================================================================================
                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549
                          __________________________

                                   FORM 10-Q
(Mark One)
[X]  Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934

For the quarterly period ended    March 31, 2001
                               ---------------------

                                      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: 0-26330
                                                -------

                           ASTEA INTERNATIONAL INC.
            (Exact name of registrant as specified in its charter)

                   Delaware                           23-2119058
         --------------------------------         -------------------
          (State or other jurisdiction of          (I.R.S. Employer
         incorporation or organization)           Identification No.)

     455 Business Center Drive, Horsham, PA                  19044
     --------------------------------------                  -----
        (Address of principal executive offices)           (Zip Code)

      Registrant's telephone number, including area code: (215) 682-2500
                                                           -------------

                                      N/A
--------------------------------------------------------------------------------
   (Former name, former address and former fiscal year, if changed since last
                                    report)


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 May 11, 2001, 14,653,587 shares of the registrant's Common Stock, par
value $.01 per share, were outstanding.


                           ASTEA INTERNATIONAL INC.

                                   FORM 10-Q
                               QUARTERLY REPORT
                                     INDEX



                                                                                Page No.
                                                                                --------
                                                                             
Facing Sheet                                                                       1

Index                                                                              2

PART I - FINANCIAL INFORMATION
--------------------------------

Item 1.        Consolidated Financial Statements

               Consolidated Balance Sheets (Unaudited)                             3

               Consolidated Statements of Operations (Unaudited)                   4

               Consolidated Statements of Cash Flows (Unaudited)                   5

               Notes to Unaudited Consolidated Financial Statements                6

Item 2.        Management's Discussion and Analysis of Financial
               Condition and Results of Operations                                 7

Item 3.        Quantitative and Qualitative Disclosure About Market Risk          10

PART II - OTHER INFORMATION
--------------------------------

Item 1.        Legal Proceedings                                                  10

Item 2.        Changes in Securities and Use of Proceeds                          10

Item 3.        Defaults upon Senior Securities                                    10

Item 4.        Submission of Matters to a Vote of Security Holders                10

Item 5.        Other Information                                                  10

Item 6.        Exhibits and Reports on Form 8-K                                   10

               Signatures                                                         11


                                       2


PART I - FINANCIAL INFORMATION
------------------------------

Item 1.  CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------

                           ASTEA INTERNATIONAL INC.
                          CONSOLIDATED BALANCE SHEETS
                                  (Unaudited)



                                                                         March 31,          December 31,
                                                                           2001                 2000
                                                                       ---------------------------------
                                                                                     
                  ASSETS
Current assets:
  Cash and cash equivalents                                            $  2,461,000        $  5,208,000
  Investments available for sale                                          5,991,000           3,506,000
  Receivables, net of reserves of $1,523,000 and $1,600,000               7,784,000           7,885,000
  Prepaid expenses and other                                              1,866,000           1,778,000
  Deferred income taxes                                                     668,000             668,000
                                                                       --------------------------------
          Total current assets                                           18,770,000          19,045,000

Property and equipment, net                                                 855,000             996,000
Capitalized software, net                                                 1,562,000           1,612,000
                                                                       --------------------------------
          Total assets                                                 $ 21,187,000        $ 21,653,000
                                                                       ================================

       LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Current portion of long-term debt                                    $     97,000        $    138,000
  Accounts payable and accrued expenses                                   4,716,000           4,731,000
  Deferred revenues                                                       4,281,000           4,508,000
                                                                       --------------------------------
          Total current liabilities                                       9,094,000           9,377,000

Deferred income taxes                                                       298,000             298,000
Long-term debt                                                               11,000              23,000

Stockholders' equity:
   Preferred stock, $.01 par value, 5,000,000 shares
      authorized, none issued                                                     -                   -
   Common stock, $.01 par value, 25,000,000 shares
      authorized, 14,654,000 and 14,821,000 outstanding                     148,000             148,000
   Less:  treasury stock at cost, 171,300 and 3,900 shares                 (160,000)             (3,000)
   Additional paid-in capital                                            22,674,000          22,671,000
   Cumulative translation adjustment                                     (1,331,000)         (1,145,000)
   Accumulated deficit                                                   (9,547,000)         (9,716,000)
                                                                       --------------------------------
                  Total stockholders' equity                             11,784,000          11,955,000
                                                                       --------------------------------
                  Total liabilities and stockholders' equity           $ 21,187,000        $ 21,653,000
                                                                       ================================


       The accompanying notes are an integral part of these statements.

                                       3


                           ASTEA INTERNATIONAL INC.
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (Unaudited)




                                                                                      Three Months
                                                                                     Ended March 31,
                                                                               2001                  2000
                                                                          ---------------------------------
                                                                                          
Revenues:
  Software license fees                                                   $ 2,282,000           $ 1,292,000
  Services and maintenance                                                  2,717,000             4,298,000
                                                                          ---------------------------------
          Total revenues                                                    4,999,000             5,590,000
                                                                          ---------------------------------
Costs and expenses:
  Cost of software license fees                                               228,000               326,000
  Cost of services and maintenance                                          1,847,000             3,230,000
  Product development                                                         583,000               691,000
  Sales and marketing                                                       1,438,000             1,854,000
General and administrative                                                    841,000               901,000
                                                                          ---------------------------------
          Total costs and expenses                                          4,937,000             7,002,000

Income (loss) from operations before interest income                           62,000            (1,412,000)

Net interest income                                                           107,000               613,000
                                                                          ---------------------------------
Income (loss) before income taxes                                             169,000              (799,000)
Income tax expense                                                                  -                     -
                                                                          ---------------------------------
Net income (loss)                                                         $   169,000           $  (799,000)
                                                                          =================================

Basic and diluted earnings (loss) per share:
  Net income (loss) per share                                             $      0.01           $    (0.06)
Shares outstanding used in computing basic earnings per share              14,698,000            14,231,000
Shares outstanding used in computing diluted earnings per share            14,772,000            14,231,000


       The accompanying notes are an integral part of these statements.

                                       4


                           ASTEA INTERNATIONAL INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)



                                                                                                   For the Three Months
                                                                                                      Ended March 31,
                                                                                                  2001              2000
                                                                                             -----------------------------
                                                                                                         
Cash flows from operating activities:
   Net income                                                                                $   169,000       $  (799,000)
   Adjustments to reconcile net income (loss) to net cash provided by (used in)
        operating activities:
           Depreciation and amortization                                                         388,000           401,000
           Variable option compensation benefit                                                        -          (183,000)
           Other                                                                                       -             7,000
   Changes in operating assets and liabilities:
           Receivables                                                                           (92,000)          942,000
           Prepaid expenses and other                                                             18,000          (507,000)
           Accounts payable and accrued expenses                                                 (91,000)         (798,000)
           Deferred revenues                                                                    (261,000)         (334,000)
                                                                                             -----------------------------
   Net cash provided by (used in) operating activities                                           131,000        (1,271,000)
                                                                                             -----------------------------
Cash flows from investing activities:
           (Purchases) sales of investments                                                   (2,485,000)        6,910,000
           Purchases of property and equipment                                                   (76,000)         (299,000)
           Capitalized software development costs                                               (150,000)         (200,000)
                                                                                             -----------------------------
   Net cash (used in) provided by investing activities                                        (2,711,000)        6,411,000
                                                                                             -----------------------------
Cash flows from financing activities:
           Proceeds from exercise of stock options and employee stock purchase plan                3,000           145,000
           Repayments of debt                                                                    (53,000)         (358,000)
           Purchases of treasury stock                                                          (157,000)                -
                                                                                             -----------------------------
   Net cash used in financing activities                                                        (207,000)         (213,000)
                                                                                             -----------------------------

   Effect of exchange rate changes on cash                                                        40,000            34,000
                                                                                             -----------------------------
   Net (decrease) increase in cash and cash equivalents                                       (2,747,000)        4,961,000
   Cash, beginning of period                                                                   5,208,000         6,158,000
                                                                                             -----------------------------
   Cash, end of period                                                                       $ 2,461,000       $11,119,000
                                                                                             =============================


       The accompanying notes are an integral part of these statements.

                                       5


Item 1. CONSOLIDATED FINANCIAL STATEMENTS (Continued)
-----------------------------------------------------


                           ASTEA INTERNATIONAL INC.
             NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


1. BASIS OF PRESENTATION
   ----------------------

The consolidated financial statements at March 31, 2001 and for the three month
periods ended March 31, 2001 and 2000 of Astea International Inc. and
subsidiaries (the "Company") are unaudited and reflect all adjustments
(consisting only of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation of the financial position and
operating results for the interim periods. The consolidated financial statements
should be read in conjunction with the consolidated financial statements and
notes thereto, together with Management's Discussion and Analysis of Financial
Condition and Results of Operations, contained in the Company's 2000 Annual
Report on Form 10-K which are hereby incorporated by reference in this quarterly
report on Form 10-Q.


2. STOCKHOLDERS' EQUITY/COMPREHENSIVE LOSS
   ---------------------------------------

The reconciliation of Stockholders' Equity and comprehensive loss from December
31, 2000 to March 31, 2001 is summarized as follows:



                                                                           Cumulative
                                                          Additional        Currency
                                  Common     Treasury      Paid-In         Translation      Accumulated      Comprehensive
                                   Stock      Stock        Capital         Adjustment         Deficit            Loss
                               -------------------------------------------------------------------------------------------
                                                                                           
Balance at December 31, 2000    $148,000    $  (3,000)    $22,671,000      $(1,145,000)     $(9,716,000)     $          -
Exercise of stock options              -            -           3,000                -                -                 -
Purchase of treasury stock             -     (157,000)              -                -                -                 -
Cumulative translation
   adjustment                          -                            -         (186,000)               -          (186,000)
Net income                             -                            -                -          169,000           169,000
                               -------------------------------------------------------------------------------------------
Balance at March 31, 2001       $148,000    $(160,000)    $22,674,000      $(1,331,000)     $(9,547,000)     $    (17,000)
                               ===========================================================================================


3. MAJOR CUSTOMERS
   ---------------

The Company had no customers that accounted for 10% or more of revenues in the
first quarter of 2001. It had one customer that accounted for 11% of revenues in
the first quarter of 2000.

                                       6


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

Overview
--------

This document contains various forward-looking statements and information that
are based on management's beliefs as well as assumptions made by and information
currently available to management. Such statements are subject to various risks
and uncertainties, which could cause actual results to vary materially from
those contained in such forward-looking statements. Should one or more of these
risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those anticipated, estimated,
expected or projected. Certain of these, as well as other risks and
uncertainties, are described in more detail herein and in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2000.

The Company develops, markets and supports front-office solutions for the
Customer Relationship Management ("CRM") software market. Astea's applications
are designed specifically for organizations for which field service and customer
support are considered mission critical aspects of business operations. The
Company licenses its products to companies worldwide, distributed across a
variety of industries that provide maintenance and repair services, including
telecommunications, information technology, healthcare, process and control
technologies and white goods. The Company markets its products both domestically
and internationally, through offices in the United States and overseas, as well
as through resellers and system integrators. Internationally, the Company
maintains operations in Canada, Australia, the Netherlands, France, the United
Kingdom and Israel.

Results of Operations
---------------------

Comparison of Three Months Ended March 31, 2001 and 2000
--------------------------------------------------------

Continuing Operations
---------------------

Revenues
--------

Revenues decreased $591,000, or 11%, to $4,999,000 for the three months ended
March 31, 2001 from $5,590,000 for the three months ended March 31, 2000.
Software license fee revenues increased $990,000, or 77%, from the same period
last year. Services and maintenance fees for the three months ended March 31,
2001 amounted to $2,717,000, a 37% decrease from the same quarter in 2000.

The Company's international operations contributed $1,598,000 of revenues in the
first quarter of 2001 compared to $1,816,000 in the first quarter of 2000. This
represents a 12% decrease from the same period last year and 32% of total
revenues in the first quarter 2001.

Software license fee revenues increased 77% to $2,282,000 in the first quarter
of 2001 from $1,292,000 in the first quarter of 2000. The increase is primarily
attributable to Alliance Enterprise license revenues that increased $1,434,000
or 221%, to $2,084,000 in the first quarter of 2001 from $650,000 in the first
quarter of 2000. The increase was partially offset by an anticipated decline in
DISPATCH-1 license fee revenue, which decreased $445,000 or 69% from $642,000 in
the first quarter of 2000 due to a natural change in the corporate market to
Alliance Enterprise, which is a newer technology information system. DISPATCH-1
accounted for 9% of total software license fee revenues in the first quarter of
2001 compared to 50% of total license fee revenues in the first quarter of 2000.

Services and maintenance revenues decreased 37% to $2,717,000 in the first
quarter of 2001 from $4,298,000 in the first quarter of 2000. The decrease
primarily relates to service and maintenance revenues from DISPATCH-1 which
decreased $1,353,000 to $1,415,000 from $2,768,000 in the first quarter of 2000.
The decrease in DISPATCH-1 service and maintenance revenue is due to the
anticipated decline in demand for these services including the decrease in
service and maintenance revenue from two major customers that purchased
DISPATCH-1 source code in 2000. The decrease in service and maintenance revenues
also included a decrease of $409,000 in Alliance Enterprise services, partially
offset by an increase of $181,000 in Alliance Enterprises maintenance revenues.
The net decrease in Alliance Enterprise service and maintenance revenue was
$228,000, or 15%.

                                       7


Costs of Revenues
-----------------

Cost of software license fees decreased 30% to $228,000 in the first quarter of
2001 from $326,000 in the first quarter of 2000. Included in the cost of
software license fees is the fixed cost of capitalized software amortization.
Capitalized software amortization was $200,000 in both the first quarter of 2001
and 2000. The cost of software license fees decreased due to decreased third
party product costs. The software licenses gross margin percentage was 90% in
the first quarter of 2001 compared to 75% in the first quarter of 2000. This
increase in gross margin was attributable to the decrease in demand for
DISPATCH-1, which has a higher cost of sales than Alliance Enterprise.

Cost of services and maintenance decreased 43% to $1,847,000 in the first
quarter of 2001 from $3,230,000 in the first quarter of 2000. The decrease in
cost of service and maintenance is primarily attributed to fewer service
personnel due to the decreasing demand for DISPATCH-1 services. The services and
maintenance gross margin percentage was 32% in the first quarter of 2001
compared to 25% in the first quarter of 2000. The increase in services and
maintenance gross margin was primarily due to increased utilization for Alliance
Enterprise service professionals.

Product Development
-------------------

Product development expense decreased 16% to $583,000 in the first quarter of
2001 from $691,000 in the first quarter of 2000. The decrease in product
development expenses is primarily attributable to the elimination of development
costs related to DISPATCH-1. Product development as a percentage of revenues
remained at 12% in the first quarter of 2001 and 2000.

Sales and Marketing
-------------------

Sales and marketing expense decreased 22% to $1,438,000 in the first quarter of
2001 from $1,854,000 in the first quarter of 2000. The decrease in sales and
marketing is attributable to reduced headcount partially offset by higher
commission expense from increased license revenues. As a percentage of revenues,
sales and marketing expenses decreased to 29% from 33% in the first quarter of
2000.

General and Administrative
--------------------------

General and administrative expenses decreased 7% to $841,000 in the first
quarter of 2001 from $901,000 in the first quarter of 2000.

Net Interest Income
--------------------

Net interest income decreased $506,000 from $613,000 in the first quarter of
2000. The decrease resulted primarily from the reduction in investments
available for sale, which were liquidated to pay a dividend to the shareholders
of the Company on June 30, 2000. In addition, interest rates earned on invested
securities declined from the same period as last year.

International Operations
------------------------

Total revenue from the Company's international operations decreased by $218,000,
or 12%, to $1,598,000 in first quarter of 2001 from $1,816,000 in the same
quarter in 2000. The decrease in revenue from international operations was
primarily attributable to the decreasing demand for DISPATCH-1 and reduced
service revenues from Alliance Enterprise. International operations resulted in
a $96,000 loss for the first quarter ended March 31, 2001 compared to a loss of
$436,000 in the same quarter in 2000 due to a 33% decrease in operational costs.

                                       8


Liquidity and Capital Resources
-------------------------------

Net cash provided by operating activities was $131,000 for the three months
ended March 31, 2001 compared to cash used for operations of $1,271,000 for the
three months ended March 31, 2000. This increase in cash provided was primarily
attributable to net income, lower payments of accounts payable and a reduction
in prepaid expenses, partially offset by an increase in receivables and the
elimination of a variable option benefit compared to the same period last year.

The Company's investing activities used $2,711,000 of cash in the first three
months of 2001 compared to the cash provided of $6,411,000 in the first three
months of 2000. The increase in cash used was primarily attributable to
increased purchases of short term investments compared to sales of investments
during the same period last year, slightly offset by lower equipment purchases
and capitalized software development costs.

The Company used $207,000 of cash from financing activities during the three
months ended March 31, 2001 compared to cash used of $213,000 in the first three
months of 2000. Cash was primarily used to purchase treasury stock and repay
long-term debt compared to last year's financing uses of repaying debt,
partially offset by the exercise of employee stock options.

At March 31, 2001, the Company had a working capital ratio of 2.1:1, with cash,
cash equivalents and investments available for sale of $8,452,000. The Company
believes that it has adequate cash resources to make the investments necessary
to maintain or improve its current position and to sustain its continuing
operations for the foreseeable future. The Board of Directors from time to time
reviews the Company's forecasted operations and financial condition to determine
whether and when payment of a dividend or dividends is appropriate. The Company
does not anticipate that its operations or financial condition will be affected
materially by inflation.

Variability of Quarterly Results and Potential Risks Inherent in the Business
-----------------------------------------------------------------------------

The Company's operations are subject to a number of risks, which are described
in more detail in the Company's prior SEC filings. Risks which are peculiar to
the Company on a quarterly basis, and which may vary from quarter to quarter,
include but are not limited to the following:


 .  The Company's quarterly operating results have in the past varied and may in
   the future vary significantly depending on factors such as the size, timing
   and recognition of revenue from significant orders, the timing of new product
   releases and product enhancements, and market acceptance of these new
   releases and enhancements, increases in operating expenses, and seasonality
   of its business.

 .  The Company's future success will depend in part on its ability to increase
   licenses of ServiceAlliance and other new product offerings, and to develop
   new products and product enhancements to complement its existing field
   service, sales automation and customer support offerings.

 .  The Customer Relationship Management (CRM) software market is intensely
   competitive.

 .  International sales for the Company's products and services, and the
   Company's expenses related to these sales, continue to be a substantial
   component of the Company's operations. International sales are subject to a
   variety of risks, including difficulties in establishing and managing
   international operations and in translating products into foreign languages.

 .  The market price of the common stock could be subject to significant
   fluctuations in response to, and may be adversely affected by, variations in
   quarterly operating results, changes in earnings estimates by analysts,
   developments in the software industry, adverse earnings or other financial
   announcements of the Company's customers and general stock market conditions,
   as well as other factors.

                                       9


Item 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
------------------------------------------------------------------

     Interest Rate Risk. The Company's exposure to market risk for changes in
interest rates relates primarily to the Company's investment portfolio. The
Company does not have any derivative financial instruments in its portfolio. The
Company places its investments in instruments that meet high credit quality
standards. The Company is adverse to principal loss and ensures the safety and
preservation of its invested funds by limiting default risk, market risk and
reinvestment risk. As of March 31, 2001, the Company's investments consisted of
corporate bonds and commercial paper. The Company does not expect any material
loss with respect to its investment portfolio.


     Foreign Currency Risk. The Company does not use foreign currency forward
exchange contracts or purchased currency options to hedge local currency cash
flows or for trading purposes. All sales arrangements with international
customers are denominated in foreign currency. The Company does not expect any
material loss with respect to foreign currency risk.

PART II - OTHER INFORMATION
---------------------------

Item 1.   Legal Proceedings
---------------------------

From time to time, the Company is involved in litigation relating to claims
arising out of its operations in the normal course of business. The Company is
not involved in any legal proceedings, which would, in management's opinion,
have a material adverse effect on the Company's business or results of
operations.

Item 2.   Changes in Securities and Use of Proceeds
---------------------------------------------------

During the quarter ended March 31, 2001, the Company purchased 167,400 shares of
its outstanding stock. The shares are recorded in the balance sheet as treasury
stock.

Item 3.   Defaults Upon Senior Securities
-----------------------------------------

There have been no defaults by the Company on any Senior Securities during the
quarter ended March 31, 2001.

Item 4.   Submission of Matters to a Vote of Security Holders
-------------------------------------------------------------

No matters were submitted to a vote of the Company's stockholders during the
first quarter of the fiscal year covered by this report through the solicitation
of proxies or otherwise.

Item 5.   Other Information
---------------------------

One of the Company's directors, Henry H. Greer resigned from the Board of
Directors effective on April 26, 2000.

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

(A)    Exhibits

              None.

(B)    Reports on Form 8-K

              None.

                                       10


                                  SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) 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 this 14th day of May
2001.

                              ASTEA INTERNATIONAL INC.

                              By:   /s/ Zack B. Bergreen
                                    --------------------
                                    Zack B. Bergreen
                                    Chief Executive Officer
                                    (Principal Executive Officer)

                              By:   /s/ Fredric Etskovitz
                                    ---------------------
                                    Fredric Etskovitz
                                    Chief Financial Officer
                                    (Principal Financial and Chief
                                    Accounting Officer)


                                       11