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FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

(Mark One)

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

For the quarterly period ended June 30, 2003

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)

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 _____

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act)

Yes _____ No __X__

As of June 30, 2003, there were 17,784,185 shares of FlexiInternational Software, Inc. Common Stock outstanding.

PART I.     FINANCIAL INFORMATION

Item 1.      Consolidated Financial Statements

See accompanying notes to consolidated financial statements.

FlexiInternational Software, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)

See accompanying notes to consolidated financial statements.

FlexiInternational Software, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

See accompanying notes to consolidated financial statements.

FlexiInternational Software, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six months ended June 30, 2003 and 2002
(unaudited)

Note 1-Basis of Presentation

The accompanying unaudited consolidated financial statements include the accounts of FlexiInternational Software, Inc. and its wholly owned subsidiary, FlexiInternational Software, Ltd. (collectively "the Company"). All significant intercompany balances and transactions have been eliminated in consolidation.

The 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. In the opinion of management, all adjustments (consisting of normal and recurring adjustments) considered necessary for a fair presentation have been included; however, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. Accordingly, the Company believes that the financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2002. Operating results for the six months ended June 30, 2003 are not necessarily indicative of the results that may be expected for the year ended December 31, 2003.

Effective December 15, 2002, the Company adopted Statement of Financial Accounting Standards No. 148 "Accounting for Stock-Based Compensation - Transition and Disclosure" (SFAS 148). This statement amends FASB statement 123, "Accounting for Stock Based Compensation". It provides alternative methods of transition for an entity that voluntarily changes to the fair value based method of accounting for employee stock based compensation. It also amends the disclosure provision of FASB statement No. 123 to require prominent disclosure about the effects on reported net income of an entity's accounting policy decisions with respect to stock-based employee compensation. As permitted by SFAS 123 and amended by SFAS 148, the Company continues to apply the intrinsic value method under Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," to account for its stock-based employee compensation arrangements.

No stock-based employee compensation cost is reflected in net income, as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant. If the Company had recorded compensation under SFAS 123, the Company's net income and net income per share would be the pro forma amounts indicated below for the six-month periods ended June 30 (in thousands except per share amounts):

Note 2-Significant Events

The second quarter 2003 revenues include $357,000 of other operating revenue arising from the Company's share of the sale of one of its Business Process Outsourcing Partners. In addition, first quarter 2003 license revenue included $450,000 of one-time revenue related to a settlement with a reseller.

Item 2.     Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-looking Statements

       In addition to historical information, this Quarterly Report contains forward-looking statements relating to, among other things our license revenue, service revenue, our new outsourcing business, the length of our sales cycle and future expenses. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words "believes," "anticipates," "plans," "expects," and similar expressions are intended to identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's opinions only as of the date hereof. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements. Readers should carefully review the risk factors described in other documents that we file from time to time with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2002.

Overview

       The Company designs, develops, markets and supports the FlexiFinancial Enterprise Suite of financial and accounting software applications and related tools. The Flexi solution - composed of FlexiFinancials, FlexiFinancial Datawarehouse or FlexiFDW, FlexilnfoAccess and FlexiTools - is designed to address the needs of users with sophisticated financial accounting and operational analysis requirements. We sell our software for use in traditional in-house accounting operations as well as through our accounting outsourcing service to companies which want to outsource their back office accounting processes.

       Our Financial Management Services solution, or FMS, a business process outsourcing (BPO) service, is designed to leverage our suite of accounting products and our expertise in back office processing of accounting data. We believe that many mid-sized and start-up fast growing companies would benefit substantially from outsourcing their back office accounting processes to enable them to better focus on financial analysis, cash management and the strategic issues of their businesses. As part of our BPO sales strategy to expand regional coverage rapidly, we recruit regional resellers of our FMS solution which will pay us a percentage of the fee they collect for using our software and related solutions. Some resellers will handle the complete BPO service while others will handle the client relationship and Flexi will handle the hosting and accounting aspects of the service. In 2001, we signed a BPO reseller agreement in which we provided the reseller a convertible loan, in the aggregate principal amount of $272,000, to help launch the reseller's BPO service. As of December 31, 2002, we opted to exercise our conversion rights under this instrument. On April 14, 2003, the reseller was acquired by a larger BPO provider. Flexi was paid $357,000 immediately for its ownership share of the reseller and may realize an additional gain of up to $400,000 if certain earn-out targets are achieved by the reseller over the next two years. The acquirer of the reseller intends to continue to utilize FlexiFinancials in its BPO operations. According to industry analysts, the finance and accounting outsourcing segment of the BPO market is in the early adoption phase and is expected to double in size over the next three years. However, the full acceptance of this solution is still several years away.

 We derive our revenue primarily from:

• royalties paid to us from third parties that distribute our products;
• non-cancelable software license agreements entered into with respect to our products;
• payment from our BPO Partners for use of products and services;
• to a lesser extent, third-party products distributed by us; and
• annual software maintenance agreements entered into with our customers.

       Our revenues have been derived from both domestic sales and international sales, with the international sales comprising 15.5% and 16.7% of total revenues for the six-month periods ended June 30, 2003 and June 30, 2002, respectively. Our international sales generally have the same cost structure as our domestic sales. The majority of our international sales are transacted in British pounds sterling, and an increase in the value of the British pound relative to the currency of the country in which we are selling our product could make our products more expensive and potentially less competitive in these markets. In addition, our international business may be subject to a variety of other risks, including difficulties in collecting international accounts receivable or obtaining U.S. export licenses for certain countries, the introduction of non-tariff barriers and higher duty rates and fiscal and monetary policies that adversely affect non-native firms. See "Certain Factors that May Affect Future Operating Results."

Results of Operations

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