================================================================================
                                  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          September 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 November 04, 2003,  2,921,901 shares of the registrant's Common Stock, par
value $.01 per share, were outstanding.




                            ASTEA INTERNATIONAL INC.

                                    FORM 10-Q
                                QUARTERLY REPORT
                                      INDEX
                                                                        Page No.
                                                                        --------

Facing Sheet                                                                1

Index                                                                       2

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

Item 1.  Consolidated Financial Statements

         Consolidated Balance Sheets (Unaudited)                            3

         Consolidated Statements of Operations (Unaudited)                  4

         Consolidated Statements of Cash Flows (Unaudited)                  5

         Notes to Unaudited Consolidated Financial Statements               6

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations                                8

Item 3.  Quantitative and Qualitative Disclosure About Market Risk         15

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               16

Item 5.  Other Information                                                 16

Item 6.  Exhibits and Reports on Form 8-K                                  17

         Signatures                                                        18


                                       2




PART I - FINANCIAL INFORMATION
------------------------------
Item 1.  CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------

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




                                                              September 30,     December 31,
                                                                  2003              2002
                                                              ------------      ------------
                                                               (Unaudited)
                                                                          
                           ASSETS
Current assets:
  Cash and cash equivalents .............................     $  3,749,000      $  4,967,000
  Restricted cash .......................................          300,000           300,000
  Receivables, net of reserves of $656,000 and $1,018,000        3,874,000         7,936,000
  Prepaid expenses and other ............................          862,000           691,000
                                                              ------------------------------
          Total current assets ..........................        8,785,000        13,894,000

Property and equipment, net .............................          556,000           586,000
Capitalized software development costs, net .............        1,259,000         1,349,000
Other assets ............................................          616,000           614,000
                                                              ------------------------------
          Total assets ..................................     $ 11,216,000      $ 16,443,000
                                                              ==============================

            LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable and accrued expenses .................     $  2,559,000      $  3,418,000
  Deferred revenues .....................................        3,012,000         4,027,000
                                                              ------------------------------
          Total current liabilities .....................        5,571,000         7,445,000

Stockholders' equity:
   Preferred stock, $.01 par value, 5,000,000 shares ....                -                 -
     authorized, none issued
   Common stock, $.01 par value, 5,000,000 shares
     authorized, 2,965,000 issued .......................           30,000            30,000
   Additional paid-in capital ...........................       22,792,000        22,792,000
   Cumulative currency translation adjustment ...........         (845,000)       (1,039,000)
   Accumulated deficit ..................................      (16,120,000)      (12,568,000)
   Less treasury stock, at cost, 43,000 and 44,000 common
      shares ............................................         (212,000)         (217,000)
                                                              ------------------------------
          Total stockholders' equity ....................        5,645,000         8,998,000
                                                              ------------------------------
          Total liabilities and stockholders' equity ....     $ 11,216,000      $ 16,443,000
                                                              ==============================



               See accompanying notes to the consolidated financial statements.

                                              3






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

                                                                Three Months                        Nine Months
                                                            Ended September 30,                 Ended September 30,
                                                      ------------------------------------------------------------------
                                                          2003              2002              2003              2002
                                                      ------------      ------------      ------------      ------------
                                                                                                
Revenues:
    Software license fees .......................     $    353,000      $  2,386,000      $  1,687,000      $  4,563,000
    Services and maintenance ....................        2,491,000         2,460,000         8,283,000         7,539,000
                                                      ------------------------------------------------------------------

         Total revenues .........................        2,844,000         4,846,000         9,970,000        12,102,000
                                                      ------------------------------------------------------------------

Costs and expenses:
    Cost of software license fees ...............          170,000           352,000           580,000           948,000
    Cost of services and maintenance ............        1,691,000         1,619,000         5,165,000         4,938,000
    Product development .........................          622,000           568,000         1,715,000         1,511,000
    Sales and marketing .........................        1,388,000         1,562,000         4,486,000         4,393,000
    General and administrative ..................          564,000           535,000         1,613,000         1,822,000
                                                      ------------------------------------------------------------------

         Total costs and expenses ...............        4,435,000         4,636,000        13,559,000        13,612,000
                                                      ------------------------------------------------------------------

Operating (loss) income before interest and taxes       (1,591,000)          210,000        (3,589,000)       (1,510,000)
                                                      ------------------------------------------------------------------

Interest income, net ............................           11,000            19,000            40,000            83,000
                                                      ------------------------------------------------------------------

(Loss) income before income tax expense .........       (1,580,000)          229,000        (3,549,000)       (1,427,000)

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

Net (loss) income ...............................     $ (1,580,000)     $    229,000      $ (3,549,000)     $ (1,627,000)
                                                      ==================================================================

Basic and diluted (loss) earnings per share .....     $      (0.54)     $       0.08      $      (1.21)     $      (0.56)
                                                      ==================================================================

Share outstanding used in computing basic (loss)
    earnings per share                                   2,922,000         2,921,000         2,922,000         2,920,000
                                                      ==================================================================


                             See accompanying notes to the consolidated financial statements.

                                                            4






                                              ASTEA INTERNATIONAL INC.
                                              ------------------------
                                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                                        -------------------------------------
                                                     (Unaudited)
                                                                                            For the Nine Months
                                                                                            Ended September 30,
                                                                                       ----------------------------
                                                                                           2003             2002
                                                                                       -----------      -----------
                                                                                                  
Cash flows from operating activities:
   Net loss ......................................................................     $(3,549,000)     $(1,627,000)
   Adjustments to reconcile net loss to net cash used in operating activities:
            Depreciation and amortization ........................................         693,000          943,000
            Changes in operating assets and liabilities:
            Receivables ..........................................................       4,300,000         (152,000)
            Prepaid expenses and other ...........................................        (172,000)         222,000
            Other assets .........................................................          (1,000)         148,000
            Accounts payable and accrued expenses ................................        (832,000)        (636,000)
            Deferred revenues ....................................................      (1,002,000)        (186,000)
                                                                                       ----------------------------
   Net cash used in operating activities .........................................        (563,000)      (1,288,000)
                                                                                       ----------------------------

Cash flows from investing activities:
           (Purchases) sales of investments available for sale ...................               -        2,987,000
           Purchases of restricted investments ...................................               -         (300,000)
           Purchases of property and equipment ...................................        (198,000)        (262,000)
           Capitalized software development costs ................................        (360,000)        (428,000)
                                                                                       ----------------------------
   Net cash (used in) provided by investing activities ...........................        (558,000)       1,997,000
                                                                                       ----------------------------

Cash flows from financing activities:
          Proceeds from exercise of stock options and employee stock purchase plan           4,000            3,000
          Net repayments of long-term debt .......................................               -          (34,000)
                                                                                       ----------------------------
   Net cash provided by (used in) financing activities ...........................           4,000          (31,000)
                                                                                       ----------------------------
   Effect of exchange rate changes on cash and cash equivalents ..................        (101,000)         (43,000)
                                                                                       ----------------------------
   Net (decrease) increase in cash and cash equivalents ..........................      (1,218,000)         635,000
   Cash and cash equivalents balance, beginning of period ........................       4,967,000        4,071,000
                                                                                       ----------------------------
   Cash and cash equivalents balance, end of period ..............................     $ 3,749,000      $ 4,706,000
                                                                                       ============================

                          See accompanying notes to the consolidated financial statements.


                                                         5






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

                            ASTEA INTERNATIONAL INC.
                            ------------------------
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
              ----------------------------------------------------



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

The  consolidated  financial  statements at September 30, 2003 and for the three
and nine month periods ended September 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 nine months
ended September 30, 2003 are not necessarily  indicative of the results that may
be expected for the full year.

2.   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 nine
months ended September 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 the provision
periodically in the future as circumstances change.

3.   RESTRICTED CASH
     ---------------

On  September  11,  2002,  $300,000  of cash was  pledged  as  collateral  on an
outstanding letter of credit related to a lease obligation and was classified as
restricted cash on the balance sheet. Unless canceled in writing by the Company,
the  letter  of  credit  will  automatically  renew for  six-month  terms  until
September 2004.

4.   REVERSE STOCK SPLIT
     -------------------

On September 2, 2003,  the Company  implemented a 1:5 reverse stock split of the
Company's  outstanding  common  stock.  The par value of all post reverse  split
shares remained unchanged at $0.01. All fractional shares that resulted from the
reverse  split were redeemed by the Company.  As a result of the reverse  split,
the number of authorized shares was reduced from 25,000,000 to 5,000,000.

Prior year  results  have been  restated  to reflect  the results of the reverse
stock split,  which  includes the common stock and  additional  paid-in  capital
accounts on the balance  sheet as well as the shares used in computing  earnings
per share.

                                       6



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

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



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

                                                                                                  
Balance at December 31, 2002     $     30,000    $ 22,792,000    $ (1,039,000)    $(12,568,000)    $   (217,000)    $          -
Issuance of common stock
   under employee stock
   purchase plan ............               -               -               -           (3,000)           5,000                -
Cumulative translation
   adjustment ...............               -               -         194,000                -                -          194,000
Net loss for the period .....               -               -               -       (3,549,000)               -       (3,549,000)
                                 -----------------------------------------------------------------------------------------------

Balance at September 30, 2003    $     30,000    $ 22,792,000    $   (845,000)    $(16,120,000)    $   (212,000)    $ (3,355,000)
                                 ===============================================================================================


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

In May  2003,  the FASB  issued  Statement  No.  150,  "Accounting  for  Certain
Financial  Instruments  with  Characteristics  of both  Liabilities  and Equity"
("SFAS 150").  SFAS 150 establishes  standards for how an issuer  classifies and
measures certain financial  instruments with characteristics of both liabilities
and equity.  It requires that an issuer classify a financial  instrument that is
within its scope as a  liability  (or an asset in some  circumstances).  Many of
those  instruments were previously  classified as equity.  SFAS 150 is effective
for  financial  instruments  entered into or modified  after May 31,  2003,  and
otherwise is effective at the  beginning of the first interim  period  beginning
after June 15, 2003. The adoption of SFAS 150 is not expected to have a material
impact on the Company's financial position or results of operation.

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              Nine months ended
                                               September 30,                   September 30,
                                        ----------------------------    ---------------------------
                                           2003             2002           2003            2002
                                        -----------------------------------------------------------
                                        (unaudited)      (unaudited)    (unaudited)     (unaudited)

                                                                            
Net (loss) income - as reported ....    $(1,580,000)    $   229,000     $(3,549,000)    $(1,627,000)

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 .............       (109,000)       (106,000)       (318,000)       (174,000)

Net (loss) income - pro forma ......    $(1,689,000)    $   123,000     $(3,867,000)    $(1,801,000)

Basic and diluted (loss) income per
   share - as reported .............    $     (0.54)    $      0.08     $     (1.21)    $     (0.56)

Basic and diluted (loss) income per
   share - pro forma ...............    $     (0.58)    $      0.04     $     (1.32)    $     (0.62)



There were no options  granted during the quarter ended  September 30, 2003. The
weighted  average fair value of those options  granted  during the quarter ended
September  30, 2002 was estimated at $3.34.  The weighted  average fair value of
those options  granted during the nine months ended  September 30, 2003 and 2002
was  estimated  at $3.15  and  $3.69.  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 3.61% and
4.30% for 2003 and 2002  grants,  respectively;  an expected  life of six years;
volatility  of 134% and  138%;  and a  dividend  yield of zero for 2003 and 2002
grants, respectively.


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.

                                       8




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  a
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,
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
----------------------------

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

Revenues

The Company generates its revenues  primarily by licensing  software,  providing
software  support and  maintenance  and providing  professional  services to its
customers.  The Company's software  arrangements  typically include:  (i) an end
user license that  provides for an initial fee in exchange for a customer's  use
of the Company's  products in perpetuity  based on a specified  number of users;
(ii) a maintenance  arrangement that provides for technical  support and product
updates  over  a  period  of  12  months;  and  (iii)  a  professional  services
arrangement on a time and materials basis.

The Company  recognizes  software  revenue using the residual method pursuant to
the   requirements   of  Statement  of  Position  No.  97-2  "Software   Revenue
Recognition"  ("SOP  97-2"),  as amended  by  Statement  of  Position  No.  98-9
"Software Revenue Recognition with Respect to Certain  Arrangements."  Under the
residual method, revenue is recognized when Company-specific  objective evidence
of fair value  exists for all of the  undelivered  elements  in the  arrangement

                                       9



(i.e.,  professional  services and  maintenance),  but does not exist for one or
more of the delivered  elements in the arrangement (i.e., the software product).
Each license  arrangement  requires  careful  analysis to ensure that all of the
individual elements in the license transaction have been identified,  along with
the fair value of each element.

The  Company  allocates  revenue  to  each  undelivered  element  based  on  its
respective fair value,  with the fair value determined by the price charged when
that element is sold  separately.  The Company  determines the fair value of the
maintenance  portion  of the  arrangement  based  on the  renewal  price  of the
maintenance  charged to the customer  based on full  deployment  of the licensed
software products and the fair value of the professional services portion of the
arrangement  based on the  hourly  rates  that the  Company  charges  for  these
services when sold  independently  from a software license.  If evidence of fair
value cannot be established for the undelivered elements of a license agreement,
the entire  amount of revenue from the  arrangement  is deferred and  recognized
over the period that these elements are delivered.

For substantially all of the Company's software arrangements, the Company defers
revenue for the fair value of the  maintenance and  professional  services to be
provided to the customer and  recognizes  revenue for the software  license when
persuasive evidence of an arrangement exists and delivery has occurred, provided
the fee is fixed or determinable and collection is deemed probable.

A  customer  typically  prepays  maintenance  for the first 12  months,  and the
related  revenue  is  deferred  and  recognized  over  the  term of the  initial
maintenance  contract.  Maintenance  is  renewable  by the customer on an annual
basis thereafter. Rates for maintenance, including subsequent renewal rates, are
typically  established based upon a specified  percentage of net license fees as
set forth in the arrangement.  Professional  services revenue primarily consists
of implementation services related to the installation of the Company's products
and training  revenues.  The Company's  software is ready to use by the customer
upon  receipt.  While many of the  Company's  customers may choose to tailor the
software to fit their specific needs, the Company's  implementation  services do
not  involve  significant  customization  to or  development  of the  underlying
software  code.   Substantially  all  of  the  Company's  professional  services
arrangements are on a time and materials basis and, accordingly,  are recognized
as the services  are  performed,  which is typically  over a three- to six-month
period  subsequent to licensing of the Company's  software.  On those  occasions
when a customer requests significant customization of the licensed software, the
entire arrangement is accounted for using contract accounting in conformity with
Accounting  Research  Bulletin No. 45  "Long-Term  Construction-Type  Contracts"
("ARB 45") using relevant guidance in Statement of Position 81-1 "Accounting for
Performance of Construction-Type  and Certain  Production-Type  Contracts" ("SOP
81-1").

Capitalized Software and Research 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  judgment 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 September 30, 2003 and 2002
------------------------------------------------------------

Revenues
--------

Revenues decreased $2,002,000,  or 41%, to $2,844,000 for the three months ended
September  30, 2003 from  $4,846,000  for the three months ended  September  30,
2002. Software license fee revenues decreased $2,033,000,  or 85%, from the same
period last year.  Services  and  maintenance  fees for the three  months  ended
September  30, 2003  amounted to  $2,491,000,  a slight  increase  from the same
quarter in 2002.

The Company's  international  operations contributed $998,000 of revenues in the
third quarter 2003  compared to  $1,291,000 in the third quarter of 2002,  which
represents a 23%  decrease.  The decrease is primarily the result of the lack of
capital spending due to the uncertainty in the economy.

Software license fee revenues  decreased 85% to $353,000 in the third quarter of
2003 from  $2,386,000 in the third quarter of 2002.  AllianceEnterprise  license
fee revenue decreased $1,990,000 from $2,343,000 in the third quarter of 2002 to
$353,000  in the third  quarter  of 2003.  Additionally,  there were no sales of
DISPATCH-1 in the third quarter of 2003 compared to $43,000 in the third quarter
of 2002. The Company  believes that overall  operations have been  significantly
impacted by the generally  weak global  economy.  Although the economy has shown
signs  of  slow  improvement  this  year,  investment  in  technology  requiring
significant  capital spending continues to be delayed.  However,  the Company is
confident  that  projections  for the CRM market will hold true to form allowing
the Company to  capitalize  on its  investment  in product  development  through
increased software license sales in the near future.

Services and maintenance  revenues increased slightly to $2,491,000 in the third
quarter  of 2003 from  $2,460,000  in the third  quarter of 2002.  The  increase
primarily relates to service and maintenance  revenues from  AllianceEnterprise,
which  increased  22% or $342,000 to  $1,894,000  from  $1,552,000  in the third
quarter of 2002. The increase is attributable to the growing number of customers
using the  Company's  AllianceEnterprise  software.  Offsetting  the increase in
service and maintenance revenues from AllianceEnterprise, DISPATCH-1 service and
maintenance revenues decreased $311,000 from $908,000 to $597,000,  as expected.
The decline in  DISPATCH-1  revenue is  attributable  to the  previous  sales of
DISPATCH-1  source code to certain  customers  which enables those customers the
ability to perform all service and maintenance work themselves  instead of using
Astea services.

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

Cost of software  license fees decreased 52% to $170,000 in the third quarter of
2003  from  $352,000  in the  third  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 third quarter
of 2003 and 2002,  respectively.  The  decrease in the cost of software  license
fees reflects the decrease in capitalized  software  amortization as well as the
decrease in sales volume.  The software licenses gross margin percentage was 52%
in the third quarter of 2003  compared to 85% in the third quarter of 2002.  The
decrease in gross margin was attributable to the decrease in the mix of products
sold in 2003.

Cost of services and maintenance increased 4% to $1,691,000 in the third quarter
of 2003  from  $1,619,000  in the  third  quarter  of  2002.  The  services  and
maintenance gross margin percentage was 32% and 34% in the third quarter of 2003
and 2002,  respectively.  The decrease in gross margin was attributable to costs
associated with certain non-billable projects undertaken during the quarter.

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

Product  development  expense  increased 10% to $622,000 in the third quarter of
2003 from  $568,000 in the third  quarter of 2002.  As a percentage of revenues,
product  development  increased  from 12% in the third quarter of 2002 to 22% in
the third quarter of 2003. The increased  percentage of  development  expense to

                                       11



sales results from the significant decrease in sales during the third quarter of
2003. The overall increase in development  expense compared to 2002 results from
the  weakening  of the U.S.  dollar  against  the  Israeli  shekel.  The Company
performs most of its development in Israel. The Company maintains its commitment
to expanding and improving the capabilities of its  AllianceEnterprise  Suite of
CRM software  products.  The Company is developing its software using  Microsoft
and Internet  technologies  to integrate  and automate  business  processes  for
managing equipment sales and service delivery.

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

Sales and marketing  expense decreased 11% to $1,388,000 in the third quarter of
2003 from $1,562,000 in the third quarter of 2002. The decrease is primarily the
result of decreased sales  commissions  resulting from lower sales volume.  As a
percentage of revenues,  sales and marketing  expenses  increased to 49% in 2003
compared to 32% in the third quarter of 2002.

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

General and administrative expense increased 5% to $564,000 in the third quarter
of 2003 from $535,000 in the third quarter of 2002.  The increase in general and
administrative expense results from unfavorable foreign exchange comparisons.

Interest Income, net
--------------------

Net interest  income  decreased  $8,000 to $11,000 in the third  quarter of 2003
from  $19,000  in  the  third  quarter  of  2002.   The  decrease  is  generally
attributable  to less cash on hand than in 2002 as well as an overall  reduction
in interest rates earned on invested cash.

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

Total revenue from the Company's international operations decreased by $293,000,
or 23%, to $998,000 in third quarter of 2003 from $1,291,000 in the same quarter
in 2002.  International  Operations  generated a $287,000  loss for the 3 months
ended  September  30, 2003 compared to a loss of $131,000 for the 3 months ended
September 30, 2002.  The decline in  performance is primarily due to the general
global economic slowdown.

Comparison of Nine Months Ended September 30, 2003 and 2002
-----------------------------------------------------------

Revenues
--------

Revenues decreased  $2,132,000,  or 18%, to $9,970,000 for the nine months ended
September  30, 2003 from  $12,102,000  for the nine months ended  September  30,
2002. The global  downturn in economic  conditions  has negatively  impacted the
Company due to the  worldwide  reduction  in capital  spending  for new business
software.  Software  license fee revenues  decreased 63% from $4,563,000 for the
nine months ended  September 30, 2002 to $1,687,000 for the same period in 2003.
Services  and  maintenance  fees for the nine months  ended  September  30, 2003
increased $744,000 from the same nine months in 2002.

The Company's international operations contributed $3,599,000 of revenues in the
first nine  months of 2003  compared to  $3,527,000  in the first nine months of
2002.  This  represents a 2% increase  from the same period last year and 36% of
total  revenues in the first nine months of 2003.  The increase in revenues is a
direct  result  of the  service  and  maintenance  revenues  generated  from the
increasing customer base in the Asia Pacific region.

Software  license  fee  revenues  decreased  in the first nine months of 2003 to
$1,687,000 from $4,563,000 during the same period in 2002. The decrease in sales
is directly  attributable  to the reluctance on the part of corporations to make
significant  capital  investment  in  information  technology  in  an  uncertain
economic environment.

Services and maintenance  revenues increased 10% to $8,283,000 in the first nine
months of 2003 from  $7,539,000  in the first nine months of 2002.  The increase
primarily relates to service and maintenance  revenues from  AllianceEnterprise,
which increased by 36% to $6,290,000 from $4,628,000 in the first nine months of
2002.  Service  and  maintenance  revenues  from  DISPATCH-1  decreased  32%  to

                                       12



$1,992,000  in the first nine months of 2003 from  $2,911,000  in the first nine
months of 2002. The Company expects to experience continued declines in revenues
for its legacy product, DISPATCH-1.

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

Cost of software license fees decreased 39% to $580,000 in the first nine months
of 2003 from $948,000 in the first nine months of 2002.  Included in the cost of
software  license fees is the fixed cost of capitalized  software  amortization.
Capitalized  software  amortization was $450,000 and $618,000 for the first nine
months of 2003 and 2002,  respectively.  The  decrease  in the cost of  software
license  fees  is   attributable   to  the  decrease  in  capitalized   software
amortization  as well as the decrease in sales  volume.  The  software  licenses
gross margin percentage was 66% in the first nine months of 2003 compared to 79%
in the first nine months of 2002. This decrease in gross margin was attributable
to the decrease in the volume of deals to close during the current period.

Cost of services and  maintenance  increased 5% to  $5,165,000 in the first nine
months of 2003 from  $4,938,000  in the first nine months of 2002.  The services
and maintenance gross margin percentage was 38% in the first nine months of 2003
compared to 35% in the first nine months of 2002.  The  increase in services and
maintenance gross margin is directly  attributable to the increased  utilization
of personnel due to certain special projects undertaken during the course of the
year.

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

Product development expense increased 14% to $1,715,000 in the first nine months
of 2003 from $1,511,000 in the first nine months of 2002. Product development as
a percentage of revenues  increased to 17% in the first nine months of 2003 from
12% in the first nine months of 2002.  The  increase in costs is  primarily  the
result of the weakening of the U.S.  dollar  relative to the Israel shekel,  the
currency used in Israel, which is the location for most of the Company's product
development.

The Company maintains its commitment to expanding and improving the capabilities
of its  AllianceEnterprise  Suite  of CRM  software  products.  The  Company  is
developing its software using  Microsoft and Internet  technologies to integrate
and  automate  business  processes  for  managing  equipment  sales and  service
delivery.

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

Sales and marketing  expense increased 2% to $4,486,000 in the first nine months
of 2003 from  $4,393,000  in the first nine months of 2002.  As a percentage  of
revenues,  sales and  marketing  expenses  increased  from 36% in 2002 to 45% in
2003.  Despite  the lower  sales  volume  during the year,  sales and  marketing
expense  remained  consistent  with the level of activity  realized in 2002. The
costs during the course of 2003 were directly related to the extensive  training
and marketing  efforts  undertaken to unify the  Company's  worldwide  marketing
approach and sales strategy.

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

General and administrative expense decreased 11% to $1,613,000 in the first nine
months of 2003 from  $1,822,000 in the first nine months of 2002.  The reduction
results  primarily  from  reduced  rent  expense in the US and the overall  cost
containment program implemented throughout the Company.

Interest Income, net
--------------------

Net  interest  income  decreased  $43,000 to $40,000 in the first nine months of
2003 from  $83,000 in the first nine months of 2002.  The  decrease 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 by $72,000,
or 2%, to  $3,599,000  in the first nine months of 2003 from  $3,527,000  in the
same nine months of 2002. The increase in revenue from international  operations
was primarily  attributable to the increasing services and maintenance  revenues

                                       13



generated  from  the  growing   customer  base  in  the  Asia  Pacific   region.
International  operations generated a loss of $828,000 for the nine months ended
September  30, 2003  compared to a loss of  $834,000  for the nine months  ended
September 30, 2002.

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

Net cash used in  operating  activities  was  $563,000 for the nine months ended
September 30, 2003, compared to $1,288,000 of cash used in operating  activities
for the nine months ended September 30, 2002. The decreased use of cash resulted
primarily from better collections mitigated by the year-to-date loss.

The  Company's  investing  activities  used  $558,000  of cash in the first nine
months of 2003  compared to  generating  $1,997,000  in the first nine months of
2002.  The increase in cash used is directly  related to the sale of assets held
for sale during 2002.

The Company  generated $4,000 from financing  activities  during the nine months
ended  September  30, 2003 compared to using $31,000 in the first nine months of
2002. All of the cash generated in 2003 were proceeds from the exercise of stock
options  through the employee  stock  purchase  plan.  For the nine months ended
September 30, 2002,  most of the cash used was  attributable to the repayment of
debt. This was partially offset by increased proceeds from the exercise of stock
options through the employee stock purchase plan.

At September 30, 2003,  the Company had a working  capital ratio of 1.6:1,  with
cash and  investments  available  for sale of  $3,749,000.  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  next  twelve  months.  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 unique 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  significant
     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 September 30, 2003, the Company's investments consisted
of  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
---------------------------------------------------

On  September  2,  2003,  the  Company  effected  a reverse  stock  split of the
Company's  outstanding  common stock based upon a 1:5 reverse stock split ratio.
The par value of all post reverse split shares remained  unchanged at $0.01. All
partial  shares as a result of the  reverse  split  were paid out in full.  As a
result of the reverse  split,  the number of authorized  shares was reduced from
25,000,000 to 5,000,000.

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

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


                                       15



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

At the Annual Meeting of Stockholders  held on August 21, 2003,  pursuant to the
Notice of Annual  Meeting of  Stockholders  dated July 15, 2003,  the  following
actions were adopted:

1.   The  election of a board of  directors to hold office until the next annual
     stockholders'  meeting  or until  their  respective  successors  have  been
     elected or appointed.

                                                    Number of Shares
                                           Voted For                 Withheld
                                           ---------                 --------
                  Zack B. Bergreen         11,807,885                151,089
                  Adrian A. Peters         11,807,885                151,089
                  Eric Siegel              11,807,885                151,089
                  Isidore Sobkowski        11,707,885                251,089


2.   The approval of a proposal to authorize the Board of Directors to amend the
     Company's  Certificate  of  Incorporation  to effect a reverse split of the
     Company's  Outstanding  Common  Stock based upon a 1:5 reverse  stock split
     ratio.

                                                  Number of Shares
                                    Voted For       Voted Against    Abstained
                                    ---------       -------------    ---------
                                    11,606,819         339,755         12,400


3.   The appointment of BDO Seidman, LLP as independent auditors for the Company
     for the fiscal year ending December 31, 2003.

                                                  Number of Shares
                                    Voted For       Voted Against    Abstained
                                    ---------       -------------    ---------
                                    11,896,236          52,731          10,007

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

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.

During the quarterly period covered by this filing, the Audit Committee approved
additional  engagements of BDO Seidman for the following non-audit services: (1)
general tax services for federal,  state and local tax filings;  and (2) special
tax matter consultations.

                                       16


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 August 14, 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 June 30, 2003.

     On August 22, 2003, the Company filed a report on Form 8-K announcing  that
     at the annual  stockholders  meeting on August 21, 2003,  its  shareholders
     approved a 1-for-5 reverse stock split of all outstanding  shares of common
     stock. The shares will begin trading on a post-split basis at the beginning
     of trading on September 2, 2003.

     On September 18, 2003, the Company filed a report on Form 8-K reporting the
     receipt of a letter  from the  NASDAQ  Stock  Market,  Inc.  notifying  the
     Company that the NASDAQ  Listing  Qualifications  Panel had  determined  to
     continue the listing of our common stock on the NASDAQ Small Cap Market.

                                       17




                                   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 Xth day of November
2003.

                                             ASTEA INTERNATIONAL INC.


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

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


                                       18