`================================================================================
                       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 March 31, 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 May 1, 2001  there were  21,972,768  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 March 31, 2001 (unaudited)..................................3

             Condensed Consolidated Statements of Operations
             For the three months ended March 31, 2001 and 2000 (unaudited)....4

             Condensed Consolidated Statements of Cash Flows
             For the three months ended March 31, 2001 and 2000 (unaudited)....5

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

Item 2.      Management's Discussion and Analysis or Plan of Operation.........9

PART II.     OTHER INFORMATION

Item 2.      Changes in Securities and Use of Proceeds........................19

Item 4.      Submission of Matters to a Vote of Security Holders..............19

Item 6.      Exhibits and Reports on Form 8-K.................................19

SIGNATURES....................................................................20




                                       2

PART I.

FINANCIAL INFORMATION

ITEM 1.      FINANCIAL STATEMENTS

                         QUERYOBJECT SYSTEMS CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEET
                                   (UNAUDITED)

                                                                                        March 31,
                                                                                          2001
ASSETS
Current assets
          Cash and cash equivalents                                                  $  1,278,938
          Accounts receivable, net of allowance for doubtful
                 accounts of $35,563                                                      183,249
          Prepaid expenses and other current assets                                       116,957
                                                                                     ------------

                       TOTAL CURRENT ASSETS                                             1,579,144

Property and equipment, net                                                             1,449,380
Deposits and other assets                                                                 108,051
                                                                                     ------------

                       TOTAL ASSETS                                                  $  3,136,575
                                                                                     ============

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
          Accounts payable                                                           $    568,788
          Accrued expenses                                                                512,579
          Deferred revenue                                                                121,081
          Deferred rent                                                                    37,890
          Capital lease obligations due within one year                                     5,270
                                                                                     ------------

                       TOTAL CURRENT LIABILITIES                                        1,245,608

Deferred rent                                                                             144,687
                                                                                     ------------

                       TOTAL LIABILITIES                                                1,390,295
                                                                                     ------------

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: 60,000,000 shares
                 authorized; 12,411,657 shares issued and outstanding                      37,235
          Additional paid-in-capital                                                   49,910,413
          Accumulated deficit                                                         (54,736,505)
                                                                                     ------------

                       TOTAL STOCKHOLDERS' DEFICIT                                     (4,788,857)
                                                                                     ------------

                       TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                   $  3,136,575
                                                                                     ============

     See accompanying Notes to Condensed Consolidated Financial Statements.



                                        3

                         QUERYOBJECT SYSTEMS CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)


                                                                 Three Months Ended March 31,
                                                                      2001            2000

Revenues
        Software licenses                                        $    105,105    $    273,800
        Services and maintenance                                      208,076          54,591
                                                                 ------------    ------------

                           TOTAL REVENUES                             313,181         328,391

Cost of revenues
        Software licenses                                               4,204          10,952
        Services and maintenance                                       36,297          20,426
                                                                 ------------    ------------

                           TOTAL COST OF REVENUES                      40,501          31,378
                                                                 ------------    ------------

Gross profit                                                          272,680         297,013
                                                                 ------------    ------------

Operating expenses
        Sales and marketing                                         2,315,885       1,409,759
        Research and development                                      814,041         526,889
        General and administrative                                    338,856         410,887
                                                                 ------------    ------------

                           TOTAL OPERATING EXPENSES                 3,468,782       2,347,535
                                                                 ------------    ------------

Loss from operations                                               (3,196,102)     (2,050,522)

Interest income                                                        32,072          65,385
Interest expense                                                       (3,150)         (5,889)
Other income (expense)                                                  9,088          (3,866)
                                                                 ------------    ------------

Net loss                                                         $ (3,158,092)   $ (1,994,892)
                                                                 ============    ============


Basic and diluted net loss per common share                      $       (.27)   $       (.24)
                                                                 ------------    ------------

Weighted average shares used in per share computation (Note 2)     11,546,101       8,313,372
                                                                   ==========       =========



     See accompanying Notes to Condensed Consolidated Financial Statements.


                                       4

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


                                                                  Three Months Ended
                                                               2001            2000

Cash flows from operating activities
    Net loss                                                $(3,158,092)   $(1,994,892)
    Adjustments to reconcile net loss to net cash used in
       operating activities
         Depreciation and amortization                          181,985        111,493
         Options issued for consulting services                 146,834        142,735
         Changes in operating assets and liabilities
            Accounts receivable, net                            262,639        230,295
            Prepaid expenses and other current assets            (2,738)       (17,100)
            Deposits and other assets                             1,428        (30,211)
            Accounts payable and accrued expenses               (83,817)      (233,641)
            Deferred rent                                        (9,497)        (2,438)
            Deferred revenue                                      1,033         54,493
                                                            -----------    -----------

            NET CASH USED IN OPERATING ACTIVITIES            (2,660,225)    (1,739,266)
                                                            -----------    -----------

Cash flows from investing activities
    Acquisitions of property and equipment                     (257,030)      (108,897)
                                                            -----------    -----------

            NET CASH USED IN INVESTING ACTIVITIES              (257,030)      (108,897)
                                                            -----------    -----------

Cash flows from financing activities
    Proceeds from issuance of common stock, net                 743,814           --
    Proceeds from exercise of common stock warrants                --        1,456,250
    Proceeds from exercise of common stock options                 --           46,919
    Payments of capital lease obligations                        (4,547)       (46,032)
                                                            -----------    -----------

            NET CASH PROVIDED BY FINANCING ACTIVITIES           739,267      1,457,137
                                                            -----------    -----------

Net decrease in cash and cash equivalents                    (2,177,988)      (391,026)

Cash and cash equivalents at beginning of year                3,456,926      4,488,854
                                                            -----------    -----------

Cash and cash equivalents at end of period                  $ 1,278,938    $ 4,097,828
                                                            ===========    ===========


     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 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 period ended March 31,
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
sum of 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.
Outstanding  options and warrants to purchase  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  incurred  operating  losses  since  inception,  has
incurred  negative cash flows from  operating  activities and had an accumulated
deficit of  $54,736,505  as of March 31,  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,  therefore, revenues are
difficult  to  predict.  It is  anticipated  that  the  Company's  cash and cash
equivalent  balance  at March 31,  2001,  after  giving  effect  to the  private
placement  described in Note 5 below, will not be sufficient to satisfy its cash
flow requirements until December 31, 2001. As a result, the Company will seek to
sell additional debt or equity  securities,  however,  there can be no assurance
that the Company would be successful in raising sufficient additional funds. The
sale of additional equity securities would result in additional  dilution to the
Company's stockholders.

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

            On February 7, 2001 the Company had the initial closing of a private
placement  (the  "2001  Private  Placement")  and  received  gross  proceeds  of
$1,230,000.  The Company sold  2,050,000  Units (the "2001 Units") at an initial
price of $.60 per Unit. Each 2001 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 2001
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 2001 Units. In addition,  the 2001
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 2001 Units.

            On April 13,  2001,  the Company  had the final  closing of the 2001
Private  Placement and received gross proceeds of $1,905,000 and net proceeds of
approximately  $1,625,000  from the sale of  7,055,556  2001 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  2001  Units to the
investors  in the  initial  closing.  In  addition,  the  exercise  price of the
redeemable common stock purchase warrants were reduced to $.485 per share.

            The  Company  granted  the  placement  agent  in  the  2001  Private
Placement an option to purchase  1,161,111 2001 Units and paid commissions and a
non-accountable expense allowance equal to 11% of the gross proceeds received by
the Company.



                                       7

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
month periods ended March 31, 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 for the year ended December 31, 2000.

                                                    Three Months Ended March 31,
                                                       2001             2000

Revenues
       Software sales and support                  $   145,781      $   328,391
       Application services                            167,400             --
                                                   -----------      -----------

                                                   $   313,181      $   328,391
                                                   -----------      -----------

Gross Profit
       Software sales and support                  $   126,612      $   297,013
       Application services                            146,068             --
                                                   -----------      -----------

                                                   $   272,680      $   297,013
                                                   -----------      -----------

Loss from operations
       Software sales and support                  $(2,382,674)     $(1,543,277)
       Application services                           (813,428)        (507,245)
                                                   -----------      -----------

                                                   $(3,196,102)     $(2,050,522)
                                                   -----------      -----------

Included in loss from operations
       Depreciation and amortization
            Software sales and support             $   123,494      $   111,199
            Application services                        58,491              294
                                                   -----------      -----------

                                                   $   181,985      $   111,493
                                                   ===========      ===========


            International sales were 35% and 13% of total revenues for the three
months ended March 31, 2001 and 2000, respectively.  Sales within the country of
Italy were 27% of total revenues for the three months ended March 31, 2001.



                                       8

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, 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  operates in two business  segments;  software sales and
support and application  services.  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 are provided by the Company's  subsidiary  IQO and include
design,  implementation and hosting services provided to third parties,  in some
cases  utilizing  the  QueryObject  technology.   While  the  Company  commenced
operations in February  1989, the Company has a limited  operating  history as a
software  product and  application  services  company and has made only  limited
sales of both its QUERYOBJECT SYSTEM and application services.

            During  April  2000,  the Company  began  significant  staffing  and
incurred  initial  product-related   expenses  and  general  and  administrative
expenses  with  respect  to IQO.  As of March  31,  2001,  IQO has 14  full-time
equivalent employees. Total expenses of IQO for the three months ended March 31,
2001 and for the year ended  December  31, 2000 were  $959,495  and  $3,358,467,
respectively.  IQO has developed and is  developing  applications  that capture,
store,  manage,  distribute  and  analyze  data for CRM  (Customer  Relationship
Management).  IQO's product,  CustomerView,  generated  $167,400 and $204,100 of
revenue for the three  months  ended March 31, 2001 and the year ended  December
31,  2000,  respectively.  IQO may also  resell  the  Company's  database,  data
streaming and data distribution technology to Internet based businesses.

            In April 2001, the Company decided to reduce its operating  expenses
in order to  conserve  cash.  As a result,  the  Company  reduced  its full time
employees by 32% and eliminated other expenses, which should result in an annual
savings of approximately $2,300,000 per year.

            To  date,   the  Company  has  incurred   substantial   losses  from
operations,  and at March 31, 2001, had an accumulated  deficit of  $54,736,505.
The Company  expects to incur  substantial  operating  expenses in the future to
support its product development efforts (including those of IQO),  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.



                                       9


            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 deferred until such
obligation  has been  satisfied.  Allowances  for estimated  future  returns are
provided for upon shipment.  Service revenues  consist  primarily of application
services,  that  includes  subscription  based  month  charges,   performed  for
customers on a project or contract basis and are recognized 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 months ended March
31, 2001 and 2000 ($ in thousands):



                                                         Three Months Ended
                                                             March 31,

                                                            2001           2000

REVENUES
            Software licenses                            $   105        $   274
            Services and maintenance                         208             54
                                                         -------        -------

            TOTAL REVENUES                                   313            328
                                                         -------        -------

Cost of revenues
            Software licenses                                  4             11
            Services and maintenance                          36             20
                                                         -------        -------

            TOTAL COST OF REVENUES                            40             31
                                                         -------        -------

GROSS PROFIT                                                 273            297
                                                         -------        -------

Operating expense
            Sales and marketing                            2,316          1,410
            Research and development                         814            527
            General and administrative                       339            411
                                                         -------        -------

            TOTAL OPERATING EXPENSES                       3,469          2,348
                                                         -------        -------

LOSS FROM OPERATIONS                                      (3,196)        (2,051)
       Interest income                                        32             65
       Interest expense                                       (3)            (6)
       Other income (expense)                                  9             (3)
                                                         -------        -------

NET LOSS                                                 $(3,158)       $(1,995)
                                                         -------        -------


                                       10


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  decreased by $15,000,  or 5%, from $328,000 for the
three  months  ended March 31, 2000  ("2000") to $313,000  for the three  months
ended March 31, 2001 ("2001").  License revenues decreased by $169,000,  or 62%,
from $274,000 in 2000 to $105,000 in 2001.  During 2001,  license  revenues were
derived from the sale of 2 licenses through a distribution partner, while during
2000 license  revenues were derived from the sale of 3 licenses sold on a direct
basis,  which resulted in higher average  revenue per license.  In January 2001,
the Company  changed  its direct  sales  model for  European  sales to a partner
distribution  model.  The  Company has closed its United  Kingdom  office and is
negotiating contracts with several European distributors.

            Services and  maintenance  revenue  increased by $154,000,  or 285%,
from $54,000 in 2000 to $208,000 in 2001. This increase was primarily the result
of IQO  application  service revenue in 2001,  comprised of  subscription  based
monthly charges to IQO customers.  Service and maintenance revenues are expected
to increase  as the Company  sells  additional  licenses  and as IQO expands its
client base.

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% in both 2001 and 2000.

            Cost of services  and  maintenance  revenues  consists  primarily of
customer  support costs and direct costs  associated with  application  services
provided by IQO.  Cost of  services  and  maintenance  revenues  decreased  as a
percentage of services and maintenance revenues from 37% in 2000 to 17% in 2001.
This  decrease  resulted  primarily  from lower 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  increased  by  $906,000,  or 64%,  from
$1,410,000 in 2000 to $2,316,000 in 2001,  primarily due to increased  personnel
related  costs,  including  marketing  and  sales  costs of IQO,  and a  general
increase in both  marketing  and  consulting  expenses of the Company.  In April
2001, the Company  implemented cost reductions that will decrease  marketing and
sales expenses for the immediate future.



                                       11

            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 increased by $287,000, or 54%, from $527,000 in 2000 to
$814,000 in 2001,  primarily due to increased  personnel related costs including
research and development  costs of IQO. The Company believes a significant level
of  investment  for  product  research  and  development  is  required to remain
competitive and, accordingly, the Company anticipates it will continue to devote
substantial  resources to product  research and development  (including those of
IQO) and that  these  costs may  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 and accounting, human resources
and general management, as well as insurance and professional expenses.  General
and administrative  expenses decreased by $72,000, or 18%, from $411,000 in 2000
to $339,000 in 2001,  primarily due to a reduction in professional  expenses and
bad debt expense.  The Company believes its general and administrative  expenses
(including those of IQO) may increase in absolute dollars.

INTEREST INCOME AND INTEREST EXPENSE

            Interest income  represents  income earned on the Company's cash and
cash equivalents.  Interest income decreased by $33,000, or 51%, from $65,000 in
2000 to  $32,000  in  2001,  primarily  due to a lower  level  of cash  and cash
equivalents on deposit during 2001.

            Interest expense generally  represents interest on capital equipment
leases.  Interest  expense  decreased by $3,000,  or 50%, from $6,000 in 2000 to
$3,000 in 2001,  primarily due to a lower  outstanding  balance on capital lease
obligations.

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
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.



                                       12


LIQUIDITY AND CAPITAL RESOURCES

            Since  January  1,  1999,  the  Company  has   consummated   several
financings to fund operations as follows:

            (a) In February and April, 2001,  respectively,  the Company had the
initial  closing and the final  closing  (the  "Closings")  of the 2001  Private
Placement.  The Company received net proceeds totaling approximately  $2,369,000
in the Closings,  after deducting expenses of the offering and the conversion of
loans payable to  stockholders  into 2001 Units.  The Company  issued a total of
11,611,111 shares of Common Stock and Warrants to purchase  23,222,222 shares of
Common  Stock.  See Note 5 of the  Notes  to  Condensed  Consolidated  Financial
Statements.

            (b) In April 2000,  IQO received  $6,534,993  in net proceeds from a
private  placement  of  Series A  Preferred  Stock  and  Common  Stock  Purchase
Warrants.

            (c) Between June and August 1999, the Company  received net proceeds
of $4,089,791 from a private placement of securities that have been converted or
exercised into an aggregate of 3,239,169 shares of Common Stock.

            (d) Between October 1998 and February 1999, the Company received net
proceeds of $3,995,000 (of which  $1,397,004 was received after January 1, 1999)
from two private  placements of securities that have been converted or exercised
into an aggregate of 4,834,103 shares of Common Stock.

            During the year ended  December 31,  1999,  the exercise of Warrants
granted  in the  private  placements  noted  in (c) and (d)  above  resulted  in
proceeds to the Company of  $5,213,908.  In January  2000,  the  exercise of the
remaining outstanding Warrants from such private placements resulted in proceeds
to the Company of $1,456,250.

            As of March 31, 2001,  the Company had  $1,278,938  in cash and cash
equivalents and working capital of $333,536.  The Company has incurred operating
losses  since  inception,  has  incurred  negative  cash  flows  from  operating
activities and had an  accumulated  deficit of $54,736,505 as of March 31, 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. It is
anticipated  that even with the  proceeds  from the  final  closing  of the 2001
Private  Placement the cash and cash equivalent  balance of the Company at March
31,  2001 will not be  sufficient  to satisfy its cash flow  requirements  until
December 31, 2001.  The Company  will seek  additional  financing so that it can
continue its  operations.  However,  there can be no assurance  that the Company
will be successful in raising  additional  funds. The sale of additional  equity
securities will result in additional dilution to the Company's stockholders. See
"Risk Factors That May Affect Future  Results -- We will need further  financing
to continue operations."

            Net cash used in operating  activities was $2,660,000 and $1,739,000
in 2001 and 2000, respectively.  For 2001, net cash used in operating activities
was primarily  attributable to a net loss of $3,158,000 reduced by a decrease in
accounts receivable of $263,000, depreciation and





                                       13


amortization of $182,000 and options issued for consulting services of $147,000.
For 2000, net cash used in operating activities was primarily  attributable to a
net loss of $1,995,000 reduced by a decrease in accounts receivable of $230,000,
less depreciation and amortization of $111,000 and options issued for consulting
services  of  $143,000.  This was  offset,  in part,  by a decrease  in accounts
payable  and accrued  expenses  of  $234,000.  Net cash  provided  by  financing
activities was $739,000 and $1,457,000 in 2001 and 2000, respectively. For 2001,
net cash provided by financing  activities  was primarily the result of the 2001
Private  Placement.  For 2000,  net cash  provided by financing  activities  was
primarily the result of 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 March 31, 2001,  the  Company's  principal  commitments
consisted of  obligations  under  operating  and capital  leases and  employment
agreements.  Pursuant to employment  agreements  with executive  officers of the
Company as of March 31,  2001,  the  Company's  remaining  obligation  is to pay
$450,000  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.

WE WILL NEED FURTHER FINANCING TO CONTINUE OUR OPERATIONS.

            We have had a limited  operating  history as a software  product and
application  services  company,  have not made significant sales of our products
and services and our revenues are difficult to predict.  Our total  revenues for
the three months ended March 31, 2001 and the year ended  December 31, 2000 were
$313,181 and $1,715,841,  respectively.  In February and April 2001, we received
net  proceeds  of  approximately  $2,369,000  from the 2001  Private  Placement.
However, given our continued operating losses, we anticipate that, even with the
proceeds from the 2001 Private  Placement,  our cash and cash equivalent balance
will be  insufficient to satisfy our cash flow  requirements  until December 31,
2001. Accordingly,  we will need additional financing to continue operations. We
cannot predict  whether we would be successful in raising  additional  funds. We
have  no  commitments,   agreements  or  understandings   regarding   additional
financings and we may be unable to obtain  additional  financing on satisfactory
terms or at all.

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 March 31, 2001, our accumulated deficit was $54,736,505.  For the
three  months  ended March 31, 2001 and the year ended  December  31,  2000,  we
incurred  net  losses  of  $3,158,092  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



                                       14


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 expect to incur net losses  for the  foreseeable  future.  We may
never achieve or sustain significant revenues or profitability on a quarterly or
annual  basis in the future.  Our future  operating  results will depend on many
factors, including:

            o  product demand
            o  product and price competition in our industry
            o  our success in expanding our direct sales force and  establishing
               indirect channel partners
            o  our ability to develop and market products that  keep  pace  with
               technological developments and emerging industry standards
            o  the percentage   of  our  revenues  that is derived from indirect
               channel partners o our ability to control costs

OUR  REVENUES  DEPEND  ON  SALES  OF  QUERYOBJECT   SYSTEM  AND  THE  SUCCESSFUL
DEVELOPMENT OF THE IQO APPLICATION  SERVICE  OFFERING.  WE ARE UNCERTAIN WHETHER
THERE WILL BE BROAD MARKET ACCEPTANCE OF THESE PRODUCTS.

            Substantially  all of our  revenue  for the  foreseeable  future  is
expected to be derived from sales of QUERYOBJECT SYSTEM and from our subsidiary,
IQO.  Through March 31, 2001, we had software  product  revenue from the sale of
only  48  QUERYOBJECT  SYSTEMS,   including  those  sold  pursuant  to  reseller
agreements  for the resellers' own use. Our future  financial  performance  will
depend upon customer acceptance of the QUERYOBJECT SYSTEM and the development of
new and enhanced versions of the product, such as the IQO service offering, that
meet an expanding  range of customer  requirements.  If we fail to achieve broad
market acceptance of QUERYOBJECT SYSTEM or fail to successfully  develop the IQO
or other service offerings and achieve broad market  acceptance,  we will not be
able to continue operating.

WE ARE  SEEKING TO DEVELOP  ADDITIONAL  STRATEGIC  RELATIONSHIPS  WITH  INDIRECT
CHANNEL  PARTNERS TO INCREASE SALES,  BUT WE MAY BE UNABLE TO ATTRACT  EFFECTIVE
PARTNERS AND WE WILL HAVE LOWER GROSS MARGINS FOR SALES THROUGH INDIRECT CHANNEL
PARTNERS.

            As part of our  sales  and  marketing  efforts,  we are  seeking  to
develop additional strategic  relationships with indirect channel partners, such
as original equipment  manufacturers and value-added resellers,  to increase the
number of our customers.  We currently are investing,  and intend to continue to
invest,  significant resources to develop indirect channel partners. Our results
of operations  will be adversely  affected if we are unable to attract  indirect
channel partners to market our products  effectively and provide timely and cost
effective customer support and service. If we successfully sell products through
these sales channels,  the lower unit prices we expect to receive for such sales
will result in our gross margins being lower than if we had sold those  products
through our direct sales force.



                                       15


WE ARE  DEPENDENT  ON A FEW  SIGNIFICANT  CUSTOMERS  AND THE  LOSS  OF A  SINGLE
CUSTOMER COULD ADVERSELY AFFECT OUR BUSINESS.

            For the three  months ended March 31, 2001 and the fiscal year ended
December 31, 2000, two customers and five customers accounted for 80% and 73% of
our total  revenues,  respectively.  We have no long-term  contracts with any of
these customers and we are unsure if we will realize significant future revenues
from any of them. We also expect for the foreseeable  future a relatively  small
number of customers  and  value-added  resellers  will account for a significant
percentage of our revenues.  The loss of any such customer would have a material
adverse effect on our operating results and financial condition.

WE ARE DEPENDENT ON A FEW KEY PERSONNEL AND WE NEED TO ATTRACT AND RETAIN HIGHLY
QUALIFIED TECHNICAL, SALES, MARKETING, DEVELOPMENT AND MANAGEMENT PERSONNEL.

            Our  future  performance   depends  in  significant  part  upon  the
continued service of key technical,  sales and senior management personnel.  The
loss of the services of one or more of our key employees, in particular,  Robert
Thompson, our Chief Executive Officer,  Joseph M. Valley, Jr., our new President
and Chief Operating  Officer,  and Daniel M. Pess, our Chief Financial  Officer,
could have a material  adverse  effect on our  business,  operating  results and
financial  condition.  We have  employment  agreements with Mr. Thompson and Mr.
Pess that expire in December  2001 and an employment  agreement  with Mr. Valley
that expires  October 2001. We are currently  negotiating  to extend the term of
the employment agreements of Messrs. Thompson, Pess and Valley. We are uncertain
whether  we will  be  successful  in  extending  any or all of  such  employment
agreements.

            Our  future  success  also  depends  on our  continuing  ability  to
attract,  train  and  retain  highly  qualified  technical,   sales,  marketing,
development and managerial personnel. Competition for such personnel is intense,
and we may be unable to retain key technical,  sales, development and managerial
employees or attract,  assimilate  or retain other highly  qualified  technical,
sales,  development and managerial  personnel in the future. If we are unable to
hire such  personnel on a timely  basis,  our  business,  operating  results and
financial condition could be materially adversely affected.

WE  LACK  PROPRIETARY  TECHNOLOGY  PROTECTION  OF  OUR  PRODUCTS  AND  MAY  RISK
INFRINGEMENT UPON TECHNOLOGY DEVELOPED BY OTHERS.

            We rely primarily on a combination of trade secrets, confidentiality
agreements and contractual provisions to protect our proprietary technology.  We
license  rather  than sell our  software  and  require  licensees  to enter into
license agreements that impose certain  restrictions on their ability to utilize
the software.  In addition,  we seek to avoid  disclosure of our trade  secrets,
including  but not  limited  to  requiring  those  persons  with  access  to our
proprietary  information to execute  confidentiality  agreements and restricting
access to our source code. These steps afford only limited protection.  While we
have applied for a patent for our Internet streaming  technology,  we are unable
to predict  whether we will receive such patent and we have no other  patents or
patent  applications  pending.  Despite our  efforts to protect our  proprietary
rights,  unauthorized  parties  may attempt to copy  aspects of our  products or
obtain and use information that we regard as proprietary.  Policing unauthorized
use of our products may be difficult and costly,  and software piracy may become
a persistent  problem.  In addition,  the laws of some




                                       16


foreign countries do not protect our proprietary rights to as great an extent as
the  laws of the  United  States.  We are  unable  to  predict  whether  we have
adequately protected our proprietary rights or if competitors will independently
develop the same technology.

            From time to time,  third parties may assert  patent,  copyright and
other  intellectual  property  claims  against  us. If we are  unable to license
protected  technology  that may be used in our products,  we could be prohibited
from manufacturing and marketing such products.  We also could incur substantial
costs to redesign our  products,  to defend any legal action taken against us or
to pay  damages  to any  infringed  party.  Litigation,  which  could  result in
substantial cost to and diversion of our resources,  may be necessary to enforce
our  other  intellectual  property  rights  or  to  defend  us  against  claimed
infringement of the rights of others.

OUR  INTERNATIONAL  SALES HAVE  DECLINED  SIGNIFICANTLY  AND WE MAY BE UNABLE TO
SUCCESSFULLY ESTABLISH FOREIGN OPERATIONS.

            Our  international  sales for the three  months ended March 31, 2001
and the fiscal year ended December 31, 2000, were  approximately  35% and 17% of
our total revenue, respectively. We have closed our office in the United Kingdom
and intend to pursue a partner  distribution  model  rather than a direct  sales
model.  We are unsure  whether this new approach  will enable us to increase our
international  sales. We anticipate that expanded  international  sales, if any,
will continue to be denominated in U.S. dollars. An increase in the value of the
U.S.  dollar  relative  to  foreign  currencies  could  make our  products  more
expensive  and,  therefore,  potentially  less  competitive  in  those  markets.
Additional  risks  inherent  in our  future  international  business  activities
generally include:

          o    unexpected changes in regulatory requirements
          o    tariffs and other trade barriers
          o    costs of localizing products for foreign countries
          o    longer accounts receivable payment cycles

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.


                                       17

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.




                                       18

PART II.    OTHER INFORMATION

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

            As described under "Management's  Discussion and Analysis or Plan of
Operation - Liquidity  and Capital  Resources,"  the Company  closed on the 2001
Private  Placement in February and April 2001. The sale of the securities in the
2001 Private  Placement was made pursuant to the exemption  contained in Section
4(2) of the Securities Act of 1933, as amended. EarlyBirdCapital,  Inc. acted as
the placement agent of the 2001 Private Placement. For more information relating
to the 2001 Private  Placement  (including  the exercise terms of the securities
issued),  please  see "Note 5 - Notes to the  Condensed  Consolidated  Financial
Statements."

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE SECURITY HOLDERS

            At a special  meeting  of  stockholders  of the  Company on March 2,
2001, the  stockholders  approved the issuance in a private  placement of Common
Stock and securities  exercisable for Common Stock representing more than 20% of
the number of issued and  outstanding  shares of Common  Stock.  The vote was as
follows:

                                                  Abstain and
          For           Against                 Broker Non-Votes

        5,427,361        49,370                        -0-


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

                 Reports on Form 8-K were filed on January 19, 2001 and
                 February 8, 2001, under Item 5. - Other Events.


                                       19

                                   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:  May 11, 2001    QUERYOBJECT SYSTEMS CORPORATION



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

                                       20`