================================================================================
                                  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          June 30, 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 August 8, 2001,  14,824,887  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 (Unaudited)

           Consolidated Balance Sheets                                      3

           Consolidated Statements of Operations                            4

           Consolidated Statements of Cash Flows                            5

           Notes to 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       11

PART II - OTHER INFORMATION

Item 1.    Legal Proceedings                                               11

Item 2.    Changes in Securities and Use of Proceeds                       11

Item 3.    Defaults upon Senior Securities                                 12

Item 4.    Submission of Matters to a Vote of Security Holders             12

Item 5.    Other Information                                               12

Item 6.    Exhibits and Reports on Form 8-K                                13

           Signatures                                                      14









                                       2



PART I - FINANCIAL INFORMATION


Item 1.  CONSOLIDATED FINANCIAL STATEMENTS


                                            ASTEA INTERNATIONAL INC.
                                           CONSOLIDATED BALANCE SHEETS


                                                                        June 30,             December 31,
                                                                          2001                   2000
                                                                       (Unaudited)
                                                                  ---------------------------------------------
                                ASSETS
                                                                                      
       Current assets:
         Cash and cash equivalents                                $           4,257,000     $    5,208,000
         Investments available for sale                                       4,016,000          3,506,000
         Receivables, net of reserves of $979,000 and $1,600,000              6,083,000          7,885,000
         Prepaid expenses and other                                           1,529,000          1,778,000
         Deferred income taxes                                                  668,000            668,000
                                                                  ---------------------------------------------
                 Total current assets                                        16,553,000         19,045,000

       Property and equipment, net                                              766,000            996,000
       Capitalized software, net                                              1,512,000          1,612,000
                                                                  ---------------------------------------------
                 Total assets                                     $          18,831,000  $      21,653,000
                                                                  =============================================

                 LIABILITIES AND STOCKHOLDERS' EQUITY
       Current liabilities:
         Current portion of long-term debt                        $              93,000      $     138,000
         Accounts payable and accrued expenses                                3,754,000          4,731,000
         Deferred revenues                                                    3,096,000          4,508,000
                                                                  ---------------------------------------------
                 Total current liabilities                                    6,943,000          9,377,000
                                                                  ---------------------------------------------

       Deferred income taxes                                                    298,000            298,000
                                                                  ---------------------------------------------

       Long-term debt                                                                 -             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, 14,825,000 and 14,821,000 outstanding                  148,000            148,000
          Less:  treasury stock at cost, 209,000 and 3,900 shares              (213,000)            (3,000)
          Additional paid-in capital                                         22,674,000         22,671,000
          Cumulative translation adjustment                                  (1,276,000)        (1,145,000)
          Accumulated deficit                                                (9,743,000)        (9,716,000)
                                                                  ---------------------------------------------
               Total stockholders' equity                                    11,590,000         11,955,000
                                                                  ---------------------------------------------
               Total liabilities and stockholders' equity         $          18,831,000     $   21,653,000
                                                                  =============================================

                        The accompanying notes are an integral part of these statements.




                                                       3



                                                 ASTEA INTERNATIONAL INC.
                                           CONSOLIDATED STATEMENTS OF OPERATIONS




                                                        Three Months                              Six Months
                                                       Ended June 30,                           Ended June 30,
                                         --------------------------------------------------------------------------------
                                                  2001                2000                2001                 2000
                                              (Unaudited)                              (Unaudited)
                                             ---------------    -----------------     --------------      ---------------
                                                                                             
Revenues:
     Software license fees                    $   1,487,000        $   2,298,000      $   3,768,000      $    3,591,000
     Services and maintenance                     2,899,000            3,682,000          5,617,000           7,980,000
                                         --------------------------------------------------------------------------------

          Total revenues                          4,386,000            5,980,000          9,385,000          11,571,000
                                         --------------------------------------------------------------------------------

Costs and expenses:
     Cost of software license fees                  373,000              429,000            602,000             755,000
     Cost of services and                         1,655,000            3,026,000          3,501,000           6,257,000
maintenance
     Product development                            669,000              833,000          1,252,000           1,524,000
     Sales and marketing                          1,383,000            2,059,000          2,822,000           3,912,000
     General and administrative                     584,000              773,000          1,424,000           1,675,000
     Restructuring charge (Note 2)                  -                  1,101,000             -                1,101,000
                                         --------------------------------------------------------------------------------

          Total costs and expenses                4,664,000            8,221,000          9,601,000          15,224,000
                                         --------------------------------------------------------------------------------

Loss from operations
     before interest and taxes                     (278,000)          (2,241,000)          (216,000)         (3,653,000)

Net interest income                                  82,000              601,000            189,000           1,214,000
Loss on sale of investments                         -                    (27,000)           -                   (27,000)
                                         --------------------------------------------------------------------------------
Loss before income tax                             (196,000)          (1,667,000)           (27,000)
                                                                                                             (2,466,000)
Income tax benefit                                  -                   -                    -                   -
                                         --------------------------------------------------------------------------------

Net loss                                      $    (196,000)       $  (1,667,000)     $     (27,000)     $   (2,466,000)
                                         ================================================================================

Basic and diluted net loss per share          $       (0.01)       $       (0.12)     $      -           $        (0.17)
                                         ================================================================================

Shares outstanding used in
     computing basic and diluted net
     loss per share                              14,661,000           14,373,000         14,657,000          14,316,000
                                         ================================================================================



                             The accompanying notes are an integral part of these statements.






                                                            4




                                           ASTEA INTERNATIONAL INC.
                                     CONSOLIDATED STATEMENTS OF CASH FLOWS



                                                                                    For the Six Months
                                                                                      Ended June 30,
                                                                             ---------------------------------
                                                                                  2001             2000
                                                                               (Unaudited)
                                                                             ---------------------------------
                                                                                          
Cash flows from operating activities:
   Net loss                                                                        $(27,000)    $(2,466,000)
   Adjustments to reconcile net loss to net cash used in
        operating activities:
           Depreciation and amortization                                            738,000         777,000
           Variable option compensation benefit                                        -           (224,000)
           Loss on sale of investments                                                 -             27,000
           Other                                                                       -              9,000
        Changes in operating assets and liabilities:
            Receivables                                                           1,666,000         827,000
            Prepaid expenses and other                                              225,000        (612,000)
            Accounts payable and accrued expenses                                  (983,000)     (1,509,000)
            Deferred revenues                                                    (1,411,000)        325,000
                                                                             ---------------------------------
   Net cash provided by (used in) operating activities                              208,000      (2,846,000)
                                                                             ---------------------------------

Cash flows from investing activities:
           (Purchases) sales of short-term investments                             (510,000)     29,018,000
           Purchases of property and equipment                                     (114,000)       (348,000)
           Capitalized software development costs                                  (300,000)       (400,000)
                                                                             ---------------------------------
   Net cash provided by (used in) investing activities                             (924,000)     28,270,000
                                                                             ---------------------------------

Cash flows from financing activities:
          Proceeds from exercise of stock options and employee
             stock purchase plan                                                      3,000       1,021,000
          Net repayments of long-term debt                                          (68,000)       (371,000)
          Dividend distribution                                                        -        (30,376,000)
          Purchases of treasury stock                                              (210,000)           -
                                                                             ---------------------------------
   Net cash (used in) financing activities                                         (275,000)    (29,726,000)
                                                                             ---------------------------------
   Effect of exchange rate changes on cash and cash equivalents                      40,000          79,000
                                                                             ---------------------------------

   Net decrease in cash and cash equivalents                                       (951,000)     (4,223,000)
   Cash and cash equivalents balance, beginning of period                         5,208,000       6,158,000
                                                                             ---------------------------------
   Cash and cash equivalents balance, end of period                             $ 4,257,000     $ 1,935,000
                                                                             ================================


                       The accompanying notes are an integral part of these statements.



                                                      5




Item 1.   CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                            ASTEA INTERNATIONAL INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1.    BASIS OF PRESENTATION

The consolidated financial statements at June 30, 2001 and for the three and six
month  periods  ended June 30,  2001and  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/A  which  are  hereby  incorporated  by  reference  in this
quarterly report on Form 10-Q.

2.   RESTRUCTURING CHARGES

During the second quarter of 2000, the Company  recorded a restructuring  charge
of  $1,101,000  for  actions  aimed at  reducing  costs  and  consolidating  its
development  activities  primarily in its service  automation  product line. The
charge includes severance  payments relating to foreign and domestic  operations
of $1,069,000,  buy-out  payments of $137,000 for various  leased  equipment and
$177,000 for the termination of certain office facilities, offset by $282,000 of
excess restructuring charges from December, 1999.

3.   STOCKHOLDERS' EQUITY/COMPREHENSIVE LOSS

The reconciliation of stockholders'  equity and comprehensive loss from December
31, 2000 to June 30, 2001 is summarized as follows:



                                                                                  Cumulative
                                                                                   Currency
                                     Common        Treasury      Additional      Translation      Accumulated    Comprehensive
                                       Stock         Stock    Paid-In Capital     Adjustment        Deficit      Income (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                    -       (210,000)             -               -               -                -
Cumulative translation
   adjustment                                 -              -              -        (131,000)              -         (131,000)
Net loss for the period                       -              -              -               -         (27,000)         (27,000)
                                     ------------------------------------------------------------------------------------------

Balance at June 30, 2001               $148,000      $(213,000)   $22,674,000     $(1,276,000)    $(9,743,000)      $ (158,000)
                                     ==========================================================================================



4.  MAJOR CUSTOMERS
    ---------------

In the second  quarter of 2001,  the  Company  did not have any  customers  that
accounted for 10% or more of its total revenues.  In the second quarter of 2000,
it had one customer that accounted for 13% of total revenues.  For the first six
months of 2001 and 2000, there were no customers that accounted for 10% of total
revenues.



                                       6




5.       DIVIDEND DECLARATION AND DISTRIBUTION

During  the second  quarter of 2000,  the  Company  declared a dividend  for all
stockholders of record as of June 15, 2000. The dividend payable was declared at
$2.05  per  share and was  distributed  on June 30,  2000.  In  accordance  with
generally  accepted  accounting  principles,  this  transaction was treated as a
return of capital.


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,   assumptions  made  by  management  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/A 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 client/server
and host-based  applications  are designed  specifically for  organizations  for
which field service and customer support are considered mission critical aspects
of business  operations.  The Company maintains operations in the United States,
Canada,  Australia,  the  Netherlands,  France,  the United  Kingdom,  Japan and
Israel.

Results of Operations

Comparison of Three Months Ended June 30, 2001 and 2000

Revenues

Total revenues decreased $1,594,000,  or 27%, to $4,386,000 for the three months
ended June 30, 2001 from  $5,980,000  for the three  months ended June 30, 2000.
Software license fee revenues decreased  $811,000,  or 35%, from the same period
last year.  Services  and  maintenance  fees for the three months ended June 30,
2001 amounted to $2,899,000, a 21% decrease from the same quarter in 2000.

The Company's  international  operations contributed $960,000 of revenues in the
second  quarter of 2001  compared to  $2,842,000  in the second  quarter of 2000
which represents a 66% decrease from the same period last year.

The Company's  revenues  from  international  operations  amounted to 22% of the
total revenue for the quarter.  The decline in revenues can be attributed to the
global slowdown in capital spending as well as the Company's  transitioning  its
flagship customer service product to a newer technology.

Software license fee revenues  decreased 35% to $1,487,000 in the second quarter
of 2001  from  $2,298,000  in the  second  quarter  of  2000.  The  decrease  is
substantially  attributable to a decline in DISPATCH-1  license revenues,  which
decreased  $1,278,000  or 91%, to  $121,000  in the second  quarter of 2001 from
$1,399,000 in the second  quarter of 2000.  Partially  offsetting the decline in
DISPATCH-1  license  revenue was an increase in  ServiceAlliance  license  fees,
which increased 52% from $899,000 in the second quarter of 2000 to $1,366,000 in
the  second  quarter  of 2001.  DISPATCH-1  accounted  for 8% of total  software
license  fee  revenues  in the second  quarter of 2001  compared to 61% of total
software   license   fee   revenues   in  the  second   quarter  of  2000  while
ServiceAlliance  represents 92% of total software license fee revenues,  up from
39% in the second quarter of 2000.

Services and  maintenance  revenues  decreased  21% to  $2,899,000 in the second
quarter of 2001 from  $3,682,000  in the second  quarter of 2000.  The  decrease
relates to service and  maintenance  revenues from  DISPATCH-1,  which decreased
$1,040,000  to  $1,415,000  from  $2,455,000  in the  second  quarter  of  2000.
Partially offsetting this decline


                                       7


was a 21% increase in  ServiceAlliance  services and maintenance from $1,221,000
in the second quarter of 2000 to $1,480,000 in the second quarter of 2001.

In the second quarter of 2001, no single customer accounted for more than 10% of
total revenues. In the second quarter of 2000, the Company had one customer that
accounted for 13% of total revenues.

Costs of Revenues

Cost of software license fees decreased 13% to $373,000 in the second quarter of
2001 from  $429,000  in the  second  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 second  quarter of
2001 and 2000.  The  decrease in the cost of software  license  fees  represents
decreased third party software costs attributable to the mix of products sold in
conjunction  with the  company's  products  in the second  quarter of 2001.  The
software  licenses gross margin percentage was 75% in the second quarter of 2001
compared to 81% in the second quarter of 2000. This decrease in gross margin was
primarily attributable to lower software license sales.

Cost of services  and  maintenance  decreased  45% to  $1,655,000  in the second
quarter of 2001 from  $3,026,000 in the second quarter of 2000. The services and
maintenance  gross  margin  percentage  was 43% in the  second  quarter  of 2000
compared to 18% in the second  quarter of 2000.  The  increase  in services  and
maintenance  gross margin was  primarily  due to higher  utilization  of service
professionals.

Product Development

Product  development  expense decreased 20% to $669,000 in the second quarter of
2001 from  $833,000  in the second  quarter of 2000.  Product  development  as a
percentage of revenues,  however, increased to 15% in the second quarter of 2001
from 14% in the second quarter of 2000.

Sales and Marketing

Sales and marketing expense decreased 33% to $1,383,000 in the second quarter of
2001 from  $2,059,000 in the second quarter of 2000. This decline is principally
due to the reduction in sales and marketing  personnel that occurred in the June
2000 restructuring.  In addition, commissions paid to sales people also declined
due to the  reduction  in  revenues.  As a  percentage  of  revenues,  sales and
marketing  expenses  decreased to 32% in 2001 from 34% in the second  quarter of
2000.

General and Administrative

General  and  administrative  expenses  decreased  24% to $584,000 in the second
quarter of 2001 from  $773,000  in the  second  quarter  of 2000.  The  decrease
resulted from the  reduction in  administrative  personnel  that occurred in the
June 2000  restructuring  as well as declines  in  facilities  rent  expense at
certain locations.

Restructuring Charge

During the second quarter of 2000, the Company  recorded a restructuring  charge
of  $1,101,000  for  actions  aimed at  reducing  costs  and  consolidating  its
development  activities.  The charge  consisted  of  severance  payments in both
foreign and domestic operations of $1,069,000,  buy-out payments of $137,000 for
various leased equipment, $177,000 for the termination of certain office leases,
offset by $282,000  of excess  restructuring  charges  from the  December,  1999
restructuring.

Net Interest Income

Net interest income decreased  $519,000 to $82,000 in the second quarter of 2001
from $601,000 in the second quarter of 2000. The decrease of interest  income is
principally  attributable to a reduction in cash and marketable  securities that
occurred on June 30, 2000 when the special  dividend of $30.4 million ($2.05 per
share) was paid,  combined with an overall  reduction in interest  rates paid on
invested cash.



                                       8


International Operations

Total  revenue  from  the  Company's   international   operations  decreased  by
$1,882,000, or 66%, to $960,000 in second quarter of 2001 from $2,842,000 in the
same quarter in 2000. The decrease in revenue from international  operations was
primarily attributable to slowdowns in the European and Asia/Pacific  economies.
International  operations  resulted  in a net  loss of  $54,000  for the  second
quarter ended June, 2001  compared to a net loss of $315,000 in the same quarter
in 2000. The improved results are primarily attributable to management's ongoing
cost containment program.

Comparison of Six Months Ended June 30, 2001 and 2000

Revenues

Revenues  decreased  $2,186,000,  or 19%, to $9,385,000 for the six months ended
June 30, 2001 from $11,571,000 for the six months ended June 30, 2000.  Software
license fee revenues increased $177,000,  or 5%, from the same period last year.
Services and maintenance fees for the six months ended June 30, 2001 amounted to
$5,617,000, a 30% decrease from the same six months in 2000.

The Company's international operations contributed $2,558,000 of revenues in the
first six months of 2001 compared to $4,658,000 in the first six months of 2000.
This  represents a 45% decrease  from the same period last year and 27% of total
revenues in the first six months of 2001.  The decline is due  primarily  to the
planned  phase-out of the Company's  legacy  product,  DISPATCH-1 as well as the
general economic slow-down that is occurring throughout the world. Revenues from
DISPATCH-1 decreased $2,374,000,  while revenues from ServiceAlliance  increased
$274,000.

Software license fee revenues increased 5% to $3,768,000 in the first six months
of 2001 from $3,591,000 in the first six months of 2000. ServiceAlliance license
revenues increased $1,901,000, or 123%, to $3,450,000 in the first six months of
2001 from  $1,549,000  in the first six months of 2000.  DISPATCH-1  license fee
revenue  decreased  $1,724,000 or 84% from $2,041,000 in the first six months of
2000 to  $319,000 in the first six months of 2001 due to  decreasing  demand for
this product. DISPATCH-1 accounted for 8% of total software license fee revenues
in the first six months of 2001 compared to 57% of total license fee revenues in
the first  six  months of 2000.  The  decline  in  DISPATCH-1  license  revenues
reflects the Company's efforts to transition to the next generation of software,
ServiceAlliance.

Services and maintenance  revenues  decreased 30% to $5,617,000 in the first six
months of 2001 from $7,980,000 in the six months of 2000. The decrease primarily
relates to service and  maintenance  revenues from  DISPATCH-1,  which decreased
$2,395,000  to  $2,832,000  from  $5,223,000  in the first  six  months of 2000.
However,  this decrease was partially offset by service and maintenance  revenue
from  ServiceAlliance,  which increased by 1% to $2,776,000 during the first six
months of 2001 compared to $2,751,000 for the same period in 2000.

In the first six months of 2001 and 2000,  the  Company  had no single  customer
that accounted for more than 10% of total revenues.

Costs of Revenues

Cost of software  license fees decreased 20% to $602,000 in the first six months
of 2001 from  $755,000 in the first six months of 2000.  Included in the cost of
software  license fees is the fixed cost of capitalized  software  amortization.
Capitalized  software  amortization was $400,000 in both the first six months of
2001 and 2000.  The  decrease in the cost of software  license  fees  represents
decreased third party software costs attributable to the mix of products sold in
conjunction  with the  company's  products in the first six months of 2000.  The
software  licenses  gross margin  percentage  was 84% in the first six months of
2001  compared  to 79% in the first six months of 2000.  This  increase in gross
margin was  attributable to the mix of licenses sold and the related third party
software costs.

Cost of services and  maintenance  decreased  44% to $3,501,000 in the first six
months of 2001 from $6,257,000 in the first six months of 2000. The services and
maintenance  gross margin  percentage was 38% and 22% in the first six months of
2001 and 2000,  respectively.  The  improvement  in gross margin  resulted  from
improved utilization of the Company's service and maintenance personnel.



                                       9


Product Development

Product  development expense decreased 18% to $1,252,000 in the first six months
of 2001 from $1,524,000 in the first six months of 2000. Product  development as
a percentage  of revenues was 13% in the first six months of both 2001 and 2000.
The decline in cost is the result of the  reduction in personnel  that  occurred
during the June 30, 2000 restructuring.

Sales and Marketing

Sales and marketing  expense decreased 28% to $2,822,000 in the first six months
of 2001 from  $3,912,000  in the first six months of 2000.  As a  percentage  of
revenues,  sales and marketing  expenses  decreased to 30% from 34% in the first
six months of 2000, due to the Company's continued effort to control costs while
striving to increase  market share and expand its  presence  through both direct
and indirect channels.

General and Administrative

General and administrative  expense decreased 15% to $1,424,000 in the first six
months of 2001 from  $1,675,000  in the first six months of 2000.  The  decrease
primarily relates to the Company's ongoing cost containment efforts, principally
using less personnel and less office space.

Net Interest Income

Net interest income decreased  $1,025,000 to $189,000 in the first six months of
2001 from $1,214,000 in the first six months of 2000. This decrease is primarily
attributable  to a reduction of  marketable  securities of $30.4 million on June
30, 2000 which was used to pay a one time  special  dividend of $2.05 per share.
In addition, interest rates earned on marketable securities have declined.

International Operations

Total  revenue  from  the  Company's   international   operations   declined  by
$2,100,000, or 45%, to $2,558,000 in first six months of 2001 from $4,658,000 in
the  same six  months  of 2000.  The  decrease  in  revenue  from  international
operations  was  primarily  attributable  to a decreases in  DISPATCH-1  license
revenue of $1,519,000 and service and maintenance  revenue declines of $856,000.
Partially  offsetting  the revenue  declines were  increases in  ServiceAlliance
license revenue of $96,000, as well as service and maintenance revenue increases
of $177,000.  International  operations  resulted in a $172,000 loss for the six
months  ended June 30, 2001 as compared to a loss of $752,000 for the six months
ended June 30, 2000. The  improvement  that resulted in reducing the net loss by
$580,000 is due to the ongoing cost  containment  efforts put into effect during
the June 2000 restructuring.

Liquidity and Capital Resources

Net cash provided by operating  activities was $208,000 for the six months ended
June 30, 2001 compared to $2,846,000 used in operations for the six months ended
June 30, 2000.  This  improvement in operations  cash flows is the result of the
2000  restructuring  charges as well as the ongoing impact of management's  cost
containment program which reduced the Company's net loss from last year.

The Company used $924,000 in investing activities during the first six months of
2001 compared to generating $28,270,000 of cash in the first six months of 2000.
The decrease in cash used for  investing  activities  resulted  from the sale of
investments  available  for sale in  2000,  which  was  used to pay the  special
dividend payment in June, 2000.

The Company used $275,000 for financing  activities  during the first six months
of 2001 compared to using $29,726,000 during the six months ended June 30, 2000.
This  decrease  is due  primarily  to  the  payment  of a  special  dividend  of
$30,376,000 or $2.05 per share in the quarter ended June 30, 2000.

At June 30, 2001, the Company had a working  capital ratio of 2.38:1,  with cash
and  investments  available for sale of $8,273,000.  The Company defines working
capital  as the ratio of  current  assets to current  liabilities.  The  Company
believes that it has adequate cash resources to make the  investments  necessary
to  maintain  or improve its


                                       10


current  position and to sustain its continuing  operations for the  foreseeable
future.  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:

o    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.

o    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 offerings.

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

o    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.

o    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,  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.

Item 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

         Interest Rate Risk.  The Company's  exposure to market risk for changes
in interest rates relate 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 June 30, 2001, the Company's  investments  consisted of
U.S. government agencies  securities,  commercial paper and corporate bonds. 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

There have been no changes in securities during the quarter ended June 30, 2001.



                                       11


Item 3.           Defaults Upon Senior Securities

There have been no defaults by the Company on any Senior  Securities  during the
quarter ended June 30, 2001.

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

The Annual Meeting of  Stockholders  of the Company was held on August 10, 2001,
at which meeting the  stockholders  voted to elect four directors of the Company
for terms  ending at the next annual  meeting,  approval  of a new Stock  Option
Plan,  and to  ratify  the  appointment  of BDO  Seidman,  LLP as the  Company's
independent auditors for the year ending December 31, 2001.

Item 5.           Other Information

None.














                                       12




Item 6.           Exhibits and Reports on Form 8-K

(A)      Exhibits

         None.

(B)      Reports on Form 8-K

         A report  on Form  8-K/A was filed on June 22,  2001  with  respect  to
         changes in registrant's certifying accountant.

         A report  on Form  8-K was  filed on June 18,  2001,  with  respect  to
         changes in registrant's certifying accountant.

         A report on Form 8-K was filed on May 7, 2001, with respect to a letter
         from The Nasdaq Stock Market,  Inc.  regarding the continued listing of
         Astea International Inc. common stock on The Nasdaq National Market.












                                       13





                                   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 13th day of August
2000.

                                     ASTEA INTERNATIONAL INC.


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

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









                                       14