SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   FORM 10-QSB


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

                For the quarterly period ended September 30, 1998

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

                         Commission file number 1-13587


                         QUERYOBJECT SYSTEMS CORPORATION
                     Formerly "CrossZ Software Corporation"
             (Exact name of registrant as specified in its charter)

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


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


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

                           CrossZ Software Corporation
                           (Former name of registrant)


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

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

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

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

<PAGE>

                         QUERYOBJECT SYSTEMS CORPORATION
                     (formerly CrossZ Software Corporation)

                                   FORM 10-QSB

                                      INDEX

PART I.   FINANCIAL INFORMATION                                            PAGE

Item 1.   Financial Statements

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

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

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

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

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

PART II.  OTHER INFORMATION

Item 2.   Changes in Securities and Use of Proceeds..........................21

Item 4.   Submission of Matters to a Vote of Security Holders................22

Item 5.   Other Information..................................................22

Item 6.   Exhibits and Reports on Form 8-K...................................22

SIGNATURES...................................................................23


                                       2
<PAGE>
Part I.   FINANCIAL INFORMATION

Item 1.   Financial Statements

                         QUERYOBJECT SYSTEMS CORPORATION
                     (formerly CrossZ Software Corporation)

                                   (Unaudited)

                                                                   September 30,
                                                                      1998
ASSETS
Current assets
      Cash and cash equivalents                                    $     45,820
      Accounts receivable, net of allowance for doubtful
          accounts of $30,000                                           259,595


      Deferred offering costs                                            41,340
      Restricted certificate of deposit                                 496,808
      Prepaid expenses and other current assets                          47,654

          Total current assets                                          891,217

Property and equipment, net                                           1,034,325
Deposits and other assets                                               148,180
                                                                   ------------
          Total assets                                             $  2,073,722
                                                                   ------------

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
      Accounts payable                                             $    766,189
      Accrued expenses                                                  855,072
      Deferred revenue                                                   52,186
      Loan payable to stockholders                                      457,749
      Customer advance                                                  300,000
      Capital lease obligations due within one year                     203,885
                                                                   ------------
          Total current liabilities                                   2,635,081

Notes payable                                                           410,000
Capital lease obligations                                               215,834
Deferred rent                                                           269,605
                                                                   ------------
          Total liabilities                                           3,530,520
                                                                   ------------

Stockholders? deficit
      Preferred stock, 2,000,000 shares authorized;
          none issued and outstanding                                      --
      Common stock, $0.001 par value:  30,000,000 shares
          authorized; 5,121,422 shares issued and outstanding             5,121
      Additional paid-in capital                                     30,509,181
      Accumulated deficit                                           (31,971,100)
                                                                   ------------

          Total stockholders' deficit                                (1,456,798)
                                                                   ------------

          Total liabilities and stockholders' deficit              $  2,073,722
                                                                   ------------

   See accompanying notes to the Condensed Consolidated Financial Statements.

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

<TABLE>
<CAPTION>

                                                                Three Months Ended                Nine Months Ended
                                                                    September 30,                   September 30,
                                                                1998             1997           1998             1997
Revenues
<S>                                                        <C>               <C>             <C>              <C>
     Software licenses...............................      $    177,500      $    95,000     $   312,500      $   493,750
     Services and maintenance........................            25,064          196,479          86,090          292,856

               Total revenues........................           202,564          291,479         398,590          786,606

Cost of revenues
     Software licenses...............................             3,750            3,804           5,250            9,611
     Services and maintenance........................            16,229           70,990          62,140          125,729

               Total cost of revenues................            19,979           74,794          67,390          135,340

Gross Profit.........................................           182,585          216,685         331,200          651,266

Operating expenses
     Sales and marketing.............................           975,097        1,283,137       3,443,543        3,344,456
     Research and development........................           596,842          691,932       1,778,098        1,889,663
     General and administrative......................           366,890          356,494       1,217,620          964,929

               Total operating expenses..............         1,938,829        2,331,563       6,439,261        6,199,048

Loss from operations.................................        (1,756,244)      (2,114,878)     (6,108,061)      (5,547,782)

Interest income......................................            11,819           11,000         113,184           38,093
Interest expense.....................................           (31,695)        (369,365)       (109,031)        (470,977)
Other income (expense)...............................                --               --            (206)             542

Net loss.............................................      $ (1,776,120)     $(2,473,243)    $(6,104,114)     $(5,980,124)
                                                           ------------    -------------    ------------     ------------

Basic net loss per share.............................      $       (.35)     $      (.98)    $     (1.19)     $     (2.38)

Weighted average shares used in basic per share
     computation (Note 3)............................         5,121,422        2,534,174       5,119,538        2,517,824
                                                           ------------    -------------    ------------     ------------
</TABLE>

   See accompanying notes to the Condensed Consolidated Financial Statements.

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

                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                            Nine Months Ended
                                                                              September 30,
                                                                          1998             1997

Cash flows from operating activities
<S>                                                                  <C>             <C>
      Net loss ................................................      $   (6,104,114) $   (5,980,124)
      Adjustments to reconcile net loss to net cash used in
      operating activities ....................................
Depreciation and amortization..................................             310,021         259,616
Amortization of debt discount..................................                --           179,447
Amortization of debt issuance costs............................                --            54,781
Loss on sale of computer equipment.............................                 206              --
Options issued for consulting services.........................             114,102         164,000
Changes in operating assets and liabilities
Accounts receivable, net.......................................              40,172         393,556
                Prepaid expenses and other current assets......                 599         (64,518)
                Deferred offering costs........................             (41,340)       (636,666)
Deposits and other assets......................................               2,094         (57,587)
Accounts payable and accrued expenses..........................             (20,865)       712,550
Deferred rent..................................................                 672          9,970
Deferred revenue...............................................              22,151         (4,821)

          Net cash used in operating activities................          (5,476,302)     (4,969,796)

Cash flows from investing activities
      Loan receivable from stockholder.........................             (65,000)           --
      Acquisitions of property and equipment...................             (96,278)       (462,540)
      Purchase of restricted certificate of deposit............             (22,554)        (28,448)

          Net cash used in investing activities................            (183,832)       (490,988)

Cash flows from financing activities
      Proceeds from issuance of  common stock..................              10,384          58,220
      Proceeds from interim and bridge financing notes payable to
        shareholders, net                                                   410,000       4,506,970
      Repayment of interim financing notes payable.............                --          (500,000)
      Release of restricted certificate of deposit.............             403,586              --
      Repayment of loan payable to stockholders................            (433,586)        (90,000)
      Payments of capital lease obligations....................            (163,282)       (198,055)
      Repayment of loan receivable from stockholder............              12,300              --
      Proceeds from sale-leaseback transaction.................              29,202         409,429

            Net cash provided by financing activities..........             268,604       4,186,564

Net decrease in cash and cash equivalents......................          (5,391,530)     (1,274,220)

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

Cash and cash equivalents at end of period.....................         $    45,820      $   93,346
                                                                        -----------     -----------
</TABLE>

   See accompanying notes to the Condensed Consolidated Financial Statements.

                                       5
<PAGE>
                         QUERYOBJECT SYSTEMS CORPORATION
                     (formerly CrossZ Software Corporation)
            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.       Basis of Presentation

         The unaudited  condensed  consolidated  financial  statements  included
herein reflect all adjustments, consisting only of normal recurring adjustments,
which in the opinion of  management  are necessary to fairly state the Company's
financial  position,  results  of  operations  and cash  flows  for the  periods
presented.  These financial  statements  should be read in conjunction  with the
Company's audited financial  statements  included in the Company's Annual Report
on Form 10-KSB for the year ended December 31, 1997. The condensed  consolidated
results  of  operations  for  the  period  ended  September  30,  1998  are  not
necessarily indicative of the results to be expected for any subsequent quarter,
for the entire fiscal year ending December 31, 1998, or for any future period.

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

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

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

2.       Initial Public Offering

         On November 20, 1997, the Company's  Initial Public Offering ("IPO") of
2,500,000  shares of common  stock,  $.001 par value (the  "Common  Stock") at a
price per share of $6.00 was consummated,  which resulted in net proceeds to the
Company  of  $12,469,574   before   repayment  of  certain  bridge  and  interim
financings,  including interest thereon, which totaled approximately $5,281,000.
As of the  closing  date  of the  IPO,  all of the  Company's  then  outstanding
preferred  stock was converted  into an aggregate of 1,697,313  shares of Common
Stock.

3.       Net Loss Per Common Share

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

         Basic net loss per common  share is computed  by dividing  net loss for
the period by the sum of the weighted  average  number of shares of common stock
issued and  outstanding  after  conversion of all  outstanding  preferred  stock
effected  contemporaneously with the IPO. All outstanding shares of Series A, B,
C and D Preferred Stock were converted as though such conversion occurred at the
beginning of the earliest  period  presented or the date of issuance in the case
of the Series D.

                                       6

<PAGE>
Historical  net loss per share has not been  presented  since such amount is not
deemed to be meaningful due to the significant  change in the Company's  capital
structure  resulting from the IPO.  Options and warrants to acquire common stock
have not been included in the computation of net loss per share because to do so
would have been antidilutive for the periods presented.

4.       Supplemental Cash Flow Information

<TABLE>
<CAPTION>

                                                                          Nine Months Ended
                                                                            September 30,
                                                                         1998           1997

<S>                                                                 <C>           <C>          
   Interest paid during the period................................  $     85,014  $     109,983
   Schedule of non cash investing and financing  activities:
         Series D Preferred Stock, issued for dividends...........            --        760,920
       Common Stock warrants issued in connection with bridge financing       --      1,512,397

</TABLE>

5.       Use of Estimates

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

6.       Liquidity and Business Risks

         The Company has incurred operating losses since inception, and negative
cash flows from operating activities.  As of September 30, 1998, the Company had
an accumulated  deficit of $31,971,100.  The Company has had a limited operating
history as a software product company and has not made significant  sales of its
products.  Therefore, revenues are difficult to predict. As previously reported,
the  Company   anticipated   that  cash  generated  from  operations   would  be
insufficient to satisfy the Company's liquidity requirements,  and therefore the
Company has been seeking to sell additional equity securities  through a private
offering  to  "accredited  investors."  See  "Note 7"  below  and  "Management's
Discussion and Analysis or Plan of Operation -"Liquidity and Capital Resources".
The independent accountants'  report for the year ended December 31, 1997 states
that the Company's  recurring losses from operations and the Company's  negative
cash flow from operating  activities raise substantial doubt about the Company's
ability to continue as a going concern.

7.       Subsequent Events

         On October 13, 1998,  the Company had the initial  closing of a private
placement (the "Series A Private  Placement")  of $3,500,000 or 1,750,000  Units
(the "Series A Units"),  each Series A Unit  consisting of one share of Series A
Convertible Preferred Stock (the "Series A Preferred Stock"), and a warrant (the
"Series A  Warrants")  to  purchase  2.5  shares of Common  Stock at a per share
exercise  price equal to $.50.  The Series A Units were sold at a purchase price
of  $2.00  per  Series A Unit and each  share  of  Series A  Preferred  Stock is
initially  convertible  into four shares of Common Stock. At the initial closing
of the Series A Private

                                       7

<PAGE>

Placement,  an amount  equal to 20% of the Series A Units were sold and $583,650
(after deduction of commissions and expenses payable to the placement agent) was
paid to the Company. In consideration thereof, the Company issued 350,000 shares
of Series A Preferred  Stock and Series A Warrants to purchase an  aggregate  of
875,000 shares of Common Stock. On November 12, 1998, the Company had the second
closing of the Series A Private  Placement.  At the  second  closing,  an amount
equal to an additional 20% of the Series A Units were sold and $660,800 was paid
to the Company. In consideration  thereof,  the Company issued 350,000 shares of
Series A Stock and Series A Warrants to purchase an aggregate of 875,000  shares
of Common Stock. Thereafter, the timing and amount of any transfer of funds will
be  made  at  the  sole  discretion  of  a  buyer   representative  (the  "Buyer
Representative") and there can be no assurance that there will be any additional
transfer of funds.

         On November 3, 1998,  the Company had the initial  closing of a private
placement  (the "Series B Private  Placement")  of  $1,000,000  or 10 Units (the
"Series B Units"),  each  Series B Unit  consisting  of ten  thousand  shares of
Series B  Convertible  Preferred  Stock (the  "Series B Preferred  Stock"),  and
warrants (the "Series B Warrants") to purchase an aggregate of 125,000 shares of
Common  Stock at a per share  exercise  price equal to $.50.  The Series B Units
were sold at a purchase  price of  $100,000  per Series B Unit and each share of
Series B Preferred Stock is initially  convertible  into twenty shares of Common
Stock. At the initial closing of the Series B Private Placement, an amount equal
to 20% of the  Series  B Units  were  sold  and  $170,900  (after  deduction  of
commissions  and  expenses  payable  to the  placement  agent)  was  paid to the
Company.  In consideration  thereof the Company issued 20,000 shares of Series B
Preferred Stock and Series B Warrants to purchase an aggregate of 250,000 shares
of Common Stock. Thereafter, the timing and amount of any additional transfer of
funds will be made at the sole discretion of the Buyer  Representative and there
can be no assurance that there will be any additional transfer of funds.

         In  connection  with the  Series A Private  Placement  and the Series B
Private  Placement,  the  placement  agent was  granted  an  option to  purchase
additional Series A and Series B Units equal to 10% of the Series A and Series B
Units sold in the  respective  Private  Placements and received a commission and
non-accountable expense allowance equal to 5.6% and 9.3%,  respectively,  of the
gross  proceeds  received  by the  Company  in the Series A and Series B Private
Placements. The securities offered and sold in the Series A and Series B Private
Placements  have  not been  registered  under  the  Securities  Act of 1933,  as
amended,  and may not be  offered or sold in the  United  States by the  holders
thereof  absent  registration  or  an  applicable  exemption  from  registration
requirements.  The  Company is required to file a  Registration  Statement  with
respect to the underlying shares of Common Stock on or about November 30, 1998.

         The following is a description of the securities issued in the Series A
Private Placement and the Series B Private Placement:

         Series A Preferred Stock and Series B Preferred Stock

         Stated Value. Each share of Series A Preferred Stock has a stated value
equal  to $2.00  (the  "Series  A Stated  Value")  and  each  share of  Series B
Preferred  Stock  has a stated  value  equal to  $10.00  (the  "Series  B Stated
Value").

                                       8

<PAGE>
         Liquidation Preference.  Upon a liquidation of the Company (including a
sale by the  Company  of all or  substantially  all of its assets or a merger or
consolidation  of the Company with another  Company where the Company is not the
surviving  entity),  the assets of the Company available for distribution to the
stockholders  of the Company (after payment or provision for  liabilities of the
Company), whether from capital, surplus or earnings, shall be distributed in the
following order of priority: (i) the holders of the Series A Preferred Stock and
the  Series  B  Preferred   Stock   shall  rank  pari  passu  with   respect  to
distributions,  (ii) the  holders of the Series A  Preferred  Stock and Series B
Preferred  Stock shall be entitled to receive,  prior and in  preference  to any
distribution  to the holders of any Junior  Securities (as defined below) of the
Company, an amount equal to the Series A Stated Value and Series B Stated Value,
respectively,  for each  share of the  Series A  Preferred  Stock  and  Series B
Preferred Stock then  outstanding and (iii) the remaining  assets of the Company
available for distribution,  if any, to the stockholders of the Company shall be
distributed pro rata to the holders of issued and  outstanding  shares of Common
Stock.

         Ranking.  The  Series B  Preferred  Stock will rank pari passu with the
Series A Preferred Stock with respect to rights on  liquidation,  dissolution or
winding up of the Company.  The Series A Preferred  Stock and Series B Preferred
Stock will rank senior to all other  classes and series of capital  stock of the
Company  then  existing  or  thereinafter  authorized,  issued  or  outstanding,
including,  without  limitation,  the Common  Stock,  and any other  classes and
series of capital stock of the Company then or thereinafter  authorized,  issued
or outstanding (collectively, "Junior Securities").

         Dividends.  The  holders of the Series A  Preferred  Stock and Series B
Preferred  Stock shall not be entitled to receive any stated  dividend  payment,
whether in cash or otherwise.

         Conversion. The holders of the Series A Preferred Stock have the right,
subject to adjustment to protect against  dilution,  at the holder's option,  at
any time, to convert each share of Series A Preferred  Stock into four shares of
Common Stock (the  "Series A  Conversion  Rate") and the holders of the Series B
Preferred  Stock  have the  right,  subject to  adjustment  to  protect  against
dilution, at the holder's option, at any time, to convert each share of Series B
Preferred  Stock into twenty  shares of Common  Stock (the  "Series B Conversion
Rate").  The shares of Common Stock that are issuable upon the conversion of the
Series A  Preferred  Stock and the  Series B  Preferred  Stock  are  hereinafter
referred to as the "Conversion Shares."

         Voting.  The  holders  of the  Series A  Preferred  Stock and  Series B
Preferred Stock are entitled to vote on all matters  submitted for a vote to the
stockholders  of the Company.  The holder of a share of Series A Preferred Stock
and Series B Preferred  Stock is entitled to cast that number of votes as equals
the  number of votes  entitled  to be cast by a holder  of the  shares of Common
Stock  into  which  it is  convertible  as of the  record  date of the  proposed
stockholder  action. The holders of the Series A Preferred Stock and the holders
of the Series B  Preferred  Stock each vote as  separate  classes on all matters
upon which the  Delaware  General  Corporation  Law  specifically  requires  the
holders of such preferred stock to vote as a separate class.

                                       9

<PAGE>
         Warrants

         Each Series A and Series B Warrant  entitles the  registered  holder to
purchase 2.5 shares of Common Stock,  subject to  adjustment to protect  against
dilution,  at a per share exercise  price equal to $.50 (the "Exercise  Price"),
commencing on the date of the closing of the Series A Private  Placement and the
Series B Private Placement, respectively, and ending on the third anniversary of
the respective closing,  unless extended by the Company, at its discretion.  The
Series A and Series B Warrants may be called for  redemption by the Company at a
redemption  price of $.01 per warrant upon not less than 30 days  prior  written
notice if the closing  price of the Common  Stock shall have been at least $1.60
per share (subject to adjustment in the event of a subdivision or combination of
the shares of Common  Stock) on 20 trading  days during any  30-consecutive  day
trading  period ending not more than three days prior to the date such notice is
given.  The shares of Common  Stock that are  issuable  upon the exercise of the
Series A and Series B  Warrants  are  hereinafter  referred  to as the  "Warrant
Shares."

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

         The discussion in this report on Form 10-QSB  contains  forward-looking
statements that involve risks and  uncertainties.  The Company's  actual results
may differ materially from those discussed  herein.  Factors that could cause or
contribute to such differences  include, but are not limited to, those discussed
in ?Risk  Factors?  in this  Part I, Item 2 as well as those  discussed  in this
section and elsewhere in this Report,  and the risks discussed in "Risk Factors"
in Part I, Item 1 - Business,  included in the  Company's  Annual Report on Form
10-KSB for the year ended December 31, 1997.

         The discussion  and analysis  below should be read in conjunction  with
the  Condensed  Consolidated  Financial  Statements of the Company and the Notes
thereto included elsewhere herein.

Overview

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

                                       10
<PAGE>
         To date, the Company has incurred  substantial  losses from operations,
and at  September  30,  1998 had an  accumulated  deficit  of  $31,971,100.  The
Company's  operations and activities have been primarily funded through sales of
equity and debt  securities,  including  the closing of the IPO on November  25,
1997. The Company expects to incur substantial  operating expenses in the future
to support its product  development  efforts,  establish and expand its domestic
and  international  sales  and  marketing  capabilities,   including  recruiting
additional  indirect channel partners,  and support and expand its technical and
management personnel and organization.

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

         Revenues  from  the  sales  of the  Company's  products  are  generally
recognized upon the execution of a software licensing  agreement and shipment of
the product,  provided that no  significant  vendor  obligations  remain and the
resulting  receivable is deemed collectible by management.  In instances where a
significant vendor obligation exists,  revenue recognition is delayed until such
obligation  has been  satisfied.  Allowances  for estimated  future  returns are
provided  for  upon  shipment.  It is  anticipated  that in the near  term,  the
Company's  revenues  from sales of products  will be difficult to predict due to
the discretionary  nature of business data delivery  software  purchases and the
variable  length of the sales cycle with  respect to new product  introductions.
Further,  the Company's product line includes products with current sales prices
from  $60,000  to over  $250,000.  As a result,  the timing of the  receipt  and
shipment  of a single  order  can have a  significant  impact  on the  Company's
revenues, results of operations and cash flows for a particular period.


                                       11
<PAGE>
Results of Operations

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

<TABLE>
<CAPTION>

                                                                    Three Months Ended        Nine Months Ended
                                                                        September 30,            September 30,
                                                                      1998         1997       1998          1997
Revenues
<S>                                                                <C>          <C>          <C>           <C>     
    Software licenses.....................................          $  178      $     95      $  313       $   494
    Services and maintenance..............................              25           196          86           293
                                                                    ------      --------      ------       -------
            Total revenues                                             203           291         399           787
                                                                    ------      --------      ------       -------

Cost of revenues
    Software licenses.....................................               4             4           5            10
    Services and maintenance..............................              16            71          62           126
                                                                    ------      --------      ------       -------
            Total cost of revenues                                      20            75          67           136
                                                                    ------      --------      ------       -------

Gross profit..............................................             183           216         332           651

Operating expenses
    Sales and marketing...................................             975         1,283       3,444         3,344
    Research and development..............................             597           692       1,778         1,890
    General and administrative............................             367           356       1,218           965

            Total operating expenses                                 1,939         2,331       6,440         6,199
                                                                    ------      --------      ------       -------

Loss from operations......................................          (1,756)       (2,115)     (6,108)       (5,548)

  Interest income.........................................              12            11         113            38
  Interest expense........................................              (32)        (369)        (109)        (471)
  Other income............................................              --            --          --             1
                                                                   --------     --------     --------      -------
Net loss..................................................         $ (1,776)    $ (2,473)    $ (6,104)     $(5,980)
                                                                   --------     --------     --------      -------
</TABLE>

Revenues

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

         Total revenues decreased by $88,000, or 31%, from $291,000 in the third
quarter of 1997 to  $203,000  in the third  quarter of 1998.  For the first nine
months,  total revenues decreased by $388,000,  or 49%, from $787,000 in 1997 to
$399,000 in 1998.  These  decreases  were primarily due to a decrease in service
revenues in the 1998 periods as compared to 1997 as a result of the  curtailment
of service-based engagements. The Company recorded license revenue from the sale
of three  licenses in the third  quarter in 1998,  whereas the Company  recorded
license  revenue from the


                                       12
<PAGE>

sale of one license in the third quarter of 1997. The Company  recorded  license
revenue  from the sale of five  licenses in the nine month period ended in 1998,
whereas the Company  recorded  license  revenue from the sale of two licenses in
the nine month  period  ended in 1997.  However,  one license sold in the second
quarter  of  1997  was a  multi-platform  sale  pursuant  to a  master  reseller
agreement, and therefore was priced at a significantly higher rate than a single
platform sale.  Service and maintenance  revenue decreased by $171,000,  or 87%,
from  $196,000 in the third  quarter of 1997 to $25,000 in the third  quarter of
1998. For the first nine months,  service and maintenance  revenue  decreased by
$207,000, or 71%, from $293,000 in 1997 to $86,000 in 1998. These decreases were
primarily due to the curtailment of service-based engagements.

Cost of Revenues

         Cost  of  software  license  revenues  consists  primarily  of  product
packaging, documentation and production costs. Cost of software license revenues
as a percentage of software  license  revenues was 1.7% and 2.1%,  respectively,
for the three month and nine month  periods  ended  September  30,  1998,  which
resulted from the sale of three  licenses in the third quarter and five licenses
for the nine  months.  Cost of  software  license  revenues as a  percentage  of
software license revenues was 4.0% and 1.9%,  respectively,  for the three month
and nine month periods ended September 30, 1997, which resulted from the sale of
one license in each of the second and third quarters of 1997.

         Cost of services and maintenance revenues consist primarily of customer
support  costs and direct costs  associated  with  providing  services.  Cost of
services and  maintenance  revenues as a percentage of services and  maintenance
revenues were 64.8% and 72.2%, respectively,  for the three month and nine month
periods ended September 30, 1998. Cost of services and maintenance revenues as a
percentage  of  services  and   maintenance   revenues  were  36.1%  and  42.9%,
respectively,  for the three month and nine month  periods  ended  September 30,
1997.  The higher  percentages  during the 1998  periods were  primarily  due to
higher personnel costs that were necessary for service-based engagements.

Operating Expenses

         Sales and Marketing.  Sales and marketing expenses consist primarily of
personnel costs,  including sales  commissions and incentives,  of all personnel
involved  in the sales and  marketing  process,  as well as  related  recruiting
costs,  public relations,  advertising  related costs,  collateral  material and
trade shows. Sales and marketing  expenses  decreased by $308,000,  or 24%, from
$1,283,000  in the third  quarter of 1997 to  $975,000  in the third  quarter of
1998.  For the first nine  months,  sales and  marketing  expenses  increased by
$100,000, or 3%, from $3,344,000 in 1997 to $3,444,000 in 1998. The decrease for
the third  quarter  of 1998 as  compared  to 1997 was  primarily  due to reduced
personnel related costs and reduced  recruiting costs. The increase for the nine
month periods were  primarily due to increased  personnel  costs,  and increased
costs  associated with public  relations,  collateral  material and trade shows.
These increases were offset,  in part, by reduced  recruiting  costs in the 1998
periods.  The  Company  believes  that its sales  and  marketing  expenses  will
increase in absolute dollars as the Company continues to increase  promotion and
other marketing expenses.


                                       13
<PAGE>
         Research and  Development.  Research and development  expenses  consist
primarily of salaries and other personnel  related  expenses,  recruiting  costs
associated  with  the  hiring  of  additional  software  engineers  and  quality
assurance personnel, consultant costs and depreciation of development equipment.
Research and development expenses decreased by $95,000, or 14%, from $692,000 in
the third  quarter of 1997 to  $597,000  in the third  quarter of 1998.  For the
first nine months,  research and development expenses decreased by $112,000,  or
6%,  from  $1,890,000  in 1997 to  $1,778,000  in  1998.  These  decreases  were
primarily due to lower  personnel  related costs and lower  recruiting  costs as
compared to 1997.  The Company  believes that a significant  level of investment
for product  research and  development  is required to remain  competitive  and,
accordingly, the Company anticipates that it will continue to devote substantial
resources to product research and development and that these costs will increase
in absolute  dollars.  To date,  all  research and  development  costs have been
expensed as incurred.

         General and Administrative. General and administrative expenses consist
primarily  of personnel  costs for finance,  MIS,  human  resources  and general
management,  as  well  as  insurance  and  professional  expenses.  General  and
administrative  expenses increased by $11,000, or 3%, from $356,000 in the third
quarter of 1997 to  $367,000  in the third  quarter of 1998.  For the first nine
months, general and administrative  expenses increased by $253,000, or 26%, from
$965,000 in 1997 to $1,218,000 in 1998.  These  increases  were primarily due to
higher consulting fees, increased  professional expenses associated with being a
public company and increased  personnel related costs and benefits.  The Company
believes that its general and administrative  expenses will increase in absolute
dollars  as it  incurs  additional  costs  related  to being a  public  company,
including investor relations programs.

Interest Income and Interest Expense

         Interest income represents income earned on the Company's cash and cash
equivalents.  Interest  income  increased by $1,000,  or 9%, from $11,000 in the
third  quarter of 1997 to $12,000  in the third  quarter of 1998.  For the first
nine months, interest income increased by $75,000, or 197%, from $38,000 in 1997
to $113,000 in 1998.  These  increases  were  primarily due to a higher level of
cash and cash equivalents on deposit during 1998.

         Interest expense  generally  represents  charges relating to the H.C.C.
Financial Services Loan Agreement (the "Loan Agreement") and interest expense on
capital equipment leases.  Interest expense decreased by $337,000,  or 91%, from
$369,000 in the third  quarter of 1997 to $32,000 in the third  quarter of 1998.
For the first nine months,  interest expense decreased by $362,000, or 77%, from
$471,000 in 1997 to $109,000 in 1998.  These decreases were primarily due to the
inclusion in 1997 of accrued  interest expense and amortization of debt discount
and debt issuance costs relating to the bridge financings consummated in 1997.

Provision for Income Taxes

         The Company  accounts for income taxes in accordance  with Statement of
Financial  Accounting  Standards  No. 109,  "Accounting  for Income  Taxes." The
Company incurred net operating losses in 1997 and 1996 and consequently  paid no
federal or state  income  taxes.  At  December  31,  1997,  the  Company had net
operating  losses and  research and  experimental  tax credit  carryforwards  of
$22,000,000  and  $144,000,  respectively,  available to offset  future  federal
taxable

                                       14

<PAGE>
income and tax. These net operating loss  carryforwards  expire at various dates
through  2012.  Although the  determination  of whether an ownership  change has
occurred is subject to factual  and legal  uncertainties,  the Company  believes
that an ownership change occurred upon the completion of previous financings and
such "ownership  change" will materially limit the Company's  ability to utilize
its NOL carryforward.  Moreover,  while such loss carryforwards are available to
offset  future  taxable  income of the  Company,  the Company does not expect to
generate sufficient taxable income so as to utilize all or a substantial portion
of such loss carryforwards prior to their expiration.

Liquidity and Capital Resources

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

         The IPO  prospectus  indicated  that  the  Company  believed  that  the
proceeds of the IPO together with then existing  resources and cash  anticipated
to be generated  from  operations,  would be sufficient to satisfy the Company?s
cash  requirements  for at least 14  months  after  the  completion  of the IPO.
However,  as of September 30, 1998  (approximately 10 months after the IPO), the
Company had negative  working  capital of $1,744,000.  The variance  between the
Company's expectations at the time of the IPO and the Company's current analysis
of its cash  position  is  primarily  due to lower  than  expected  sales of the
Company's  products.  The Board of Directors of the Company  considered  various
means of  procuring  additional  financing  and had  determined  that a  private
offering  of the  Company's  securities  would be in the best  interests  of the
Company.

         In October  and  November  1998,  the Company  consummated  the initial
closing of the Series A and Series B Private Placement and the second closing of
the Series A Private  Placement,  pursuant  to which the  Company  received  net
proceeds  of  $1,414,000.  See Note 7 to the  Condensed  Consolidated  Financial
Statements.  The net  proceeds  of the Series A and Series B Private  Placements
will be used for sales and  marketing,  research  and  development,  and general
working capital  purposes in the proportions of 40%, 40% and 20%,  respectively.
As noted in Note 7 to the Condensed Consolidated Financial Statements above, the
timing and amount of any additional  transfer of funds shall be made at the sole
discretion of the Buyer  Representative and there can be no assurance that there
will be any additional transfer of funds.  Assuming that subsequent transfers of
funds are consummated  and that the Company's sales forecasts are achieved,  the
Company  anticipates  that these  fundings  will be  sufficient  to satisfy  the
Company's cash  requirements  until  September 1999. If the Company is unable to
effect subsequent transfers of funds, or obtain other short-term financing,  the
Company will lack the cash necessary to continue operating.

         In September 1998, the Company borrowed  $410,000 from  stockholders of
the Company in exchange for unsecured  promissory  notes (the "Notes  Payable").
The Notes  Payable bear  interest at 12% per annum and are due at the earlier of
March 2000 or the successful  consummation  of the Series A and Series B Private
Placement. Upon the initial closing of the Series A Private Placement in October
1998,  $20,000 of such Notes was converted into Series A Unites.  The

                                       15

<PAGE>

balance of the Notes  Payable,  $390,000,  are still  outstanding.  Further,  in
October 1998, the Company  borrowed an additional  $80,000 from  stockholders of
the Company in exchange  for notes under  similar  terms and  conditions  as set
forth above. In November 1998, the $80,000 notes were repaid.

                  Under Rule 4310(c)(25)(H)(i) of the Nasdaq Stock Market ("Rule
4310(c)(25)(H)(i)"),  the Company is required to obtain stockholder  approval in
connection with any transaction, other than a public offering, that involves the
issuance  by the  Company of Common  Stock (or  securities  convertible  into or
exercisable for Common Stock) that equals 20% or more of the Common Stock of the
Company  outstanding  before the  issuance of such  securities  at a price below
market value (the "20%  Limitation").  In  connection  with the Series A Private
Placement and the Series B Private Placement, the Company held a special meeting
of  stockholders on August 12, 1998 and at such meeting it received the approval
of the  issuance  of  shares  of  Common  Stock  and the  granting  of  warrants
exercisable into Common Stock in excess of the 20% Limitation.  However, at such
meeting the Company's  stockholders did not specifically approve the issuance of
preferred stock. While under the Delaware General  Corporation Law and the terms
of the Company's Amended and Restated Certificate of Incorporation the Company's
Board of  Directors  has the power to issue  the  Series A  Preferred  Stock and
Series B  Preferred  Stock,  the  issuance of such  preferred  stock may violate
Nasdaq Rule  4310(c)(25)(H)(i)  since the Series A Preferred  Stock and Series B
Preferred Stock were not specifically authorized.  If Nasdaq deems such issuance
to be in violation of Nasdaq Rule 4310(c)(25)(H)(i),  the Company's Common Stock
may be delisted  from  Nasdaq and  trading,  if any,  of the Common  Stock would
thereafter be conducted on the OTC Bulletin Board. See "Risk Factors -- Possible
Nasdaq and Boston Delisting; Potentially Limited Trading Market."

         Prior to the IPO, the Company funded its operations  primarily  through
sales  of  preferred  equity   securities,   with  net  proceeds   therefrom  of
approximately  $14,000,000 and, to a lesser extent,  through interim  financings
and a bridge  financing,  through capital and operating  equipment  leases,  the
issuance of notes payable and the Loan Agreement.  As of September 30, 1998, the
Company had  $46,000 in cash and cash  equivalents.  Net cash used in  operating
activities  was  $5,476,000 and $4,970,000 for the nine months ended in 1998 and
1997,  respectively.  For  1998,  net  cash  used in  operating  activities  was
primarily  attributable  to a net  loss of  $6,104,000,  less  depreciation  and
amortization of $310,000 and a decrease in accounts receivable of $240,000.  For
1997, net cash used in operating activities was primarily  attributable to a net
loss of $5,980,000 less  depreciation and amortization of $494,000,  an increase
in accounts  payable and accrued  expenses of  $713,000,  a decrease in accounts
receivable of $394,000 and an increase in deferred  offering  costs of $637,000.
Net cash  provided  by  financing  activities  of  $4,187,000  in 1997  resulted
primarily from interim and bridge  financing notes payable to  stockholders  and
the proceeds of sale-leaseback transactions.

         The Company does not currently  have a line of credit with a commercial
bank.  Under the Loan Agreement,  the Company has outstanding  borrowings in the
aggregate principal amount of approximately  $458,000, such indebtedness secured
by a security  interest in and lien on all of the Company's  assets. An addendum
(the  "Addendum")  to the Loan  Agreement  provides that H.C.C.  Financial,  the
lender  thereunder,  will not  demand  payment  under  the Loan  Agreement  (and
requires the Company to maintain a restricted  Certificate  of Deposit which was
in the amount of $497,000 as of September 30, 1998),  until the earlier of March
31,  1998,  a material  breach by the Company  under the Addendum or an event of
default under the Loan Agreement.  In April 1998, the


                                       16
<PAGE>

Company began repaying the indebtedness under the Loan Agreement,  utilizing the
funds on deposit in the restricted  Certificate of Deposit. In October 1998, the
remaining  balance was repaid in full and the restricted  Certificate of Deposit
account was closed.

         As of September 30, 1998, the Company's principal commitments consisted
of obligations  under  operating and capital leases  (payable  through 2001) and
employment agreements (payable through 1999).

Year 2000 Compliance

         The  Company is aware of the  issues  related to the Year 2000 that are
associated with the programming  code in existing  computer  systems.  The "Year
2000 problem" may affect every computer  operation to varying  degrees.  Systems
that do not properly  recognize the Year 2000 could  generate  erroneous data or
cause a  system  to fail.  Management  is in the  process  of  working  with its
programmers and software  vendors to affirm that the Company is prepared for the
Year  2000.   Management  does  not  anticipate  that  the  Company  will  incur
significant  operating  expenses or be  required  to invest  heavily in computer
systems improvements to be Year 2000 compliant. However, significant uncertainty
exists concerning the potential costs and effects  associated with any Year 2000
compliance.  The Company believes that its current  products,  on all platforms,
are Year 2000 compliant.  Any Year 2000 compliance problem of either the Company
or its customers  could  materially  adversely  affect the  Company's  business,
operating results, financial condition and prospects.

         The Company has designed and tested the latest versions of its products
to be Year  2000  compliant.  There  can be no  assurances,  however,  that  the
Company's  current  products  do  not  contain   undetected  errors  or  defects
associated  with Year 2000 date  functions  that may result in material costs to
the Company.  It is possible that a significant  amount of litigation will arise
out of Year 2000 compliance issues.  Because of the unprecedented nature of such
litigation,  it is  uncertain  whether  or to what  extent  the  Company  may be
affected  by such  issues.  Although  the  Company is not aware of any  material
operational  issues or costs  associated with preparing its internal systems for
the Year 2000,  there can be no assurances  that the Company will not experience
serious  unanticipated  negative  consequences  and/or  material costs caused by
undetected errors or defects in the technology used in its internal systems.

Risk Factors That May Affect Future Results

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

         Company May Not Receive All  Proceeds  From the  Offering:  Company May
Discontinue Operations. The receipt by the Company of post-closing  installments
under  the  Series  S  and  Series  B  Private   Placements  (the  "Post-Closing
Installments") is contingent upon the discretion of the Buyer Representative and
the  performance  of the  obligations  of the investors  under the  subscription
agreement.  There is no objective criteria under which the Buyer  Representative
will use his decision to require the payment of the  Post-Closing  Installments.
If the Buyer


                                       17
<PAGE>

Representative  determines  that the  Company  should not receive any or all the
Post-Closing  Installments  or an  investor  refuses to  provide a  Post-Closing
Installment,  the  Company  may not  receive  the  necessary  funds to  continue
operations. Moreover, given the continued operating losses of the Company, there
can be no assurance  that the Company  will be able to continue  its  operations
even if all Post-Closing Installments are made.

         Working Capital  Deficiency;  Need For Additional Funding. At September
30, 1998,  the Company had a deficiency in working  capital of  $1,743,864.  The
Company has had a limited  operating  history as a software  product company and
has  not  made  significant  sales  of its  products.  Therefore,  revenues  are
difficult to predict. As previously reported,  the Company anticipated that cash
generated  from  operations  would be  insufficient  to  satisfy  the  Company's
liquidity  requirements,  and as a result,  the Company sold  additional  equity
securities.  See  "Management's  Discussion  and Analysis or Plan of Operation -
Liquidity  and Capital  Resources."  As described  under Note 7 to the Condensed
Consolidated  Financial  Statements,  the Company has  received  net proceeds of
$1,414,000  from the Series A and Series B Private  Placement.  Pursuant  to the
Series  A and  Series  B  Private  Placements,  the  timing  and  amount  of any
additional  transfer of funds shall be made at the sole  discretion of the Buyer
Representative  and there can be no assurance  that there will be any additional
transfer of funds.  Assuming that subsequent  transfers of funds are consummated
and that the Company's  sales  forecasts are achieved,  the Company  anticipates
that  these   fundings  would  be  sufficient  to  satisfy  the  Company's  cash
requirements until September 1999. If the Company is unable to effect subsequent
transfers of funds, or obtain other short-term financing,  the Company will lack
the cash necessary to continue operating.

         Accumulated Deficit;  Historical and Projected Future Operating Losses;
Going Concern Qualification in the Independent Accountants' Report. At September
30, 1998, the Company had an accumulated deficit of $31,971,100.  For the fiscal
years ended December 31, 1997 and 1996, and for the nine months ended  September
30,  1998,  the  Company  incurred  net losses of  $10,563,484,  $4,917,935  and
$6,104,114,  respectively.  In addition,  the Company has incurred a net loss in
each year during which it has  operated,  and its  operations  to date have been
financed in significant  part through sales of both equity and debt  securities.
The Company's expense levels are high and revenues are difficult to predict.  As
a  result,  the  Company  expects  to  continue  to  incur  net  losses  for the
foreseeable  future.  There can be no  assurance  that  significant  revenues or
profitability  will ever be achieved or, if they are achieved,  that they can be
sustained or  increased  on a quarterly  or annual  basis in the future.  Future
operating  results  will depend on many  factors,  including  the demand for the
Company's  products,  the level of product and price competition,  the Company's
success in expanding its direct sales force and indirect distribution  channels,
the ability of the Company to develop and market  products and to control costs,
the percentage of the Company's  revenues derived from indirect channel partners
and general economic  conditions.  The independent  accountants'  report for the
year ended  December 31, 1997 states that the  Company's  recurring  losses from
operations and the Company's negative cash flow from operating  activities raise
substantial doubt about the Company's ability to continue as a going concern.

         Lack of Substantial Revenue; Limited Operating History. The Company has
had a limited  operating  history as a software product company and has not made
significant  sales of its products.  Total  revenues for the year ended December
31, 1997 and for the nine months ended  September 30, 1998 were  $1,012,159  and
$398,590, respectively. Total revenues for the periods noted above included four
sales and five sales,  respectively,  of the Company?s product,  the QueryObject

                                       18

<PAGE>

System.  Prior to 1997,  the  Company's  revenues  were derived  primarily  from
contract  services  provided to customers using the Company's  proprietary  data
analysis technology. The Company has discontinued this business.

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

         Possible  Nasdaq  and  Boston  Stock  Exchange  Delisting;  Potentially
Limited  Trading  Market.  The  Common  Stock is listed on Nasdaq and the Boston
Stock Exchange.  Under Nasdaq rules, in order for the Company to remain eligible
for listing on Nasdaq,  (i) the  Company's  Common Stock must have a minimum bid
price of $1.00,  (ii) the  Company  must have  minimum  tangible  net  assets of
$2,000,000 or a market  capitalization  of $35,000,000 or net income of $500,000
in two of the three prior  years,  (iii) the Company must have a public float of
at least  500,000  shares  with a market  value of at least  $1,000,000  and the
Common  Stock must have at least two  market  makers and be held of record by at
least 300  stockholders.  As of September 30, 1998, the Company had a deficiency
of  $1,456,798 in net tangible  assets.  Nasdaq has advised the Company that the
Company no longer meets the requirements  for continued  listing and accordingly
the Company has provided  Nasdaq its proposal for achieving  compliance.  Nasdaq
has  requested  that the  Company  provide  certain  additional  information  by
November  18, 1998.  If Nasdaq  determines  that the  proposal  will not warrant
continued  listing,  Nasdaq  will issue a Formal  Notice of  deficiency  and the
Common  Stock will be delisted  pending a hearing.  If the Buyer  Representative
authorizes the transfer to the Company of all funds to be raised in the Series A
and Series B Private Placements,  the Company will add approximately  $3,900,000
(after  deducting the estimated  commissions  or expense  allowance  that may be
payable in  connection  with sales made  through the  placement  agent and other
expenses  of the Series A and Series B Private  Placement)  to its net  tangible
assets.  Due to  anticipated  and continued  losses  subsequent to September 30,
1998,  however,  there can be no  assurance  that such  amount  will  enable the
Company to meet the Nasdaq  requirement of $2,000,000 in net tangible assets for
a sustained period. Moreover, Nasdaq has discretionary power to delist companies
from Nasdaq even if they satisfy the requirements for eligibility.  As a result,
there can be no assurance  that the Company will  continue to meet the standards
for continued  listing on Nasdaq even if the Company  receives the entire amount
of the  Post-Closing  Installments.  Accordingly,  the Company may seek to enter
into a transaction or transactions to raise additional  equity capital to ensure
that its Common  Stock  will  continue  to be listed on Nasdaq.  There can be no
assurance that any additional financing,  if required,  will be available to the
Company on acceptable  terms,  if at all. In addition to the failure to meet the
financial requirements,  the issuance of Preferred Stock may violate Nasdaq Rule
4310(c)(25)(H)(i)  because the issuance of Conversion  Shares and Warrant Shares
may  exceed  the  20%  limitation  and  the  Company's   stockholders   did  not
specifically  approve the issuance of Preferred  Stock.  The failure to meet the
maintenance criteria

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<PAGE>

may result in the Common Stock no longer being  eligible for quotation on Nasdaq
and trading,  if any, of the Common Stock would  thereafter  be conducted on the
OTC  Bulletin  Board.  As  a  result  of  such   ineligibility  for  quotations,
stockholders  may find it more  difficult  to dispose of, or to obtain  accurate
quotations as to the market value of the Common Stock.

         Furthermore, on August 24, 1998, the Company received a letter from the
Boston  Stock  Exchange  informing  the Company that it no longer met the Boston
Stock  Exchange's  minimum  shareholder's  equity  maintenance   requirement  of
$500,000.  The Company  has  submitted  a written  response to the Boston  Stock
Exchange  indicating  that such  deficiency  has been  cured.  The Boston  Stock
Exchange has requested that the Company complete a listing  application prior to
making a determination on the adequacy of the Company's response.  If the Boston
Stock Exchange  determines that the Company's response is not adequate,  trading
in the  Company's  Common Stock could be suspended on the Boston Stock  Exchange
and such Common Stock could be delisted.

         In the  event of  Nasdaq  and  Boston  Stock  Exchange  delisting,  the
regulations of the Securities and Exchange Commission ("Commission") promulgated
under the Exchange Act require additional  disclosure relating to the market for
penny stocks.  Commission  regulations  generally  define a penny stock to be an
equity security (that is not listed on Nasdaq or a national securities exchange)
that has a market  price of less  than  $5.00  per  share,  subject  to  certain
exceptions.  A  disclosure  schedule  explaining  the penny stock market and the
risks  associated  therewith  is required  to be  delivered  to a purchaser  and
various sales practice requirements are imposed on broker-dealers who sell penny
stocks to persons  other than  established  customers and  accredited  investors
(generally  institutions).  In  addition,  the  broker-dealer  must  provide the
customer  with  current  bid and  offer  quotations  for the  penny  stock,  the
compensation  of the  broker-dealer  and its  salesperson in the transaction and
monthly account  statements showing the market value of each penny stock held in
the  customer's  account.  If the  Company's  securities  become  subject to the
regulations  applicable to penny stocks,  the market liquidity for the Company's
securities  could be severely  affected.  In such an event,  the  regulations on
penny stocks  could limit the ability of  broker-dealers  to sell the  Company's
securities  and thus the ability of purchasers  of the  Company's  securities to
sell their  securities  in the  secondary  market.  In the  absence of an active
trading  market,   holders  of  the  Common  Stock  may  experience  substantial
difficulty in selling their securities.

         The  trading  price of the  Company's  Common  Stock is  expected to be
subject to  significant  fluctuations  in response to  variations  in  quarterly
operating results,  changes in analysts' earnings estimates,  general conditions
in the computer  software  industry and other  factors.  In addition,  the stock
market is subject to price and volume fluctuations that affect the market prices
for companies and that are often unrelated to operating performance.

         Dependence on Significant Customers. For the fiscal year ended December
31, 1997 and for the nine months ended  September 30, 1998, one customer in each
period accounted for 65% and 55%, respectively, of the Company's total revenues.
The Company does not know at this time if significant future revenues from these
customers will occur.


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

Part II.          OTHER INFORMATION

Item 2.           Changes in Securities and Use of Proceeds

         As a result of the  designation  and issuance of the Series A Preferred
Stock and Series B  Preferred  Stock,  (i) the  rights of the  holders of Common
Stock with respect to liquidation,  dissolution or winding up of the Company are
junior to those of the  holders  of the  Series A  Preferred  Stock and Series B
Preferred  Stock,  (ii) no  dividends  may be payable on the Common Stock unless
equivalent  dividends are declared and paid  concurrently  to the holders of the
Series A Preferred  Stock and Series B Preferred  Stock and (iii) the holders of
the Series A Preferred  Stock and Series B Preferred Stock are entitled to vote,
on an  as-converted  basis,  on all  matters  submitted  to a vote of the Common
Stockholders  of the Company and the holders of the Series A Preferred Stock and
Series B Preferred Stock vote as separate  classes on all matters upon which the
Delaware  General  Corporation  Law  specifically  require  the  holders of such
preferred stock to vote as separate classes.

         On November 19, 1997 the  Commission  declared  effective the Company's
Registration  Statement on Form SB-2 (File No.  333-34667)  relating to the IPO.
Subsequent to the  information  provided in the Company?s  Annual Report on Form
10-KSB for the year ended  December 31, 1997,  the Company has used  proceeds of
the IPO as follows;  $2,579,000  has been used to fund the Company's  integrated
full scale sales and marketing  activities and to expand its sales and marketing
activities both domestically and  internationally,  $1,451,000 has been used for
research  and  development  including  enhancements  to  existing  features  and
development  of new  functions  for  QueryObject  System and  $1,260,000  of the
proceeds  of the IPO have been used for working  capital  and general  corporate
purposes. As of September 30, 1998 all of the IPO proceeds have been expended.

                                       21
<PAGE>
Item 4.  Submission of Matters to a Vote of Security Holders

      At a special  meeting of  stockholders  of the Company on August 12, 1998,
the  stockholders  approved a proposal that authorizes the Board of Directors of
the Company to determine  (i) the number of shares of Common Stock that would be
issued in a private offering (which could exceed 20% or more of the common Stock
outstanding);  (ii) the purchase  price of such shares of Common Stock and (iii)
whether  warrants would be issued in the private  offering and, if so, the terms
and conditions of the warrants.

         The vote to authorize the Private Placement was as follows:

                  For                 Against           Abstain

                  2,774,528           34,995            21,635

Item 5.  Other Information

         See Note 7 of Notes to the Condensed Consolidated Financial Statements.

Item 6.  Exhibits and Reports on Form 8-K

         (a)  Exhibits

              Certificate  of  Designations,  Preferences  and Other  Rights and
              Qualifications  of Series A Convertible  Preferred  Stock (Exhibit
              99-A)

              Certificate  of Correction  to the  Certificate  of  Designations,
              Preferences  and  Other  Rights  and  Qualifications  of  Series A
              Convertible Preferred Stock (Exhibit 99-B)

              Certificate  of  Designations,  Preferences  and Other  Rights and
              Qualifications  of Series B Convertible  Preferred  Stock (Exhibit
              99-C)

               Form of Warrant Issued in Private Placement (Exhibit 99-D)

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

               Financial Data Schedule (Exhibit 27.1)

           (b) Reports on Form 8-K

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

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<PAGE>
                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.



Dated: November 13, 1998           QUERYOBJECT SYSTEMS CORPORATION



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


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