  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">4.24</div>
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  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">92,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; WIDTH: 52%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: top; PADDING-BOTTOM: 4px; WIDTH: 52%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt">Options Vested and Expected to Vest</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 4px; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">651,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">2.60</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">5.56</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">148,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  </table>
  
  <div><br>
  </div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-STYLE: italic; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt">Convertible Preferred Stock</div>
  
  <div><br>
  </div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.1pt">Series A</div>
  
  <div><br>
  </div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.1pt">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.&#160;&#160;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 June 30, 2017, there were accrued dividends of $150,000.</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left">&#160;</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.1pt">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.&#160;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. 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.</div>
  
  <div><br>
  </div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.1pt">The Company reports the Series A Preferred Stock on the Company's consolidated balance sheet within stockholders' deficit.</div>
  
  <div><br>
  </div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.1pt">Series B</div>
  
  <div><br>
  </div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: justify">On June 20, 2014, the Company&#160;issued 797,000 of Series-B Convertible Preferred Stock ("Series B Preferred Stock")&#160;to&#160;its Chief Executive Officer at a price of $2.51 per share in exchange for the cancellation of&#160;$2,000,000 of outstanding principal owed to its Chief Executive Officer under a Revolving Promissory Note dated&#160;March 26, 2014.</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: justify">&#160;</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: justify">&#160;</div>
  
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  <div id="DSPFPageNumberArea" style="TEXT-ALIGN: center"><font id="DSPFPageNumber" style="FONT-SIZE: 8pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: normal; FONT-STYLE: normal">12</font></div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: justify">&#160;</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; 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.&#160;&#160;The Series B Preferred Stock will pay a quarterly dividend, which will accrue at an annual rate of 10%.&#160;&#160;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.&#160;&#160;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.&#160; The Series B Preferred Stock ranks senior to the common stock and on parity with the Company's Series A Convertible Preferred Stock.&#160; 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.&#160; Preferred stock dividends on the Series B are declared quarterly by the Board of Directors.&#160; At June 30, 2017, there were accrued dividends of $100,000.</div>
  
  <div><br>
  </div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt">The Company reports the Series B Preferred Stock on the Company's consolidated balance sheet within stockholders' deficit.</div>
  
  <div><br>
  <div style="TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt"><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">7.</font><font id="TRGRRTFtoHTMLTab" style="FONT-SIZE: 1px; DISPLAY: inline-block; WIDTH: 18pt">&#160;</font><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif"><u> LOSS PER SHARE</u></font></div>
  
  <div><br>
  </div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt">Loss per share is computed on the basis of the weighted average number of shares and common stock equivalents outstanding during the period.&#160; In the calculation of diluted loss per share, shares outstanding are adjusted to assume conversion of the Company's non-interest bearing convertible preferred stock and exercise of options as if they were dilutive.&#160; In the calculation of basic loss per share, weighted average numbers of shares outstanding are used as the denominator.</div>
  
  <div><br>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify">The Company had a net loss allocable to common stockholders for the six months ended June 30, 2017 and 2016.&#160; Loss per share is computed as follows:</div>
  
  <div><br>
  </div>
  
  <div><br>
  </div>
  
  <div><br>
  </div>
  
  <table id="zb9f7d38e346f43bf9cb6ecc968337076" style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; WIDTH: 100%" cellspacing="0" cellpadding="0">
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: top; BORDER-BOTTOM: #000000 2px solid" valign="bottom" colspan="6">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">Three Months Ended</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">June 30,</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: top; BORDER-BOTTOM: #000000 2px solid" valign="bottom" colspan="6">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">Six Months Ended</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">June 30,</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: top; BORDER-BOTTOM: #000000 2px solid" valign="bottom" colspan="2">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">2017</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: top; BORDER-BOTTOM: #000000 2px solid" valign="bottom" colspan="2">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">2016</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: top; BORDER-BOTTOM: #000000 2px solid" valign="bottom" colspan="2">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">2017</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: top; BORDER-BOTTOM: #000000 2px solid" valign="bottom" colspan="2">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">2016</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 9.5pt">Numerator:</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: top" valign="bottom" colspan="2">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: top" valign="bottom" colspan="2">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: top" valign="bottom" colspan="2">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: top" valign="bottom" colspan="2">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 52%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 9.5pt">Net loss available to common</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 9.5pt">&#160;&#160;&#160;&#160;shareholders</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(352,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div>$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(1,173,000</div>
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  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
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  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">$</div>
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  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(1,156,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(1,995,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 52%" valign="bottom">
  <div>&#160;</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 9.5pt">Denominator:</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 52%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 9.5pt">Weighted average shares used to</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 9.5pt">&#160;&#160;&#160;&#160;compute net loss available</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 9.5pt">&#160;&#160;&#160;&#160;to common shareholders per</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 9.5pt">&#160;&#160;&#160;&#160;common share basic and dilutive</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">3,594,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div></div>
  
  <div></div>
  
  <div></div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">3,587,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div></div>
  
  <div></div>
  
  <div></div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">3,594,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div></div>
  
  <div></div>
  
  <div></div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">3,587,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 4px; WIDTH: 52%" valign="bottom">
  <div>&#160;</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 9.5pt">Basic and dilutive net loss per share to</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 9.5pt">&#160;&#160;&#160;&#160;common shareholder</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 4px; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(0.10</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div>$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(0.33</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(0.32</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div>$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(0.56</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  </tr>
  </table>
  
  <div><br>
  </div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify">All options outstanding to purchase shares of common stock and shares of common stock issued on the conversion of the eligible preferred stock were excluded from the diluted loss per common share calculation for the three and six month periods ended June 30, 2017 and 2016, as the inclusion of these options and preferred stock would have been antidilutive.</div>
  
  <div><br>
  </div>
  
  <div><br>
  </div>
  
  <div><br>
  </div>
  
  <div id="DSPFPageBreakArea" style="MARGIN-BOTTOM: 10pt; CLEAR: both; MARGIN-TOP: 10pt">
  <div id="DSPFPageNumberArea" style="TEXT-ALIGN: center"><font id="DSPFPageNumber" style="FONT-SIZE: 8pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: normal; FONT-STYLE: normal">13</font></div>
  
  <div id="DSPFPageBreak" style="PAGE-BREAK-AFTER: always">
  <hr style="BORDER-LEFT-WIDTH: 0px; HEIGHT: 2px; BORDER-RIGHT-WIDTH: 0px; BORDER-BOTTOM-WIDTH: 0px; COLOR: #000000; CLEAR: both; MARGIN: 4px 0px; BORDER-TOP-WIDTH: 0px; WIDTH: 100%; BACKGROUND-COLOR: #000000" noshade="noshade">
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  <div>&#160;</div>
  
  <div><br>
  </div>
  
  <div style="TEXT-ALIGN: justify"><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">8.</font><font id="TRGRRTFtoHTMLTab" style="FONT-SIZE: 1px; DISPLAY: inline-block; WIDTH: 20pt">&#160;</font><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif"><u>GEOGRAPHIC SEGMENT DATA</u></font></div>
  
  <div><br>
  </div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify">The Company and its subsidiaries are engaged in the design, development, marketing and support of its service management software solutions.&#160; Substantially all revenues result from the license of the Company's software products and related professional services and customer support services.&#160; 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.&#160; Accordingly, the Company considers itself to have three reporting segments as follows:</div>
  
  <div><br>
  </div>
  
  <table id="za0c40661f1214e9b81a10ff6ed88f236" style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; WIDTH: 100%" cellspacing="0" cellpadding="0" border="0">
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left">&#160;</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid" valign="bottom" colspan="6">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">Three Months</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">Ended June 30,</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid" valign="bottom" colspan="6">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">Six Months</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">Ended June 30,</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left">&#160;</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid" valign="bottom" colspan="2">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">2017</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid" valign="bottom" colspan="2">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">2016</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid" valign="bottom" colspan="2">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">2017</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid" valign="bottom" colspan="2">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: center">2016</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left">Revenues</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom" colspan="2">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom" colspan="2">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom" colspan="2">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom" colspan="2">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 19.8pt">Software license fees</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom" colspan="2">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom" colspan="2">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom" colspan="2">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom" valign="bottom" colspan="2">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 4px; WIDTH: 52%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 29.7pt">United States</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 4px; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">301,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">96,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">412,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">581,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 52%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 29.7pt">Europe</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">47,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">147,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">47,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">500,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 52%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 29.7pt">Asia Pacific</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">54,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">5,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">186,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">11,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 52%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 39.6pt">Total foreign software license fees revenue</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">101,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">152,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">233,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">511,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 52%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 39.6pt">&#160;&#160;&#160;&#160;Total software license fees</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">402,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">248,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">645,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">1,092,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 52%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Subscriptions</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 4px; WIDTH: 52%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 29.7pt">United States</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 4px; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">268,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">675,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">754,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">856,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 52%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 29.7pt">Europe</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">165,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">317,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">333,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">582,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 52%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 29.7pt">Asia Pacific</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">71,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">74,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">184,000</div>
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  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">130,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 52%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 39.6pt">Total foreign subscriptions</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">236,000</div>
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  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">391,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">517,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">712,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 52%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 39.6pt">&#160;&#160;&#160;&#160;Total subscription revenue</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">504,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">1,066,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">1,271,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">1,568,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 52%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Services and maintenance</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 4px; WIDTH: 52%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 29.7pt">&#160;United States</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 4px; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">2,792,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">2,704,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">5,614,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">5,191,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 52%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 29.7pt">Europe</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">949,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">874,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">2,019,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">1,591,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 52%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 29.7pt">Asia Pacific</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">1,309,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">794,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">2,408,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">1,592,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 52%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 39.6pt">Total foreign services and</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 52%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 49.5pt">maintenance revenue</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">2,258,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">1,668,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">4,427,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">3,183,000</div>
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  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 52%" valign="bottom">
  <div style="TEXT-ALIGN: left">&#160;</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Total services and maintenance revenue</div>
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  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">5,050,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">4,372,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">10,041,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">8,374,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 52%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 4px; WIDTH: 52%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left">Total revenue</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 4px; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">5,956,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">5,686,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">11,957,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">11,034,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 52%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left">&#160;</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 52%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left">Net&#160; income (loss)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 52%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;United States</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(244,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(664,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(945,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">$</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(1,362,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 52%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 29.7pt">Europe</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">136,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(302,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">182,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(257,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  </tr>
  
  <tr>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; WIDTH: 52%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left; MARGIN-LEFT: 29.7pt">Asia Pacific</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 2px; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(119,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(82,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(143,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 2px solid; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(126,000</div>
  </td>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
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  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
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  <td style="VERTICAL-ALIGN: bottom; TEXT-ALIGN: right; WIDTH: 9%" valign="bottom">&#160;</td>
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  <td style="VERTICAL-ALIGN: bottom; PADDING-BOTTOM: 4px; WIDTH: 52%" valign="bottom">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Net loss</div>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">$</div>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(227,000</div>
  </td>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">$</div>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(1,048,000</div>
  </td>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">$</div>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(906,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">$</div>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">(1,745,000</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 4px double; TEXT-ALIGN: left; WIDTH: 1%" valign="bottom" nowrap="nowrap">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">)</div>
  </td>
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  <div style="TEXT-ALIGN: left"><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">9.</font><font id="TRGRRTFtoHTMLTab" style="FONT-SIZE: 1px; DISPLAY: inline-block; WIDTH: 20pt">&#160;</font><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif"><u>SUBSEQUENT EVENT</u></font></div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left">On August 11, 2017, <font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; BACKGROUND-COLOR: #ffffff">the Company entered in to a Business Financing Agreement (the "Financing Agreement") with Bridge Bank, a division of Western Alliance Bank, which includes a revolving line of credit and term loan. The agreement will mature in August 2019.</font></div>
  
  <div>&#160;</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: justify">The Financing Agreement with Bridge Bank, 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").&#160;&#160;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.&#160;&#160;Advances under the Revolving Credit Line (the "Advances") may be repaid and reborrowed in accordance with the Loan Agreement.&#160;&#160;Pursuant to the Financing Agreement, the Company agreed to pay to Bridge Bank the outstanding principal amount of all Advances, the unpaid interest thereon, and all other obligations incurred with respect to the Loan Agreement in August 2019.&#160; Interest will be accrued and paid monthly at the Wall Street Journal Prime Rate plus 1.5%.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: justify">The Term Loan provides $400,000 to the Company.&#160; For the first six months of the Term Loan, the Company will pay interest only.&#160; For the next 18 months, the Term Loan will be amortized into monthly payments of principal and interest.&#160; The interest rate on the Term Loan will be the Wall Street Journal Prime Rate plus 1.75%.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: justify">At the closing of the Financing Agreement, the Company repaid all outstanding amounts owed to SVB under the Revolving Facility and terminated the Revolving Facility.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: justify">Subject to certain exceptions, the 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.&#160;&#160;Further, the Company must maintain minimum liquidity of $750,000, tested monthly, consisting of a combination of Unrestricted cash at Bridge Bank plus available U.S. accounts receivable.&#160; In addition, actual operating performance for the trailing 6-month period must be at least 75% of Projected GAAP EBITDA, as tested quarterly.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: justify">The 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.&#160;&#160;The Financing Agreement contains a negative covenant prohibiting the Company from granting a security interest in their intellectual property to any party.</div>
  
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  <div style="TEXT-ALIGN: left"><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold"><u>Item 2.</u></font><font id="TRGRRTFtoHTMLTab" style="FONT-SIZE: 1px; DISPLAY: inline-block; WIDTH: 72pt">&#160;</font><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold"><u>MANAGEMENT'S DISCUSSION AND ANALYSIS OF&#160; FINANCIAL CONDITION AND RESULTS OF&#160; OPERATIONS</u></font></div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left; MARGIN-RIGHT: 1.8pt"><u>Overview</u></div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt">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.&#160; 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.&#160; 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.&#160;&#160; 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, 2016.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt">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.&#160; 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.&#160; 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.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt">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.&#160; It integrates and optimizes critical business processes for Campaigns, Call Center, Depot Repair, Field Service, Logistics, Projects and Sales, and Order Processing applications.&#160; Astea extends its application suite with mobile workforce management, dynamic scheduling optimization, third party vendor and customer self-service portals, and business intelligence.&#160; 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.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt">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.&#160; Add-on features include a web-based customer self-service portal, workforce optimization capabilities, and equipment-centric functionality.&#160;&#160; 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.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt">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.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt"><u>Critical Accounting Policies and Estimates</u></div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt">The Company's significant accounting policies are described in its "Summary of Accounting Policies," Note 2, in the Company's 2016 Annual Report on Form 10-K.&#160; 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.&#160; 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.&#160; 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.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-STYLE: italic; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt">Revenue Recognition</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify; MARGIN-RIGHT: 0.9pt">Astea's revenue is principally recognized from three sources: (i) licensing arrangements, (ii) subscription services and (iii) services and maintenance.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify; MARGIN-RIGHT: 0.9pt">The Company markets its products primarily through its direct sales force and resellers.&#160; License agreements do not provide for a right of return, and historically, product returns have not been significant.</div>
  
  <div>&#160;</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt">The Company recognizes revenue from license sales when all of the following criteria are met: persuasive evidence of an arrangement exists, delivery has occurred, the license fee is fixed and determinable and the collection of the fee is probable.&#160; The Company utilizes written contracts as a means to establish the terms and conditions by which our products, services and maintenance support are sold to our customers.&#160; Delivery is considered to have occurred when title and risk of loss have been transferred to the customer, which generally occurs after a license key has been delivered electronically to the customer.&#160; Revenue for arrangements with extended payment terms in excess of one year is recognized when the payments become due, provided all other recognition criteria are satisfied.&#160; If collectability is not considered probable, revenue is recognized when the fee is collected.&#160; Our typical end user license agreements do not contain acceptance clauses.&#160; However, if acceptance criteria are required, revenues are deferred until customer acceptance has occurred.</div>
  
  <div><br>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify">If these criteria are not met, then revenue is deferred until such criteria are met or until the period(s) over which the last undelivered element is delivered. If there is objective and reliable evidence of fair value for all units of accounting in an arrangement, the arrangement consideration is allocated to the separate units of accounting based on each unit's relative fair value. There may be cases, however, in which there is objective and reliable evidence of fair value of the undelivered item(s) but no such evidence for the delivered item(s). In those cases, the residual method is used to allocate the arrangement consideration. Under the residual method, the amount of consideration allocated to the delivered item(s) equals the total arrangement consideration less the aggregate fair value of the undelivered item(s). We apply the revenue recognition policies discussed below to each separate unit of accounting.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt">Astea allocates revenue to each element in a multiple-element arrangement based on the elements' respective fair value, determined by the price charged when the element is sold separately.&#160; Specifically, Astea determines the fair value of the maintenance portion of the arrangement based on the price, at the date of sale, if sold separately, which is generally a fixed percentage of the software license selling price.&#160; The professional services portion of the arrangement is based on hourly rates which the Company charges for those services when sold separately from software.&#160; If evidence of fair value of all undelivered elements exists, but evidence does not exist for one or more delivered elements, then revenue is recognized using the residual method.&#160; If an undelivered element for which evidence of fair value does not exist, all revenue in an arrangement is deferred until the undelivered element is delivered or fair value can be determined.&#160; Under the residual method, the fair value of the undelivered elements is deferred and the remaining portion of the arrangement fee is recognized as revenue.&#160; The proportion of the revenue recognized upon delivery can vary from quarter-to-quarter depending upon the determination of vendor-specific objective evidence (VSOE) of fair value of undelivered elements.&#160; The residual value, after allocation of the fee to the undelivered elements based on VSOE of fair value, is then allocated to the perpetual software license for the software products being sold.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt">When appropriate, the Company may allocate a portion of its software revenue to post-contract support activities or to other services or products provided to the customer free of charge or at non-standard rates when provided in conjunction with the licensing arrangement.&#160; Amounts allocated are based upon standard prices charged for those services or products which, in the Company's opinion, approximate fair value.&#160; Software license fees for resellers or other members of the indirect sales channel are based on a fixed percentage of the Company's standard prices.&#160; The Company recognizes software license revenue for such contracts based upon the terms and conditions provided by the reseller to its customer. The Company regularly communicates with its resellers and recognizes revenue based on information from its resellers regarding possible returns and collectability. However, the Company does not have a history of returns from the resellers.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt">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.&#160; The subscription revenue is recognized on a straight-line basis over the service period.&#160; A SaaS contract is generally 1 to 3 years in duration. In accordance with generally accepted accounting principles, the Company may not recognize any SaaS revenue before the customer goes live, to ensure that the revenue will match the use of services. The implementation period is typically between 8 and 10 months. When upfront implementation, consulting and training services are bundled with the subscription based arrangement, these services are recognized over the life of the initial contract, once the project goes live.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: justify">The post-contract support on perpetual licenses provides for technical support and unspecified updates to the Company's software products.&#160; Post-contract support is charged separately for renewals of annual maintenance in subsequent years.</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: justify">&#160;</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: justify">Fair value for maintenance is based upon either renewal rates stated in the contracts or separate sales of renewals to customers. Revenue is recognized ratably, or monthly, over the term of the maintenance period, which is typically one year.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt">Consulting and training service revenue are generally unbundled and, therefore, recognized at the time the services are performed except when these services are bundled with&#160;subscription revenues.&#160; If the Company has any fixed-price arrangements for services, the revenue is recognized using the proportional performance method based on direct labor hours incurred to date as a percentage of total estimated direct labor hours required to complete the project.&#160; Fees from licenses sold together with consulting services are generally recognized upon shipment, provided that the contract has been executed, delivery of the software has occurred, fees are fixed and determinable and collection is probable. <font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">The Company offers a variety of consulting services that include project management, implementation, data conversion, integration, custom report writing and training. Our professional services are generally billed on a time and materials basis using hourly rates together with reimbursement for travel and accommodation expenses. We recognize revenue as these professional services are performed. On rare occasions these consulting service arrangements involve acceptance criteria. In such cases, revenue is recognized upon acceptance.</font></div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify">We believe that our accounting estimates used in applying our revenue recognition are critical because:</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">the determination that it is probable that the customer will pay for the products and services purchased is inherently judgmental;</div>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">the allocation of proceeds to certain elements in multiple-element arrangements is complex;</div>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">the determination of whether a service is essential to the functionality of the software is complex;</div>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">establishing company-specific fair values of elements in multiple-element arrangements requires adjustments from time-to-time to reflect recent prices charged when each element is sold separately; and</div>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">the determination of the stage of completion for certain consulting arrangements is complex.</div>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify">Changes in the aforementioned items could have a material effect on the type and timing of revenue recognized.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify">For the six months ended June 30, 2017 and 2016, the Company recognized $11,957,000 and $11,034,000, respectively, of revenue related to software license fees, subscription revenue, and services and maintenance.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt">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 consolidated balance sheets until such amounts are remitted to the taxing authority.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-STYLE: italic; TEXT-ALIGN: justify">Capitalized Software Research and Development Costs</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; 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.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; 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.&#160; The Company's estimated life for its capitalized software products is two years based on current sales trends and the rate of product release.&#160; 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 June 30, 2017, management believes that no revisions to the remaining useful lives or write-downs of capitalized software development costs are required.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify; MARGIN-RIGHT: 0.9pt">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 consolidated statements of changes in stockholders' deficit.&#160; Foreign exchange transaction gains and losses are included in general and administrative expenses in the consolidated statements of operations. General and administrative expenses include an exchange transaction loss of $19,000 for the six months ended June 30, 2017 and a $51,000 gain for the six months ended June 30, 2016.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt"><u>Results of Operations</u></div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt">Total revenues increased by $270,000 or 5%, to $5,956,000 for the three months ended June 30, 2017 from $5,686,000 for the three months ended June 30, 2016.&#160; Software license fee revenues increased $154,000, or 62%, from the same quarter in 2016.&#160; Subscription revenues decreased $562,000 or 53% to $504,000 from $1,066,000 from the same period last year. Services and maintenance revenue for the three months ended June 30, 2017 increased $678,000 or 16% from the same quarter in 2016.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify; MARGIN-RIGHT: 2.15pt">Software license fee revenue increased 62% to $402,000 in the second quarter of 2017 from $248,000 in the second quarter of 2016. The increase was primarily due to sales of FieldCentrix licenses to existing customers. Expected sales of Astea Alliance licenses which had been expected to close in the second quarter of 2017, have slipped into the third quarter of 2017.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt">Subscription revenue decreased 53% to $504,000 in the second quarter of 2017 from $1,066,000 in the second quarter of 2016.&#160; The primary reason for the decrease resulted from a hosted customer who went live in the second quarter of 2016 for which the annual hosting revenue had been deferred since 2014. This customer had an extended implementation period due to certain functionality requirements of the customer that lengthened the time necessary for this customer to go-live. Previously deferred hosting revenues were recognized as the service periods for those hosting services had lapsed. This implementation was more complex than most, as typical customers generally go live in 8 to 10 months. Included in subscription revenue for the second quarter of 2016 was $400,000 which was accumulated from periods prior to going live.&#160; The Company continues to sell Software as a Service (SaaS) for which hosting revenue may not be recognized until the customers go-live.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt">Services and maintenance revenues increased by 15% to $5,050,000 in the second quarter of 2017 compared to $4,372,000 in the second quarter of 2016.&#160; Astea Alliance service and maintenance revenues increased by $706,000 or 19% compared to the second quarter of 2016.&#160; The increase was mainly attributable to a strong backlog of professional services required by new customer implementations and upgrades of current customers in all regions.<font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">&#160;</font>Service and maintenance revenues generated by FieldCentrix decreased by $29,000 or 5% to $544,000 in the second quarter of 2017 compared to $573,000 during the same period in 2016.&#160; T<font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">he decrease is due to a reduction in maintenance revenue compared to the second quarter in 2016.</font></div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt">Costs of Revenues</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt">Cost of software license fees decreased 2% to $573,000 in the second quarter of 2017 from $585,000 in the second quarter of 2016.&#160; 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.&#160; Amortization of capitalized software development costs was $566,000 for the quarter ended June 30, 2017 compared to $565,000 for the same quarter in 2016. The gross margin percentage on software license sales was (43%) in the second quarter of 2017 compared to (136%) in the second quarter of 2016.&#160; The improvement in the license margin resulted primarily from the increase in software license fees revenue in the second quarter of 2017.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt">Cost of subscriptions decreased 7% to $225,000 in the second quarter of 2017 from $242,000 in the second quarter of 2016. The decrease in cost of subscriptions is mainly attributed to cost savings of hosting fees eliminated after the cancelation of a significant customer in the last quarter of 2016, partially offset by increased <font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">costs from a growing base of hosted customers</font>.&#160; The gross margin percentage on hosting was 55% in the second quarter of 2017 compared to 77% in the second quarter of 2016. The decline in the gross margin is mainly due to the decrease in subscription revenue.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt">Cost of services and maintenance decreased 3% to $3,599,000 in the second quarter of 2017 from $3,712,000 in the second quarter of 2016. The decrease in cost of service and maintenance is mainly attributed to decreased headcount in the U.S.&#160; The gross margin percentage was 29% in the second quarter of 2017 compared to 15% in the second quarter of 2016.&#160; The increase in services and maintenance gross margin was primarily due to the decreased service and maintenance costs in U.S and by an increase in service revenue in Japan.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt">Gross Profit</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt"><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">Gross profit increased 36% to $1,559,000 in the second quarter of 2017 from $1,147,000 in the second quarter of 2016 primarily due to an increase in software license and service and maintenance revenues and a decrease in all cost of revenues partially offset by a 53% decrease in in subscription revenue.</font>&#160;<font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">As a percentage of revenue, gross profit in the second quarter of 2017 was 26% compared to 20% in the second quarter of 2016.</font></div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt">Operating Expenses</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-STYLE: italic; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt">Product Development</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify"><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">Product development expenses decreased 12% to $235,000 in the second quarter of 2017 from $267,000 in the second quarter of 2016.&#160;</font> Fluctuations in product development expense from period to period result from the amount of product development expense that is capitalized.&#160; Development costs of $638,000 were capitalized in the second quarter of 2017 compared to $760,000 during the same period in 2016.&#160; Gross product development expense was $873,000 in the quarter ended June 30, 2017 which is 15% lower than $1,027,000 during the same quarter in 2016. <font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">The decrease was primarily due to lower headcount. &#160;Most of the Company's development occurs in Israel.</font> Product development expense as a percentage of revenues was 4% in the second quarters of 2017 and 5% in the second quarter of 2016.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-STYLE: italic; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt">Sales and Marketing</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt">Sales and marketing expense decreased 32% to $807,000 in the second quarter of 2017 from $1,178,000 in the second quarter of 2016.&#160; The decrease in sales and marketing expense resulted from reduced headcount in both sales and marketing, and lower commissions partially offset by an increase in marketing cost for the Astea user's conference held by the Company in June 2017. The Company<font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000"> continues to focus on expanding its market presence in all regions by expanding awareness of the Company's products, which occurs through the use of Webinars focused in the vertical industries in which the Company operates, attendance at selected trade shows, and increased efforts in lead generation for its sales force.&#160;</font> As a percentage of revenues, sales and marketing expense was 14% in the second quarter of 2017 compared to 21% in the same period of 2016. The decrease is sales and marketing expense as a percentage of revenue is due to less headcount in both sales and marketing.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-STYLE: italic; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt">General and Administrative</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt"><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">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. </font>General and administrative expenses decreased 2% to $705,000 during the second quarter of 2017 from $717,000 in the second quarter of 2016. The decrease is due to lower executive management costs and lower travel costs partially offset by foreign currency losses resulting from a weakening U.S. dollar compared to the other regions where the Company operates.&#160; As a percentage of revenue, general and administrative expenses were 12% in the second quarter of 2017 compared to 13% in the second quarter of 2016.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt">Net Interest Expense</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt">Net interest expense was $32,000 in the second quarter of 2017 compared to $21,000 in the second quarter of 2016.&#160; The increase in interest expense resulted from borrowing larger amounts against its line of credit with SVB Bank and the CEO/Director than the same period in 2016. In addition, the prime rate charged by SVB to the Company increased.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt">The Company reported a provision for income tax of $7,000 for the second quarter of 2017 compared to $12,000 during the second quarter of 2016.&#160; The tax expense results from a tax provision in Israel.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt">International Operations</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt">The Company's international operations generated revenues of $2,595,000 in the second quarter of 2017, an increase of 17% over the same quarter in 2016.&#160; Revenues from international operations comprised 44% of the Company's total revenue for the second quarter in 2017, compared to 39% of total revenues for the same quarter in 2016.&#160; The increase in international revenues compared to the same period in 2016 is primarily due to increases in Japan partially offset by a decline in license and subscription revenues in Europe.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; FONT-STYLE: italic; TEXT-ALIGN: left">Comparison of Six Months Ended June 30, 2017 and 2016</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; COLOR: #000000; TEXT-ALIGN: left">Revenues</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.1pt">Total revenues increased $923,000, or 8%, to $11,957,000 for the six months ended June 30, 2017 from $11,034,000 for the six months ended June 30, 2016.&#160;&#160;Software license revenues decreased 41% from the same period last year.&#160; Subscription revenue decreased 19% from the same period last year and service and maintenance revenues for the six months ended June 30, 2017 amounted to $10,041,000, a 20% increase from the same period in 2016.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify; MARGIN-RIGHT: 2.15pt"><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">Software license fees revenue decreased 41% to $645,000 in the first six months of 2017 from $1,092,000 in the first six months of 2016.&#160;&#160;Astea Alliance license revenues decreased $605,000 to $432,000 or 58% in the first six months of 2017 from $1,037,000 in the first six months of 2016. The decrease resulted from a decline in Astea license sales in the U.S. and Europe partially offset by increase in license sales in Japan. </font>A number of sales that had been expected to close in the first six months of 2017 slipped into the second half of 2017. FieldCentrix license revenue increased $158,000 to 213,000 in the first six months of 2017 from $55,000 in the first six months of 2016.&#160; FieldCentrix sales consisted of additional user licenses sold to existing customers in the first half of 2017.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.1pt"><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">Subscription revenue decreased 19% to $1,271,000 in the first six months of 2017 from $1,568,000 in the first six months of 2016. </font>Subscription revenue was much greater in 2016 because one customer, who went live during this period in 2016, had an unusually long implementation period, which caused many months of hosting revenue to be recognized in the period they went live on Astea Alliance. Because of the extended implementation period for this customer, future hosting revenue from this customer will not be of the same magnitude it was during the six-month period in 2016.&#160;&#160;Included in subscription revenue for the six months of 2016 was $295,000 which was accumulated from periods prior to going live.&#160; The decrease in subscription revenue was partially offset by completion of the implementation process for certain customers which allowed them to go live on the SaaS solution in the first six months of 2017. Revenue for subscription services may not be recognized until the customers go-live. The implementation period is typically between 8 to 10 months.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.1pt"><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">Services and maintenance revenues increased 20% to $10,041,000 in the first six months of 2017 from $8,374,000 in the first six months of 2016. Astea Alliance service and maintenance revenues were $8,979,000 for the first six months of 2017, an increase of 24% from $7,217,000 in Alliance service and maintenance revenue for the six months ended June 30, 2016.</font> The increase was mainly attributable to an increase in services in all regions of the Company. Japan service revenue increased significantly due to all the new license deals signed over the past 12 months. In addition, a<font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000"> UK hosting customer went live in the first six months of 2017 and the U.S. and APAC regions had several customers which went live in the last quarter of 2016, which also added to the increase.&#160; Once a hosted customer goes live, we start to recognize deferred implementation fees over the remaining life of the contract.&#160; In addition, increases in services revenue and a slight increase in maintenance revenue from license sales that closed in the last quarter of 2016 also contributed to the increase. </font>Service and maintenance revenues generated by FieldCentrix decreased by $94,000 or 8% to $1,062,000 in the first six months of 2017 compared to $1,156,000 during the same period in 2016.&#160; T<font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">he decrease is due to a reduction in upgrade projects, customers transitioning to Alliance and the loss of some customers compared to the first six months in 2016.</font></div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.1pt"><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">Cost of software license fees increased 10% to $1,290,000 in the first six months of 2017 from $1,168,000 in the first six months of 2016.</font>&#160; Included in the cost of software license fees are the costs of capitalized software amortization and all third party software embedded in the Company's software licenses which are sold to customers.&#160; <font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">Amortization of capitalized software development costs was $1,271,000 for the six months ended June 30, 2017, an increase of 13% compared to the same period in 2016.</font> The increase resulted primarily from amortization of Version 14 after its release in October 2016 partially offset by Version 11.5 being fully amortized as of June 30, 2016 and Version 12 being fully amortized by February 2017.<font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">&#160;&#160;The gross margin percentage on software licenses was (100%) in the first six months of 2017 compared to (7%) in the first six months of 2016. The decrease in gross margin is a reflection of the decreased license revenue in 2017.</font></div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.1pt">Cost of subscriptions decreased 8% to $433,000 in the first six months of 2017 from $469,000 in the first six months of 2016. The decrease in cost of subscriptions is mainly attributed to reduced hosting fees from a customer who cancelled their agreement in the fourth quarter of 2016, offset by an increase in <font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">costs from adding new customers</font>.&#160; The gross margin percentage was 66% in the first six months of 2017 compared to 70% in the first six months of 2016. The slight decline was due to the reduced revenue from a large customer who canceled their hosting contract in the last quarter of 2016 which lowered revenue, partially offset by the hosting cost savings.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.1pt"><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">Cost of services and maintenance increased 4% to $7,153,000 in the first six months of 2017 from $6,903,000 in the first six months of 2016.&#160;&#160;</font>The increase in cost of service and maintenance is attributed primarily to increases in contracted headcount who provided consulting services in Japan, and increased travel expenses in all regions offset partially offset by headcount reductions in the U.S.&#160; <font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">The services and maintenance gross margin percentage was 29% in 2017 and 18% in 2016. The improvement in the gross margin is due to the increase in service revenue in Japan and headcount reductions in the U.S.&#160; partially offset by increase in headcount in Japan and travel expenses in all regions.</font></div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.1pt">Gross profit increased 24% to $3,081,000 in the first six months of 2017 from $2,494,000 in the first six months of 2016.&#160; As a percentage of revenue, gross profit was 26% in the first six months of 2017 compared to 23% in the first six months of 2016.&#160; The year-over-year increase in gross profit was largely driven by the increase in service and maintenance revenue as well as a slight decrease in cost of subscriptions. Partially offsetting these components was a decrease in license and subscription revenues, and increases in cost of software license fees and cost of services and maintenance.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.1pt">Product development expense increased 102% to $797,000 in the first six months of 2017 from $394,000 in the first six months of 2016.&#160; Fluctuations in product development expense from period to period can vary due to the amount of development expense which is capitalized.&#160;&#160;Software development costs of $1,246,000 were capitalized in the first six months of 2017 compared to $1,592,000 during the same period in 2016, a decrease of $346,000.&#160;&#160;Gross development expense was $2,043,000 during the first six months of 2017, an increase of 3%, compared to $1,986,000 for the same period in 2016.&#160;&#160;The increase was primarily due to additional outside consulting services which was partially offset by lower headcount in the first six months of 2017. Product development expense as a percentage of revenues was 7% in first six months of 2017 compared to 4% during the same period in 2016.&#160;&#160;</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.1pt">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, foreign currency exchange, bad debt expense and various costs associated with the Company's status as a public company. General and administrative expenses decreased 12% to $1,368,000 in the first six months of 2017 from $1,557,000 in the first six months of 2016.&#160;&#160;The decrease was mainly driven by less executive management cost and lower travel expenses.&#160;&#160; &#160;As a percentage of revenues, general and administrative expenses were 11% for the six months ended June 30, 2017 and 14% in the first six months of 2016. The decrease in costs relative to revenues is due to higher revenues in the first six months of 2017.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.1pt">Interest expense was $74,000 in the first six months of 2017 compared to $46,000 of interest expense in the first six months of 2016.&#160; The increase in interest expense resulted from borrowing larger amounts against its line of credit with SVB Bank and the CEO/Director than the same period in 2016. In addition, the prime rate charged by SVB to the Company increased.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify">The Company generated $2,052,000 of cash from operating activities in the first six months of 2017 compared to $1,362,000 for the first six months of 2016.&#160; The increase in operating cash flows of $690,000 was due to a decrease in net loss of $839,000, an increase in cash provided by prepaid expenses of $62,000, a decrease in cash used in accounts payable and accrued expenses of $296,000, an increase in cash from deferred revenues of $294,000, and an increase in cash provided by other assets of $35,000 and partially offset by an increase in accounts receivable of $943,000. In addition, there was an increase in cash used non-cash expenses of $107,000.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify">The Company used $1,246,000 for investing activities in the first six months of 2017 compared to $1,624,000 used in the first six months of 2016. The decrease in cash used for investing activities of $378,000 is principally attributable to lower capitalized software development costs of $346,000 in 2017 and a decrease in cash used for capital expenditures of $32,000. </div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt">The Company used $172,000 of cash in financing activities in the first six months of 2017 compared to using $68,000 in the first six months of 2016.&#160; The increase in financing activities in 2017 was due to payments of preferred stock dividends of $250,000 in 2017 and compared to $220,000 in the first six months of 2016.&#160; The Company borrowed $5,062,000 and repaid $5,434,000 during the first six months of 2017 compared to borrowing $200,000 and repaying $48,000 in the same quarter last year on its line of credit from SVB. The Company borrowed $450,000 on its line of credit with the CEO/Director during the first six months ended June 30, 2017.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt">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, resulted in a decrease of cash of $14,000 in 2017 compared to an increase of $20,000 in 2016.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify">The Company has a history of net losses and an accumulated deficit of $36,343,000 as of June 30, 2017.&#160; In the first six months of 2017, the Company generated a net loss of $906,000 compared to a net loss of $1,745,000 generated in the first six months of 2016.&#160; Further, at June 30, 2017, the Company had a working capital ratio of 0.45:1, with cash and cash equivalents of $1,277,000 compared to December 31, 2016 when the Company had cash and cash equivalents of $661,000.&#160; The increase in cash and cash equivalents for the first six months of 2017 was primarily driven by increases in cash provided by operations offset by cash used for the Company's capitalized software development costs. The increase in cash provided by operating activities was primarily due to a decrease in the net loss as well as increased collections of accounts receivable and an increase in deferred revenues.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify"><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">As of June 30, 2017 the Company owed $1,555,000 against the line of credit from Silicon Valley Bank ("SVB").&#160;&#160; The availability under the SVB line of credit was tied to a borrowing base formula that is based on 80% of the Company's eligible domestic accounts receivable. As of June, 2017, the availability under the line of credit was $445,000.&#160; In April 2017, </font><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; BACKGROUND-COLOR: #ffffff">the Company extended its Revolving Loan Agreement and associated Revolving Promissory Note with its Chief Executive Officer/Director.&#160;&#160;The loan provides an unsecured $1,000,000 revolving line of credit to the Company.&#160;&#160;The proceeds of the borrowings, if needed, will be used by the Company for operating activities. If an extension of the line of credit is appropriate and agreed to by the Chief Executive Officer/Director, we will then obtain the necessary approvals from </font>WAB<font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; BACKGROUND-COLOR: #ffffff">. </font><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">The SVB line of credit was to expire in April 2018.&#160; In August 2017, the Company obtained a new line of credit and term loan from</font> WAB and paid off its outstanding borrowings with SVB. The term of the WAB line of credit and term loan extend through August 2019. <font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">The Company has projected revenues that management believes will provide sufficient funds along with available borrowings under its lines of credit to sustain its continuing operations through at least September 30, 2018.</font></div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: justify">The Company was in compliance with the financial covenants for the line of credit with SVB as of June 30, 2017. &#160;&#160;In the event the Company does not meet its financial covenants in the future under the WAB financing and WAB does not extend a waiver or forbearance agreement, and the Company does not believe that it has adequate liquidity to operate, the Company will implement additional cost adjustments, as necessary, that will reduce its expenditures to the appropriate level that matches its operating cash flows.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify"><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #222222; BACKGROUND-COLOR: #ffffff">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.&#160; 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.&#160; 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.&#160; <font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">However, projections of future cash needs and cash flows are subject to risks and uncertainty.&#160;</font></div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify">Management's current operating plan reflects a reduction in operating expenses which occurred at the end of the first quarter of 2017 in order to align its expenditures with its expected revenues.&#160; The primary area of cost reduction, which occurred at the end of the first quarter of 2017, was to reduce company headcount by eliminating non-revenue generating personnel throughout the Company.&#160; The Company remains focused on maximizing revenue from its revenue generating resources, including repurposing certain personnel to become revenue generators to help the Company improve its liquidity.&#160; The Company has a substantial professional services backlog that resulted from the acquisition of new customers in the second half of 2016 as well as upgrade projects for existing customers as they move to the latest version of Alliance.&#160; Management also initiated cost containment programs in other areas including the elimination or reduction of non-essential marketing activities, space reduction in areas in which the Company has excess office capacity, focusing marketing activities only on those programs that directly drive new business and eliminating contractors who are not essential to growth.&#160; In addition, we do not expect to spend a significant amount on capital expenditures.&#160; Overall, we have already implemented steps to reduce total operating expenses without impairing our ability to grow the business by obtaining new customers and increasing sales to existing customers.&#160; <font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">We expect our revenues and cost reductions to </font><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #222222; BACKGROUND-COLOR: #ffffff">generate sufficient cash from operations.</font>&#160;<font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #222222; BACKGROUND-COLOR: #ffffff">As noted above, if the Company's actual results fall short of expectations, the Company will make further cost adjustments to improve the Company's operating cash flows.</font></div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #222222; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt"><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; BACKGROUND-COLOR: #ffffff">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></div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: justify">The Company does not plan any significant capital expenditures in 2017 other than to support its operations. The Company's plans for continued investment in product development and capitalized software costs are expected to be similar to prior years.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-STYLE: italic; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt">&#160;&#160;&#160;Off-Balance Sheet Arrangement Transactions</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt">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.</div>
  
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  <div style="TEXT-ALIGN: left; MARGIN-RIGHT: 1.8pt"><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold"><u>Item 3.</u></font><font id="TRGRRTFtoHTMLTab" style="FONT-SIZE: 1px; DISPLAY: inline-block; WIDTH: 40pt">&#160;</font><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold"><u>QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK</u></font></div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt">Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates.&#160; Our market risk exposure is primarily a result of fluctuations in interest rates.&#160; We do not hold&#160;&#160; financial instruments for trading purposes.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify"><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-STYLE: italic">Interest Rate Risk.</font><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold">&#160; </font><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">At June 30, 2017, the Company's debt consisted of&#160; lines of credit with its Chief Executive Officer/Director and&#160; SVB.&#160; At June 30, 2017, the outstanding balance owed on our line of credit under the revolving credit facility with SVB was $1,555,000 and with its Chief Executive Officer was $450,000.&#160; Our old credit facility with SVB and our new credit facility with WAB both have variable interest rates, which exposes us to interest rate risk.</font></div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify"><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-STYLE: italic">Foreign Currency Risk.</font>&#160; The Company does not use foreign currency forward exchange contracts or purchased currency options to hedge local currency cash flows or for trading purposes.&#160; All sales arrangements with international customers are denominated in foreign currency.&#160; For the six months ended June 30, 2017, approximately 43% of the Company's overall revenue resulted from sales to customers outside the United States.&#160; 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.&#160; The Company does not expect any material loss with respect to foreign currency risk.</div>
  
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  <div style="TEXT-ALIGN: left; MARGIN-RIGHT: 1.8pt"><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold"><u>Item 4.</u></font><font id="TRGRRTFtoHTMLTab" style="FONT-SIZE: 1px; DISPLAY: inline-block; WIDTH: 40pt">&#160;</font><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold"><u>CONTROLS AND PROCEDURES</u></font></div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify; MARGIN-TOP: 9pt">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. There were no changes in our internal control over financial reporting during the quarter ended June 30, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: left"><u>PART II - OTHER INFORMATION</u></div>
  
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  <div style="TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt"><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold"><u>Item 1A.</u><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-VARIANT: normal; FONT-WEIGHT: bold; FONT-STYLE: normal">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</font></font><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold"><u>RISK FACTORS</u></font></div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify">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, 2016, 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, 2016 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.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; FONT-STYLE: italic; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt">Variability of Quarterly Results</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt">Risks which are peculiar to the Company on a quarterly basis, and which may vary from quarter to quarter, include but are not limited to the following:</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">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.</div>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif">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.</div>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt"><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif"><u>Item 5.</u></font>&#160;<font id="TRGRRTFtoHTMLTab" style="FONT-SIZE: 1px; DISPLAY: inline-block; WIDTH: 9pt">&#160;</font><font id="TRGRRTFtoHTMLTab" style="FONT-SIZE: 1px; DISPLAY: inline-block; WIDTH: 9pt">&#160;</font><font id="TRGRRTFtoHTMLTab" style="FONT-SIZE: 1px; DISPLAY: inline-block; WIDTH: 9pt">&#160;</font><font id="TRGRRTFtoHTMLTab" style="FONT-SIZE: 1px; DISPLAY: inline-block; WIDTH: 9pt">&#160;</font><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif"><u>OTHER INFORMATION</u></font></div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: left">On August 11, 2017, <font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; BACKGROUND-COLOR: #ffffff">the Company entered in to a Business Financing Agreement (the "Financing Agreement") with Bridge Bank, a division of Western Alliance Bank, which includes a revolving line of credit and term loan. The agreement will mature in August 2019.</font></div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: justify">The Financing Agreement with Bridge Bank, 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").&#160;&#160;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.&#160;&#160;Advances under the Revolving Credit Line (the "Advances") may be repaid and reborrowed in accordance with the Loan Agreement.&#160;&#160;Pursuant to the Financing Agreement, the Company agreed to pay to Bridge Bank the outstanding principal amount of all Advances, the unpaid interest thereon, and all other obligations incurred with respect to the Loan Agreement in August 2019.&#160; Interest will be accrued and paid monthly at the Wall Street Journal Prime Rate plus 1.5%.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: justify">The Term Loan provides $400,000 to the Company.&#160; For the first six months of the Term Loan, the Company will pay interest only.&#160; For the next 18 months, the Term Loan will be amortized into monthly payments of principal and interest.&#160; The interest rate on the Term Loan will be the Wall Street Journal Prime Rate plus 1.75%.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify"><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">At the closing of the Financing Agreement, the Company repaid all outstanding amounts owed to Silicon Valley Bank under a revolving credit facility (the "Revolving Facility") established under a Loan and Security Agreement among the Company, </font>Network Data, Inc., Virtual Service Corporation, FC Acquisition Corp., and <font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000">Silicon Valley Bank dated June 13, 2014 (as amended, the "SVB Agreement").&#160; Upon repayment of all amounts outstanding owed under the Revolving Facility on August 11, 2017, the SVB Agreement was terminated and all security interests in favor of Silicon Valley Bank were released.&#160; </font>The SVB Agreement was described in Item 1.01 of the Company's Current Report on Form&#160;8-K filed with the Securities and Exchange Commission on June 16, 2014, and which description is incorporated herein by reference.&#160;</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: justify">Subject to certain exceptions, the 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.&#160;&#160;Further, the Company must maintain minimum liquidity of $750,000, tested monthly, consisting of a combination of Unrestricted cash at Bridge Bank plus available U.S. accounts receivable.&#160; In addition, actual operating performance for the trailing 6-month period must be at least 75% of Projected GAAP EBITDA, as tested quarterly.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: justify">The 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.&#160;&#160;The Financing Agreement contains a negative covenant prohibiting the Company from granting a security interest in their intellectual property to any party.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000; TEXT-ALIGN: justify">The foregoing is only a summary of the Financing Agreement and does not purport to be complete.&#160; This summary is qualified in its entirety by reference to the full text of the Financing Agreement, which is attached hereto as Exhibit 10.23, and is incorporated by reference herein.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: left"><font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif"><u>Item 6</u></font>.&#160;&#160; <font style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif"><u>EXHIBITS</u></font></div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif"><a href="ex10-23.htm">Business Financing Agreement among Astea International Inc., Network Data, Inc. and Western Alliance Bank dated as of August 11, 2017</a></div>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif"><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></div>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; COLOR: #000000"><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></div>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif"><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 &#8211; Chief Executive Officer</a></div>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif"><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 &#8211; Chief Financial Officer</a></div>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: center; MARGIN-RIGHT: 1.8pt">SIGNATURES</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: justify; MARGIN-RIGHT: 1.8pt; TEXT-INDENT: 36pt">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.</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left; MARGIN-RIGHT: 1.8pt">ASTEA INTERNATIONAL INC.</div>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left; MARGIN-RIGHT: 1.8pt">Date:&#160; August 14, 2017</div>
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  <div style="TEXT-ALIGN: left; MARGIN-RIGHT: 1.8pt"><u>/s/Zack Bergreen</u></div>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left; MARGIN-RIGHT: 1.8pt">Zack Bergreen</div>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left; MARGIN-RIGHT: 1.8pt">(Principal Executive Officer)</div>
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  <td style="BORDER-TOP: medium none; BORDER-RIGHT: medium none; VERTICAL-ALIGN: top; BORDER-BOTTOM: medium none; BORDER-LEFT: medium none; WIDTH: 50%">&#160;</td>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left; MARGIN-RIGHT: 1.8pt">Date:&#160; August 14, 2017</div>
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  <td style="BORDER-TOP: medium none; BORDER-RIGHT: medium none; VERTICAL-ALIGN: top; BORDER-BOTTOM: medium none; BORDER-LEFT: medium none; WIDTH: 50%">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left; MARGIN-RIGHT: 1.8pt">Rick Etskovitz</div>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left; MARGIN-RIGHT: 1.8pt">Chief Financial Officer</div>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left; MARGIN-RIGHT: 1.8pt">(Principal Financial and Chief Accounting Officer)</div>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">&#160;</div>
  
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">&#160;</div>
  
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; FONT-WEIGHT: bold; TEXT-ALIGN: center; MARGIN-RIGHT: 1.8pt"><u>EXHIBIT INDEX</u></div>
  
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  <div>&#160;</div>
  
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  <td style="VERTICAL-ALIGN: top; WIDTH: 10.71%"><u>No.</u>&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 4.67%">&#160;</td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 84.62%"><u>Description</u></td>
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  <td style="VERTICAL-ALIGN: top; WIDTH: 10.71%">&#160;</td>
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  <td style="VERTICAL-ALIGN: top; WIDTH: 10.71%">&#160;</td>
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  <td style="VERTICAL-ALIGN: top; WIDTH: 84.62%">&#160;</td>
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  <td style="VERTICAL-ALIGN: top; WIDTH: 10.71%">10.23&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 4.67%">&#160;</td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 84.62%">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif"><a href="ex10-23.htm">Business Financing Agreement among Astea International Inc., Network Data, Inc. and Western Alliance Bank dated as of August 11, 2017&#160;</a></div>
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  <td style="VERTICAL-ALIGN: top; WIDTH: 10.71%">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 4.67%">&#160;</td>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left; MARGIN-RIGHT: 0.8pt">31.1</div>
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  <td style="VERTICAL-ALIGN: bottom; WIDTH: 4.67%">&#160;</td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 84.62%">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left; MARGIN-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></div>
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  <td style="VERTICAL-ALIGN: top; WIDTH: 10.71%">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 4.67%">&#160;</td>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left; MARGIN-RIGHT: 0.8pt">31.2</div>
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  <td style="VERTICAL-ALIGN: bottom; WIDTH: 4.67%">&#160;</td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 84.62%">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left; MARGIN-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&#160; the Sarbanes-Oxley Act of 2002</a></div>
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  <td style="VERTICAL-ALIGN: top; WIDTH: 10.71%">&#160;</td>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left; MARGIN-RIGHT: 0.8pt">32.1</div>
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  <td style="VERTICAL-ALIGN: bottom; WIDTH: 4.67%">&#160;</td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 84.62%">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left; MARGIN-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 &#8211; Chief Executive Officer</a></div>
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  <td style="VERTICAL-ALIGN: top; WIDTH: 10.71%">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 4.67%">&#160;</td>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left; MARGIN-RIGHT: 0.8pt">32.2</div>
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  <td style="VERTICAL-ALIGN: bottom; WIDTH: 4.67%">&#160;</td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 84.62%">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left; MARGIN-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 &#8211; Chief Financial Officer</a></div>
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  <td style="VERTICAL-ALIGN: top; WIDTH: 10.71%">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 4.67%">&#160;</td>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left; MARGIN-RIGHT: 0.8pt">101.INS</div>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left; MARGIN-RIGHT: 0.8pt">&#160;&#160;</div>
  </td>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left; MARGIN-RIGHT: 0.8pt">XBRL Instance Document</div>
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  <td style="VERTICAL-ALIGN: top; WIDTH: 10.71%">&#160;</td>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left; MARGIN-RIGHT: 0.8pt">101.SCH</div>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left; MARGIN-RIGHT: 0.8pt">&#160;&#160;</div>
  </td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 84.62%">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left; MARGIN-RIGHT: 0.8pt">XBRL Taxonomy Extension Schema</div>
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  <td style="VERTICAL-ALIGN: top; WIDTH: 10.71%">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 4.67%">&#160;</td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 84.62%">&#160;</td>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left; MARGIN-RIGHT: 0.8pt">101.CAL</div>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left; MARGIN-RIGHT: 0.8pt">&#160;&#160;</div>
  </td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 84.62%">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left; MARGIN-RIGHT: 0.8pt">XBRL Taxonomy Extension Calculation Linkbase</div>
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  <td style="VERTICAL-ALIGN: top; WIDTH: 10.71%">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 4.67%">&#160;</td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 84.62%">&#160;</td>
  </tr>
  
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  <td style="VERTICAL-ALIGN: top; WIDTH: 10.71%">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left; MARGIN-RIGHT: 0.8pt">101.DEF</div>
  </td>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left; MARGIN-RIGHT: 0.8pt">&#160;&#160;</div>
  </td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 84.62%">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left; MARGIN-RIGHT: 0.8pt">XBRL Taxonomy Extension Definition Linkbase</div>
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  <td style="VERTICAL-ALIGN: top; WIDTH: 10.71%">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 4.67%">&#160;</td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 84.62%">&#160;</td>
  </tr>
  
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  <td style="VERTICAL-ALIGN: top; WIDTH: 10.71%">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left; MARGIN-RIGHT: 0.8pt">101.LAB</div>
  </td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 4.67%">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left; MARGIN-RIGHT: 0.8pt">&#160;&#160;</div>
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  <td style="VERTICAL-ALIGN: top; WIDTH: 84.62%">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left; MARGIN-RIGHT: 0.8pt">XBRL Taxonomy Extension Label Linkbase</div>
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  <td style="VERTICAL-ALIGN: top; WIDTH: 10.71%">&#160;</td>
  <td style="VERTICAL-ALIGN: bottom; WIDTH: 4.67%">&#160;</td>
  <td style="VERTICAL-ALIGN: top; WIDTH: 84.62%">&#160;</td>
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  <td style="VERTICAL-ALIGN: top; WIDTH: 10.71%">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left; MARGIN-RIGHT: 0.8pt">101.PRE</div>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left; MARGIN-RIGHT: 0.8pt">&#160;&#160;</div>
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  <td style="VERTICAL-ALIGN: top; WIDTH: 84.62%">
  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left; MARGIN-RIGHT: 0.8pt">XBRL Taxonomy Extension Presentation Linkbase</div>
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  <div style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman', Times, serif; TEXT-ALIGN: left">&#160;</div>
  
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  <div>&#160;</div>
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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
  June 30, 2017
  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)
  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 definition of "accelerated filer", "large accelerated filer", "non-accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange act.
  Large Accelerated filer __      Accelerated Filer __      Non-accelerated Filer       Smaller Reporting Company
  X
  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 August 8, 2017, 3,594,549 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
  Consolidated Balance Sheets
  3
  Consolidated Statements of Operations (unaudited)
  4
  Consolidated Statements of Comprehensive Loss (unaudited)
  5
  Consolidated Statements of Stockholders' Deficit (unaudited)
  6
  Consolidated Statements of Cash Flows (unaudited)
  7
  Notes to Unaudited Consolidated Financial Statements
  8
  Item 2.
  Management's Discussion and Analysis of Financial
  Condition and Results of Operations
  16
  Item 3.
  Quantitative and Qualitative Disclosure About Market Risk
  24
  Item 4.
  Controls and Procedures
  25
  PART II - OTHER INFORMATION
  Item 1A.
  Risk Factors
  25
  Item 5.
  Other Information
  25
  Item 6.
  Exhibits
  27
  Signatures
  28
  2
  PART I - FINANCIAL INFORMATION
  Item 1.
  FINANCIAL STATEMENTS
  ASTEA INTERNATIONAL INC
  . AND SUBSIDIARIES
  CONSOLIDATED BALANCE SHEETS
  June 30,
  December 31,
  2017
  (Unaudited)
  2016
  ASSETS
  Current assets:
  Cash and cash equivalents
  $
  1,277,000
  $
  661,000
  Accounts receivables, net of reserves allowance of $66,000 (unaudited)
  and $66,000, respectively
  5,356,000
  5,596,000
  Prepaid expenses and other current assets
  298,000
  304,000
  Total current assets
  6,931,000
  6,561,000
  Property and equipment, net
  114,000
  131,000
  Capitalized software development costs, net
  3,995,000
  4,021,000
  Restricted cash
  73,000
  69,000
  Other long-term assets
  162,000
  152,000
  Total assets
  $
  11,275,000
  $
  10,934,000
  LIABILITIES AND STOCKHOLDERS' DEFICIT
  Current liabilities:
  Borrowings under line of credit from CEO/Director
  $
  450,000
  $
  -
  Borrowings under line of credit from Silicon Valley Bank
  1,555,000
  -
  Accounts payable and accrued expenses
  3,196,000
  2,904,000
  Deferred revenues
  10,353,000
  9,556,000
  Total current liabilities
  15,554,000
  12,460,000
  Long-term liabilities:
  Borrowings under line of credit from Silicon Valley Bank
  -
  1,927,000
  Long-term accrued expenses
  458,000
  332,000
  Deferred tax liability
  41,000
  41,000
  Deferred revenues, net of current portion
  690,000
  384,000
  Total long-term liabilities
  1,189,000
  2,684,000
  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
  3,636,000 shares; shares outstanding 3,594,000
  36,000
  36,000
  Additional paid-in-capital
  31,888,000
  32,075,000
  Accumulated deficit
  (36,343,000
  )
  (35,437,000
  )
  Accumulated other comprehensive loss
  (857,000
  )
  (692,000
  )
  Treasury stock at cost, 42,000 common shares
  (208,000
  )
  (208,000
  )
  Total stockholders' deficit
  (5,468,000
  )
  (4,210,000
  )
  Total liabilities and stockholders' deficit
  $
  11,275,000
  $
  10,934,000
  See accompanying notes to the unaudited consolidated financial statements.
  3
  ASTEA INTERNATIONAL INC
  . AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF OPERATIONS
  (Unaudited)
  Three Months
  Six Months
  Ended June 30
  ,
  Ended June 30,
  2017
  2016
  2017
  2016
  Revenues:
  Software license fees
  $
  402,000
  $
  248,000
  $
  645,000
  $
  1,092,000
  Subscriptions
  504,000
  1,066,000
  1,271,000
  1,568,000
  Services and maintenance
  5,050,000
  4,372,000
  10,041,000
  8,374,000
  Total revenues
  5,956,000
  5,686,000
  11,957,000
  11,034,000
  Costs of revenues:
  Cost of software license fees
  573,000
  585,000
  1,290,000
  1,168,000
  Cost of subscriptions
  225,000
  242,000
  433,000
  469,000
  Cost of services and maintenance
  3,599,000
  3,712,000
  7,153,000
  6,903,000
  Total cost of  revenues
  4,397,000
  4,539,000
  8,876,000
  8,540,000
  Gross profit
  1,559,000
  1,147,000
  3,081,000
  2,494,000
  Operating Expenses:
  Product development
  235,000
  267,000
  797,000
  394,000
  Sales and marketing
  807,000
  1,178,000
  1,734,000
  2,218,000
  General and administrative
  705,000
  717,000
  1,368,000
  1,557,000
  Total operating expenses
  1,747,000
  2,162,000
  3,899,000
  4,169,000
  Loss from operations
  (188,000
  )
  (1,015,000
  )
  (818,000
  )
  (1,675,000
  )
  Interest expense, net
  32,000
  21,000
  74,000
  46,000
  Loss before income taxes
  (220,000
  )
  (1,036,000
  )
  (892,000
  )
  (1,721,000
  )
  Income tax expense
  7,000
  12,000
  14,000
  24,000
  Net loss
  (227,000
  )
  (1,048,000
  )
  (906,000
  )
  (1,745,000
  )
  Preferred dividend
  125,000
  125,000
  250,000
  250,000
  Net loss available to common stockholders
  $
  (352,000
  )
  $
  (1,173,000
  )
  $
  (1,156,000
  )
  $
  (1,995,000
  )
  Basic and diluted loss per share available to common stockholders
  $
  (0.10
  )
  $
  (0.33
  )
  $
  (0.32
  )
  $
  (0.56
  )
  Weighted average shares outstanding used in computing basic and diluted loss per common share
  3,594,000
  3,587,000
  3,594,000
  3,587,000
  See accompanying notes to the unaudited consolidated financial statements.
  4
  ASTEA INTERNATIONAL INC
  . AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
  (Unaudited)
  Three Months Ended
  June 30,
  Six Months Ended
  June 30,
  2017
  2016
  2017
  2016
  Net loss
  $
  (227,000
  )
  $
  (1,048,000
  )
  $
  (906,000
  )
  $
  (1,745,000
  )
  Other comprehensive income (loss):
  Foreign currency translation adjustment
  (154,000
  )
  266,000
  (165,000
  )
  161,000
  Comprehensive loss
  $
  (381,000
  )
  $
  (782,000
  )
  $
  (1,071,000
  )
  $
  (1,584,000
  )
  See accompanying notes to the unaudited consolidated financial statements.
  5
  ASTEA INTERNATIONAL INC. AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
  (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, 2016
  $
  8,000
  $
  8,000
  $
  36,000
  $
  32,075,000
  $
  (692,000
  )
  $
  (35,437,000
  )
  $
  (208,000
  )
  $
  (4,210,000
  )
  Net loss
  —
  —
  —
  —
  —
  (906,000
  )
  —
  (906,000
  )
  Series A and B preferred
  dividends
  —
  —
  —
  (250,000
  )
  —
  —
  —
  (250,000
  )
  Stock-based compensation
  —
  —
  —
  63,000
  —
  —
  —
  63,000
  Other comprehensive income
  —
  —
  —
  —
  (165,000
  )
  —
  —
  (165,000
  )
  Balances at June 30, 2017
  $
  8,000
  $
  8,000
  $
  36,000
  $
  31,888,000
  $
  (857,000
  )
  $
  (36,343,000
  )
  $
  (208,000
  )
  $
  (5,468,000
  )
  See accompanying notes to the unaudited consolidated financial statements.
  6
  ASTEA INTERNATIONAL INC
  . AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF CASH FLOWS
  (Unaudited)
  Six Months Ended
  June 30,
  2017
  2016
  Cash flows from operating activities:
  Net loss
  $
  (906,000
  )
  $
  (1,745,000
  )
  Adjustments to reconcile net loss to net cash
  provided by operating activities:
  Depreciation and amortization
  1,288,000
  1,177,000
  Amortization of deferred financing costs
  23,000
  12,000
  Stock-based compensation
  63,000
  66,000
  Deferred income tax
  -
  12,000
  Changes in operating assets and liabilities:
  Receivables
  194,000
  1,137,000
  Prepaid expenses and other
  (23,000
  )
  (85,000
  )
  Other assets
  (10,000
  )
  (45,000
  )
  Accounts payable and accrued expenses
  366,000
  70,000
  Deferred revenues
  1,057,000
  763,000
  Net cash  provided by operating activities
  2,052,000
  1,362,000
  Cash flows from investing activities:
  Purchases of property and equipment
  -
  (32,000
  )
  Capitalized software development costs
  (1,246,000
  )
  (1,592,000
  )
  Net cash used in investing activities
  (1,246,000
  )
  (1,624,000
  )
  Cash flows from financing activities:
  Dividend payments on preferred stock
  (250,000
  )
  (220,000
  )
  Proceeds on line of credit CEO/Director
  450,000
  -
  Payment on line of credit from Silicon Valley Bank
  (5,434,000
  )
  (48,000
  )
  Proceeds on line of credit from Silicon Valley Bank
  5,062,000
  200,000
  Net cash (used in) provided by financing activities
  (172,000
  )
  (68,000
  )
  Effect of exchange rate changes on cash
  (14,000
  )
  20,000
  Net increase (decrease) increase in cash, cash equivalents and restricted cash
  620,000
  (310,000
  )
  Cash, cash equivalents and restricted cash, beginning of period
  730,000
  1,791,000
  Cash, cash equivalents and restricted cash, end of period
  $
  1,350,000
  $
  1,481,000
  Supplemental disclosure of cash flows information:
  Cash paid for interest
  $
  51,000
  $
  34,000
  Supplemental disclosure of non-cash flows information:
  Accrued dividends
  $
  250,000
  $
  110,000
  See accompanying notes to the unaudited consolidated financial statements.
  7
  Item 1.
  FINANCIAL STATEMENTS (Continued)
  ASTEA INTERNATIONAL INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  (Unaudited)
  1.
  BASIS OF PRESENTATION
  The consolidated financial statements at June 30, 2017 and for the three and six month periods ended June 30, 2017 and 2016 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 March 31, 2016, June 30, 2016, September 30, 2016 and March 31, 2017. The interim financial information presented is not necessarily indicative of results expected for the entire year ending December 31, 2017.
  Cash, cash equivalents and restricted cash
  In November 2016, the Financial Accounting Standards Board issued guidance to reduce diversity in practice that exists in the classification and presentation of changes in restricted cash on the statement of cash flows. The guidance requires that amounts generally described as restricted cash and restricted cash equivalents be included in with cash and cash equivalents when reconciling the beginning of period and end of period total amounts shown on the statement of cash flows. The Company early adopted this guidance as of January 1, 2017, on a retrospective basis, and all periods are presented under this guidance. The adoption of this new guidance resulted in the inclusion of $73,000 and $69,000, respectively in June 30, 2017 and December 31, 2016 in restricted cash in the cash and cash equivalents balance in its consolidated statements of cash flows.
  The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheet that sum to the total of the same such amounts shown on the consolidated cash flows:
  June 30,
  2017
  December 31, 2016
  Cash and cash equivalents
  $
  1,277,000
  $
  661,000
  Restricted cash
  73,000
  69,000
  Total cash, cash equivalents, and
  restricted cash reported on the
  consolidated cash flows
  $
  1,350,000
  $
  730,000
  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 lease expires.
  Operating Matters and Liquidity
  The Company has a history of net losses and an accumulated deficit of $36,343,000 as of June 30, 2017.  In the first six months of 2017, the Company generated a net loss of $906,000 compared to a net loss of $1,745,000 generated in the first six months of 2016.  Further, at June 30, 2017, the Company had a working capital ratio of 0.45:1, with cash and cash equivalents of $1,277,000 compared to December 31, 2016 when the Company had cash and cash equivalents of $661,000.  The increase in cash and cash equivalents for the first six months of 2017 was primarily driven by increases in cash provided by operations offset by cash used for the Company's capitalized software development costs. The increase in cash provided by operating activities was primarily due to a decrease in the net loss as well as increased collections of accounts receivable and an increase in deferred revenues.
  8
  As of June 30, 2017 the Company owed $1,555,000 against the line of credit from Silicon Valley Bank ("SVB").   The availability under the SVB line of credit is tied to a borrowing base formula that is based on 80% of the Company's eligible domestic accounts receivable. As of June 30, 2017, the availability under the line of credit was $445,000.  In April 2017,
  the Company extended its Revolving Loan Agreement and associated Revolving Promissory Note with its Chief Executive Officer/Director.  The loan provides an unsecured $1,000,000 revolving line of credit to the Company.    The proceeds of the borrowings, if needed, will be used by the Company for operating activities. If an extension of the line of credit is appropriate and agreed to by the Chief Executive Officer/Director, we will then obtain the necessary approvals from
  Western Alliance Bank ("WAB")
  .
  The SVB line of credit was to expire in April 2018.  In August 2017, the Company obtained a new line of credit and term loan from
  WAB and repaid its outstanding borrowings with SVB. The term of the WAB line of credit and term loan extend through August 2019.
  The Company has projected revenues that management believes will provide sufficient funds along with available borrowings under its lines of credit to sustain its continuing operations through at least September 30, 2018.
  The Company was in compliance with the financial covenants for the line of credit with SVB as of June 30, 2017.   In the event the Company does not meet its financial covenants in the future under the WAB financing and WAB does not extend a waiver or forbearance agreement, and the Company does not believe that it has adequate liquidity to operate, the Company will implement additional cost adjustments, as necessary, that will reduce its expenditures to the appropriate level that matches its operating cash flows.
  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 reflects a reduction in operating expenses which occurred at the end of the first quarter of 2017 in order to align its expenditures with its expected revenues.  The primary area of cost reduction, which occurred at the end of the first quarter of 2017, was to reduce company headcount by eliminating non-revenue generating personnel throughout the Company.  The Company remains focused on maximizing revenue from its revenue generating resources, including repurposing certain personnel to become revenue generators to help the Company improve its liquidity.  The Company has a substantial professional services backlog that resulted from the acquisition of new customers in the second half of 2016 as well as upgrade projects for existing customers as they move to the latest version of Alliance.  Management also initiated cost containment programs in other areas including the elimination or reduction of non-essential marketing activities, space reduction in areas in which the Company has excess office capacity, focusing marketing activities only on those programs that directly drive new business and eliminating contractors who are not essential to growth.  In addition, we do not expect to spend a significant amount on capital expenditures.  Overall, we have already implemented steps to reduce total operating expenses without impairing our ability to grow the business by obtaining new customers and increasing sales to existing customers.
  We expect our revenues and cost reductions to
  generate sufficient cash from operations.
  As noted above, if the Company's actual results fall short of expectations, the Company will make further cost adjustments to improve the Company's operating cash flows.
  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.
  9
  2.
  NEW ACCOUNTING PRONOUNCEMENTS
  In May 2014, as part of its ongoing efforts to assist in the convergence of U.S. GAAP and International Financial Reporting Standards, the Financial Accounting Standards Board (FASB) issued a new standard related to revenue recognition. Under the new standard, recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to receive in exchange for those goods or services. The standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.
  Additionally, under the new guidance, expenses incurred, will be deferred as an asset and will be amortized
  over the period that services or goods are transferred to the customer.
  Hence, the new guidance will result in the Company recognizing deferred costs (asset) on our consolidated balance sheet.
  The new standard will be effective for the Company beginning January 1, 2018
  at which point we plan to adopt the standard using the "modified retrospective method." Under that method, we will apply the rules to all contracts existing as of January 1, 2018, recognizing in beginning retained earnings an adjustment for the cumulative effect of the change and providing additional disclosures comparing results to previous accounting standards.
  We believe our notes to the consolidated financial statements related to revenue recognition will be expanded and are still assessing the quantitative impact to our consolidated financial statements. Also, we are in process of implementing changes to our accounting system, accounting policies, business processes, license contract management processes, systems and financial controls to support the new accounting and disclosure requirements. Once our evaluation is complete, we will disclose the quantitative impact of adopting the updated guidance.
  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 is effective for reporting periods beginning after December 15, 2018 and early adoption is permitted. The guidance must be adopted on a modified retrospective basis and provides for certain practical expedients. The Company expects to adopt this guidance in the first quarter of 2019 and we currently expect that the adoption of this guidance will likely change the way we account for our operating leases and will likely result in recording the future benefits of those leases as an asset and the related minimum lease payments as a liability on our consolidated balance sheets. The Company has not yet begun to quantify the specific impacts of this guidance.
  3.
  CONCENTRATION OF CREDIT RISK
  Financial instruments, which potentially subject the Company to credit risk, consist of 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.
  LINES OF CREDIT
  Line of Credit Silicon Valley Bank
  The Loan Agreement with Silicon Valley Bank ("SVB") as amended on January 14, 2016, established a revolving credit facility for the Company in the principal amount of up to $2,000,000 (the "Revolving Facility").  Availability under the Revolving Facility was tied to a borrowing base formula that is based on 80% of the Company's eligible domestic accounts receivable.  Advances under the Revolving Facility (the "Advances") could have been repaid and reborrowed in accordance with the Loan Agreement.  Pursuant to the Loan Agreement, the Company agreed to pay to SVB the outstanding principal amount of all Advances, the unpaid interest thereon, and all other obligations incurred with respect to the Loan Agreement in April 2018. The Company terminated the Loan Agreement in August 2017. Interest was payable monthly on the unpaid principal balance of the Advances at a floating per annum rate equal to the greater of: (i) 2.25% above the prime rate (which may be reduced to 2.00% above the prime rate for every month in which the Company maintains an "adjusted quick ratio" of at least 1.50:1) or (ii) 5.25%; provided, that the minimum interest amount due per month shall not be less than $2,000.
  The Revolving Facility was 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 Agreement contained a negative covenant prohibiting the Company from granting a security interest in their intellectual property to any party.
  10
  As of June 30, 2017 and December 31, 2016, the Company owed $1,555,000 and $1,927,000, respectively, under the Revolving Facility.  The Company incurred $72,000 and $46,000 of interest expense to SVB for the six months ended June 30, 2017 and 2016, respectively.  As of June 30, 2017, the availability under the line of credit was $445,000. The Company was in compliance with the covenants of the Loan Agreement as of June 30, 2017.  The Revolving Facility was repaid in August 2017 with the proceeds of a new financing agreement (See Note 9).
  Line of Credit
  Chief Executive Officer/Director
  In April 2017,
  the Company extended its Revolving Loan Agreement and associated Revolving Promissory Note with its Chief Executive Officer/Director.  This loan agreement provides an unsecured $1,000,000 revolving line of credit to the Company.  Amounts outstanding under the line of credit will bear interest at a rate of 7% per annum, payable monthly.  The maturity date of the line of credit is May 1, 2018. The Company may pay all amounts outstanding and terminate the agreement prior to that time with no penalties.  The loan agreement contains customary covenants, default provisions and other provisions.  The loan agreement was negotiated by the Audit Committee of the Company's Board of Directors, and borrowings under the Line of Credit will be subject to the Audit Committee's approval.  The proceeds of the borrowings, if needed, will be used by the Company for working capital and other general corporate purposes. If an extension of the line of credit is appropriate and agreed to by the Chief Executive Officer/Director, we will then obtain the necessary approvals from WAB.
  As of June 30, 2017 the Company owed $450,000 against the line of credit with its Chief Executive Officer/Director. The Company incurred $2,000 of interest expense to its Chief Executive Officer/Director for the six months ended June 30, 2017. The Company was in compliance with the covenants of the loan agreement as of June 30, 2017.
  5.
  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 2013 through 2016, 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, results of operations or cash flows.
  The Company's policy for recording interest and penalties associated with uncertain tax positions is to record such items as a component of income before income taxes.  Penalties are recorded in general and administrative expenses and interest paid or received is recorded in interest expense or interest income, respectively, in the statement of operations.  For the first three months of 2017 and 2016, there was no interest or penalties related to uncertain tax positions.
  At June 30, 2017, the Company maintained a 100% valuation allowance for its remaining deferred tax assets, based on the uncertainty of the realization of the deferred tax assets due to the uncertainty of future taxable income.
  6.
  EQUITY PLANS
  Share-Based Awards
  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.
  Under the Company's stock option plans, options awards generally vest over a four-year period of continuous service and have a 10-year contractual term.
  As of June 30, 2017, the total unrecognized compensation cost related to non-vested options amounted to $200,000, which is expected to be recognized over the options' average remaining vesting period of 2.64years.
  11
  Activity under the Company's stock option plans for the six months ended June 30, 2017 is as follows:
  OPTIONS OUTSTANDING
  Shares
  Weighted Average Exercise Price Per Share
  Balance, December 31, 2016
  710,000
  $
  2.73
  Granted
  125,000
  1.81
  Forfeited
  (99,000
  )
  3.23
  Balance, June 30, 2017
  736,000
  $
  2.51
  The following table summarizes outstanding options under the Company's stock option plans as of June 30, 2017:
  Number
  of Shares
  Weighted
  Average
  Exercise Price
  Per Share
  Weighted Average Remaining Contractual Term (in years)
  Aggregate
  Intrinsic
  Value
  Outstanding Options
  736,000
  $
  2.51
  5.96
  $
  189,000
  Ending Vested and Exercisable
  456,000
  $
  2.93
  4.24
  $
  92,000
  Options Vested and Expected to Vest
  651,000
  $
  2.60
  5.56
  $
  148,000
  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 June 30, 2017, there were accrued dividends of $150,000.
  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. 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 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.
  12
  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 will pay a quarterly dividend, which will accrue 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 Convertible 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 June 30, 2017, there were accrued dividends of $100,000.
  The Company reports the Series B Preferred Stock on the Company's consolidated balance sheet within stockholders' deficit.
  7.
  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 loss per share, shares outstanding are adjusted to assume conversion of the Company's non-interest bearing convertible preferred 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 a net loss allocable to common stockholders for the six months ended June 30, 2017 and 2016.  Loss per share is computed as follows:
  Three Months Ended
  June 30,
  Six Months Ended
  June 30,
  2017
  2016
  2017
  2016
  Numerator:
  Net loss available to common
  shareholders
  $
  (352,000
  )
  $
  (1,173,000
  )
  $
  (1,156,000
  )
  $
  (1,995,000
  )
  Denominator:
  Weighted average shares used to
  compute net loss available
  to common shareholders per
  common share basic and dilutive
  3,594,000
  3,587,000
  3,594,000
  3,587,000
  Basic and dilutive net loss per share to
  common shareholder
  $
  (0.10
  )
  $
  (0.33
  )
  $
  (0.32
  )
  $
  (0.56
  )
  All options outstanding to purchase shares of common stock and shares of common stock issued on the conversion of the eligible preferred stock were excluded from the diluted loss per common share calculation for the three and six month periods ended June 30, 2017 and 2016, as the inclusion of these options and preferred stock would have been antidilutive.
  13
  8.
  GEOGRAPHIC SEGMENT 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 reporting segments as follows:
  Three Months
  Ended June 30,
  Six Months
  Ended June 30,
  2017
  2016
  2017
  2016
  Revenues
  Software license fees
  United States
  $
  301,000
  $
  96,000
  $
  412,000
  $
  581,000
  Europe
  47,000
  147,000
  47,000
  500,000
  Asia Pacific
  54,000
  5,000
  186,000
  11,000
  Total foreign software license fees revenue
  101,000
  152,000
  233,000
  511,000
  Total software license fees
  402,000
  248,000
  645,000
  1,092,000
  Subscriptions
  United States
  268,000
  675,000
  754,000
  856,000
  Europe
  165,000
  317,000
  333,000
  582,000
  Asia Pacific
  71,000
  74,000
  184,000
  130,000
  Total foreign subscriptions
  236,000
  391,000
  517,000
  712,000
  Total subscription revenue
  504,000
  1,066,000
  1,271,000
  1,568,000
  Services and maintenance
  United States
  2,792,000
  2,704,000
  5,614,000
  5,191,000
  Europe
  949,000
  874,000
  2,019,000
  1,591,000
  Asia Pacific
  1,309,000
  794,000
  2,408,000
  1,592,000
  Total foreign services and
  maintenance revenue
  2,258,000
  1,668,000
  4,427,000
  3,183,000
  Total services and maintenance revenue
  5,050,000
  4,372,000
  10,041,000
  8,374,000
  Total revenue
  $
  5,956,000
  $
  5,686,000
  $
  11,957,000
  $
  11,034,000
  Net  income (loss)
  United States
  $
  (244,000
  )
  $
  (664,000
  )
  $
  (945,000
  )
  $
  (1,362,000
  )
  Europe
  136,000
  )
  (302,000
  )
  182,000
  (257,000
  )
  Asia Pacific
  (119,000
  )
  (82,000
  )
  (143,000
  )
  (126,000
  )
  Net loss
  $
  (227,000
  )
  $
  (1,048,000
  )
  $
  (906,000
  )
  $
  (1,745,000
  )
  9.
  SUBSEQUENT EVENT
  On August 11, 2017,
  the Company entered in to a Business Financing Agreement (the "Financing Agreement") with Bridge Bank, a division of Western Alliance Bank, which includes a revolving line of credit and term loan. The agreement will mature in August 2019.
  14
  The Financing Agreement with Bridge Bank, 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 agreed to pay to Bridge Bank the outstanding principal amount of all Advances, the unpaid interest thereon, and all other obligations incurred with respect to the Loan Agreement in August 2019.  Interest will be accrued and paid monthly at the Wall Street Journal Prime Rate plus 1.5%.
  The Term Loan provides $400,000 to the Company.  For the first six months of the Term Loan, the Company will pay interest only.  For the next 18 months, the Term Loan will be amortized into monthly payments of principal and interest.  The interest rate on the Term Loan will be the Wall Street Journal Prime Rate plus 1.75%.
  At the closing of the Financing Agreement, the Company repaid all outstanding amounts owed to SVB under the Revolving Facility and terminated the Revolving Facility.
  Subject to certain exceptions, the 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.  Further, the Company must maintain minimum liquidity of $750,000, tested monthly, consisting of a combination of Unrestricted cash at Bridge Bank plus available U.S. accounts receivable.  In addition, actual operating performance for the trailing 6-month period must be at least 75% of Projected GAAP EBITDA, as tested quarterly.
  The 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 Financing Agreement contains a negative covenant prohibiting the Company from granting a security interest in their intellectual property to any party.
  15
  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, 2016.
  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 2016 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 Recognition
  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.
  16
  The Company recognizes revenue from license sales when all of the following criteria are met: persuasive evidence of an arrangement exists, delivery has occurred, the license fee is fixed and determinable and the collection of the fee is probable.  The Company utilizes written contracts as a means to establish the terms and conditions by which our products, services and maintenance support are sold to our customers.  Delivery is considered to have occurred when title and risk of loss have been transferred to the customer, which generally occurs after a license key has been delivered electronically to the customer.  Revenue for arrangements with extended payment terms in excess of one year is recognized when the payments become due, provided all other recognition criteria are satisfied.  If collectability is not considered probable, revenue is recognized when the fee is collected.  Our typical end user license agreements do not contain acceptance clauses.  However, if acceptance criteria are required, revenues are deferred until customer acceptance has occurred.
  If these criteria are not met, then revenue is deferred until such criteria are met or until the period(s) over which the last undelivered element is delivered. If there is objective and reliable evidence of fair value for all units of accounting in an arrangement, the arrangement consideration is allocated to the separate units of accounting based on each unit's relative fair value. There may be cases, however, in which there is objective and reliable evidence of fair value of the undelivered item(s) but no such evidence for the delivered item(s). In those cases, the residual method is used to allocate the arrangement consideration. Under the residual method, the amount of consideration allocated to the delivered item(s) equals the total arrangement consideration less the aggregate fair value of the undelivered item(s). We apply the revenue recognition policies discussed below to each separate unit of accounting.
  Astea allocates revenue to each element in a multiple-element arrangement based on the elements' respective fair value, determined by the price charged when the element is sold separately.  Specifically, Astea determines the fair value of the maintenance portion of the arrangement based on the price, at the date of sale, if sold separately, which is generally a fixed percentage of the software license selling price.  The professional services portion of the arrangement is based on hourly rates which the Company charges for those services when sold separately from software.  If evidence of fair value of all undelivered elements exists, but evidence does not exist for one or more delivered elements, then revenue is recognized using the residual method.  If an undelivered element for which evidence of fair value does not exist, all revenue in an arrangement is deferred until the undelivered element is delivered or fair value can be determined.  Under the residual method, the fair value of the undelivered elements is deferred and the remaining portion of the arrangement fee is recognized as revenue.  The proportion of the revenue recognized upon delivery can vary from quarter-to-quarter depending upon the determination of vendor-specific objective evidence (VSOE) of fair value of undelivered elements.  The residual value, after allocation of the fee to the undelivered elements based on VSOE of fair value, is then allocated to the perpetual software license for the software products being sold.
  When appropriate, the Company may allocate a portion of its software revenue to post-contract support activities or to other services or products provided to the customer free of charge or at non-standard rates when provided in conjunction with the licensing arrangement.  Amounts allocated are based upon standard prices charged for those services or products which, in the Company's opinion, approximate fair value.  Software license fees for resellers or other members of the indirect sales channel are based on a fixed percentage of the Company's standard prices.  The Company recognizes software license revenue for such contracts based upon the terms and conditions provided by the reseller to its customer. The Company regularly communicates with its resellers and recognizes revenue based on information from its resellers regarding possible returns and collectability. However, the Company does not have a history of returns from the resellers.
  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 service period.  A SaaS contract is generally 1 to 3 years in duration. In accordance with generally accepted accounting principles, the Company may not recognize any SaaS revenue before the customer goes live, to ensure that the revenue will match the use of services. The implementation period is typically between 8 and 10 months. When upfront implementation, consulting and training services are bundled with the subscription based arrangement, these services are recognized over the life of the initial contract, once the project goes live.
  The post-contract support on perpetual licenses provides for technical support and unspecified updates to the Company's software products.  Post-contract support is charged separately for renewals of annual maintenance in subsequent years.
  Fair value for maintenance is based upon either renewal rates stated in the contracts or separate sales of renewals to customers. Revenue is recognized ratably, or monthly, over the term of the maintenance period, which is typically one year.
  17
  Consulting and training service revenue are generally unbundled and, therefore, recognized at the time the services are performed except when these services are bundled with subscription revenues.  If the Company has any fixed-price arrangements for services, the revenue is recognized using the proportional performance method based on direct labor hours incurred to date as a percentage of total estimated direct labor hours required to complete the project.  Fees from licenses sold together with consulting services are generally recognized upon shipment, provided that the contract has been executed, delivery of the software has occurred, fees are fixed and determinable and collection is probable.
  The Company offers a variety of consulting services that include project management, implementation, data conversion, integration, custom report writing and training. Our professional services are generally billed on a time and materials basis using hourly rates together with reimbursement for travel and accommodation expenses. We recognize revenue as these professional services are performed. On rare occasions these consulting service arrangements involve acceptance criteria. In such cases, revenue is recognized upon acceptance.
  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;
  ·
  the allocation of proceeds 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;
  ·
  establishing company-specific fair values of elements in multiple-element arrangements requires adjustments from time-to-time to reflect recent prices charged when each element is sold separately; and
  ·
  the determination of the stage of completion for certain consulting arrangements is complex.
  Changes in the aforementioned items could have a material effect on the type and timing of revenue recognized.
  For the six months ended June 30, 2017 and 2016, the Company recognized $11,957,000 and $11,034,000, respectively, of revenue related to software license fees, subscription revenue, and services and maintenance.
  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 consolidated balance sheets until such amounts are remitted to the taxing authority.
  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 June 30, 2017, management believes that no revisions to the remaining useful lives or write-downs of capitalized software development costs are required.
  18
  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 consolidated statements of changes in stockholders' deficit.  Foreign exchange transaction gains and losses are included in general and administrative expenses in the consolidated statements of operations. General and administrative expenses include an exchange transaction loss of $19,000 for the six months ended June 30, 2017 and a $51,000 gain for the six months ended June 30, 2016.
  Results of Operations
  Comparison of Three Months Ended June 30, 2017 and 2016
  Revenues
  Total revenues increased by $270,000 or 5%, to $5,956,000 for the three months ended June 30, 2017 from $5,686,000 for the three months ended June 30, 2016.  Software license fee revenues increased $154,000, or 62%, from the same quarter in 2016.  Subscription revenues decreased $562,000 or 53% to $504,000 from $1,066,000 from the same period last year. Services and maintenance revenue for the three months ended June 30, 2017 increased $678,000 or 16% from the same quarter in 2016.
  Software license fee revenue increased 62% to $402,000 in the second quarter of 2017 from $248,000 in the second quarter of 2016. The increase was primarily due to sales of FieldCentrix licenses to existing customers. Expected sales of Astea Alliance licenses which had been expected to close in the second quarter of 2017, have slipped into the third quarter of 2017.
  Subscription revenue decreased 53% to $504,000 in the second quarter of 2017 from $1,066,000 in the second quarter of 2016.  The primary reason for the decrease resulted from a hosted customer who went live in the second quarter of 2016 for which the annual hosting revenue had been deferred since 2014. This customer had an extended implementation period due to certain functionality requirements of the customer that lengthened the time necessary for this customer to go-live. Previously deferred hosting revenues were recognized as the service periods for those hosting services had lapsed. This implementation was more complex than most, as typical customers generally go live in 8 to 10 months. Included in subscription revenue for the second quarter of 2016 was $400,000 which was accumulated from periods prior to going live.  The Company continues to sell Software as a Service (SaaS) for which hosting revenue may not be recognized until the customers go-live.
  Services and maintenance revenues increased by 15% to $5,050,000 in the second quarter of 2017 compared to $4,372,000 in the second quarter of 2016.  Astea Alliance service and maintenance revenues increased by $706,000 or 19% compared to the second quarter of 2016.  The increase was mainly attributable to a strong backlog of professional services required by new customer implementations and upgrades of current customers in all regions.
  Service and maintenance revenues generated by FieldCentrix decreased by $29,000 or 5% to $544,000 in the second quarter of 2017 compared to $573,000 during the same period in 2016.  T
  he decrease is due to a reduction in maintenance revenue compared to the second quarter in 2016.
  Costs of Revenues
  Cost of software license fees decreased 2% to $573,000 in the second quarter of 2017 from $585,000 in the second quarter of 2016.  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 $566,000 for the quarter ended June 30, 2017 compared to $565,000 for the same quarter in 2016. The gross margin percentage on software license sales was (43%) in the second quarter of 2017 compared to (136%) in the second quarter of 2016.  The improvement in the license margin resulted primarily from the increase in software license fees revenue in the second quarter of 2017.
  Cost of subscriptions decreased 7% to $225,000 in the second quarter of 2017 from $242,000 in the second quarter of 2016. The decrease in cost of subscriptions is mainly attributed to cost savings of hosting fees eliminated after the cancelation of a significant customer in the last quarter of 2016, partially offset by increased
  costs from a growing base of hosted customers
  .  The gross margin percentage on hosting was 55% in the second quarter of 2017 compared to 77% in the second quarter of 2016. The decline in the gross margin is mainly due to the decrease in subscription revenue.
  Cost of services and maintenance decreased 3% to $3,599,000 in the second quarter of 2017 from $3,712,000 in the second quarter of 2016. The decrease in cost of service and maintenance is mainly attributed to decreased headcount in the U.S.  The gross margin percentage was 29% in the second quarter of 2017 compared to 15% in the second quarter of 2016.  The increase in services and maintenance gross margin was primarily due to the decreased service and maintenance costs in U.S and by an increase in service revenue in Japan.
  19
  Gross Profit
  Gross profit increased 36% to $1,559,000 in the second quarter of 2017 from $1,147,000 in the second quarter of 2016 primarily due to an increase in software license and service and maintenance revenues and a decrease in all cost of revenues partially offset by a 53% decrease in in subscription revenue.
  As a percentage of revenue, gross profit in the second quarter of 2017 was 26% compared to 20% in the second quarter of 2016.
  Operating Expenses
  Product Development
  Product development expenses decreased 12% to $235,000 in the second quarter of 2017 from $267,000 in the second quarter of 2016.
  Fluctuations in product development expense from period to period result from the amount of product development expense that is capitalized.  Development costs of $638,000 were capitalized in the second quarter of 2017 compared to $760,000 during the same period in 2016.  Gross product development expense was $873,000 in the quarter ended June 30, 2017 which is 15% lower than $1,027,000 during the same quarter in 2016.
  The decrease was primarily due to lower headcount.  Most of the Company's development occurs in Israel.
  Product development expense as a percentage of revenues was 4% in the second quarters of 2017 and 5% in the second quarter of 2016.
  Sales and Marketing
  Sales and marketing expense decreased 32% to $807,000 in the second quarter of 2017 from $1,178,000 in the second quarter of 2016.  The decrease in sales and marketing expense resulted from reduced headcount in both sales and marketing, and lower commissions partially offset by an increase in marketing cost for the Astea user's conference held by the Company in June 2017. The Company
  continues to focus on expanding its market presence in all regions by expanding awareness of the Company's products, which occurs through the use of Webinars focused in the vertical industries in which the Company operates, attendance at selected trade shows, and increased efforts in lead generation for its sales force.
  As a percentage of revenues, sales and marketing expense was 14% in the second quarter of 2017 compared to 21% in the same period of 2016. The decrease is sales and marketing expense as a percentage of revenue is due to less headcount in both sales and marketing.
  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 decreased 2% to $705,000 during the second quarter of 2017 from $717,000 in the second quarter of 2016. The decrease is due to lower executive management costs and lower travel costs partially offset by foreign currency losses resulting from a weakening U.S. dollar compared to the other regions where the Company operates.  As a percentage of revenue, general and administrative expenses were 12% in the second quarter of 2017 compared to 13% in the second quarter of 2016.
  Net Interest Expense
  Net interest expense was $32,000 in the second quarter of 2017 compared to $21,000 in the second quarter of 2016.  The increase in interest expense resulted from borrowing larger amounts against its line of credit with SVB Bank and the CEO/Director than the same period in 2016. In addition, the prime rate charged by SVB to the Company increased.
  Income Tax Expense
  The Company reported a provision for income tax of $7,000 for the second quarter of 2017 compared to $12,000 during the second quarter of 2016.  The tax expense results from a tax provision in Israel.
  20
  International Operations
  The Company's international operations generated revenues of $2,595,000 in the second quarter of 2017, an increase of 17% over the same quarter in 2016.  Revenues from international operations comprised 44% of the Company's total revenue for the second quarter in 2017, compared to 39% of total revenues for the same quarter in 2016.  The increase in international revenues compared to the same period in 2016 is primarily due to increases in Japan partially offset by a decline in license and subscription revenues in Europe.
  Comparison of Six Months Ended June 30, 2017 and 2016
  Revenues
  Total revenues increased $923,000, or 8%, to $11,957,000 for the six months ended June 30, 2017 from $11,034,000 for the six months ended June 30, 2016.  Software license revenues decreased 41% from the same period last year.  Subscription revenue decreased 19% from the same period last year and service and maintenance revenues for the six months ended June 30, 2017 amounted to $10,041,000, a 20% increase from the same period in 2016.
  Software license fees revenue decreased 41% to $645,000 in the first six months of 2017 from $1,092,000 in the first six months of 2016.  Astea Alliance license revenues decreased $605,000 to $432,000 or 58% in the first six months of 2017 from $1,037,000 in the first six months of 2016. The decrease resulted from a decline in Astea license sales in the U.S. and Europe partially offset by increase in license sales in Japan.
  A number of sales that had been expected to close in the first six months of 2017 slipped into the second half of 2017. FieldCentrix license revenue increased $158,000 to 213,000 in the first six months of 2017 from $55,000 in the first six months of 2016.  FieldCentrix sales consisted of additional user licenses sold to existing customers in the first half of 2017.
  Subscription revenue decreased 19% to $1,271,000 in the first six months of 2017 from $1,568,000 in the first six months of 2016.
  Subscription revenue was much greater in 2016 because one customer, who went live during this period in 2016, had an unusually long implementation period, which caused many months of hosting revenue to be recognized in the period they went live on Astea Alliance. Because of the extended implementation period for this customer, future hosting revenue from this customer will not be of the same magnitude it was during the six-month period in 2016.  Included in subscription revenue for the six months of 2016 was $295,000 which was accumulated from periods prior to going live.  The decrease in subscription revenue was partially offset by completion of the implementation process for certain customers which allowed them to go live on the SaaS solution in the first six months of 2017. Revenue for subscription services may not be recognized until the customers go-live. The implementation period is typically between 8 to 10 months.
  Services and maintenance revenues increased 20% to $10,041,000 in the first six months of 2017 from $8,374,000 in the first six months of 2016. Astea Alliance service and maintenance revenues were $8,979,000 for the first six months of 2017, an increase of 24% from $7,217,000 in Alliance service and maintenance revenue for the six months ended June 30, 2016.
  The increase was mainly attributable to an increase in services in all regions of the Company. Japan service revenue increased significantly due to all the new license deals signed over the past 12 months. In addition, a
  UK hosting customer went live in the first six months of 2017 and the U.S. and APAC regions had several customers which went live in the last quarter of 2016, which also added to the increase.  Once a hosted customer goes live, we start to recognize deferred implementation fees over the remaining life of the contract.  In addition, increases in services revenue and a slight increase in maintenance revenue from license sales that closed in the last quarter of 2016 also contributed to the increase.
  Service and maintenance revenues generated by FieldCentrix decreased by $94,000 or 8% to $1,062,000 in the first six months of 2017 compared to $1,156,000 during the same period in 2016.  T
  he decrease is due to a reduction in upgrade projects, customers transitioning to Alliance and the loss of some customers compared to the first six months in 2016.
  Costs of Revenues
  Cost of software license fees increased 10% to $1,290,000 in the first six months of 2017 from $1,168,000 in the first six months of 2016.
  Included in the cost of software license fees are the costs of capitalized software amortization and all third party software embedded in the Company's software licenses which are sold to customers.
  Amortization of capitalized software development costs was $1,271,000 for the six months ended June 30, 2017, an increase of 13% compared to the same period in 2016.
  The increase resulted primarily from amortization of Version 14 after its release in October 2016 partially offset by Version 11.5 being fully amortized as of June 30, 2016 and Version 12 being fully amortized by February 2017.
  The gross margin percentage on software licenses was (100%) in the first six months of 2017 compared to (7%) in the first six months of 2016. The decrease in gross margin is a reflection of the decreased license revenue in 2017.
  Cost of subscriptions decreased 8% to $433,000 in the first six months of 2017 from $469,000 in the first six months of 2016. The decrease in cost of subscriptions is mainly attributed to reduced hosting fees from a customer who cancelled their agreement in the fourth quarter of 2016, offset by an increase in
  costs from adding new customers
  .  The gross margin percentage was 66% in the first six months of 2017 compared to 70% in the first six months of 2016. The slight decline was due to the reduced revenue from a large customer who canceled their hosting contract in the last quarter of 2016 which lowered revenue, partially offset by the hosting cost savings.
  21
  Cost of services and maintenance increased 4% to $7,153,000 in the first six months of 2017 from $6,903,000 in the first six months of 2016.
  The increase in cost of service and maintenance is attributed primarily to increases in contracted headcount who provided consulting services in Japan, and increased travel expenses in all regions offset partially offset by headcount reductions in the U.S.
  The services and maintenance gross margin percentage was 29% in 2017 and 18% in 2016. The improvement in the gross margin is due to the increase in service revenue in Japan and headcount reductions in the U.S.  partially offset by increase in headcount in Japan and travel expenses in all regions.
  Gross Profit
  Gross profit increased 24% to $3,081,000 in the first six months of 2017 from $2,494,000 in the first six months of 2016.  As a percentage of revenue, gross profit was 26% in the first six months of 2017 compared to 23% in the first six months of 2016.  The year-over-year increase in gross profit was largely driven by the increase in service and maintenance revenue as well as a slight decrease in cost of subscriptions. Partially offsetting these components was a decrease in license and subscription revenues, and increases in cost of software license fees and cost of services and maintenance.
  Operating Expenses
  Product Development
  Product development expense increased 102% to $797,000 in the first six months of 2017 from $394,000 in the first six months of 2016.  Fluctuations in product development expense from period to period can vary due to the amount of development expense which is capitalized.  Software development costs of $1,246,000 were capitalized in the first six months of 2017 compared to $1,592,000 during the same period in 2016, a decrease of $346,000.  Gross development expense was $2,043,000 during the first six months of 2017, an increase of 3%, compared to $1,986,000 for the same period in 2016.  The increase was primarily due to additional outside consulting services which was partially offset by lower headcount in the first six months of 2017. Product development expense as a percentage of revenues was 7% in first six months of 2017 compared to 4% during the same period in 2016.
  Sales and Marketing
  Sales and marketing expense decreased 22% to $1,734,000 in the first six months of 2017 from $2,218,000 in the first six months of 2016.
  The decrease in sales and marketing expense is attributable to decreases in sales and marketing headcount and commissions related to the decline in license deals partially offset by an increase in
  marketing costs related to the ACE Conference held by the Company in June 2017.
  The Company continues to focus on expanding its market presence through intensified marketing efforts to increase awareness of the Company's products, including its newest product, SaaS and its subscription services.  This occurs through the use of Webinars focused in the vertical industries in which the Company operates, attendance at selected trade shows, and increased efforts in lead generation for its sales force.
  As a percentage of revenues, sales and marketing expenses was 15% in the first six months of 2017 compared with 20% in the first six months of 2016. The decrease in costs relative to revenues is due to higher revenues in the first six months of 2017.
  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, foreign currency exchange, bad debt expense and various costs associated with the Company's status as a public company. General and administrative expenses decreased 12% to $1,368,000 in the first six months of 2017 from $1,557,000 in the first six months of 2016.  The decrease was mainly driven by less executive management cost and lower travel expenses.    As a percentage of revenues, general and administrative expenses were 11% for the six months ended June 30, 2017 and 14% in the first six months of 2016. The decrease in costs relative to revenues is due to higher revenues in the first six months of 2017.
  Interest Expense, Net
  Interest expense was $74,000 in the first six months of 2017 compared to $46,000 of interest expense in the first six months of 2016.  The increase in interest expense resulted from borrowing larger amounts against its line of credit with SVB Bank and the CEO/Director than the same period in 2016. In addition, the prime rate charged by SVB to the Company increased.
  22
  Income Tax Expense
  The Company recorded income tax expense of $14,000 for the six months ended June 30, 2017 compared to $24,000 for the six months ended June 30, 2016.
  The tax expense resulted from the tax provision in Israel.
  Liquidity and Capital Resources
  Operating Activities
  The Company generated $2,052,000 of cash from operating activities in the first six months of 2017 compared to $1,362,000 for the first six months of 2016.  The increase in operating cash flows of $690,000 was due to a decrease in net loss of $839,000, an increase in cash provided by prepaid expenses of $62,000, a decrease in cash used in accounts payable and accrued expenses of $296,000, an increase in cash from deferred revenues of $294,000, and an increase in cash provided by other assets of $35,000 and partially offset by an increase in accounts receivable of $943,000. In addition, there was an increase in cash used non-cash expenses of $107,000.
  Investing Activities
  The Company used $1,246,000 for investing activities in the first six months of 2017 compared to $1,624,000 used in the first six months of 2016. The decrease in cash used for investing activities of $378,000 is principally attributable to lower capitalized software development costs of $346,000 in 2017 and a decrease in cash used for capital expenditures of $32,000.
  Financing Activities
  The Company used $172,000 of cash in financing activities in the first six months of 2017 compared to using $68,000 in the first six months of 2016.  The increase in financing activities in 2017 was due to payments of preferred stock dividends of $250,000 in 2017 and compared to $220,000 in the first six months of 2016.  The Company borrowed $5,062,000 and repaid $5,434,000 during the first six months of 2017 compared to borrowing $200,000 and repaying $48,000 in the same quarter last year on its line of credit from SVB. The Company borrowed $450,000 on its line of credit with the CEO/Director during the first six months ended June 30, 2017.
  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, resulted in a decrease of cash of $14,000 in 2017 compared to an increase of $20,000 in 2016.
  The Company has a history of net losses and an accumulated deficit of $36,343,000 as of June 30, 2017.  In the first six months of 2017, the Company generated a net loss of $906,000 compared to a net loss of $1,745,000 generated in the first six months of 2016.  Further, at June 30, 2017, the Company had a working capital ratio of 0.45:1, with cash and cash equivalents of $1,277,000 compared to December 31, 2016 when the Company had cash and cash equivalents of $661,000.  The increase in cash and cash equivalents for the first six months of 2017 was primarily driven by increases in cash provided by operations offset by cash used for the Company's capitalized software development costs. The increase in cash provided by operating activities was primarily due to a decrease in the net loss as well as increased collections of accounts receivable and an increase in deferred revenues.
  As of June 30, 2017 the Company owed $1,555,000 against the line of credit from Silicon Valley Bank ("SVB").   The availability under the SVB line of credit was tied to a borrowing base formula that is based on 80% of the Company's eligible domestic accounts receivable. As of June, 2017, the availability under the line of credit was $445,000.  In April 2017,
  the Company extended its Revolving Loan Agreement and associated Revolving Promissory Note with its Chief Executive Officer/Director.  The loan provides an unsecured $1,000,000 revolving line of credit to the Company.  The proceeds of the borrowings, if needed, will be used by the Company for operating activities. If an extension of the line of credit is appropriate and agreed to by the Chief Executive Officer/Director, we will then obtain the necessary approvals from
  WAB
  .
  The SVB line of credit was to expire in April 2018.  In August 2017, the Company obtained a new line of credit and term loan from
  WAB and paid off its outstanding borrowings with SVB. The term of the WAB line of credit and term loan extend through August 2019.
  The Company has projected revenues that management believes will provide sufficient funds along with available borrowings under its lines of credit to sustain its continuing operations through at least September 30, 2018.
  23
  The Company was in compliance with the financial covenants for the line of credit with SVB as of June 30, 2017.   In the event the Company does not meet its financial covenants in the future under the WAB financing and WAB does not extend a waiver or forbearance agreement, and the Company does not believe that it has adequate liquidity to operate, the Company will implement additional cost adjustments, as necessary, that will reduce its expenditures to the appropriate level that matches its operating cash flows.
  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 reflects a reduction in operating expenses which occurred at the end of the first quarter of 2017 in order to align its expenditures with its expected revenues.  The primary area of cost reduction, which occurred at the end of the first quarter of 2017, was to reduce company headcount by eliminating non-revenue generating personnel throughout the Company.  The Company remains focused on maximizing revenue from its revenue generating resources, including repurposing certain personnel to become revenue generators to help the Company improve its liquidity.  The Company has a substantial professional services backlog that resulted from the acquisition of new customers in the second half of 2016 as well as upgrade projects for existing customers as they move to the latest version of Alliance.  Management also initiated cost containment programs in other areas including the elimination or reduction of non-essential marketing activities, space reduction in areas in which the Company has excess office capacity, focusing marketing activities only on those programs that directly drive new business and eliminating contractors who are not essential to growth.  In addition, we do not expect to spend a significant amount on capital expenditures.  Overall, we have already implemented steps to reduce total operating expenses without impairing our ability to grow the business by obtaining new customers and increasing sales to existing customers.
  We expect our revenues and cost reductions to
  generate sufficient cash from operations.
  As noted above, if the Company's actual results fall short of expectations, the Company will make further cost adjustments to improve the Company's operating cash flows.
  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.
  The Company does not plan any significant capital expenditures in 2017 other than to support its operations. The Company's plans for continued investment in product development and capitalized software costs are expected to be similar to prior years.
  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.  We do not hold   financial instruments for trading purposes.
  Interest Rate Risk.
  At June 30, 2017, the Company's debt consisted of  lines of credit with its Chief Executive Officer/Director and  SVB.  At June 30, 2017, the outstanding balance owed on our line of credit under the revolving credit facility with SVB was $1,555,000 and with its Chief Executive Officer was $450,000.  Our old credit facility with SVB and our new credit facility with WAB both have variable interest rates, which exposes us to interest rate risk.
  24
  Foreign Currency Risk.
  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 six months ended June 30, 2017, approximately 43% 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. There were no changes in our internal control over financial reporting during the quarter ended June 30, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
  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, 2016, 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, 2016 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 which are peculiar 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.
  Item 5.
  OTHER INFORMATION
  On August 11, 2017,
  the Company entered in to a Business Financing Agreement (the "Financing Agreement") with Bridge Bank, a division of Western Alliance Bank, which includes a revolving line of credit and term loan. The agreement will mature in August 2019.
  The Financing Agreement with Bridge Bank, 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 agreed to pay to Bridge Bank the outstanding principal amount of all Advances, the unpaid interest thereon, and all other obligations incurred with respect to the Loan Agreement in August 2019.  Interest will be accrued and paid monthly at the Wall Street Journal Prime Rate plus 1.5%.
  The Term Loan provides $400,000 to the Company.  For the first six months of the Term Loan, the Company will pay interest only.  For the next 18 months, the Term Loan will be amortized into monthly payments of principal and interest.  The interest rate on the Term Loan will be the Wall Street Journal Prime Rate plus 1.75%.
  25
  At the closing of the Financing Agreement, the Company repaid all outstanding amounts owed to Silicon Valley Bank under a revolving credit facility (the "Revolving Facility") established under a Loan and Security Agreement among the Company,
  Network Data, Inc., Virtual Service Corporation, FC Acquisition Corp., and
  Silicon Valley Bank dated June 13, 2014 (as amended, the "SVB Agreement").  Upon repayment of all amounts outstanding owed under the Revolving Facility on August 11, 2017, the SVB Agreement was terminated and all security interests in favor of Silicon Valley Bank were released.
  The SVB Agreement was described in Item 1.01 of the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on June 16, 2014, and which description is incorporated herein by reference.
  Subject to certain exceptions, the 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.  Further, the Company must maintain minimum liquidity of $750,000, tested monthly, consisting of a combination of Unrestricted cash at Bridge Bank plus available U.S. accounts receivable.  In addition, actual operating performance for the trailing 6-month period must be at least 75% of Projected GAAP EBITDA, as tested quarterly.
  The 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 Financing Agreement contains a negative covenant prohibiting the Company from granting a security interest in their intellectual property to any party.
  The foregoing is only a summary of the Financing Agreement and does not purport to be complete.  This summary is qualified in its entirety by reference to the full text of the Financing Agreement, which is attached hereto as Exhibit 10.23, and is incorporated by reference herein.
  26
  Item 6
  .
  EXHIBITS
  10.23
  Business Financing Agreement among Astea International Inc., Network Data, Inc. and Western Alliance Bank dated as of August 11, 2017
  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
  27
  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:  August 14, 2017
  /s/Zack Bergreen
  Zack Bergreen
  Chief Executive Officer
  (Principal Executive Officer)
  Date:  August 14, 2017
  /s/Rick Etskovitz
  Rick Etskovitz
  Chief Financial Officer
  (Principal Financial and Chief Accounting Officer)
  28
  EXHIBIT INDEX
  No.
  Description
  10.23
  Business Financing Agreement among Astea International Inc., Network Data, Inc. and Western Alliance Bank dated as of August 11, 2017
  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
  29