
Catprog |
PC A2 A3 A4
B1 EN B3 B4
C1 C2 C3 PC
If both PCs can attack EN (this question is not about the effects of reach) is EN flanked by both of them.

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Lower PC would need to step to C3 or D4. Then they would be flanking - NOTE: if they are both threatening. The lower PC would need 15' reach (two diagonals = 5'+10' for the second one), if I am not mistaken.
I might be wrong about the reach (it might be ok at 10' still).
Alternately Upper PC could move 5 to B1 and Lower PC could move to B4 (or B3) and be flanking (with proper reach to threaten).

Wheldrake |
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The fact that they are not treated as flanking is purely an artifact of the way diagonals work in a square grid system. If the absolute positions remained the same and you rotated the grid 45 degrees, they would be flanking.
So the RAW answer is no, they are not flanking. The DM may choose to allow flanking bonuses anyway if he wishes (and it's not a PFS game).