<PAGE>
 
                                 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, 1996

  [ ]       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 - 27794

                              SEGUE SOFTWARE, INC.
             (Exact name of registrant as specified in its charter)


Delaware                                                    95-4188982
(State or other jurisdiction of                       (I.R.S. Employer
incorporation or organization)                     Identification No.)
 

            1320 Centre Street, Newton Centre, Massachusetts 02159
                   (Address of principal executive offices)

      Registrant's telephone number, including area code: (617) 796-1000


     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 a 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 [ ]

     The number of shares of Registrant's Common Stock outstanding as of 
November 8, 1996 was 6,789,668.

<PAGE>
 
                              SEGUE SOFTWARE, INC.

                                     INDEX

 
                                                                  Page No.
                                                                  --------

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements:
         
         Balance Sheets                                                3
            September 30, 1996 and December 31, 1995
 
         Statements of Operations                                      4
            Three and nine months ended September 30, 1996 and 1995
 
         Statements of Cash Flows                                      5
            Nine months ended September 30, 1996 and 1995
 
         Notes to Financial Statements                                 6
 
Item 2.  Management's Discussion and Analysis of Financial             8
            Condition and Results of Operations
 
PART II. OTHER INFORMATION
 
Item 1.  Legal Proceedings                                            13
 
Item 4   Submission of Matters to a Vote of Security Holders          13
 
Item 6.  Exhibits and Reports on Form 8-K                             13
 
Signatures                                                            14
 
Exhibits Index                                                        15

                                                                               2
<PAGE>
PART I.  FINANCIAL INFORMATION
  ITEM I.   FINANCIAL STATEMENTS


                             SEGUE SOFTWARE, INC.
                                BALANCE SHEETS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)               


<TABLE> 
<CAPTION> 

                                                                September 30,       December 31,
                                                                    1996               1995
                                                                -------------       ------------
<S>                                                             <C>                 <C> 
ASSETS
Current assets:
      Cash and cash equivalents                                   $  7,479            $    442
      Short-term investments                                        32,026                --  
      Accounts receivable, net of allowances of $125 and $150        3,517               2,595
      Other current assets                                             355                  96
                                                                  --------            --------
           Total current assets                                     43,377               3,133
                                                                                              
Property and equipment, net                                          1,910               1,154
Intangible assets, net of accumulated                                                         
  amortization of $330 and $266                                       --                    64
Other assets                                                           119                 145
                                                                  --------            --------
      Total assets                                                $ 45,406            $  4,496
                                                                  ========            ========
                                                                                              
LIABILITIES AND STOCKHOLDERS' EQUITY                                                          
Current liabilities:                                                                          
      Accounts payable                                            $    226            $    461
      Accrued compensation and benefits                                543                 604
      Accrued expenses                                               1,102                 185
      Deferred revenue                                               1,616               1,068
      Accrued royalties                                                147                 219
      Convertible debt to stockholders                                 562                 654
                                                                  --------            --------
           Total current liabilities                                 4,196               3,191
                                                                                              
Stockholders' equity:                                                                         
      Series A Preferred Stock, $.01 par value; noncumulative;                               
         4,000,000 shares authorized; no shares and 2,291,458                                 
             shares issued and outstanding                            --                    23
      Common Stock, $.01 par value; 30,000,000                                               
             shares authorized; 6,547,618 and 1,586,090                                       
             issued and outstanding                                     65                  16
      Additional paid-in capital                                    45,498               5,027
      Unearned compensation                                           (478)               --  
      Accumulated deficit                                           (3,875)             (3,761)
                                                                  --------            --------
           Total stockholders' equity                               41,210               1,305
                                                                  ========            ========
           Total liabilities and stockholders' equity             $ 45,406            $  4,496
                                                                  ========            ======== 

</TABLE> 
   The accompanying notes are an integral part of the financial statements.
                                                                               3
<PAGE>
                                       SEGUE SOFTWARE, INC.
                                     STATEMENTS OF OPERATIONS
                              (IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE> 
<CAPTION> 
                                                     Three months ended      Nine months ended
                                                       September 30,           September 30,
                                                    --------------------    --------------------
                                                      1996        1995        1996        1995
                                                    --------    --------    --------    --------
<S>                                                 <C>         <C>         <C>         <C> 
Revenue:                                           
  Software                                          $  3,075    $  2,210    $  8,184    $  5,652
  Services                                             1,142         731       3,164       1,880
  Royalties                                             --            26        --           109
                                                    --------    --------    --------    --------
    Total revenue                                      4,217       2,967      11,348       7,641
                                                   
Cost of revenue:                                   
  Cost of software                                        75          84         231         247
  Cost of services                                       453         327       1,294         852
  Cost of royalties                                     --             6        --            25
                                                    --------    --------    --------    --------
    Total cost of revenue                                528         417       1,525       1,124
                                                   
Gross profit                                           3,689       2,550       9,823       6,517
                                                   
Operating expenses:                                
  Sales and marketing                                  1,884       1,419       5,679       3,792
  Research and development                               987         592       2,744       1,617
  General and administrative                             680         370       1,785       1,204
  Severance charges                                     --          --          --           449
                                                    --------    --------    --------    --------
    Total operating expenses                           3,551       2,381      10,208       7,062
                                                    --------    --------    --------    --------
                                                   
Income (loss) from operations                            138         169        (385)       (545)
                                                   
Litigation settlement                                   (744)       --          (744)       --
Other income (expense), net                              520          (4)      1,015         (16)
                                                    --------    --------    --------    --------
Net income (loss)                                   $    (86)   $    165    $   (114)   $   (561)
                                                    ========    ========    ========    ========
Net income (loss) per common and common            
equivalent share (1)                                $   (.01)   $    .04    $   (.02)   $   (.14)
                                                    ========    ========    ========    ========
                                                   
Weighted average common shares and common          
  equivalent shares outstanding (1)                    6,545       4,685       5,717       4,075

</TABLE> 


(1) Presented on a pro forma basis giving effect to the conversion of all 
    outstanding shares of preferred stock.


   The accompanying notes are an integral part of the financial statements.


                                                                               4
<PAGE>
                         SEGUE SOFTWARE, INC.
                      STATEMENTS OF CASH FLOWS
                           (IN THOUSANDS) 
<TABLE> 
<CAPTION> 


                                                                       Nine months ended
                                                                         September 30,
                                                                     -----------------------
                                                                        1996         1995
                                                                     ----------   ----------
<S>                                                                  <C>          <C> 
Cash flows from operating activities:
  Net loss                                                            $   (114)   $   (561)
  Adjustments to reconcile net loss                                   
    to net cash provided by operating activities:                     
      Depreciation and amortization                                        469         302
      Loss on disposal of property and equipment                             9          20
      Noncash compensation charges                                          97        --
      Changes in operating assets and liabilities:                    
      Accounts receivable                                                 (922)       (420)
      Other current assets                                                (259)         (7)
      Other assets                                                          26          12
      Accounts payable                                                    (235)       (123)
      Accrued expenses, compensation, and benefits                         856         391
      Accrued royalties                                                    (72)         23
      Deferred revenue                                                     548         350
                                                                      --------    --------
Net cash provided (used) by operating activities                           403         (13)
                                                                      --------    --------
                                                                      
Cash flows from investing activities:                                 
      Additions to property and equipment                               (1,170)       (488)
      Increase in short-term investments                               (32,026)       --
                                                                      --------    --------
Net cash used in investing activities                                  (33,196)       (488)
                                                                      --------    --------
                                                                      
Cash flows from financing activities:                                 
      Net proceeds from initial public offering                         39,527        --
      Proceeds from exercise of stock options                              303          62
                                                                      --------    --------
Net cash provided by financing activities                               39,830          62
                                                                      --------    --------
                                                                      
Net increase (decrease) in cash and cash equivalents                     7,037        (439)
Cash and cash equivalents, beginning of period                             442         711
                                                                      ========    ========
Cash and cash equivalents, end of period                              $  7,479    $    272
                                                                      ========    ========
                                                                      
Supplemental disclosure of noncash financing                          
   transactions:                                                      
Conversion of convertible debt to stockholders into                   
   common stock                                                       $     92    $     --

</TABLE> 


   The accompanying notes are an integral part of the financial statements.
                                                                        
                                                                               5
<PAGE>
 
                             SEGUE SOFTWARE, INC.
                         NOTES TO FINANCIAL STATEMENTS

1.      The financial statements included herein have been prepared by
Segue Software, Inc. (the "Company"), without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission.  Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations.  The Company believes, however,
that disclosures are adequate to make the information presented not misleading.
It is suggested that these financial statements be read in conjunction with the
financial statements for the year ended December 31, 1995 and the notes thereto
included in the Company's Registration Statement filed on Form S-1 (Registration
No. 333-1488).

This financial information reflects, in the opinion of management, all
adjustments of a normal recurring nature necessary to present fairly the results
for the interim periods.  Results of interim periods may not be indicative of
results for the full year.

2.      Cash and cash equivalents include cash on hand and all highly liquid
short-term investments with original maturities of three months or less when
purchased. Cash equivalents are stated at cost plus accrued interest, which
approximates market.

3.      Net income (loss) per share is computed based upon the weighted
average number of common and common equivalent shares outstanding during each
period.  Common equivalent shares are included in the per share calculations
where the effect of their inclusion would be dilutive.  The convertible debt
outstanding is not considered a common stock equivalent.  In accordance with the
Securities and Exchange Commission Staff Accounting Bulletin No. 83 ("SAB No.
83"), all common and common equivalent shares (including stock options) issued
during the twelve month period prior to the initial filing date in February 1996
of the Registration Statement relating to the Company's initial public offering
have been included in the calculation as if they were outstanding for all
periods presented.  As a result, the common equivalent shares for stock options
were determined using the treasury stock method.

On a historical basis, net income (loss) per common and common equivalent share
is as follows:
<TABLE>
<CAPTION>
                                     Three months ended              Nine months ended
                                       September  30,                   September 30,
                                     ------------------              ------------------
                                    1996           1995            1996             1995
                                   ------        -------          ------           ------
<S>                             <C>          <C>                 <C>          <C>
 
Net income (loss) per common    $     (.01)      $      .04       $     (.02)     $     (.31)
and common equivalent share
 
Weighted average common          6,545,000        4,685,000        4,896,000       1,784,000
and common equivalent shares
outstanding
</TABLE>

                                                                               6
<PAGE>
 
Net income (loss) per common share on a pro forma basis is computed in the same
manner as net income (loss) per common share on a historical basis except all
outstanding shares of the Series A Preferred Stock are included in the
computation as if they had been converted into an equivalent number of shares of
common stock even if anti-dilutive.

Fully diluted net income (loss) per common share is the same as primary net
income (loss) per common share.

4.      In April 1996, an initial public offering of 3,162,500 shares of the
Company's Common Stock ($.01 par value) at an initial public offering price of
$18.00 per share was consummated. Concurrent with the closing of the offering in
April 1996, all outstanding shares of Series A Preferred Stock were converted
into Common Stock. The total shares sold in the offering consisted of 2,000,000
shares sold by the Company, 750,000 shares sold by selling shareholders and an
additional 412,500 shares sold by the Company to cover the underwriters' over-
allotment option. Proceeds to the Company from this offering, net of
underwriters' discount and associated costs, were approximately $40 million.

5.      On September 30, 1996, the Company entered into a definitive agreement
with Softbridge, Inc. to settle the litigation brought against the Company and
certain of its current and former employees. The litigation, which was brought
in June, 1996, alleged breach of contracts, among other things. The Company
recorded a charge of $744,000 in the third quarter of fiscal 1996 to cover the
settlement and other expenses incurred in connection therewith.

                                                                               7
<PAGE>
 
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

RESULTS OF OPERATIONS

          The following table sets forth certain unaudited quarterly results of
operations expressed as a percentage of total revenue for the periods indicated:
<TABLE>
<CAPTION>
 
                                   Percentage of Revenue for                  Percentage of Revenue for
                                  Three Months Ended September 30,         Nine Months Ended September 30,
                                 -----------------------------------       --------------------------------
                                       1996              1995                    1996              1995
                                      ------            ------                  ------            ------
<S>                              <C>                  <C>                    <C>                <C>
Revenue:
 Software                              72.9%             74.5%                   72.1%              74.0%
 Services                              27.1              24.6                    27.9               24.6
 Royalties                                -                .9                       -                1.4
                                      -----             -----                   -----              -----
  Total revenue                       100.0             100.0                   100.0              100.0
 
Cost of revenue:
 Cost of software                       1.8               2.8                     2.0                3.2
 Cost of services                      10.7              11.0                    11.4               11.2
 Cost of royalties                        -                .2                       -                 .3
                                      -----             -----                   -----              -----
  Total cost of revenue                12.5              14.0                    13.4               14.7
 
Gross margin                           87.5              86.0                    86.6               85.3
 
Operating expenses:
 Sales and marketing                   44.7              47.8                    50.1               49.6
 Research and development              23.4              20.0                    24.2               21.1
 General and administrative            16.1              12.5                    15.7               15.8
 Severance charges                        -                 -                       -                5.9
                                      -----             -----                   -----              -----
  Total operating expenses             84.2              80.3                    90.0               92.4
 
Income (loss) from operations           3.3               5.7                    (3.4)              (7.1)
 
Litigation settlement                 (17.6)                -                    (6.5)                 -
Other income (expense), net            12.3              ( .1)                    8.9                (.2)
                                      -----             -----                   -----              -----
 
Net income (loss)                      (2.0)%             5.6%                   (1.0)%             (7.3)%
                                      =====             =====                   =====              =====
 
</TABLE>

REVENUE

     Revenue from Software.  Software revenue increased 39% to $3,075,000 during
the third quarter of 1996 from $2,210,000 in the third quarter of 1995.  For the
nine month period ended September 30, 1996, software revenue increased 45% to
$8,184,000 from $5,652,000 for the first nine months of 1995.  These increases
are primarily due to the continuing growth in unit shipments of QA Partner and
QA Organizer.  The increase in unit shipments came largely through the direct
domestic sales channel.  Revenue from the domestic indirect distribution
channels and from the Company's international distributors accounted for 6% and
7% of the 

                                                                               8
<PAGE>
 
revenue in the quarter, respectively, and 6 % and 10% for the nine month period
ended September 30, 1996, respectively. In the comparable quarter in 1995, those
channels accounted for 5% and 10% of total revenue, respectively. For the nine
month period ended September 30, 1995, revenues from domestic indirect channels
and from international distributor channels accounted for 2% and 8%,
respectively.

     Revenue from Services. Service revenue increased 56% to $1,142,000 during
the third quarter of 1996 from $731,000 in the third quarter of 1995 driven by
the increase in maintenance revenue and training and consulting revenue related
to the increase in software licenses sold.  Training and consulting revenue
increased 46% while maintenance revenue increased 64%.  For the nine month
period ended September 30, 1996, service revenue increased 68% to $3,164,000
from $1,880,000 for the first nine months of 1995.  In that period, training and
consulting revenue increased 61% while maintenance revenue increased 82% over
the comparable period in 1995.

     Revenue from Royalties. Royalty revenue amounted to $26,000 in the quarter
ended September 30, 1995 and $109,000 for the nine month period ended September
30, 1995.  There were no royalty revenues in the third quarter or the first nine
months of 1996.  Royalty revenue is related to porting contracts completed in
1991 for Lotus Development Corporation.  The Company does not expect any
significant revenues, if any, from these contracts in the future.


COST OF REVENUE

     Cost of Software. Cost of software decreased 11% to $75,000 during the
third quarter of 1996 from $84,000 in the third quarter of 1995.  For the nine
month period ended September 30,1996, cost of software declined 6% to $231,000
from $247,000 for the nine months ended September 30, 1995.  As a percent of
software license revenue, costs in the current quarter declined to 2.4% of
revenue from 3.8% of revenue a year earlier.  For the nine month period ended
September 30, 1996, cost of software as a percent of software license revenue
declined to 2.8% from 4.4% for the nine months ended September 30, 1995.  This
is largely the result of some fixed costs being amortized over a larger revenue
base.

     Cost of Services. Cost of services increased 39% to $453,000 during the
third quarter of 1996 from $327,000 in the third quarter of 1995.  For the nine
months ended September 30, 1996, cost of services increased 52% to $1,294,000
from $852,000 for the nine months ended September 30, 1995.  As a percent of
service revenue, costs in the current quarter decreased to 40% from 45% a year
earlier.  For the nine months ended September 30, 1996, cost of services as a
percent of service revenue decreased to 41% from 45% for the nine months ended
September 30, 1995. The decrease in cost of services as a percent of service
revenue in the current quarter over the prior year and for the nine months over
the nine month period in 1995 is largely the result of the maintenance revenue
in the quarter growing at a faster pace than the customer support hotline costs
and an improved margin on the Company's training and consulting business.

                                                                               9
<PAGE>
 
     Cost of Royalties. There were no royalty revenues or costs related thereto
in the third quarter or the first nine months of 1996.  Cost of royalties
totaled $6,000 in the third quarter of 1995 and $25,000 for the nine months
ended September 30, 1995.  These costs represent the portion of royalties that
the Company received from Lotus Development Corporation that are due to the
third parties who assisted the Company in completing the porting contracts for
Lotus Development Corporation in 1991.



OPERATING EXPENSES

     Sales and Marketing. Sales and marketing expenses increased 33% to
$1,884,000 during the third quarter of 1996 from $1,419,000 in the third quarter
of 1995.  For the nine months ended September 30, 1996, sales and marketing
expenses increased 50% to $5,679,000 from $3,792,000 for the first nine months
of 1995.  These increases are largely due to the increased investment in
marketing programs, sales commissions related to the increase in revenue and
additional sales and marketing personnel.  The total number of employees in
sales and marketing totaled 42 as of September 30, 1996.  This is an increase of
14 employees over the period ended September 30, 1995.

     Research and Development. Research and development expenses increased 67%
to $987,000 during the third quarter of 1996 from $592,000 in the third quarter
of 1995.  For the nine months ended September 30, 1996, research and development
expenses increased 70% to $2,744,000 from $1,617,000 for the first nine months
of 1995.  These increases are largely due to the growth of the research and
development staff in order to continue to enhance the Company's products and
develop new products.  The staff grew from 23 employees at September 30, 1995 to
37 employees as of September 30, 1996.  To date, all of the Company's costs for
research and development have been charged to operations as incurred, since the
amount of software development costs qualifying for capitalization has been
immaterial.

     General and Administrative. General and administrative expenses increased
84% to $680,000 during the third quarter of 1996 from $370,000 in the third
quarter of 1995.  For the nine months ended September 30, 1996, general and
administrative expenses increased 48% to $1,785,000 from $1,204,000 for the
first nine months of 1995.  These increases are largely attributable to the
increase in the general and administrative staff, performance bonus awards
related to the completion of several key objectives, consulting assistance
related to the implementation of the Company's new order entry and financial
systems and legal and accounting costs related to the activities and filings
required as a public company.

     Severance Charges. In 1995, the Company entered into an employment
separation agreement with its former Chief Executive Officer.  The costs of the
employment separation agreement totaled $449,000 and included severance pay and
the purchase of vested options.

                                                                              10
<PAGE>
 
LITIGATION SETTLEMENT

     On September 30, 1996, the Company entered into a definitive agreement with
Softbridge, Inc. to settle the litigation brought against the Company and
certain of its current and former employees.  The litigation, which was brought
in June, 1996, alleged breach of contracts, among other things.  The Company
recorded a charge of $744,000 in the third quarter of fiscal 1996 to cover the
settlement and other expenses incurred in connection therewith.


OTHER INCOME (EXPENSE), NET

     Other income (expense), net is comprised primarily of interest income from
cash, cash equivalents and short-term investments. Prior to April 2, 1996, the
Company generally invested in money market accounts. On April 2, 1996, the
Company completed an initial public offering and received net proceeds of
approximately $40 million. The Company has invested, and will continue to invest
the offering proceeds, primarily in U.S. Government and Government Agency
securities, in A1 rated commercial paper and in money market accounts until such
time as the proceeds are needed to fund operations. As a result of the Company's
receipt and investment of the offering proceeds, the Company's other income has
increased substantially over prior periods. Interest income is partially offset
by interest expense related to the Company's convertible debt.


PROVISION FOR INCOME TAXES

     The Company recorded no provision for income taxes for the third quarter of
1996, the nine months ended September 30, 1996 or for fiscal 1995 due to the
fact that it incurred net losses.


INFLATION

Inflation has not had a significant impact on the Company's operating results to
date.


LIQUIDITY AND CAPITAL RESOURCES

     Cash, cash equivalents and short-term investments increased from $442,000
at December 31, 1995 to $39,505,000 at September 30, 1996 primarily as a result
of the funds raised in the Company's initial public offering.

The Company provided $403,000 from operations in the first nine months of 1996
and used $13,000 in operating activities in the first nine months of 1995.  In
the first nine months of 1996, funds provided by operating activities were
primarily the result of the growth in accrued expenses and deferred revenue,
partially offset by the growth in accounts receivable.  In the first

                                                                              11
<PAGE>
 
nine months of 1995, funds used for operating activities were primarily the
result of the year to date loss from operations and the growth in accounts
receivable, offset by growth in accrued expenses and deferred revenue.

The Company utilized $33,196,000 and $488,000 for investing activities in the
first nine months of 1996 and 1995, respectively.  The investing activities in
the first nine months of 1996 were the result of the investment of the initial
public offering proceeds and the purchase of computer equipment, software and
furniture for employees.  The investing activities in the first nine months of
1995 were the result of capital equipment purchases for employees.

The Company generated funds from financing activities of $39,830,000 and $62,000
in the first nine months of 1996 and 1995, respectively. As noted above, the
Company generated approximately $40,000,000 from its initial public offering.

Assuming there is no significant change in the Company's business, the Company
believes that the existing cash balances and short-term investment balances and
cash flow from operations will be sufficient to meet its working capital
requirements for at least the next twelve months.

IMPORTANT FACTORS RELATED TO FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS

     This Quarterly Report on Form 10-Q contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. These forward-looking statements include
statements regarding the sufficiency of the Company's liquidity and capital.
Such statements are based on management's current expectations and are subject
to a number of uncertainties and risks that could cause actual results to differ
materially from those described in the forward-looking statements. Such
uncertainties and risks include, but are not limited to, potential fluctuations
in the Company's quarterly results, the Company's dependence on revenues from
licenses of QA Partner, dependence on key personnel, developments in the
emerging automated software testing product market, technological change,
competition, and the Company's ability to manage its recent growth, hire sales
and marketing personnel, expand its international sales, develop indirect sales
channels, avoid distribution channel conflicts, introduce new products and avoid
product defects and product liability, and protect its intellectual property and
proprietary rights. For more explanation of these and other risk factors, please
see the Company's final prospectus dated March 28, 1996.

                                                                              12
<PAGE>
 
PART II.  OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS
     The Company has previously reported the matter captioned Softbridge, Inc.
                                                              ----------------
     v. Laurence Kepple et al. on Form 8-K, filed August 1, 1996.
     --------------------------                                   

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
     The Company held the 1996 Annual Meeting of Stockholders on July 26, 1996
     for stockholders of record on June 12, 1996.  At the meeting, stockholders
     voted to elect seven members to the Board of Directors and to ratify the
     appointment of Coopers & Lybrand L.L.P. as the Company's independent public
     accountants for the fiscal year ending December 31, 1996.  Represented at
     the meeting were holders of an aggregate of 3,661,243 shares of common
     stock of the Company which constituted a majority of all outstanding shares
     of voting stock of the Company.  3,661,043 shares were voted in favor of
     each director nominee and 200 shares were withheld.  3,618,950 shares were
     voted for the ratification of the appointment of Coopers & Lybrand, 38,399
     shares voted against ratification and 3,894 shares abstained.  No other
     business was brought before the Annual Meeting.

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Exhibits:
          11.1  Computation of primary and fully-diluted net income (loss) per
          common share for the three months and nine months ended September 30,
          1996 and 1995.
          27.1  Financial Data Schedule
     (b)  Reports on Form 8-K:
          Softbridge, Inc. v. Laurence Kepple et. al.
          August 1, 1996.

                                                                              13
<PAGE>
 
                                   SIGNATURES

Pursuant to the requirements 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.

Date: November 13, 1996


                                         SEGUE SOFTWARE, INC.
 


                                         /s/ ELISABETH ELTERMAN
                                         ----------------------
                                         President and Chief Executive Officer



                                         /s/ J. JEFFREY BINGENHEIMER
                                         ---------------------------
                                         Chief Financial Officer and Treasurer
                                         (Principal Financial and Accounting
                                         Officer)

                                                                              14
<PAGE>
 
                               INDEX TO EXHIBITS

Exhibit
No.       Description
---       -----------

11.1      Computation of primary and fully-diluted net income (loss) per common
          share for the three months and nine months ended September 30, 1996
          and September 30, 1995.
27.1      Financial Data Schedule

                                                                              15