================================================================================
                                  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          March 31, 2005
                               -----------------------------

                                       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 is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act).  Yes        No X
                                                ----      ----

As of May 9, 2005, 2,960,741 shares of the registrant's Common Stock, par value
$.01 per share, were outstanding.








                                                                                                  

                                 ASTEA INTERNATIONAL INC.

                                        FORM 10-Q
                                     QUARTERLY REPORT
                                          INDEX
                                                                                                  Page No.
                                                                                                  --------

Facing Sheet                                                                                         1

Index                                                                                                2

PART I - FINANCIAL INFORMATION
------------------------------

Item 1.             Consolidated Financial Statements

                    Consolidated Balance Sheets (Unaudited)                                           3

                    Consolidated Statements of Operations (Unaudited)                                 4

                    Consolidated Statements of Cash Flows (Unaudited)                                 5

                    Notes to Unaudited Consolidated Financial Statements                              6

Item 2.             Management's Discussion and Analysis of Financial
                    Condition and Results of Operations                                               8

Item 3.             Quantitative and Qualitative Disclosure About Market Risk                        12

Item 4.             Controls and Procedures                                                          12

PART II - OTHER INFORMATION
----------------------------

Item 1.             Legal Proceedings                                                                13

Item 2.             Changes in Securities and Use of Proceeds                                        13

Item 3.             Defaults upon Senior Securities                                                  13

Item 4.             Submission of Matters to a Vote of Security Holders                              13

Item 5.             Other Information                                                                13

Item 6.             Exhibits and Reports on Form 8-K                                                 13

                    Signatures                                                                       14




                                       2










                                                                     

PART I - FINANCIAL INFORMATION

Item 1.  CONSOLIDATED FINANCIAL STATEMENTS



                                                              March 31,     December 31,
                                                                2005            2004
                                                          ------------------------------
ASSETS                                                                (Unaudited)
Current assets:
Cash and cash equivalents                                 $  4,581,000     $  4,483,000
Restricted cash                                                300,000          300,000
Receivables, net of reserves of $348,000 and $411,000        5,061,000        6,428,000
Prepaid expenses and other                                     542,000          441,000
                                                          ------------------------------

Total current assets                                        10,484,000       11,652,000

Property and equipment, net                                    540,000          548,000
Capitalized software, net                                    1,618,000        1,520,000
Other assets                                                    40,000           34,000
                                                          ------------------------------

Total assets                                              $ 12,682,000     $ 13,754,000
                                                          ==============================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses                     $  2,790,000     $  3,194,000
Deferred revenues                                            4,464,000        4,489,000
                                                          ------------------------------

Total current liabilities                                    7,254,000        7,683,000

Stockholders' equity:
 Preferred stock, $.01 par value, 5,000,000 shares
authorized, none issued                                           --               --
 Common stock, $.01 par value, 25,000,000 shares
authorized, 3,002,000 issued                                    30,000           30,000
 Additional paid-in capital                                 22,997,000       22,997,000
 Cumulative translation adjustment                            (806,000)        (779,000)
 Accumulated deficit                                       (16,585,000)     (15,967,000)
 Less:treasury stock at cost, 42,000 and 43,000 shares
respectfully                                                  (208,000)        (210,000)
                                                          ------------------------------

Total stockholders' equity                                   5,427,000        6,071,000
                                                          ------------------------------

Total liabilities and stockholders' equity                $ 12,682,000     $ 13,754,000
                                                          ==============================


       See accompanying notes to the consolidated financial statements.





                                       3


                            ASTEA INTERNATIONAL INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)


                                                           Three Months Ended
                                                               March 31,
                                                           2005          2004
                                                      --------------------------
Revenues:
   Software license fees                              $   598,000    $ 2,896,000
   Services and maintenance                             3,172,000      2,988,000
                                                      --------------------------

Total revenues                                          3,770,000      5,884,000
                                                      --------------------------

Costs and expenses:
Cost of software license fees                             265,000        410,000
   Cost of services and maintenance                     1,840,000      1,547,000
   Product development                                    477,000        408,000
Sales and marketing                                     1,249,000      1,489,000
General and administrative                                583,000        555,000
                                                      --------------------------

Total costs and expenses                                4,414,000      4,409,000
                                                      --------------------------

Income (loss) from operations                            (644,000)     1,475,000

Interest income, net                                       26,000          8,000
                                                      --------------------------

Income (loss) before income taxes                        (618,000)     1,483,000

Income tax expense                                           --             --
                                                      --------------------------

Net (loss) income                                     $  (618,000)   $ 1,483,000
                                                      ==========================

Basic and diluted (loss) income per share:
 Net (loss) income per share                          $     (0.21)   $      0.51
Shares outstanding used in computing basic (loss)
income per share                                        2,960,000      2,922,000
Shares outstanding used in computing diluted (loss)
income per share                                        2,960,000      2,923,000


        See accompanying notes to the consolidated financial statements.






                                       4







                                                                                            

                            ASTEA INTERNATIONAL INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

                                                                                Three Months Ended
                                                                                    March 31,
                                                                                2005          2004
                                                                           ---------------------------
Cash flows from operating activities:
 Net (loss) income                                                         $  (618,000)   $ 1,483,000
 Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
 Depreciation and amortization                                                 351,000        299,000
 Increase in allowance for doubtful accounts                                   120,000         22,000
 Changes in operating assets and liabilities:
Receivables                                                                  1,241,000     (2,362,000)
Prepaid expenses and other                                                    (101,000)        (2,000)
Other assets                                                                      --            1,000
Accounts payable and accrued expenses                                         (405,000)       401,000
Deferred revenues                                                              (23,000)       505,000
Other long term assets                                                          (6,000)          --
                                                                           ---------------------------

 Net cash provided by operating activities                                     559,000        347,000
                                                                           ---------------------------

Cash flows from investing activities:
Purchases of property and equipment                                            (85,000)       (19,000)
Capitalizedsoftware development costs                                         (350,000)      (217,000)
                                                                           ---------------------------

 Net cash used in investing activities                                        (435,000)      (236,000)
                                                                           ---------------------------

Cash flows from financing activities:
Proceeds from issuance of stock through the employee stock purchase plan         1,000          1,000
                                                                           ---------------------------

 Effect of exchange rate changes on cash                                       (27,000)        (7,000)
                                                                           ---------------------------
 Net increase in cash and cash equivalents                                      98,000        105,000
Cash, beginning of period                                                    4,483,000      3,480,000
                                                                           ---------------------------

Cash, end of period                                                        $ 4,581,000    $ 3,585,000
                                                                           ===========================


                          See accompanying notes to the consolidated financial statements.




                                       5





Item 1. CONSOLIDATED FINANCIAL STATEMENTS (Continued)
-----------------------------------------------------

                            ASTEA INTERNATIONAL INC.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



1.BASIS OF PRESENTATION 
  ---------------------

The consolidated  financial statements at March 31, 2005 and for the three month
periods  ended  March  31,  2005  and  2004  of  Astea  International  Inc.  and
subsidiaries   (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  consolidated financial statements
should be read in conjunction  with the  consolidated  financial  statements and
notes thereto,  together with Management's  Discussion and Analysis of Financial
Condition  and Results of  Operations,  contained in the  Company's  2004 Annual
Report on Form 10-K which are hereby incorporated by reference in this quarterly
report on Form  10-Q.Results  of operations  and cash flows for the three months
ended March 31, 2005 are not  necessarily  indicative of the results that may be
expected for the full year.

2. STOCKHOLDERS' EQUITY/COMPREHENSIVE INCOME
  ------------------------------------------




                                                                                        

The reconciliation of Stockholders' Equity and comprehensive income from
December 31, 2004 to March 31, 2005 is summarized as follows:

                                                              Cumulative
                                              Additional       Currency
                                  Common       Paid-In       Translation     Accumulated        Treasury     Comprehensive
                                   Stock       Capital        Adjustment       Deficit            Stock          Income
                               -------------------------------------------------------------------------------------------

Balance at December 31, 2004   $     30,000   $ 22,997,000   $   (779,000)   $(15,967,000)   $   (210,000)
    Issuance of common stock
        under employee stock
               purchase plan           --             --             --                             2,000
      Cumulative translation
                  adjustment           --             --          (27,000)           --              --      $    (27,000)
                  Net (loss)           --             --             --          (618,000)           --      $   (618,000)
                               -------------------------------------------------------------------------------------------

   Balance at March 31, 2005   $     30,000   $ 22,997,000   $   (806,000)   $(16,585,000)   $   (208,000)   $   (645,000)
                               ===========================================================================================




3. CHANGE IN ACCOUNTING ESTIMATE
   -----------------------------

During the first quarter of 2004, the Company  re-evaluated  the estimated lives
of its  capitalized  software assets related to licenses and determined that the
estimated life of 3 years currently used should be reduced to 2 years,  based on
the rate of product release and the current sales trend.The impact of the change
in the estimated life resulted in an increase in amortization,  and reduction in
net income, of $80,000,  or $0.03 per share for the three months ended March 31,
2004.

4. INCOME TAX EXPENSE
   ------------------

The Company has utilized a portion of its net operating  loss carry forwards for
the three  months  ended  March 31,  2004 to reduce  any tax  provisions  on its
pre-tax  income.At  March 31,  2005,  the  Company  maintains  a 100%  valuation
allowance for its remaining net deferred tax assets based on the  uncertainty of
the realization of future taxable income.

5. STOCK BASED COMPENSATION
   ------------------------

In  December  2004,  the FASB  issued FAS  123(R),  "Share  Based  Payment,"  an
amendment of FASB  Statements 123 and 95.FAS No,  123(R),  replaced FAS No. 123,
"Accounting  for Stock-Based  Compensation,"  and supercedes 




                                       6



APB Opinion No. 25,  "Accounting for Stock Issued to  Employees."This  statement
requires  companies  to  recognized  the fair value of stock  options  and other
stock-based  compensation to employees prospectively beginning with fiscal years
beginning  after June 15,  2005.This  means that the Company will be required to
implement FAS No. 123(R) no later than the quarter beginning January 1, 2006.The
Company  currently  measures  stock-based  compensation  in accordance  with APB
Opinion No. 25 as discussed above.The Company anticipates  adopting the modified
prospective  method of FAS No.  123(R) on  January  1,  2006.  The impact on the
Company's financial condition or results of operations will depend on the number
and terms of stock options  outstanding on the day of change,  as well as future
options that may be granted.

In December 2002, the FASB issued Statement No. 148, "Accounting for Stock-Based
Compensation-Transition  and Disclosure,  an amendment of FASB Statement No. 123
("SFAS 148").SFAS 148 amends FASB Statement No. 123,  Accounting for Stock-Based
Compensation,  to provide  alternative  methods of transition for an entity that
voluntarily changes to the fair value based method of accounting for stock-based
employee compensation.It also amends the disclosure provisions of that Statement
to require  prominent  disclosure about the effects on reported net income of an
entity's  accounting  policy  decisions  with  respect to  stock-based  employee
compensation.Finally,  this Statement amends Accounting Principles Board ("APB")
Opinion No. 28, Interim Financial  Reporting,  to require disclosure about those
effects in interim  financial  information.SFAS  148 is effective  for financial
statements for fiscal years ending after December 15, 2002.The  Company plans to
continue to use the intrinsic valuation method for stock compensation.

The Company  accounts for options and the employee stock purchase plan under the
recognition  and  measurement  principles of Accounting  Principles  Board (APB)
Opinion  No.  25,  "Accounting  for Stock  Issued to  Employees."No  stock-based
employee  compensation  cost is reflected in net income,  as all options granted
under  those  plans  had an  exercise  price  equal to the  market  value of the
underlying  common  stock on the  date of  grant.Had  compensation  cost for the
Company's  stock  options  and  employee  stock  purchase  plan been  determined
consistent with SFAS No. 123,  "Accounting for  Stock-Based  Compensation,"  the
Company's net loss and basic and diluted net loss per share would have been:




                                                                                       

                                                              March 31, 2005       March 31, 2004 
                                                              ----------------    ----------------
                                                                (unaudited)        (unaudited)

Net (loss) income - as reported                                $  (618,000)        $ 1,483,000  
                                                                                 
Add:Stock-based compensation included in net (loss)                              
 income as reported, net or related tax effects                       --                  --
Deduct: Stock-based compensation determined under                                
 fair value based methods for all awards, net of                                 
 related tax effects                                               (37,000)            (32,000)
                                                                                 
Net (loss) income - pro forma                                  $  (655,000)        $ 1,451,000
                                                                                 
Basic and diluted (loss) income per share - as reported        $     (0.21)        $      0.51
Basic and diluted (loss) income per share - pro forma          $     (0.22)        $      0.50



                                                                                
The weighted  average fair value of those  options  granted  during the quarters
ended March 31, 2005 and 2004 was estimated at $7.03 and $2.94, respectively.The
fair value of each  option  grant is  estimated  on the date of grant  using the
Black-Scholes   option-pricing   model  with  the  following   weighted  average
assumptions:risk-free interest rate of 4.53% and 3.65% for 2005 and 2004 grants,
respectively;  an expected life of six years; volatility of 128% and 130%: and a
dividend yield of zero for 2005 and 2004 grants, respectively.

6. MAJOR CUSTOMERS

For the first three months of 2005, there were no major  customers.For the first
three months of 2004,  one customer  accounted  for 33% of the  Company's  total
revenues.At March 31, 2004, this same customer  represented 30% of the Company's
accounts receivable balance, the majority of which was subsequently  received in
the second quarter of 2004.




                                       7





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 the
Company's  Annual  Report on Form 10-K for the fiscal  year ended  December  31,
2004.

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,  The  Netherlands  and  Israel.Astea  Alliance  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  Contact  Center,   Field  Service,   Depot  Repair,   Logistics,
Professional  Services,  and Sales and  Marketing.Astea  extends its application
with portal,  analytics and mobile  solutions.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.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.


Critical Accounting Policies and Estimates
------------------------------------------

The Company's  significant  accounting  policies are more fully described in its
Summary of Accounting Policies,  Note 2, to the Company's consolidated financial
statement.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

Revenues are recognized in accordance  with Statement of Procedures  (SOP) 97-2,
which  provides   guidelines  on  the   recognition  of  software   license  fee
revenue.Principally,  revenue may be recognized when  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  allocates 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
discounts  when provided in conjunction  with the licensing  arrangement.Amounts
allocated  are  based  upon  standard  prices  charged  for  those  services  or
products.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.

Revenue from  post-contract  support is recognized  ratably over the term of the
contract on a  straight-line  basis.Consulting  and training  service revenue is
generally  recognized  at the time the service is  performed.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.




                                       8



In  instances  where the  aforementioned  criteria  have not been met,  both the
license  and  the  consulting  fees  are  recognized  under  the  percentage  of
completion method of contract accounting.

In limited instances, the Company will enter into contracts for which revenue is
recognized  under  contract  accounting.The  accounting  for  such  arrangements
requires  judgement,  which  impacts  the  timing  of  revenue  recognition  and
provision for estimated losses, if applicable.

Accounts Receivable

The Company evaluates the adequacy of its allowance for doubtful accounts at the
end of each quarter.In  performing  this  evaluation,  the Company  analyzes the
payment  history  of  its  significant   past  due  accounts,   subsequent  cash
collections  on  these  accounts  and  comparative   accounts  receivable  aging
statistics.Based  on this information,  along with  consideration of the general
strength  of the  economy,  the  Company  develops  what  it  considers  to be a
reasonable   estimate  of  the   uncollectible   amounts  included  in  accounts
receivable.This estimate involves significant judgement by the management of the
Company.Actual uncollectible amounts may differ from the Company's estimate.

Capitalized Software Research and Development Costs

The Company accounts for its internal  software  development costs in accordance
with Statement of Financial  Accounting  Standards  ("SFAS") No. 86, "Accounting
for the Costs of Computer  Software to be Sold,  Leased or Otherwise  Marketed."
The  Company   capitalizes   software   development   costs  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.  Development  costs
associated with product  enhancements that extend the original product's life or
significantly improve the original product's  marketability are also capitalized
once technological feasibility has been  established.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  (usually two years),  beginning with
the initial release to  customers.During  the first quarter of 2004, the Company
revised the  estimated  life for its  capitalized  software  products from three
years to two  years  based  on  current  sales  trends  and the rate of  product
releases.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 estimated  future revenues of each product.As
of March 31, 2005, management believes that no revisions to the remaining useful
lives or write-downs of capitalized software development costs are required.

Results of Operations
---------------------

Comparison of Three Months Ended March 31, 2005 and 2004
--------------------------------------------------------

Revenues 
--------

Revenues decreased $2,114,000,  or 36%, to $3,770,000 for the three months ended
March  31,  2005  from   $5,884,000   for  the  three  months  ended  March  31,
2004.Software license fee revenues decreased  $2,298,000,  or 79%, from the same
period last  year.Services and maintenance fees for the three months ended March
31, 2005 amounted to $3,172,000, a 6% increase from the same quarter in 2004.

The Company's international operations contributed $2,006,000 of revenues in the
first  quarter of 2005  compared to $1,486,000 in the first quarter of 2004.This
represents  a 35%  increase  from the  same  period  last  year and 53% of total
revenues  in the first  quarter  2005.The  increase  in  revenues  is due to the
increase in sales from the Company's  operations  in Europe and Japan  partially
offset by a slight decrease in sales from operations inAustralia.

Software license fee revenues  decreased 79% to $598,000 in the first quarter of
2005 from  $2,896,000  in the first  quarter of 2004.The  decrease is  primarily
attributable to poor sales results in the United States during the first quarter
of 2005, as well as two  significant  U.S.  sales  totaling  approximately  $2.1
million,  that closed during the first quarter of  2004.Astea  Alliance  license
revenues decreased $2,147,000 or 79%, to $583,000 in the first quarter of




                                       9



2005 from $2,730,000 in the first quarter of 2004.The  Company also sold $15,000
and $166,000 of DISPATCH-1  licenses to existing  customers in the first quarter
of 2005 and 2004, respectively.

Services  and  maintenance  revenues  increased  6% to  $3,172,000  in the first
quarter  of 2005 from  $2,988,000  in the first  quarter  of  2004.The  increase
primarily relates to service and maintenance revenues from Astea Alliance, which
increased  $393,000,  or 16%, to $2,824,000 from $2,431,000 in the first quarter
of 2004.The  increase in Astea Alliance  service and  maintenance  revenues is a
direct  result  of the  growth  of the Astea  Alliance  customer  base.Partially
offsetting the increase in Astea Alliance service and maintenance revenues was a
decrease of $210,000 in  DISPATCH-1  service  and  maintenance  revenues,  which
resulted from an expected decrease in demand.

Costs of Revenues
-----------------

Cost of software  license fees decreased 35% to $265,000 in the first quarter of
2005 from $410,000 in the first quarter of 2004.Included in the cost of software
license fees is the fixed cost of capitalized software  amortization.During  the
first  quarter of 2004,  the Company  revised the  estimated  useful life of its
capitalized  software  products  from  3  years  to  2  years,  which  increased
amortization  for the  period  to  $252,000  and  $230,000  for 2005  and  2004,
respectively,  compared  to $150,000  in the first  quarter of 2003.The  cost of
software  license fees also decreased due to the lower level of software license
sales in the first quarter of 2005.The software licenses gross margin percentage
was 56% in the first  quarter of 2005  compared  to 86% in the first  quarter of
2004. The decrease in gross margin was  attributable to the mix of products sold
in 2005 as well as the  relationship of the fixed cost of amortized  capitalized
software to a lower level of sales in 2005.

Cost of  services  and  maintenance  increased  19% to  $1,840,000  in the first
quarter of 2005 from  $1,547,000  in the first  quarter of 2004.The  increase in
cost of  service  and  maintenance  is  primarily  attributed  to  additions  in
headcount  from last year to this year,  along  with the use of outside  service
consultants.The  services and maintenance gross margin percentage was 42% in the
first quarter of 2005 compared to 48% in the first quarter of 2004.The  decrease
in services  and  maintenance  gross  margin was  primarily  due to start up and
training of new staff that decreased the  utilization of Astea Alliance  service
professionals.

Product Development
-------------------

Product  development  expense  increased 17% to $477,000 in the first quarter of
2005 from  $408,000  in the first  quarter of 2004.  The  Company  excludes  the
capitalization  of software  costs in product  development.Capitalized  software
totaled  $350,000 in the first quarter of 2005  compared to $217,000  during the
same period in  2004.Product  development as a percentage of revenues was 13% in
the first  quarter of 2005  compared  with 7% in the first  quarter of  2004.The
increase in percentage of revenues is the result of the continued  effort of the
Company to improve the quality and  functionality of its products by adding more
development staff, combined with the decreased sales volume.

Sales and Marketing
-------------------

Sales and marketing  expense decreased 16% to $1,249,000 in the first quarter of
2005 from  $1,489,000  in the first  quarter of 2004.  The decrease in sales and
marketing is primarily  attributable to a reduction in sales commissions related
to the  decrease  in  license  sales.As  a  percentage  of  revenues,  sales and
marketing expenses increased to 33% from 25% in the first quarter of 2004, which
is the direct result of decreased revenues.

General and Administrative
--------------------------

General  and  administrative  expenses  increased  5% to  $583,000  in the first
quarter of 2005 from  $555,000  in the first  quarter of  2004.The  increase  in
general and  administrative  expenses  is  attributable  to higher  costs due to
company  initiatives and an increase in foreign currency exchange  activity.As a
percentage of revenues,  general and  administrative  expenses  increased to 15%
from 9% in the  first  quarter  of  2004.The  increase  is due to a  significant
decrease in revenues.





                                       10



Interest Income, net 
--------------------

Net interest income  increased  $18,000 from $8,000 in the first quarter of 2004
to $26,000 in the first quarter of 2005.The increase resulted  primarily from an
increase in the amount of investments  as well as higher  interest rates paid on
the Company's portfolio of invested funds.

International Operations
------------------------

Total revenue from the Company's international operations increased by $520,000,
or 35%, to $2,006,000  in the first quarter of 2005 from  $1,486,000 in the same
quarter in  2004.The  increase  in revenue  from  international  operations  was
primarily  attributable  to the increase in revenues  from Japanese and European
operations.International  operations  generated  net income of $257,000  for the
first  quarter  ended March 31, 2005  compared to income of $152,000 in the same
quarter in 2004.

Liquidity and Capital Resources 
-------------------------------

Net cash  provided by  operating  activities  was  $560,000 for the three months
ended March 31, 2005 compared to cash provided by operations of $347,000 for the
three months ended March 31,  2004.The  increase in cash  provided by operations
was primarily  attributable  to significant  collections in accounts  receivable
compared to the same quarter last year, when the Company had  significant  sales
at  the  end  of  the   quarter   and   accounts   receivable   increased   $2.3
million.Partially  offsetting the $3.5 million swing in accounts  receivable was
the decrease in earnings and reduction in accounts payable.

The Company used $435,000 for investing  activities in the first three months of
2005 compared to using  $236,000 in the first three months of 2004.The  increase
in cash  used is  attributable  to an  increase  in both the  capitalization  of
software development costs and the acquisition of property and equipment.

The Company generated $1,000 of cash from financing activities during both three
month  periods  ended March 31, 2005 and 2004 from the issuance of stock through
the employee stock purchase plan.

At March 31, 2005, the Company had a working  capital ratio of 1.4:1,  with cash
and restricted cash of $4,881,000.The Company believes that it has adequate cash
resources to make the  investments  necessary to maintain or improve its current
position and to sustain its continuing operations for the next twelve months.The
Board of Directors from time to time reviews the Company's forecasted operations
and financial  condition to determine  whether and when payment of a dividend or
dividends is appropriate.The  Company does not anticipate that its operations or
financial condition will be affected materially by inflation.

Variability of Quarterly Results and Potential Risks Inherent in the Business
-----------------------------------------------------------------------------

The Company's  operations are subject to a number of risks,  which are described
in more detail in the Company's  prior SEC  filings.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:

o    The Company's  quarterly  operating results have in the past varied and may
     in the future vary  significantly  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.

o    The Company's future success will depend in part on its ability to increase
     licenses  of  AllianceEnterprise  and other new product  offerings,  and to
     develop new products and product  enhancements  to complement  its existing
     field service, sales automation and customer support offerings.

o    The enterprise software market is intensely competitive.

o    International  sales  for the  Company's  products  and  services,  and the
     Company's  expenses  related to these sales,  continue to be a  substantial
     component of the Company's  operations.International sales are subject to a
     variety of



                                       11



     risks,  including  difficulties in establishing and managing  international
     operations and in translating products into foreign languages.

o    The market  price of the  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 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
--------------------------------------------------------------------

Interest Rate Risk.The Company's exposure to market risk for changes in interest
rates relates primarily to the Company's investment  portfolio.The  Company does
not have any  derivative  financial  instruments  in its  portfolio.The  Company
places  its   investments   in   instruments   that  meet  high  credit  quality
standards.The  Company is adverse to  principal  loss and ensures the safety and
preservation  of its invested  funds by limiting  default risk,  market risk and
reinvestment risk.As of March 31, 2005, the Company's  investments  consisted of
U.S. government  commercial  paper.The Company does not expect any material loss
with respect to its investment portfolio.

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.The  Company does not expect any material loss
with respect to foreign currency risk.

Item 4.    CONTROLS AND PROCEDURES
----------------------------------

Our management,  under the supervision and with the  participation  of the Chief
Executive Officer and Chief Financial  Officer,  has evaluated the effectiveness
of  our  controls  and  procedures  related  to  our  reporting  and  disclosure
obligations as of March 31, 2005, which is the end of the period covered by this
Quarterly  Report on Form  10-Q.Based on that  evaluation,  the Chief  Executive
Officer and Chief Financial Officer have concluded that our disclosure  controls
and procedures are sufficient to provide that (a) material  information relating
to us, including our consolidated subsidiaries,  is made known to these officers
by our and our consolidated subsidiaries other employees,  particularly material
information  related  to the  period  for which  this  periodic  report is being
prepared; and (b) this information is recorded, processed, summarized, evaluated
and reported, as applicable,  within the time periods specified in the rules and
forms promulgated by the Securities and Exchange Commission.

There were no changes that  occurred  during the fiscal  quarter ended March 31,
2005 that have  materially  affected,  or are  reasonable  likely to  materially
affect, our internal controls over financial reporting.









                                       12







PART II - OTHER INFORMATION

Item 1.           Legal Proceedings
-----------------------------------

From time to time,  the  Company is involved  in  litigation  relating to claims
arising out of its  operations in the normal course of  business.The  Company is
not involved in any legal  proceedings,  which would, in  management's  opinion,
have a  material  adverse  effect  on  the  Company's  business  or  results  of
operations.

Item 2.           Changes in Securities and Use of Proceeds
-----------------------------------------------------------

There have been no changes in  securities  during the  quarter  ended  March 31,
2005.

Item 3.           Defaults Upon Senior Securities
-------------------------------------------------

There have been no defaults by the Company on any Senior  Securities  during the
quarter ended March 31, 2005.

Item 4.           Submission of Matters to a Vote of Security Holders
---------------------------------------------------------------------

No matters were  submitted to a vote of the  Company's  stockholders  during the
first quarter of the fiscal year covered by this report through the solicitation
of proxies or otherwise.

Item 5.           Other Information
-----------------------------------

None.

Item 6. Exhibits and Reports on Form 8-K
----------------------------------------

(A)      Exhibits

  31.1    Certification  pursuant  to Section 302 of the  Sarbanes-Oxley  Act of
          2002 - President and Chief Executive Officer
         
  31.2    Certification  pursuant  to Section 302 of the  Sarbanes-Oxley  Act of
          2002 - Chief Financial Officer
         
  32.1    Certification  pursuant to 18 U.S.C. Section 1350, as adopted pursuant
          to Section 906 of the Sarbanes-Oxley Act of 2002 - President and 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
         
      
(B) Reports on Form 8-K

         On March 28, 2005, the Company filed a report on Form 8-K with respect
         to the press release issued as of that date reporting the results for
         the three months and year ended December 31, 2004.

         On January 7, 2005, the Company filed a report on Form 8-K/A announcing
         Rick Etskovitz as Chief Financial Officer.





                                       13





                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) 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 this 11th day of May
2005.

                                            ASTEA INTERNATIONAL INC.
                                          
                                          
                                             By: /s/Zack B. Bergreen
                                                 ------------------------------
                                                 Zack B. Bergreen
                                                 Chief Executive Officer
                                                 (Principal Executive Officer)
                                          
                                              By: /s/Rick Etskovitz
                                                 ------------------------------
                                                  Rick Etskovitz
                                                  Chief Financial Officer
                                                  (Principal Financial and Chief
                                                  Accounting Officer)
                                          
                                          
                           


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