<PAGE>   1


                                    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 March 31, 2000

                                       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)

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

                                 (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 March 31, 2000,  there were 17,668,595  shares of  FlexiInternational
Software, Inc. Common Stock outstanding.



<PAGE>   2


                        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 Statements 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...............................   9

PART II. OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K..................................   14

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

                                       2
<PAGE>   3


PART I.  FINANCIAL INFORMATION

              Item 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                        FLEXIINTERNATIONAL SOFTWARE, INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS

                        (IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
                                                                                   March 31,   December 31,
                                                                                  -----------  ------------
                                                                                     2000          1999
                                                                                  -----------   -----------
                                                                                  (unaudited)
<S>                                                                                <C>          <C>
         ASSETS
         ------
Current assets:

  Cash and cash equivalents                                                         $  1,138    $  1,874
  Accounts receivable, net of allowance for doubtful
    accounts of $798 and $843, respectively                                            5,413       6,155
  Prepaid expenses and other current assets                                              528         477
                                                                                    --------    --------
        Total current assets                                                           7,079       8,506
                                                                                    --------    --------

Property and equipment at cost, net of accumulated depreciation
 and amortization of $3,916 and $3,444, respectively                                   1,411       1,663
Acquired software, net of accumulated amortization of $758 and $648, respectively      1,401       1,512
Goodwill, net of accumulated amortization of $5,447 and $5,430, respectively             220         237
Other assets, net of accumulated amortization of $200 and $217, respectively             156         154
                                                                                    --------    --------

        Total assets                                                                $ 10,267    $ 12,072
                                                                                    ========    ========
         LIABILITIES AND STOCKHOLDERS' DEFICIT CURRENT LIABILITIES:
         ----------------------------------------------------------
  Accounts payable                                                                  $  1,704    $  1,657
  Accrued commissions                                                                    346         387
  Accrued restructuring costs                                                            284         401
  Accrued expenses                                                                     1,901       2,272
  Current portion of capital lease obligations                                           536         578
  Deferred revenues                                                                    7,258       8,408
                                                                                    --------    --------
        Total current liabilities                                                     12,029      13,703
                                                                                    --------    --------
Long-term portion of capital lease obligations                                           176         287
                                                                                    --------    --------
        Total liabilities                                                             12,206      13,990
                                                                                    --------    --------
Stockholders' deficit:
  Common stock; $.01 par value; 50,000,000 shares authorized;
    issued shares - 17,683,133, as of the end of both periods and
    outstanding shares - 17,668,595 and 17,664,008,  respectively                        177         177
  Additional paid-in capital                                                          56,128      56,128
  Accumulated deficit                                                                (58,240)    (58,251)
  Other comprehensive income                                                              23          63
  Common stock in treasury at cost - 14,538 and 19,125 shares, respectively              (27)        (35)
                                                                                    --------    --------
        Total stockholders' deficit                                                   (1,939)     (1,918)
                                                                                    --------    --------

        Total liabilities and stockholders' deficit                                 $ 10,267    $ 12,072
                                                                                    ========    ========
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       3
<PAGE>   4


                        FLEXIINTERNATIONAL SOFTWARE, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                        Three Months Ended March 31,
                                        ----------------------------
                                          2000                1999
                                        --------           ---------
                                                           (Restated,
                                                            Note 3)
<S>                                     <C>                 <C>
Revenues:
  Software license                      $  1,032            $    855
  Service and maintenance                  2,595               3,133
                                        --------            --------
        Total revenues                     3,627               3,988
                                        --------            --------

Cost of revenues:
  Software license                           218                  68
  Service and maintenance                  1,130               2,601
                                        --------            --------
        Total cost of revenues             1,348               2,669
                                        --------            --------

Operating expenses:
  Sales and marketing                        411               2,461
  Product development                        799               2,686
  General and administrative               1,050               2,249
  Restructuring charge (See Note 2)           --               1,896
                                        --------            --------
Total operating expenses                   2,260               9,292
                                        --------            --------

Operating income (loss)                       19              (7,973)
Interest income                               16                 104
Interest expense                             (18)                (30)
                                        --------            --------
Income (loss) before income taxes             17              (7,899)
Income taxes                                  --                  --
                                        --------            --------
Net income (loss)                       $     17            $ (7,899)
                                        ========            ========

Net income (loss) per share:
  Basic                                 $   0.00            $  (0.46)
  Diluted                               $   0.00            $  (0.46)

Weighted average shares:
  Basic                                   17,665              17,339
  Diluted                                 17,996              17,339
</TABLE>



     See accompanying notes to condensed consolidated financial statements.

                                       4
<PAGE>   5


                        FLEXIINTERNATIONAL SOFTWARE, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                 (IN THOUSANDS)

                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                       Three Months Ended March 31,
                                                       ----------------------------
                                                         2000                1999
                                                       --------           ---------
                                                                         (Restated,
                                                                           Note 3)
<S>                                                    <C>               <C>
Cash flows from operating activities:

Net income (loss)                                      $    17             $(7,899)
Non-cash items included in net income (loss):
   Depreciation and amortization                           366                 744
   Provision for doubtful accounts                          60                 602
   Loss on disposal of assets                               12                  --
Change in operating accounts:
   Accounts receivable                                     722               1,586
   Prepaid expenses and other assets                       (54)                170
   Accounts payable and accrued expenses                  (351)             (2,444)
   Accrued restructuring                                  (117)              1,211
   Deferred revenue                                     (1,122)              1,064
                                                       -------             -------
Net cash used in operating activities                     (467)             (4,966)
                                                       -------             -------

Cash flows from investing activities:

Proceeds from sales of property and equipment               --                  29
Purchase of property and equipment                          (8)               (105)
                                                       -------             -------
Net cash used in investing activities                       (8)                (76)
                                                       -------             -------

Cash flows from financing activities:

  Proceeds from line of credit                              --               2,000
  Proceeds from employee stock purchase plan                 8                  56
  Payments of capital lease obligations                   (152)               (156)
                                                       -------             -------
Net cash (used in) provided by  financing activities      (144)              1,900
                                                       -------             -------

Effect of exchange rate changes on cash                   (117)                 37
                                                       -------             -------

Decrease in cash and cash equivalents                     (736)             (3,105)
                                                       -------             -------
Cash and cash equivalents at beginning of period         1,874               7,876
                                                       -------             -------
Cash and cash equivalents at end of period             $ 1,138             $ 4,771
                                                       =======             =======
</TABLE>


     See accompanying notes to condensed consolidated financial statements.

                                       5
<PAGE>   6

                        FLEXIINTERNATIONAL SOFTWARE, INC.
           CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

                        (IN THOUSANDS, EXCEPT SHARE DATA)
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                   Common Stock     Additional                   Other                   Total
                               -------------------   paid-in    Accumulated  comprehensive  Treasury  stockholders' Comprehensive
                                 Shares     Amount   capital      deficit       income        stock     deficit     income (loss)
                               ----------   ------  ----------  -----------  -------------  --------   -------      -------------
<S>                             <C>          <C>      <C>        <C>             <C>         <C>        <C>              <C>
Balance at December 31, 1999   17,683,133    $ 177    $56,128    $(58,251)       $   63      $  (35)    $(1,918)
Shares issued for stock plan           --       --         --          (6)           --           8           2
Net income                             --       --         --          17            --          --          17          $   17
Currency translation
 adjustment                            --       --         --          --           (40)         --         (40)            (40)
                                                                                                                         ------
Comprehensive Income                   --       --         --          --            --          --          --          $  (23)
                               ----------    -----    -------    --------        ------      ------     -------          ======


Balance at March 31, 2000      17,683,133    $ 177    $56,128    $(58,240)       $   23      $  (27)    $(1,939)
                               ==========    =====    =======    ========        ======      ======     =======
</TABLE>


     See accompanying notes to condensed consolidated financial statements.

                                       6
<PAGE>   7


                        FLEXIINTERNATIONAL SOFTWARE, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                        THREE MONTHS ENDED MARCH 31, 2000
                                   (UNAUDITED)

NOTE 1 - BASIS OF PRESENTATION

The condensed consolidated financial statements included herein have been
prepared by the Company, 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, the Company believes that the
disclosures are adequate to make the information presented not misleading. These
condensed consolidated financial statements should be read in conjunction with
the financial statements and the notes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1999.

The unaudited condensed consolidated financial statements include the accounts
of FlexiInternational Software, Inc. and its subsidiaries 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 three month
period ended March 31, 2000. The results for the three-month period ended March
31, 2000 are not necessarily indicative of the results expected for the full
year.

NOTE 2 - RESTRUCTURING CHARGE

On February 26, 1999, management, with the approval of the Board of Directors,
took certain actions to reduce employee headcount in order to align its sales,
development and administrative organization with the current overall
organization structure, and to position the Company for profitable growth in the
future consistent with management's long term objectives. In this regard, the
primary actions taken include involuntary terminations of selected personnel.
Severance packages were offered to 66 employees. This reduction in headcount
also led to the Company having excess leased facility space. As a result of
these actions, the Company recorded a charge to operations during the
three-month period ended March 31, 1999 of $1,896. Of the total amount of this
charge, $1,730 was related to severance costs, of which $667 was paid during the
three-month period ended March 31, 1999 and $166 related to costs of idle
facility space, of which $18 was paid during the three-month period ended March
31, 1999. In the quarter ended March 31, 2000, $117 of severance benefits were
paid and charged against this reserve. The remaining balance of the severance
costs is $284 and is payable in installments for up to eleven months. See table
below. The Company believes that these actions resulted in sustainable cost
savings, primarily through the elimination of redundant functions in product
development, due to completion of development work on FlexiFinancials Release 4,
and to a lesser extent in the support and sales organizations.

Detail of the restructuring charge is as follows:

<TABLE>
<CAPTION>
                             Severance          Excess
                            & Benefits        Facilities        Total
                            ----------        ----------      ---------
<S>                          <C>               <C>            <C>
Reserve balances,
December 31, 1999            $     401         $     --       $     401

Cash charges                      (117)              --            (117)
                             ----------        --------       ---------
Reserve balances,
March 31, 2000               $     284         $     --       $     284
                             =========         ========       =========
</TABLE>


NOTE 3 - RESTATEMENT

As a result of the Company's regular quarterly financial statement review with
its independent accountants in the second quarter of 1999, the Company
determined that it would restate the prior year amounts originally reported for
1998 and the first quarter of 1999, to reflect a change in the revenue
recognition for several software license contracts. Most of the restated amounts
relate to two contracts that the Company believes were appropriately due and
payable under their


                                       7
<PAGE>   8


contractual terms but payments with respect to which, in the second quarter of
1999 became subject to dispute as a result of certain performance commitments,
by the contracting parties. For revenue which has been restated in 1998 and
1999, all amounts billed are included in accounts receivable as of the related
periods with a corresponding offset included in deferred revenues. Any amounts
stipulated in contracts which have not been invoiced have not been recognized in
the financial statements. A summary of the effects of the restatement follows:

<TABLE>
<CAPTION>
                                      Quarter ended March 31, 1999
                                      -----------------------------
                                      As Reported         Restated
                                      -----------        ----------
<S>                                     <C>                <C>
OPERATING STATEMENT:
Software license revenue                $ 1,055            $   855
Service and maintenance revenue           3,281              3,133
                                        -------            -------
Total revenues                            4,336              3,988

Total operating expenses                  9,292              9,292
Operating loss                           (7,625)            (7,973)
Loss before income taxes                 (7,551)            (7,899)
Net loss                                 (7,551)            (7,899)
Loss per share:
  Basic                                 $ (0.44)           $ (0.46)
  Diluted                               $ (0.44)           $ (0.46)
</TABLE>

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS
          OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

      OVERVIEW

      The Company designs, develops, markets and supports the Flexi Financial
Enterprise Suite of financial and accounting software applications and related
tools. The Flexi solution -- composed of FlexiFinancials, Flexi Financial
Datawarehouse (FlexiFDW), FlexilnfoAccess and FlexiTools -- is designed to
address the needs of users with sophisticated financial accounting and
operational analysis requirements.

      The Company's revenues are derived from two sources: software license
revenues and service and maintenance revenues. Software license revenues had
generally grown as additional applications had been released for general
availability and the installed base of customers has increased. However, this
trend has reversed in recent years, due to a delay in customers buying
decisions, as a result of uncertainties surrounding year 2000. Service and
maintenance revenues have generally grown due to the increase in the Company's
installed base of customers and the growth in the Company's consulting services
practice.

      Software license revenues include (i) revenues from noncancellable
software license agreements entered into between the Company and its customers
with respect to the Company's products, (ii) royalties due to the Company from
third parties that distribute the Company's products and, to a lesser extent,
(iii) third-party products distributed by the Company. Software license revenues
through the Company's direct sales channel are recognized when persuasive
evidence of an arrangement exists, the licensed products have been shipped, fees
are fixed and determinable and collectibility is considered probable. Customers
may elect to receive the licensed products pre-loaded and configured on a
hardware unit. In this case, revenue is recognized when the licensed products
are installed on the hardware unit, the unit is shipped and all other criteria
are met. Software license royalties earned through the Company's indirect sales
channel are recognized as such fees are reported to the Company. 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 modification
that are essential to the product. Revenues for maintaining, supporting and
providing periodic upgrading are deferred and recognized ratably over the
maintenance period, generally one year. Revenues from training and consulting
services are recognized as such services are performed. The Company does not
require collateral for its receivables, and reserves are maintained for
potential losses.

                                       8
<PAGE>   9

      Historically, the Company's revenues have been derived from both domestic
sales and international sales, with the international sales comprising 31.0% and
30.4% of total revenues for the quarters ended March 31, 2000 and 1999
respectively. The Company's international sales generally have the same cost
structure as its 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 the Company's products more expensive
and, therefore, potentially less competitive in foreign markets. In addition,
the Company's 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. See "Certain Factors that May Affect Future Operating
Results."

      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 the Company's financial
position or results of operations. Therefore, the Company charges all product
development expenses to operations in the period incurred.

RESULTS OF OPERATIONS

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

<TABLE>
<CAPTION>
                                                                  QUARTER ENDED MARCH 31,
                                                                  ------------------------
                                                                    2000          1999 (1)
                                                                  -------         --------
<S>                                                                <C>            <C>
              Revenues:
                 Software license                                   28.5%            21.4%
                 Service and maintenance                            71.5%            78.6%
                                                                  -------         --------
                    Total revenues                                 100.0%           100.0%
              Cost of revenues:
                 Software license                                    6.0%             1.7%
                 Service and maintenance                            31.2%            65.2%
                                                                  -------         --------
                    Total cost of revenues                          37.2%            66.9%
                                                                  -------         --------
              Gross Profit                                          62.8%            33.1%
              Operating expenses:
                 Sales and marketing                                11.3%            61.7%
                 Product development                                22.0%            67.4%
                 General and administrative                         28.9%            56.4%
                 Restructuring charge                                 --             47.5%
                                                                  -------         --------
                   Total operating expenses                         62.3%           233.0%
                                                                  -------         --------
              Operating income (loss)                                 .5%          (199.9%)
              Interest (expense) income                             (0.1%)            1.9%
                                                                  -------         --------
              Income (loss) before income taxes                      0.5%          (198.1%)
              Income taxes                                            --                --
                                                                  -------         --------
              Net income (loss)                                      0.5%          (198.1%)
                                                                  =======         ========
</TABLE>

(1) Restated, see Note 6 to the consolidated financial statements.


Quarter Ended March  31, 2000  Compared to Quarter Ended March 31, 1999

      Revenues. Total revenues, consisting of software license revenues and
service and maintenance revenues, decreased 9%, from $4.0 million for the
quarter ended March 31, 1999 to $3.6 million for the quarter ended March 31,
2000. Domestic revenues increased 24% for the quarter ended March 31, 2000 to
$3.0 million from $2.4 million in revenue the quarter ended March 31, 1999.
International revenues, those derived from sales outside of the U.S., decreased
59% from $1.6 million for the quarter ended March 31, 1999 to $0.6 million for
the quarter ended March 31, 2000. The Company believes that the combination of a
long sales cycle for it's products, coupled with the delays in potential
customers' buying decisions last year, as result of concerns over the effect
that the new millennium (Y2K) may have had on their computer systems, adversely
impacted first quarter 2000 revenue. The Company expects these issues to
continue to slow its recovery process over the next several quarters.

                                       9
<PAGE>   10

      Software license revenues increased 21%, to $1.0 million for the quarter
ended March 31, 2000 from $0.9 million for the comparable period of the prior
year. One customer in the March 2000 quarter accounted for almost half of the
Company's total software revenue. The Company believes that the growth in
software revenues was and will continue to be negatively impacted by the year
2000 acquisition slowdown among large potential customers but will slowly return
to normalcy as concerns about year 2000 abate. Even though the Company's
products have successfully broached the millennium, the normal sales cycle for
the Company's products from lead generation to closing is two to three quarters
and can extend to over a year for very large orders. The Company is trying to
bolster its recovery by rebuilding its' sales force, employing additional sales
channels such as the previously disclosed agreement with The Freedom Group and
expanding its product offerings to include providing accounting outsourcing for
companies utilizing the Company's software and internal resources. The Company
believes the addition of an accounting outsourcing product extension will, over
time, provide a solid, consistent and profitable source of revenue that will
smooth out some of the current seasonality of its business. The Company does not
expect to realize revenue from accounting outsourcing before the fourth quarter
of the current fiscal year. While the Company is confident that these actions
will ultimately produce a return to consistent and profitable growth in the
future, it recognizes that this evolution will take several quarters to begin to
have a positive impact on operations.

        Service and maintenance revenues decreased 17%, from $3.1 million for
the quarter ended March 31, 1999 to $2.6 million for the quarter ended March 31,
2000. The decrease was primarily attributable to a 27% drop in service revenue
due to fewer active client implementations. The Company does not expect this
source of revenue to resume a growth pattern until it resumes a stronger pattern
of growth in software license fees.

      Cost of Revenues. The Company's 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 the Company 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 the Company's
products and the cost of providing software maintenance to customers, technical
support services and periodic upgrades of software.

      Cost of software license revenues increased 221%, from $68,000 for the
quarter ended March 31, 1999 to $218,000 for the quarter ended March 31, 2000.
Cost of software license revenues as a percentage of software license revenues
increased from 8% for the quarter ended March 31, 1999 to 21% for the quarter
ended March 31, 2000. The increase in cost of software license revenues was
primarily due to an increase in third-party software products distributed by the
Company

      Cost of service and maintenance revenues decreased 57%, from $2.6 million
for the quarter ended March 31, 1999 to $1.1 million for the quarter ended March
31, 2000. The decrease in the costs of services and maintenance was primarily
the result of the increased efficiency realized in providing services in the
current year, which is a direct result of the corporate restructuring that took
place in the first and second quarters of the prior fiscal year (see
Restructuring below).

      Aggregate operating expenses declined 76% in the quarter ended March 31,
2000 to $2.3 million from $9.3 million in the quarter ended March 31, 1999. This
is a direct result of the restructuring noted below and the aforementioned
reduced level of revenues. Comparisons made between the first quarter of the
current fiscal year to the comparable period of the prior year may not be
meaningful because of the restructuring.

      Sales and Marketing. Sales and marketing expenses consist primarily of
salaries, commissions, travel and promotional expenses, and facility and
communication costs for direct sales offices. Sales and marketing expenses
decreased 83%, from $2.5 million for the quarter ended March 31, 1999 to $.4
million in the first quarter of the current fiscal year. The decrease in dollar
amount was primarily attributable to reduced staffing levels in the sales and
marketing organization, as the costs of this organization were reduced to a
level consistent with revenues anticipated when the Company went through its'
restructuring. The Company has recently started to increase its investment in
sales and marketing to both support the expansion of its product line to the
accounting outsourcing area and to continue the pursuit of more Flexi Industry
Partnership arrangements.

      Product Development. Product development expenses include software
development costs and consist primarily of engineering personnel costs. Product
development expenses decreased 70%, from $2.7 million for the quarter ended
March 31, 1999 to $.08 million for the quarter ended March 31, 2000. Product
development expenses are expected to increase slightly throughout the latter
part of the year as the Company supplements the core development area.

      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 decreased 70%, from $2.2
million for the quarter ended March

                                       10
<PAGE>   11

31, 1999 to $1.1 million in the first quarter of fiscal year 2000. The general
and administrative expenses should stay fairly constant over the next several
quarters. The Company expects to leverage its existing staff to provide
resources for the beginning stages of the accounting outsourcing product

      Interest Income and Interest Expense. Interest income represents income
earned on the Company's cash, cash equivalents. Net interest expense was $2,000
for the quarter ended March 31, 2000 versus net income of $74,000 for the
comparable period of the prior year. This decrease was primarily due to the
reduced level of funds invested in the current fiscal year as compared to the
prior year. Interest expense represents interest expense on capital equipment
leases, and borrowings under the Company's line of credit.

      Income Taxes. No provision or benefit for federal, state or foreign income
taxes was made for the quarters ended March 31, 2000 or 1999 due to the
operating losses incurred in the respective periods. The Company has reported
only tax losses to date and consequently has approximately $44.9 million and
$9.2 million of U.S. and foreign net operating loss carryforwards, respectively,
which expire during the years 2005 through 2019, 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. The Company's deferred tax assets at
March 31, 2000 were $22.6 million, consisting primarily of net operating loss
carryforwards. The Company's benefit of deferred tax assets has been fully
reserved as of March 31, 2000 as the realization of deferred taxes is dependent
on future events and earnings, if any, the timing and extent of which are
uncertain.

CERTAIN FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS

      Dependence on Key Personnel. The Company's performance depends
substantially on the performance of its executive officers and key employees,
including the Company's sales force and software professionals, particularly
project managers, software engineers and other senior technical personnel. The
Company is dependent on its ability to attract, retain and motivate high-quality
personnel, especially its management, sales staff and highly skilled development
team. The Company does not have employment contracts with any of its key
personnel. The loss of the services of any of the Company's executive officers
or other key employees could have a material adverse effect on the Company's
business, financial condition and results of operations. The Company maintains a
key person insurance policy on Stefan R. Bothe, Chief Executive Officer.

      Flexi Industry Partnerships. The Company has entered into several
long-term agreements where the Company's products are licensed to the end users
by a third party. As a result of the reduction in sales and marketing
expenditures that were part of last year's restructuring, this sales channel has
become critical to the continued success of the Company. While these
arrangements have so far been successful, the Company has no control over the
sales effort put forth by these companies and cannot be guaranteed that these
arrangements will continue to benefit the Company in the future.

        The Impact on Sales of the Year 2000. The Company's recovery may be
slowed if the delays in potential customers' buying decisions that occurred last
year, as result of concerns over the effect that the new millennium (Y2K) may
have had on their computer systems, do not return to a normal level of demand
for the Company's products.

      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 required 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 its 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.

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

      The timing, size and nature of individual licensing transactions are
important factors in the Company's 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 the Company will be successful in closing such large transactions on a
timely basis or at all. Software license revenues under the Company's 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 modification
that are essential to the product. Delays in the installation of the Company's
software, including potential delays associated with contractual enhancements to
the Company's software products, could materially adversely affect the Company's
quarterly results of operations. In addition, as the Company derives a
significant proportion of total revenues from license revenues, the Company may
realize a disproportionate amount of its 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.

YEAR 2000 COMPLIANCE

      The year 2000 issue related to computer programs and systems that
recognize dates using two-digit year data rather than four-digit year data.
These programs and systems could have failed or may have provided incorrect
information when using dates after December 31, 1999.

      Neither the Company's own products nor those software products used to
conduct the Company's day to day operations were negatively impacted or failed
to perform to specifications due to the change in millennium.

ITEM 2A.     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.

FORWARD-LOOKING STATEMENTS

      In addition to historical information, this Quarterly Report contains
forward-looking statements. 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. The Company undertakes 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 the
Company files from time to time with the Securities and Exchange Commission,
including the Annual Report on Form 10-K for the year ended December 31, 1999.

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LIQUIDITY AND CAPITAL RESOURCES

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

      As of March 31, 2000, the Company had cash and cash equivalents of $1.1
million, a decrease of $0.7 million from December 31, 1999. The Company's
working capital deficit at March 31, 2000 was $5.0 million, compared to $5.2
million at December 31, 1999. This working capital deficit is caused by the
deferred revenues of $7.3 and $8.4 at March 31, 2000 and 1999 respectively. The
Company's operating activities resulted in net cash outflow of $0.7 million for
the three months March 31, 2000, and result primarily from payment of previously
accrued liabilities and a reduction of deferred liability. The Company's
financing activities resulted in a net cash outflow for the three months ended
March 31, 2000 of $0.1 million, principally from the payment of lease
obligations.

      While the Company believes that cash and cash equivalents, cash generated
internally by operations, will be sufficient to meet the Company's working
capital requirements for at least the next twelve months, it cautions that this
is contingent upon the Company continuing to have substantially breakeven
results over the next several quarters. The Company is currently evaluating
financing alternatives, however there can be no assurance that capital will be
available to the Company 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 the Company will be able to reduce costs
to a level to appropriately respond to competitive pressures or to obtain
additional funding. As a result of the foregoing, there exists substantial doubt
about the Company's ability to continue as a going concern. These financial
statements do not include any adjustments relating to the recoverability of the
carrying amount of recorded assets or the amounts of liabilities that might
result from the outcome of this uncertainty.

PART II.   OTHER INFORMATION

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

           (a)   Exhibits

                 None

           (b)   Reports on Form 8-K

                 None

                                    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.


                                         By: ____________________________

                                         Stefan R. Bothe, Chairman of the Board,
                                         President and Chief Executive Officer
                                         (Principal Executive Officer)


Date: May 11, 2000

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