================================================================================
                                  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, 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: 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.)

    240 Gibraltar Road, 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
                                             ----     ---
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 August 12, 2003,  14,606,530 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                                               9

Item 3.             Quantitative and Qualitative Disclosure About Market Risk                        14

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

Item 1.             Legal Proceedings                                                                15

Item 2.             Changes in Securities and Use of Proceeds                                        15

Item 3.             Defaults upon Senior Securities                                                  15

Item 4.             Submission of Matters to a Vote of Security Holders                              15

Item 5.             Other Information                                                                15

Item 6.             Exhibits and Reports on Form 8-K                                                 16

                    Signatures                                                                       17


                                       2





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


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


                                        ASTEA INTERNATIONAL INC.
                                        ------------------------
                                      CONSOLIDATED BALANCE SHEETS
                                      ---------------------------

                                                                        June 30,           December 31,
                                                                          2003                  2002
                                                                       (Unaudited)
                                                                 ---------------------------------------
                                                                                      
                                ASSETS
       Current assets:
         Cash and cash equivalents                                    $  5,250,000        $  4,967,000
         Restricted cash                                                   300,000             300,000
         Receivables, net of reserves of $715,000 and $1,018,000         4,533,000           7,936,000
         Prepaid expenses and other                                        943,000             691,000
                                                                 ---------------------------------------
                 Total current assets                                   11,026,000          13,894,000

       Property and equipment, net                                         614,000             586,000
       Capitalized software, net                                         1,289,000           1,349,000
       Other assets                                                        616,000             614,000
                                                                 ---------------------------------------

                  Total assets                                        $ 13,545,000        $ 16,443,000
                                                                 =======================================

                 LIABILITIES AND STOCKHOLDERS' EQUITY
       Current liabilities:
         Accounts payable and accrued expenses                        $  2,837,000        $  3,418,000
         Deferred revenues                                               3,477,000           4,027,000
                                                                 ---------------------------------------

                 Total current liabilities                               6,314,000           7,445,000

       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 issued                                 148,000             148,000
          Additional paid-in capital                                    22,674,000          22,674,000
          Cumulative translation adjustment                               (836,000)         (1,039,000)
          Accumulated deficit                                          (14,540,000)        (12,568,000)
          Less:  treasury stock at cost, 218,000 and 221,000 shares       (215,000)           (217,000)
                                                                 ---------------------------------------

                 Total stockholders' equity                              7,231,000           8,998,000
                                                                 ---------------------------------------

                 Total liabilities and stockholders' equity           $ 13,545,000        $ 16,443,000
                                                                 =======================================

                          See accompanying notes to the consolidated financial statements.



                                       3





                            ASTEA INTERNATIONAL INC.
                            ------------------------
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      -------------------------------------
                                   (Unaudited)


                                                      Three Months                    Six Months
                                                     Ended June 30,                 Ended June 30,
                                         ---------------------------------------------------------------------
                                              2003              2002              2003            2002
                                         --------------- -----------------  --------------  ---------------
                                                                                    

Revenues:
     Software license fees                     312,000           710,000       1,334,000        2,177,000
     Services and maintenance                2,826,000         2,592,000       5,792,000        5,079,000
                                         ---------------------------------------------------------------------

          Total revenues                     3,138,000         3,302,000       7,126,000        7,256,000
                                         ---------------------------------------------------------------------

Costs and expenses:
     Cost of software license fees             181,000           320,000         410,000          596,000
     Cost of services and
     maintenance                             1,830,000         1,687,000       3,474,000        3,319,000
     Product development                       587,000           502,000       1,094,000          942,000
     Sales and marketing                     1,524,000         1,572,000       3,098,000        2,831,000
     General and administrative                531,000           659,000       1,049,000        1,288,000
                                         ---------------------------------------------------------------------

          Total costs and expenses           4,653,000         4,740,000       9,125,000        8,976,000
                                         ---------------------------------------------------------------------

Loss from operations
     before interest and taxes             (1,515,000)       (1,438,000)      (1,999,000)     (1,720,000)

Net interest income                             12,000            26,000          29,000           64,000
                                         ---------------------------------------------------------------------
Loss before income tax                     (1,503,000)       (1,412,000)       (1,970,000)    (1,656,000)

Income tax expense                                   -         (150,000)               -        (200,000)
                                         ---------------------------------------------------------------------

Net loss                                   (1,503,000)       (1,562,000)       (1,970,000)    (1,856,000)
                                         =====================================================================

Basic and diluted net loss per share            (0.10)            (0.11)           (0.13)          (0.13)
                                         =====================================================================

Shares outstanding used in
     computing basic and diluted net
     loss per share                         14,607,000        14,602,000      14,607,000       14,602,000
                                         =====================================================================

                            See accompanying notes to the consolidated financial statements.






                                       4






                            ASTEA INTERNATIONAL INC.
                            ------------------------
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      -------------------------------------
                                   (Unaudited)
                                                                                      For the Six Months
                                                                                        Ended June 30,
                                                                                    2003              2002
                                                                              -----------------------------------
                                                                                             

Cash flows from operating activities:
   Net loss                                                                          $(1,970,000)          $(1,856,000)
   Adjustments to reconcile net loss to net cash provided by (used in)
        operating activities:
        Depreciation and amortization                                                    469,000               621,000
        Changes in operating assets and liabilities:
            Receivables                                                                3,615,000               736,000
            Prepaid expenses and other                                                  (241,000)               37,000
            Other assets                                                                  (2,000)              165,000
            Accounts payable and accrued expenses                                       (584,000)             (427,000)
            Deferred revenues                                                           (515,000)             (315,000)
                                                                                   -----------------------------------

 Net cash provided by (used in) operating activities                                     772,000            (1,039,000)
                                                                                   -----------------------------------

Cash flows from investing activities:
   (Purchases) sales of short-term investments                                                 -             1,988,000
   Purchases of property and equipment                                                  (153,000)             (113,000)
   Capitalized software development costs                                               (240,000)             (308,000)
                                                                                   -----------------------------------

Net cash (used in) provided by investing activities                                     (393,000)            1,567,000
                                                                                   -----------------------------------

Cash flows from financing activities:
   Proceeds from exercise of stock options and employee stock purchase plan                2,000                 3,000
   Net repayments of long-term debt                                                            -               (34,000)
                                                                                   -----------------------------------

   Net cash provided by (used in) financing activities                                     2,000               (31,000)
                                                                                   -----------------------------------

   Effect of exchange rate changes on cash and cash equivalents                          (98,000)              (21,000)
                                                                                   -----------------------------------

   Net increase in cash and cash equivalents                                             283,000               476,000
   Cash and cash equivalents balance, beginning of period                              4,967,000             4,071,000
                                                                                   -----------------------------------

   Cash and cash equivalents balance, end of period                                  $ 5,250,000           $ 4,547,000
                                                                                  ====================================

                        See accompanying notes to the consolidated financial 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, 2003 and for the three and six
month  periods  ended June 30,  2003 and 2002 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  2002 Annual
Report on Form 10-K which are hereby incorporated by reference in this quarterly
report on Form  10-Q.  Results of  operations  and cash flows for the six months
ended June 30, 2003 are not  necessarily  indicative  of the results that may be
expected for the full year.

2. RESTRUCTURING CHARGES
   ---------------------

During the fourth quarter of 2001, the Company  recorded a restructuring  charge
of  $409,000 in  connection  with  severance  costs to  downsize  the  Company's
employment rolls ($211,000) and eliminate excess office space ($198,000). During
the first six months of 2002,  the Company made payments of $229,000  related to
the 2001 Restructuring  Plan,  including  severance  obligations of $139,000 and
lease  obligations  of $90,000.  During the second  quarter of 2002, the Company
evaluated  its  restructuring  accrual  based  on the  then  current  facts  and
determined  that  $55,000  related  to  severance  costs was not  needed for the
purposes of the 2001 plan and, accordingly, the accrual was reversed.

3. INCOME TAX EXPENSE
   ------------------

The  Company  accounts  for  income  taxes  in  accordance  with  SFAS  No.  109
"Accounting  for Income  Taxes"  which  requires  that  deferred  tax assets and
liabilities  be  recognized  using enacted tax rates for the effect of temporary
differences  between the book and tax basis of recorded assets and  liabilities.
SFAS No. 109 also  requires  that  deferred tax assets be reduced by a valuation
allowance if it is more likely than not that some portion or all of the deferred
tax asset will not be realized.

The realizability of the deferred tax assets is evaluated quarterly by assessing
the  valuation  allowance  and by  adjusting  the  amount of the  allowance,  if
necessary.  The factors used to assess the  likelihood  of  realization  are the
forecast of future  taxable  income and available tax planning  strategies  that
could be  implemented  to realize  the net  deferred  tax asset.  During the six
months  ended June 30, 2002,  the Company  recorded a tax expense of $200,000 to
increase its valuation  allowance related to its net deferred tax asset based on
an  assessment  of what  portion  of the  asset  is more  likely  than not to be
realized,  in  accordance  with FSAS No.  109.  The  Company  will  review  this
provision periodically in the future as circumstances change.





                                       6






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

The reconciliation of stockholders'  equity and comprehensive loss from December
31, 2002 to June 30, 2003 is summarized as follows:



                                                                Cumulative
                                               Additional        Currency
                                    Common      Paid-In        Translation     Accumulated       Treasury      Comprehensive
                                    Stock       Capital         Adjustment       Deficit           Stock       Income (Loss)
                                    -----       -------         ----------       -------           -----       -------------

                                                                                             
Balance at December 31, 2002       $148,000      $22,674,000   $(1,039,000)    $(12,568,000)      $(217,000)   $
                                                                                                                        -
Issuance of common stock
  Under employee stock
  Purchase plan                           -                              -           (2,000)          2,000             -
Cumulative translation
   Adjustment                             -                -       203,000                -             -            203,000
Net loss for the period                   -                -             -       (1,970,000)            -         (1,970,000)
                                 ----------------------------------------------------------------------------------------------

Balance at June 30, 2003           $148,000      $22,674,000     $(836,000)    $(14,540,000)      $(215,000)   $   (1,767,000)
                                 ===============================================================================================



5. MAJOR CUSTOMERS
   ---------------

In the second  quarter of 2003,  the there were no customers  that accounted for
10% of total  revenues.  In the second  quarter  of 2002,  the  Company  had one
customer that accounted for 11% of its total  revenue.  For the first six months
of 2003 and  2002,  there  were no  customers  that  accounted  for 10% of total
revenues.

6. RECENT ACCOUNTING PRONOUNCEMENTS
   --------------------------------

In December 2002, the FASB issued Statement No. 148, "Accounting for Stock-Based
Compensation-Transition  and Disclosure,  an amendment of FASB Statement No. 123
("SFAS 148"). SFAS 148 amends FASB Statement No. 123, Accounting for Stock-Based
Compensation,  to provide  alternative  methods of transition for an entity that
voluntarily changes to the fair value based method of accounting for stock-based
employee  compensation.  It  also  amends  the  disclosure  provisions  of  that
Statement  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.  Finally,  this Statement amends  Accounting  Principles
Board ("APB") Opinion No. 28, Interim Financial Reporting, to require disclosure
about those effects in interim financial information.  SFAS 148 is effective for
financial  statements  for fiscal  years ending  after  December  15, 2002.  The
Company  plans to  continue  to use the  intrinsic  valuation  method  for stock
compensation.


                                       7


Stock Compensation

The Company  accounts for options and the employee stock purchase plan under the
recognition  and  measurement  principles of Accounting  Principles  Board (APB)
Opinion No. 25,  "Accounting  for Stock  Issued to  Employees."  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.  Had  compensation  cost for the
Company's  stock  options  and  employee  stock  purchase  plan been  determined
consistent with SFAS No. 123,  "Accounting for  Stock-Based  Compensation,"  the
Company's net loss and basic and diluted net loss per share would have been:



                                                  Three months ended                       Six months ended
                                                       June 30,                                June 30,
                                            ---------------------------------      ----------------------------------
                                                 2003              2002                 2003               2002
                                            -------------------------------------------------------------------------
                                              (unaudited)       (unaudited)          (unaudited)        (unaudited)
                                                                                            
Net loss - as reported                   $    (1,503,000)   $   (1,562,000)    $    (1,970,000)          (1,856,000)

Add:  Stock-based compensation
   included in net income as
   reported, net or related tax effects            -                  -                  -                   -

Deduct stock-based compensation
   determined under fair value based
   methods for all awards, net of
   related tax effects                          (120,000)           53,000            (205,000)             (67,000)


Net loss - pro forma                     $    (1,623,000)   $   (1,509,000)    $    (2,174,000)        $ (1,923,000)

Basic and diluted loss per share -
   as reported                           $         (0.10)   $        (0.11)    $         (0.13)        $      (0.13)
Basic and diluted loss per share -
   pro forma                             $         (0.11)   $        (0.10)    $         (0.15)        $      (0.13)

The weighted  average fair value of those  options  granted  during the quarters
ended June 30, 2003 and 2002 was estimated at $0.76 and $0.86, respectively. The
weighted average fair value of those options granted during the six months ended
June 30, 2003 and 2002 was estimated at $0.63 and $0.86.  The fair value of each
option  grant  is  estimated  on the  date  of  grant  using  the  Black-Scholes
option-pricing model with the following weighted average assumptions:  risk-free
interest  rate of 3.38%  and 5.02% for 2003 and 2002  grants,  respectively;  an
expected life of six years; volatility of 144% and 147%; and a dividend yield of
zero for 2003 and 2002 grants, respectively.




                                       8


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 for the fiscal  year ended  December  31,
2002.

The Company  develops,  markets and supports  Customer  Relationship  Management
(CRM) software  solutions for companies that sell and service capital equipment.
Clients include Fortune 500 to mid-size  companies that automate equipment sales
and service  business  processes to increase  competitive  advantages,  top-line
revenue growth,  profitability,  and customer  loyalty.  The Company  supports a
global  client base with a worldwide  sales and service  network  that  conducts
business  through  Company  facilities  in the United  States,  United  Kingdom,
Australia, the Netherlands, and Israel.

Over the past  year,  the  Company  has  continued  the  process  of making  the
transition from a field service software provider to a provider of comprehensive
suite of CRM  solutions.  In  addition  to field  service,  the CRM  suite  also
streamlines   and  automates   processes  for  managing   sales  and  marketing,
multi-channel  customer contact centers and professional  services.  The Company
continues to focus on companies in industries that sell and service equipment.

The Company has invested  heavily to  modernize  the product and to move it from
PowerBuilder  and client server  technology to cutting edge thin client internet
technology and completely Microsoft and XML coding. The new technology is highly
scalable,  which allows the Company to pursue large  opportunities,  and enables
the  Company  to offer a  replacement  product to a legacy  base of  large-scale
customers.

The  Company has made a  conscious  decision to cleanse its  pipeline of smaller
deals.  The Company is now focused on going  after large  enterprises  that will
roll  out  its  application  in  multiple  divisions  and  locations,  including
worldwide  in some  instances.  This  newly  exclusive  focus  has  caused  some
short-term  shortfalls  in revenue,  since the  smaller  deals did tend to close
quicker.  The new  enterprise  level  deals  require  approval  from  many  more
departments  and levels within the  organization,  resulting in lengthier  sales
cycles. The roster of recent signings such as United Technologies, Circuit City,
Carrier,  Johnson & Johnson and Thales reflects the growing  acceptance by major
corporations of the Company's Astea Alliance Suite offering.

As economic conditions throughout the world continue to deteriorate, the Company
diligently  monitors costs and  aggressively  manages them. The Company believes
that its  investment  in  development  along with its  continued  commitment  to
marketing  its CRM suite will  favorably  position  the  Company  when  economic
conditions improve in the future.


Critical Accounting Policies and Estimates
------------------------------------------

The Company's significant accounting policies are more fully described in Note 2
of the Notes to the  Consolidated  Financial  Statements in the Company's Annual
Report on Form 10-K. The preparation of financial  statements in conformity with
accounting  principles  generally  accepted  within the United  States  requires
management  to make  estimates and  assumptions  in certain  circumstances  that
affect amounts  reported in the  accompanying  financial  statements and related
notes.  In preparing these  financial  statements,  management has made its best
estimates and judgments of certain amounts included in the financial statements,
giving due consideration to materiality. The Company does not believe there is a
great likelihood that materially  different amounts would be reported related to
the  accounting  policies  described  below;   however,   application  of  these
accounting   policies  involves  the  exercise  of

                                       9


judgments  and the use of  assumptions  as to  future  uncertainties  and,  as a
result, actual results could differ from these estimates.

Revenue Recognition

Revenues are  recognized in accordance  with  Statement of Position  (SOP) 97-2,
which provides  guidelines on the  recognition of software  license fee revenue.
Principally,   revenue  may  be  recognized  when  persuasive   evidence  of  an
arrangement  exists,  delivery  has  occurred,  the  license  fee is  fixed  and
determinable and the collection of the fee is probable.  The Company allocates a
portion of its software revenue to post-contract  support activities or to other
services or products  provided to the customer free of charge or at non-standard
discounts when provided in conjunction with the licensing  arrangement.  Amounts
allocated are based upon standard prices charged for those services or products.
Software  license  fees for  resellers or other  members of the  indirect  sales
channel are based on a fixed percentage of the Company's  standard  prices.  The
Company  recognizes  software  license revenue for such contracts based upon the
terms and conditions provided by the reseller to its customer.

Revenue from  post-contract  support is recognized  ratably over the term of the
contract on a straight-line  basis.  Consulting and training  service revenue is
generally  recognized at the time the service is  performed.  Fees from licenses
sold together with consulting  services are generally  recognized upon shipment,
provided  that the  contract  has been  executed,  delivery of the  software has
occurred,  fees are  fixed and  determinable  and  collection  is  probable.  In
instances where the aforementioned  criteria have not been met, both the license
and the consulting fees are recognized under the percentage of completion method
of contract accounting.

In limited instances, the Company will enter into contracts for which revenue is
recognized  under contract  accounting.  The  accounting  for such  arrangements
requires  judgement,  which  impacts  the  timing  of  revenue  recognition  and
provision for estimated losses, if applicable.

Accounts Receivable

The Company evaluates the adequacy of its allowance for doubtful accounts at the
end of each quarter.  In performing this  evaluation,  the Company  analyzes the
payment  history  of  its  significant   past  due  accounts,   subsequent  cash
collections  on  these  accounts  and  comparative   accounts  receivable  aging
statistics.  Based on this information,  along with consideration of the general
strength  of the  economy,  the  Company  develops  what  it  considers  to be a
reasonable   estimate  of  the   uncollectible   amounts  included  in  accounts
receivable.  This estimate involves  significant  judgement by the management of
the  Company.  Actual  uncollectible  amounts  may  differ  from  the  Company's
estimate.

Capitalized Software Research and Development Costs

The Company accounts for its internal  software  development costs in accordance
with Statement of Financial  Accounting  Standards  ("SFAS") No. 86, "Accounting
for the Costs of Computer  Software to be Sold,  Leased or Otherwise  Marketed."
Accordingly,   all  costs   incurred   subsequent  to  attaining   technological
feasibility  are  capitalized  and  amortized  over a period not to exceed three
years.  Technological  feasibility is attained when software products reach Beta
release. Costs incurred prior to the establishment of technological  feasibility
are charged to product development  expense.  The establishment of technological
feasibility and the ongoing assessment of recoverability of capitalized software
development costs require  considerable  judgement by management with respect to
certain external  factors,  including,  but not limited to,  anticipated  future
revenues,   estimated  economic  life  and  changes  in  software  and  hardware
technologies.  Upon the general  release of the software  product to  customers,
capitalization  ceases and such  costs are  amortized,  using the  straight-line
method,  on a  product-by-product  basis  over  the  estimated  life,  which  is
generally three years. All research and development  expenditures are charged to
research and development expense in the period incurred.


                                       10


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

Comparison of Three Months Ended June 30, 2003 and 2002
-------------------------------------------------------

Revenues
--------

Total  revenues  decreased  $164,000,  or 5%, to $3,138,000 for the three months
ended June 30, 2003 from  $3,302,000  for the three  months ended June 30, 2002.
Software license fee revenues decreased  $398,000,  or 56%, from the same period
last year.  Services and maintenance  fees increased by 9% over the same quarter
in 2002 for the three months ended June 30, 2003 to $2,826,000.

The Company's international operations contributed $1,238,000 of revenues in the
second quarter of 2003,  which was a 20% increase over total revenues  generated
during the second  quarter of 2002.  The Company's  revenues from  international
operations  amounted to 40% of the total revenue for the second  quarter in 2003
as compared to 31% of total revenues for the same quarter in 2002.

Software license fee revenues decreased 56% to $312,000 in the second quarter of
2003 from $710,000 in the second quarter of 2002.  The decrease is  attributable
to the inability to conclude sales  opportunities  that the Company had expected
to close this  quarter.  Continued  uncertainty  in the economy  contributed  to
preventing corporate decision makers from committing to large software projects.

Services  and  maintenance  revenues  increased 9% to  $2,826,000  in the second
quarter of 2003 from  $2,592,000  in the second  quarter of 2002.  The  increase
relates  to  a  31%   increase  in  service  and   maintenance   revenues   from
AllianceEnterprise,  which  increased  $509,000 to $2,160,000 from $1,651,000 in
the  second  quarter  of 2002.  Partially  offsetting  this  increase  was a 29%
decrease in  DISPATCH-1  services and  maintenance  from  $941,000 in the second
quarter of 2002 to $666,000 in the second quarter of 2003.

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

Cost of software license fees decreased 43% to $181,000 in the second quarter of
2003 from  $320,000  in the  second  quarter  of 2002.  Included  in the cost of
software  license fees is the fixed cost of capitalized  software  amortization.
Capitalized  software  amortization  was  $150,000  and  $200,000  in the second
quarter of 2003 and 2002,  respectively.  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 2003. The decrease is also due to the decrease in license sales.  The
software  licenses gross margin percentage was 42% in the second quarter of 2003
compared to 55% in the second quarter of 2002. This decrease in gross margin was
primarily attributable to lower software license sales.

Cost of  services  and  maintenance  increased  8% to  $1,830,000  in the second
quarter of 2003 from  $1,687,000 in the second quarter of 2002. The services and
maintenance  gross margin  percentage was 35% in both the second quarter of 2003
and 2002.

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

Product  development  expense increased 17% to $587,000 in the second quarter of
2003 from $502,000 in the second  quarter of 2002. The increase is primarily due
to the  strengthening  of the Israel  shekel  against the U.S.  dollar.  Product
development  as a percentage of revenues  increased to 19% in the second quarter
of 2003 as compared to 15% in the second quarter of 2002.

Most of the Company's product development occurs in its office in Tefen, Israel.
In 2003 the Israeli  shekel  increased  in value  relative  to the U.S.  dollar,
increasing  the  Company's  development  expenses  on a U.S.  dollar  basis.  In
addition,  the Company is  focusing  on  completing  the  transformation  of its
products to version 7.0, a completely  web-based  architect,  so the size of the
development staff has increased by 15% since the same time last year.


                                       11


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

Sales and marketing  expense decreased 3% to $1,524,000 in the second quarter of
2003 from $1,572,000 in the second quarter of 2002. This decrease is principally
associated  with the cost of hiring sales and marketing  personnel in the second
quarter  of 2002 as  well as  increased  costs  in the  second  quarter  of 2002
associated with the development of an aggressive marketing campaign to introduce
new  products  which are  expected to  generate  sales in future  periods.  As a
percentage of revenues,  sales and marketing  expenses  increased to 49% in 2003
from 48% in the second quarter of 2002.

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

General and administrative  expenses decreased 19% to $531,000 during the second
quarter of 2003 from $659,000 in the second  quarter of 2002. As a percentage of
revenue, general and administrative costs decreased to 17% in the second quarter
of 2003 from 20% in the  second  quarter  of 2002.  The  decrease  is  primarily
attributable  to the resolution of a collection  matter in the Company's  favor,
which resulted in a net decrease of $235,000.


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

Net interest income  decreased  $14,000 to $12,000 in the second quarter of 2003
from $26,000 in the second quarter of 2002.  The decrease of interest  income is
generally  attributable  to less cash on hand than in 2002 as well as an overall
reduction in interest rates paid on invested cash.

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

Total revenue from the Company's  international  operations increased during the
second  quarter of 2003 to  $1,238,000  compared  to  $1,035,000  for the second
quarter of 2002.  International  operations generated a net loss of $397,000 for
the second quarter ended June 30, 2003 compared to a net loss of $454,000 in the
same quarter in 2002.

Comparison of Six Months Ended June 30, 2003 and 2002
-----------------------------------------------------

Revenues
--------

Revenues decreased $130,000,  or 2%, to $7,126,000 for the six months ended June
30,  2003 from  $7,256,000  for the six  months  ended June 30,  2002.  Software
license fee revenues decreased $843,000, or 39%, from the same period last year.
Services and maintenance fees for the six months ended June 30, 2003 amounted to
$5,792,000, a 14% increase from the same six months in 2002.

The Company's international operations contributed $2,601,000 of revenues in the
first six months of 2003 compared to $2,236,000 in the first six months of 2002.
This  represents a 16% increase  from the same period last year and 36% of total
revenues in the first six months of 2003.

Software  license fee  revenues  decreased  39% to  $1,334,000  in the first six
months  of  2003   from   $2,177,000   in  the   first   six   months  of  2002.
AllianceEnterprise license revenues decreased $665,000, or 33%, to $1,334,000 in
the first six  months of 2003 from  $1,999,000  in the first six months of 2002.
There  were no  license  sales of the  DISPATCH-1  product  during the first six
months of 2003 as  compared  to  $178,000  during the same  period in 2002.  The
decline  in  DISPATCH-1  license  revenues  reflects  the  Company's  efforts to
transition to the next generation of software, AllianceEnterprise.

Services and maintenance  revenues  increased 14% to $5,792,000 in the first six
months of 2003 from $5,079,000 in the six months of 2002. The increase primarily
relates to service  and  maintenance  revenues  from  AllianceEnterprise,  which
increased  $1,320,000 to $4,396,000  from  $3,076,000 in the first six months of
2002.  However,  this increase was partially offset by a decrease in service and
maintenance  revenue on DISPATCH-1,  which decreased by 30% to $1,396,000 during
the first six months of 2003 compared to $2,003,000 for the same period in 2002.

                                       12


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

Cost of software  license fees decreased 31% to $410,000 in the first six months
of 2003 from  $596,000 in the first six months of 2002.  Included in the cost of
software  license fees is the fixed cost of capitalized  software  amortization.
Capitalized  software  amortization  was  $300,000 and $418,000 in the first six
months of 2003 and 2002,  respectively.  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 2003.  The software  licenses  gross margin  percentage was 69% in the
first six months of 2003  compared to 73% in the first six months of 2002.  This
decrease in gross margin was attributable to the decrease in license sales.

Cost of services and  maintenance  increased 5% to  $3,474,000  in the first six
months of 2003 from $3,319,000 in the first six months of 2002. The services and
maintenance  gross margin  percentage was 40% and 35% in the first six months of
2003 and 2002, respectively. The increase in gross margin resulted from improved
realization on professional services projects and cost reduction efforts.


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

Product  development expense increased 16% to $1,094,000 in the first six months
of 2003 from $942,000 in the first six months of 2002. Product  development as a
percentage of revenues was 15% and 13% in the first six months of 2003 and 2002,
respectively.  The  increase in cost is the result of the  strengthening  of the
Israel  shekel  relative  to the  U.S.  dollar.  Most of the  Company's  product
development  occurs in its office in Tefen,  Israel. In 2003, the Israeli shekel
increased  in  value  relative  to  the  U.S.  dollar   increasing  the  Company
development  expenses  on a U.S.  dollar  basis.  In  addition,  the  Company is
focusing on the  transformation  of its  products to version  7.0, a  completely
web-based  architect,  so the size of the development staff has increased by 15%
since the same time last year.

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

Sales and marketing  expense increased 19% to $3,098,000 in the first six months
of 2003 from  $2,831,000  in the first six months of 2002.  As a  percentage  of
revenues,  sales and marketing  expenses  increased to 43% from 39% in the first
six months of 2002 due to lower sales  during the first six months of 2003.  The
Company  continues to improve market  awareness of its products through numerous
channels,  including webinars, webexs, attendance at trade shows and development
and  distribution  of white  papers.  While the results of these efforts are not
expected to draw any  short-term  benefits,  management  feels the programs will
build  customer  awareness  of  the  Company's  products  and  capabilities  and
ultimately lead to increased sales.

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

General and administrative  expense decreased 19% to $1,049,000 in the first six
months of 2003 from  $1,288,000  in the first six months of 2002.  The  decrease
primarily relates to the Company's ongoing cost containment efforts, principally
using less personnel and less office space. In addition,  the Company's European
operations  recently resolved a collection matter in the Company's favor,  which
resulted in a net decrease of $235,000.

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

Net interest income decreased $35,000 to $29,000 in the first six months of 2003
from  $64,000  in the  first six  months of 2002.  This  decrease  is  primarily
attributable  to less invested cash during 2003 as well as an overall  reduction
in interest rates earned on invested cash and marketable securities.

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

Total revenue from the Company's international operations increased by $365,000,
or 16%, to  $2,601,000  in the first six months of 2003 from  $2,236,000  in the
same six months of 2002. The increase in revenue from  international  operations
was primarily attributable to an increase in service and maintenance revenues of
$356,000.

                                       13


International  operations  resulted in a $541,000  loss for the six months ended
June 30, 2003  compared to a loss of $703,000  for the six months ended June 30,
2002.

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

Net cash provided by operating  activities was $772,000 for the six months ended
June 30, 2003 compared to $1,039,000 used in operations for the six months ended
June 30, 2002. The increase in cash generated is primarily  attributable  to the
Company's collection efforts of its accounts receivables.

The Company used $393,000 in investing activities during the first six months of
2003  compared to  generating  $1,567,000  in the first six months of 2002.  The
increase in cash used for investing activities in 2002 resulted from the Company
liquidating  almost $2.0 million from its  marketable  securities.  This was not
necessary in 2003 due to the high level of cash  generated by the  collection of
the Company's accounts receivable balances in 2003.

The  Company  generated  $2,000 for  financing  activities  during the first six
months of 2003  compared to using  $31,000  during the six months ended June 30,
2002. In 2002 the Company completed  repaying a capital lease obligation.  There
was no long-term debt outstanding in 2003.

At June 30, 2003, the Company had a working  capital ratio of 1.75:1,  with cash
and  investments  available for sale of $5,250,000.  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  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  AllianceEnterprise  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.





                                       14



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, 2003, the Company's  investments  consisted of
U.S.  government  agencies securities 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
-----------------------------------------------------------

On July 23, 2003 the Company  received a NASDAQ Staff  Determination  indicating
the Company has failed to comply with the minimum bid price requirement of $1.00
a share as set forth in Marketplace Rule 4310(c)(4) for continued listing on the
NASDAQ SmallCap Market, and is therefore subject to delisting.

The Company has appealed this  determination,  and requested a hearing  before a
NASDAQ  Listing  Qualifications  Panel.  The Company's  common stock will remain
listed on the NASDAQ  SmallCap Market pending a decision from the NASDAQ Listing
Qualifications  Panel.  There can be no  assurance  that the Listing  Panel will
grant the Company's request for continued listing.

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

There have been no defaults by the Company on any Senior  Securities  during the
quarter ended June 30, 2003.


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
second   quarter  of  the  fiscal  year  covered  by  this  report  through  the
solicitation of proxies or otherwise.  The Annual Meeting of Stockholders of the
Company is scheduled for August 21, 2003.

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

In accord with Section  10A(I)(2)  of the  Securities  Exchange Act of 1934,  as
added  by  Section  202 of  the  Sarbanes-Oxley  Act of  2002,  the  Company  is
responsible for listing the non-audit services approved in the Second Quarter by
the  Company's  Audit  Committee to be performed by BDO Seidman,  the  Company's
external  auditor.  Non-audit  services are defined in the law as services other
than those  provided in  connection  with an audit or a review of the  financial
statements  of the  Company.  The  non-audit  services  approved  by  the  Audit
Committee  in the  Second  Quarter  are each  considered  by the  Company  to be
audit-related services which are closely related to the financial audit process.
Each of the services has been  approved in accord with a  pre-approval  from the
Committee's Chairman pursuant to delegated authority by the Committee.

                                       15


During the quarterly period covered by this filing, the Audit Committee approved
additional  engagements  of BDO Seidman for the  following  non-audit  services:
general tax services for federal, state and local tax filings.


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

(A)      Exhibits

          31.1      Certification  pursuant to Section 302 of the Sarbanes-Oxley
                    Act of 2002 - CEO and Principal Executive Officer

          31.2      Certification  pursuant to Section 302 of the Sarbanes-Oxley
                    Act  of  2002  -  CFO  and  Principal  Financial  and  Chief
                    Accounting Officer.

          32.1      Certification  pursuant to Section 906 of the Sarbanes-Oxley
                    Act of 2002 - President and Principal Executive Officer

          32.2      Certification  pursuant to Section 906 of the Sarbanes-Oxley
                    Act  of  2002  -  CFO  and  Principal  Financial  and  Chief
                    Accounting Officer.

(B)      Reports on Form 8-K

          On May 13, 2003,  the Company  filed a report on Form 8-K with respect
          to the press release  issued as of that date reporting the results for
          the three months ended March 31, 2003.

          On July 29, 2003,  the Company  filed a report on Form 8-K  disclosing
          that we had  received a letter  from the  Nasdaq  Stock  Market,  Inc.
          notifying  us that our  common  stock has  failed to meet the  minimum
          listing requirements.  See Part II, Item 2 for additional  information
          contained in the report.



                                       16






                                   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 August
2003.

                                            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)



                                       17