<PAGE>
                                    FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

(MARK ONE)
[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
         EXCHANGE ACT OF 1934.

For the quarterly period ended September 30,2001

                                       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: 000-23453

                        FLEXIINTERNATIONAL SOFTWARE, INC.

             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

             Delaware                                     06-1309427
   (STATE OR OTHER JURISDICTION OF                    (I.R.S. EMPLOYER
   INCORPORATION OR ORGANIZATION)                     IDENTIFICATION NO.)
    Two Enterprise Drive, Shelton, CT                      06484
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                  (ZIP CODE)

                                 (203) 925-3040
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

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 [ ]


As of September 30, 2001, there were 17,784,181 shares of FlexiInternational
Software, Inc. Common Stock outstanding.
<PAGE>

                        FLEXIINTERNATIONAL SOFTWARE, INC.

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                   PAGE
                                                                                   -----
<S>                                                                                <C>
PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements
        Condensed Consolidated Balance Sheets .............................           3
        Condensed Consolidated Statements of Operations ...................           4
        Condensed Consolidated Statements of Cash Flows ...................           5
        Condensed Consolidated Statement of Stockholders' Deficit .........           6
        Notes to Condensed Consolidated Financial Statements ..............           7
Item 2. Management's Discussion and Analysis of Financial
        Condition and Results of Operations ...............................           8
Item 3. Quantitative and Qualitative Disclosures About Market Risk ........          13

PART II. OTHER INFORMATION
Item 1.  Legal Proceedings ................................................          13
Item 2.  Changes in Securities and Use of Proceeds ........................          13
Item 3.  Default 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


Signature .................................................................          14
</TABLE>


                                       2
<PAGE>

PART I.  FINANCIAL INFORMATION

ITEM 1.  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                        FLEXIINTERNATIONAL SOFTWARE, INC.
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                                  (unaudited)

<TABLE>
<CAPTION>
                                                                                             SEPTEMBER 30,     DECEMBER 31,
                                                                                                 2001              2000
                                                                                             -------------     ------------
<S>                                                                                          <C>                  <C>
ASSETS
Current assets:
    Cash and cash equivalents                                                                  $    314           $  1,389
    Marketable securities - restricted                                                               37                108
    Accounts receivable, net of allowance for doubtful accounts of $177 and
         $352, respectively                                                                       3,334              2,558
    Prepaid expenses and other current assets                                                       242                322
                                                                                               --------           --------

 Total current assets                                                                             3,927              4,377

Property and equipment at cost, net of accumulated depreciation
     of $4,509 and $4,154, respectively                                                             474                841
Goodwill, net of accumulated amortization of $7,521 and $6,582,
     respectively                                                                                 1,245
Other assets                                                                                        181                160
                                                                                               --------           --------
     TOTAL ASSETS                                                                              $  4,582           $  6,623
                                                                                               ========           ========

     LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
  Accounts payable and accrued expenses                                                        $  1,473           $  1,666
  Accrued restructuring                                                                              --                 27
  Short term portion of long-term debt                                                              701                976
  Deferred revenues                                                                               5,156              5,012
                                                                                               --------           --------
     Total current liabilities                                                                    7,330              7,681

Long term debt-less current portion                                                                 321                457
                                                                                               --------           --------
     Total liabilities                                                                            7,651              8,138
                                                                                               --------           --------

Stockholders' deficit:
Preferred stock: $.01 par value; 5,000,000 shares authorized; none issued                            --                 --
Common stock: $.01 par value; 50,000,000 shares authorized; issued shares -                         178                177
   17,784,181 and outstanding shares - 17,784,181 and 17,672,703, respectively
 Additional paid-in capital                                                                      56,117             56,128
 Accumulated deficit                                                                            (59,655)           (58,094)
 Other accumulated comprehensive income                                                             291                293
 Common stock in treasury at cost - 10,430 shares                                                   (19)
                                                                                               --------           --------
     Total stockholders' deficit                                                                 (3,069)            (1,515)
                                                                                               --------           --------

     TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                                               $  4,582           $  6,623
                                                                                               ========           ========
</TABLE>

See accompanying notes to condensed consolidated financial statements.


                                       3
<PAGE>

                        FLEXIINTERNATIONAL SOFTWARE, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                        THREE MONTHS ENDED                 NINE MONTHS ENDED
                                                          SEPTEMBER 30,                      SEPTEMBER 30,
                                                     -------------------------         ------------------------
                                                       2001             2000             2001             2000
                                                     --------         --------         --------         --------
<S>                                                 <C>               <C>              <C>                <C>
REVENUES:
   Software license                                  $    368         $    769         $  2,275         $  2,815
   Service and maintenance                              1,490            2,033            5,016            6,511
                                                     --------         --------         --------         --------
       Total revenues                                   1,858            2,802            7,291            9,326
                                                     --------         --------         --------         --------

COST OF REVENUES:
   Software license                                       291              228              444              428
   Service and maintenance                                571              649            1,807            2,865
                                                     --------         --------         --------         --------
      Total cost of revenues                              862              877            2,251            3,293
                                                     --------         --------         --------         --------

GROSS PROFIT                                              996            1,925            5,040            6,033
                                                     --------         --------         --------         --------

OPERATING EXPENSES:
   Sales and marketing                                    602              380            2,123            1,233
   Product development                                    270              529            1,335            1,978
   General and administrative                             940              960            2,257            2,731
   Goodwill impairment                                    862               --              862               --
                                                     --------         --------         --------         --------
      Total operating expenses                          2,674            1,869            6,577            5,942
                                                     --------         --------         --------         --------

OPERATING (LOSS) INCOME                                (1,678)              56           (1,537)              91

Net interest expense                                       (9)              (5)             (24)              (5)
                                                     --------         --------         --------         --------

(LOSS) INCOME BEFORE INCOME TAXES                      (1,687)              51           (1,561)              86
Provision for income taxes                                 --               --               --               --
                                                     --------         --------         --------         --------
NET (LOSS) INCOME                                    $ (1,687)        $     51         $ (1,561)        $     86
                                                     ========         ========         ========         ========

BASIC NET (LOSS) INCOME PER SHARE                    $  (0.10)        $   0.00         $  (0.09)        $   0.00
                                                     ========         ========         ========         ========

Weighted average common shares outstanding             17,705           17,669           17,686           17,665
                                                     ========         ========         ========         ========

DILUTED NET (LOSS) INCOME  PER SHARE                 $  (0.10)        $   0.00         $  (0.09)        $   0.00
                                                     ========         ========         ========         ========
Weighted average common shares outstanding             17,705           17,919           17,686           17,996
                                                     ========         ========         ========         ========
</TABLE>

See accompanying notes to condensed consolidated financial statements.


                                       4
<PAGE>

                        FLEXIINTERNATIONAL SOFTWARE, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                  NINE MONTHS ENDED
                                                                                      SEPTEMBER 30
                                                                             -----------------------------
                                                                               2001                 2000
                                                                             --------             --------
<S>                                                                          <C>                  <C>
Cash flows from operating activities:
Net (loss) income                                                            $ (1,561)            $     86
Non-cash items:
  Depreciation and amortization                                                   780                  972
  Goodwill impairment                                                             862                   --
  Provision for doubtful accounts                                                  --                  180
  (Loss) gain on disposal of assets                                                (4)                  14
Change in operating accounts:
  Accounts receivable                                                            (780)               3,808
  Prepaid expenses and other assets                                                58                   16
  Accounts payable and accrued expenses                                           (47)              (1,764)
  Accrued restructuring                                                           (27)                (295)
  Deferred revenue                                                                153               (3,764)
                                                                             --------             --------
Net cash used in operating activities                                            (566)                (747)
                                                                             --------             --------

Cash flows from investing activities:
  Sales of marketable securities                                                   71                   --
  Proceeds from the sale of property and equipment                                  1
  Purchases of property and equipment                                             (32)                 (12)
                                                                             --------             --------
Net cash provided by (used in) investing activities                                40                  (12)
                                                                             --------             --------

Cash flows from financing activities:
  Repayments of debt                                                             (151)                  --
  Proceeds from employee stock purchase plan                                        9                    8
  (Payments of) additions to capital lease obligations                           (402)                 128
                                                                             --------             --------
Net cash (used in) provided by financing activities                              (544)                 136
                                                                             --------             --------

Effect of exchange rate changes on cash                                            (5)                 230
                                                                             --------             --------

Decrease in cash and cash equivalents                                          (1,075)                (393)
Cash and cash equivalents at beginning of period                                1,389                1,874
                                                                             --------             --------
Cash and cash equivalents at end of period                                   $    314             $  1,481
                                                                             ========             ========

Supplemental disclosures:
  Interest paid in cash                                                      $     30             $     45
  Conversion of accounts payable into notes payable                          $    142
</TABLE>

See accompanying notes to condensed consolidated financial statements.


                                       5
<PAGE>

                        FLEXIINTERNATIONAL SOFTWARE, INC.
            CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                       Other
                                         Common Stock       Additional                compre-                Total        Compre-
                                      ------------------     paid-in    Accumulated   hensive   Treasury  stockholders'   hensive
                                      Shares      Amount     capital      deficit     income     stock      deficit         loss
                                    ----------    ------    ----------  -----------   -------   --------  ------------    -------
<S>                                 <C>           <C>       <C>         <C>           <C>       <C>       <C>             <C>
Balance at December 31, 2000        17,683,133     $177     $ 56,128      $(58,094)     $ 293      $(19)     $(1,515)
Shares issued for stock plan           101,048        1          (11)           --         19         9
Net loss                                    --       --           --        (1,561)        --        --       (1,561)     $(1,561)
Currency translation adjustment             --       --           --            --         (2)       --           (2)          (2)
                                                                                                                          -------
Comprehensive loss                          --       --           --            --         --        --           --      $(1,563)
                                    ----------     ----     --------      --------      -----      ----      -------      =======

Balance at September 30, 2001       17,784,181     $178     $ 56,117      $(59,655)     $ 291      $ --      $(3,069)
                                    ==========     ====     ========      ========      =====      ====      =======
</TABLE>

     See accompanying notes to condensed consolidated financial statements.


                                       6
<PAGE>


                        FlexiInternational Software, Inc.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                  NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
                                   (UNAUDITED)

NOTE 1 - BASIS OF PRESENTATION

The condensed consolidated financial statements included herein have been
prepared by us, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. However, we believe that the disclosures are adequate to
make the information presented not misleading. These condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements and the notes thereto included in our Annual Report on Form
10-K for the year ended December 31, 2000.

The unaudited condensed consolidated financial statements include the accounts
of FlexiInternational Software, Inc. and its subsidiary and reflect all
adjustments (which include only normal, recurring adjustments) which are, in the
opinion of management, necessary to state fairly the results for the interim
periods. The results of operations are not necessarily indicative of the results
expected for the full year.

NOTE 2-NEW ACCOUNTING STANDARDS

On July 5, 2001, the Financial Accounting Standards Board approved Financial
Accounting Standard No. 142 - "Goodwill and Other Intangible Assets" ("SFAS
142"). SFAS 142 includes requirements to test goodwill and indefinite lived
intangible assets for impairment rather than amortize them (see Note 4). SFAS
142 will be effective for fiscal years beginning after December 15, 2001. The
Company will adopt SFAS 142 beginning in the first quarter of 2002. The
financial statements will not be impacted.

NOTE 3-SIGNIFICANT EVENTS

During the first quarter of 2001, we completed an audit under the terms of a
contract with one of our partners, which encompassed several years of royalty
payments. Our claim amounts to $1.7 million, which they dispute. We met on
several occasions with this customer during the second quarter in an attempt to
settle this dispute without success. We recorded this amount in accounts
receivable and, because the amount is in dispute, have deferred the entire
amount that was invoiced. We will recognize the income when either an agreement
can be reached with the customer or it can be otherwise determined that we are
assured of the collection of the amounts owed. As is provided under the terms of
the contract, we requested binding arbitration on July 18, 2001.

NOTE 4-IMPAIRMENT OF GOODWILL

During September of 2001 management conducted a periodic impairment assessment
of the intangible assets resulting from the Dodge acquisition, which took place
in June of 1998. As a result of that review, management concluded that an
impairment had occurred with the goodwill and intangible assets and that the
remaining balance relating to the Dodge acquisition in the amount of $862,000
should be written off in the current quarter. Flexi's financial data warehouse
products, based on older technologies, will not be upgraded to current
technology and therefore these products will not be competitive in the future.
While we expect to maintain these products for our current support customers, we
do not expect any revenue from new sales in the future. Prior to the
reassessment, the unamortized balance of the intangible assets was $862,000,
consisting of $727,000 of acquired software and $135,000 of goodwill.


                                       7
<PAGE>
ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS
          OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

      In addition to historical information, this Quarterly Report contains
forward-looking statements relating to, among other things, our sales staff, the
length of our sales cycle and future expenses. For this purpose, any statements
contained herein that are not statements of historical fact may be deemed to be
forward-looking statements. Without limiting the foregoing, the words
"believes," "anticipates," "plans," "expects," and similar expressions are
intended to identify forward-looking statements. Readers are cautioned not to
place undue reliance on these forward-looking statements, which reflect
management's opinions only as of the date hereof. We undertake no obligation to
revise or publicly release the results of any revision to these forward-looking
statements. Readers should carefully review the risk factors described in other
documents that we file from time to time with the Securities and Exchange
Commission, including our Annual Report on Form 10-K for the year ended December
31, 2000.

OVERVIEW

      FlexiInternational Software Inc. designs, develops, markets and supports
the FlexiFinancial Enterprise Suite of financial and accounting software
applications and related tools. The Flexi solution - composed of
FlexiFinancials, FlexiFinancial Datawarehouse (FlexiFDW), FlexiInfoAccess and
FlexiTools - is designed to address the needs of users with sophisticated
financial accounting and operational analysis requirements. In addition, we
recently began marketing our Financial Management Services (FMS) solution, a
business process outsourcing (BPO) service designed to leverage our suite of
accounting products and our expertise in back office processing of accounting
data. We believe that many mid-sized and fast growing start-up companies want to
outsource their back office accounting processes while they focus on the
financial analysis, cash management and the strategic issues of their business.

      Software license revenues include (i) revenues from noncancellable
software license agreements entered into between our customers and us with
respect to our products, (ii) royalties due us from third parties that
distribute our products and, to a lesser extent, (iii) third-party products
distributed by us. Software license royalties earned through our indirect sales
channel are recognized as such fees are reported to us. Revenues on all software
license transactions in which there are significant outstanding obligations are
not recognized until such obligations are fulfilled. Significant obligations
would include future promises of enhancements and/or modifications that are
essential to the product. Revenues for maintaining, supporting and providing
periodic upgrading are deferred and recognized ratably over the maintenance
period, which is generally one year. Revenues from training and consulting
services are recognized as such services are performed. We do not require
collateral for our receivables, and reserves are maintained for potential
losses.

      In accordance with Statement of Financial Accounting Standards No. 86,
Accounting for the Costs of Computer Software to Be Sold, Leased or Otherwise
Marketed, the Company, during the software development phase, evaluates the
technological feasibility of its various products. The time period during which
costs could be capitalized, from the point of reaching technological feasibility
until the time of general product release is very short and, consequently, the
amounts that could be capitalized are not material to our financial position or
results of operations. Therefore, we charge all of our product development
expenses to operations in the period incurred.

      Historically, our revenues have been derived from both domestic sales and
international sales, with the international revenues comprising 19% of total
revenues for both of the three-month periods ended September 30, 2001 and 2000.
Our international sales generally have the same cost structure as our domestic
sales. A majority of international sales are denominated in British pounds. An
increase in the value of the British pound relative to foreign currencies could
make our products more expensive and, therefore, potentially less competitive in
foreign markets. In addition, our international business may be subject to a
variety of risks, including difficulties in collecting international accounts
receivable or obtaining U.S. export licenses, the introduction of non-tariff
barriers and higher duty rates and fiscal and monetary policies that adversely
affect non-native firms.


                                       8
<PAGE>
RESULTS OF OPERATIONS

      The following table sets forth certain financial data as a percentage of
revenues for the periods indicated.

<TABLE>
<CAPTION>


                                           THREE MONTHS ENDED                  NINE MONTHS ENDED
                                             SEPTEMBER 30,                      SEPTEMBER 30,
                                          2001           2000                 2001          2000
                                     ------------------------------      -----------------------------
<S>                                  <C>                    <C>          <C>                <C>
REVENUES:

   Software license                           19.8%          27.4%                31.2%         30.2%
   Service and maintenance                    80.2%          72.6%                68.8%         69.8%
                                     ------------------------------      -----------------------------
       Total revenues                        100.0%         100.0%               100.0%        100.0%
                                     ------------------------------      -----------------------------
COST OF REVENUES:
   Software license                           15.7%           8.1%                 6.1%          4.6%
   Service and maintenance                    30.7%          23.2%                24.8%         30.7%
                                     ------------------------------      -----------------------------
      Total cost of revenues                  46.4%          31.3%                30.9%         35.3%
                                     ------------------------------      -----------------------------

GROSS PROFIT                                  53.6%          68.7%                69.1%         64.7%
                                     ------------------------------      -----------------------------

OPERATING EXPENSES:

   Sales and marketing                        32.4%          13.6%                29.1%         13.2%
   Product development                        14.5%          18.9%                18.3%         21.2%
   General and administrative                 50.6%          34.3%                31.0%         29.3%
   Goodwill impairment                        46.4%           0.0%                11.8%          0.0%
                                     ------------------------------      -----------------------------
      Total operating expenses               143.9%          66.8%                90.2%         63.7%
                                     ------------------------------      -----------------------------

OPERATING (LOSS) INCOME                     (90.3)%           1.9%              (21.1)%          1.0%

Net interest expense                         (0.5)%         (0.2)%               (0.3)%        (0.1)%
                                     ------------------------------      -----------------------------

LOSS INCOME BEFORE INCOME TAXES             (90.8)%           1.7%              (21.4)%          0.9%
Provision for income taxes                        -              -                    -             -
                                     ------------------------------      -----------------------------
NET (LOSS) INCOME                           (90.8)%           1.7%              (21.4)%          0.9%
                                     ==============================      =============================
</TABLE>

      Revenues. Total revenues, consisting of software license revenues and
service and maintenance revenues, decreased 34%, from $2.8 million for the
quarter ended September 30, 2000 to $1.9 million for the quarter ended September
30, 2001. Total revenues for the nine-month period decreased 22% to $7.3
million.

      Software license revenues decreased 52% and 19% to $368,000 and $2.3
million in the third quarter and the first nine-months of the current year,
respectively, from $769,000 and $2.8 million in the comparable periods of the
prior year. The decrease in license revenue for the three month period ending
September 30, 2001 is primarily attributable to a decrease in product sales. The
decrease in license revenue for the nine-month period ending September 30, 2001
is primarily attributable to a reduction of one time events that occurred during
the nine month period ended September 30, 2000. One customer accounted for 74%
of the software license revenue recognized during the first quarter of the
current year, and another customer accounted for almost half of last year's
first quarter's software license revenue. Approximately $1.0 million of the
current year's license revenue for the nine-month period was previously deferred
income from a former customer, which was recognized upon settlement of a
long-standing dispute. During the third quarter, we reduced the size of our
sales department and refocused our efforts on building our FMS solution and our
BPO business. We intend to focus on our reseller relationships to increase sales
of our FMS solution to generate more dependable and recurring sources of
revenue.

                                       9


<PAGE>

        Service and maintenance revenues decreased over 20%, for both the third
quarter and nine-month periods from the levels of the comparable periods of the
prior year. This decrease continues to be primarily attributable to a decline in
service revenue due to fewer active client implementations. We do not expect
this trend to be reversed until we begin to experience a higher level of new
product sales.

      Cost of Revenues. Our cost of revenues consists of cost of software
license revenues and cost of service and maintenance revenues. Cost of software
license revenues consists primarily of the cost of third-party software products
distributed by us and the cost of product media, manuals and shipping. Cost of
service and maintenance revenues consists of the cost of providing consulting,
implementation and training to licensees of our products and the cost of
providing software maintenance to customers, technical support services and
periodic upgrades of software.

      The cost of software license revenues is not indicative of our normal
operations because in both the first quarter of the current year and the first
and second quarters of last year there were settlements with former customers
that resulted in the recognition of revenue without any associated cost of
revenues. In the third quarter of the current year our new license sales
consisted of a higher percentage of sales of third party software, which in turn
resulted in a higher cost of software sales.

      Cost of service and maintenance revenues declined substantially in both
the third quarter and the nine-month period of the current year versus the
comparable periods of the prior year as a direct result of a reduction in
staffing due to a lower level of client implementations.

        Operating Expenses. Aggregate operating expenses, before the one time
charge for the impairment of goodwill, for the third quarter and the nine-month
period were 3% and 4% below those for the prior year's third quarter and
nine-month period respectively. During the quarter, we made the decision to
reduce costs in every aspect of our business. During the third quarter, we
reduced the size of our sales department and refocused our efforts on building
our FMS solution and our BPO business. We intend to focus on our reseller
relationships to increase sales of our FMS solution to generate more dependable
and recurring sources of revenue. These actions had the immediate effect of
reducing our ongoing operating expenses.

      Sales and Marketing. Sales and marketing expenses consist primarily of
salaries, commissions, travel and promotional expenses, and facility and
communication costs for our sales staff. Sales and marketing expenses increased
58% to $602,000 for the third quarter of 2001 from $380,000 in the comparable
period of last year and increased 72% to $2.1 million for the nine-month period,
in each case, primarily due to the build-up of our sales force. [As we decrease
our sales force and focus our efforts on our reseller relationships we expect
that our sales expenses will also decrease]. The amounts for the nine-month
period of the current year included approximately $330,000 in commissions
awarded to sales agents in arbitration, which was previously disclosed.

      Product Development. Product development expenses include software
development costs and consist primarily of engineering personnel costs. Product
development expenses decreased 49%, to $270,000 for the quarter ended September
30, 2001 from $529,000 for the quarter ended September 30, 2000. For the
nine-month period, these expenses declined 33% or $643,000 to $1.3 million. The
declines in both periods were primarily due to a reduction in headcount. Product
development expenses are expected to continue to be at reduced levels until
revenue begins to increase.

General and Administrative. General and administrative expenses consist
primarily of salaries of executive, administrative and financial personnel, as
well as provisions for doubtful accounts, amortization of goodwill and outside
professional fees. General and administrative expenses declined 2% and 17% to
$940,000 and $2.3 million for the quarter and nine-month period ended September
30, 2001, respectively, from $960,000 and $2.7 million in the third quarter and
nine-month period of fiscal year 2000. This is primarily due to a reduction in
headcount and reduced professional fees. We expect the level of general and
administrative expenses to continue to decline [DOES GOOD WILL IMPACTG&A?] as we
continue to reduce our usage of outside professionals and work to further reduce
other expenses in this area.

Impairment of Goodwill. During September of 2001 management conducted a periodic
impairment assessment of the intangible assets resulting from the Dodge
acquisition, which took place in June of 1998. As a result of that review,
management concluded that an impairment had occurred with the goodwill and
intangible assets and that the remaining balance of goodwill relating to the
Dodge acquisition in the amount of $862,000 should be written off in the current
quarter.


                                       10
<PAGE>

Interest Income and Interest Expense. Interest income represents income earned
on the Company's cash, cash equivalents and marketable securities. Net interest
expense was $9,000 for the third quarter and $24,000 for the nine-month period
of the current year. Net interest expense increased over the comparable periods
last year as a result of the reduced level of funds invested in the current
fiscal year as compared to the prior year, while our interest expense increased
as a result of interest on notes payable to vendors and borrowings under our
equipment financing arrangements.

Income Taxes. No provision or benefit for federal, state or foreign income taxes
was made for any of the periods reported upon due to current earnings being
offset by operating loss carry forwards. Until recently, we have reported only
tax losses to date and consequently have approximately $47.9 million and $9.1
million of U.S. and foreign net operating loss carryforwards, respectively,
which expire during the years 2005 through 2020, available to offset future
taxable income. The utilization of such net operating losses is subject to
limitations as a result of ownership changes. The annual limitation and the
timing of attaining profitability will result in the expiration of net operating
loss carryforwards before utilization and therefore a valuation reserve has been
set up for any deferred tax assets.

LIQUIDITY AND CAPITAL RESOURCES

      Since our inception, we have primarily financed our operations through
private placements of stock to private investors, issuances of convertible and
nonconvertible promissory notes and loans, equipment financing and traditional
borrowing arrangements, and in December 1997, an initial public offering of
Common Stock, resulting in net proceeds to the Company of approximately $22.2
million.

      As of September 30, 2001, we had cash and cash equivalents of $351,000, a
decrease of $1,146,000 from December 31, 2000. Cash declined primarily as a
result of a loss on operations and payments on trade accounts payable and long
term financing arrangements. Our working capital deficit at September 30, 2001
was $3.4 million, compared to $3.3 million at December 31, 2000. This working
capital deficit is primarily the result of deferred revenues of $5.0 million and
$5.1 million at December 31, 2000 and September 30, 2001, respectively. Our
operating activities resulted in net cash outflow of $566,000 for the nine
months ended September 30, 2001, and results primarily from payment of
previously accrued liabilities and a reduction of deferred revenue. Our
financing activities resulted in a net cash outflow for the nine months ended
September 30, 2001 of $544,000, principally from payment of lease obligations
and notes payable.

      While we believe that cash and cash equivalents and cash generated
internally by operations will be sufficient to meet our working capital
requirements for the next several quarters, we caution that this is contingent
upon our continuing to have substantially breakeven results over the next
several quarters. We are currently evaluating financing alternatives; however,
there can be no assurance that capital will be available to us on favorable
terms, or at all.

      Management continues to take actions to reduce costs in response to lower
revenues and is prepared to take further actions, if necessary, in order to
continue to respond to competitive and economic pressures in the marketplace.
However, there can be no assurance that we will be able to reduce costs to a
level to appropriately respond to competitive pressures or to obtain additional
funding.

CERTAIN FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS

      Unproven Market Acceptance of our FMS Solution. We are still in the early
stages of marketing our FMS back office processing solution. Our future
financial performance could depend, in significant part, on the successful
introduction and customer acceptance of FMS. There can be no assurance that our
FMS solution will be successfully implemented or gain market acceptance.

      Potential Fluctuations in Quarterly Performance; Seasonality. Our revenues
and operating results have varied substantially from quarter to quarter. Our
quarterly operating results may continue to fluctuate due to a number of
factors, including the timing, size and nature of our licensing transactions;
the market acceptance of new services, products or product enhancements by us or
our competitors; product and price competition; the relative proportions of
revenues derived from license fees, services and third-party channels; changes
in our operating expenses; personnel changes; the timing of the introduction,
and the performance of, our Flexi Industry Partners; foreign currency exchange
rates; and fluctuations in economic and financial market conditions.


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<PAGE>

      The timing, size and nature of individual licensing transactions are
important factors in our quarterly results of operations. Many such transactions
involve large dollar amounts, and the sales cycles for these transactions are
often lengthy and unpredictable. In addition, the sales cycles associated with
these transactions are subject to a number of uncertainties, including
customers' budgetary constraints, the timing of customers' budget cycles and
customers' internal approval processes. There can be no assurance that we will
be successful in closing such large transactions on a timely basis or at all.
Software license revenues under our license agreements are recognized upon
delivery and installation of the product and when all significant contractual
obligations have been satisfied. Significant obligations would include future
promises of enhancements and/or modifications that are essential to the product.
Delays in the installation of the software, including potential delays
associated with contractual enhancements to our software products, could
materially adversely affect the quarterly results of operations. In addition, as
we derive a significant proportion of total revenues from license revenues, we
may realize a disproportionate amount of our revenues and income in the last
month of each quarter and, as a result, the magnitude of quarterly fluctuations
may not become evident until late in, or at the end of, a given quarter.
Accordingly, delays in product delivery and installation or in the closing of
sales near the end of a quarter could cause quarterly revenues and, to a greater
degree, results of operations to fall substantially short of anticipated levels.

      Due to all of the foregoing factors, we believe that period-to-period
comparisons of our results of operations are not necessarily meaningful and that
such comparisons cannot be relied upon as indicators of future performance.
There can be no assurance that future revenues and results of operations will
not vary substantially. It is also possible that in some future quarter our
results of operations will be below the expectations of public market analysts
and investors. In either case, the price of our Common Stock could be materially
adversely affected.

      Dependence on Key Personnel. Our performance depends substantially on the
performance of our Chief Executive Officer, Stefan Bothe as well as our limited
sales force and other software professionals, particularly project managers,
software engineers and other senior technical personnel. We are dependent on our
ability to attract, retain and motivate high-quality personnel, especially our
management, sales staff and highly skilled development team. We do not have
employment contracts with any of our key personnel. The further loss of services
of any of our key employees could have a material adverse effect on our
business, financial condition and results of operations. We maintain a key
person insurance policy on Stefan R. Bothe, Chairman of the Board of Directors,
Chief Executive Officer and acting Chief Financial Officer.

      Lengthy Sales Cycle. The Company's software is often used for
business-critical purposes, and its implementation involves significant capital
commitments by customers. Potential customers generally commit significant
resources to an evaluation of available software and require the Company to
expend substantial time, effort and money educating potential customers about
the value of the Company's solutions. Sales of the Company's software products
require an extensive education and marketing effort throughout a customer's
organization because decisions to license such software generally involve the
evaluation of the software by a significant number of customer personnel in
various functional and geographic areas, each having specific and often
conflicting requirements. A variety of factors, including factors over which the
Company has little or no control, may cause potential customers to favor a
competing vendor or to delay or forego a purchase. As a result of these or other
factors, the sales cycle for the Company's products is long, typically ranging
between three and nine months. Due to the length of the sales cycle for our
software products, including delays in implementing the Company's software
across several functional and geographic areas of an organization, the Company's
ability to forecast the timing and amount of specific sales is limited, and the
delay or failure to complete one or more large license transactions could have a
material adverse effect on the Company's business, financial condition or
results of operations.

      Competition. The market for the Company's products and services is
intensely competitive and is characterized by rapid change in technology and
user needs and the frequent introduction of new products. In recent quarters,
the Company has been observing increasingly aggressive pricing practices and/or
unusual terms and conditions offered to customers by its competitors, and
increasing competition in the middle market from competitors which previously
focused principally on larger corporations. A number of the Company's
competitors are more established, benefit from greater name recognition and have
substantially greater financial, technical and marketing resources than the
Company and its partners and distributors. In addition, the Company's partners
may develop or offer products and services that compete with the Company's
products and services. There can be no assurance that the Company's partners
will not give higher priority to the sales of these or other competitive
products and services. There can be no assurance that the


                                       12
<PAGE>
Company will be able to compete successfully against current and future
competitors or that competitive pressures faced by the Company will not
materially adversely affect its business, financial condition and results of
operations.

      Risks Associated with Third-Party Channels. We address certain vertical
and geographic markets through our partners. We rely on our third-party channels
to provide sales and marketing presence and name recognition, as well as the
resources necessary to offer industry-specific financial accounting solutions.
Although we expect to dedicate significant resources to develop our partners,
there can be no assurance that we will be able to attract and retain qualified
firms in targeted vertical markets. Our failure of to maintain our current
third-party channels or find other third-party channels, our inability to
adequately support such channels, the development of competitive products and
services by our third-party channels or the entry by such firms into alliances
with our competitors would substantially limit our ability to market our
products and services and, accordingly, have a material adverse effect on our
business, financial condition and results of operations. Although we have
attempted to seek partners in distinct vertical markets and distributors in
distinct geographic markets, and to manage them in a manner to avoid potential
channel conflicts, there can be no assurance that channel conflicts may not
develop. Any such conflicts may adversely affect our relationship with
third-party channels or adversely affect our ability to develop new channels.

ITEM 3.      QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

      Market risk refers to the potential effects of unfavorable changes in
certain prices and rates on Company's financial results and conditions,
primarily foreign currency exchange rates and interest rates on marketable
securities. The Company does not utilize derivative instruments in managing its
exposure to such changes. The Company does not believe that near-term changes in
foreign currency exchange rates or interest rates will have a material effect on
its future earnings, fair values or cash flows.

PART II.  OTHER INFORMATION

ITEM 1.         LEGAL PROCEEDINGS

                  None

ITEM 2.        CHANGES IN SECURITIES AND USE OF PROCEEDS

                      None

ITEM 3.        DEFAULT UPON SENIOR SECURITIES

                      None

ITEM 4.        SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

                     None

ITEM 5.        OTHER INFORMATION

                     None

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits

                 None

              (b)   Reports on Form 8K

                      None


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<PAGE>

                                    SIGNATURE

      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.

                                     FLEXIINTERNATIONAL SOFTWARE, INC.

<TABLE>
<S>                                  <C>
      Date: November  14 , 2001      By   /s/ Stefan R. Bothe
                                        ------------------------------------------------------------
                                          Stefan R. Bothe, Chairman of the Board, President,
                                          Chief Executive Officer and acting Chief Financial Officer
                                          (Principal Executive Officer and Principal Financial Officer)
</TABLE>


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