<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 June 30, 2002

                                       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>
<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 June 30, 2002, there were 17,784,185 shares of FlexiInternational
Software, Inc. Common Stock outstanding.

<PAGE>

                        FLEXIINTERNATIONAL SOFTWARE, INC.

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                       PAGE
                                                                                                                       ----
<S>     <C>                                                                                                            <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' Equity (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 4. Submission of Matters to a Vote of Security Holders............................................................13
Item 6. Exhibits and Reports on Form 8-K...............................................................................14

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


                                       2

<PAGE>

PART I.  FINANCIAL INFORMATION

ITEM 1.  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                FLEXIINTERNATIONAL SOFTWARE, INC. AND SUBSIDIARY
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                        (in thousands, except share data)

<TABLE>
<CAPTION>
                                                                           June 30,       December 31,
                                                                             2002             2001
                                                                           --------       ------------
                                                                          (unaudited)      (audited)
<S>                                                                        <C>            <C>
ASSETS

CURRENT ASSETS
Cash and cash equivalents                                                  $  1,449         $    637
Accounts receivable, net of allowance for doubtful accounts of
  $439 and $22, respectively                                                  1,058            1,954
Prepaid expenses and other current assets                                       203              126
                                                                           --------         --------
                   TOTAL CURRENT ASSETS                                       2,710            2,717

Property and equipment at cost, net of accumulated depreciation
  of $4,654 and $4,569, respectively                                            322              418
Other assets                                                                    371              276
                                                                           --------         --------
                                                                           $  3,403         $  3,411
                                                                           ========         ========

LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES
Accounts payable and accrued expenses                                      $  1,585         $  1,739
Deferred revenue                                                              2,946            3,478
Current portion of long-term debt                                               241              148
                                                                           --------         --------
                   TOTAL CURRENT LIABILITIES                                  4,772            5,365
                                                                           --------         --------
LONG-TERM DEBT LESS PRINCIPAL DUE WITHIN
ONE YEAR                                                                        759              933

STOCKHOLDERS' DEFICIT:

Preferred stock,  par value $.01 per share, 5,000,000 shares
  authorized, no shares issued and outstanding                                    0                0
Common stock, par value $.01 per share, 50,000,000 shares
  authorized, 17,784,185 issued and outstanding                                 178              178
Additional paid-in-capital                                                   56,117           56,117
Accummulated deficit                                                        (58,700)         (59,477)
Other accumulated comprehensive income                                          277              295
                                                                           --------         --------

                   TOTAL STOCKHOLDERS' DEFICIT                               (2,128)          (2,887)
                                                                           --------         --------
                                                                              3,403            3,411
                                                                           ========         ========
</TABLE>

      See accompanying notes to condensed consolidated financial statements.


                                       3

<PAGE>

                FLEXIINTERNATIONAL SOFTWARE, INC. AND SUBSIDIARY
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                    (in thousands, except per share amounts)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                    Three Months Ended                 Six Months Ended

                                                                 June 30,         June 30,         June 30,         June 30,
                                                                   2002             2001             2002             2001
                                                                 --------         --------         --------         --------
<S>                                                              <C>              <C>              <C>              <C>
REVENUE
      Software license                                           $    301         $    530         $    467         $  1,907
      Other operating revenue                                           0                0              500                0
      Service and maintenance                                       1,557            1,749            3,166            3,526
                                                                 --------         --------         --------         --------
                                        TOTAL REVENUE               1,858            2,279            4,133            5,433
                                                                 --------         --------         --------         --------

COST OF REVENUE
      Software license                                                 63               48               82              153
      Service and maintenance                                         491              454            1,076            1,236
                                                                 --------         --------         --------         --------
                                TOTAL COST OF REVENUE                 554              502            1,158            1,389
                                                                 --------         --------         --------         --------
                                         GROSS PROFIT               1,304            1,777            2,975            4,044
                                                                 --------         --------         --------         --------

OPERATING EXPENSES
      Sales and marketing                                             381              887              738            1,520
      Product development                                             339              381              719            1,065
      General and administrative                                      351              476              726            1,318
                                                                 --------         --------         --------         --------
                             TOTAL OPERATING EXPENSES               1,071            1,744            2,183            3,903
                                                                 --------         --------         --------         --------
                               INCOME FROM OPERATIONS                 233               33              792              141

OTHER INCOME (DEDUCTIONS)
      Net interest (expense)                                           (3)              (4)             (15)             (15)
                                                                 --------         --------         --------         --------
                           INCOME BEFORE INCOME TAXES                 230               29              777              126
INCOME TAXES                                                            0                0                0                0
                                                                 --------         --------         --------         --------

                                           NET INCOME            $    230         $     29         $    777         $    126
                                                                 ========         ========         ========         ========

INCOME PER SHARE

      Basic                                                      $   0.01         $   0.00         $   0.04         $   0.01
                                                                 ========         ========         ========         ========

      Diluted                                                    $   0.01         $   0.00         $   0.04         $   0.01
                                                                 ========         ========         ========         ========

WEIGHTED AVERAGE SHARES

      Basic                                                        17,784           17,678           17,784           17,676
                                                                 ========         ========         ========         ========

      Diluted                                                      17,784           17,680           17,784           17,768
                                                                 ========         ========         ========         ========
</TABLE>

     See accompanying notes to condensed consolidated financial statements.


                                       4

<PAGE>

                FLEXIINTERNATIONAL SOFTWARE, INC. AND SUBSIDIARY
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                   Six Months Ended
                                                               -----------------------
                                                               June 30,        June 30,
                                                                 2002           2001
                                                               -------         -------
<S>                                                            <C>             <C>
Cash flows from operating activities:
Net income                                                     $   777         $   126
Non-cash items:
  Depreciation and amortization                                    100             543
  Provision (credit) for doubtful accounts                         251             (11)
Change in operating accounts:
  Accounts receivable                                              644            (563)
  Prepaid expenses and other assets                               (172)           (164)
  Accounts payable and accrued expenses                           (153)           (188)
  Accrued restructuring                                              0             (27)
  Deferred revenue                                                (532)           (188)
                                                               -------         -------
Net cash provided by (used in) operating activities                915            (472)
                                                               -------         -------

Cash flows from investing activities:
  Sales of marketable securities                                     0              60
  Purchases of property and equipment                               (4)             (5)
                                                               -------         -------
Net cash provided by (used in) investing activities                 (4)             55
                                                               -------         -------

Cash flows from financing activities:
  Repayments of debt                                               (30)           (130)
  Proceeds from employee stock purchase plan                         0               1
  Payments of capital lease obligations                            (51)           (283)
                                                               -------         -------
Net cash used in financing activities                              (81)           (412)
                                                               -------         -------

Effect of exchange rate changes on cash                            (18)            (16)
                                                               -------         -------

Increase (decrease) in cash and cash equivalents                   812            (845)
Cash and cash equivalents at beginning of period                   637           1,389
                                                               -------         -------
Cash and cash equivalents at end of period                     $ 1,449         $   544
                                                               =======         =======

Supplemental disclosures:
  Interest paid in cash                                        $    22         $    13
  Conversion of accounts payable into notes payable            $     0         $   142
</TABLE>

     See accompanying notes to condensed consolidated financial statements.


                                       5

<PAGE>

                FLEXIINTERNATIONAL SOFTWARE, INC. AND SUBSIDIARY
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
                        (in thousands, except share data)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                            Other
                                          Common Stock        Additional                 Accumulated                   Total
                                      ---------------------     Paid-in    Accumulated  Comprehensive    Treasury   Stockholders'
                                        Shares       Amount     Capital      Deficit        Income        Stock       Deficit
                                      ----------     ------   ----------   -----------  -------------    --------   -------------
<S>                                   <C>            <C>      <C>          <C>          <C>              <C>        <C>
Balance at December 31, 2001          17,784,185      $178      $56,117      $(59,477)       $ 295         $  0       $(2,887)

Net Income                                     0         0            0           777            0            0           777
       Currency Translation
             Adjustment                        0         0            0             0          (18)           0           (18)
                                                                                                                     --------
Comprehensive Income                           0         0            0             0            0            0           759
                                      ----------      ----      -------      --------        -----         ----       -------
Balance at June 30, 2002              17,784,185      $178      $56,117      $(58,700)       $ 277         $  0       $(2,128)
                                      ==========      ====      =======      ========        =====         ====       =======
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       6
<PAGE>

                FLEXIINTERNATIONAL SOFTWARE, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                     Six months ended June 30, 2002 and 2001
                                   (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 U.S. generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. However, the Company believes
that the condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and the notes thereto
included in the Company's Annual Report on Form 10-K for the year ended December
31, 2001.

NOTE 2--NEW ACCOUNTING STANDARDS
On July 5, 2001, the Financial Accounting Standards Board approved Statement of
Financial Accounting Standards 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. SFAS 142 will
be effective for fiscal years beginning after December 15, 2001. The Company
adopted SFAS 142 in the first quarter of 2002. This did not have a material
effect on the financial statements.

Effective January 1, 2001, the Company adopted Statement of Financial Accounting
Standards No. 133 "Accounting for Derivative Instruments and Hedging Activities"
("SFAS No. 133"). This statement establishes accounting and reporting standards
for derivative instruments embedded in other contracts and hedging activities.
It requires that an entity recognize all derivatives as either other assets or
liabilities in the balance sheet and measure those instruments at fair value.
This statement did not have a material impact on financial condition and results
of operations.

NOTE 3--SIGNIFICANT EVENTS
The second quarter 2002 revenues included $215,000 under license revenue related
to an insurance settlement related to a dispute with a client while the first
quarter 2002 included other operating revenue of $500,000 for the sale of the
dodge.com URL.


                                       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 license revenue,
service revenue, our new outsourcing business, 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, 2001.

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, or FlexiFDW, FlexilnfoAccess and
FlexiTools - is designed to address the needs of users with sophisticated
financial accounting and operational analysis requirements. We sell our software
for use in traditional in-house accounting operations as well as through our
accounting outsourcing service to companies which want to outsource their back
office accounting processes.

         Our Financial Management Services solution, or FMS, a business process
outsourcing (BPO) service, is 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 start-up fast growing companies would benefit
substantially from outsourcing their back office accounting processes to enable
them to better focus on financial analysis, cash management and the strategic
issues of their business. As part of our BPO sales strategy to expand regional
coverage rapidly, we recruit regional resellers of our FMS solution which will
pay us a percentage of the fee they collect for using our software and related
solutions. Some resellers will handle the complete BPO service while others will
handle the client relationship and Flexi will handle the hosting and accounting
aspects of the service. In 2001, we signed a BPO reseller agreement in which we
provided the reseller a convertible loan, in the aggregate principal amount of
$272,000, to help launch the reseller's BPO service. According to industry
analysts, the finance and accounting outsourcing segment of the BPO market is in
the early adoption phase and is expected to double in size over the next three
years. However, the full acceptance of this solution is still several years
away.

         We derive our revenue primarily from:

         -        noncancellable software license agreements entered into with
                  respect to our products;
         -        royalties paid to us from third parties that distribute our
                  products;
         -        to a lesser extent, third-party products distributed by us;
                  and
         -        annual software maintenance agreements entered into with our
                  customers.

         Our revenues have been derived from both domestic sales and
international sales, with the international sales comprising 16.7% and 18.0% of
total revenues for the six-month period ending June 31, 2002 and 2001,
respectively. Our international sales generally have the same cost structure as
our domestic sales. The majority of our international sales are transacted in
British pounds sterling, and an increase in the value of the British pound
relative to the currency of the country in which we are selling our product
could make our products more expensive and potentially less competitive in these
markets. In addition, our international business may be subject to a variety of
other risks, including difficulties in collecting international accounts
receivable or obtaining U.S. export licenses for certain countries, 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."


                                       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               Six Months Ended

                                                                       June 30,       June 30,         June 30,        June 30,
                                                                         2002           2001             2002            2001
                                                                       --------       --------         --------        --------
<S>                                                                    <C>            <C>              <C>             <C>
REVENUE
       Software license                                                  16.2%           23.3%           11.3%           35.1%
       Other operating revenue                                            0.0%            0.0%           12.1%            0.0%
       Service and maintenance                                           83.8%           76.7%           76.6%           64.9%
                                                                        -----           -----           -----           -----
                                     TOTAL REVENUE                      100.0%          100.0%          100.0%          100.0%
                                                                        -----           -----           -----           -----
COST OF REVENUE
       Software license                                                   3.4%            2.1%            2.0%            2.8%
       Service and maintenance                                           26.4%           19.9%           26.0%           22.7%
                                                                        -----           -----           -----           -----
                                         TOTAL COST OF REVENUE           29.8%           22.0%           28.0%           25.5%
                                                                        -----           -----           -----           -----
                                                  GROSS PROFIT           70.2%           78.0%           72.0%           74.5%
                                                                        -----           -----           -----           -----
OPERATING EXPENSES
       Sales and marketing                                               20.5%           38.9%           17.9%           28.0%
       Product development                                               18.2%           16.7%           17.4%           19.6%
       General and administrative                                        18.9%           20.9%           17.6%           24.3%
                                                                        -----           -----           -----           -----
                                      TOTAL OPERATING EXPENSES           57.6%           76.5%           52.9%           71.9%
                                                                        -----           -----           -----           -----
                                        INCOME FROM OPERATIONS           12.6%            1.5%           19.1%            2.6%

OTHER INCOME (DEDUCTIONS)
       Net interest (expense)                                            -0.2%           -0.2%           -0.4%           -0.3%
                                                                        -----           -----           -----           -----
                                    INCOME BEFORE INCOME TAXES           12.4%            1.3%           18.7%            2.3%
INCOME TAXES                                                              0.0%            0.0%            0.0%            0.0%
                                                                        -----           -----           -----           -----

                                                    NET INCOME           12.4%            1.3%           18.7%            2.3%
                                                                        =====           =====           =====           =====
</TABLE>

         Revenues. Total revenues, consisting of software license revenues and
service and maintenance revenues, decreased 18.5% from $2.3 million for the
quarter ended June 30, 2001 to $1.9 million for the quarter ended June 30, 2002.
Total revenues for the six-month period decreased 23% to $4.1 million. Software
license revenues decreased 43% to $301,000 in the second quarter of the current
year from $530,000 in the comparable period of the prior year. The prior year
six-month period included $1.0 million of one-time revenue related to an
arbitration settlement with a former reseller while the second quarter ended
June 30, 2002 included a settlement with a client which resulted in $215,000 in
one-time revenue. One customer accounted for 71% of the software license revenue
recognized during the second quarter of the current year. Our license revenue
will remain low in the foreseeable future as we continue to focus on building
our BPO service revenue.

         Service and maintenance revenues decreased 10%, from $3.5 million for
the quarter ended June 30, 2001 to $3.2 million for the quarter ended June 30,
2002. 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 from new product licenses and BPO contracts.

         Other revenues for the six months ended June 30, 2002 is for $500,000
for the sale of our rights to the URL dodge.com in the first quarter. This was a
one-time sale.

         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 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.


                                       9

<PAGE>

         Cost of software license revenue increased 31%, from $48,000 for the
quarter ended June 30, 2001 to $63,000 for the quarter ended June 30, 2002, but
decreased 46% from $153,000 for the six-month period ended June 30, 2001 to
$82,000 for the same six-month period of 2002. While increases or decreases of
cost of software license revenue are directly related to increases or decreases
on new license revenue, the percentage of third-party revenue will also impact
the cost of software license revenue as third-party revenue has a higher cost
component than our own software. Cost of software license revenues as a
percentage of software license revenues increased to 21% for the quarter ended
June 30, 2002 from 9% for the quarter ended June 30, 2002 and increased to 17%
for the six months ended June 30, 2002 from 8% for the same period of 2001 due
to a higher component of third-party sales.

         Cost of service and maintenance revenues increased 8%, from $454,000
for the quarter ended June 30, 2001 to $491,000 for the quarter ended June 30,
2001. Cost of service and maintenance revenue decreased 13% from $1.2 million
for the six-month period ended June 30, 2001 to $1.1 million for the six-month
period ended June 30, 2002. This six-month decrease is a result of a reduction
in staffing due to a lower level of client implementations.

         Operating Expenses. Aggregate operating expenses declined 39% in the
quarter ended June 30, 2002 to $1.1 million, from $1.7 million in the quarter
ended June 30, 2002. Operating expenses declined 44% for the six-month period
ended June 30, 2002 to $2.2 million from $3.9 million for the same six-month
period in 2001. Over the past three years we have focused our efforts on
reducing expenses to attain a level of profitability.

         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 decreased
57% to $381,000 for the second quarter of 2001 from $887,000 in the comparable
period of last year and decreased 51% for the six-month period as result of a
smaller, more focused sales force.

         Product Development. Product development expenses include software
development costs and consist primarily of engineering personnel costs. Product
development expenses decreased 11% to $339,000 for the quarter ended June 30,
2002 from $381,000 for the quarter ended June 30, 2001. For the six-month
period, these expenses declined 32% or $346,000 to $719,000. The decrease in
product development expense was due primarily to the decrease in development
personnel as a result of the completion of the development work on
FlexiFinancials Release 4.3 during 2001. The Company expects to continue to
enhance the functionality of its core financial accounting and reporting
applications and its BPO solutions but does not anticipate the need to
materially increase its development staff from its current level.

         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 26% to $351,000
for the quarter ended June 30, 2002 from $476,000 in the second quarter of
fiscal year 2001. For the six-month period, these expenses declined 45% from
$1.3 million in 2001 to $726,000 in the same period of 2002. This is primarily
due to a reduction of legal expenses and executive compensation.

         Net Interest Expense. Interest income represents income earned on the
Company's cash, cash equivalents and marketable securities while interest
expense represents interest paid under our equipment leasing agreement. Net
interest expense was $3,000 for the quarter ended June 30, 2002 versus net
interest expense of $4,000 for the comparable period of last year. For the
six-month periods of 2001 and 2002 the net interest expense remained the same at
$15,000.

         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 carryforwards. We have reported only tax
losses to date and consequently have approximately $40.3 million and $26.9
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. The Company's deferred tax assets at
December 31, 2001 were approximately $24.5 million, consisting primarily of net
operating loss carryforwards. The Company's benefit of deferred tax assets has
been fully reserved as of December 31, 2001 and June 30, 2002 as the realization
of deferred taxes is dependent on future events and earnings, if any, the timing
and extent of which are uncertain.

LIQUIDITY AND CAPITAL RESOURCES

         Since inception, the Company has primarily financed its operations
through private placements of its capital stock, issuance of convertible
promissory notes and loans, equipment financing and other traditional borrowing
arrangements. In addition, in December 1997 Flexi consummated an initial public
offering of common stock.

         For the past two years, however, Flexi has funded its operations
primarily through cash received from license and royalty revenues, annual
maintenance contracts, and consulting services provided to its clients. Given
the critical nature of software to our customers' business, most maintenance
contracts are renewed regularly and cancellations are usually due to
circumstances such as mergers and acquisitions of Flexi clients with companies
that are using a competing product.


                                       10

<PAGE>
         As of June 30, 2002, we had cash and cash equivalents of $1.4 million,
an increase of $812,000 from December 31, 2001 including the $500,000 received
for the sale of the dodge.com URL and a $215,000 payment to us under one of our
insurance policies. The Company's working capital deficit at June 30, 2002 was
$2.1 million, compared to a working capital deficit of $2.7 million at December
31, 2001.

         The Company's operating activities resulted in a net cash inflow of
$915,000 for the period ended June 30, 2002 which was mainly the result of an
increase in accounts receivable collections, the cash received from the sale of
our rights to the URL dodge.com and the insurance payment. The Company's
investing activities resulted in a net cash outflow of $4,000 for the period
ended June 30, 2002. At June 30, 2002, the Company had no material commitments
for capital expenditures. During the period ended June 30, 2002, the Company had
net cash outflows from financing activities of $81,000, of which about $8,000
represents interest, which was primarily related to payments of capital lease
obligations and repayments of debt.

         Flexi's contractual cash obligations are outlined in the table below
including its equipment lease and office rental obligations, as well as payments
due under payment terms negotiated with companies for current debt and
settlements of payment disputes. These cash obligations were $243,000 for the
period ending June 30, 2002 and are expected to amount to approximately $91,000
per month for fiscal 2002. Flexi also has an arbitration award of $331,000
against the Company for which collection attempts have been made recently and
payment terms are expected to be negotiated. Where appropriate, Flexi will seek
to negotiate extended payment terms with respect to its financial obligations.
<TABLE>
<CAPTION>
                                                                             Payments Due by Period
                                                                                 (in thousands)
                                                --------------------------------------------------------------------------------
                                                                 Less than                                              After 5
Contractual Obligations                           Total            1 year           1-3 years        4-5 years            years
-----------------------                         --------         ---------          ---------        ---------          --------
<S>                                             <C>              <C>                <C>              <C>                <C>
Facilities Obligation ................          $  499.9             358.2             141.7                --                --
Capital Lease Obligation .............             369.1             214.6             154.6                --                --
Operating Leases .....................              65.3              43.2              22.0                --                --
Other Obligations ....................           1,491.9             463.5             610.0             120.0             298.3
Insurance Obligations ................              72.7              72.7                --                --                --
                                                --------          --------          --------          --------          --------
Total Contractual Cash Obligations ...          $2,498.8            1152.2             928.3             120.0             298.3
                                                ========          ========          ========          ========          ========
</TABLE>
---------------

CERTAIN FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS

         Unproven Market Acceptance of our FMS Solution. If our FMS Solution
does not gain market acceptance, our business will be adversely affected. The
growth of our business will depend largely on the successful implementation of
our recently introduced FMS solution. This solution is an accounting business
processing outsource service or BPO, which we anticipate will allow us to
leverage our suite of accounting software products and our expertise in back
office processing of accounting data. We expect to derive a portion of our
revenues in the future from our BPO service in conjunction with our existing
software suites. If our BPO service does not gain market acceptance, our
revenues may decline and our business may be adversely affected. Factors that
may affect the market acceptance of our BPO service, some of which are beyond
our control, may include:

                  -        the growth, acceptance and changing requirements in
                           the BPO industry;
                  -        the performance, quality and price of our new service
                           and our existing product suites; and
                  -        the availability, price, quality and performance of
                           competing products and services.

         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 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

                                       11

<PAGE>

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.

         The Company's expense levels are based, in significant part, on its
expectations as to future revenues and are largely fixed in the short term. As a
result, the Company may be unable to adjust spending in a timely manner to
compensate for any unexpected shortfall in revenues. Accordingly, any
significant shortfall of revenues in relation to the Company's expectations
would have an immediate and material adverse effect on the Company's business,
financial condition and results of operations.

         The Company has experienced, and may experience in the future,
significant seasonality in its business, and the Company's financial condition
or results of operations may be affected by such trends in the future. In past
years, the Company had greater demand for its products in its fourth quarter and
has experienced lower revenues in its succeeding first quarter. These
fluctuations are caused primarily by pressures on prospects to complete
purchases before year-end to achieve their goals and use the allocated budgets.

         Due to all of the foregoing factors, the Company believes that
period-to-period comparisons of its results of operations are not necessarily
meaningful and that such comparisons cannot be relied upon as indicators of
future performance. The Company's future revenues and results of operations may
vary substantially. It is also possible that in some future quarter the
Company's results of operations will be below the expectations of public market
analysts and investors. In either case, the price of the Company's Common Stock
could be materially adversely affected.

         Dependence on Key Personnel. The Company's performance depends
substantially on the performance of its Chief Executive Officer, Stefan R.
Bothe. The Company has experienced significant turnover in its management and is
therefore operating with a limited group of executive officers and key
employees. In addition, the Company has experienced personnel turnover with
respect to its sales force and software professionals. 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
loss of the services of the Company's executive officer 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.

         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
requires 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.

         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. The Company's partners may not give higher priority to
the sales of these or other competitive products and services. The Company may
not be able to compete successfully against current and future competitors or
competitive pressures faced by the Company would materially adversely affect the
Company's business, financial condition and results of operations.


                                       12

<PAGE>

         Risks Associated with Third-Party Channels. The Company addresses
certain vertical and geographic markets through its partners for its outsourcing
and software business. The Company relies on its 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
the Company expects to dedicate significant resources to develop its partners,
the Company may not be able to attract and retain qualified firms in its
targeted vertical or regional markets. The failure of the Company to maintain
its current third-party channels or find other third-party channels, the
Company's inability to adequately support such channels, the development of
competitive products and services by the Company's third-party channels or the
entry by such firms into alliances with competitors of the Company would
substantially limit the Company's ability to provide its products and services
and, accordingly, have a material adverse effect on the Company's business,
financial condition and results of operations. Although the Company has
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, channel conflicts may develop. Any such conflicts may
adversely affect the Company's relationship with third-party channels or
adversely affect its ability to develop new channels.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES 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

         On July 18, 2001, the Company filed for arbitration with the American
Arbitration Association in a royalty and enhancement fee dispute with its
healthcare industry reseller McKesson Information Services (formerly known as
McKesson HBOC). Several offers by the Company to settle the dispute were
rejected by McKesson. Arbitration is proceeding and the Company expects the case
to be heard in 2002.

         The Company is also a party to various disputes and proceedings arising
from the ordinary course of general business activities including a sales tax
audit by the State of Connecticut involving past acquisition of computer and
related equipment. Although the final outcome of these matters cannot be
determined, we believe that these matters will not seriously harm our business.

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

         (a) The Company held its Annual Meeting of Stockholders on May 24, 2002
(the "Annual Meeting"). There were represented at the meeting in person or by
proxy the holders of 14,272,731 shares of Common Stock, $.01 par value per
share, of the Company, out of a total of 17,698,222 shares of Common Stock of
the Company issued, outstanding and entitled to vote at the meeting.

         (b) At the Annual Meeting, the stockholders elected Robert A. Degan as
a Class II director of the Company for a three-year term by a vote of 14,226,692
shares for, zero votes abstained and zero broker non-votes out of a total of
14,272,731 shares present in person or by proxy and entitled to vote at the
meeting.

         (c) At the Annual Meeting, the stockholders elected Jennifer V. Cheng
as Class II director of the Company for a three-year term by a vote of
13,699,191 shares for, zero votes abstained and zero broker non-votes out of a
total of 14,272,731 shares present in person or by proxy and entitled to vote at
the meeting.

         (d) At the Annual Meeting, the stockholders ratified the appointment of
Hill Barth & King LLC as the independent auditors of the Company for the current
fiscal year by a vote of 14,214,756 shares for, 5,375 against and 52,600
abstaining and zero broker non-votes out of a total 14,272,731 present in person
or by proxy and entitled to vote at the meeting.

         (e) Mr. A. David Tory and Mr. Stefan R. Bothe will continue to serve as
directors having been previously elected by the stockholders.


                                       13

<PAGE>

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a) Exhibits

         99       Certification of Chief Executive Officer and Acting Chief
                  Financial Officer Pusuant to 18 U.S.C. Section 1350, as
                  Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
                  2002.

         (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 /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)


Date: August 14, 2002


                                       14