<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, 1999

                                       OR

____________ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
             EXCHANGE ACT OF 1934.

For the transition period from  _______ to _______

Commission File Number:  000-23453

                        FLEXIINTERNATIONAL SOFTWARE, INC.

             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


         Delaware                                     06-1309427
(STATE OR OTHER JURISDICTION               (I.R.S. EMPLOYER IDENTIFICATION NO.)
OF INCORPORATION OR ORGANIZATION)

  Two Enterprise Drive, Shelton, CT                    06484
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)             (ZIP CODE)

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


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                                              Yes   X         No
                                                  -----          -----

As of October 26, 1999, there were 17,588,008 shares of FlexiInternational
Software, Inc. Common Stock outstanding.
<PAGE>   2
                        FLEXIINTERNATIONAL SOFTWARE, INC.

                                TABLE OF CONTENTS



<TABLE>
<CAPTION>
                                                                                                 PAGE
                                                                                                 ----

<S>                                                                                             <C>
PART I.  FINANCIAL INFORMATION

Item 1.           Condensed Consolidated Financial Statements
                      Condensed Consolidated Balance Sheet.....................................    3
                      Condensed Consolidated Statement of Operations...........................    4
                      Condensed Consolidated Statement of Cash Flows...........................    5
                      Condensed Consolidated Statement of Stockholders' (Deficit) Equity.......    6
                      Notes to Condensed Consolidated Financial Statements.....................    7
Item 2.           Management's Discussion and Analysis of Financial Condition and Results
                  of Operations................................................................    11
Item 3.           Quantitative And Qualitative Disclosure About Market Risk....................    15


PART II.          OTHER INFORMATION
Item 1.           Legal Proceedings............................................................    16
Item 2.           Changes in Securities and Use of Proceeds....................................    16
Item 6.           Exhibits and Reports on Form 8-K.............................................    16
                  Signature....................................................................    17
</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)
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                                              September 30,    December 31,
                                                                                                 1999             1998
                                                                                                 ----             ----
                                                                                                                 audited
                                                                                                                (Restated,
                                                                                                                see Note 7)
<S>                                                                                          <C>              <C>
         ASSETS
         ------
Current assets:
  Cash and cash equivalents                                                                  $     2,089      $     7,876
  Marketable securities                                                                                -            3,000
  Accounts receivable, net of allowance for doubtful
    accounts of $776 and $812, respectively                                                        6,557           11,041
  Prepaid expenses and other current assets                                                          388              999
                                                                                             -----------      -----------
        Total current assets                                                                       9,034           22,916

Property and equipment at cost, net of accumulated depreciation
 and amortization of $4,129 and $3,121, respectively                                               2,287            2,732
Acquired software, net of accumulated amortization of $540 and $216, respectively                  1,620            1,944
Goodwill, net of accumulated amortization of $5,375 and $566, respectively (see Note 4)              292            5,101
Other assets                                                                                         192              218
                                                                                             -----------      -----------
        Total assets                                                                         $    13,425      $    32,911
                                                                                             ===========      ===========

         LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
         ----------------------------------------------
Current liabilities:
  Accounts payable                                                                           $     2,035      $     3,199
  Accrued commissions                                                                                333              725
  Accrued restructuring costs                                                                        530                -
  Accrued expenses - other                                                                         1,954            3,483
  Current portion of capital lease obligations                                                       600              586
  Deferred revenues                                                                                8,857            7,426
                                                                                             -----------      -----------
        Total current liabilities                                                                 14,309           15,419

Long-term portion of capital lease obligations                                                       418              878
                                                                                             -----------      -----------

        Total liabilities                                                                         14,727           16,297
                                                                                             -----------      -----------

Commitments and contingencies (see Note 6)                                                             -                -

Stockholders' (deficit) equity:
  Common stock: $.01 par value; 50,000,000 shares authorized;
    issued shares - 17,608,133 and 17,383,133, respectively, and
    outstanding shares - 17,588,008 and 17,293,622,  respectively                                    176              174
  Additional paid-in capital                                                                      56,128           56,308
  Accumulated deficit                                                                            (57,645)         (39,656)
  Currency translation adjustment                                                                     75                2
  Common stock in treasury at cost - 20,125 and 89,511 shares, respectively                          (36)            (214)
                                                                                             ------------     -----------
        Total stockholders' (deficit) equity                                                      (1,302)          16,614
                                                                                             ------------     -----------
        Total liabilities and stockholders' (deficit) equity                                 $    13,425      $    32,911
                                                                                             ===========      ===========
</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)
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                 Three Months Ended September 30,      Nine months Ended September 30,
                                                 --------------------------------      -------------------------------
                                                    1999             1998                   1999             1998
                                                    ----             ----                   ----             ----
                                                                   (Restated,                             (Restated,
                                                                   see Note 7)                            see Note 7)
<S>                                             <C>             <C>                    <C>             <C>
Revenues:
  Software license                               $      294      $    1,653             $     1,806     $     8,454
  Service and maintenance                             3,281           4,129                   9,692          10,109
                                                 ----------      ----------             -----------     -----------
        Total revenues                                3,575           5,782                  11,498          18,563

Cost of revenues:
  Software license                                      144             203                     306           1,334
  Service and maintenance                             1,516           3,248                   6,091           7,107
                                                 ----------      ----------             -----------     -----------
        Total cost of revenues                        1,660           3,451                   6,397           8,441

Operating expenses:
  Sales and marketing                                 1,002           3,160                   5,300           7,908
  Product development                                 1,393           3,053                   5,997           7,379
  General and administrative                          1,585           2,452                   5,685           3,869
  Goodwill impairment (see Note 4)                        -               -                   4,224               -
  Restructuring charge (see Note 5)                     (72)              -                   1,824               -
  Acquired in-process research & development              -               -                       -           1,890
                                                 ----------      ----------             -----------     -----------
Total operating expenses                              3,908           8,665                  23,030          21,046
                                                 ----------      ----------             -----------     -----------

Operating loss                                       (1,993)         (6,334)                (17,929)        (10,924)

Interest income                                          12             254                     153             824
Interest expense                                        (42)            (28)                    (99)            (70)
                                                 -----------     -----------            ------------    ------------
Loss before provision for income taxes               (2,023)         (6,108)                (17,875)        (10,170)

Provision for income taxes                                -               -                       -               -
                                                 ----------      ----------             -----------     -----------

Net loss                                         $   (2,023)    $    (6,108)            $   (17,875)    $   (10,170)
                                                 ===========    ===========             ============    ============

Net loss per share:
  Basic                                          $    (0.12)     $    (0.35)            $    (1.03)     $    (0.61)
  Diluted                                        $    (0.12)     $    (0.35)            $    (1.03)     $    (0.61)
Weighted average shares:
  Basic                                              17,361          17,360                  17,338          16,809
  Diluted                                            17,361          17,360                  17,338          16,809
</TABLE>



     See accompanying notes to condensed consolidated financial statements.



                                       4
<PAGE>   5
                        FLEXIINTERNATIONAL SOFTWARE, INC.
                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                                   Nine Months Ended
                                                                                                   -----------------
                                                                                                     September 30,
                                                                                                     -------------
                                                                                                1999               1998
                                                                                                ----               ----
                                                                                                                (Restated,
                                                                                                                see Note 7)
<S>                                                                                          <C>              <C>
Cash flows from operating activities:
Net loss                                                                                     $   (17,875)     $   (10,170)
Non-cash items included in net loss:
   Depreciation and amortization                                                                   1,953            1,014
   Goodwill impairment                                                                             4,224                -
   Acquired in-process research and development                                                        -            1,890
   Provision for doubtful accounts                                                                 1,201              976
Change in operating accounts:
   Accounts receivable                                                                             3,277             (161)
   Prepaid expenses and other assets                                                                 458                8
   Accounts payable and accrued expenses                                                          (3,092)            (190)
   Accrued restructuring                                                                             530                -
   Deferred revenues                                                                               1,433              (75)
                                                                                             -----------      ------------
Net cash used in operating activities                                                             (7,891)          (6,708)

Cash flows from investing activities:
   Acquisition of subsidiary, less cash acquired                                                       -             (493)
   Proceeds from sale of property and equipment                                                       29                -
   Purchase of property and equipment                                                               (629)            (689)
                                                                                             -----------      -----------
Net cash used in investing activities                                                               (600)          (1,182)

Cash flows from financing activities:
  Purchase of short-term investments                                                                   -           (3,448)
  Sale of short-term investments                                                                   3,000            3,448
  Proceeds from line of credit                                                                     2,000            1,450
  Repayment of line of credit                                                                     (2,000)               -
  Repayment of debt                                                                                    -             (393)
  Purchase of treasury stock                                                                           -             (322)
  Proceeds from exercise of stock options and warrants                                                 4               47
  Proceeds from employee stock purchase plan                                                          61               32
  Payments of capital lease obligations                                                             (446)            (198)
                                                                                             -----------      -----------
Net cash provided by financing activities                                                          2,619              616
                                                                                             -----------      -----------

Effect of exchange rate changes on cash                                                               85                4

Decrease in cash and cash equivalents                                                             (5,787)          (7,270)
                                                                                             -----------      -----------
Cash and cash equivalents at beginning of period                                                   7,876           24,622
                                                                                             -----------      -----------
Cash and cash equivalents at end of period                                                   $     2,089      $    17,352
                                                                                             ===========      ===========
</TABLE>



     See accompanying notes to condensed consolidated financial statements.




                                       5
<PAGE>   6
                        FLEXIINTERNATIONAL SOFTWARE, INC.
       CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' (DEFICIT) EQUITY
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                                   (UNAUDITED)
                             (RESTATED, SEE NOTE 7)


<TABLE>
<CAPTION>
                                                 Common Stock          Additional
                                                 ------------           paid-in       Accumulated
                                             Shares        Amount       capital         deficit
                                             ------        ------       -------         -------

<S>                                       <C>             <C>          <C>            <C>
Balance at December 31, 1998               17,383,133       $ 174      $ 56,308       $  (39,656)
  Shares issued for ESPP                            -           -             -              (88)
  Exercise of stock options                   225,000           2             -              (26)
  Cancellation of options issued in
     conjunction with the acquisition
     of The Dodge Group                             -           -          (180)               -
  Net loss                                          -           -             -          (17,875)
  Currency translation adjustment                   -           -             -                -
Comprehensive income (loss)                         -           -             -                -
                                           ----------       -----      --------       ----------
Balance at September 30, 1999              17,608,133       $ 176      $ 56,128       $  (57,645)
                                           ==========       =====      ========       ==========
</TABLE>

<TABLE>
<CAPTION>
                                          Currency                       Total
                                         translation    Treasury     stockholders'     Comprehensive
                                         adjustment       stock    (deficit) equity    income (loss)
                                         ----------       -----    ----------------    -------------

<S>                                      <C>           <C>          <C>                <C>
Balance at December 31, 1998             $       2     $   (214)    $      16,614
  Shares issued for ESPP                         -          150                62
  Exercise of stock options                      -           28                 4
  Cancellation of options issued in
     conjunction with the acquisition
     of The Dodge Group                          -            -              (180)
  Net loss                                       -            -           (17,875)     $   (17,875)
  Currency translation adjustment               73            -                73               73
                                                                                       -----------
Comprehensive income (loss)                      -            -                -       $   (17,802)
                                         ---------     --------      -----------       ===========
Balance at September 30, 1999            $      75     $    (36)     $    (1,302)
                                         =========     ========      ===========
</TABLE>


     See accompanying notes to condensed consolidated financial statements.




                                       6
<PAGE>   7
                        FlexiInternational Software, Inc.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE 1 - BASIS OF PRESENTATION
------------------------------

RESTATEMENT OF FINANCIAL STATEMENTS AND CHANGES TO CERTAIN INFORMATION. The
condensed consolidated financial statements contain previously reported amounts
which have been restated to reflect a change in the revenue recognition for
certain contracts (see Note 7).

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/A for the year ended December 31, 1998 (See Note 7).

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, 1999. The results for the three and nine
month periods ended September 30, 1999 are not necessarily indicative of the
results expected for the full year.

NOTE 2 - LOSS PER SHARE
-----------------------

Basic loss per share includes no dilution and is computed by dividing net loss
available to common stockholders by the weighted average number of common shares
outstanding for the period. Diluted loss per share reflects the potential
dilution of securities that could share in the earnings of an entity. The
Company has presented basic and diluted loss per share for all periods. The
number of shares used in the September 30, 1999 and 1998 diluted per share
calculations do not include the effect of outstanding stock options, as the
effect would be anti-dilutive.

NOTE 3 - 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". Software license revenues through the
Company's direct sales channel are recognized when persuasive evidence of an
arrangement exists, the licensed products have been shipped, fees are fixed and
determinable and collectibility is considered probable. Customers may elect to
receive the licensed products pre-loaded and configured on a hardware unit. In
this case, revenue is recognized when the licensed products are installed on the
hardware unit, the unit is shipped and all other criteria are met. 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
software license transactions in which there are significant outstanding
obligations are not recognized until such obligations are fulfilled. For
multiple element arrangements and arrangements with extended payment terms, or
where a significant portion of the payment is due after inception of the license
agreement, all revenue is deferred until the final portion of the license fee
becomes due and payable, and all other criteria are met at that time.
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 4 - 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. As a result of the acquisition, the company wrote off $1.9 million
for acquired in-process research and development in the June 1998 quarter.

Following executive and staff cutbacks in connection with a first quarter 1999
restructuring program (see Note 5), management revised its plans for the
existing Dodge financial data warehouse business acquired in 1998. As a


                                       7
<PAGE>   8
result, expected revenues and cash flows from these software products have been
revised significantly downward. Additionally, competitive pressures and a
continuation of the general business slowdown previously disclosed have caused
management to reassess the long term potential of the Dodge business and to
reprioritize its investments.

During June 1999 the Company reassessed the value of the intangible assets
recorded by the Company as a result of the acquisition. Prior to that
reassessment, the unamortized balance of the intangible assets was $6,263,
consisting of $1,728 of acquired software and $4,535 of goodwill. After
assessment of the acquired software asset, management concluded that the
carrying value approximated net realizable value for that software. Management
also assessed the related goodwill arising from the Dodge acquisition in
accordance with established policies. The economic factors indicated above have
caused management to revise downward its estimates of future cash flows from
current and future products associated with the Dodge business as a whole. As a
result of management's analysis, and using the best information available,
management recorded a goodwill impairment charge of $4,224 in the second quarter
of 1999.

In applying its policy for assessing the carrying amount of the goodwill for
impairment, management first estimated future cash flows from the acquired Dodge
business generated from existing and planned future product introductions over
the next four years (estimated remaining useful life), and assumed a terminal
value factor after the fourth year based on a range of EBITDA multiples for a
sample of comparable public financial software companies. That estimate was then
compared to the carrying amount of the underlying assets, and on that basis
management concluded that an impairment existed. In measuring the impairment,
the estimated future cash flows were discounted to a net present value at 25%, a
rate consistent with that used in the original purchase accounting for the Dodge
business. The goodwill was then reduced accordingly to reflect the difference
between its carrying amount and estimated fair value.

Management will continue, periodically, to conduct reassessments of the value of
the acquired software and goodwill. Because the estimates made in these
reassessments are inherently subjective, there can be no assurance that future
reassessments will not result in further reductions of the carrying value of
these assets.

NOTE 5 - RESTRUCTURING CHARGE
-----------------------------

On February 26, 1999, management, with the approval of the Board of Directors,
took certain actions to reduce employee headcount in order to align its sales,
development and administrative organization with the current overall
organization structure, and to position the Company for profitable growth in the
future consistent with management's long term objectives. In this regard, the
primary actions taken included involuntary terminations of selected personnel.
Severance packages were offered to 66 employees. This reduction in headcount
also led to the Company having excess leased facility space. In addition, during
the third quarter of 1999, the Company took additional actions to reduce
employee headcount. This action also included involuntary terminations of
selected personnel. Severance packages were offered to 18 employees.

As a result of both of these actions, the Company recorded a charge to
operations during the three month periods ended March 31, 1999 and September 30,
1999 of $1,896 and $125, respectively. Of the total amount of these charges,
$1,855 were related to severance costs, of which $667, $181 and $281 were paid
during the three month periods ended March 31, 1999, June 30, 1999 and September
30, 1999, respectively, and $166 related to costs of idle facility space, of
which $18, $95 and $53 were paid during the three month periods ended March 31,
1999, June 30, 1999 and September 30, 1999, respectively. Additionally, during
the third quarter of 1999 one of the Company's former employees obtained
employment elsewhere, and the Company is no longer obligated to make payments
totaling $196. As such, the Company reversed this accrued liability during the
three months ended September 30, 1999. The remaining $530 of the severance
costs, will be payable in installments for up to 18 months. The Company believes
that these actions resulted in sustainable cost savings, primarily through the
elimination of redundant functions in product development, due to completion of
development work on FlexiFinancials Release 4, and to a lesser extent in the
support and sales organizations.



                                       8
<PAGE>   9
Detail of the restructuring charge is as follows:

<TABLE>
<CAPTION>
                             Severance           Excess
                            & benefits         facilities           Total
                            ----------         ----------           -----
<S>                         <C>                <C>              <C>
Reserve balances,
February 26, 1999            $   1,730         $    166         $   1,896

Additional charge
September 30, 1999                 125                -               125

Change in estimate of
severance costs                   (196)               -              (196)

Cash charges                    (1,129)            (166)           (1,295)
                             ----------        ---------        ----------

Reserve balances,
September 30, 1999           $     530         $      -         $     530
                             =========         ========         =========
</TABLE>

NOTE 6 - COMMITMENTS AND CONTINGENCIES
--------------------------------------

The Company is party to contracts for licensing of software and provision of
services with two customers for a total of approximately $4,000. The revenue
recognition for those contracts has been restated as a result of payment
disputes that arose with these customers in the second quarter of 1999 (see Note
7). The Company believes that the amounts in dispute are appropriately due under
terms of the contracts and expects the amounts to be realized. The Company is
vigorously pursuing collection of these amounts through all available means
under the contract terms, including arbitration. However, there can be no
assurance that the carrying amounts of these receivables will be realized.

NOTE 7 - RESTATEMENT OF 1998 AND FIRST QUARTER 1999
---------------------------------------------------

As a result of the Company's regular quarterly financial statement review with
its independent accountants in the second quarter of 1999, the Company
determined that it would restate the prior period amounts originally reported
for 1998 and the first quarter of 1999, to reflect a change in the revenue
recognition for several software license contracts. Most of the restated amounts
relate to two contracts that the Company believes were appropriately due and
payable under their contractual terms but payments with respect to which, in the
second quarter of 1999, became subject to dispute by the contracting parties.
For revenue which has been restated in the three and nine months ended September
30, 1998, all amounts billed are included in accounts receivable, with a
corresponding offset included in deferred revenues. Any amounts stipulated in
contracts which have not been invoiced have not been recognized in the financial
statements. A summary (unaudited) of the effects of the restatement as of
December 31, 1998 and for the three and nine month periods ended September 30,
1998 follows (in thousands, except per share amounts):


<TABLE>
<CAPTION>
                                             Three Months Ended                      Nine Months Ended
                                             September 30, 1998                     September 30, 1998
                                             ------------------                     ------------------
                                          As Reported      Restated             As Reported      Restated
                                          -----------      --------             -----------      --------
<S>                                       <C>             <C>                    <C>             <C>
Statement of Operations:
------------------------
  Software license revenue                $   1,866       $  1,653               $  12,612       $   8,454
  Service and maintenance revenue             4,243          4,129                  10,256          10,109
    Total revenue                             6,109          5,782                  22,868          18,863

  Operating loss                             (6,007)        (6,334)                 (6,619)        (10,924)

  Net loss                                $  (5,781)      $ (6,108)                 (5,865)        (10,170)

 Net loss per share:
     Basic                                $   (0.33)      $  (0.35)              $    (0.35)     $    (0.61)
     Diluted                              $   (0.33)      $  (0.35)              $    (0.35)     $    (0.61)
</TABLE>


                                       9
<PAGE>   10
<TABLE>
<CAPTION>
                                                   December 31, 1998
                                                   -----------------
                                               As Reported      Restated
                                               -----------      --------
<S>                                            <C>             <C>
Balance Sheet:
--------------
Accounts receivable, net of
  allowance for doubtful accounts              $  13,051       $ 11,041
Total current assets                              24,926         22,916
Total assets                                      34,921         32,911
Deferred revenues                                  4,341          7,426
Current liabilities                               12,334         15,419
Total liabilities                                 13,212         16,297
Accumulated deficit                              (34,561)       (39,656)
Total stockholders' equity                        21,109         16,614
Total liabilities and stockholders' equity        34,921         32,911
</TABLE>

NOTE 8 - GOING CONCERN
----------------------

Late in the second quarter of 1999, management identified a number of factors
that cause them to believe that available cash resources may not be sufficient
to fund anticipated operating losses. These include: (1) the continued general
business slowdown, which resulted in revenue levels significantly lower than
expected in the first half of 1999; (2) payment disputes that arose in the
second quarter of 1999 related to two significant contracts for licensing of
software and provision of services (see Note 7) and; (3) delays experienced in
the second quarter of 1999 related to the release of the next version of the
Company's general ledger product. Management has taken actions to reduce costs
in response to lower revenues and is prepared to take further actions, if
necessary, in order to continue to respond to competitive and economic pressures
in the marketplace. Management is also seeking to obtain additional equity
capital. However, there can be no assurance that the Company will be able to
reduce costs to a level to appropriately respond to competitive pressures or to
obtain additional funding. As a result of the foregoing, there exists
substantial doubt about the Company's ability to continue as a going concern.
These financial statements do not include any adjustments relating to the
recoverability of the carrying amount of recorded assets or the amounts of
liabilities that might result from the outcome of this uncertainty.



                                       10
<PAGE>   11
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/A for the year ended December 31, 1998.

RESULTS OF OPERATIONS

      Restatement. The condensed consolidated financial statements included and
discussed herein contain amounts which have been restated to reflect a change in
the original revenue recognition for certain contracts. (See Note 7 to the
condensed consolidated financial statements for effects of the restatement.) The
appropriate amounts below reflect the restatement.

      Revenues. Total revenues, consisting of software license revenues and
service and maintenance revenues, decreased 38.2%, from $5.8 million for the
three months ended September 30, 1998 to $3.6 million for the three months ended
September 30, 1999. Year to date revenues decreased 38.1% from $18.6 million in
1998 to $11.5 million for the same period in 1999. Two customer provided
approximately 43.7% and no customer provided greater than 10% of revenue for the
three months ended September 30, 1999 and 1998, respectively. Two customers
provided approximately 33.2% and three customers provided approximately 42.8% of
the total revenues for the nine months ended September 30, 1999 and 1998,
respectively.

      Software license revenues decreased 82.2%, from $1.7 million for the three
months ended September 30, 1998 to $294,000 for the three months ended September
30, 1999. Year to date software license revenues decreased 78.6% from $8.5
million in 1998 to $1.8 million in 1999. The Company believes that the decline
in software license revenue is primarily due to a slowdown in software
acquisition decisions among large customers due to concerns about Year 2000.

      Service and maintenance revenues decreased 20.5%, from $4.1 million for
the three months ended September 30, 1998 to $3.3 million for the three months
ended September 30, 1999. Year to date service and maintenance revenues
decreased 4.1% from $10.1 million in 1998 to $9.7 million in 1999. The decrease
in service and maintenance revenues was primarily attributable to lower service
revenue due to fewer active client implementations.

      Cost of Revenues. The Company's cost of revenues consists of cost of
software license revenues and cost of service and maintenance revenues. Cost of
software license revenues consists primarily of the cost of third-party software
products distributed by the Company and the cost of product media, manuals and
shipping. Cost of service and maintenance revenues consists of 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 decreased 29.1%, from $203,000 for the
three months ended September 30, 1998 to $144,000 for the three months ended
September 30, 1999. Cost of software license revenues as a percentage of
software license revenues increased from 12.3% for the three months ended
September 30, 1998 to 49.0% for the three months ended September 30, 1999. Year
to date, the cost of software license revenues decreased 77.1% from $1.3 million
in 1998 to $306,000 in 1999, while increasing as a percentage of software
license revenue from 15.8% in 1998 to 16.9% in 1999. The increase in this
percentage for both the three and nine months period ended September 30, 1999
was primarily the result of an adjustment to a previous estimate.

      Cost of service and maintenance revenues decreased 53.3%, from $3.2
million for the three months ended September 30, 1998 to $1.5 million for the
three months ended September 30, 1999. Cost of service and maintenance revenues
as a percentage of service and maintenance revenues decreased from 78.7% for the
three months ended September 30, 1998 to 46.2% for the three months ended
September 30, 1999. Year to date, the cost of service and maintenance revenues
decreased 14.3% from $7.1 million in 1998 to $6.1 million in 1999, and decreased
as a percentage of service and maintenance revenues from 70.3% in 1998 to 62.8%
in 1999. The decrease


                                       11
<PAGE>   12
in dollar amount and as a percent of service and maintenance revenue for the
three and nine months ended September 30, 1999 was primarily the result of the
staff reduction actions taken by the Company to reduce costs in the service
organization.

      Sales and Marketing. Sales and marketing expenses consist primarily of
salaries, commissions, travel and promotional expenses, and facility and
communication costs for direct sales offices. Sales and marketing expenses
decreased 68.3%, from $3.2 million for the three months ended September 30, 1998
to $1.0 million for the three months ended September 30, 1999. Year to date
sales and marketing expenses decreased 33.0% from $7.9 million in 1998 to $5.3
million in 1999. The decrease in dollar amount was primarily attributable to
staff reduction actions taken by the Company to align its sales and marketing
expenses with its anticipated revenues. Sales and marketing expenses as a
percentage of total revenues decreased from 54.7% to 28.0% for the three months
ended September 30, 1998 and 1999, respectively, and increased from 42.6% to
46.1% for year to date 1998 and 1999, respectively. The decrease in this
percentage for the three month period ended September 30, 1999 was primarily the
result of the staff reduction actions taken by the Company to reduce its sales
and marketing expense. The increase in this percentage for the nine month period
ended September 30, 1999,was primarily due to lower revenue.

      Product Development (Excluding Acquired In-Process Research and
Development). Product development expenses include software development costs
and consist primarily of engineering personnel costs.

      Product development expenses decreased 54.4%, from $3.1 million for the
three months ended September 30, 1998 to $1.4 million for the three months ended
September 30, 1999. Year to date product development expenses decreased 18.7%
from $7.4 million in 1998 to $6.0 million in 1999. The decrease in product
development expenses was due primarily to the actions taken by the Company to
reduce its development expense. Product development expenses as a percentage of
total revenues decreased from 52.8% to 39.0% for the three months ended
September 30, 1998 and 1999, respectively, and increased from 39.8% to 52.2% for
year to date 1998 and 1999, respectively. The decrease in this percentage for
the three month period ended September 30, 1999 was the result of the staff
reduction actions taken by the Company to reduce its development expense, while
the increase in this percentage for the nine month period ended September 30,
1999 is the result of spending in the first quarter that was needed to complete
work on the Company's latest version of its software.

      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
decreased 35.4%, from $2.5 million for the three months ended September 30, 1998
to $1.6 million for the three months ended September 30, 1999. The decrease was
primarily the result the staff reduction actions taken by the Company to reduce
its general and administrative expenses. Year to date general and administrative
expenses increased 46.9% from $3.9 million in 1998 to $5.7 million in 1999. The
increase was primarily the result of an increase in the reserve for bad debts,
increased professional fees and commencement of amortization of acquired
software and goodwill associated with the June 1998 acquisition of The Dodge
Group. General and administrative expenses as a percentage of total revenues
increased from 42.4% to 44.3% for the three months ended September 30, 1998 and
1999, respectively, and from 20.8% to 49.4% for year to date 1998 and 1999,
respectively. The increase in these percentages were primarily due to lower
revenue.

      Goodwill Impairment. During June 1999 management conducted a periodic
impairment assessment of the intangible assets resulting from the Dodge
acquisition. As a result of that review, management concluded that an impairment
had occurred with the goodwill and a $4.2 million write down of goodwill to a
carrying value of $0.3 million was recorded in the second quarter of 1999 (see
Note 4 to the condensed consolidated financial statements.) The Company's
financial data warehouse products based on existing technologies are expected to
continue generating revenue through 2002, and thereafter, be substantially
replaced by more advanced technologies currently under development. However,
future research and development spending on follow-on technologies will be
dependent on management's prioritization of investments under conditions of
limited financial resources (see Liquidity and Capital Resources section). As a
result, expected future revenue and cash flows from the acquired Dodge business
have been revised downward significantly, causing the impairment of goodwill.

      Prior to the reassessment, the unamortized balance of the intangible
assets was $6.2 million, consisting of $1.7 million of acquired software and
$4.5 million of goodwill. After assessment of the acquired software asset,
management concluded that the carrying value approximated net realizable value
for that software. Management also assessed the related goodwill arising from
the Dodge acquisition in accordance with established policies. The economic
factors indicated above have caused management to revise downward its estimates
of future cash flows from current and future products associated with the Dodge
business as a whole. As a result of management's analysis, and using the best
information available, management recorded a goodwill impairment of $4.2 million
in the second quarter to reduce the carrying amount of the goodwill to $0.3
million.

                                       12
<PAGE>   13
      In applying its policy for assessing the carrying amount of the goodwill
for impairment, management first estimated future cash flows from the acquired
Dodge business generated from existing and planned future product introductions
over the next four years (estimated remaining useful life), and assumed a
terminal value factor after the fourth year based on a range of EBITDA multiples
for a sample of comparable public financial software companies. That estimate
was then compared to the carrying amount of the underlying assets, and on that
basis management concluded that an impairment existed. In measuring the
impairment, the estimated future cash flows were discounted to a net present
value at 25%, a rate consistent with that used in the original purchase
accounting for the Dodge business. The goodwill was then reduced accordingly to
reflect the difference between its carrying amount and estimated fair value.

      Management will continue, periodically, to conduct reassessments of the
value of the acquired software and goodwill. Because the estimates made in these
reassessments are inherently subjective, there can be no assurance that future
reassessments will not result in further reductions of the carrying value of
these assets.

       Acquired In-Process Research and Development. As a result of the June 24,
1998 acquisition of The Dodge Group, there is a one-time charge of $1.9 million
for acquired in-process research and development in the nine month period ended
September 30, 1998.

      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, 1999 and 1998. The Company has reported only annual tax losses to
date and consequently has approximately $32.6 million and $7.3 million of U.S.
and foreign net operating loss carryforwards, respectively at December 31, 1998,
which expire at various times through the year 2018, 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.

      Net Loss and Loss per Share Actual and Excluding Nonrecurring Charges.
Excluding the one-time charges for acquired in-process research and development
of $1.9 million, restructuring charge of $1.8 million and goodwill impairment of
$4.2 million, as described above, (unaudited) net income and earnings per share
are as follows:

<TABLE>
<CAPTION>
                                            Three Months Ended September 30,                Nine Months Ended September 30,
                                    ----------------------------------------------  ----------------------------------------------
                                      1999       1999(a)      1998        1998        1999       1999(b)      1998       1998(c)
                                     Actual   Supplemental   Actual   Supplemental   Actual   Supplemental   Actual   Supplemental
                                    --------  ------------  --------  ------------  --------  ------------  --------  ------------
                                                               (as restated)                                    (as restated)
<S>                                 <C>         <C>         <C>         <C>         <C>         <C>         <C>         <C>
Supplemental net loss                $(2,023)    $(2,095)    $(6,108)    $(6,108)    $(17,875)   $(11,827)   $(10,170)   $(8,280)

Supplemental net loss per share
   Basic                            $ (0.12)    $ (0.12)    $ (0.37)    $ (0.37)    $  (1.03)   $  (0.68)   $  (0.62)   $ (0.50)
   Diluted                          $ (0.12)    $ (0.12)    $ (0.37)    $ (0.37)    $  (1.03)   $  (0.68)   $  (0.62)   $ (0.50)
</TABLE>

(a) Excludes one-time gain of $0.1 million for reversal of restructuring.
(b) Excludes one-time charges of $4.2 million for goodwill impairment and $1.8
    million restructuring charge
(c) Excludes one-time charge of $1.9 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, equipment financing and traditional
borrowing arrangements, and in December 1997, an initial public offering of its
Common Stock, resulting in net proceeds to the Company of approximately $22.2
million.

      As of September 30, 1999, the Company had cash and cash equivalents of
$2.1 million, a decrease of $8.8 million from December 31, 1998. The Company's
working capital at September 30, 1999 was a deficiency of $5.3 million, compared
to $7.5 million at December 31, 1998.

      The Company's operating activities resulted in net cash outflow of $7.9
million for the nine months ended September 30, 1999, principally from the net
operating loss. Investing activities, consisting of capital expenditures,
resulted in net cash outflow of $600,000 for the nine months ended September 30,
1999. The Company's financing activities resulted in a net cash inflow for the
nine months ended September 30, 1999 of $2.6 million, principally from the sale
of short-term investments.

      The Company's Board of Directors has adopted a share repurchase program
authorizing the Company to


                                       13
<PAGE>   14
purchase up to 1.0 million shares of its common stock on the open market. As of
September 30, 1999 the Company has purchased 135,000 common shares at a total
cost of $463,000.

      Late in the second quarter of 1999, management identified a number of
factors that cause them to believe that available cash resources may not be
sufficient to fund anticipated operating losses. These include: (1) the
continued general business slowdown, which resulted in revenue levels
significantly lower than expected in the first half of 1999; (2) payment
disputes that arose in the second quarter of 1999 related to two significant
contracts for licensing of software and provision of services (see Note 7) and;
(3) delays experienced in the second quarter of 1999 related to the release of
the next version of the Company's general ledger product. Management has taken
actions to reduce costs in response to lower revenues and is prepared to take
further actions, if necessary, in order to continue to respond to competitive
and economic pressures in the marketplace. Management may also seek to obtain
additional equity capital. However, there can be no assurance that the Company
will be able to reduce costs to a level to appropriately respond to competitive
pressures or to obtain additional funding. As a result of the foregoing, there
exists substantial doubt about the Company's ability to continue as a going
concern. The Company's financial statements do not include any adjustments
relating to the recoverability of the carrying amount of recorded assets or the
amounts of liabilities that might result from the outcome of this uncertainty.


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.
These programs and systems may fail or provide incorrect information when using
dates after December 31, 1999. If the year 2000 issue disrupts our internal
information technology systems, or the information technology systems of
companies with whom we have significant commercial relationships, our business
and financial condition could be materially adversely affected.

     The year 2000 issue may affect three areas of our business: (1) the design
of our products, (2) our internal computer systems, and (3) the computer systems
of our significant suppliers or customers. Each area is addressed below.

     1. YEAR 2000 COMPLIANCE OF OUR PRODUCTS. In as much as no test of year 2000
compliance can simulate the actual change of the millennium, we cannot assure
you that our products will be unaffected by the year 2000. From the beginning,
our products have been designed and tested to be year 2000 compliant, and we
design new products, and any updates of existing products, to be year 2000
compliant. However, failures that cannot be detected using currently available
compliance testing could have a material adverse effect on our business and
financial condition.

      2. YEAR 2000 COMPLIANCE OF OUR INTERNAL SYSTEMS. Our internal computer
programs and operating systems relate to virtually all segments of our business,
including:

            *    merchandising

            *    customer database management

            *    marketing

            *    order processing

            *    order fulfillment

            *    contract management

            *    customer service

            *    financial reporting

These applications are currently, or are expected to be, year 2000 compliant.
Nonetheless, we have requested compliance statements from any parties that
service or supply these applications. To date we have not found any major risks
associated with these applications.

     3. YEAR 2000 COMPLIANCE OF THIRD-PARTY SYSTEMS. The computer programs and
operating systems used by entities with whom we have commercial relationships
pose potential problems relating to the year 2000 issue, which may affect our
operations in a variety of ways. These risks are more difficult to assess than
those posed by internal programs and systems. We rely on third parties for some
of the software code or programs that are embedded in, or work with, our
products. We are assessing whether the functionality of our products would be
materially diminished by a failure of such third-party software to be year 2000
compliant. There can be no assurance that we may not experience unanticipated
expenses or be otherwise adversely impacted by a failure of third-party systems
or software to be year 2000 compliant.

                                       14
<PAGE>   15
     We have formed a management team assigned with the task of assessing the
programs and systems of the entities with whom we have commercial relationships;
questionnaires have been sent out and responses were evaluated. We did not
identify any major risks or uncertainties. Those risks and uncertainties that
have been identified are being resolved by working with the relevant vendors and
providers or by working internally to identify alternative sourcing. We expect
the resolution of all significant risks and uncertainties, to be completed by
December 31, 1999. We do 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 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.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

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



                                       15
<PAGE>   16
PART II.   OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS

         In July 1997, Innovative Computing Corporation ("ICC") filed a suit
against the Company in federal district court for the Western District of
Oklahoma. The complaint alleges breaches by the Company under a software
distribution agreement and seeks damages equal in amount to any damages that
Challenger Motor Freight, a sublicensee of ICC, may recover from ICC. The
Company has denied the allegations and counterclaimed against ICC for breach of
contract and violation of the covenant of good faith and fair dealing. In a
separate action, in August 1998, Client Server Solutions Limited ("CSS") filed a
demand for arbitration, asserting claims for commissions of $3.4 million
allegedly owing by the Company to CSS pursuant to an international
representation agreement between the parties. The Company has denied CSS's
allegations and the matter is currently awaiting hearing before the arbitrators.
Finally, the Company is a party to various disputes and proceedings arising from
time to time in the ordinary course of general business activities. Depending on
the amount and the timing, an unfavorable resolution of some or all of the
foregoing matters could materially adversely affect the Company's future results
of operations or cash flows in a particular period and its financial condition.


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
                    of which is herein reported, was declared effective as of
                    December 11, 1997.

               (4)(vii) The Company used approximately $22.1 million of
                        the proceeds from the initial public offering for
                        ongoing operations of the Company ($19.5 million),
                        the purchase and installation of property and
                        equipment ($1.4 million), the payment of convertible
                        notes payable in connection with the Dodge
                        acquisition ($754,000) and the purchase of 135,000
                        shares ($463,000) of its common stock on the open
                        market under the Company's share repurchase program.
                        Other than officers salaries and severance payments,
                        no payments of these expenses 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 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

             None



                                       16
<PAGE>   17
     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 12, 1999



                                       17
<PAGE>   18
EXHIBIT INDEX

       EXHIBIT                                           DESCRIPTION
       -------                                           -----------
         NO.
         ---

          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, 1999).




                                       18