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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   FORM 10-QSB


/X/         QUARTERLY  REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
            EXCHANGE ACT OF 1934

                For the quarterly period ended September 30, 2001


/ /         TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
            EXCHANGE ACT OF 1934

                         Commission file number 1-13587


                         QUERYOBJECT SYSTEMS CORPORATION
             (Exact name of registrant as specified in its charter)

                           DELAWARE                      94-3087939
       (State or other jurisdiction of       (IRS Employer Identification Number)
       incorporation or organization)


                        ONE EXPRESSWAY PLAZA - SUITE 208
                         ROSLYN HEIGHTS, NEW YORK 11577
                    (Address of principal executive offices)


                                 (516) 228-8500
              (Registrant's telephone number, including area code)



            Indicate  by check mark  whether  the  registrant  (1) has filed all
reports  required to be filed by Section 13 or 15(d) of the Securities  Exchange
Act of 1934 during the preceding 12 months (or for such shorter  period that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/  No / /

            As  of  November  1,  2001  there  were  26,417,213  shares  of  the
Registrant's common stock outstanding.

Transitional Small Business Disclosure Format.  Yes / /     No /X/

================================================================================







                         QUERYOBJECT SYSTEMS CORPORATION

                                   FORM 10-QSB

                                      INDEX




PART I.      FINANCIAL INFORMATION                                          PAGE
                                                                            ----

Item 1.      Financial Statements

             Condensed Consolidated Balance Sheet
             As of September 30, 2001 (unaudited).............................3

             Condensed  Consolidated  Statements  of  Operations  For the
             three months and nine months ended September 30, 2001
             and 2000 (unaudited).............................................4

             Condensed Consolidated Statements of Cash Flows
             For the nine months ended September 30, 2001 and
             2000 (unaudited)...............................................  5

             Notes to the Condensed Consolidated Financial Statements.........6

Item 2.      Management's Discussion and Analysis or Plan of Operation.......11

PART II.     OTHER INFORMATION

Item 2.      Changes in Securities and Use of Proceeds.......................17

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

SIGNATURES ..................................................................18

                                       2





PART I.      FINANCIAL INFORMATION

ITEM 1.      FINANCIAL STATEMENTS

                         QUERYOBJECT SYSTEMS CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEET
                                   (UNAUDITED)


                                                                            SEPTEMBER 30,
                                                                                2001
ASSETS
Current assets
          Cash and cash equivalents                                        $    221,235
          Accounts receivable, net of allowance for doubtful
                 accounts of $48,939                                            650,195
          Prepaid expenses and other current assets                             167,498
                                                                           ------------

                      TOTAL CURRENT ASSETS                                    1,038,928

Property and equipment, net                                                   1,140,756
Note receivable                                                                 150,000
Deposits and other assets                                                        91,841
                                                                           ------------

                      TOTAL ASSETS                                         $  2,421,525
                                                                           ------------

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
          Accounts payable                                                 $    444,495
          Accrued expenses                                                      322,938
          Deferred revenue                                                       78,835
          Deferred rent                                                          39,153
                                                                           ------------

                      TOTAL CURRENT LIABILITIES                                 885,421

Deferred rent                                                                   124,430
                                                                           ------------

                      TOTAL LIABILITIES                                       1,009,851
                                                                           ------------

Minority interest                                                             6,535,137
                                                                           ------------

Stockholders' deficit
          Preferred stock, $.001 par value: 4,000,000 shares authorized;
                 none issued and outstanding                                       --
          Common stock, $.003 par value: 100,000,000 shares
                 authorized; 26,417,213 shares issued and outstanding            79,252
          Additional paid-in-capital                                         52,975,726
          Accumulated deficit                                               (58,178,441)
                                                                           ------------

                      TOTAL STOCKHOLDERS' DEFICIT                            (5,123,463)
                                                                           ------------

                      TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT          $  2,421,525
                                                                           ------------


     See accompanying Notes to Condensed Consolidated Financial Statements.

                                       3





                         QUERYOBJECT SYSTEMS CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)


                                                     Three Months Ended           Nine Months Ended
                                                        September 30,                 September 30,
                                                    2001            2000           2001           2000

Revenues
        Software licenses                     $    317,854    $    222,000    $    913,639    $  1,078,650
        Services and maintenance                   202,403         154,711         701,360         320,022
                                              ------------    ------------    ------------    ------------
                 TOTAL REVENUES                    520,257         376,711       1,614,999       1,398,672

Cost of revenues
        Software licenses                           12,715           8,880          36,546          43,652
        Services and maintenance                    41,008          70,556         137,757         110,340
                                              ------------    ------------    ------------    ------------
                 TOTAL COST OF REVENUES             53,723          79,436         174,303         153,992
                                              ------------    ------------    ------------    ------------
GROSS PROFIT                                       466,534         297,275       1,440,696       1,244,680
                                              ------------    ------------    ------------    ------------
Operating expenses
        Sales and marketing                        994,653       2,020,391       4,923,168       5,045,948
        Research and development                   531,228         693,640       1,996,654       1,916,024
        General and administrative                 324,643         380,465       1,055,892       1,317,450
                                              ------------    ------------    ------------    ------------
                 TOTAL OPERATING EXPENSES        1,850,524       3,094,496       7,975,714       8,279,422
                                              ------------    ------------    ------------    ------------
LOSS FROM OPERATIONS                            (1,383,990)     (2,797,221)     (6,535,018)     (7,034,742)

Interest income                                      2,011         110,658          44,432         295,148
Interest expense                                    (2,740)         (1,293)       (107,811)        (11,390)
Other (expense) income                              (8,157)          1,286          (1,631)         (2,380)
                                              ------------    ------------    ------------    ------------
NET LOSS                                      $ (1,392,876)   $ (2,686,570)   $ (6,600,028)   $ (6,753,364)
                                              ============    ============    ============    ============

Basic and diluted net loss per common share   $      (0.06)   $      (0.27)   $      (0.28)   $      (0.72)
                                              ------------    ------------    ------------    ------------
Weighted average shares used in per share
        computation (Note 2)                    24,298,164       9,844,960      23,161,105       9,325,154
                                              ============    ============    ============    ===========


     See accompanying Notes to Condensed Consolidated Financial Statements.

                                       4





                         QUERYOBJECT SYSTEMS CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)


                                                                                          Nine Months Ended
                                                                                            September 30,
                                                                                         2001            2000

Cash flows from operating activities
    Net loss                                                                          $(6,600,028)   $(6,753,364)
    Adjustments to reconcile net loss to net cash used in
       operating activities
         Depreciation and amortization                                                    523,215        341,367
         Interest expense related to beneficial conversion feature on notes payable       101,851           --
         Loss on disposal of equipment                                                       --            9,033
         Options issued for consulting services                                           338,981        436,551
         Changes in operating assets and liabilities
            Accounts receivable, net                                                     (204,307)       480,765
            Prepaid expenses and other current assets                                     (53,279)      (191,808)
            Deposits and other assets                                                      17,637        (47,567)
            Accounts payable and accrued expenses                                        (397,749)      (212,607)
            Deferred rent                                                                 (28,490)         3,358
            Deferred revenue                                                              (41,214)       (21,588)
                                                                                       ----------     -----------
            Net cash used in operating activities                                      (6,343,383)    (5,955,860)
                                                                                       ----------     -----------
Cash flows from investing activities
    Acquisitions of property and equipment                                               (289,637)      (736,017)
                                                                                       ----------     -----------
            Net cash used in investing activities                                        (289,637)      (736,017)
                                                                                       ----------     -----------
Cash flows from financing activities
    Proceeds from issuance of common stock, net                                         3,557,146           --
    Proceeds from issuance of IQO preferred stock, net                                       --        6,534,993
    Proceeds from exercise of common stock warrants                                          --        1,456,250
    Proceeds from exercise of common stock options                                           --          102,618
    Increase in note receivable                                                          (150,000)          --
    Payments of capital lease obligations                                                  (9,817)      (146,034)
                                                                                       ----------     -----------
            Net cash provided by financing activities                                   3,397,329      7,947,827
                                                                                       ----------     -----------
Net (decrease) increase in cash and cash equivalents                                   (3,235,691)     1,255,950

Cash and cash equivalents at beginning of year                                          3,456,926      4,488,854
                                                                                       ----------     -----------
Cash and cash equivalents at end of period                                            $   221,235    $ 5,744,804
                                                                                       ----------     -----------

     See accompanying Notes to Condensed Consolidated Financial Statements.

                                       5





                         QUERYOBJECT SYSTEMS CORPORATION
            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.          BASIS OF PRESENTATION

            The unaudited condensed  consolidated  financial statements included
herein reflect all adjustments, consisting only of normal recurring adjustments,
which in the opinion of  management  are necessary to fairly state the Company's
financial  position,  results  of  operations  and cash  flows  for the  periods
presented.  These financial  statements  should be read in conjunction  with the
Company's audited financial  statements  included in the Company's Annual Report
on Form 10-KSB, as amended,  for the year ended December 31, 2000, and have been
prepared on the basis that the Company will continue as a going  concern,  which
contemplates  the  realization of assets and the  satisfaction of liabilities in
the normal course of business.  The results of operations  for the periods ended
September 30, 2001 are not necessarily  indicative of the results to be expected
for any subsequent  quarter,  or for the entire fiscal year ending  December 31,
2001, or for any future period.

            The condensed consolidated financial statements include the accounts
of QueryObject  Systems  Corporation and its  subsidiaries,  internetQueryObject
Corporation  ("IQO"),  QueryObjectEXCHANGE  Corporation and QueryObject  Systems
Corporation, Ltd. All significant intercompany transactions have been eliminated
in consolidation.

2.          BASIC AND DILUTED NET LOSS PER SHARE

            Basic net loss per share is computed by dividing the net loss by the
weighted  average  number of shares of common  stock  outstanding.  The weighted
average  number of shares of common  stock  outstanding  includes  the number of
common shares issued upon the conversion of Convertible  Preferred  Stock, as of
the date of conversion, and the number of common shares issued upon the exercise
of options and warrants, as of the date of exercise.

            Diluted  earnings per share is based on the potential  dilution that
would  occur on exercise or  conversion  of  securities  into common  stock.  At
September  30, 2001,  outstanding  options and  warrants to purchase  38,906,631
shares of common stock that could potentially dilute basic earnings per share in
the future were not  included in the  computation  of diluted net loss per share
because  to do so  would  have  had  an  antidilutive  effect  for  the  periods
presented.  In addition, the Convertible Preferred Stock outstanding during 2000
has  been  excluded  prior  to  its  conversion  to  common  stock,  due  to the
antidilutive  effect.  As a result,  the basic and diluted per share amounts are
identical for all periods presented.

3.          USE OF ESTIMATES

            The  preparation  of the financial  statements  in  conformity  with
generally accepted  accounting  principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

                                       6



4.          LIQUIDITY AND BUSINESS RISKS

            The Company has  experienced  a drop-off in sales  activities  since
early  September  2001 and has not been  successful  in raising  the  additional
capital necessary to continue  operating in the current economic  climate.  As a
result, in October 2001, the Company laid off significantly all of its employees
and is  exploring a number of options  including  the sale of all or part of its
assets. The Company has incurred operating losses since inception,  has incurred
negative cash flows from operating  activities and had an accumulated deficit of
$58,178,441  as of September 30, 2001.  The Company has had a limited  operating
history as a software product and application  services company and has not made
significant sales of its products or services.

5.          PRIVATE PLACEMENT OF COMMON STOCK AND COMMON STOCK PURCHASE WARRANTS

            On August 15, 2001, the Company had a closing of a private placement
(the "August Private Placement") and received gross proceeds of $1,200,000.  The
Company repaid out of the gross proceeds $500,000 to stockholders of the Company
in satisfaction of promissory  notes  outstanding that were issued in July 2001.
The Company sold  4,444,445  Units (the  "August  Units") at a price of $.27 per
Unit.  Each August Unit consists of one share of common stock and two redeemable
common stock purchase warrants  exercisable until August 15, 2006 at an exercise
price of $.395 per share.  The per unit purchase  price was based on the average
of the closing sales price of the Company's  common stock in the five day period
ended two days prior to the closing.

            On February 7, 2001 the Company had the initial closing of a private
placement  (the  "February  Private  Placement")  and received gross proceeds of
$1,230,000.  The  Company  sold  2,050,000  Units (the  "February  Units") at an
initial  price of $.60 per Unit.  Each  February  Unit  consists of one share of
common stock and two redeemable common stock purchase warrants exercisable until
February  7, 2006 at an initial  exercise  price of $.925 per share,  subject to
adjustment.  The per unit purchase price was based on the average of the closing
sales price of the Company's  common stock in the five day period ended two days
prior to the initial closing ("Initial Price"). On the date of the final closing
of the February  Private  Placement,  if the average  closing sales price of the
Company's  common stock in the five day period ended two days prior to the final
closing (the "Final Closing  Price") is less than the Initial Price,  such lower
amount will be used in determining  the purchase price of the February Units. In
addition,  the  February  Units sold in the initial  closing will be repriced to
reflect the lower  price.  The Company  received net proceeds of $743,814 in the
initial closing,  after deducting expenses of the offering and the conversion of
loans payable to  stockholders,  totaling  $250,000,  into February Units.  This
adjustment  resulted in an additional  discount on the notes  payable  issued to
stockholders,  and the conversion  ratio  represented a discount from the market
value of the common stock at the date of issuance.  Accordingly, the discount is
considered an incremental yield  ("beneficial  conversion  feature") to the note
holders  representing  approximately  $102,000  and  was  recorded  as  interest
expense.

                                       7





            On April 13, 2001, the Company had the final closing of the February
Private  Placement and received gross proceeds of $1,905,000 and net proceeds of
$1,649,106  from the  sale of  7,055,556  February  Units at a price of $.27 per
Unit. As a result of the Final Closing Price being lower than the Initial Price,
the Company issued 2,505,558  additional  February Units to the investors in the
initial closing. In addition,  the exercise price of the redeemable common stock
purchase warrants were reduced from $.925 to $.485 per share.

            The Company  granted the  placement  agent in the  February  Private
Placement an option to purchase  1,161,111  February Units and paid  commissions
and a  non-accountable  expense  allowance  equal to 11% of the  gross  proceeds
received by the Company.

            Pursuant to the provisions of the February  Private  Placement,  the
Company was  required  to have a  Registration  Statement  in effect by June 19,
2001, covering the common stock underlying the February Units (the "Registration
Statement").  Since the Registration  Statement was not declared effective until
July 2001,  the Company was  required to issue an  additional  1,161,111  common
stock purchase warrants at an exercise price of $.485 per share to the investors
in the February Private Placement.

6.          BUSINESS SEGMENTS

            The Company  operates in two business  segments;  software sales and
support and application services.  The following tables present revenues,  gross
profit, loss from operations and depreciation and amortization for the three and
nine month periods ended September 30, 2001 and 2000. Software sales and support
includes software sales to third parties on a direct basis or through a business
partner, and includes related support in the form of maintenance  agreements and
consulting.  Application  services  include design,  implementation  and hosting
services  provided to third  parties,  in some cases  utilizing the  QueryObject
technology.  The  accounting  policies of the business  segments are the same as
those described in the summary of significant  accounting  policies  included in
the Company's  Consolidated  Financial Statements contained in its Annual Report
on Form 10-KSB, as amended, for the year ended December 31, 2000.

                                       8




                                            Three Months Ended             Nine Months Ended
                                                September 30,                September 30,
                                             2001          2000           2001          2000

Revenues
       Software sales and support       $   358,757    $   268,011    $ 1,034,599    $ 1,229,972
       Application services                 161,500        108,700        580,400        168,700
                                        -----------    -----------    -----------    -----------

                                        $   520,257    $   376,711    $ 1,614,999    $ 1,398,672
                                        -----------    -----------    -----------    -----------

Gross Profit
       Software sales and support       $   317,828    $   229,167    $   939,174    $ 1,117,672
       Application services                 148,706         68,108        501,522        127,008
                                        -----------    -----------    -----------    -----------

                                        $   466,534    $   297,275    $ 1,440,696    $ 1,244,680
                                        -----------    -----------    -----------    -----------

Loss from operations
       Software sales and support       $  (962,669)   $(1,950,500)   $(4,842,744)   $(5,190,316)
       Application services                (421,321)      (846,721)    (1,692,274)    (1,844,426)
                                        -----------    -----------    -----------    -----------

                                        $(1,383,990)   $(2,797,221)   $(6,535,018)   $(7,034,742)
                                        -----------    -----------    -----------    -----------

Included in loss from operations
       Depreciation and amortization
           Software sales and support   $    98,069    $   116,008    $   345,970    $   337,372
           Application services              59,572          1,465        177,245          3,995
                                        -----------    -----------    -----------    -----------

                                        $   157,641    $   117,473    $   523,215    $   341,367
                                        -----------    -----------    -----------    -----------

            International  sales were 20% and 0% of total revenues for the three
months ended September 30, 2001 and 2000, respectively. Sales within the country
of Italy were 20% and 0% of total revenues for the three months ended  September
30, 2001 and 2000, respectively.

            International  sales were 45% and 21% of total revenues for the nine
months ended September 30, 2001 and 2000, respectively. Sales within the country
of Italy were 43% and 16% of total revenues for the nine months ended  September
30, 2001 and 2000, respectively.

7.          RECENT ACCOUNTING PRONOUNCEMENTS

            In July  2001,  the  Financial  Accounting  Standards  Board  issued
Statement  of  Financial   Accounting   Standards  ("SFAS")  No.  141  "Business
Combinations" and SFAS No. 142 "Goodwill and Other Intangible  Assets." SFAS No.
141 requires business combinations initiated after June 30, 2001 to be accounted
for using the  purchase  method of  accounting,  and  broadens  the criteria for
recording intangible assets separate from goodwill.  Recorded goodwill and other
intangibles  will be  evaluated  against  this new  criteria  and may  result in
certain  intangibles  being subsumed into goodwill,  or  alternatively,  amounts
initially recorded as goodwill may be separately identified and recognized apart
from goodwill.  SFAS No. 142 requires the use of a  nonamortization  approach to
account for purchased goodwill and certain intangibles.  Under a nonamortization
approach, goodwill and certain intangibles will not be amortized into results of

                                       9





operations,  but instead would be reviewed for  impairment  and written down and
charged to results of operations only in the periods in which the recorded value
of goodwill and certain  intangibles is more than its fair value. The provisions
of each statement  which apply to goodwill and intangible  assets acquired prior
to June 30, 2001, will be adopted by the Company on January 1, 2002.

                                       10





ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

            THE   DISCUSSION   IN   THIS   REPORT   ON  FORM   10-QSB   CONTAINS
FORWARD-LOOKING  STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES.  THE COMPANY'S
ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE DISCUSSED  HEREIN.  FACTORS THAT
COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES  INCLUDE,  BUT ARE NOT LIMITED TO,
THOSE  DISCUSSED  IN  "RISK  FACTORS"  IN THIS  PART I,  ITEM 2 AS WELL AS THOSE
DISCUSSED IN THIS SECTION AND ELSEWHERE IN THIS REPORT,  AND THE RISKS DISCUSSED
IN "RISK FACTORS" IN PART I, ITEM 1 - BUSINESS, INCLUDED IN THE COMPANY'S ANNUAL
REPORT ON FORM 10-KSB, AS AMENDED, FOR THE YEAR ENDED DECEMBER 31, 2000.

             THE  DISCUSSION  AND ANALYSIS  BELOW SHOULD BE READ IN  CONJUNCTION
WITH THE  CONDENSED  CONSOLIDATED  FINANCIAL  STATEMENTS  OF THE COMPANY AND THE
NOTES THERETO, INCLUDED ELSEWHERE HEREIN.

OVERVIEW

            The Company has  experienced  a drop-off in sales  activities  since
early  September  2001 and has not been  successful  in raising  the  additional
capital necessary to continue  operating in the current economic  climate.  As a
result, in October 2001, the Company laid off significantly all of its employees
and is  exploring a number of options  including  the sale of all or part of its
assets.

            Revenues  from the sales of the  Company's  products  are  generally
recognized upon the execution of a software licensing  agreement and shipment of
the product,  provided that no  significant  vendor  obligations  remain and the
resulting  receivable  is  deemed  collectible  by  management.  Allowances  for
estimated  future  returns are  provided  for upon  shipment.  Service  revenues
consist  primarily of application  services,  that includes  subscription  based
monthly hosting charges,  performed for customers on a project or contract basis
and are  recognized  ratably as the services  are provided  over the term of the
respective  agreements.  Maintenance  revenues  consist of ongoing  support  and
products  updates  and are  recognized  ratably  over the term of the  contract,
generally 12 months.

RESULTS OF OPERATIONS

            The  following  table  sets  forth  certain  items in the  Company's
condensed  consolidated  statements of  operations  for the three and nine month
periods ended September 30, 2001 and 2000 ($ in thousands):

                                       11





                                           Three Months Ended    Nine Months Ended
                                              September 30,        September 30,
                                              2001      2000      2001         2000

Revenues
       Software licenses                   $   318    $   222    $   914    $ 1,079
       Services and maintenance                202        155        701        320
                                           -------    -------    -------    -------
                Total revenues                 520        377      1,615      1,399
                                           -------    -------    -------    -------
Cost of revenues
       Software licenses                        13          9         36         44
       Services and maintenance                 41         71        138        110
                                           -------    -------    -------    -------
                Total cost of revenues          54         80        174        154
                                           -------    -------    -------    -------
Gross profit                                   466        297      1,441      1,245
                                           -------    -------    -------    -------
Operating expense
       Sales and marketing                     995      2,020      4,923      5,046
       Research and development                531        694      1,997      1,916
       General and administrative              324        380      1,056      1,318
                                           -------    -------    -------    -------
                Total operating expenses     1,850      3,094      7,976      8,280
                                           -------    -------    -------    -------
Loss from operations                        (1,384)    (2,797)    (6,535)    (7,035)

Interest income                                  2         10         44        295
Interest expense                                (3)        (1)      (108)       (11)
Other (expense) income                          (8)         1         (1)        (2)
                                           -------    -------    -------    -------
Net loss                                   $(1,393)   $(2,787)   $(6,600)   $(6,753)
                                           =======    =======    =======    =======

REVENUES

            The Company has  recognized  revenue  for all periods  presented  in
accordance with the American Institute of Certified Public Accountants Statement
of Position 97-2,  "Software Revenue  Recognition" as amended, and in compliance
with SEC Staff Accounting Bulletin No. 101.

            Total revenues  increased by $143,000,  or 38%, from $377,000 in the
third  quarter of 2000 to $520,000 in the third  quarter of 2001.  For the first
nine months,  total revenues  increased by $216,000,  or 15% from  $1,399,000 in
2000 to $1,615,000 in 2001. License revenues increased by $96,000,  or 43%, from
$222,000 in the third  quarter of 2000 to $318,000 in the third quarter of 2001.
For the first nine months,  license revenues  decreased by $165,000 or 15%, from
$1,079,000 in 2000 to $914,000 in 2001.  The Company  recorded  license  revenue
from the sale of five licenses in the third quarter of 2001 compared to the sale
of two  licenses  in the third  quarter of 2000.  The Company  recorded  license
revenue from the sale of 14 licenses for the first nine months of 2001  compared
to the sale of 13  licenses  for the  first  nine  months of 2000.  The  average
revenue per  license  was lower  during the 2001  periods  compared to 2000.  In
January 2001, the Company changed its direct sales model for European sales to a


                                       12





partner distribution model. The Company has closed its United Kingdom office and
currently has one distributor in Europe.

            Services and maintenance  revenue increased by $47,000, or 30%, from
$155,000 in the third  quarter of 2000 to $202,000 in the third quarter of 2001.
For the first  nine  months,  services  and  maintenance  revenue  increased  by
$381,000,  or 119%,  from $320,000 in 2000 to $701,000 in 2001.  These increases
were primarily the result of IQO application service revenue in 2001,  comprised
primarily of subscription based monthly charges to IQO customers.

COST OF REVENUES

            Cost of software  license  revenues  consists  primarily  of royalty
payments to third  parties,  product  packaging,  documentation  and  production
costs.  Cost of software  license  revenues as a percentage of software  license
revenues was 4.0% for the three and nine month periods ended in 2001 and 2000.

            Cost of services  and  maintenance  revenues  consists  primarily of
direct costs associated with application  services  provided by IQO and customer
support  costs.  Cost of services and  maintenance  revenues as a percentage  of
services and maintenance  revenues were 20% for the three and nine month periods
ended  September  30,  2001.  Cost of  services  and  maintenance  revenues as a
percentage of services and maintenance revenues were 46% and 34%,  respectively,
for the three and nine months periods ended September 30, 2000.  These increases
resulted  primarily from higher costs as a percentage of revenue associated with
IQO application service revenue compared to the fixed personnel costs related to
providing maintenance and related customer support.

OPERATING EXPENSES

            SALES AND MARKETING.  Sales and marketing expenses consist primarily
of personnel costs, including sales commissions and incentives, of all personnel
involved  in the sales and  marketing  process,  and related  recruiting  costs,
public  relations,  advertising  related  costs,  collateral  material and trade
shows.  Sales and  marketing  expenses  decreased by  $1,025,000,  or 51%,  from
$2,020,000  in the third  quarter of 2000 to  $995,000  in the third  quarter of
2001,  primarily due to decreased  personnel related costs,  including marketing
and sales costs of IQO, and a general decrease in both marketing, recruiting and
consulting  expenses  of the  Company.  For the  first  nine  months,  sales and
marketing  expenses  decreased by $123,000,  or 2%, from  $5,046,000  in 2000 to
$4,923,000 in 2001, primarily due to increased personnel related costs including
marketing and sales costs of IQO early in fiscal 2001. During the second quarter
of 2001, the Company  implemented  cost reductions that decreased  marketing and
sales expenses.

                                       13





            RESEARCH AND DEVELOPMENT.  Research and development expenses consist
primarily of salaries and other personnel  related  expenses,  recruiting  costs
associated  with  the  hiring  of  software   engineers  and  quality  assurance
personnel,  consultant costs and depreciation of development equipment. Research
and  development  expenses  decreased by $163,000,  or 23%, from $694,000 in the
third quarter of 2000 to $531,000 in the third quarter of 2001, primarily due to
decreased  personnel  related costs including  research and development costs of
IQO. For the first nine months,  research and development  expenses increased by
$81,000, or 4%, from $1,916,000 in 2000 to $1,997,000 in 2001,  primarily due to
increased  personnel  related  costs of IQO early in fiscal 2001.  To date,  all
research and development costs have been expensed as incurred.

            GENERAL  AND  ADMINISTRATIVE.  General and  administrative  expenses
consist primarily of personnel costs for finance and accounting, human resources
and general management, as well as insurance and professional expenses.  General
and administrative  expenses decreased by $56,000,  or 15%, from $380,000 in the
third quarter of 2000 to $324,000 in the third quarter of 2001, primarily due to
a reduction in  professional  expenses and bad debt expense.  For the first nine
months, general and administrative  expenses decreased by $262,000, or 20%, from
$1,318,000  in 2000 to  $1,056,000  in 2001,  primarily  due to a  reduction  in
professional expenses and bad debt expense.

INTEREST INCOME AND INTEREST EXPENSE

            Interest income  represents  income earned on the Company's cash and
cash equivalents. Interest income decreased by $8,000, from $10,000 in the third
quarter  of 2000 to $2,000  in the third  quarter  of 2001.  For the first  nine
months,  interest income  decreased by $251,000 from $295,000 in 2000 to $44,000
in 2001.  These  decreases  were primarily due to a lower level of cash and cash
equivalents on deposit during 2001.

            Interest  expense during 2001  represents the beneficial  conversion
feature  on notes  payable  issued  during  2000 that were  converted  to equity
securities during 2001.  During 2000,  interest expense  represents  interest on
capital equipment leases.  Interest expense increased by $2,000,  from $1,000 in
the third quarter of 2000 to $3,000 in the third quarter of 2001.  For the first
nine  months,  interest  expense  increased  by $97,000  from $11,000 in 2000 to
$108,000 in 2001.  The increase for the first nine months was  primarily  due to
the conversion feature that represented incremental yield to the note holders in
the amount of  approximately  $102,000.  As of September  30, 2001,  all capital
lease obligations have been repaid.

PROVISION FOR INCOME TAXES

            The Company  accounts for income taxes in accordance  with Statement
of Financial  Accounting  Standards No. 109,  "Accounting for Income Taxes." The
Company incurred net operating losses in 2000 and 1999 and consequently  paid no
federal or state  income  taxes.  At  December  31,  2000,  the  Company had net
operating  losses and  research and  experimental  tax credit  carryforwards  of
approximately $45,332,000 and $360,000, respectively, available to offset future
federal taxable income and tax. These net operating loss carryforwards expire at
various dates through 2020.  Although the  determination of whether an ownership
change has occurred is subject to factual and legal  uncertainties,  the Company
believes  that an ownership  change  occurred  upon the  completion  of previous
financings  and such  "ownership  change" will  materially  limit the  Company's

                                       14





ability to utilize its NOL carryforward. Moreover, while such loss carryforwards
are available to offset future  taxable  income of the Company,  the Company may
not generate  sufficient  taxable  income so as to utilize all or a  substantial
portion of such loss carryforwards  prior to their expiration,  and accordingly,
the Company has provided a full valuation allowance against its net deferred tax
assets.

LIQUIDITY AND CAPITAL RESOURCES

            Since  January  1,  2000,  the  Company  received  net  proceeds  of
approximately  $11,554,000  from various  financings and the exercise of options
and warrants.

            The Company has  experienced  a drop-off in sales  activities  since
early  September  2001 and has not been  successful  in raising  the  additional
capital necessary to continue  operating in the current economic  climate.  As a
result, in October 2001, the Company laid off significantly all of its employees
and is  exploring a number of options  including  the sale of all or part of its
assets.  As of  September  30,  2001,  the Company had $221,235 in cash and cash
equivalents and working capital of $153,507.  The Company has incurred operating
losses  since  inception,  has  incurred  negative  cash  flows  from  operating
activities  and had an  accumulated  deficit of  $58,178,441 as of September 30,
2001. The Company has had a limited  operating history as a software product and
application services company and has not made significant sales of its products.
Therefore, revenues and operating profitability are difficult to predict.

            Net cash used in operating  activities was $6,343,000 and $5,956,000
in 2001 and 2000, respectively.  For 2001, net cash used in operating activities
was primarily attributable to a net loss of $6,600,000,  reduced by depreciation
and  amortization of $523,000.  For 2000, net cash used in operating  activities
was primarily  attributable to a net loss of $6,753,000  reduced by depreciation
and  amortization  of $341,000  and options  issued for  consulting  services of
$437,000.   Net  cash  provided  by  financing  activities  was  $2,955,000  and
$7,948,000  in 2001 and 2000,  respectively.  For  2001,  net cash  provided  by
financing activities was primarily the result of the February and August Private
Placements.  For 2000,  net cash provided by financing  activities was primarily
the result of the sale of IQO  preferred  stock and the exercise of common stock
purchase  warrants.  Net cash used in investing  activities  was  primarily  the
acquisition of property and equipment for both 2001 and 2000.

            The  Company  does  not  currently  have a  line  of  credit  with a
commercial bank. As of September 30, 2001, the Company's  principal  commitments
consisted of  obligations  under  operating  leases and  employment  agreements.
Pursuant to employment  agreements with executive  officers of the Company as of
September 30, 2001, the Company's remaining obligation is to pay $124,500 and $0
in salaries for the years ended December 31, 2001 and 2002, respectively.

RISK FACTORS THAT MAY AFFECT FUTURE RESULTS

            THE COMPANY OPERATES IN A RAPIDLY CHANGING ENVIRONMENT THAT INVOLVES
A NUMBER OF RISKS, SOME OF WHICH ARE BEYOND THE COMPANY'S CONTROL. THE FOLLOWING
DISCUSSION HIGHLIGHTS THE MOST MATERIAL OF THE RISKS.

                                       15





WE WILL NEED TO SELL ASSETS TO CONTINUE OUR OPERATIONS.

            Due to our continued operating losses, we have announced that we are
attempting  to  sell  all or part of our  assets.  We have no firm  commitments,
agreements or  understandings  regarding any sale of assets and we may be unable
to sell assets on satisfactory terms or at all. If we are unable to consummate a
sale, we may be required to liquidate and dissolve the company.

WE HAVE HAD A HISTORY OF OPERATING  LOSSES AND PROJECT FUTURE LOSSES;  THEREFORE
WE HAVE SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN.

            At September 30, 2001, our accumulated deficit was $58,178,411.  For
the nine months ended  September 30, 2001 and the year ended  December 31, 2000,
we incurred net losses of  $6,600,028  and  $10,240,366,  respectively.  We have
incurred  a net  loss in each  year of our  existence,  and  have  financed  our
operations  primarily  through sales of equity and debt securities.  Our expense
levels are high and our  revenues  are  difficult  to predict.  The  independent
accountants' report on our financial  statements for the year ended December 31,
2000 states that our  recurring  losses from  operations  and negative cash flow
from operating  activities raise substantial doubt about our ability to continue
as a going concern.

WE CAN GIVE NO ASSURANCES THAT OUR FORWARD LOOKING STATEMENTS WILL BE CORRECT.

Certain forward-looking statements,  including statements regarding our expected
financial  position,   business  and  financing  plans  are  contained  in  this
prospectus  or are  incorporated  in  documents  annexed  as  exhibits  to  this
prospectus.  These forward-looking  statements reflect our views with respect to
future events and financial performance. The words, "believe," "expect," "plans"
and "anticipate" and similar expressions  identify  forward-looking  statements.
Although we believe  that the  expectations  reflected  in such  forward-looking
statements are reasonable,  we can give no assurance that such expectations will
prove to have been correct. Important factors that could cause actual results to
differ materially from such  expectations are disclosed in this prospectus.  All
subsequent written and oral  forward-looking  statements  attributable to us are
expressly qualified in their entirety by the cautionary  statements.  We caution
readers not to place undue reliance on these forward-looking  statements,  which
speak only as of their dates.  We undertake no obligations to publicly update or
revise any forward-looking  statements,  whether as a result of new information,
future events or otherwise.

WE HAVE A SIGNIFICANT  AMOUNT OF AUTHORIZED BUT UNISSUED  PREFERRED STOCK, WHICH
MAY AFFECT THE LIKELIHOOD OF A CHANGE OF CONTROL IN OUR COMPANY.

            Our Board of Directors has the authority,  without further action by
the  stockholders,  to issue up to 4,000,000  shares of preferred  stock on such
terms and with such rights,  preferences and  designations,  including,  without
limitation  restricting  dividends on our common  stock,  dilution of the voting
power of our common stock and impairing the liquidation rights of the holders of
our  common  stock,  as  the  Board  may  determine  without  any  vote  of  the
stockholders.  Issuance  of such  preferred  stock,  depending  upon the rights,
preferences and designations thereof may have the effect of delaying,  deterring
or  preventing  a  change  in  control.  In  addition,  certain  "anti-takeover"
provisions of the Delaware  General  Corporation  Law,  among other things,  may
restrict  the  ability  of our  stockholders  to  authorize  a merger,  business
combination or change of control.

                                       16





PART II.    OTHER INFORMATION

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

            As  described  in  Note 5 of the  Notes  to  Condensed  Consolidated
Financial  Statements  included elsewhere herein, the Company has consumated the
August  Private  Placement.  The sale of the  securities  in the August  Private
Placement was made in reliance on the exemption contained in Section 4(2) of the
Securities Act of 1933, as amended.  For more information relating to the August
Private  Placement  (including  the exercise terms of the warrants and placement
option  issued in the Private  Placement),  see Note 5 of the Notes to Condensed
Consolidated Financial Statements.


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

             (a)  Exhibits

                  Statement of Computation of Net Loss Per Share (Exhibit 11.1)

             (b)  Reports on Form 8-K

                  No reports on Form 8-K were filed  during the quarter  ended
September 30, 2001.


                                       17





                                   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.



Dated:  November 14, 2001         QUERYOBJECT SYSTEMS CORPORATION



                                  By:  /s/ Daniel M. Pess
                                       ---------------------------------------
                                       Executive Vice President and Chief
                                       Financial Officer (Principal  Financial
                                       Officer and Principal
                                       Accounting Officer)

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