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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                             ----------------------

                                   FORM 10-QSB


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

                  For the quarterly period ended June 30, 2001


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

                         Commission file number 1-13587


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

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


                        ONE EXPRESSWAY PLAZA - SUITE 208
                         ROSLYN HEIGHTS, NEW YORK 11577

                    (Address of principal executive offices)
                              --------------------

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


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

            As  of  August  1,  2001  there  were   21,972,768   shares  of  the
Registrant's common stock outstanding.

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

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







                         QUERYOBJECT SYSTEMS CORPORATION

                                   FORM 10-QSB

                                      INDEX




PART I.      FINANCIAL INFORMATION                                          PAGE
                                                                            ----

Item 1.      Financial Statements

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

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

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

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

Item 2.      Management's Discussion and Analysis or Plan of Operation......10

PART II.     OTHER INFORMATION

Item 2.      Changes in Securities and Use of Proceeds......................20

Item 4.      Submission of Matters to a Vote of Security Holders............20

Item 5.      Other Information..............................................21

Item 6.      Exhibits and Reports on Form 8-K...............................21

SIGNATURES                                                                  22

                                       2




PART I.

FINANCIAL INFORMATION

ITEM 1.      FINANCIAL STATEMENTS

                         QUERYOBJECT SYSTEMS CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEET
                                   (UNAUDITED)


                                                                               JUNE 30,
                                                                                2001
                                                                                ----
ASSETS
Current assets
          Cash and cash equivalents                                        $    330,884
          Accounts receivable, net of allowance for doubtful
                 accounts of $50,106                                            665,697
          Prepaid expenses and other current assets                             129,475
                                                                           ------------

                      TOTAL CURRENT ASSETS                                    1,126,056

Property and equipment, net                                                   1,291,134
Note receivable                                                                 150,000
Deposits and other assets                                                        99,256
                                                                           ------------

                      TOTAL ASSETS                                         $  2,666,446
                                                                           ------------

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
          Accounts payable                                                 $    328,677
          Accrued expenses                                                      493,163
          Deferred revenue                                                       76,516
          Deferred rent                                                          38,886
                                                                           ------------

                      TOTAL CURRENT LIABILITIES                                 937,242

Deferred rent                                                                   134,194
                                                                           ------------

                      TOTAL LIABILITIES                                       1,071,436
                                                                           ------------

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; 21,972,768 shares issued and outstanding            65,918
          Additional paid-in-capital                                         51,779,521
          Accumulated deficit                                               (56,785,566)
                                                                           ------------

                      TOTAL STOCKHOLDERS' DEFICIT                            (4,940,127)
                                                                           ------------

                      TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT          $  2,666,446
                                                                           ------------

     See accompanying Notes to Condensed Consolidated Financial Statements.

                                       3





                         QUERYOBJECT SYSTEMS CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

                                               THREE MONTHS ENDED JUNE 30,       SIX MONTHS ENDED JUNE 30,
                                                    2001             2000           2001             2000

Revenues
        Software licenses                     $    490,680    $    582,850    $    595,785    $    856,650
        Services and maintenance                   290,881         110,720         498,957         165,311
                                              ------------    ------------    ------------    ------------

                 TOTAL REVENUES                    781,561         693,570       1,094,742       1,021,961

Cost of revenues
        Software licenses                           19,627          23,820          23,831          34,772
        Services and maintenance                    60,453          19,358          96,750          39,784
                                              ------------    ------------    ------------    ------------

                 TOTAL COST OF REVENUES             80,080          43,178         120,581          74,556
                                              ------------    ------------    ------------    ------------

GROSS PROFIT                                       701,481         650,392         974,161         947,405
                                              ------------    ------------    ------------    ------------

Operating expenses
        Sales and marketing                      1,612,630       1,615,798       3,928,515       3,025,557
        Research and development                   651,385         695,495       1,465,426       1,222,384
        General and administrative                 392,393         526,098         731,249         936,985
                                              ------------    ------------    ------------    ------------

                 TOTAL OPERATING EXPENSES        2,656,408       2,837,391       6,125,190       5,184,926
                                              ------------    ------------    ------------    ------------

LOSS FROM OPERATIONS                            (1,954,927)     (2,186,999)     (5,151,029)     (4,237,521)

Interest income                                     10,349         119,105          42,421         184,490
Interest expense                                  (101,921)         (4,208)       (105,071)        (10,097)
Other (expense) income                              (2,562)            200           6,526          (3,666)
                                              ------------    ------------    ------------    ------------

NET LOSS                                      $ (2,049,061)   $ (2,071,902)   $ (5,207,153)   $ (4,066,794)
                                              ============    ============    ============    ============


Basic and diluted net loss per common share   $      (0.10)   $      (0.21)   $      (0.32)   $      (0.45)
                                              ------------    ------------    ------------    ------------

Weighted average shares used in per share
        computation (Note 2)                    20,711,962       9,811,407      16,154,352       9,062,390
                                              ============    ============    ============    ============


     See accompanying Notes to Condensed Consolidated Financial Statements.

                                       4





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


                                                                                       SIX MONTHS ENDED JUNE 30,
                                                                                           2001         2000

Cash flows from operating activities
    Net loss                                                                          $(5,207,153)   $(4,066,794)
    Adjustments to reconcile net loss to net cash used in
       operating activities
         Depreciation and amortization                                                    365,574        223,894
         Interest expense related to beneficial conversion feature on notes payable       101,851           --
         Loss on disposal of equipment                                                       --            9,033
         Options issued for consulting services                                           293,669        289,625
         Changes in operating assets and liabilities
            Accounts receivable, net                                                     (219,809)       319,961
            Prepaid expenses and other current assets                                     (15,257)        11,100
            Deposits and other assets                                                      10,223        (58,397)
            Accounts payable and accrued expenses                                        (343,343)      (263,470)
            Deferred rent                                                                 (18,993)        (5,055)
            Deferred revenue                                                              (43,532)       (18,826)
                                                                                      -----------    -----------

            NET CASH USED IN OPERATING ACTIVITIES                                      (5,076,770)    (3,558,929)
                                                                                      -----------    -----------

Cash flows from investing activities
    Acquisitions of property and equipment                                               (282,375)      (314,228)
                                                                                      -----------    -----------

            NET CASH USED IN INVESTING ACTIVITIES                                        (282,375)      (314,228)
                                                                                      -----------    -----------

Cash flows from financing activities
    Proceeds from issuance of common stock, net                                         2,392,920           --
    Proceeds from issuance of IQO preferred stock, net                                       --        6,534,993
    Proceeds from exercise of common stock warrants                                          --        1,456,250
    Proceeds from exercise of common stock options                                           --           73,285
    Increase in note receivable                                                          (150,000)          --
    Payments of capital lease obligations                                                  (9,817)      (163,663)
                                                                                      -----------    -----------

            NET CASH PROVIDED BY FINANCING ACTIVITIES                                   2,233,103      7,900,865
                                                                                      -----------    -----------

Net (decrease) increase in cash and cash equivalents                                   (3,126,042)     4,027,708

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

Cash and cash equivalents at end of period                                            $   330,884    $ 8,516,562
                                                                                      ===========    ===========

     See accompanying Notes to Condensed Consolidated Financial Statements.

                                       5




                         QUERYOBJECT SYSTEMS CORPORATION
            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.          BASIS OF PRESENTATION

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

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

2.          BASIC AND DILUTED NET LOSS PER SHARE

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

            Diluted  earnings per share is based on the potential  dilution that
would occur on exercise or conversion of securities  into common stock.  At June
30,  2001,  outstanding  options and warrants to purchase  30,066,798  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  $56,785,566  as of June 30,  2001.  The  Company  has had a limited
operating history as a software product and application services company and has
not made significant sales of its products or services,  therefore, revenues are
difficult  to  predict.  It is  anticipated  that  the  Company's  cash and cash
equivalent  balance at June 30, 2001,  after giving effect to the loans received
from  stockholders as described in Note 7 below, will only satisfy its cash flow
requirements through August 31, 2001. As a result, the Company will seek to sell
additional  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 will 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  "February  Private  Placement")  and received gross proceeds of
$1,230,000.  The  Company  sold  2,050,000  Units (the  "February  Units") at an
initial  price of $.60 per Unit.  Each  February  Unit  consists of one share of
common stock and two redeemable common stock purchase warrants exercisable until
February  7, 2006 at an initial  exercise  price of $.925 per share,  subject to
adjustment.  The per unit purchase price was based on the average of the closing
sales price of the Company's  common stock in the five day period ended two days
prior to the initial closing ("Initial Price"). On the date of the final closing
of the February  Private  Placement,  if the average  closing sales price of the
Company's  common stock in the five day period ended two days prior to the final
closing (the "Final Closing  Price") is less than the Initial Price,  such lower
amount will be used in determining  the purchase price of the February Units. In
addition,  the  February  Units sold in the initial  closing will be repriced to
reflect the lower  price.  The Company  received net proceeds of $743,814 in the
initial closing,  after deducting expenses of the offering and the conversion of
loans payable to  stockholders,  totaling  $250,000,  into February Units.  This
adjustment  resulted in an additional  discount on the notes  payable  issued to
stockholders,  and the conversion  ratio  represented a discount from the market
value of the common stock at the date of issuance.  Accordingly, the discount is
considered an incremental yield  ("beneficial  conversion  feature") to the note
holders  representing  approximately  $102,000  and  was  recorded  as  interest
expense.

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

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

                                       7




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

6.          BUSINESS SEGMENTS

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

                                        THREE MONTHS ENDED JUNE 30,    SIX MONTHS ENDED JUNE 30,
                                              2001           2000         2001           2000

Revenues
       Software sales and support       $   530,061    $   633,570    $   675,842    $   961,961
       Application services                 251,500         60,000        418,900         60,000
                                        -----------    -----------    -----------    -----------

                                        $   781,561    $   693,570    $ 1,094,742    $ 1,021,961
                                        -----------    -----------    -----------    -----------

Gross Profit
       Software sales and support       $   494,733    $   591,492    $   621,345    $   888,505
       Application services                 206,748         58,900        352,816         58,900
                                        -----------    -----------    -----------    -----------

                                        $   701,481    $   650,392    $   974,161    $   947,405
                                        -----------    -----------    -----------    -----------

Loss from operations
       Software sales and support       $(1,497,402)   $(1,418,082)   $(3,880,076)   $(3,239,816)
       Application services                (457,525)      (768,917)    (1,270,953)      (997,705)
                                        -----------    -----------    -----------    -----------

                                        $(1,954,927)   $(2,186,999)   $(5,151,029)   $(4,237,521)
                                        -----------    -----------    -----------    -----------

Included in loss from operations
       Depreciation and amortization
           Software sales and support   $   124,407    $   110,165    $   247,901    $   221,364
           Application services              59,182          2,236        117,673          2,530
                                        -----------    -----------    -----------    -----------

                                        $   183,589    $   112,401    $   365,574    $   223,894
                                        ===========    ===========    ===========    ===========

                                       8





            International sales were 38% and 34% of total revenues for the three
months ended June 30, 2001 and 2000,  respectively.  Sales within the country of
Italy were 38% and 32% of total  revenues  for the three  months  ended June 30,
2001 and 2000, respectively.

            International  sales were 37% and 27% of total  revenues for the six
months ended June 30, 2001 and 2000,  respectively.  Sales within the country of
Italy were 35% and 22% of total  revenues for the six months ended June 30, 2001
and 2000, respectively.

7.          SUBSEQUENT EVENT

            On July 27, 2001, the Company borrowed $500,000 from stockholders of
the Company evidenced by promissory notes (the "Notes"). The Notes bear interest
at 10% per annum and are due on demand or upon the successful  consummation of a
private placement. The Notes are secured by all assets of the Company.

8.          RECENT ACCOUNTING PRONOUNCEMENTS

            In July  2001,  the  Financial  Accounting  Standards  Board  issued
Statement  of  Financial   Accounting   Standards  ("SFAS")  No.  141  "Business
Combinations" and SFAS No. 142 "Goodwill and Other Intangible  Assets." SFAS No.
141 requires business combinations initiated after June 30, 2001 to be accounted
for using the  purchase  method of  accounting,  and  broadens  the criteria for
recording intangible assets separate from goodwill.  Recorded goodwill and other
intangibles  will be  evaluated  against  this new  criteria  and may  result in
certain  intangibles  being subsumed into goodwill,  or  alternatively,  amounts
initially recorded as goodwill may be separately identified and recognized apart
from goodwill.  SFAS No. 142 requires the use of a  nonamortization  approach to
account for purchased goodwill and certain intangibles.  Under a nonamortization
approach, goodwill and certain intangibles will not be amortized into results of
operations,  but instead would be reviewed for  impairment  and written down and
charged to results of operations only in the periods in which the recorded value
of goodwill and certain  intangibles is more than its fair value. The provisions
of each statement  which apply to goodwill and intangible  assets acquired prior
to June 30, 2001, will be adopted by the Company on January 1, 2002.

                                       9





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

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

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

OVERVIEW

            The Company  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.  Total  expenses of IQO for the six months ended
June 30,  2001 and for the year ended  December  31,  2000 were  $1,689,853  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 $418,900 and
$204,100  of revenue  for the six months  ended June 30, 2001 and the year ended
December 31, 2000, respectively.

            During the second quarter of 2001, the Company decided to reduce its
operating  expenses in order to conserve  cash.  The  reduction  in expenses was
completed  by August 1, 2001.  As a result,  the  Company  reduced its full time
employees by 48% and eliminated  significant  marketing and other expenses which
the  Company  anticipates  will  result in an annual  savings  of  approximately
$3,500,000 per year.

            To  date,   the  Company  has  incurred   substantial   losses  from
operations, and at June 30, 2001, had an accumulated deficit of $56,785,566. 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.

                                       10





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

RESULTS OF OPERATIONS

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

                                           THREE MONTHS ENDED      SIX MONTHS ENDED
                                                  JUNE 30,             JUNE 30,
                                             2001       2000       2001      2000

Revenues
       Software licenses                   $   491    $   583    $   596    $   857
       Services and maintenance                291        111        499        165
                                           -------    -------    -------    -------
                TOTAL REVENUES                 782        694      1,095      1,022
                                           -------    -------    -------    -------
Cost of revenues
       Software licenses                        20         24         24         35
       Services and maintenance                 60         20         97         40
                                           -------    -------    -------    -------
                TOTAL COST OF REVENUES          80         44        121         75
                                           -------    -------    -------    -------
GROSS PROFIT                                   702        650        974        947
                                           -------    -------    -------    -------

Operating expense
       Sales and marketing                   1,613      1,616      3,929      3,026
       Research and development                651        695      1,465      1,222
       General and administrative              392        526        731        937
                                           -------    -------    -------    -------
                TOTAL OPERATING EXPENSES     2,656      2,837      6,125      5,185
                                           -------    -------    -------    -------
LOSS FROM OPERATIONS                        (1,954)    (2,187)    (5,151)    (4,238)

Interest income                                 10        119         42        184
Interest expense                              (102)        (4)      (105)       (10)
Other (expense) income                          (3)      --            7         (3)
                                           -------    -------    -------    -------
NET LOSS                                   $(2,049)   $(2,072)   $(5,207)   $(4,067)
                                           =======    =======    =======    =======

                                       11





REVENUES

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

            Total  revenues  increased by $88,000,  or 13%, from $694,000 in the
second  quarter of 2000 to $782,000 in the second quarter of 2001. For the first
six months,  total revenues increased by $73,000,  or 7% from $1,022,000 in 2000
to  $1,095,000  in 2001.  License  revenues  decreased by $92,000,  or 16%, from
$583,000  in the second  quarter of 2000 to  $491,000  in the second  quarter of
2001. For the first six months,  license revenues  decreased by $261,000 or 30%,
from $857,000 in 2000 to $596,000 in 2001. The Company  recorded license revenue
from the sale of seven  licenses in the second  quarter of 2001  compared to the
sale of eight  licenses  in the second  quarter of 2000.  The  Company  recorded
license  revenue from the sale of nine licenses for the first six months of 2001
compared  to the sale of 11  licenses  for the  first six  months  of 2000.  The
average revenue per license was lower during the 2001 periods  compared to 2000.
In January 2001,  the Company  changed its direct sales model for European sales
to a partner  distribution  model.  The  Company  has closed its United  Kingdom
office and currently has one distributor in Europe.

            Services and  maintenance  revenue  increased by $180,000,  or 162%,
from $111,000 in the second quarter of 2000 to $291,000 in the second quarter of
2001. For the first six months,  services and maintenance  revenue  increased by
$334,000,  or 202%,  from $165,000 in 2000 to $499,000 in 2001.  These increases
were primarily the result of IQO application service revenue in 2001,  comprised
primarily of subscription  based monthly  charges to IQO customers.  Service and
maintenance revenues are expected to increase as IQO expands its client base and
as the Company sells additional licenses.

COST OF REVENUES

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

            Cost of services  and  maintenance  revenues  consists  primarily of
direct costs associated with application  services  provided by IQO and customer
support  costs.  Cost of services and  maintenance  revenues as a percentage  of
services and maintenance revenues were 21% and 19%, respectively,  for the three
and six month  periods  ended June 30, 2001.  Cost of services  and  maintenance
revenues as a percentage of services and maintenance  revenues were 17% and 24%,
respectively,  for the three and six months  periods ended June 30, 2000.  These
increases  resulted  primarily  from  higher  costs as a  percentage  of revenue
associated with IQO application  service revenue compared to the fixed personnel
costs related to providing maintenance and related customer support.

                                       12





OPERATING EXPENSES

            SALES AND MARKETING.  Sales and marketing expenses consist primarily
of personnel costs, including sales commissions and incentives, of all personnel
involved  in the sales and  marketing  process,  and related  recruiting  costs,
public  relations,  advertising  related  costs,  collateral  material and trade
shows.  Sales and marketing expenses decreased by $3,000, or 0%, from $1,616,000
in the second  quarter  of 2000 to  $1,613,000  in the  second  quarter of 2001,
primarily due to the net effect of increased personnel related costs,  including
marketing  and  sales  costs  of IQO,  reduced  by a  general  decrease  in both
marketing,  recruiting and consulting expenses of the Company. For the first six
months,  sales and  marketing  expenses  increased  by  $903,000,  or 30%,  from
$3,026,000 in 2000 to $3,929,000 in 2001,  primarily due to increased  personnel
related  costs  including  marketing  and sales costs of IQO.  During the second
quarter of 2001,  the Company  implemented  cost  reductions  that will decrease
marketing and sales expenses for the immediate future.

            RESEARCH AND DEVELOPMENT.  Research and development expenses consist
primarily of salaries and other personnel  related  expenses,  recruiting  costs
associated  with  the  hiring  of  software   engineers  and  quality  assurance
personnel,  consultant costs and depreciation of development equipment. Research
and  development  expenses  decreased  by $44,000,  or 6%, from  $695,000 in the
second quarter of 2000 to $651,000 in the second quarter of 2001,  primarily due
to decreased personnel related costs including research and development costs of
IQO. For the first six months,  research and development  expenses  increased by
$243,000,  or 20%, from $1,222,000 in 2000 to $1,465,000 in 2001,  primarily due
to increased  personnel related 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 $134,000, or 25%, from $526,000 in the
second quarter of 2000 to $392,000 in the second quarter of 2001,  primarily due
to a reduction in professional  expenses and bad debt expense. For the first six
months, general and administrative  expenses decreased by $206,000, or 22%, from
$937,000  in  2000  to  $731,000  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 $109,000,  from $119,000 in the
second  quarter of 2000 to $10,000 in the second  quarter of 2001. For the first
six months,  interest  income  decreased  by $142,000  from  $184,000 in 2000 to
$42,000 in 2001. These decreases were primarily due to a lower level of cash and
cash equivalents on deposit during 2001.

                                       13





            Interest  expense during 2001  represents the beneficial  conversion
feature  on notes  payable  issued  during  2000 that were  converted  to equity
securities during 2001.  During 2000,  interest expense  represents  interest on
capital equipment leases.  Interest expense increased by $98,000, from $4,000 in
the second  quarter of 2000 to $102,000 in the second  quarter of 2001.  For the
first six months,  interest expense increased by $95,000 from $10,000 in 2000 to
$105,000 in 2001.  These increases were primarily due to the conversion  feature
that  represented  incremental  yield  to the  note  holders  in the  amount  of
approximately  $102,000. As of June 30, 2001, all capital lease obligations have
been repaid.

PROVISION FOR INCOME TAXES

            The Company  accounts for income taxes in accordance  with Statement
of Financial  Accounting  Standards No. 109,  "Accounting for Income Taxes." The
Company incurred net operating losses in 2000 and 1999 and consequently  paid no
federal or state  income  taxes.  At  December  31,  2000,  the  Company had net
operating  losses and  research and  experimental  tax credit  carryforwards  of
approximately $45,332,000 and $360,000, respectively, available to offset future
federal taxable income and tax. These net operating loss carryforwards expire at
various dates through 2020.  Although the  determination of whether an ownership
change has occurred is subject to factual and legal  uncertainties,  the Company
believes  that an ownership  change  occurred  upon the  completion  of previous
financings  and such  "ownership  change" will  materially  limit the  Company's
ability to utilize its NOL carryforward. Moreover, while such loss carryforwards
are available to offset future  taxable  income of the Company,  the Company may
not generate  sufficient  taxable  income so as to utilize all or a  substantial
portion of such loss carryforwards  prior to their expiration,  and accordingly,
the Company has provided a full valuation allowance against its net deferred tax
assets.

LIQUIDITY AND CAPITAL RESOURCES

            Since  January  1,  2000,  the  Company  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 February  Private
Placement.  The Company received net proceeds totaling approximately  $2,393,000
in the Closings,  after deducting expenses of the offering and the conversion of
loans payable to stockholders into February Units. The Company issued a total of
11,611,111 shares of Common Stock and Warrants to purchase a total of 24,383,333
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.

            In January  2000,  the  exercise of the  outstanding  Warrants  from
private  placements of  securities  during 1998 and 1999 resulted in proceeds to
the Company of $1,456,250.

            As of June 30,  2001,  the  Company  had  $330,884  in cash and cash
equivalents and working capital of $188,814.  The Company has incurred operating
losses  since  inception,  has  incurred  negative  cash  flows  from  operating
activities  and had an  accumulated  deficit of

                                       14





$56,785,566 as of June 30, 2001. The Company has had a limited operating history
as a  software  product  and  application  services  company  and has  not  made
significant   sales  of  its   products.   Therefore,   revenues  and  operating
profitability  are difficult to predict.  It is  anticipated  that the Company's
cash and cash  equivalent  balance at June 30,  2001 will only  satisfy its cash
flow  requirements  through August 31, 2001. The Company has received loans from
stockholders  so that it can continue its  operations.  The Company will seek to
sell additional equity securities. 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 $5,077,000 and $3,559,000
in 2001 and 2000, respectively.  For 2001, net cash used in operating activities
was  primarily  attributable  to a net loss of  $5,207,000,  plus an increase in
accounts  receivable of $220,000 and a decrease in accounts  payable and accrued
expenses of $343,000,  reduced by depreciation  and amortization of $366,000 and
options issued for consulting  services of $294,000.  For 2000, net cash used in
operating  activities  was  primarily  attributable  to a net loss of $4,067,000
reduced by a decrease in accounts  receivable of $320,000 and  depreciation  and
amortization of $224,000 and options issued for consulting services of $290,000.
This was offset, in part, by a decrease in accounts payable and accrued expenses
of  $263,000.  Net cash  provided by financing  activities  was  $2,233,000  and
$7,901,000  in 2001 and 2000,  respectively.  For  2001,  net cash  provided  by
financing activities was primarily the result of the February Private Placement.
For 2000, net cash provided by financing  activities was primarily the result of
the sale of IQO  preferred  stock  and the  exercise  of common  stock  purchase
warrants. Net cash used in investing activities was primarily the acquisition of
property and equipment for both 2001 and 2000.

            The  Company  does  not  currently  have a  line  of  credit  with a
commercial  bank.  As of June 30,  2001,  the  Company's  principal  commitments
consisted of  obligations  under  operating  leases and  employment  agreements.
Pursuant to employment  agreements with executive  officers of the Company as of
June 30, 2001, the Company's  remaining  obligation is to pay $287,500 and $0 in
salaries for the years ended December 31, 2001 and 2002, respectively.

RISK FACTORS THAT MAY AFFECT FUTURE RESULTS

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

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 six months  ended June 30,  2001 and the year ended  December  31, 2000 were
$1,094,742 and $1,715,841, respectively. In February and April 2001, we received
net proceeds of approximately $2,393,000 from the February Private Placement and
in July 2001, we received loan  proceeds of $500,000  from  stockholders  of the
Company.  However,  given  our  continued  operating  losses,  our cash and cash
equivalent  balance will be insufficient  to satisfy our cash flow  requirements
past August 31, 2001. Accordingly, we will need additional financing to continue
operations.  We  cannot  predict  whether  we would  be

                                       15



successful in raising sufficient  additional funds. We have no firm 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 June 30, 2001, our accumulated  deficit was $56,785,566.  For the
six months ended June 30, 2001 and the year ended December 31, 2000, we incurred
net losses of $5,207,153 and $10,240,366,  respectively.  We have incurred a net
loss in each year of our existence,  and have financed our operations  primarily
through sales of equity and debt securities. Our expense levels are high and our
revenues are difficult to predict.  The independent  accountants'  report on our
financial  statements  for the year ended  December  31,  2000  states  that our
recurring   losses  from  operations  and  negative  cash  flow  from  operating
activities  raise  substantial  doubt  about our  ability to continue as a going
concern.

            We 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 June 30, 2001,  we had software  product  revenue from the sale of
only  55  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

                                       16





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.

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

            For the six  months  ended June 30,  2001 and the fiscal  year ended
December 31, 2000, three customers and five customers  accounted for 87% 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 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,

                                       17





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 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 six months ended June 30, 2001 and
the fiscal year ended December 31, 2000, were  approximately  37% and 17% of our
total revenue,  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 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

                                       18





subsequent written and oral  forward-looking  statements  attributable to us are
expressly qualified in their entirety by the cautionary  statements.  We caution
readers not to place undue reliance on these forward-looking  statements,  which
speak only as of their dates.  We undertake no obligations to publicly update or
revise any forward-looking  statements,  whether as a result of new information,
future events or otherwise.

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

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

                                       19





PART II.    OTHER INFORMATION

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

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

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

            At the annual  meeting  of  stockholders  of the  Company on July 6,
2001,  the  stockholders  (i) elected seven members of the Board of Directors to
serve until the next annual  meeting,  (ii) approved the issuance in an exchange
offer of  shares of Common  Stock in  excess of 20% of the  outstanding  shares,
(iii)  approved an amendment to the 2000 Stock  Option  Plan,  (iv)  approved an
amendment  to  the  Company's   Certificate  of  Incorporation  to  increase  to
100,000,000 the number of authorized  shares of Common Stock,  and, (v) ratified
the  appointment  of  PricewaterhouseCoopers  LLP as the  Company's  independent
public accountants for the year ending December 31, 2001.

            (i)  The  vote  to elect  seven members of the Board of Directors to
                 serve until the next annual meeting was as follows:

                 Nominee                     For                     Withheld
                 -------                     ---                     --------

                 Robert A. Thompson          15,267,756              17,223
                 Joseph M. Valley, Jr.       15,267,756              17,223
                 Daniel M. Pess              15,267,756              17,223
                 Rino Bergonzi               15,267,756              17,223
                 Alan W. Kaufman             15,267,756              17,223
                 Amy L. Newmark              15,267,756              17,223
                 Andre Szykier               15,267,756              17,223

           (ii)  The vote to approve the issuance in an exchange offer of shares
                 of Common Stock was as follows:

                                                                Abstain and
                 For                         Against            Broker Non-Votes
                 ---                         -------            ----------------

                 11,748,908                  118,654            10,979

                                       20



          (iii)  The vote to approve the amendment to the 2000 Stock Option Plan
                 was as follows:

                                                                Abstain and
                 For                         Against            Broker Non-Votes
                 ---                         -------            ----------------

                 11,711,062                  155,379            12,100


           (iv)  The vote to amend the Company's Certificate of Incorporation to
                 increase  to  100,000,000  the number of  authorized  shares of
                 Common Stock was as follows:

                                                                Abstain and
                 For                         Against            Broker Non-Votes
                 ---                         -------            ----------------

                 11,769,770                  99,773             8,998


           (v)   The    vote    for     ratifying     the     appointment     of
                 PricewaterhouseCoopers  LLP as the Company's independent public
                 accountants  for the  year  ending  December  31,  2001  was as
                 follows:

                                                                Abstain and
                 For                         Against            Broker Non-Votes
                 ---                         -------            ----------------

                 15,284,511                  9,922              6,433

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 2002 Annual Meeting of Stockholders  (the "Annual
Meeting")  will be March 18, 2002. As to all such matters which the Company does
not have notice on or prior to March 18, 2002, 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 Loss Per Share (Exhibit 11.1)

         (b)  Reports on Form 8-K

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

                                       21





                                   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 10, 2001             QUERYOBJECT SYSTEMS CORPORATION



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

                                       22`