--------------------------------------------------------------------------------
                       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 June 30, 1998

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

                         Commission file number 1-13587

                         QUERYOBJECT SYSTEMS CORPORATION
                     Formerly "CrossZ Software 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)

                         60 Charles Lindbergh Boulevard
                            Uniondale, New York 11553
                    (Address of principal executive offices)

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

                           CrossZ Software Corporation
                           (Former name of registrant)

             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 July 31, 1998 there were 5,121,422 shares of the Registrant's
common stock outstanding.

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

--------------------------------------------------------------------------------
<PAGE>
                         QUERYOBJECT SYSTEMS CORPORATION
                     (formerly CrossZ Software Corporation)

                                   FORM 10-QSB

                                      INDEX




PART I.   FINANCIAL INFORMATION                                             PAGE

Item 1.   Financial Statements

          Condensed Consolidated Balance Sheet
          As of  June 30, 1998 (unaudited)............................      3

          Condensed  Consolidated  Statement  of  Operations
          For the three months and six months ended June 30, 1998
          and 1997 (unaudited) ......................................      4

          Condensed Consolidated Statement of Cash Flows
          For the six months ended June 30, 1998 and 1997 (unaudited).     5

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

Item 2.   Management's Discussion and Analysis or Plan of Operation...     7

PART II.  OTHER INFORMATION

Item 2.   Changes in Securities and Use of Proceeds..................     16

Item 4.   Submission of Matters to a Vote of Security Holders........     16

Item 5.   Other Information..........................................     17

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

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


                                       2
<PAGE>
Part I.    FINANCIAL INFORMATION

Item 1.    Financial Statements

                         QUERYOBJECT SYSTEMS CORPORATION
                     (formerly CrossZ Software Corporation)
                      CONDENSED CONSOLIDATED BALANCE SHEET
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                                  June 30,
                                                                                   1998
ASSETS
Current assets
<S>                                                                          <C>
      Cash and cash equivalents....................................          $   1,003,853
      Accounts receivable, net of allowance for doubtful
          accounts of $30,000......................................                158,680


      Restricted certificate of deposit............................                598,453
      Prepaid expenses and other current assets....................                 79,540
                                                                              ------------
          Total current assets.....................................              1,840,526

Property and equipment, net........................................              1,131,600
Deposits and other assets..........................................                146,452
                                                                              ------------
          Total assets.............................................          $   3,118,578
                                                                              ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
      Accounts payable.............................................          $     285,660
      Accrued expenses.............................................                890,476
      Deferred revenue.............................................                 58,751
      Loan payable to stockholders.................................                565,122
      Customer advance.............................................                300,000
      Capital lease obligations due within one year................                206,652
                                                                              ------------
          Total current liabilities................................              2,306,661

Capital lease obligations..........................................                260,816
Deferred rent  ....................................................                269,381
                                                                              ------------
          Total liabilities........................................              2,836,858
                                                                              ------------

Stockholders' equity
      Preferred stock, 2,000,000 shares authorized;
          none issued and outstanding..............................                     --
      Common stock, $0.001 par value:  30,000,000 shares
          authorized; 5,121,422 shares issued and outstanding......                  5,121
      Additional paid-in capital...................................             30,471,579
      Accumulated deficit..........................................            (30,194,980)
                                                                              ------------
          Total stockholders' equity...............................                281,720
                                                                              ------------
          Total liabilities and stockholders' equity...............          $   3,118,578
                                                                              ============
</TABLE>

   See accompanying notes to the Condensed Consolidated Financial Statements.

                                       3
<PAGE>
                         QUERYOBJECT SYSTEMS CORPORATION
                     (formerly CrossZ Software Corporation)
                 CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                    Three Months Ended                       Six Months Ended
                                                                         June 30,                                June 30,
                                                                 1998                  1997               1998               1997
Revenues
<S>                                                        <C>                 <C>                  <C>                <C>
     Software licenses...............................      $    60,000         $     398,750        $    135,000       $    398,750
     Services and maintenance........................           24,165                81,187              61,026             96,377
                                                          ------------          ------------         -----------        ------------
               Total revenues........................           84,165               479,937             196,026            495,127

Cost of revenues
     Software licenses...............................              750                 5,807               1,500              5,807
     Services and maintenance........................           21,155                51,169              45,911             54,739
                                                          ------------          ------------         -----------        ------------
               Total cost of revenues................           21,905                56,976              47,411             60,546
                                                          ------------          ------------         -----------        ------------

Gross Profit.........................................           62,260               422,961             148,615            434,581
                                                          ------------          ------------         -----------        ------------
Operating expenses
     Sales and marketing.............................        1,141,228               986,988           2,468,446          2,061,319
     Research and development........................          614,839               662,315           1,181,256          1,197,731
     General and administrative......................          400,729               323,711             850,730            608,435
                                                          ------------          ------------         -----------        ------------
               Total operating expenses..............        2,156,796             1,973,014           4,500,432          3,867,485
                                                           -----------          ------------         -----------        ------------

Loss from operations.................................       (2,094,536)           (1,550,053)         (4,351,817)        (3,432,904)

Interest income......................................           38,024                 8,239             101,365             27,093
Interest expense.....................................          (35,924)              (58,101)            (77,336)          (101,612)
Other income (expense)...............................               25                    --                (206)               542
                                                          ------------          ------------         -----------        ------------

Net loss............................................ .    $ (2,092,411)        $  (1,599,915)       $ (4,327,994)      $ (3,506,881)
                                                          ------------          ------------         -----------        ------------

Basic net loss per share.............................     $       (.41)        $        (.64)       $       (.85)       $     (1.41)
                                                          ------------          ------------         -----------        ------------

Weighted average shares used in basic per share
     computation (Note 3)............................       5,120,519             2,498,768           5,118,580           2,494,666
                                                          ===========          ============         ===========        ============
</TABLE>

   See accompanying notes to the Condensed Consolidated Financial Statements.

                                       4
<PAGE>
                         QUERYOBJECT SYSTEMS CORPORATION
                     (formerly CrossZ Software Corporation)
                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                                       Six Months Ended
                                                                                           June 30,
                                                                                  1998                      1997

<S>                                                                             <C>                      <C>           
Cash flows from operating activities
      Net loss ................................................                 $ (4,327,994)            $  (3,506,881)
      Adjustments to reconcile net loss to net cash used in
          operating activities
               Depreciation and amortization......................                   204,864                    97,413
               Loss on sale of computer equipment.................                       206                        --
               Options issued for consulting services.............                    76,499                   104,500
               Changes in operating assets and liabilities
                  Accounts receivable, net........................                   341,087                   595,537
                  Prepaid expenses and other current assets.......                   (31,286)                  (90,830)
                  Deposits and other assets.......................                     3,822                   (44,525)
                  Accounts payable and accrued expenses...........                  (465,976)                  476,927
                  Deferred rent...................................                       448                     6,647
                  Deferred revenue................................                    28,716                    71,387
                                                                                ------------             -------------
          Net cash used in operating activities................                   (4,169,614)               (2,289,825)
                                                                                ------------             -------------

Cash flows from investing activities
      Release of restricted certificate of deposit.............                      296,213                        --
      Loan receivable from stockholder.........................                      (65,000)                       --
      Acquisitions of property and equipment...................                      (88,408)                 (215,856)
      Purchase of restricted certificate of deposit............                      (16,827)                  (18,012)
                                                                                ------------             -------------
          Net cash provided by (used in) investing activities..                      125,978                  (233,868)
                                                                                ------------             -------------

Cash flows from financing activities
      Proceeds from issuance of  common stock..................                       10,384                    52,218
      Proceeds from interim financing notes payable to 
        shareholders..............................................                        --                   950,000
      Repayment of loan payable to stockholders................                     (326,213)                  (60,000)
      Payments of capital lease obligations....................                     (115,534)                 (128,394)
      Repayment of loan receivable from stockholder............                       12,300                        --
      Proceeds from sale-leaseback transaction.................                       29,202                   409,429
                                                                                ------------             -------------
          Net cash (used in) provided by financing activities.....                  (389,861)                1,223,253
                                                                                ------------             -------------

Net decrease in cash and cash equivalents......................                   (4,433,497)               (1,300,440)

Cash and cash equivalents at beginning of year.................                    5,437,350                 1,367,566
                                                                                ------------             -------------

Cash and cash equivalents at end of period.....................                 $  1,003,853             $      67,126
                                                                                ============             =============
</TABLE>

   See accompanying notes to the Condensed Consolidated Financial Statements.

                                       5
<PAGE>
                         QUERYOBJECT SYSTEMS CORPORATION
                     (formerly CrossZ Software 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 for the year ended December 31, 1997. The condensed  consolidated
results of  operations  for the period  ended June 30, 1998 are not  necessarily
indicative  of the results to be expected for any  subsequent  quarter,  for the
entire fiscal year ending December 31, 1998, or for any future period.

         In May 1998,  the Company's  stockholders  approved an amendment to the
Company's  Certificate  of  Incorporation  changing  the name of the  Company to
"QueryObject Systems Corporation".

         In May 1998, the Company formed QueryObject Systems Corporation Ltd., a
wholly owned subsidiary based in the United Kingdom. The condensed  consolidated
financial statements include the accounts of the Company and its subsidiary. All
significant intercompany accounts and transactions have been eliminated.

         Certain  reclassifications  have been made to the  condensed  financial
statements  for the six  months  ended  June  30,  1997 to  conform  to the 1998
presentation.

2.       Initial Public Offering

         On November 20, 1997, the Company's  Initial Public Offering ("IPO") of
2,500,000 shares of common stock was consummated, which resulted in net proceeds
to the Company of  $12,469,574  before  repayment of certain  bridge and interim
financings,  including interest thereon, which totaled approximately $5,281,000.
As of the closing date of the IPO, all of the  Company's  outstanding  preferred
stock was converted into an aggregate of 1,697,313 shares of Common Stock.

3.       Net Loss Per Common Share

         The Company  adopted  Statement of Financial  Accounting  Standards No.
128,  "Earnings per Share"  ("SFAS 128")  beginning  with the  Company's  fourth
quarter of 1997.

         Basic net loss per common  share is computed  by dividing  net loss for
the period by the sum of the weighted  average  number of shares of common stock
issued and  outstanding  after  conversion of all  outstanding  preferred  stock
effected  contemporaneously with the IPO. All outstanding shares of Series A, B,
C and D Preferred Stock were converted as though such conversion occurred at the
beginning of the earliest  period  presented or the date of issuance in the case
of the Series D. Historical net loss per share has not been presented since such
amount  is not  deemed to be  meaningful  due to the  significant  change in the
Company's  capital  structure  resulting  from the IPO.


                                       6
<PAGE>
Options  and  warrants  to acquire  common  stock have not been  included in the
computation of net loss per share because to do so would have been  antidilutive
for the periods presented.

4.       Supplemental Cash Flow Information
<TABLE>
<CAPTION>

                                                                               Six Months Ended
                                                                                   June 30,
                                                                              1998               1997

<S>                                                                    <C>              <C>
Interest paid during the period................................        $     78,752     $       81,421
Schedule of non cash investing and financing  activities:
      Series D Preferred Stock, issued for dividends...........                  --            506,342
</TABLE>

5.       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.       Liquidity and Business Risks

         The Company has incurred operating losses since inception, and negative
cash flows from  operating  activities.  As of June 30, 1998, the Company had an
accumulated  deficit of  $30,194,980.  The Company  has had a limited  operating
history as a software product company and has not made significant  sales of its
products.  Therefore, revenues are difficult to predict. As previously reported,
the  Company   anticipated   that  cash  generated  from  operations   would  be
insufficient to satisfy the Company's liquidity requirements,  and therefore the
Company  is  seeking  to sell  additional  equity  securities  through a private
offering to "accredited investors." See "Management's Discussion and Analysis or
Plan of Operation Liquidity and Capital Resources".  To date, the Company has no
commitments,  agreements or understandings  with respect to the private offering
or any other additional financing and there can be no assurance that the Company
will be able to consummate the private  offering or any other  transaction.  Any
sale of additional equity  securities will result in additional  dilution to the
Company's stockholders.  The independent  accountants' report for the year ended
December 31, 1997 states that the Company's recurring losses from operations and
the Company's  negative cash flow from operating  activities  raise  substantial
doubt about the Company's ability to continue as a going concern.

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 for the year ended December 31, 1997.


                                       7
<PAGE>
         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  commenced  operations  in  February  1989,  and  to  date
substantially  all of its revenues  have been derived  from  providing  contract
services to customers using its proprietary business intelligence technology. In
the third quarter of 1996, the Company shifted its focus to commercializing  its
proprietary  business  intelligence  technology and most of its activities since
then have been  devoted  to  research  and  development,  recruiting  personnel,
raising   capital,   and   developing  a  sales  and   marketing   strategy  and
infrastructure.  Accordingly,  the Company has a limited  operating history as a
software  product  company and has made only  limited  sales of its  QueryObject
System.  The  Company's  future  financial  performance  will  depend  upon  the
successful customer acceptance of QueryObject System.

         To date, the Company has incurred  substantial  losses from operations,
and at June 30, 1998 had an accumulated  deficit of  $30,194,980.  The Company's
operations and activities have been primarily funded through sales of equity and
debt  securities,  including  the closing of the IPO on November 25,  1997.  The
Company expects to incur substantial operating expenses in the future to support
its  product  development  efforts,   establish  and  expand  its  domestic  and
international sales and marketing capabilities,  including recruiting additional
indirect channel  partners,  and support and expand its technical and management
personnel and organization.

In November  1997,  the Company began  implementation  of  full-scale  marketing
activity  for  QueryObject   System.   QueryObject  System  previously  required
additional consulting services to implement and was promoted selectively through
the direct sales  channel,  at several  industry  trade shows,  and to potential
business  partners.  The  current  release of  QueryObject  System  has  reduced
consulting  requirements  and is capable of running on additional UNIX operating
systems and the Windows NT  operating  system.  The Company  intends to increase
promotional activity, including increased trade show and partnering activity and
public relations.  The Company markets and sells QueryObject  System through its
direct sales force as well as through indirect channel partners such as Original
Equipment Manufacturers ("OEMs") and Value Added Resellers ("VARs"). The Company
anticipates  that sales  through  indirect  channel  partners  will be harder to
forecast  and will  most  likely  have  lower  gross  margins.  There  can be no
assurance that the Company will be successful in developing additional products,
in marketing and selling its products,  or that such products will achieve broad
market  acceptance.  The  Company's  inability  to develop  its  products  or to
establish and expand its relationships with indirect channel partners would have
a material  adverse effect on the Company's  business,  financial  condition and
results of operations.

         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.  In instances where a
significant vendor obligation exists,  revenue recognition is delayed until such
obligation  has been  satisfied.  Allowances  for estimated  future  returns are
provided  for  upon  shipment.  It is  anticipated  that in the near  term,  the
Company's  revenues  from sales of products  will be difficult to predict due to
the discretionary  nature of business data delivery


                                       8
<PAGE>
software  purchases  and the variable  length of the sales cycle with respect to
new product  introductions.  Further,  although the Company's  product line will
include   products  with  sales  prices  from  $7,500  to  over  $250,000,   the
preponderance of its revenues is expected to be derived from products with sales
prices  from  $60,000 to  $160,000.  As a result,  the timing of the receipt and
shipment  of a single  order  can have a  significant  impact  on the  Company's
revenues, results of operations and cash flows for a particular period.

Results of Operations

         The following table sets forth certain items in the Company's condensed
consolidated  statement of operations  for the three and six month periods ended
June 30, 1998 and 1997 ($ in thousands):
<TABLE>
<CAPTION>

                                                                       Three Months Ended             Six Months Ended
                                                                            June 30,                      June 30,
                                                                      1998            1997            1998          1997

<S>                                                                <C>             <C>           <C>            <C>
Revenues
      Software licenses......................................      $       60      $    399      $     135      $     399
      Services and maintenance...............................              24            81             61             96
                                                                   ----------      --------      ---------     ----------
         Total revenues......................................              84           480            196            495
                                                                   ----------      --------      ---------     ----------

Cost of revenues
      Software licenses......................................               1             6              1              6
      Services and maintenance...............................              21            51             46             54
                                                                   ----------      --------      ---------     ----------
         Total cost of revenues..............................              22            57             47             60
                                                                   ----------      --------      ---------     ----------
Gross profit.................................................              62           423            149            435
                                                                   ----------      --------      ---------     ----------

Operating expenses
      Sales and marketing....................................           1,141           987          2,469          2,061
      Research and development...............................             615           662          1,181          1,198
      General and administrative.............................             401           324            851            609
                                                                   ----------      --------      ---------     ----------
         Total operating expenses............................           2,127         1,973          4,501         (3,868)
                                                                   ----------      --------      ---------     ----------

Loss from operations.........................................          (2,095)       (1,550)        (4,352)        (3,433)

  Interest income............................................              38             8            101             27
  Interest expense...........................................             (35)          (58)           (77)          (102)
  Other income...............................................              --            --             --              1
                                                                   ----------      --------      ---------     ----------
Net loss.....................................................      $   (2,092)     $ (1,600)     $  (4,328)    $   (3,507)
                                                                   ==========      ========      =========     ==========
</TABLE>

Revenues

         The  Company's  license  revenues  have been  generated  from  sales of
QueryObject  System.  Service  revenues  have been  generated  from fees paid by
customers on a project or contract  basis for data analysis by the Company using
its  proprietary  software,  and are recognized  over the term of the respective
agreements.  Maintenance revenues consist of ongoing support and product updates
and are  recognized  ratably over the term of the  contract,  which is typically
twelve months.


                                       9
<PAGE>
         Total  revenues  decreased by $396,000,  or 83%,  from  $480,000 in the
second  quarter of 1997 to $84,000 in the second  quarter of 1998. For the first
six months, total revenues decreased by $299,000,  or 60%, from $495,000 in 1997
to $196,000 in 1998. These decreases were primarily due to a decrease in license
revenues in the 1998 periods as compared to 1997. The Company  recorded  license
revenue  from  the  sale of one  license  in each of the two  quarters  in 1998,
whereas the Company recorded license revenue from the sale of one license in the
second quarter of 1997. However,  the license sold in the second quarter of 1997
was a multi-platform sale pursuant to a master reseller agreement, and therefore
was priced at a higher rate than single platform sales.  Service and maintenance
revenue decreased by $57,000, or 70%, from $81,000 in the second quarter of 1997
to $24,000 in the second quarter of 1998. For the first six months,  service and
maintenance  revenue  decreased  by  $35,000,  or 36%,  from  $96,000 in 1997 to
$61,000 in 1998.  These  decreases  were  primarily  due to the  curtailment  of
service-based engagements.

Cost of Revenues

         Cost  of  software  license  revenues  consists  primarily  of  product
packaging, documentation and production costs. Cost of software license revenues
as a percentage of software  license  revenues was 1.3% and 1.1%,  respectively,
for the three month and six month  periods ended June 30, 1998,  which  resulted
from the sale of one license in each quarter of 1998.  Cost of software  license
revenues as a  percentage  of software  license  revenues  was 1.5% for both the
three month and six month periods ended June 30, 1997,  which  resulted from the
sale of one license in the second quarter of 1997.

         Cost of services and maintenance revenues consist primarily of customer
support  costs and direct costs  associated  with  providing  services.  Cost of
services and  maintenance  revenues as a percentage of services and  maintenance
revenues were 87.5% and 75.2%,  respectively,  for the three month and six month
periods  ended June 30,  1998.  Cost of services and  maintenance  revenues as a
percentage  of  services  and   maintenance   revenues  were  63.0%  and  56.8%,
respectively, for the three month and six month periods ended June 30, 1997. The
higher  percentages  during  the  1998  periods  were  primarily  due to  higher
personnel costs necessary to service an expanded customer base.

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,  as well as  related  recruiting
costs,  public relations,  advertising  related costs,  collateral  material and
trade shows. Sales and marketing  expenses  increased by $154,000,  or 16%, from
$987,000 in the second  quarter of 1997 to $1,141,000  in the second  quarter of
1998.  For the first six  months,  sales and  marketing  expenses  increased  by
$407,000, or 20%, from $2,061,000 in 1997 to $2,468,000 in 1998. These increases
were primarily due to increased  personnel costs, and increased costs associated
with public relations, collateral material and trade shows. These increases were
offset,  in part, by reduced  recruiting costs in the 1998 periods.  The Company
believes that its sales and marketing expenses will increase in absolute dollars
as the Company continues to increase promotion and other marketing expenses.


                                       10
<PAGE>
         Research and  Development.  Research and development  expenses  consist
primarily of salaries and other personnel  related  expenses,  recruiting  costs
associated  with  the  hiring  of  additional  software  engineers  and  quality
assurance personnel, consultant costs and depreciation of development equipment.
Research and development  expenses decreased by $47,000, or 7%, from $662,000 in
the second  quarter of 1997 to $615,000 in the second  quarter of 1998.  For the
first six months, research and development expenses decreased by $17,000, or 1%,
from  $1,198,000 in 1997 to $1,181,000 in 1998.  These  decreases were primarily
due to lower  consulting  costs and lower  recruiting costs as compared to 1997.
The Company believes that a significant level of investment for product research
and development is required to remain competitive and, accordingly,  the Company
anticipates  that it will  continue to devote  substantial  resources to product
research and development and that these costs will increase in absolute dollars.
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,  MIS,  human  resources  and general
management,  as  well  as  insurance  and  professional  expenses.  General  and
administrative  expenses  increased  by $77,000,  or 24%,  from  $324,000 in the
second  quarter of 1997 to $401,000 in the second quarter of 1998. For the first
six months,  general and administrative  expenses increased by $243,000, or 40%,
from $608,000 in 1997 to $851,000 in 1998. These increases were primarily due to
higher consulting fees, increased  professional expenses associated with being a
public company and increased  personnel related costs and benefits.  The Company
believes that its general and administrative  expenses will increase in absolute
dollars  as it  incurs  additional  costs  related  to being a  public  company,
including investor relations programs.

Interest Income and Interest Expense

         Interest income represents income earned on the Company's cash and cash
equivalents.  Interest income increased by $30,000,  or 375%, from $8,000 in the
second  quarter of 1997 to $38,000 in the second  quarter of 1998. For the first
six months,  interest income increased by $74,000, or 274%, from $27,000 in 1997
to $101,000 in 1998.  These  increases  were  primarily due to a higher level of
cash and cash equivalents on deposit during 1998.

         Interest expense  generally  represents  charges relating to the H.C.C.
Financial Services Loan Agreement (the "Loan Agreement") and interest expense on
capital  equipment leases.  Interest expense decreased by $22,000,  or 38%, from
$58,000 in the second  quarter of 1997 to $36,000 in the second quarter of 1998.
For the first six months,  interest expense  decreased by $25,000,  or 24%, from
$102,000  in 1997 to $77,000 in 1998.  These  decreases  were  primarily  due to
reduced outstanding borrowings under the Loan Agreement.

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 1997 and 1996 and consequently  paid no
federal or state  income  taxes.  At  December  31,  1997,  the  Company had net
operating  losses and  research and  experimental  tax credit  carryforwards  of
$22,000,000  and  $144,000,  respectively,  available to offset  future  federal
taxable income and tax. These net operating loss carryforwards expire at various
dates through 2012.

                                       11

<PAGE>
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  ability to utilize its
NOL  carryforward.  Moreover,  while such loss  carryforwards  are  available to
offset  future  taxable  income of the  Company,  the Company does not expect to
generate sufficient taxable income so as to utilize all or a substantial portion
of such loss carryforwards prior to their expiration.

Liquidity and Capital Resources

         On November 25, 1997, the Company consummated the IPO. The Company sold
2,500,000  shares  of  Common  Stock  in  the  IPO  and  received  approximately
$12,470,000  of cash,  net of  underwriting  discounts,  commissions  and  other
offering costs. The Company  immediately repaid $5,100,000 plus accrued interest
due on Bridge and Interim  Financings  payable.  Upon completion of the IPO, all
outstanding  shares  of  preferred  stock (a total  of  approximately  1,697,000
shares) were converted into shares of Common Stock.

                  The IPO prospectus  indicated  that the Company  believed that
the  proceeds  of the  IPO  together  with  then  existing  resources  and  cash
anticipated to be generated from operations,  would be sufficient to satisfy the
Company's cash  requirements  for at least 14 months after the completion of the
IPO.  However,  as of June 30, 1998, the Company had negative working capital of
$466,000. The variance between the Company's expectations at the time of the IPO
and the  Company's  current  analysis of its cash  position is primarily  due to
lower than expected sales of the Company's  products.  The Board of Directors of
the Company has considered various means of procuring  additional  financing and
has determined that a private  offering of the Company's  securities would be in
the best  interests of the Company.  Accordingly,  the Company is  undertaking a
private  offering  which  currently  contemplates  the  issuance of a minimum of
2,000,000  shares of Common  Stock and a maximum of  4,000,000  shares of Common
Stock and which may also include the grant of Common Stock Purchase  Warrants to
the  purchasers  in the  private  offering.  The  Company  anticipates  that the
offering  price will be at a discount to the closing sale price of the Company's
Common Stock on the day immediately preceding the initial closing of the private
placement.  On August 13,  1998,  the  closing sale price of the Common Stock of
the  Company  on the  Nasdaq  SmallCap  Market  was  $2 3/4  per share.  The net
proceeds of the private offering will be used for sales and marketing,  research
and development, and general working capital purposes in the proportions of 50%,
30% and 20%, respectively.  To date, the Company has no commitments,  agreements
or understandings  with respect to such private offering or any other additional
financing and there can be no assurance as to the terms of such private offering
or that the Company  will be able to  consummate  such  private  offering or any
other  financing  transaction.  If the  Company is unable to effect the  private
offering, or obtain other short-term  financing,  the Company will lack the cash
necessary to continue  operating.  The sale of additional equity securities will
result in additional dilution to the Company's stockholders.

                  Under Rule 4310(c)(25)(H)(i) of the Nasdaq Stock Market ("Rule
4310(c)(25)(H)(i)"),  the Company is required to obtain stockholder  approval in
connection with any transaction, other than a public offering, that involves the
issuance  by the  Company of Common  Stock (or  securities  convertible  into or
exercisable for Common Stock) that equals 20% or more of the Common Stock of the
Company  outstanding  before the issuance of such  securities,  at a price below
market  value.  On August  12,  1998,  in order to effect  compliance  with Rule
4310(c)(25)(H)(i)  and enable the Company to consummate a private offering,  the
Company's stockholders approved a proposal that authorizes the Board of


                                       12

<PAGE>
Directors of the Company to  determine  (i) the number of shares of Common Stock
that will be issued in a private  offering  (which  may or may not exceed 20% or
more of the Common Stock outstanding); (ii) the purchase price of such shares of
Common Stock and (iii) whether  Warrants will be issued in the private  offering
and, if so, the terms and conditions of the Warrants.

         Prior to the IPO, the Company funded its operations  primarily  through
sales  of  preferred  equity   securities,   with  net  proceeds   therefrom  of
approximately  $14,000,000 and, to a lesser extent,  through interim  financings
and a bridge  financing,  through capital and operating  equipment  leases,  the
issuance  of notes  payable and the Loan  Agreement.  As of June 30,  1998,  the
Company had $1,004,000 in cash and cash equivalents.  Net cash used in operating
activities  was  $4,170,000  and $2,290,000 for the six months ended in 1998 and
1997,  respectively.  For  1998,  net  cash  used in  operating  activities  was
primarily  attributable  to a net  loss of  $4,328,000,  less  depreciation  and
amortization  of $205,000.  For 1997, net cash used in operating  activities was
primarily  attributable  to a net  loss  of  $3,507,000  less  depreciation  and
amortization of $97,000 and an increase in accounts payable and accrued expenses
and a decrease in accounts receivable totaling $1,072,000.  Net cash provided by
financing  activities of $1,223,000 in 1997 resulted  primarily  from an Interim
Financing  Note  payable to a  stockholder  and the  proceeds of  sale-leaseback
transactions.  In  addition to the IPO,  since  January 1, 1997,  the  Company's
principal sources of capital have been through several bridge financings whereby
the Company received  approximately  $6,100,000 in proceeds.  The Company repaid
promissory notes issued in connection with such bridge  financings either out of
proceeds from the IPO or out of proceeds from a bridge financing  consummated in
July 1997.

         The Company does not currently  have a line of credit with a commercial
bank.  Under the Loan Agreement,  the Company has outstanding  borrowings in the
aggregate principal amount of approximately  $565,000, such indebtedness secured
by a security  interest in and lien on all of the Company's  assets. An Addendum
to the Loan  Agreement  provides that H.C.C.,  the lender  thereunder,  will not
demand  payment under the Loan Agreement (and requires the Company to maintain a
restricted Certificate of Deposit which was in the amount of $598,000 as of June
30, 1998), until the earlier of March 31, 1998, a material breach by the Company
under the  Addendum or an event of default  under the Loan  Agreement.  In April
1998,  the Company began  repaying the  indebtedness  under the Loan  Agreement,
utilizing the funds on deposit in the  restricted  Certificate  of Deposit.  The
indebtedness  is being  repaid at the rate of 10% of the  outstanding  month end
balance each month, for twelve  consecutive  months, to be followed by a payment
in full of the remaining outstanding balance.

         As of June 30, 1998, the Company's principal  commitments  consisted of
obligations  under  operating  and capital  leases  (payable  through  2001) and
employment agreements. Pursuant to employment agreements with executive officers
of the  Company,  the  Company is  obligated  to pay  $936,000  and  $460,000 in
salaries for the years ended December 31, 1998 and 1999, respectively.

Year 2000 Compliance

         The Company has assessed and continues to assess the impact of the Year
2000 issue on its  operations,  including the development of cost estimates for,
and the extent of programming changes required to address,  this issue. Although
final cost estimates have yet to be determined,  the Company  expects that these
Year 2000 costs will not be material to the Company's  expenses  during 1998 and
1999.  The Company does not currently have any  information  concerning the Year
2000 compliance status of its suppliers and customers.  In the event that any of
the  Company's  significant  suppliers or customers  does not  successfully  and
timely achieve Year 2000 compliance,  the Company's business or operations could
be adversely affected.

                                       13
<PAGE>
Risk Factors That May Affect Future Results

         The Company's  business  involves a number of risks,  some of which are
beyond the Company's control. The following discussion  highlights some of these
risks and should be read in conjunction  with "Risk Factors" in Part I, Item 1 -
Business,  included in the  Company's  Annual Report on Form 10-KSB for the year
ended December 31, 1997.

         Negative  Working  Capital;  Need For Additional  Funding.  At June 30,
1998, the Company had negative working capital of $466,135.  The Company has had
a limited  operating  history as a  software  product  company  and has not made
significant sales of its products. Therefore, revenues are difficult to predict.
As  previously  reported,  the  Company  anticipated  that cash  generated  from
operations   would  be   insufficient   to  satisfy  the   Company's   liquidity
requirements,  and as a result, the Company is seeking to sell additional equity
securities.  See  "Management's  Discussion  and Analysis or Plan of Operation -
Liquidity and Capital  Resources." If the Company is unable to close the private
offering,  or obtain other short-term financing,  the Company will lack the cash
necessary  to continue  operating.  To date,  the  Company  has no  commitments,
agreements or understandings with respect to such additional financing and there
can be no  assurance  that  the  Company  will be able to  consummate  any  such
transaction.  The sale of additional equity securities will result in additional
dilution to the Company's stockholders.

         Accumulated Deficit;  Historical and Projected Future Operating Losses;
Going Concern Qualification in the Independent  Accountants' Report. At June 30,
1998,  the Company had an  accumulated  deficit of  $30,194,980.  For the fiscal
years ended  December  31, 1997 and 1996,  and for the six months ended June 30,
1998, the Company incurred net losses of $10,563,484, $4,917,935 and $4,327,994,
respectively.  In  addition,  the Company  has  incurred a net loss in each year
during which it has operated,  and its  operations to date have been financed in
significant part through sales of both equity and debt securities. The Company's
expense levels are high and revenues are difficult to predict.  As a result, the
Company  expects to  continue  to incur net losses for the  foreseeable  future.
There can be no assurance that significant  revenues or profitability  will ever
be achieved or, if they are achieved, that they can be sustained or increased on
a quarterly or annual basis in the future.  Future operating results will depend
on many factors,  including the demand for the Company's products,  the level of
product and price  competition,  the  Company's  success in expanding its direct
sales force and indirect  distribution  channels,  the ability of the Company to
develop  and  market  products  and to  control  costs,  the  percentage  of the
Company's  revenues  derived from indirect channel partners and general economic
conditions.  The independent accountants' report for the year ended December 31,
1997  states  that  the  Company's  recurring  losses  from  operations  and the
Company's  negative cash flow from operating  activities raise substantial doubt
about the Company's ability to continue as a going concern.

         Lack of Substantial Revenue; Limited Operating History. The Company has
had a limited  operating  history as a software product company and has not made
significant  sales of its products.  Total  revenues for the year ended December
31,  1997  and for the six  months  ended  June 30,  1998  were  $1,012,159  and
$196,026, respectively. Total revenues for the periods noted above included four
sales and two sales,  respectively,  of QueryObject  System.  Prior to 1997, the
Company's  revenues were derived  primarily from contract  services  provided to
customers using the Company's proprietary data analysis technology.  The Company
has discontinued this business.


                                       14
<PAGE>
         Dependence   Upon   New   Products;    Uncertain   Market   Acceptance.
Substantially  all of the  Company's  revenues  for the  foreseeable  future are
expected to be derived from sales of QueryObject System. Between January 1, 1995
and June 30, 1998, the Company realized  software product revenue from only nine
QueryObject   System   installations,   one  of  which  (sold  in  1995)  was  a
pre-production  beta  version.  Further,  the Company has recently  commenced an
integrated  marketing  effort for its products.  The Company's  future financial
performance will depend upon the successful introduction and customer acceptance
of QueryObject  System and the  development of new and enhanced  versions of the
product.  The failure to achieve broad market  acceptance of QueryObject  System
will have a material  adverse  effect on the  business,  operating  results  and
financial condition of the Company.

         Potentially Limited Trading Market; Possible Volatility of Stock Price.
The  Common  Stock is listed on the Nasdaq  SmallCap  Market  ("Nasdaq").  Under
recently  implemented  Nasdaq rules, in order for the Company to remain eligible
for listing on Nasdaq,  (i) the  Company's  Common Stock must have a minimum bid
price of $1.00,  (ii) the  Company  must have  minimum  tangible  net  assets of
$2,000,000 or a market  capitalization  of $35,000,000 or net income of $500,000
in two of the three prior  years,  (iii) the Company must have a public float of
at least  500,000  shares  with a market  value of at least  $1,000,000  and the
Common  Stock must have at least two  market  makers and be held of record by at
least 300  stockholders.  As of June 30,  1998,  the Company had $281,720 in net
tangible  assets.  The Company  believes that without  additional  financing (of
which there can be no  assurance),  the Company will  continue to have less than
$2,000,000 in net tangible assets. The failure to meet the maintenance  criteria
in the  future  may  result in the Common  Stock no longer  being  eligible  for
quotation on Nasdaq and trading, if any, of the Common Stock would thereafter be
conducted  on the OTC  Bulletin  Board.  As a result of such  ineligibility  for
quotations,  it may be more  difficult for investors to dispose of, or to obtain
accurate quotations as to the market value of, the Common Stock.

         The   regulations   of   the   Securities   and   Exchange   Commission
("Commission")  promulgated  under  the  Securities  Exchange  Act of  1934,  as
amended,  require additional disclosure relating to the market for penny stocks.
Commission  regulations  generally define a penny stock to be an equity security
that has a market  price of less  than  $5.00  per  share,  subject  to  certain
exceptions.  A  disclosure  schedule  explaining  the penny stock market and the
risks  associated  therewith  is required  to be  delivered  to a purchaser  and
various sales practice requirements are imposed on broker-dealers who sell penny
stocks to persons  other than  established  customers and  accredited  investors
(generally  institutions).  In  addition,  the  broker-dealer  must  provide the
customer  with  current  bid and  offer  quotations  for the  penny  stock,  the
compensation  of the  broker-dealer  and its  salesperson in the transaction and
monthly account  statements showing the market value of each penny stock held in
the  customer's  account.  If the  Company's  securities  become  subject to the
regulations  applicable to penny stocks,  the market liquidity for the Company's
securities  could be severely  affected.  In such an event,  the  regulations on
penny stocks  could limit the ability of  broker-dealers  to sell the  Company's
securities  and thus the ability of purchasers  of the  Company's  securities to
sell their  securities  in the  secondary  market.  In the  absence of an active
trading  market,   holders  of  the  Common  Stock  may  experience  substantial
difficulty in selling their securities.

         The  trading  price of the  Company's  Common  Stock is  expected to be
subject to  significant  fluctuations  in response to  variations  in  quarterly
operating results,  changes in analysts' earnings estimates,  general conditions
in the computer  software  industry and other  factors.  In addition,  the


                                       15
<PAGE>
stock market is subject to price and volume  fluctuations that affect the market
prices for companies and that are often unrelated to operating performance.

         Dependence on Significant Customers. For the fiscal year ended December
31, 1997 and for the six months ended June 30, 1998, one customer in each period
accounted for 65% and 71%,  respectively,  of the Company's total revenues.  The
Company does not know at this time if  significant  future  revenues  from these
customers will occur.

         Potential  Fluctuations in Periodic Results. The Company's revenues may
be  subject  to  significant   variation  from  period  to  period  due  to  the
discretionary  nature of business  intelligence data delivery software purchases
and will be difficult to predict.  Further,  although the Company's product line
will  include  products  with sales  prices  from $7,500 to over  $250,000,  the
majority of its  revenues is expected  to be derived  from  products  with sales
prices  from  $60,000 to  $160,000.  As a result,  the timing of the receipt and
shipment  of a single  order  can have a  significant  impact  on the  Company's
revenues and results of operations for a particular  period. It is also expected
that for the foreseeable  future a relatively small number of customers and VARs
will account for a significant percentage of the Company's revenues. The Company
anticipates that product revenues in any quarter will be substantially dependent
on orders  booked  and  shipped in that  quarter,  and  revenues  for any future
quarter  will not be  predictable  with any  significant  degree  of  certainty.
Product  revenues are also difficult to forecast because the market for business
intelligence  software  products is rapidly  evolving,  and the Company's  sales
cycle may vary substantially  with each customer.  As the Company matures in its
product  releases,  it is anticipated that the Company will operate with limited
order backlog  because its software  products will typically be shipped  shortly
after orders are received.

Part II.          OTHER INFORMATION

Item 2.  Changes in Securities and Use of Proceeds

         On November 19, 1997 the  Commission  declared  effective the Company's
Registration Statement on Form SB-2 (File No. 333-34667) relating to the initial
public  offering  ("IPO") of 2,500,000  shares of common stock,  $.001 par value
(the "Common Stock") of the Company at a price per share of $6.00. Subsequent to
the information  provided in the Company's  Annual Report on Form 10-KSB for the
year ended  December  31,  1997,  the  Company  has used  proceeds of the IPO as
follows;  $2,138,000 has been used to fund the Company's  integrated  full scale
sales and marketing  activities and to expand its sales and marketing activities
both domestically and internationally, $1,108,000 has been used for research and
development  including  enhancements to existing features and development of new
functions for QueryObject  System and $1,040,000 of the proceeds of the IPO have
been used for working  capital and general  corporate  purposes.  The  remaining
amount of the proceeds from the IPO, $1,004,000,  have been invested temporarily
in investment grade, short-term, interest bearing instruments.

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

         At the annual meeting of  stockholders  of the Company on May 27, 1998,
the  stockholders  (i) elected  five  members of the Board of Directors to serve
until the next  annual  meeting,  (ii)  amended  the  Company's


                                       16
<PAGE>

Certificate  of  Incorporation  to change  the  Company's  name to  "QueryObject
Systems Corporation", and (iii) ratified the appointment of Price Waterhouse LLP
as the Company's independent public accounts for year ending December 31, 1998.

         The vote for nominated directors was as follows:

            Nominee              For             Withhold

            Alan W. Kaufman      3,538,295       1,300
            Andre Szykier        3,538,295       1,300
            Rino Bergonzi        3,538,295       1,300
            Irwin Jacobs         3,538,295       1,300
            Amy Newmark          3,538,295       1,300

         The vote for amending the Certificate of Incorporation was as follows:

               For                  Against                    Abstain

            3,534,795                3,300                      1,500

         The vote for Ratifying the  Appointment of Price  Waterhouse LLP was as
follows:

               For                  Against                    Abstain

            3,538,595                1,000                         --

Item 5.  Other Information

           Pursuant to recent amendments to the proxy rules under the Securities
Exchange Act of 1934, as amended,  the Company's  stockholders are notified that
the deadline for providing the Company timely notice of any stockholder proposal
to be  submitted  outside of the Rule 14a-8  process  for  consideration  at the
Company's 1999 Annual  Meeting of  Stockholders  (the "Annual  Meeting") will be
March 12, 1999. As to all such matters which the Company does not have notice on
or prior to March 12, 1999, discretionary  authorization shall be granted to the
designated persons in the Company's proxy statement for the Annual Meeting.

Item 6.  Exhibits and Reports on Form 8-K

         (a)  Exhibits

               Statement of Computation of Net Income Per Share (Exhibit 11.1)
               Financial Data Schedule (Exhibit 27.1)

         (b)   Reports of Form 8-K

               No Reports on Form 8-K were filed  during the quarter  ended June
30, 1998.


                                       17
<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.



Dated:   August 13, 1998                 QUERYOBJECT SYSTEMS CORPORATION



                                    By:  /s/ Daniel M. Pess
                                         --------------------------------------
                                         Senior Vice President and
                                         Chief Financial Officer
                                         (Duly Authorized Officer and Principal
                                          Financial Officer)



                                       18