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, 1999


/ /      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)


                         60 Charles Lindbergh Boulevard
                            Uniondale, New York 11553

                    (Address of principal executive offices)


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



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

         As of July 31,  1999 there were  7,073,647  shares of the  Registrant's
common stock outstanding.

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

<PAGE>
                         QUERYOBJECT SYSTEMS CORPORATION

                                   FORM 10-QSB

                                      INDEX



PART I.    FINANCIAL INFORMATION                                            PAGE

Item 1.    Financial Statements

           Condensed Consolidated Balance Sheet
           As of June 30, 1999 (unaudited)................................... 3

           Condensed Consolidated Statement of Operations
           For the three months and six months ended June 30, 1999
           and 1998 (unaudited)...............................................4

           Condensed Consolidated Statement of Cash Flows
           For the six months ended June 30, 1999 and 1998 (unaudited)....... 5

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

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

PART II.   OTHER INFORMATION

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

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

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

Item 6.    Exhibits and Reports on Form 8-K..................................23

SIGNATURES...................................................................24


                                       2
<PAGE>
Part I.

Item 1.                    Financial Statements


                         QUERYOBJECT SYSTEMS CORPORATION

                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                        June 30,
                                                                         1999
ASSETS
Current assets
<S>                                                                  <C>
   Cash and cash equivalents ....................................    $   283,503
   Accounts receivable, net of allowance for doubtful
      accounts of $70,000 .......................................        825,371


      Prepaid expenses and other current assets .................        253,724
                                                                    ------------
          Total current assets ..................................      1,362,598

Property and equipment, net .....................................        818,670
Deposits and other assets .......................................         68,616
                                                                    ------------
          Total assets ..........................................   $  2,249,884
                                                                    ------------

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
   Accounts payable .............................................   $    874,069
   Accrued expenses .............................................        850,854
   Deferred revenue .............................................        144,060
   Deferred rent ................................................         10,247
   Capital lease obligations due within one year ................        180,964
                                                                    ------------
          Total current liabilities .............................      2,060,194

Deferred rent ...................................................        251,455
Capital lease obligations .......................................         80,787
                                                                    ------------
          Total liabilities .....................................      2,392,436
                                                                    ------------
Stockholders' deficit
   Preferred stock, $.001 par value, 4,000,000 shares authorized;
      1,650,500, 95,500 and 1,000 shares of Series A, B and C,
      respectively, issued and outstanding ......................          1,747
   Common stock, $0.001 par value: 60,000,000 shares
      authorized; 6,805,997 shares issued and outstanding .......          6,806
   Additional paid-in capital ...................................     38,514,209
   Accumulated deficit ..........................................    (38,665,314)
                                                                    ------------
          Total stockholders' deficit ...........................       (142,552)

          Total liabilities and stockholders' deficit ...........   $  2,249,884
                                                                    ------------
</TABLE>

     See accompanying Notes to Condensed Consolidated Financial Statements.

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


                                                                         Three Months Ended               Six Months Ended
                                                                               June 30,                       June 30,
                                                                       1999             1998           1999            1998
Revenues
<S>                                                               <C>              <C>             <C>              <C>
     Software licenses............................................$   503,200      $    60,000     $   553,200      $  135,000
     Services and maintenance.....................................     26,905           24,165          53,094          61,026
                                                                  -----------     -----------    -------------     -----------
               Total revenues.....................................    530,105           84,165         606,294         196,026

Cost of revenues
     Software licenses                                                 20,128              750          22,178           1,500
     Services and maintenance.....................................     18,870           21,155          37,858          45,911
                                                                  -----------     -----------    -------------     -----------
               Total cost of revenues.............................     38,998           21,905          60,036          47,411
                                                                  -----------     -----------    -------------     -----------
Gross profit                                                          491,107           62,260         546,258         148,615
                                                                  -----------     -----------    -------------     -----------
Operating expenses
     Sales and marketing                                              961,289        1,141,228       1,849,974       2,468,446
     Research and development.....................................    707,596          614,839       1,239,627       1,181,256
     General and administrative...................................    345,392          400,729         692,516         850,730
                                                                  -----------     -----------    -------------     -----------
               Total operating expenses...........................  2,014,277        2,156,796       3,782,117       4,500,432
                                                                  -----------     -----------    -------------     -----------
Loss from operations.............................................. (1,523,170)      (2,094,536)     (3,235,859)     (4,351,817)

Interest income...................................................      2,063          38,024           11,312         101,365
Interest expense..................................................    (12,923)        (35,924)         (27,022)        (77,336)
Other (expense) income............................................     (1,288)             25           (1,288)           (206)
                                                                  -----------     -----------    -------------     -----------
Net loss..........................................................$(1,535,318)    $(2,092,411)   $  (3,252,857)    $(4,327,994)
                                                                  ===========     ===========    =============     ===========


Basic and diluted net loss per common share.......................$      (.24)    $      (.41)   $        (.54)    $      (.85)
                                                                  -----------     -----------    -------------     -----------
Weighted average shares used in per share
     computation (Note 2).........................................  6,467,380       5,120,519        5,978,579       5,118,580
                                                                  ===========     ===========    =============     ===========
</TABLE>

     See accompanying Notes to Condensed Consolidated Financial Statements.

                                       4

<PAGE>
                         QUERYOBJECT SYSTEMS CORPORATION
                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                                         Six Months Ended
                                                                                            June 30,
                                                                                      1999             1998

Cash flows from operating activities
<S>                                                                             <C>               <C>
      Net loss                                                                  $ (3,252,857)     $(4,327,994)
      Adjustments to reconcile net loss to net cash used in operating
          activities
      Depreciation and amortization                                                  219,849          204,864
      Write-off of computer equipment                                                  1,288               --
      Loss on sale of computer equipment                                                  --              206
      Options issued for consulting services                                         257,652           76,499
      Changes in assets and liabilities
          Accounts receivable, net                                                  (548,844)         341,087
          Prepaid expenses and other current assets.....................            (215,973)         (31,286)
          Deposits and other assets.....................................              12,415            3,822
          Accounts payable and accrued expenses.........................             438,148         (465,976)
          Deferred rent.................................................              (8,127)             448
          Deferred revenue..............................................              59,269           28,716

          Net cash used in operating activities.........................           3,037,180)      (4,169,614)
                                                                                -----------       -----------
Cash flows from investing activities
      Release of restricted certificate of deposit......................                  --          296,213
      Loan receivable from stockholder..................................                  --          (65,000)
      Acquisitions of property and equipment............................             (78,564)         (88,408)
      Repayment of stockholder loan.....................................              65,000               --
      Purchase of restricted certificate of deposit.....................                  --          (16,827)
                                                                                -----------       -----------

          Net cash (used in) provided by investing activities...........             (13,564)         125,978
                                                                                -----------       -----------
Cash flows from financing activities
      Proceeds from exercise of  common stock warrants and options......             635,256           10,384
      Proceeds from issuance of preferred stock, net....................             834,517               --
      Collection of stock subscriptions receivable, net.................           1,396,000               --
      Repayment of notes payable to stockholders........................            (700,000)        (326,213)
      Payments of capital lease obligations.............................             (85,544)        (115,534)
      Proceeds from notes payable to stockholders.......................             400,000               --
      Repayment of loan receivable from stockholder.....................                  --           12,300
      Proceeds from sale-leaseback transaction..........................                  --           29,202
                                                                                -----------       -----------

          Net cash provided by (used in) financing activities...........           2,480,229         (389,861)
                                                                                -----------       -----------

Net decrease in cash and cash equivalents...............................           (570,515)       (4,433,497)


Cash and cash equivalents at beginning of year.........................             854,018         5,437,350
                                                                                -----------       -----------

Cash and cash equivalents at end of period.............................         $   283,503       $ 1,003,853
                                                                                -----------       -----------
</TABLE>


     See accompanying Notes to Condensed Consolidated Financial Statements.

                                       5
<PAGE>
                         QUERYOBJECT SYSTEMS CORPORATION
            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


1.       Basis of Presentation

         The unaudited  condensed  consolidated  financial  statements  included
herein reflect all adjustments, consisting only of normal recurring adjustments,
which in the opinion of  management  are necessary to fairly state the Company's
financial  position,  results  of  operations  and cash  flows  for the  periods
presented.  These financial  statements  should be read in conjunction  with the
Company's audited financial  statements  included in the Company's Annual Report
on Form 10-KSB for the year ended  December 31, 1998.  The results of operations
for the period ended June 30, 1999 are not necessarily indicative of the results
to be expected for any subsequent  quarter, or for the entire fiscal year ending
December 31, 1999, or for any future period.

2.       Net Loss Per Share

         Basic  net loss per  share is  computed  by  dividing  net loss for the
period by the sum of the  weighted  average  number  of  shares of common  stock
outstanding.  Options  and  warrants to acquire  common  stock and the Series A,
Series B and Series C Convertible  Preferred 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.

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

                                                                      Six Months Ended
                                                                          June 30,
                                                                    1999          1998


<S>                                                             <C>           <C>
    Interest paid during the period............................ $  37,163     $  78,752
    Common stock options issued for consulting services........   257,652        76,499
</TABLE>

4.       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.

5.       Liquidity and Business Risks

         The Company has incurred operating losses since inception, has incurred
negative cash flows from operating activities,  has negative working capital and
had an accumulated  deficit of $38,665,314  and  $35,412,456 as of June 30, 1999
and  December 31, 1998,  respectively.  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. The Company anticipates
that its cash and cash equivalent  balances,  after giving effect to the sale of
Series C


                                       6
<PAGE>

Convertible  Preferred Stock (the "Series C Preferred Stock") subsequent to June
30, 1999, may be insufficient to satisfy its operating cash flow requirements in
the foreseeable  future.  As discussed in Note 6. below,  the Company has sold a
total of $3,730,000  (37.3 Units) of Series C Preferred  Stock and will continue
to sell  additional  Series C Preferred  Stock until August 31, 1999 or until 45
Units are sold, whichever is earlier.  However,  there can be no assurances that
the Company will be successful in raising  additional  funds.  See "Risk Factors
That May Affect Future Results"  Negative Working  Capital;  Need for Additional
Funding".  The sale of additional  equity  securities  will result in additional
dilution to the Company's stockholders.

6.       Series C Convertible Preferred Stock

         On June 28, 1999, the Company had the initial  closing of 10 Units (the
"Units") of Series C Preferred Stock totaling  $1,000,000 in a private placement
(the "Series C Private Placement").  The Series C Private Placement provides for
a minimum of 10 and a maximum of 45 Units at a purchase  price of  $100,000  per
unit.  Each Unit  consists of 100 shares of  newly-created  Series C Convertible
Preferred  Stock,  $.001 par value,  and a Common  Stock  Purchase  Warrant (the
"Warrants")  exercisable  until December 28, 2001 to purchase  100,000 shares of
Common Stock at an exercise price of $.8625 per share. In the initial closing of
Series C Preferred  Stock,  the Company  received  net  proceeds of $834,517 and
issued  1,000  shares of  Series C  Preferred  Stock  that is  convertible  into
1,159,426  shares of Common Stock and Warrants to purchase  1,000,000  shares of
Common Stock.  Each share of Series C Preferred  Stock is convertible  into such
number  of  shares  of  Common  Stock as is equal to the  quotient  obtained  by
dividing $1,000 by the fair market value of the Common Stock,  i.e., the average
closing price of the Common Stock in the principal securities market in which it
is then traded for the five trading days  immediately  preceding the date of the
initial closing of the offering ($.8625).

         Subsequent to June 30, 1999, the Company had additional  closings which
totaled 27.3 Units or  $2,730,000 of such  securities  receiving net proceeds of
$2,519,650  and  issued  2,730  shares  of  Series  C  Preferred  Stock  that is
convertible  into  3,165,218  shares of Common  Stock and  Warrants  to purchase
2,730,000  shares of Common  Stock.  The Company will seek to sell the remaining
7.7 Units until August 31, 1999 unless it extends the termination date.

         In  connection  with  the  initial  closing  of the  Series  C  Private
Placement,  the placement agent was granted an option to purchase that number of
shares of Common  Stock as equals 8% of the number of shares  issuable  upon the
conversion  of the  Series C  Preferred  Stock and  received  a  commission  and
non-accountable  expense allowance equal to 7% of the gross proceeds received by
the Company in the Series C Private  Placement.  The securities offered and sold
in the Series C Private  Placement 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
September 27, 1999.
                                       7

<PAGE>
         The following is a description of the Series C Preferred Stock:

         Stated Value. Each share of Series C Preferred Stock has a stated value
(the "Stated Value") equal to $1,000.

         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) first, to the holders of the Series A Preferred
Stock  and the  Series B  Preferred  Stock to the  extent  of their  liquidation
preference,  presently $2.00 per share and $10.00 per share, respectively:  (ii)
second, to the holders of the Series C Preferred Stock,  prior and in preference
to any  distribution to the holders of any Junior  Securities an amount equal to
the Stated Value for each share of Series C Preferred Stock then outstanding and
(iii)  third,  to the  holders  of issued  and  outstanding  Junior  Securities,
including shares of Common Stock.

         Ranking. The Series C Preferred Stock will rank junior to the Company's
Series A Preferred  Stock and Series B Convertible  Preferred Stock with respect
to rights on liquidation, dissolution or winding up of the Company. The Series C
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.

         Dividends.  The  holders of the Series C  Preferred  Stock shall not be
entitled  to  receive  any  stated  amount  of  dividends,  whether  in  cash or
otherwise.

         Conversion. The holders of the Series C 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 C Preferred  Stock into one thousand
one hundred and fifty nine (1,159) shares of Common Stock.

         Voting.  The  holders of the Series C 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 C 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 C Preferred Stock vote as
a separate class on all matters upon which the Delaware General  Corporation Law
specifically  requires the holders of such preferred stock to vote as a separate
class.

         Warrants

         Each  Warrant  entitles  the  registered  holder to purchase at anytime
until December 28, 2001,  100,000 shares of Common Stock,  subject to adjustment
to protect against dilution,  at a per share exercise price equal to $.8625. The
Series C Warrants  may be called for  redemption  by



                                       8
<PAGE>

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 $1.20 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.

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, 1998.

         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 until 1997
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. In November 1997, the Company began implementation of full-scale
marketing  activity for QueryObject  System. The Company has a limited operating
history as a software  product  company and has made only  limited  sales of its
QueryObject System.

         To date, the Company has incurred  substantial  losses from operations,
and at June 30, 1999, had an  accumulated  deficit of  $38,665,314.  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.

         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.

                                       9
<PAGE>
Results of Operations

         The  following   table  sets  forth  certain  items  in  the  Company's
consolidated  statements of operations for the three and six month periods ended
June 30, 1999 and 1998 ($ in thousands):

                                     Three Months Ended     Six Months Ended
                                         June 30,                June 30,
                                       1999       1998       1999       1998
Revenues
      Software licenses ..........   $   503    $    60    $   553    $   135
      Maintenance ................        27         24         53         61
                                     -------    -------    -------    -------
           Total revenues ........       530         84        606        196
                                     -------    -------    -------    -------
Cost of revenues
      Software licenses ..........        20          1         22          1
      Maintenance ................        19         21         38         46
                                     -------    -------    -------    -------
          Total cost of revenues .        39         22         60         47
                                     -------    -------    -------    -------
Gross profit .....................       491         62        546        149
                                     -------    -------    -------    -------
Operating expenses
      Sales and marketing ........       961      1,141      1,850      2,469
      Research and development ...       708        615      1,240      1,181
      General and administrative .       345        401        692        851
                                     -------    -------    -------    -------
          Total operating expenses     2,014      2,157      3,782      4,501
                                     -------    -------    -------    -------
Loss from operations .............    (1,523)    (2,095)    (3,236)    (4,352)

  Interest income ................         2         38         11        101
  Interest expense ...............       (13)       (35)       (27)       (77)
  Other expense ..................        (1)      --           (1)      --
                                     -------    -------    -------    -------
Net loss .........................   $(1,535)   $(2,092)   $(3,253)   $(4,328)
                                     -------    -------    -------    -------

Revenues

         The  Company's  license  revenues  have been  generated  from  sales of
QueryObject System. Maintenance revenues consist of ongoing support and products
updates  and are  recognized  ratably  over the term of the  contract,  which is
typically twelve months.

         Total  revenues  increased  by $446,000,  or 531%,  from $84,000 in the
second  quarter of 1998 to $530,000 in the second quarter of 1999. For the first
six months, total revenues increased by $410,000,  or 209% from $196,000 in 1998
to  $606,000  in 1999.  These  increases  were  primarily  due to an increase in
license  revenues in the 1999 periods as compared to 1998. The Company  recorded
license  revenue  from the sale of 5 licenses  in the second  quarter of 1999 as
compared  to the sale of 1 license in the second  quarter of 1998.  The  Company
recorded license revenue from the sale of 6 licenses for the first six months of
1999 as  compared  to the sale of 2  licenses  for the first six months of 1998.
Maintenance  revenue  increased  by $3,000,  or 13%,  from


                                       10
<PAGE>

$24,000 in the second  quarter of 1998 to $27,000 in the second quarter of 1999.
For the first six months,  maintenance  revenue decreased by $8,000, or 13% from
$61,000 in 1998 to $53,000 in 1999.  Maintenance revenue is expected to increase
as the Company continues to sell additional licenses.

Cost of Revenues

         Cost of software  license  revenues  consists  primarily of  royalties,
product packaging,  documentation and production costs. Cost of software license
revenues as a  percentage  of software  license  revenues was 4.0% in the second
quarter  of 1999 as  compared  to 1.3% for the second  quarter of 1998.  Cost of
software  license revenues as a percentage of software license revenues was 4.0%
for the first six months of 1999 as compared to 1.1% for the first six months of
1998.  These increases  resulted from royalty  payments made to third parties in
the 1999 periods.

         Cost of maintenance  revenues consists  primarily of personnel costs in
providing  customer  support.  Cost of  maintenance  revenues as a percentage of
maintenance revenues were 70.1% and 71.3%,  respectively,  for the three and six
month periods ended June 30, 1999. Cost of maintenance  revenues as a percentage
of maintenance revenues were 87.5% and 75.2%, respectively,  for the three month
and six month periods ended June 30, 1998.  These  decreases in the 1999 periods
were primarily due to a reduced requirement for customer support.

Operating Expenses

         Sales and Marketing.  Sales and marketing expenses consist primarily of
personnel  costs,  including  sales  commissions and incentives of all personnel
involved  in the sales and  marketing  process,  as well as  related  recruiting
costs,  public  relations,   consulting  expense,   advertising  related  costs,
collateral  material and trade shows.  Sales and marketing expenses decreased by
$180,000,  or 16%, from  $1,141,000 in the second quarter of 1998 to $961,000 in
the  second  quarter  of 1999.  For the first six  months,  sales and  marketing
expenses decreased by $619,000, or 25%, from $2,469,000 in 1998 to $1,850,000 in
1999.  These  decreases in the 1999 periods were  primarily due to reduced sales
personnel  related costs as a result of fewer employees and decreased  marketing
expenses.  The  Company  believes  that its sales and  marketing  expenses  will
increase  in  absolute  dollars as the  Company  increases  promotion  and other
marketing expenses.

         Research and  Development.  Research and development  expenses  consist
primarily of salaries and other personnel  related  expenses,  recruiting  costs
associated  with  the  hiring  of  software   engineers  and  quality  assurance
personnel,  consultant costs and depreciation of development equipment. Research
and  development  expenses  increased by $93,000,  or 15%,  from $615,000 in the
second  quarter of 1998 to $708,000 in the second quarter of 1999. For the first
six months,  research and development expenses increased by $59,000, or 5%, from
$1,181,000 in 1998 to $1,240,000  in 1999.  These  increases in the 1999 periods
were primarily due to increased  personnel  related costs.  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.


                                       11

<PAGE>

         General and Administrative. General and administrative expenses consist
primarily  of personnel  costs for finance,  MIS,  human  resources  and general
management, as well as insurance,  consulting and professional expenses. General
and administrative  expenses decreased by $56,000,  or 14%, from $401,000 in the
second  quarter of 1998 to $345,000 in the second quarter of 1999. For the first
six months,  general and administrative  expenses decreased by $159,000, or 19%,
from $851,000 in 1998 to $692,000 in 1999.  These  decreases in the 1999 periods
were  primarily  due to a reduction  in personnel  related  costs as a result of
fewer employees and decreased  professional  expenses. The Company believes that
its general and administrative expenses will 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 $36,000,  or 95%, from $38,000 in the
second  quarter of 1998 to $2,000 in the second  quarter of 1999.  For the first
six months,  interest income decreased by $90,000, or 89%, from $101,000 in 1998
to $11,000 in 1999.  These decreases in the 1999 periods were primarily due to a
lower level of cash and cash equivalents on deposit.

         Interest expense  generally  represents  interest on capital  equipment
leases,  and for the 1998  periods,  charges  relating  to the H.C.C.  Financial
Services Loan Agreement (the "Loan  Agreement").  Interest expense  decreased by
$22,000,  or 63%,  from $35,000 in the second  quarter of 1998 to $13,000 in the
second quarter of 1999. For the first six months,  interest expense decreased by
$50,000, or 65%, from $77,000 in 1998 to $27,000 in 1999. These decreases in the
1999  periods  were  primarily  due to payments  made to reduce the  outstanding
balance under the Loan Agreement during the 1998 periods.  The remaining balance
under the Loan Agreement was repaid in full during October 1998.

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 1998 and 1997 and consequently  paid no
federal or state  income  taxes.  At  December  31,  1998,  the  Company had net
operating  losses and  research and  experimental  tax credit  carryforwards  of
$29,660,000  and  $207,000,  respectively,  available to offset  future  federal
taxable income and tax. These net operating loss carryforwards expire at various
dates through 2018.  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.


                                       12
<PAGE>

Liquidity and Capital Resources

         On November  25,  1997,  the  Company  consummated  its initial  public
offering  ("IPO") whereby it sold 2,500,000  shares of Common Stock 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 analysis of its
cash position was  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 determined  that a private  offering of the
Company's securities would be in the best interests of the Company.

         As a result,  in October and November 1998, the Company had the initial
closing of two  private  placements  -- the Series A Private  Placement  and the
Series  B  Private  Placement.  The  Series A  Private  Placement  consisted  of
1,750,000  Units (the "Series A Units") with a gross sales price of  $3,500,000.
The Series B Private Placement consisted of 10 Units (the "Series B Units") with
a gross sales price of $1,000,000.  Each Series A Unit consisted of one share of
Series A Convertible  Preferred Stock ("Series A Preferred Stock") and a warrant
to purchase  2.5 shares of Common Stock at a per share  exercise  price equal to
$.50.  Each Series B Unit  consisted  of 10,000  shares of Series B  Convertible
Preferred  Stock  ("Series B  Preferred  Stock")  and  warrants  to  purchase an
aggregate of 125,000  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 Unit and
each share of Series A Preferred Stock share is convertible  into four shares of
Common Stock.  The Series B Units were sold at a purchase  price of $100,000 per
Unit and each  share of Series B  Preferred  Stock is  convertible  into  twenty
shares  of  Common  Stock.  The  effective  purchase  price,  on a Common  Stock
equivalent  basis was $.50 per common share,  which  represented a discount from
the fair market  value of the  Company's  Common  Stock on the various  dates of
issuance.  The  Company  consummated  the final  closing on each of the Series A
Private  Placement  and the  Series B Private  Placement  in  February  1999 and
received an  aggregate  of (1)  $3,181,000  from the Series A Private  Placement
(after deduction of commissions and expenses payable to the placement agent) and
(ii)  $814,000  from  the  Series  B  Private   Placement  (after  deduction  of
commissions and expenses payable to the placement  agent).  The Company has also
received  $635,256 from the exercise of warrants granted in the Series A Private
Placement and Series B Private Placement,  of which $294,006 was received in the
three months ended June 30, 1999.

         In connection  with the Series A and Series B Private  Placements,  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 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.



                                       13
<PAGE>

         In June 1999, the Company consummated the initial closing of the Series
C Private  Placement,  pursuant to which the Company  received  net  proceeds of
$834,517. See Note 6 to the Condensed Consolidated Financial Statements. The net
proceeds of the Series C Private Placement will be used for sales and marketing,
research and development, and general working capital purposes.

         During  May  and  June  1999,  the  Company   borrowed   $400,000  from
stockholders  of the  Company in  exchange  for  promissory  notes  (the  "Notes
Payable").  The Notes Payable bear interest at 12% per annum and were due at the
earlier of June 30, 1999 or the successful  consummation of the Series C Private
Placement.  Upon the initial  closing of the Series C Private  Placement on June
28, 1999, the Notes were repaid.

         As of June  30,  1999,  the  Company  had  $284,000  in cash  and  cash
equivalents  and a  working  capital  deficit  of  $698,000.  Net  cash  used in
operating  activities  was  $3,037,000  and  $4,170,000 for the six month period
ended in 1999 and  1998,  respectively.  For 1999,  net cash  used in  operating
activities  was  primarily  attributable  to a  net  loss  of  $3,253,000,  less
depreciation and amortization of $220,000.  For 1998, net cash used in operating
activities  was  primarily  attributable  to a  net  loss  of  $4,328,000,  less
depreciation  and  amortization  of  $205,000.  Net cash  provided by  financing
activities  was  $2,480,000 in 1999,  primarily as a result of the collection of
stock  subscription  receivables,  the  initial  closing of the Series C Private
Placement and the exercise of common stock purchase warrants.

         The Company does not currently  have a line of credit with a commercial
bank. As of December 31, 1998, the Company's principal  commitments consisted of
obligations  under  operating and capital leases and employment  agreements.  At
that date,  the Company had  approximately  $347,000 in  outstanding  borrowings
under capital  leases which are payable  through 2001.  The Company is currently
negotiating new employment  agreements  with executive  officers of the Company.
Pursuant to employment  agreements with executive  officers of the Company as of
June 30, 1999,  the Company's  remaining  obligation is to pay $54,000 and $0 in
salaries for the years ended December 31, 1999 and 2000, respectively.

         As of June 30,  1999,  the Company had a deficit in working  capital of
$698,000.  During 1999, the Company received  $1,396,000 in working capital from
the proceeds of the 1998 Private Placement, $854,186 from the initial closing of
the Series C Private  Placement  and  $834,517  from the  exercise  of  warrants
granted in the 1998  Private  Placements.  The  Company has  incurred  operating
losses  since  inception,  has  incurred  negative  cash  flows  from  operating
activities  and had an  accumulated  deficit of $38,665,314 as of June 30, 1999.
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.  The Company anticipates that its cash and cash equivalent
balances,  after  giving  effect to the sale of Series C  Convertible  Preferred
Stock (the  "Series C Preferred  Stock")  subsequent  to June 30,  1999,  may be
insufficient to satisfy its operating cash flow  requirements in the foreseeable
future.  As discussed in Notes 5. and 6. above,  the Company has sold a total of
$3,730,000  of  Series C  Convertible  Preferred  Stock  and  will  seek to sell
additional  Series C Preferred  Stock up to 45 Units.  However,  there can be no
assurances that the Company will be successful in raising  additional funds. See
"Risk Factors That May Affect Future Results - Negative  Working  Capital;  Need
for Additional Funding". The sale of additional equity securities will result in
additional dilution to the Company's stockholders.

                                       14
<PAGE>

Year 2000 Compliance

         We have  commenced  an  assessment  of the  readiness  of our  internal
business  information  systems  for  handling  the Year  2000 and the Year  2000
compliance  of our  products.  We believe that we will need to modify or replace
portions  of our  internal  business  information  systems  to ensure  Year 2000
compliance  and we expect  that we will  successfully  address  Year 2000 issues
relating to our internal business information systems by the end of fiscal 1999.

         We believe that our current products are Year 2000 compliant.  However,
it is possible that current or future  customers  will assert claims  against us
with  respect to Year 2000 issues and, in the event such claims are asserted and
adjudicated in favor of these customers, our liability could be material. We are
taking steps to identify  affected  customers and assist them in assessing risks
that  may be  associated  with  our  products.  We may  incur  increasing  costs
regarding  customer service related to these actions over the next few years. As
our customer service programs are currently ongoing,  we are unsure of the scope
of any resulting  Year 2000 issues and potential  liability  resulting from such
issues.  We do not know the potential impact on our business,  operating results
and financial condition with respect to these matters.

         We have had discussions with our significant vendors, service providers
and large  customers  to  evaluate  Year 2000  issues,  if any,  relating to the
interaction of their systems with our internal systems. We have not yet received
written compliance  information from these third parties and we cannot currently
determine  when we will  receive  all of this  information.  Thus,  despite  the
initiation of these discussions,  we lack the information  necessary to estimate
the  potential  impact of Year 2000  compliance  issues  relating to these third
parties  and their  interaction  with us and are unsure of when we will  receive
such information.

         While we have not incurred any material expenditures in connection with
identifying or evaluating Year 2000 compliance issues, there can be no assurance
that our Year 2000  compliance  costs will  continue at this level.  Most of our
expenses  have related to the  opportunity  cost of time spent by our  employees
evaluating  our  internal  business  information  systems,  our products and the
interaction  of our  internal  business  information  systems  with the internal
systems of third  parties.  Although we are unaware of any material  operational
issues or costs  associated  with  preparing our internal  business  information
systems and products for the Year 2000, we are unsure that we will avoid serious
unanticipated  negative  consequences and/or material costs caused by undetected
errors or defects in our technology.  Such unanticipated  negative  consequences
and/or material costs, if incurred,  could have a material adverse effect on our
business, operating results or financial condition.

         Because we are unaware of any material Year 2000 compliance  issues, we
lack a Year  2000-specific  contingency plan. If Year 2000 compliance issues are
discovered, we will evaluate the need for one or more contingency plans relating
to  such  issues.  If  we  are  unable  to  develop  and  implement  appropriate
contingency  plans, as needed,  in a timely manner, we may experience delays in,
or increased costs  associated  with,  implementation  of changes to address any
such  issues,  which  could  have a  material  adverse  effect on our  business,
operating results or financial condition.

                                       15
<PAGE>

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.

         Negative  Working  Capital;  Need For Additional  Funding:  At June 30,
1999,  we had  negative  working  capital  of  $697,596.  We have had a  limited
operating history as a software product company, have not made significant sales
of our products and our revenues are  difficult to predict.  Given our continued
operating losses, we may need additional financing to continue  operations.  Our
current projections  indicate that our current cash and cash equivalent position
may be insufficient to satisfy our liquidity requirements. Except as provided in
the  next  paragraph,  we  have no  commitments,  agreements  or  understandings
regarding  additional  financings  and we may be  unable  to  obtain  additional
financing.

         On June 28,  1999 we sold  our  first  $1,000,000  of  securities  in a
private  placement  (the  "Series C Private  Placement").  The  Series C Private
Placement  provides for a minimum of 10 and a maximum of 30 units (the  "Units")
at a purchase  price of $100,000 per unit.  We have the ability to increase this
offering  to 45 Units  at our  discretion  and have  elected  to so.  Each  Unit
consists of 100 shares of  newly-created  Series C Convertible  Preferred Stock,
$.001 par value (the "Series C Preferred  Stock"),  and a Common Stock  Purchase
Warrant (the "Warrant")  exercisable until December 28, 2001 to purchase 100,000
shares of Common Stock at an exercise price of $.8625 per share.  As a result of
our sale of  $1,000,000 of securities on June 28, 1999, we received net proceeds
of  $834,517  and  issued  1,000  shares of  Series C  Preferred  Stock  that is
convertible  into  1,159,426  shares of Common  Stock and  Warrants  to purchase
1,000,000  shares  of  Common  Stock.  Subsequent  to  June  30,  1999,  we sold
$2,730,000 of such  securities  receiving net proceeds of $2,519,650  and issued
2,730  shares of Series C Preferred  Stock that is  convertible  into  3,165,218
shares of Common  Stock and  Warrants  to  purchase  2,730,000  shares of Common
Stock. We are currently attempting to sell additional Units and will do so until
all 45 Units are sold.  Each share of Series C  Preferred  Stock is  convertible
into such number of shares of Common Stock as is equal to the quotient  obtained
by  dividing  $1,000 by the fair market  value of the Common  Stock,  i.e.,  the
average closing price of the Common Stock in the principal  securities market in
which it is then traded for the five trading days immediately preceding the date
of the initial closing of the offering ($.8625).

         Accumulated Deficit;  Historical and Projected Future Operating Losses;
Going Concern  Qualification  in Independent  Accountants'  Report:  At June 30,
1999, our accumulated deficit was $38,665,314. For the six months ended June 30,
1999 and the fiscal years ended  December 31,  1998,  and 1997,  we incurred net
losses of $3,252,857, $7,294,032 and $10,563,484, 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, 1998 states
that our recurring losses from  operations,  our deficiencies in working capital
and stockholders? equity, and negative cash flow from operating activities raise
substantial doubt about our ability to continue as a going concern.


                                       16
<PAGE>

         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 and control costs

         o        the  percentage  of our revenues that is derived from indirect
                  channel partners

         Limited  Operating  History;  Lack of  Substantial  Revenue:  We have a
limited  operating  history as a  software  product  company  and have made only
limited sales of our products.  Our total  revenues for the year ended  December
31, 1998 and for the six months ended June 30, 1999 were  $928,505 and $606,294,
respectively.  Prior to 1997, our revenues were derived  primarily from contract
data analysis services, which we no longer provide.

         Dependence  Upon  QueryOject  System;  Uncertain  Market  Acceptance of
QueryObject System: Substantially all of our revenues for the foreseeable future
are expected to be derived from sales of QueryObject System.  Between January 1,
1995 and June 30, 1999, we had software product revenue from only 21 QueryObject
System  installations,  including those sold pursuant to reseller agreements for
the  resellers'  own use. We only  recently  commenced an  integrated  marketing
effort for our products.  Our 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.  If we fail to achieve
broad market acceptance of QueryObject  System, it would have a material adverse
effect on our business, operating results and financial condition.

         Nasdaq Delisting;  Potentially  Limited Trading Market:  Effective with
the close of business on May 6, 1999,  our Common  Stock was  delisted  from the
Nasdaq  SmallCap  Market  ("Nasdaq")  because of our  inability  to comply  with
certain  maintenance   standards  required  for  continued  listing  on  Nasdaq,
including  the  net  tangible  asset  requirement.  We  fell  out of  compliance
primarily as a result of continued losses during 1998.

         Now that the Common Stock has been delisted from Nasdaq, trading in the
Common  Stock is  conducted  on the OTC  Bulletin  Board and may  continue to be
conducted on the Boston Stock  Exchange.  The Boston Stock Exchange has notified
us that we may not meet such exchange's  continuing  listing  requirements  with
regard to net  tangible  assets and that it will  delist the Common  Stock if we
have less than $500,000 in net tangible assets.  We may be unable to maintain at
least $500,000 in net tangible assets without additional  financing.  The Boston
Stock Exchange has advised us that the Common Stock can temporarily  continue to
be listed on the Boston Stock  Exchange at least until August 16, 1999.  At such
time, we must advise the Boston Stock Exchange  whether the offering of Series C
Preferred  Stock has closed


                                       17
<PAGE>

and how  much  proceeds  we have  received  from  such  offering.  Based on such
information and our financial  condition at such time, the Boston Stock Exchange
may determine to delist the Common Stock.

         If the Common  Stock is delisted  from the Boston Stock  Exchange,  the
Common Stock could be considered a penny stock. SEC regulations generally define
a penny  stock to be an  equity  security  that is not  listed  on  Nasdaq  or a
national  securities exchange and that has a market price of less than $5.00 per
share,  subject to certain exceptions.  The regulations of the SEC would require
broker-dealers  to deliver to a purchaser of Common Stock a disclosure  schedule
explaining  the penny stock  market and the risks  associated  with it.  Various
sales practice  requirements are also imposed on  broker-dealers  who sell penny
stocks to persons  other than  established  customers and  accredited  investors
(generally institutions). In addition,  broker-dealers 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 our  Common  Stock is  traded  only on the OTC  Bulletin  Board and
becomes  subject to the  regulations  applicable to penny stocks,  investors may
find it more  difficult to obtain timely and accurate  quotes and execute trades
in the Common Stock.

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

         Dependence on Significant Customers:  For the six months ended June 30,
1999,  four customers  accounted for 94%, and for the fiscal year ended December
31, 1998, four customers accounted for 80%, of our total revenues. We are unsure
if we will realize  significant future revenues from any of these customers.  We
also  expect  that 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.

         Dependence  Upon Key  Personnel;  Need to  Increase  Sales,  Marketing,
Development  and  Technical   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 President and Chief Executive
Officer,  or Daniel M. Pess, our Chief  Operating and Financial  Officer,  could
have a material adverse effect on our business,  operating results and financial
condition.  We have an employment  agreement  with Mr.  Thompson that expires in
October  1999,  and an  employment  agreement  with Mr. Pess that expired in May
1999. We are currently  negotiating with Messrs.  Thompson and Pess on the terms
of new employment agreements.


                                       18
<PAGE>

         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.

         Lack of Proprietary  Technology Protection;  Risks of Infringement:  We
rely primarily on a combination of trade secrets, confidentiality agreements and
contractual provisions to protect our proprietary technology.  We license rather
than sell our  software and require  licensees to enter into license  agreements
that impose certain  restrictions  on their ability to utilize the software.  In
addition,  we seek to avoid  disclosure of our trade secrets,  including but not
limited to requiring those persons with access to our proprietary information to
execute  confidentiality  agreements and restricting  access to our source code.
These  steps  afford  only  limited  protection.  We have no  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 do the laws of the
United  States.  We are unable to predict  whether our means of  protecting  our
proprietary  rights will be adequate or whether  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 ourselves against claimed infringement
of the rights of others.

         International  Operations:  Our international  sales for the six months
ended June 30,  1999 and for the fiscal year ended in 1998,  were  approximately
56%  and 17% of our  total  revenue,  respectively.  We  intend  to  expand  our
international  operations and to enter additional  international  markets, which
will require significant  management attention and financial resources and could
adversely  affect our business,  operating  results or financial  condition.  To
expand  international sales successfully,  we must establish  additional foreign
operations,  hire  additional  personnel  and recruit  additional  international
resellers and  distributors.  If we are unable to do so in a timely manner,  our
growth,  if any,  in  international  sales will be  limited,  and our  business,
operating  results  and  financial  condition  could  be  materially   adversely
affected.   We  anticipate  that  our  international  sales,  if  any,  will  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


                                       19
<PAGE>

         Possible  Volatility  of  Securities  Prices:  The market  price of our
common  stock  has in the  past  been,  and may in the  future  continue  to be,
volatile. For instance, between January 1, 1998 and August 10, 1999, the closing
price of our common stock has ranged  between $.47 and $5.50.  The volatility of
the market  price of our common  stock may further  increase now that our common
stock has been  delisted  from Nasdaq.  A variety of events may cause the market
price of our common stock to fluctuate significantly, including:

        o         quarter to quarter variations in operating results
        o         adverse news announcements
        o         the introduction of new products
        o         market conditions in the industry

         In  addition,   the  stock  market  in  recent  years  has  experienced
significant price and volume  fluctuations  that have particularly  affected the
market prices of equity  securities of many  companies that service the software
industry and that often have been unrelated to the operating performance of such
companies.  These  market  fluctuations  may  adversely  affect the price of our
common stock.

         Issuance of Preferred Stock;  Anti-Takeover  Provisions: As of June 30,
1999,  our Board of Directors has the authority,  without  further action by the
stockholders,  to issue  2,083,650  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 our
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.

         Forward   Looking    Statements   and   Associated    Risks:    Certain
forward-looking   statements,   including   statements  regarding  our  expected
financial  position,   business  and  financing  plans  are  contained  in  this
prospectus  or are  incorporated  in  documents  annexed  as  exhibits  to  this
prospectus.  These forward-looking  statements reflect our views with respect to
future events and financial performance. The words, "believe," "expect," "plans"
and "anticipate" and similar expressions  identify  forward-looking  statements.
Although we believe  that the  expectations  reflected  in such  forward-looking
statements are reasonable,  we can give no assurance that such expectations will
prove to have been correct. Important factors that could cause actual results to
differ materially from such  expectations are disclosed in this prospectus.  All
subsequent written and oral  forward-looking  statements  attributable to us are
expressly qualified in their entirety by the cautionary statements.  Readers are
cautioned 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.

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<PAGE>

Part II. OTHER INFORMATION

Item 2.  Changes in Securities and Use of Proceeds

         As described  under  "Management's  Discussion  and Analysis or Plan of
Operation  -Liquidity  and  Capital  Resources,"  the  Company has closed on the
Series C Private  Placement.  The sale of the securities in the Series C Private
Placement was made  pursuant to the  exemption  contained in Section 4(2) of the
Securities  Act of 1933,  as amended.  Seaboard  Securities,  Inc.  acted as the
placement agent of the Series C Private Placement. For more information relating
to the Series C Private Placement (including the conversion or exercise terms of
the  securities  issued in the  Private  Placement),  please  see  "Management's
Discussion and Analysis of Plan of Operation  "Liquidity and Capital Resources."

         During the three  months  ended June 30,  1999,  the Company  issued an
aggregate of 149,500 shares of Common Stock pursuant to the conversion of Series
A Preferred  Stock and Series B  Preferred  Stock.  The  Company  also issued an
aggregate of 588,012 shares of Common Stock pursuant to the exercise of Warrants
granted in the Series A Private  Placement  and the Series B Private  Placement.
The  Warrants  had an  exercise  price of $.50 per  share of Common  Stock.  The
issuance  of the  shares of Common  Stock  upon the  conversion  of the Series A
Preferred  Stock  and the  Series B  Preferred  Stock  and the  exercise  of the
Warrants  was made  pursuant to the  exemption  contained in Section 4(2) of the
Securities Act of 1933, as amended.

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

         At the annual meeting of  stockholders  of the Company on June 2, 1999,
the  stockholders  (i) elected  seven members of the Board of Directors to serve
until the next annual  meeting,  (ii) approved an increase in authorized  common
stock,  (iii) approved an increase in authorized  preferred stock, (iv) approved
an amendment to the 1991 stock option plan, and (v) ratified the  appointment of
PricewaterhouseCoopers LLP as the Company's independent public accounts for year
ending December 31, 1999.

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

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

               Robert A. Thompson       10,972,322                 --
               Daniel M. Pess           10,972,322                 --
               Alan W. Kaufman          10,972,322                 --
               Andre Szykier            10,972,322                 --
               Rino Bergonzi            10,972,322                 --
               Irwin Jacobs             10,972,322                 --
               Amy Newmark              10,972,322                 --


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<PAGE>

         (ii)  The vote for the  approval of an increase  in  authorized  common
               stock was as follows:

               Common Stock and Preferred Stock Voting Together
               For                      Against                Abstain
               ---                      -------                -------
               10,957,922               26,750                 2,000

               Common Stock Voting as a Separate Class
               For                      Against                Abstain
               ---                      -------                -------
                3,897,922               26,750                 2,000

        (iii)  The vote for the approval of an increase in authorized  preferred
               stock was as follows:

               Common Stock and Preferred Stock Voting Together
               For                      Against                Abstain
               ---                      -------                -------
               7,980,294                68,075                 --

               Preferred Stock Voting as a Separate Class
               For                      Against               Abstain
               ---                      -------               -------
               7,060,000                --                    --

        (iv)   The vote for the  approval of amendment to 1991 stock option plan
               was as follows:

               For                      Against              Abstain
               ---                      -------              -------
               7,942,044                84,925               21,400

         (v)   The vote for ratifying the appointment of  PricewaterhouseCoopers
               LLP was as follows:

               For                      Against              Abstain
               ---                      -------              -------
               10,978,122               7,050                1,500

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 2000 Annual  Meeting of  Stockholders  (the "Annual  Meeting") will be
March 18, 2000. As to all such matters which the Company does not have notice on
or prior to March 18, 2000, discretionary  authorization shall be granted to the
designated persons in the Company's proxy statement for the Annual Meeting.

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

         (a)  Exhibits

              Statement of Computation of Net Loss Per Share (Exhibit 11.1)
              Financial Data Schedule (Exhibit 27)
              Andre Szykier's Terms of Separation from Employment (Exhibit 99.1)

         (b)  Reports of Form 8-K

              No Reports on Form 8-K were filed  during the  quarter  ended June
              30, 1999.



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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:     August 13, 1999          QUERYOBJECT SYSTEMS CORPORATION



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



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