<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 September 30, 1998

                                       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 September 30, 1998, there were 17,331,122 shares of FlexiInternational
Software, Inc. Common Stock outstanding.





                                       1

<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 Sheet..............................3
            Condensed Consolidated Statement of Operations....................4
            Condensed Consolidated Statement of Cash Flows....................5
            Condensed Consolidated Statement of Stockholders' Equity..........6
            Notes to Condensed Consolidated Financial Statements..............7
Item 2.   Management's Discussion and Analysis of Financial
          Condition and Results of Operations.................................10

PART II.  OTHER INFORMATION

Item 2.   Changes in Securities and Use of Proceeds...........................15
Item 5.   Other Information...................................................15
Item 6.   Exhibits and Reports on Form 8-K....................................15
          Signature...........................................................15
</TABLE>




                                       2
<PAGE>   3
PART I.   FINANCIAL INFORMATION

ITEM 1.   CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


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


<TABLE>
<CAPTION>
                                                                                 September 30,   December 31,
                                                                                 -------------   ------------
                                                                                     1998            1997
                                                                                     ----            ----
                                                                                  (unaudited)
<S>                                                                              <C>             <C>
   ASSETS

Current assets:
 Cash and cash equivalents                                                         $ 17,352        $ 24,622
 Accounts receivable, net of allowance for doubtful
  accounts of $812 and $672, respectively                                            11,341           8,571
 Prepaid expenses and other current assets                                            1,176           1,143
                                                                                   --------        --------
          Total current assets                                                       29,869          34,336

Property and equipment at cost, net of accumulated depreciation
 and amortization of $2,733 and $1,392, respectively                                  2,483           1,222
Long-term receivable                                                                    800              --
Acquired software, net of accumulated amortization of $108 and $0, respectively       2,052              --
Goodwill, net of accumulated amortization of $36 and $0, respectively                   691              --
Other assets, net of accumulated amortization of $215 and $197, respectively            217             112
                                                                                   --------        --------
          Total assets                                                             $ 36,112        $ 35,670
                                                                                   ========        ========
   LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
 Accounts payable and accrued expenses                                             $  6,781        $  4,409
 Current portion of capital lease obligations                                           408             206
 Short-term debt                                                                      1,450              --
 Deferred revenues                                                                    3,324           3,045
                                                                                   --------        --------
          Total current liabilities                                                  11,963           7,660

Long-term portion of capital lease obligations                                          705             304
                                                                                   --------        --------

          Total liabilities                                                          12,668           7,964
                                                                                   --------        --------

Stockholders' equity:
 Common stock; $.01 par value; 50,000,000 shares authorized;
  issued shares - 17,383,133 and 16,492,008 respectively
  outstanding shares - 17,331,122 and 16,492,008 respectively                           174             165
 Additional paid-in capital                                                          56,308          49,749
 Currency translation adjustment                                                         18              --
 Common stock in treasury at cost - 52,011 and 0 shares, respectively                  (277)             --
 Accumulated deficit                                                                (32,779)        (22,208)
                                                                                   --------        --------
          Total stockholders' equity                                                 23,444          27,706
                                                                                   --------        --------

          Total liabilities and stockholders' equity                               $ 36,112        $ 35,670
                                                                                   ========        ========
</TABLE>


     See accompanying notes to condensed consolidated financial statements.




                                       3
<PAGE>   4
                        FLEXIINTERNATIONAL SOFTWARE, INC.
                 CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)



<TABLE>
<CAPTION>
                                                 Three Months Ended September 30,               Nine Months Ended September 30,
                                                 --------------------------------               -------------------------------
                                                   1998                    1997                   1998                   1997
                                                 --------                --------               --------               --------
                                                (unaudited)            (unaudited)             (unaudited)            (unaudited)
<S>                                              <C>                    <C>                     <C>                    <C>
Revenues:
  Software license                               $  1,866                $ 4,541                $ 12,612               $  7,362
  Service and maintenance                           4,243                  2,397                  10,256                  5,098
                                                 --------                -------                --------               --------
          Total revenues                            6,109                  6,938                  22,868                 12,460

Cost of revenues:
  Software license                                    203                    160                   1,334                    619
  Service and maintenance                           3,248                  1,622                   7,107                  3,499
                                                 --------                -------                --------               --------
          Total cost of revenues                    3,451                  1,782                   8,441                  4,118

Operating expenses:
  Sales and marketing                               3,160                  1,992                   7,908                  5,306
  Product development                               3,053                  1,906                   7,379                  5,972
  General and administrative                        2,205                    597                   3,622                  1,699
  Acquired in-process research & development           --                     --                   6,830                     --
                                                 --------                -------                --------               --------
Total operating expenses                            8,418                  4,495                  25,739                 12,977
                                                 --------                -------                --------               --------

Operating (loss) income                            (5,760)                   661                 (11,312)                (4,635)
Interest income                                       254                     32                     824                     98
Interest expense                                      (28)                   (57)                    (70)                  (103)
                                                 --------                -------                --------               --------
(Loss) income before provision for income taxes    (5,534)                   636                 (10,558)                (4,640)
Provision for income taxes                             --                     --                      --                     --
                                                 --------                -------                --------               --------
Net (loss) income                                $ (5,534)               $   636                $(10,558)              $ (4,640)
                                                 ========                =======                ========               ========

Net (loss) income per share:
  Basic                                          $  (0.32)               $  0.10                $  (0.63)              $  (0.79)
  Diluted                                        $  (0.32)               $  0.09                $  (0.63)              $  (0.79)
Weighted average shares:
  Basic                                            17,360                  6,090                  16,809                  5,848
  Diluted                                          17,360                  6,776                  16,809                  5,848
</TABLE>


     See accompanying notes to condensed consolidated financial statements.




                                       4
<PAGE>   5

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


<TABLE>
<CAPTION>
                                                                      Nine Months Ended
                                                                      -----------------
                                                                        September 30,
                                                                        -------------
                                                                     1998           1997
                                                                     ----           ----
                                                                  (unaudited)   (unaudited)
<S>                                                                <C>            <C>
Cash flows from operating activities:
Net loss                                                           $(10,558)      $(4,640)
Non-cash items included in net loss:
   Depreciation and amortization                                        767           404
   Acquired in-process research and development charge                6,830            --
   Provision for doubtful accounts                                      976           275
Change in operating accounts:
   Accounts receivable                                               (3,737)       (2,014)
   Prepaid expenses and other assets                                      8          (241)
   Accounts payable and accrued expenses                               (190)          461
   Deferred revenue                                                    (804)          285
                                                                   --------       -------
Net cash used in operating activities                                (6,708)       (5,470)

Cash flows from investing activities:
   Acquisition of subsidiary, less cash acquired                       (493)           --
   Purchase of property and equipment                                  (689)         (575)
                                                                   --------       -------
Net cash used in investing activities                                (1,182)         (575)

Cash flows from financing activities:
  Purchase of short-term investments                                 (3,448)           --
  Sale of short-term investments                                      3,448            --
  Proceeds from sales of common stock, net of stock issue costs          --         4,300
  Proceeds from line of credit                                        1,450         2,000
  Repayment of debt                                                    (393)           --
  Proceeds from exercise of stock options and warrants                   47            45
  Proceeds from employee stock purchase plan                             32            --
  Purchase of treasury stock                                           (322)           --
  Repayments of convertible note payable                                 --          (106)
  Payments of capital lease obligations                                (198)         (210)
                                                                   --------       -------
Net cash provided by financing activities                               616         6,029
                                                                   --------       -------
Effect of exchange rate changes on cash                                   4            --

Decrease in cash and cash equivalents                                (7,270)          (16)
                                                                   --------       -------
Cash and cash equivalents at beginning of period                     24,622         3,273
                                                                   --------       -------
Cash and cash equivalents at end of period                         $ 17,352       $ 3,257
                                                                   ========       =======
</TABLE>


     See accompanying notes to condensed consolidated financial statements.




                                       5
<PAGE>   6
<TABLE>
<CAPTION>
                                               FLEXIINTERNATIONAL SOFTWARE, INC.
                                   CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                                               (IN THOUSANDS, EXCEPT SHARE DATA)



                                            Common Stock     Additional   Currency                                 Total
                                         ------------------    Paid-in   Translation   Treasury    Accumulated  Stockholders'
                                           Shares    Amount    Capital   Adjustment      Stock       Deficit       Equity
                                         ----------  ------  ----------  -----------  -----------  -----------  -------------
<S>                                      <C>         <C>     <C>         <C>          <C>          <C>          <C>

Balance at January 1, 1998               16,492,008   $165     $49,749       $ --        $  --      $(22,208)     $ 27,706
  Exercise of stock options and warrants     27,625     --          47         --           --            --            47
  Stock issued in conjunction with the
   acquisition of The Dodge Group           863,500      9       6,512         --           --            --         6,521
  Shares issued for ESPP                         --     --          --         --           45           (13)           32
  Treasury stock acquired                        --     --          --         --         (322)           --          (322)
  Net loss                                       --     --          --         --           --       (10,558)      (10,558)
  Currency translation adjustment                --     --          --         18           --            --            18
                                         ----------   ----     -------        ---        -----      --------      --------
Balance at September 30, 1998            17,383,133   $174     $56,308        $18        $(277)     $(32,779)     $ 23,444
                                         ==========   ====     =======        ===        ======     ========      ========


                            See accompanying notes to condensed consolidated financial statements.
</TABLE>




                                        6
<PAGE>   7
                        FLEXIINTERNATIONAL SOFTWARE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



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, 1997.

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 and
nine month periods ended September 30, 1998. The results for the three and nine
month periods ended September 30, 1998 are not necessarily indicative of the
results expected for the full year.

NOTE 2 - EARNINGS PER SHARE

In 1997, the Company adopted Financial Accounting Standards Board Statement 
No. 128, "Earnings Per Share" ("SFAS No. 128"). SFAS No. 128 applies to entities
with publicly held common stock or potential common stock and is effective for
financial statements issued for periods ending after December 15, 1997. Under
SFAS No. 128, the presentation of primary earnings per share is replaced with a
presentation of basic earnings per share. SFAS No. 128 requires dual
presentation of basic and diluted earnings per share for entities with complex
capital structures. Basic earnings per share includes no dilution and is
computed by dividing net income (loss) available to common stockholders by the
weighted average number of common shares outstanding for the period. Diluted
earnings per share reflects the potential dilution of securities that could
share in the earnings of an entity, similar to fully diluted earnings per share.
The Company has presented basic and diluted income (loss) per share for all 
periods.

In February 1998, the SEC issued Staff Accounting Bulletin No. 98 ("SAB 
No. 98"). SAB No. 98 requires the disclosure of historical earnings per share
information for all pre initial public offering (IPO) periods in accordance with
SFAS No. 128. As a result, the Company has included net income (loss) per share 
for all pre-IPO periods presented.

NOTE 3 - ACQUISITION

On June 24, 1998, the Company completed the acquisition of The Dodge Group, Inc.
("Dodge"), a software developer that specializes in financial data warehouse
solutions. Under the terms of the acquisition, the Company issued an aggregate
of 863,500 shares of its common stock and $754,000 in cash in exchange for all
outstanding shares of Dodge stock and payment in full of principal and interest
on promissory notes of Dodge held by certain former stockholders of Dodge. In
addition, the Company granted options to employees of Dodge, under its 1997
Stock Incentive Plan to purchase an aggregate of 168,000 shares of common stock.
The acquisition was accounted for using the purchase method of accounting, and
accordingly, the results of Dodge's operations are included in the Company's
condensed consolidated financial statements from the date of acquisition.

A summary of the purchase price for the acquisition is as follows (in
thousands):

      Stock and stock options                                  $6,521
      Payment of convertible notes payable                        754
      Acquisition costs                                           281
      Liabilities assumed                                       2,161
                                                               ------
                                                               $9,717
                                                               ======




                                       7
<PAGE>   8
A summary of the allocation of the purchase price is as follows (in thousands):

      Acquired in-process research and development             $6,830
      Acquired software                                         2,160
      Goodwill                                                    727
                                                               ------
                                                               $9,717
                                                               ======

Acquired in-process research and development represents the fair value of
technologies acquired for use in the Company's own development efforts. The
Company determined the amount of the purchase price to be allocated to
in-process research and development and acquired software based on an
independent valuation using the income approach. This approach assumes that a
given stream of income and related profits can be attributed to certain
in-process research and development and acquired software. This method examines
the time and cost to incorporate the acquired technology into the Company's
development projects, expected incremental revenues and expenses associated with
the development projects utilizing the acquired technology, and risks and
uncertainties associated with the acquired technology. Such risks and
uncertainties include inherent difficulties and uncertainties in incorporating
the acquired technology into the Company's development projects and risks
related to the viability of and potential changes to target markets. The Company
also concluded that the acquired technology had no alternative future use.

Acquired software represents the fair value of applications and technologies
presently in use. The resulting value will be amortized using the straight-line
method over its estimated life of five years, and subjected to periodic
impairment tests in accordance with established policies.

Goodwill represents the excess of the purchase price over the fair value of
identifiable tangible and intangible assets acquired and is amortized using the
straight-line method over its estimated life of five years.

The acquisition of Dodge was a tax free reorganization under the Internal
Revenue Code (IRC). Therefore, the charge for in-process research and
development is not deductible for income tax purposes. The Company acquired a
net operating loss carryforward of approximately $29 million, which expires no
later than 2009. Under the provisions of the IRC, the amount of these net
operating loss carryforwards available annually to offset future taxable income
is significantly limited. No value has been attributed to these net operating
losses in the purchase price allocation due to these limitations.

In connection with the acquisition, approximately 86,350 shares of common stock
issued were placed in escrow as security for obligations made by former
shareholders of Dodge.

The following table reflects pro forma combined results of operations
(unaudited) of the Company and Dodge, giving effect to the acquisition of Dodge
at the beginning of the fiscal year 1997, for all periods presented, and
excludes the one-time in-process research and development charge of $6,830 for
the periods presented:

<TABLE>
<CAPTION>
                                                Three Months Ended September,                Nine Months Ended September 30,
                                            -----------------------------------            -----------------------------------
                                              1998                        1997               1998                       1997
                                            --------                     ------            --------                   --------
                                            (in thousands, except per share amounts)  (in thousands, except per share amounts)
<S>                                               <C>                    <C>               <C>                    <C>

Revenue                                      $ 6,109                     $9,289            $27,314                    $19,082
Net (loss) income                            $(5,534)                    $  146            $(6,067)                   $(6,215)
Net (loss) income per diluted common share   $ (0.32)                    $ 0.02            $ (0.35)                   $ (0.93)
Shares used in computation                    17,360                      7,640             17,366                      6,712
</TABLE>


NOTE 4 - REVENUE RECOGNITION

The Company licenses software under noncancellable license agreements through
direct and indirect channels, and provides services including maintenance,
training and consulting. Effective January 1, 1998, the Company has adopted SOP
97-2 "Software Revenue Recognition". The adoption of SOP 97-2 had no material
impact on the Company's financial statements. Software license revenues through
the Company's direct sales channel and guaranteed minimum royalties through its
indirect sales channel are recognized when a noncancellable license agreement
has been signed, the product has been delivered and installed, collection is
considered probable by management and all significant contractual obligations
have been satisfied. Other software license royalties earned through the
Company's indirect sales channel are recognized as such fees are reported to the
Company. Revenues on all



                                       8
<PAGE>   9
software license transactions in which there are significant outstanding
obligations are not recognized until such obligations are fulfilled. Maintenance
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.

NOTE 5 - COMPREHENSIVE INCOME

In June 1997, the Financial Accounting Standards Board issued Statement No.
130,"Reporting Comprehensive Income," ("SFAS No. 130"). SFAS No. 130 applies to
all companies and is effective for fiscal years beginning after December 15,
1997. SFAS No. 130 establishes standards for the reporting and display of
comprehensive income in a set of financial statements. Comprehensive income is
defined as the change in net assets of a business enterprise during a period
from transactions generated from non-owner sources. It includes all changes in
equity during a period except those resulting from investments by owners and
distributions to owners. The following table sets forth the calculation of 
comprehensive income:



<TABLE>
<CAPTION>
                                            Three Months Ended        Nine Months Ended
                                               September 30,            September 30,
                                           ---------------------    ---------------------
                                                           (in thousands)
                                             1998          1997       1998          1997
                                           --------       ------    --------      -------
<S>                                        <C>            <C>       <C>           <C>
Net (loss) income                          $(5,534)       $  636    $(10,558)     $(4,640)
Currency translation adjustments                18            --          18           --
                                           -------        ------    --------      -------
Comprehensive Income                       $(5,516)       $  636    $(10,540)     $(4,640)
                                           =======        ======    ========      =======
</TABLE>


NOTE 6 - RECENTLY ISSUED ACCOUNTING STANDARDS

In June 1997, the Financial Accounting Standards Board issued Statement No. 131,
"Disclosures about Segments of an Enterprise and Related Information," ("SFAS
No. 131"). SFAS No. 131 applies to all public companies and is effective for
fiscal years beginning after December 15, 1997. SFAS No. 131 requires that
business segment financial information be reported in the financial statements
utilizing the management approach, and also includes disclosures of certain
geographic financial information. The management approach is defined as the
manner in which management organizes the segments within the enterprise for
making operating decisions and assessing performance. The adoption of this 
standard is not expected to materially affect presentation and disclosure in 
the Company's financial statements.




                                       9
<PAGE>   10
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. 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, 1997.

RESULTS OF OPERATIONS

       Revenues. Total revenues, consisting of software license revenues and
service and maintenance revenues, decreased 12%, from $6.9 million for the three
months ended September 30, 1997 to $6.1 million for the three months ended
September 30, 1998. Year to date revenues increased 84% from $12.5 million in
1997 to $22.9 million for the same period in 1998. The revenue decline for the
three-month period ended September 30, 1998 was due primarily to contract and
implementation delays, partially offset by increased service and maintenance
revenues. For the three-month period ended September 30, 1998, no customer
represented greater than 10% of revenues, and for the year to date period ended
September 30, 1998, two customers provided approximately 26% of the total
revenues.

       Software license revenues decreased 59%, from $4.5 million for the three
months ended September 30, 1997 to $1.9 million for the three months ended
September 30, 1998. Year to date software license revenues increased 71% from
$7.4 million in 1997 to $12.6 million in 1998. This revenue decline for the
three-month period ended September 30, 1998 was due primarily to contract and
implementation delays. Year to date software license revenue growth was due to
increased revenue from new clients, existing clients and indirect sales channel
fees.

       Service and maintenance revenues increased 77%, from $2.4 million for the
three months ended September 30, 1997 to $4.2 million for the three months ended
September 30, 1998. Year to date service and maintenance revenues increased 101%
from $5.1 million in 1997 to $10.3 million in 1998. The increases were primarily
attributable to the growth of the installed base of customers and the increasing
complexity of user requirements, which resulted in an increase in consulting
service revenues.

       Cost of Revenues. The Company's cost of revenues consists of the cost of
software license revenues and the 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 costs
to provide 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 27%, from $160,000 for the
three months ended September 30, 1997 to $203,000 for the three months ended
September 30, 1998. Cost of software license revenues as a percentage of
software license revenues increased from 4% for the three months ended September
30, 1997 to 11% for the three months ended September 30, 1998. Year to date the
cost of software license revenues increased 116% from $619,000 in 1997 to $1.3
million in 1998, and increased as a percentage of software license revenue from
8% in 1997 to 11% in 1998. The dollar increases in cost of software license
revenues was primarily attributable to an increase in third-party software
products distributed by the Company. The increases as a percent of software
license revenue was the result of an increased percentage of sales that
contained third-party product.

       Cost of service and maintenance revenues increased 100%, from $1.6
million for the three months ended September 30, 1997 to $3.2 million for the
three months ended September 30, 1998. Cost of service and maintenance revenues
as a percentage of service and maintenance revenues increased from 68% for the
three months ended September 30, 1997 to 77% for the three months ended
September 30, 1998. Year to date the cost of service and maintenance revenues
increased 103% from $3.5 million in 1997 to $7.1 million in 1998, while
remaining constant as a percentage of service and maintenance revenues at 69%.
The dollar increases in cost of service and maintenance revenues resulted
primarily from the addition of service consultants and customer support
personnel to provide services to a larger customer base. The third quarter 
increase as a percent of cost of service and maintenance revenues was primarily
due to increased non-billable time of service employees while they were
cross-trained on the Company's products, as a result of The Dodge Group
acquisition.



                                       10
<PAGE>   11
       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
increased 59%, from $2.0 million for the three months ended September 30, 1997
to $3.2 million for the three months ended September 30, 1998. Year to date
sales and marketing expenses increased 49% from $5.3 million in 1997 to $7.9
million in 1998. The dollar increase in sales and marketing expenses was
primarily attributable to increased staffing in the direct sales force and sales
and marketing organizations. Sales and marketing expenses as a percentage of
total revenues increased from 29% to 52% for the three months ended September
30, 1997 and 1998, respectively, and decreased from 43% to 35% for year to date
1997 and 1998, respectively. The increase in the percentage for the three months
ended September 30, 1998, was primarily the result of the lower revenues for the
period coupled with an increase in the sales and marketing staff. The decrease
in the percentage for year to date was primarily due to an increasing revenue
base. While the acquisition of The Dodge Group increased the Company's
international presence, the Company is still in the process of expanding its
distribution channels, both domestically and internationally and, accordingly,
sales and marketing expenses are expected to increase in dollar amount in the
future.

       Product Development (Excluding Acquired In-Process Research and
Development). Product development expenses include software development costs
and consist primarily of engineering personnel costs. The Company has made
significant investments in product development in the past several years to
bring its suite of component-based, object-oriented financial accounting
products to market.

       Product development expenses increased 60%, from $1.9 million for the
three months ended September 30, 1997 to $3.1 million for the three months ended
September 30, 1998. Year to date product development expenses increased 24% from
$6.0 million in 1997 to $7.4 million in 1998. The increases in product
development expenses were due primarily to an increase in staffing. Product
development expenses as a percentage of total revenues increased from 27% to 50%
for the three months ended September 30, 1997 and 1998, respectively, and
decreased from 48% to 32% for year to date 1997 and 1998, respectively. The
Company anticipates that product development expenses will increase in dollar
amount in future periods as the Company continues to enhance the functionality
of its core financial accounting and reporting and workflow applications and as
it continues development work on the next releases of its suite of application
modules.

       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 acquired software and
goodwill and outside professional fees. General and administrative expenses
increased 269%, from $597,000 for the three months ended September 30, 1997 to
$2.2 million for the three months ended September 30, 1998. Year to date general
and administrative expenses increased 113% from $1.7 million in 1997 to $3.6
million in 1998. The increases in general and administrative expenses were
primarily the result of an increased reserve for bad debts, commencement of
amortization of acquired software and goodwill associated with the June 24, 1998
acquisition of The Dodge Group and an increase in administrative personnel as a
result of the Dodge Group acquisition. General and administrative expenses as a
percentage of total revenues increased from 9% to 36% for the three months ended
September 30, 1997 and 1998, respectively, and from 14% to 16% for year to date
1997 and 1998, respectively.

        Acquired In-Process Research and Development. As a result of the June
24, 1998 acquisition of The Dodge Group, the Company experienced a one-time
charge of $6.8 million for acquired in-process research and development in the
year to date 1998. The Company anticipates additional product development
expenses in future periods in order to establish technological feasibility for
this technology, and expects that this will be a commercially viable product
within the next 9 months.

        Provision for Income Taxes. No provision or benefit for federal, state
or foreign income taxes was made for the three-month or year to date periods
ended September 30, 1998 and 1997. Excluding the Dodge acquisition, the Company
has reported only annual tax losses to date and consequently has approximately
$18.0 million of net operating loss carryforwards, which expire at various times
through the year 2012, available to offset future taxable income. The
utilization of such net operating losses is subject to limitations as a result
of an ownership change. The annual limitation and the timing of attaining
profitability may result in the expiration of net operating loss carryforwards
before utilization.




                                       11
<PAGE>   12
       Net (Loss) Income and (Loss) Income per Share. The net loss for the three
and nine-month periods ended September 30, 1998, was ($5.5) million or ($0.32)
per diluted share and ($10.6) million or ($0.63) per diluted share,
respectively. Excluding the second quarter one-time charge of $6.8 million for
acquired in-process research and development the net loss for the nine-month
period ended September 30, 1998 was ($3.7) or ($0.22) per diluted share. This
compares to net income of $636,000 or $0.09 per diluted share and net loss of
($4.6) million or ($0.79) per diluted share in the three and nine-month periods
ended September 30, 1997, respectively, as reflected in the following table:

<TABLE>
<CAPTION>
                               Three Months Ended September,   Nine Months Ended September 30,
                               -----------------------------   -------------------------------
                                 1998                  1997      1998       1998*       1997
                               --------               ------   ---------  ---------   --------
                                           (in thousands except per share amounts)
<S>                            <C>                    <C>      <C>        <C>         <C>
Net (loss) income              $(5,534)               $  636   $(10,558)   $(3,728)   $(4,640)

Net (loss) income per share:
     Basic                     $ (0.32)               $ 0.10   $  (0.63)   $ (0.22)   $ (0.79)
     Diluted                   $ (0.32)               $ 0.09   $  (0.63)   $ (0.22)   $ (0.79)
</TABLE>


* Excludes one-time charge of $6.8 million for acquired in-process research &
  development

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 and, to a lesser extent, equipment
financing and traditional financing arrangements. In December 1997, the Company
completed an initial public offering of its common stock, resulting in net
proceeds to the Company of approximately $22.2 million.

       As of September 30, 1998, the Company had cash and cash equivalents of
$17.4 million, a decrease of $7.2 million from December 31, 1997. The Company's
working capital at September 30, 1998 was $17.9 million, compared to $26.7
million at December 31, 1997.

       The Company's operating activities resulted in net cash outflow of $6.7
million for the nine months ended September 30, 1998, attributable primarily to
the net operating loss and increased accounts receivable, consistent with the
growth in revenues. Investing activities, consisting of payments under the Dodge
acquisition on June 24, 1998, and capital expenditures (primarily computer
property and equipment), resulted in net cash outflow of $1.2 million for the
nine months ended September 30, 1998. The Company's financing activities
resulted in net cash inflow of $616,000 for the nine months ended September 30,
1998.

       The Company's Board of Directors approved a share repurchase program
authori7 zing the Company to purchase up to 1.0 million shares of its common
stock on the open market. As of September 30, 1998 the Company has purchased
60,000 common shares at a total cost of $322,000.

        The Company has a working capital revolving line of credit with a bank,
which is secured by the Company's accounts receivable. The amount available
under this facility is limited to the lesser of 80% of the Company's eligible
accounts receivable, as defined, or $4.8 million. The facility will expire on
April 1, 1999. The agreement under which the line of credit was established
contains certain covenants, including provisions requiring the Company to
maintain specified financial ratios. The Company was in compliance with these
covenants at September 30, 1998. At September 30, 1998, $1.5 million of these
borrowings were outstanding under this line of credit.

       The Company believes that cash and cash equivalents, cash generated
internally by operations, and available borrowings under the line of credit will
be sufficient to meet the Company's working capital requirements for at least
the next twelve months.

YEAR 2000 COMPLIANCE


         The Year 2000 issue relates to computer programs and systems that
recognize dates using two-digit year data rather than four-digit year data. As a
result, such programs and systems may fail or provide incorrect information when
using dates after December 31, 1999. If the Year 2000 issue were to disrupt to
the Company's internal information technology systems, or the information
technology systems of entities with whom the Company has significant commercial
relationships, the Company's business and financial condition could be
materially adversely affected.

         The Year 2000 issue is relevant to four areas of the Company's
business: (1) the Company's accounting software products, (2) the Company's
internal computer systems, (3) the computer systems of significant suppliers or
customers of the Company, and (4) the products, internal systems and third-party
dependencies of The Dodge Group. Each such area is addressed below.

         1.       THE COMPANY'S PRODUCTS. From its inception, the Company has
designed and tested all of its products to be Year 2000 compliant. Accordingly,
the Company does not intend to adopt a formal Year 2000 compliance program for
its products, other than to maintain its policy of designing all new products,
and any updates of its existing products, to be Year 2000 compliant.

         2.       INTERNAL SYSTEMS. The Company's internal computer programs and
operating systems relate to virtually all segments of the Company's business,
including merchandising, customer database management, marketing, order
processing, order fulfillment, contract management, inventory management,
customer service and financial reporting. These programs and systems consist
primarily of:

                  X        "Front-end" Systems. These systems automate and
                           manage business functions such as contract
                           management, order-taking and order-processing,
                           inventory management, accounting and financial
                           reporting.

                  X        Personal Computers and Local Area Networks. These
                           systems are used for word processing, document
                           management and other similar administrative
                           functions.

                  X        Telecommunications Systems. These systems provide
                           telephone, voicemail, e-mail, Internet and intranet
                           connectivity, and enable the Company to manage
                           overall internal and external communications.

         All of the Company's "front-end" systems that relate to accounting and
financial functions consist of the Company's own products, which have been
designed and tested to be Year 2000 compliant. All other internal systems
consist of widely available office applications and application suites for
word-processing, voicemail and other office-related functions. The Company
maintains current versions of all such applications and all are, or are expect
to be, Year 2000 compliant. Accordingly, the Company does not intend to adopt a
formal Year 2000 compliance program for its internal systems.




                                       12
<PAGE>   13
         3.       THIRD-PARTY SYSTEMS. The computer programs and operating
systems used by entities with whom the Company has commercial relationships pose
potential problems relating to the Year 2000 issue, which may affect the
Company's operations in a variety of ways. These risks are more difficult to
assess than those posed by internal programs and systems, and the Company has
not yet completed the process of formulating a plan for assessing them. The
Company believes that the programs and operating systems used by entities with
whom it has commercial relationships generally fall into two categories:

         X        First, the Company relies upon programs and systems used by
                  providers of basic services necessary to enable the Company to
                  reach, communicate and transact business with its suppliers
                  and customers. Examples of such providers include the United
                  States Postal Service, UPS, telephone companies, other utility
                  companies and banks. Services provided by such entities affect
                  almost all facets of the Company's operations. However, these
                  third-party dependencies are not specific to the Company's
                  business, and disruptions in their availability would likely
                  have a negative impact on most enterprises within the software
                  industry and on many enterprises outside the software
                  industry. The Company believes that all of the most reasonably
                  likely worst-case scenarios involving disruptions to its
                  operations stemming from the Year 2000 issue relate to
                  programs and systems in this first category.

         X        Second, the Company relies upon third parties for certain
                  software code or programs that are embedded in, or work with,
                  its products. The Company believes that the functionality of
                  its products would not be materially diminished by a failure
                  of such third-party software to be Year 2000 compliant.
                  Nonetheless, the Company expects, as part of its plan for
                  assessing third-party programs and systems, to solicit
                  assurances of Year 2000 compliance from each provider of
                  significant in-licensed software.

         There can be no assurance that the Company may not experience
unanticipated expenses or be otherwise adversely impacted by a failure of
third-party systems or software to be Year 2000 compliant. The most reasonably
likely worst-case scenarios may include: (i) corruption of data contained in the
Company's internal information systems, (ii) hardware failure, and (iii) failure
of infrastructure services provided by utilities and/or government. The Company
intends to include an evaluation of such scenarios in its plan for assessing the
programs and systems of the entities with whom it has commercial relationships.

         4.       THE DODGE GROUP. In June 1998, the Company acquired The Dodge
Group. The Company has not yet completed the process of formulating a plan for
assessing the potential impact of the Year 2000 problem on the products or
internal operations of The Dodge Group, or those of significant third-party
suppliers or customers of The Dodge Group. A failure of the products or
disruption of the operations of The Dodge Group, or those of third parties upon
which its business is substantially dependent, could have a material adverse
effect on the Company's business and financial condition.

         The Company expects to complete the formulation of its plan for
assessing the programs and systems of the entities with whom it has commercial
relationships by the end of fiscal 1998 and the identification of related
risks and uncertainties by the end of the first quarter of fiscal 1999. Once
such identification has been completed, the Company intends to resolve any
material risks and uncertainties that are identified by communicating further
with the relevant vendors and providers, by working internally to identify
alternative sourcing and by formulating contingency plans to deal with such
material risks and uncertainties. To date, however, the Company has not
formulated such a contingency plan. The Company expects the resolution of such
material risks and uncertainties to be an ongoing process until all year 2000
problems are satisfactorily resolved. The Company does not currently anticipate
that the total cost of any Year 2000 remediation efforts that may be needed will
be material.

EUROPEAN MONETARY UNION (EMU)

       The Company's internal business information systems are comprised of the
same commercial application software products generally offered for license by
the Company to end user customers. The Company's latest software release
contains EMU functionality that allows for dual currency reporting and
information management. The Company is not aware of any material operational
issues or costs associated with preparing internal systems for the EMU. However,
the Company utilizes other third party vendor network equipment, and other third
party software products that may or may not be EMU compliant. Although the
Company is currently taking steps to address the impact, if any, of EMU
compliance for such third party products, failure of any critical technology
components to operate properly post EMU may have an adverse impact on business
operations or require the Company to incur unanticipated expenses to remedy any
problems. 



                                       13
<PAGE>   14
PART II.   OTHER INFORMATION

ITEM 2.    CHANGES IN SECURITIES AND USE OF PROCEEDS

           (d) Use of Proceeds.

               (1) The Company's registration statement on Form S-1 under the
                   Securities Act of 1933, as amended, (File No. 333-38403) for
                   the Company's initial public offering, the use of proceeds
                   from which is herein reported, was declared effective as of
                   December 11, 1997.

               (4) (vii) From December 11, 1997 to September 30, 1998, the
                         Company used approximately $1,765,000 of the proceeds
                         from the initial public offering for the purchase and
                         installation of property and equipment ($689,000),
                         payments of convertible notes payable in connection
                         with the Dodge acquisition ($754,000), and purchase
                         60,000 shares ($322,000) of its common stock on the
                         open market under the Company's share repurchase
                         program. Payment of these expenses and costs were to
                         persons other than (a) directors or officers of the
                         Company or their associates, (b) persons owning 10% or
                         more of the equity securities of the Company or (c)
                         affiliates of the Company.

ITEM 5.    OTHER INFORMATION

           The Company's Board of Directors approved a share repurchase program
authorizing the Company to purchase up to 1.0 million shares of its common stock
on the open market. As of September 30, 1998 the Company has purchased 60,000
common shares at a total cost of $322,000.

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

           (a) Exhibits

               3.1   Amended and Restated Certificate of Incorporation

               3.2   Amended and Restated By-Laws

               27.1  Financial Data Schedule

           (b) Reports on Form 8-K

           The registrant filed a report on Form 8-K/A on September 8, 1998
reporting its acquisition of The Dodge Group under Item 2.


                                    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 & CEO

Date: November 15, 1998




                                       14
<PAGE>   15
                                  EXHIBIT INDEX

EXHIBIT
  NO.                              DESCRIPTION


3.1        Amended and Restated Certificate of Incorporation of the Registrant
           is incorporated herein by reference to Exhibit 3.2 to the
           Registrant's Registration Statement on Form S-1, as amended (File No
           333-38403) (the "Form S-1").
3.2        Amended and Restated By-Laws of the Registrant is incorporated herein
           by reference to Exhibit 3.4 to the Form S-1.
27.1       Financial Data Schedule (nine-month period ended September 30, 1998).








                                       15