SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                 AMENDMENT NO. 3
                                       ON
                                  FORM 10-KSB/A

[X]   Annual report under Section 13 or 15(d) of the Securities  Exchange Act of
      1934 for the fiscal year ended December 31, 1996

[_]   Transition report under Section 13 or 15(d) of the Securities Exchange Act
      of 1934 for the transition period from _______ to _______

                         Commission file number 0-15873

                             LASERGATE SYSTEMS, INC.
                 (Name of small business issuer in its charter)

            Florida                                              59-2543206
--------------------------------                             -------------------
   State or other jurisdiction                                (I.R.S. Employer 
of incorporation or organization                             Identification No.)

28050 U.S. 19 North, Suite 502, Clearwater, Florida                 34621
---------------------------------------------------               ----------
    (Address of principal executive offices)                      (Zip Code)

Issuer's telephone number: (813) 725-0882

Securities registered under Section 12 (b) of the Exchange Act:  None

Securities registered under Section 12 (g) of the Exchange Act:

                     Common Stock, par value $0.03 per share
                     ---------------------------------------
                                (Title of Class)

                               Redeemable Warrants
                               -------------------
                                (Title of Class)

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 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 [_]

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation  S-B is not  contained  in  this  form,  and no  disclosure  will  be
contained,  to the best of the  registrant's  knowledge,  in definitive proxy or
information statement  incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.

The issuer's revenue for its most recent fiscal year was $4,204,626.



<PAGE>



State the  aggregate  market  value of the voting  stock held by  non-affiliates
computed by reference  to the price at which the stock was sold,  or the average
bid and asked  prices of such stock,  as of a specified  date within the past 60
days.

State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date.

At March 20, 1997,  7,462,061 shares of Common Stock were outstanding.  At March
20, 1997, the aggregate  market value of the Common Stock of Lasergate  Systems,
Inc. held by non-affiliates (7,235,234 shares) was $2,713,213.

Documents  incorporated by reference:  Selected  portions of the Proxy Statement
for the  Company's  1997 Annual  Meeting of  Shareholders  are  incorporated  by
reference into Part III of this Form 10-KSB.


                                     PART I

            Some of the  statements  contained  in this  document  are  based on
current  expectations.  These  statements are forward looking and actual results
may differ  materially based upon certain risk factors.  These impacting factors
may include, but are not limited to, technological change, availability and cost
of financing,  long-term investment cycles,  customer  acceptance,  product ship
schedules,  product  integration,   saturation,   corporate  licenses,  cost  of
revenues,  sales and marketing and support  investments,  intellectual  property
rights, and litigation.

ITEM 1. DESCRIPTION OF BUSINESS

            Lasergate  Systems,  Inc. (the "Company") is a corporation  that was
organized  under the laws of the State of  Florida  in 1985.  The  Company is an
integrator and provider of admission control and revenue accounting systems.

GENERAL

            The  Company  is engaged in the  development,  assembly,  marketing,
servicing, installation, and sales of computerized admission control and revenue
accounting systems.  These products include a reserved seating ticketing system,
general  admission  ticketing  system and an access  control  solution which are
marketed to  ticketing  operations  at a variety of  entertainment  venues.  The
Company's products are marketed to the facility based entertainment industry and
are used at many types of facilities,  including  amusement parks,  theme parks,
ski  resorts,  multi-purpose  stadiums  and arenas,  performing  arts  theaters,
museums, casinos,  aquariums, and zoos in the United States, Canada, and certain
countries outside of North America.

            The Company has  developed an access  control  system which  employs
various  applications  of laser  scanning  bar code  technology  to automate and
verify   admission  to   attractions   and  to  provide   revenue   control  and
accountability,  while  reducing  fraud  inherent in situations  involving  cash
transactions  when proper  controls are not  implemented.  The system  creates a
detailed  record of and permits  individual  charges for both  overall  facility
admission and access to each of its  attractions  or events.  The access control
system  has  been  designed  to  interface  with  any of the  Company's  general
admission ticketing systems, thus providing a seamless solution.


                                       -2-

<PAGE>



            The Company has developed  three  versions of the general  admission
ticketing  product called Admits,  Admits Gold and Admits Platinum.  Each system
provides computerized  point-of-sale general admission tickets,  including timed
admission tickets and/or wristband tickets for amusement and water parks. Admits
Gold is  generally  marketed  to smaller  facilities  with ten or less points of
sale.  Admits  Platinum is marketed to  facilities  with more than ten points of
sale. The Company's  newest offering,  Admits,  is a Windows NT7 based ticketing
system.

            The Company  markets the Passmaker  video ID system,  in conjunction
with the  Admits  family of  products.  This  system  allows  the venue to issue
on-the-spot  personalized  credentials for season passes,  membership cards, and
employee cards.  Producing a personalized  credential involves bringing together
information,  a photo image,  a bar code,  and some fixed text onto a medium for
tamper proof, durable use by a customer, employee, or member.

            The Company's reserved seating ticketing  product,  "Select-a-Seat,"
allows  the  customer  to  sell  tickets  and  assigns  individual  seats  for a
particular performance or for a series of performances. The Select-a-Seat system
controls individual box office ticket sales and optionally has the capability of
taking telephone and mail order reservations, group reservations,  remote outlet
sales and season subscription sales.

            The Company has installed  general  admission  ticketing  systems in
over 200 facilities including:

               Knott's Camp Snoopy at the Mall of America in 
                    Bloomington, Minnesota 
               Tatilya Park,  Istanbul,  Turkey
               Universal Studios, Los Angeles, California 
               Sun Valley, a ski and golf resort in Sun  Valley,  Idaho 
               World of Coca Cola, Atlanta, Georgia
               Snowbird, a ski resort in Snowbird, Utah
               House of Blues, a night club chain in Los Angeles, California,
                   New Orleans, Louisiana  and  Cambridge,  Massachusetts  
               The Florida Aquarium,  Tampa,  Florida 
               The  Guggenheim  Museum,  New York,  New York  
               Sunday  River,  a ski resort in Bethel, Maine 
               Steamboat Springs Ski Resort,  Steamboat  Springs, Colorado  
               The Basketball Hall of Fame,  Springfield, Massachusetts 
               Rock n Roll Hall of Fame, Cleveland, Ohio

            The  Company's  Select-a-Seat  system is used by over 80  facilities
including:

               Carnegie Hall, New York, New York
               Boston Red Sox, Boston, Massachusetts
               MGM Grand Hotel, Las Vegas, Nevada
               Datatix (providing tickets for the Utah Jazz), 
                    Salt Lake City, Utah

            Current  installations  vary from systems  which  provide for simple
general  admission  tickets  to  those  which  allow  access  by  patrons  to an
entertainment  facility, or systems which provide for more complex arrangements,
such as tickets of  decrementing  value,  (the  point or  monetary  value of the
ticket  decreases  with each use),  which permit  limited  access to  individual
events and attractions within a park. Individually bar-coded tickets are printed
by the  Admits  system  and  authorized  for use by the  holder  upon  printing.
Relevant data


                                       -3-

<PAGE>



concerning the remaining value and restrictions of the ticket are available from
the access control system each time the bar code is read and processed. With bar
codes, no information is actually contained in the bar code, but instead is held
by the Admits  system in individual  records  identified by the unique bar code.
The bar code is scanned by a laser  scanner  and, if the bar code is valid,  the
access  control  system  releases  a  turnstile.  This  validation  process,  in
conjunction with proprietary processing and storage features, permits the Admits
system to  utilize  many  printing  point-of-sale  stations  and  turnstiles  at
individual attractions to process simultaneous information at all locations.

NEW PRODUCT STRATEGY

            The Company's  product  strategy is focused on  integrating  leading
edge hardware and software  technologies into a cohesive family of products that
provide  users with the  flexibility  and  control to  positively  impact  their
business  results.  Three elements of this new strategy  include:  transitioning
from  separate  products  to  offering  one  product  with  a  modular  solution
orientation,  substituting  a  standard  product  with  customized  modules  for
customized  application  solutions;  and moving from a DOS or UNIX platform to a
Windows7 95/NT platform.

            During the fourth  quarter of 1996,  the Company  began  selling the
next generation of its ticketing system,  Admits. It is a Windows7 version which
includes  ticketing,  access control,  concession sales,  reporting and advanced
reservations as well as other features  currently under development  designed to
meet the many needs of Windows7  based  clients.  The Company  plans to take the
current  functions of the  Select-a-Seat  product and  integrate  them into this
Windows7 based product.  This will create a singular product with the ability to
generate  general  admission  and reserved  seat  ticketing,  thereby  providing
customers with an integrated solution for multiple ticketing requirements.

ADMITS

            Admits  is  a   Windows7-based   point-of-sale   (POS)  system  that
integrates technologies that enhance ticketing and access control operation. The
system can be used to issue  tickets,  wristbands or receipts and provide access
control  both  for  general  admission  or timed  admission  events.  A  minimum
configuration  for an Admits system  presently  consists of the following  basic
components:  a personal computer, a printer, and the Company's Admits engineered
ticketing  software.  It may also have optional  peripherals,  including but not
limited to: touch screen monitor;  specialized keyboards;  ticket,  wristband or
receipt printer; credit card reader; and a customer display.

            Admits is designed to handle the diverse needs of a ticketing office
including cash control,  ticket printing,  event set-up and financial reporting.
Admits  can be a  stand-alone  POS device or  multiple  POS  stations  networked
together,  selling  from one common  inventory of  available  events.  Using the
Windows7 95/NT platform, Admits delivers a superior price/performance  ticketing
and access control solution.

            The  Admits  product  architecture  uses  a  layered  approach  that
provides the user with a relatively powerful set of user definable configuration
options in  addition to a high level of  integrity  of  operations.  The Company
deploys this product  architecture to enhance  performance and provide customers
with application and programming  flexibility.  The  configuration  layer of the
architecture provides software development tools for custom  configurations.  By
developing  this  configuration  layer,  the  Company has given the end user the
ability to configure systems more effectively and efficiently with less risk and
expense of software modifications.


                                       -4-

<PAGE>




ADMITS GOLD AND ADMITS PLATINUM

            The Company's  Admits  computer  software  system  provides  general
admission  ticketing  for  facilities  that desire the  flexibility  of offering
tickets that can be printed for a variety of applications,  with and without bar
codes.  It ranges  from  simple  entry fees to timed  admission  and  tickets of
decrementing value.

            ADMITS  GOLD.  Admits Gold is  particularly  well-suited  for use by
smaller  facilities with one to ten selling  stations.  The computer  program is
installed on a personal computer with an MS-DOS operating system.

            ADMITS PLATINUM Admits Platinum is a comprehensive  admission system
that is flexible enough to meet a variety of customer needs.  Admits Platinum is
better-suited than Admits Gold for larger applications,  such as ski resorts and
large  amusement  parks,  in which  numerous  ticketing  stations are  required.
Operating on a personal  computer  workstation with a UNIX host, Admits Platinum
can include, in addition to the ticketing issuance  capabilities of Admits Gold,
point-of-sale  software for gift shops and  concession  stands as well as access
control using bar code scanners and turnstiles.  The Admits  Platinum  software,
although not protected by a registered copyright, is deemed by the Company to be
proprietary,  and the Company  relies upon a  combination  of contract and trade
secret  laws  to  protect  its  proprietary   interest  in  such  software  (See
"Intellectual  Property.").  It is the Company's belief that this  comprehensive
system  provides the Company with an advantage over its competitors by providing
customers with a variety of functions which can be customized to the needs of an
installation.  The system competes on the basis of its reputation in the market,
based on the number and quality of its  installed  sites.  When using the access
control  features of the Admits Platinum  system,  each ticket is given a unique
bar code that, when processed,  identifies the conditions  under which it can be
used,  the remaining  value of that ticket and the time,  place and frequency of
admission.  As a ticket  passes a laser  scanner,  the bar  codes  are  scanned,
allowing the access  control system to  simultaneously  release the turnstile or
perform another function while reducing the value of the ticket. This system may
accommodate  millions of active tickets in use and thousands of different ticket
types,  varying from tickets that admit holders during specified  hours,  during
specified  days or that are issuable for children,  adults,  senior  citizens or
other special categories.

            Unlike  other  forms of  admission  control  which can be subject to
tampering,  the Company's  access control system  maintains the records for each
ticket holder on the system computer and only recognizes  those tickets produced
by Admits Platinum.  This makes  counterfeiting  nearly  impossible and prevents
ticket holders from  manipulating the value of their ticket.  While  competitors
offer  systems which supply many of the same  features as Admits  Platinum,  the
Company believes that the large number of features and flexibility of its system
gives the  Company a  competitive  advantage  in  marketing  its  products  (See
"Competition.").

            The Company  continues its success with respect to the  installation
of Admits  Platinum in the ski area  market.  The system  provides for fast lift
ticketing  and season pass  production  in  addition to mobile  scanning at lift
entry areas. Recent  installations  include Sugarloaf,  Maine; Shawnee Mountain,
Pennsylvania; and Massanutten, Virginia.

            This combined  admission control system utilizes the following basic
components:

                        TICKET.  A bar-coded ticket is printed at one of several
                        locations.  Since  the bar code is ink on  paper  and is
                        printed  by a  standard  thermal  or laser  printer,  it
                        cannot be  demagnetized  (unlike  magnetic  tickets) and
                        will generally remain valid even if the ticket is folded
                        or  mutilated.  The  system can be  expanded  to provide
                        season passes with photographic  identification cards as
                        well

                                      -5-

<PAGE>



                        as group ticketing and reservation applications to print
                        numerous  tickets   simultaneously   for  sales  through
                        brokers or to groups.

                        ATTENDED AND AUTOMATED POINT OF SALE TERMINALS.  Tickets
                        can be sold either by an attendant with a  point-of-sale
                        terminal,  which  includes a cash drawer,  a terminal to
                        select the  ticket  type and  ticket  printer,  or by an
                        automated   point-of-sale   terminal.  As  a  ticket  is
                        printed,  a computer record is made of the bar code, the
                        type of ticket  sold,  its cost and the type of payment.
                        These  can  be   reconciled   later  against  the  funds
                        collected by a ticket  attendant.  The terminal can also
                        be operated to request patron survey information.

            An automated  point-of-sale  terminal  menu is much like a bank ATM.
The patron answers questions about the type of ticket desired on a touch screen,
inserts cash and the terminal prints the ticket. Both the automated and attended
point-of-sale terminal have the capability of directly communicating with credit
card  companies to check the patron's  credit and make the  appropriate  charge.
Accountability  for cash receipts  occurs by tracking and reporting all cash and
other collections and the subsequent use of the ticket issued.  Each transaction
and entry updates the record for each bar code.

            SCANNERS.  Scanners  can  be  directly  linked  to  Admits  Platinum
software to read bar-coded tickets produced by the Admits Platinum software.

            PRICE.  The price for the Admits  Platinum or the Admits Gold system
varies widely, ranging from approximately $30,000 to $750,000,  depending on the
complexity of the system desired,  the kinds of additional features added to the
system,  and the number of people expected to use the system,  which affects the
number of entry points and the equipment  required.  To date, most of the Admits
Platinum  systems the Company has  installed  were sold for prices  ranging from
approximately  $50,000 to  $250,000.  The price for the Admits  Gold system also
varies depending on generally the same factors as Admits Platinum.  However,  as
this product is specifically  targeted to the lower end of the market, the price
range is generally under $100,000.

            ADMITS FEATURES. Admits systems are adaptable to allow a facility to
meet its ticketing  requirements.  Applications  range from ticketing for simple
general  admission  to a  facility  to more  complex  ticketing,  such as season
passes,  tickets  which admit the holder to certain or all rides and/or areas of
the park and discount tickets which may only be used at certain times of the day
or on certain days. Admits systems are menu driven, allowing individuals without
computer  skills to  operate  them.  The  Systems  are also  flexible,  allowing
facility personnel to modify the charge (i.e., apply a coupon or discount,  give
consideration to the age of the ticket holder,  etc.) to the ticket holder for a
given  ride or  attraction.  A ticket or card can be  printed  at one of several
locations and can include the name of the  facility.  The type of ticket and any
other information specified by the facility may also be included. Tickets can be
designed  in the form of paper  tickets  for single day use,  laminated  plastic
cards with photographs for season pass use, or wristbands for use by children or
in water parks.

            Facilities  are able to utilize the ability of the Admits systems to
generate  a wide  variety  of ticket  types and to easily  change the value of a
ticket-type to enhance  revenues.  For example,  an amusement park can lower the
points needed to enter an attraction during low-usage periods to equalize patron
traffic and generate more revenue during low-use time periods. Similarly, a park
can offer commercial  sponsorship for various  attractions  during specific time
periods,   attracting  advertising  income.  The  system's  flexibility  permits
numerous variations of ticketing strategies to encourage facility attendance and
increase usage.



                                       -6-

<PAGE>



            Admits Gold and Admits Platinum are computer software systems.  Each
can be purchased  separately  for  inclusion in a facility's  existing  computer
system or, more  typically,  with a number of  additional  optional  hardware or
software  components  with which the Company  can  integrate  at the  customer's
request.  Such  additional  hardware  items may include  ticket  printers,  cash
drawers, personal computers,  customer display devices and attended or automated
point-of-sale terminals.  What the Company believes to be the proprietary nature
of the Admits systems is a result of the  inter-relationship of these components
and the increased number of functions that this relationship  provides,  as well
as the  software  which  links  them,  rather  than the  components  themselves.
Additional  software systems could include,  but are not limited to, credit card
processing, season pass capability, fund raising, and access control.

SELECT-A-SEAT

            The   Company's   reserved   seating   software   system  is  called
Select-a-Seat.  Select-a-Seat  software  controls  reserved  seating  as well as
general admission sales.  Select-a-Seat has 90 installations  servicing over 200
facilities,  which are selling in excess of 30 million  tickets  annually in the
United States, Canada, Australia,  Malaysia, Singapore and Ireland. The software
can be used for  distribution  and control of  admission  tickets for  theaters,
professional  sports  teams,  university  athletic  departments,   multi-purpose
arenas,  race tracks,  casinos,  concert halls,  performing arts  organizations,
museums and IMAXJ theaters.

            Select-a-Seat   is  a  broad   in-house   computerized   box  office
management,  reservation and event  marketing  system.  The system  maintains an
inventory of available seats, storing the section, row and seat information.  At
the time of sale,  the  system  prints  tickets  for a  customer;  printing  the
pertinent  performance  information  as  well  as the  seating  location  in the
facility.  Select-a-Seat  controls  reserved  seating and general  admission box
office sales, telephone and mail order reservations, group reservations,  remote
outlet sales, and season subscription ticket sales.

            In  addition  to ticket  sales and  revenue  control,  Select-a-Seat
stores a database of ticket buyers.  Facilities can maintain such information as
name, address, purchase and payment history, and demographic information such as
age, performance preference and source of account.

            When selling tickets,  Select-a-Seat displays a series of prompts on
a computer  screen,  leading the ticket  seller  through  the  selling  process.
Tickets  are only held  unavailable  in the  system  while a  transaction  is in
process. Once a ticket sale is completed,  all pertinent performance records are
updated and inventory is immediately depleted.  Any unsold tickets held for that
transaction are made available again.

            The  Select-a-Seat  season  ticketing  program  provides  for  fast,
efficient and simple entry of season purchase or account data, seat  assignment,
payment posting, account verification, financial auditing, seat status auditing,
ticket printing and client invoicing.

            In addition  to being a  comprehensive  ticket and  revenue  control
system, Select-a-Seat is an important marketing tool. It stores parking, novelty
purchases,  and  tracks  buyer  characteristics  such  as  show  preference  and
advertising  response.  Demographic  and biographic  information  about a ticket
buyer or prospective ticket buyer is stored in Select-a-Seat.

            The  Select-a-Seat  system is also  purchased by  entrepreneurs  and
governmental  agencies  to set up  regional  or  city-wide  ticket  distribution
networks as an  alternative  to a national  service  bureau.  The  Select-a-Seat
system is an alternative to the national service bureau,  allowing facilities to
control their own ticket inventory,


                                       -7-

<PAGE>



maintain  reasonable  service  charges,  and retain service charge revenue.  The
Company has sold and installed Select-a-Seat Systems that sell tickets where the
event  is  held,  as  well as over  the  telephone  and  through  remote  ticket
distribution  points. When organizations  purchase  Select-a-Seat,  tickets sold
over the  telephone  and at remote sales  locations  carry a per ticket  service
charge which the owner of the system retains. Therefore, many organizations will
purchase  Select-a-Seat to be used as a source of generating  additional revenue
for the facility as well as controlling inventory and ticket sales.

            TICKETING.  Select-a-Seat  maintains an inventory of available seats
in a facility, including section, row and seat information. At the time of sale,
the  system  prints  tickets  for a  customer  with  the  pertinent  performance
information  as well as the  seating  location  in the  facility.  Select-a-Seat
displays a series of prompts on a computer  screen,  leading  the ticket  seller
through the selling  process.  Once a ticket sale is  completed,  all  pertinent
performance  records are updated and inventory is simultaneously  depleted.  The
Select-a-Seat season ticketing program provides for rapid,  efficient and simple
entry of season  ticket  purchases or account  data,  seat  assignment,  payment
posting, account verification,  financial auditing, seat status auditing, ticket
printing and client invoicing.

            MARKETING.  In  addition to ticket and  revenue  control  functions,
Select-a-Seat  can be used to store various  characteristics  of each individual
patron,  such as car parking  preferences,  novelty purchases made,  performance
preferences  and  past  responses  to  various  forms  of   advertising.   These
characteristics,  combined with  demographic  and biographic  data,  give system
owners a powerful tool for direct mailings.

            Select-a-Seat  offers  features  specifically  designed  to meet the
needs of various market niches such as performing  arts venues,  large stadiums,
city-wide ticket bureaus and professional sports teams.

            PRICE.  The price of  Select-a-Seat  varies depending on the modules
purchased and the number of concurrent  users provided for, ranging from a price
of $7,000 for a single terminal box office to $600,000 for multi-terminal access
and modules to support season tickets,  telephone  orders,  reporting and credit
card authorizations.  To date, most of the Select-a-Seat  systems installed were
sold for prices ranging from approximately $35,000 to $200,000.

ACCESS CONTROL

            BACKGROUND.  Bar codes,  which have been available for use since the
1970's,  consist of a series of lines or bars  printed on paper or  plastic.  By
varying the width of the bars and spaces  between the bars, a bar code  provides
an item, such as a ticket, with a unique identity.

            The Company's  technology,  through its admission and access control
system  (previously  sold under the name of  Gatepas),  reduces  fraud and labor
costs while enhancing accountability and profitability. Within the United States
alone, the entertainment and recreation  industry encompass tens of thousands of
facilities adaptable to the Company's systems. Included are family entertainment
centers,  fairgrounds,  stadiums,  water parks,  amusement parks,  arenas, zoos,
aquariums,  museums,  ice skating  facilities,  movie  theaters  and  convention
centers.

            Use of bar codes and standard scanning  equipment or radio frequency
hand-held  scanners  permit the access control system to closely monitor general
attendance at both  amusement/theme  park facilities as well as ski resorts.  By
recognizing  tickets with valid bar codes,  these  scanning  devices  reduce the
possibility of admission from counterfeit  tickets.  Bar-coded tickets cannot be
successfully  altered by the  holder to defeat  the system and are more  durable
than the fragile magnetic strips.


                                       -8-

<PAGE>



            FEATURES.  The Company's access control system, which is an optional
feature with the Admits family of products,  integrates the scanning  technology
of bar codes with  scanners  placed in  turnstiles,  and hand-held or stationary
readers.  The Company  believes  the  proprietary  nature of the access  control
system is the  inter-relationship  of the  components,  as well as the  software
which links  them,  rather than the  components  themselves.  To gain entry to a
facility  or an  individual  attraction,  the bar code on the card or  ticket is
scanned  by a laser  scanner  located  at the point of entry.  The ticket can be
scanned in any direction by the ticket  holder.  After it is  processed,  if the
ticket is valid,  the access control system responds with an audible signal and,
if desired,  opens a turnstile.  If the ticket  holder does not pass through the
turnstile,  the ticket  retains its prior value.  In  facilities  where  tickets
decrease in value as used, display devices may be placed throughout the facility
to simply read the ticket  value so that a holder can  determine  the  remaining
value of a ticket.

            Facility  personnel  can thus  access a  summary  of cash  receipts,
attendance  and  other  statistical   information  about  admissions  as  it  is
occurring.  The  computer can be  programmed  to generate a summary of the day's
activity, including the cash and credit card transactions, the number of patrons
entering  the  facility  and  individual   attractions  and  other   statistical
information.  Such data,  along with  summary  weekly,  monthly or annual  data,
assists  facilities in managing their business and can highlight  irregularities
in ticket collections.

            DISCONTINUED  PRODUCTS.  During  1996,  the Company did not have any
sales of its Facility  Management  System, or its Resort Management  System. The
Facility  Management System is a third-party  software designed to manage events
at a meeting  facility,  such as a  convention  center for which the Company has
marketing rights.  The Resort Management System is software owned by the Company
that  provides  the  ability to manage  golf tee times and tennis  reservations.
Neither of these  products was a primary  focus of the Company in 1996,  and the
Company considers them to be discontinued.

            SOFTWARE  AND  COMPUTERS.  The  Company  holds a federal  registered
copyright,  granted in 1987, on its gate-control software included in the access
control  system.  The system was  designed and  developed  by the Company.  This
copyright  affords the Company the protection of the federal copyright laws. The
Company has introduced an upgrade to its ticketing and reporting software, based
on software  acquired  when the Company  purchased  Delta and GIS.  The software
upgrade is not protected by a registered  copyright;  however, the Company deems
it proprietary  and relies upon a combination  of contract,  copyright and trade
secret laws to protect its  proprietary  interest in the upgraded  software (See
"Intellectual Property.").

PRODUCT SERVICING AND ADMINISTRATION

            The  Company  has  developed  a  number  of  common  procedures  for
producing and servicing each of its products.

            ASSEMBLY  AND  TESTING.  The Company  purchases  components  for its
systems,  such as the computer equipment and circuit boards,  turnstiles,  metal
housings,  laser  scanners  and  ticket  printers  from a variety  of  carefully
selected  sources and  assembles and  integrates  critical  components  with its
proprietary  software.  Many of the  components  are  enhanced by  off-the-shelf
hardware readily available from numerous sources.  However,  all subsections and
unique  operating  environments are fully integrated and all Company software is
tested to ensure proper  operation and delivery of the highest  quality  product
possible.

            INSTALLATION AND TRAINING. The Company's technicians install each of
the Company's systems,  providing any customization  required and overseeing the
placement of all equipment.  The purchaser is responsible  for  installation  of
cabling to link each component to the central computer.  Low-voltage  cables are
dedicated to the


                                       -9-

<PAGE>



system and are not expensive or difficult to install. This cabling method allows
both new and existing  purchasers to easily  install the  Company's  systems and
allows existing installations to expand their existing systems as their business
grows.  The Company also  provides  interfaces  into various local area networks
(LAN's) and fiber-optics systems.

            The Company provides initial training for the administrators  and/or
facility  personnel  of each  system at each  installation  and  provides a user
manual.  The Company  encourages  training of personnel at the supervisory level
and  encourages  these  individuals  to train  the end  users  who  operate  the
Company's  system  within the  customer's  environment.  Additional  training is
available either at the installation  site or the Company's  headquarters at the
option and expense of the purchaser.

            WARRANTY  MAINTENANCE  AND  SERVICING.  The Company  offers a 90 day
warranty for its software  products.  After the end of the warranty period,  the
Company  offers its customers  maintenance  and servicing for an annual fee. The
Company provides for telephone  response to calls for assistance  during certain
business  hours and days, or available  around the clock,  seven days a week for
certain  additional  charges.  Also provided are standard  updates to the system
purchased,  user  guides and repair or  replacement  (at  customer  expense)  of
hardware  components.  The  Company's  customer  support  staff is often able to
diagnose  and correct  problems  through  computer  link-up  from the  Company's
headquarters to each site. If more extensive  modifications are required or if a
facility requires training for additional personnel, Company personnel will make
additional site visits for a fee.

            At  December  31,  1995,  the  Company  had  $297,000   reserved  to
accomplish  upgrades  of  original  Delta  and  GIS  sites.  Most  of  this  was
accomplished  during 1996;  however,  additional  upgrades and enhancements were
committed to customers during 1996. These were primarily customers who purchased
Delta product (Admits  Platinum) from the Company during 1995 and early 1996. At
December  31,  1996,  the Company has  $571,000  reserved  to  accomplish  these
upgrades  and  enhancements  as  well  as  a  certain  amount  of  upgrades  and
enhancements that may be committed in the future (a warranty  allowance) on 1996
sales.

RESEARCH AND DEVELOPMENT

            The Company's  engineers are engaged in developing  enhancements and
applications  for the Company's  technology.  Such  applications are intended to
create  new  products  for  the  Company's   markets  and  to  enhance   product
competitiveness. The Company's technical staff will concentrate their efforts on
completing the technology  necessary for such new installations,  although there
can be no assurance  that the Company will be able to develop or market such new
products or applications.

MARKETING

            The   Company's   overall   marketing   strategy  is  focused  on  a
distribution  model that  provides for direct and indirect  selling  channels of
distribution.  The  Company's  products are  segmented  to address  requirements
targeted at specific  entertainment venues which include  amusement/theme parks,
ski resorts, stadiums and arenas, performing arts theaters,  museums,  aquariums
and zoos and regional ticketing networks.

            The Company has  traditionally  marketed  its  products and services
through a direct sales  channel.  Marketing  efforts take place  principally  at
selected  industry trade shows which are aligned with the above defined vertical
markets,  at regional  seminars  which focus on application  solutions,  through
targeted  direct  mail  campaigns  and  by  advertising  in  trade  periodicals.
Qualified leads, generated as a result of these marketing


                                      -10-

<PAGE>



efforts,  and  high-profile,  target  accounts  selected from the above vertical
markets,  provide the basis upon which the direct sales organization pursues new
opportunities.  Additionally,  some new  prospects  have been  attracted  by the
positive  impressions  created  through  discussions  with or visits to existing
customer installations.

            In 1996,  the  Company  began  marketing  its  products  through two
additional channels; an in-house telemarketing group, and a value added reseller
(VAR) program.  The telemarketing  group is responsible for qualifying new leads
generated through the Company's marketing programs, pursuing new or add-on sales
opportunities  that have a revenue  value of between  ten  thousand  dollars and
fifty thousand dollars and initiating  specific sales promotions targeted at the
existing  installed  base.  The VAR program has led to the  recruitment of three
qualified  resellers in targeted  metropolitan  areas.  Resellers are focused on
low-end general admission  opportunities  that have a revenue value of up to ten
thousand  dollars.  For the resellers to become  certified by the Company,  they
must  have  completed  a  comprehensive  certification  process  which  includes
formalized  product and technical  training at the Company's  training facility.
This program is designed to prepare them to sell and install the product,  train
the users and support their future application needs.

            The Company  believes that certain of its prior  customers using one
or more of the Company's  products may currently have or may soon develop a need
for  additional  products  offered by the  Company.  Therefore,  in  addition to
seeking new customers and new markets for its products,  the Company  intends to
market its full  product  line to its existing  customer  base through  targeted
direct mail campaigns and telemarketing.

            The Company has also recently aligned itself with certain  companies
that sell other products used for ticketing, admissions, and access control, and
has successfully secured sales contracts in the process. The most significant of
these is a recent  alliance with  Neighborhood  Box Office,  a  manufacturer  of
ticketing  kiosks.  The Company does not have  exclusive  arrangements  with any
vendors with whom the Company has from time-to-time partnered; however, as these
arrangements  have been mutually  beneficial in the past, the Company intends to
further pursue this type of joint marketing.

            The Company  markets  products that  typically  require  substantial
customization in order to meet the customer's particular requirements. While the
Company  has  reduced  the  cost  of  installing,   customizing   and  servicing
(maintaining)  the customized  software,  these costs have remained  higher than
desired.  With this in mind, in June,  1996,  the Company  initiated an internal
assessment  of its  marketing  and product  management  strategies  to determine
whether  the  current  software  could be modified in order to provide a broader
range  of  product  options  to  its  customers  without  incurring  substantial
customization costs.

            As a result of the  assessment,  the Company has concluded  that its
principal  application  components for ticketing,  revenue management and access
control  will  continue to provide  significant  benefits to our  customers  and
prospects;  however,  rather  than  continue  to market  products  that  require
substantial  customization,  it will  design  and  offer  products  in a modular
fashion that allow the user to define how the  software is set up or  configured
for a particular site through a table-driven  set of parameters  selected by the
user. They will consist of a primary product with optional pre-developed modules
and a  configuration  layer to meet specific  customer  needs that would require
limited or no customization by the Company.  Additionally, the implementation of
this  project  will  afford  the  Company  an  opportunity  to  employ  the same
development tool (a high level, Rapid Application Development language) for each
module which will provide a high degree of  consistency  and  efficiency  in the
product  development  process.  Although no assurances can be given,  management
expects that applying the Company's proprietary  technology in this fashion will
provide  a  highly  effective  means  for  delivery  business  solution  to  the
entertainment industry.



                                      -11-

<PAGE>



            Accordingly, the Company commenced the development effort to support
this new marketing  approach in 1996.  As of December 31, 1996,  the Company had
not completed any  installations  of the new product and,  accordingly,  had not
realized any revenue from the new product.  As of March,  1997,  the Company has
installed  limited  functionality  versions of the new product in five  customer
sites,  resulting in $881,000 of revenue  recognized in the first quarter due to
the new product.  These  limited  functionality  versions  had fully  functional
ticketing  modules and some  additional  features,  but not all of the  features
planned for the general release version. The Company anticipates  completing the
development  of  additional  modules at an average  rate of one per month  until
approximately June, 1997, when the Company anticipates having the entire general
admission  product line  rewritten.  Beta sites will  continue to be selected to
facilitate  testing of each module in a live environment and new  configurations
with the additional  modules will be sold before general release of the products
which is anticipated to be in June of 1997. The current legacy software products
will continue to be marketed and the Company will support this software for some
period of time beyond  availability  of the general  release  version of the new
general  admissions  product for the customers who desire to continue  using the
current software.

            As a result of this development effort and new product introduction,
the Company expects to achieve cost  reductions  beginning in late 1997 in areas
of product development and customer support. In addition,  the product will have
a new appearance  that is more user friendly and will allow the user to modify a
configuration  layer  (without  access to the source code),  which can remain in
place when  updating  the  product to a new  revision  level.  As a result,  the
Company expects its new products to be more competitive in the market.

CUSTOMERS

            The Company has sold its products to a variety of customers.  Listed
below is one example of each type of installation:

            SELECT-A-SEAT  AT CARNEGIE HALL,  NEW YORK, NEW YORK.  Select-a-Seat
was installed in Carnegie  Hall in 1987.  There are over 35 users of this system
that sell tickets to all concert performances, taking telephone reservations and
processing season subscription ticket sales;

            ADMITS  GOLD  WITH  ACCESS  CONTROL  AT ROCK N ROLL  HALL  OF  FAME,
CLEVELAND,  OHIO.  The Admits Gold system  installed  at the Rock n Roll Hall of
Fame  includes 10  point-of-sale  ticketing  stations and provides for automated
scanning and access control.  The system has been operating since opening day in
September, 1995 and has processed over 1,000,000 tickets;

            ADMITS  PLATINUM AT SUN VALLEY SKI RESORT,  SUN VALLEY,  IDAHO.  The
Admits Platinum at Sun Valley Ski Resort includes 27 point-of-sale  stations for
lift ticket sales, 6 video ID stations for season passes,  and 6 radio frequency
ski lift scanning  stations for access control.  It has processed over 3,000,000
skier visits since it was installed and currently processes over 400,000 tickets
per year.

            ADMITS PLATINUM WITH ACCESS CONTROL AT THE FLORIDA AQUARIUM,  TAMPA,
FLORIDA. The Company installed its Admits Platinum and access control systems at
The  Florida  Aquarium in early 1995.  The  systems  provide for a  computerized
point-of-sale  ticketing  system  and  laser  scanning  bar code  technology  to
automate and verify admission and access to the facility.  The systems have sold
and scanned approximately 1.9 million tickets since its grand opening in 1995.

            ADMITS AT ART GALLERY OF ONTARIO, ONTARIO, CANADA. The Admits system
at the Art Gallery of Ontario was  installed  in the first  quarter of 1997.  It
includes 12 point-of-sale stations for main ticketing, group sales and


                                      -12-

<PAGE>



back office ticketing  applications.  The system has enabled AGO to implement an
Art Card  which  provides  bar  coded  access  control  through  6 entry  points
utilizing custom ticket stock imprinted with selected artwork.

            Due to the  length of time it takes  for the  Company  to  purchase,
customize  and install  certain of its  products,  there may  occasionally  be a
backlog of orders for equipment.  As of December 31, 1996 and December 31, 1995,
the  Company's  backlog was $963,000 and  $1,190,000  respectively.  The backlog
represented   sales  to  numerous  sites  with  purchase   prices  ranging  from
approximately $52,000 to $326,000. Management believes the backlog was less than
the prior year because of the  transition  in sales from legacy  products to the
new  product.  As is common  within  the  software  industry,  some  prospective
customers  refused to consider a system which did not have a lengthy  history of
performance at sizable  installations  within their market segment.  In 1995, no
one customer represented more than 10% of the Company's sales. In 1996, Bayindir
Insaat  Turizm  Ticaret (a large,  indoor  amusement  park in Istanbul,  Turkey)
represented 12% of the Company's sales.

COMPETITION

            The Company faces competition from different sources with respect to
each of its products.  The Company is unaware of any one competitive source with
the  capabilities  to supply the number of  different  admission  and  ticketing
products  which the Company  offers.  The Company  believes it has a competitive
advantage over any other single company due to the Company's  ability to satisfy
a great variety of software or hardware  requirements a customer might have with
respect to general admission ticketing, access control and reserved seating.

            ADMITS.  There are several  companies in the United States  offering
basic computerized ticketing capabilities which are similar to those the Company
offers through its Admits Gold and Admits Platinum systems. They include,  among
others,  PACER  CATS and  Gateway  Ticketing  Systems.  While  those  firms have
automated ticketing programs similar to that of the Company,  and have resources
substantially  greater than those of the Company,  the Company  believes  Admits
competes  effectively  with these  companies on the basis of pricing and ease of
installation, use and maintenance.

            SELECT-A-SEAT.  The Company's  Select-a-Seat reserved seating system
competes against companies such as Ticketmaster,  Inc., Select Ticketing Systems
and Prologue Systems, Inc. Some of those companies have resources  substantially
greater than the Company. The Company believes that it competes effectively both
in pricing and over all functionality of its  Select-a-Seat  system and that the
Company has a  competitive  advantage in that the  Select-a-Seat  software  will
operate with a wide variety of hardware  products which a customer might already
own.  The  computerized  reserved  seat ticket  industry has  historically  been
dominated by two national ticketing companies: Ticketron, Inc. and Ticketmaster,
Inc.  Ticketron,  Inc.  was  acquired by  Ticketmaster,  Inc.,  leaving only one
national ticketing company, Ticketmaster,  Inc. Ticketmaster,  Inc. leases their
equipment and software to arenas,  stadiums and theaters and establishes  remote
sales  locations and  telephone  reservations  centers to sell  tickets.  Ticket
buyers pay a service charge to  Ticketmaster,  Inc. for their services.  Service
charges can range from $1.50 per ticket to over $7.50 per ticket.  The Company's
Select-a-Seat  system,  as an alternative to the national  ticketing  companies,
allows  facilities to retain  control of their ticket  inventory,  and ticketing
service charges.  When organizations  purchase  Select-a-Seat,  all tickets sold
over the  telephone,  the  Internet,  or at remote sales  locations  can carry a
per-ticket service charge (if the owner chooses to do so) which the owner of the
system retains. Therefore, many organizations purchase Select-a-Seat as a source
of revenue.  For a discussion of  Select-a-Seat,  see the  information  included
under the caption "Select-a-Seat" above.



                                      -13-

<PAGE>



            ACCESS CONTROL.  The primary competing  technology for the Company's
access control system is magnetic  strips,  such as those located on the back of
most credit  cards and many forms of paper  tickets as well as various  forms of
bar code readers.  Competitors  in this arena include VGS and Gateway  Ticketing
Systems.  The Company's primary competitor for its access control system is Data
Service  Company of America,  Inc. which offers access control by allowing users
to swipe their bar-coded ticket through a slot reader.  The Company believes its
access control system competes effectively with Data Service Company of America,
Inc.

            GENERAL. The Company generally enters into non-disclosure agreements
related to its proprietary technologies and trade secrets with its employees and
with those companies and individuals with whom it has contractual agreements.

PRODUCTION AND SUPPLIERS

            The Company  produces each of its systems by enhancing,  integrating
and assembling various components readily available from numerous  suppliers.  A
few  components,  such as  metal  housings  and  circuit  boards  are  specially
manufactured for the Company to its  specifications and ordered from one or more
suppliers.  The  Company's  major  suppliers  of  such  components  are  Digital
Equipment,  Tech Data, Data General, BOCA Systems,  Inc., Alvarado Manufacturing
Co., Indiana Cash Drawer Corporation, Jetstar, Inc., Arco Distributors, Inc. The
other products the Company offers are primarily software.

            The Company assembles and tests its software at its headquarters and
installs it along with appropriate hardware on-site for its various customers.

PERSONNEL

            In order to reduce its overhead  costs,  the Company entered into an
agreement   effective   January  1,  1996,   with  a  firm  that   provides  all
administrative services relating to payroll, personnel and employee benefits (an
employee leasing agreement). The Company signed an agreement with a new employee
leasing  company  effective  December  16, 1996.  Management  continues to hire,
dismiss, set pay rates, and supervise the employees.

            As of December 31, 1996, the Company  employed (or employee  leased)
42 individuals, including 4 in management, 8 in engineering, 13 in operations, 8
in sales  and  marketing,  5 in  finance  and  accounting  and 4  support  staff
personnel.  The Company  also  retained 1  individual  who served as a part-time
consultant.

            The Company generally enters into non-disclosure and non-competition
agreements with its employees. None of the Company's employees is represented by
a union or covered by a collective  bargaining  agreement.  The Company believes
its relations with its employees is excellent.

INTELLECTUAL PROPERTY

            The Company holds copyrights for the software  comprising its access
control system and the software comprising the Select-a-Seat system. The Company
has service marks for the names  Select-a-Seat and Lasergate  Systems,  Inc. and
also  for the  Select-a-Seat  and LSi  logos.  The  Company  believes  that  its
copyrights  and service marks  provide it with a  competitive  advantage and are
valuable assets.

            The Company  regards  certain  features of its internal  operations,
software and  documentation as proprietary.  The Company relies on a combination
of contract, copyright, service marks and trade secret laws and


                                      -14-

<PAGE>



other measures to protect its  proprietary  information.  The Company  generally
enters into confidentiality  agreements with each of its employees and customers
and, where appropriate,  with certain vendors, in which each party agrees not to
use the  Company's  proprietary  intellectual  property for purposes  other than
those for the benefit of the Company.  In addition,  the Company  safeguards its
technology  through  security  measures  such as passwords  and codes.  Policing
unauthorized use of the Company's  information and technology is difficult,  and
there can be no assurance  that these  safeguard  measures will be successful or
that the Company  will have the  financial  resources  necessary  to enforce its
proprietary  rights.  Trade  secret  laws in the  computer  technology  area are
rapidly   developing   and,  should  the  Company's   proprietary   products  be
appropriated it may seek to enforce its rights.

            While the Company's  competitiveness  may be affected by its ability
to protect its proprietary information, the Company believes that because of the
rapid pace of  technological  change in the computer  software  industry,  trade
secret and copyright  protection are less significant  competitive  factors than
the  know-how,  ability and  experience  of the  Company's  employees,  frequent
product  enhancements and the timeliness and quality of support services.  While
competitors may be able to develop software products with similar  capabilities,
the  Company  believes  that a  competitor  would  have  to  devote  substantial
resources to develop  products that can compete  effectively  with the Company's
products.  Accordingly,  although the Company deems its proprietary  interest in
its service marks and  copyrights to be important,  it does not believe that its
failure or  inability  to protect that  interest  would have a material  adverse
effect on its business.  The competitive  advantage  derived from the technology
involved   in   each   of  the   Company's   products   is  a   result   of  the
inter-relationships  of the components and the variety of features that they are
able to provide when integrated,  and the software that links them,  rather than
the individual components themselves.

            The Company  intends to apply for copyrights  when feasible in order
to protect  its  product  enhancements  as they are  developed.  There can be no
assurance that copyrights  will be obtained or that they will afford  sufficient
protection for the Company's products. In addition, the Company may not have the
resources necessary to enforce its rights with respect to any of its copyrights,
trade  secrets,  service marks or  prospective  filings since this can sometimes
involve protracted legal battles.

            As referred to above,  the  Company has  servicemarks  for the names
Select-a-Seat and Lasergate  Systems,  Inc.; Admits is a product of the Company.
All other brands and products  mentioned in this report are  trademarks of their
respective holder(s).

ITEM 2. DESCRIPTION OF PROPERTY

            The Company  currently  leases  approximately  11,910 square feet of
office space in  Clearwater,  Florida.  The lease expires on April 30, 1999. The
Company has the right under its written lease agreement to one five-year renewal
of the lease at prevailing  market rates.  The Company also has a right of first
refusal  for  additional  office  space in the same  building  as space  becomes
available.  From March 1997  through  February  1998,  the rent  payable will be
approximately $14,000 per month.

ITEM 3. LEGAL PROCEEDINGS

            On June 15, 1995,  the  Company's  founder and former  President and
Chief  Executive  Officer,  Donald  Turner,  has commenced an action against the
Company in the Circuit Court for Pinellas County,  Florida,  Civil Division. Mr.
Turner alleges,  among other things, that he was wrongfully  terminated from his
employment and


                                      -15-

<PAGE>



seeks  damages  which in the  aggregate  could  exceed  $1,000,000.  The Company
believes Mr.  Turner's suit is without merit and intends to continue  vigorously
defending the action.

            In January  1997,  Derek Betty and James Potter  instituted  actions
against the Company arising  pursuant to agreements  entered into at the time of
the sale of Delta Information Services, Inc. ("Delta") to the Company.
 The first action is entitled Derek Betty v. Lasergate Systems, Inc. (the "Betty
Action") and the second action is entitled  James Potter v.  Lasergate  Systems,
Inc. and 1103065 Ontario, Inc. ( the "Potter Action").  Both actions are pending
in the Circuit Court of the Sixth Judicial  Circuit in and for Pinellas  County,
Florida.  The Betty Action  alleges that the Company has failed to return shares
of the Company's  stock which are being held in escrow  pursuant to a Collateral
Stock Pledge Agreement executed in connection with the sale of Delta Information
Services,  Inc. ("Delta") to the Company. The Betty Action also alleges a breach
of the terms and  conditions of a Registration  Rights and Put Option  Agreement
executed in connection  with the sale of Delta to the Company.  The Betty Action
seeks  damages  in an amount in excess  of  $15,000,  which is the  jurisdiction
amount,  but it is anticipated  that damages could be in excess of $25,000.  The
Potter  Action also alleges a breach of the  Registration  Rights and Put Option
Agreement.  Moreover,  the Potter Action includes  allegations  concerning James
Potter's Consulting Agreement with the Company and a Non-Compete Agreement.  The
Potter  Action seeks a  declaratory  judgment  determining  that the Company and
1103065  Ontario  Inc  ("Ontario")  are in  material  breach of the  Non-Compete
Agreement  and that Potter is relieved of all  obligations  to perform under the
Non-Compete  Agreement.  The  Company has moved to dismiss  both  actions and to
compel  arbitration  pursuant to an arbitration  provision in the Stock Purchase
Agreement  relating to the  acquisition of Delta. A hearing on the motion in the
Potter Action is scheduled for April 1, 1997, and a hearing on the motion in the
Betty Action is scheduled  for May 2, 1997.  The Company  intends to  vigorously
defend both actions.

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

            None.








                                      -16-

<PAGE>



                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

            The following tables set forth the high and low sales prices for the
Common Stock on the NASDAQ Stock Market for the periods indicated:


    Quarter Ended              High Sales Price         Low Sales Price
    -------------              ----------------         ---------------
March 31, 1995                        $13                      $7
June 20, 1995                           9                       4
September 30, 1995                      6                       3
December 31, 1995                       6                       1
March 31, 1996                          2                    7/8
June 30, 1996                           1                   11/16
September 30, 1996                      1                   17/32
December 31, 1996                   25/32                    7/32

            As of March 20,  1997,  there  were  1,616  holders of record of the
Common  Stock.  No dividends  have ever been  declared or paid on the  Company's
Common Stock.  The closing price of the Common Stock on March 20, 1997, was $3/8
per share.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

GENERAL

            Due to the  Company's  net  loss  for  1996 of  $4,997,962,  and its
history of operating  losses that have  accumulated to $16,783,318,  at December
31, 1996, our  independent  certified  public  accountants  have qualified their
accountants'  report  dated March 28,  1997,  on the  Company's  1996  financial
statements as to a going concern  uncertainty.  The following  commentary within
Management's Discussion and Analysis addresses the Company's operations for 1996
and its plan to improve future results. These matters are also discussed in Note
3 to the financial statements.

            Since the second  quarter of 1994,  a number of  significant  events
have had a material impact upon the Company's  operating results and its current
and future  prospects.  In addition to a change in control and a public offering
of its securities, the changes included replacement of the majority of the Board
of  Directors  during  1996  and  over  the  course  of 1995 and 1996 all of the
Company's  senior  executives,  as well as most  of its  other  personnel.  This
included the President/CEO,  the Vice President of Finance/CFO (twice), the Vice
President of  Development/Operations  and the Vice  President of Sales.  Some of
this turnover of senior  executives  was  encouraged or effected by the Board of
Directors.

            These events also included two  acquisitions  (Delta and GIS Systems
Limited Partnership ("GIS") with a combined customer base of over 200 sites, and
various product integration and development efforts). and


                                      -17-

<PAGE>



required  more than two years of  sustained  effort and  substantial  amounts of
capital.  At the beginning of 1996, the Company had very little working capital.
This  situation  grew  worse  during the first  half of the year,  resulting  in
shipments to customers  falling behind schedule because orders for their product
were not placed  with  vendors,  in that the  Company  had  utilized  all credit
extended to it by its vendors. Given those circumstances,  the Company undertook
two private  placements of convertible  preferred stock during that time period,
for  which  the  Company  received  a  combined  total  of  $6,623,082,  net  of
commissions and offering expenses.  That capital infusion allowed the Company to
initiate two basic programs  designed to move the Company toward  profitability.
First was development of a new modular product (Admits)  allowing the product to
be  customized  more  easily  and  installed  more  efficiently.  The second was
committing  additional funds to marketing  efforts,  including a doubling of the
sales force aimed at substantially  increasing  revenues and potentially  moving
the Company beyond the break-even point and towards profitability in the future.

            The  development  effort was  immediately  focused  upon the general
admission  product  since it would most  likely  yield the  fastest  and largest
payback.  The core of the product was developed  earlier than planned and was in
Beta testing by November 1996. The  experience of the  development  team and the
ability to forego the creation of a detailed  program  design by  utilizing  the
software  programs  of the legacy  products  as a  production  plan  accelerated
development.  With the  Company's  efforts to satisfy new and existing  customer
demands for  programming  changes to the Delta and GIS  products,  a substantial
portion of the Company's  resources remained dedicated to the legacy products in
all areas: development, installation, customer support, training, documentation,
and  marketing.  However,  the Company  kept the general  admission  development
effort on schedule.  At the present time,  management  believes the Company will
have the new Admits general  admission  product available for general release by
June 1997.

            For most of 1996 the  Company  employed  three or four  field  sales
representatives.  During the fourth quarter of 1996, two systems  engineers were
dedicated to providing  pre-sales  support and an inside  sales  department  was
organized with two inside sales representatives hired initially. During February
and March of 1997,  two  additional  field  sales  representatives  were  hired,
bringing the total to six sales  personnel.  Thus, for most of 1997, the Company
plans to have ten employees dedicated to sales efforts compared to three or four
during 1996.

            The result for the Company  expanding its sales force and delivering
the new Admits general  admission  product on schedule should  favorably  impact
upon  revenue  during the latter part of 1997.  Management  believes it can thus
achieve  a  reduction  of the  operating  loss by the  end of  1997  and lay the
foundation  for  future  profitability.  Although  no  assurance  can be  given,
management believes that sustained expenditure and cash controls, would maintain
adequate  working capital through 1997,  based upon the further premise that the
new general  admission Admits product will be completed as planned by June 1997.
Nevertheless,  the  Company  intends  to seek and  actively  pursue  a  possible
relationship with a strategic partner,  which would include an equity investment
in the Company and may review other financing opportunities.

Results of Operations: 1996 Compared to 1995

Revenues
--------

            Revenues  increased to $4,204,626  in 1996 from  $2,835,206 in 1995,
representing   a  48%   increase.   Revenues   consisted  of  system  sales  and
installations  of $3,588,383 in 1996 and $2,538,206 in 1995, and maintenance and
support of $616,243 in 1996 and  $300,000 in 1995.  The increase in system sales
and


                                      -18-

<PAGE>



installations  was  primarily  attributable  to  marketing  activities  from  an
increased sales staff, and from the Company's enhanced products.

            In 1996, the Company's  principal  products,  Select-a-Seat,  Admits
Platinum,  and Admits  Gold,  represented  approximately  33%,  35%,  and 16% of
revenues, respectively, compared to 42%, 30%, and 12% of revenues, respectively,
in 1995.  By the end of 1997,  the  Company  expects  the  revenue  from  Admits
Platinum  and Admits Gold to be  substantially  replaced by revenue from Admits,
the Company's modular Windows7 based general admission product.  Maintenance and
support  represented 14% of revenues in 1996 and 11% in 1995. While  maintenance
and support  revenue for 1997 is expected to increase,  its  percentage of total
revenues is not expected to increase.

            In 1996,  one customer,  Bayindir  Insaat Turizm  Ticaret,  a large,
indoor amusement park in Istanbul, Turkey, represented 12% of revenues. In 1995,
no customers  represented  10% or more of revenues.  As the total  customer base
grows, the likelihood of having certain  customers  account for more than 10% of
revenues in future years is reduced.

Cost of Revenues
----------------

            Cost of revenues in 1996 and 1995 included the costs associated with
the hardware and software acquired for the Company's  customers,  the full costs
associated with the engineering  and  installation of the systems,  and the full
costs associated with the provision of customer support.

            Cost of revenues  increased to $2,937,269 from $2,619,436.  This 12%
increase  was the  result  of costs  related  to a 48%  increase  in  sales  and
increased  warranty  costs,   partially  offset  by  increased  efficiencies  in
installing products.  Warranty provisions for 1996 totaled $568,000 and warranty
work charged against the allowance in 1996 totaled  $430,000.  The warranty work
was primarily a continuation of the enhancements to original Delta and GIS sites
as  discussed  in the  Company's  annual  report on Form 10-K for the year ended
December  31,  1995.  As a  percentage  of  revenues,  cost of  revenues in 1996
represented  70%  of  revenues  compared  to  92%  of  revenues  in  1995.  This
improvement represents more efficient installation and support of products.

            Although  the  sales  mix for  hardware  versus  software  has  been
relatively consistent during 1995 and 1996, it should be noted that the ratio of
cost of revenues-to-revenues is also a function of whether the sales or services
are hardware or software intensive. Hardware sales result in lower gross margins
as hardware is not developed by the Company, but acquired for customers, as is a
small portion of software.  Sales of the Company's  software and related systems
development activities provide the Company greater gross margins.

Development Costs
-----------------

            Development  costs  increased  to $460,709 in 1996 from  $348,352 in
1995, an increase of $112,357, or 32%. As a percentage of revenues,  development
costs decreased from 12% in 1995 to 11% in 1996. The Company expects to continue
development  efforts  in 1997 at  about  the same  level  as in  1996,  with the
majority of the development effort focused on its new modular products.



                                      -19-

<PAGE>



Selling, General and Administrative
-----------------------------------

            Selling, general and administrative expenses increased to $4,715,513
in 1996 from $4,122,914 in 1995, representing a 14% increase. As a percentage of
revenues,  these expenses were 112% in 1996 and 145% in 1995, which reflects the
substantial increase in revenues in 1996.

            The  principal  components  of the increase in selling,  general and
administrative, in 1996 as compared to 1995 are described below:

            Sales and  marketing  expenses  increased to $1,273,751 in 1996 from
$1,036,506 in 1995, representing a 23% increase. This increase was attributed to
increased salaries,  benefits, and commissions of $467,213,  associated with the
Company's additions to the sales force, offset by a reduction of $234,715 in the
amount paid to independent contractors who performed similar functions in 1995.

            General and administrative  expenses increased to $3,441,762 in 1996
from $3,086,408 in 1995,  representing a 12% increase.  The principal components
of the  increase  are  increase in  shareholder  relations  expenses,  executive
compensation, employee wages, legal fees, and bad debt expense.

Write Down of Capitalized Software Costs
----------------------------------------

            In 1996,  the  Company  decided to offer its  products  in a modular
fashion and the Company  commenced the  development of the new modular  product.
Accordingly, the Company wrote down the value of capitalized software $1,075,000
under the net realizable value determination  provisions of SFAS No. 86 Computer
Software to be Sold, Leased, or Otherwise Marketed. (See Note 7 to the financial
statements). In 1995, there was no write down of assets.

Other Income (Expense)
----------------------

            Interest expense was $45,061 in 1995. Due to the funds received from
the private  offering in June 1996,  the Company  paid off its debt and invested
the remaining funds, earning net interest income in 1996 of $53,577.

            Net other income/(expense) represented $67,674 of expense in 1996 as
compared  to $93,775 of income in 1995.  The  decrease is  primarily  due to the
results of operations of the Company's  joint venture in Australia with P.M.S.I.
Group  Pty.   Limited.   The  company's   share  of  the  joint   venture's  net
earnings/(loss)  from operations was a $77,790 loss in 1996 compared to earnings
of $48,060 in 1995.

Income Taxes
------------

            The  Company   currently  has  a  substantial   net  operating  loss
carryforward  for which the Company has not  recognized a tax benefit due to the
uncertainty  related to when and how much of the tax benefits will be ultimately
realized (See Note 10 to the financial statements).

Net Loss
--------

            Net  loss  increased  to  $4,997,962  ($.82 a  share)  in 1996  from
$4,206,782  ($1.39 a share) in 1995. The Company's  operations  were affected by
various factors as discussed  above with the largest  component being a one-time
write down of capitalized software in the amount of $1,075,000.


                                      -20-

<PAGE>



New Accounting Pronouncements Adopted
-------------------------------------

            SFAS  No.  123,   Accounting  for  Stock  Based   Compensation   was
implemented during 1996. The affect upon the Company's financial  statements was
immaterial.

            SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of was implemented  during 1996. The effect
upon the Company's financial statements was immaterial.

Financial Condition: 1996 Compared to 1995
------------------------------------------

            Total assets remained  relatively constant at $6,436,945 on December
31, 1996,  from  $6,406,236  on December 31, 1995,  representing  an increase of
$30,709,  or less than 1%. This  includes an increase in cash of $1,268,319 as a
result of two private placements and a decrease in systems and software costs of
$1,173,928, primarily due to a write-down of these costs.

            Total liabilities decreased to $3,320,392 on December 31, 1996, from
$4,719,465 on December 31, 1995, representing a decrease of $1,399,073,  or 30%.
The  principal  contributing  factors to the decrease are the repayment of notes
payable  of  $300,000  and the  repayment  of the  promissory  notes  payable to
stockholders  with  conversion  futures,  which  had  a  balance  of  $2,324,335
partially offset by increases in deferred  revenue,  accrued warranty costs, and
accrued  expenses.  (See Note 4 to the  financial  statements  and Liquidity and
Capital Resources below).

Liquidity and Capital Resources
-------------------------------

            The following  table  presents a summary of the Company's  cash flow
for 1996 and 1995:


                                                1996           1995
                                            -----------    -----------
Net cash used in operating activities       $(2,282,971)   $(2,833,237)
Net cash used in investing activities          (228,663)      (708,917)
Net cash provided by financing activities     3,779,953      2,608,823
Net increase (decrease) in cash and cash    $ 1,268,319    $  (933,331)
equivalents

            The Company used cash of $2,282,971  in 1996 and  $2,833,237 in 1995
for operating  activities.  From its inception in October 1985 through  December
31, 1996, the Company has incurred cumulative losses of $16,783,318, with a loss
of $4,997,962  for the year ended  December 31, 1996.  The company's net loss in
1996 was due primarily to expenditures  related to the factors referred to under
the caption Results of Operations:  1996 Compared to 1995 above. Included in the
net loss for 1996 were non-cash expenses totaling $2,006,626, which included (I)
a   write-down   of   capitalized    software   costs   of   $1,075,000;    (ii)
depreciation/amortization   expenses  of  $513,153;   and  (iii)  equity-related
transactions totaling $229,686 of compensation expense recognized as a result of
the issuance of stock in 1996 and the grant of stock options in 1994.  Cash that
was used to purchase


                                      -21-

<PAGE>



items  classified as current  assets totaled  $426,428 with accounts  receivable
increasing by $540,617,  investment in  inventories  decreasing by $70,763,  and
prepaid  expenses  decreasing  by $43,426.  These uses of cash were offset by an
increase in accounts  payable and accrued  expenses of $764,362,  an increase in
accrued  warranty  costs of  $273,919,  and an increase  in deferred  revenue of
$180,110.

            The  Company  used cash in  investing  activities  in the  amount of
$228,663 in 1996,  which was used for  additions  to  property,  equipment,  and
software costs, and used cash in investment activities in the amount of $708,917
in 1995, principally related to the loan to GIS stockholders of $559,000.

            The Company was provided cash by financing  activities of $3,779,953
in 1996 and  $2,608,823 in 1995.  The Company relied on net proceeds from public
and private  offerings and loans and advances  from related  parties to fund its
operations  during 1996 and 1995.  Two private  offerings  in 1996 and a private
offering in 1995 provided $6,623,082 and $1,870,976, respectively.

            In 1995, the Company borrowed $859,505, consisting of $559,505 as an
unsecured cash advance from two former shareholders as evidenced by a promissory
note due  October  1996,  at an annual  interest  rate of 8% and  $300,000 as an
additional  unsecured  cash  advance  from  the  same  parties  evidenced  by  a
convertible  secured  promissory  note due March 30, 1996, at an annual interest
rate of 9.5%.  In June 1995,  the Company  issued  79,950 shares of its Series A
Preferred Stock in satisfaction of the $559,505  promissory note and $200,000 of
additional note payables outstanding since 1994.

            In February  1995,  the Company  acquired  substantially  all of the
assets of GIS for an aggregate  consideration of approximately  $3,700,000.  The
purchase price consisted of 109,333 shares of the Company's  Common Stock valued
at $765,331,  111,800 shares of the company's Series B Preferred Stock valued at
$559,000, and the Company's unsecured,  non-interest-bearing promissory notes in
the aggregate  amount of $2,324,335.  In addition,  the Company agreed to assume
certain  liabilities of GIS and loaned GIS $559,000 as evidenced by a promissory
note from GIS due March 31, 1996, which was secured by the pledge to the Company
of the 111,800 shares of the Company's Series B Preferred Stock.

            On March 11, 1996, the Company and GIS Systems  Limited  Partnership
executed an agreement whereby the parties agreed,  among other things, to settle
the remaining  obligation to GIS totaling  $2,324,335,  cancel the $559,000 note
receivable from GIS, cancel the $199,359 account receivable from GIS, and redeem
the  109,333  shares of Common  Stock and  111,800  shares of Series B Preferred
Stock previously issued to GIS. In connection  therewith,  the Company agreed to
pay to GIS the sum of $1,550,000.

            The cash payment of  $1,550,000  made to GIS on April 12, 1996,  the
date of closing,  was  principally  provided  from the net proceeds of the April
1996 Private Placement described below.

            On March 27, 1996, the Company  commenced a Private Placement of the
Company's  newly  established  Series E Preferred  Stock at $10.00 per share and
completed  the private  placement  as of April 22,  1996.  The Company  received
$1,450,582,  net of commissions and offering  expenses,  for the sale of 162,500
shares of preferred  stock. As of June 28, 1996,  150,000 shares of the Series E
Preferred Stock had been converted into 2,453,686 shares of the Company's Common
Stock.

            On June 10, 1996, the Company commenced a Private Placement of 8,000
shares, at $750 a share, of the Company's newly established Series F Convertible
Preferred Stock. On June 27, 1996, the Private Placement closed with the Company
receiving $5,172,500,  net of commissions and offering expenses, for the sale of
8,000


                                      -22-

<PAGE>



such shares.  Also, on June 27, 1996,  the Company used $300,000 of the proceeds
of the Series F Preferred  Stock Private  Placement to pay off the notes payable
to related  parties and on June 28,  1996,  the Company used  $1,000,000  of the
proceeds to redeem 95,950 shares of Series A Convertible Preferred Stock held by
the same party. These preferred shares were convertible into 1,879,837 shares of
Common Stock and  potentially  convertible  into as many as 2,590,650  shares of
Common  Stock  had  they not  been  redeemed  (plus  additional  shares  for any
dividends which would have accrued).

            Each share of Series F Preferred Stock is also  convertible into the
Company's  Common Stock, at a conversion price that is tied to the trading price
of the Company's Common Stock at the time of conversion; provided, however, that
for  purposes  of such  conversion,  a trading  price that is less than $.45 per
share, will be deemed to be $.45 and a trading price that is more than $1.00 per
share will be deemed to be $1.00.  On January 27, 1997, 55 Series AF convertible
preferred  shares  were  converted  into  100,000  shares of  common  stock at a
conversion  price of $.55 a share.  The  conversion  price was  calculated as of
September 30, 1996, the conversion request date.

            Upon payment of the  $300,000  note and  redemption  of the Series A
Convertible  Preferred  Stock,  each  of  which  was  held by the  same  private
investors,  three members of the Company's board of directors  (Stewart L. Krug,
Lawrence  W.  Umstadter,  and Timothy E.  Mahoney)  who were  nominated  by such
private  investors and served at their  request,  resigned  from the board.  The
company filled the vacancies  created by such  resignations by appointing  three
new directors. (Bruce D. Barrington, John J. Chluski, and Philip P. Signore)

            While no  assurances  can be  given,  management  believes  that the
current organization infrastructure and the Company's products are sufficient to
support  revenues greater than the levels achieved in 1996, and that income from
operations  should continue to progress  throughout 1997, such that the net loss
in 1997 should be less than the net loss in 1996.




                                      -23-

<PAGE>



ITEM 7. FINANCIAL STATEMENTS

            Following this page are the Company's  financial  statements for the
year ended December 31, 1996 which include the following items:

                                                                            Page
                                                                            ----

            Report of Independent Certified Public Accountants               F-1

            Consolidated Balance Sheets as of
              December 31, 1996 and December 31, 1995                        F-2

            Consolidated Statements of Operations for the years ended
              December 31, 1996 and December 31, 1995                        F-3

            Consolidated Statements of Stockholders' Equity for the
              years ended December 31, 1996 and December 31, 1995            F-4

            Consolidated Statements of Cash Flows for the years
              ended December 31, 1996 and December 31, 1995                  F-5

            Notes to Consolidated Financial Statements                       F-7


ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

            None.




                                      -24-

<PAGE>






                        CONSOLIDATED FINANCIAL STATEMENTS
                            AND REPORT OF INDEPENDENT
                          CERTIFIED PUBLIC ACCOUNTANTS

                             LASERGATE SYSTEMS, INC.
                                AND SUBSIDIARIES

                           December 31, 1996 and 1995




<PAGE>



                                TABLE OF CONTENTS

                                                                            PAGE

Report of Independent Certified Public Accountants .......................  F-1

Consolidated Balance Sheets as of December 31, 1996 and 1995 .............  F-2

Consolidated Statement of Operations for the Years
  Ended December 31, 1996 and 1995 .......................................  F-3

Consolidated Statement of Stockholders' Equity for the
  Years Ended December 1996 and 1995 .....................................  F-4

Consolidated Statements of Cash Flows for the Years
  Ended December 31, 1996 and 1995 .......................................  F-5

Notes to Consolidated Financial Statements ...............................  F-7



                                      -ii-

<PAGE>





               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



Board of Directors
Lasergate Systems, Inc. and Subsidiaries

            We have  audited the  accompanying  consolidated  balance  sheets of
Lasergate Systems,  Inc. and Subsidiaries as of December 31, 1996, and 1995, and
the related consolidated statements of operations, stockholders' equity and cash
flows  for  the  years  then  ended.   These   financial   statements   are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

            We  conducted  our  audits in  accordance  with  generally  accepted
auditing  standards.  Those standards require that we plan and perform the audit
to obtain reasonable  assurance about whether the financial  statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting  the amounts and  disclosures in the financial  statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by  management,  as well  as  evaluating  an  overall  financial  statement
presentation. We believe our audits provide a reasonable basis for our opinion.

            In our opinion,  the financial  statements referred to above present
fairly, in all material  respects,  the financial position of Lasergate Systems,
Inc. and  Subsidiaries  at December 31, 1996, and 1995, and the results of their
operations  and their cash flows for the years then ended,  in  conformity  with
generally accepted accounting principles.

            The accompanying  financial statements have been prepared,  assuming
that the Company will  continue as a going  concern.  As shown in the  financial
statements,  the Company incurred a net loss of $4,997,962 during the year ended
December 31, 1996, and, as of that date, the Company has an accumulated  deficit
of $16,783,318.  The Company has historically relied on net proceeds from public
and private  offerings and loans and advances  from related  parties to fund its
operations.  Management  believes that additional monies from these sources will
not be  necessary  to fund  its  operations  in  1997.  However,  the  Company's
operating loss history raises  substantial  doubt about the Company's ability to
continue as a going concern.  Management's  plans in regard to these matters are
described in Note 3. The  financial  statements  do not include any  adjustments
that might result from the outcome of this uncertainty.


                                                  /s/ Grant Thornton LLP

                                                  GRANT THORNTON LLP


Tampa, Florida
March 28, 1997



                                       F-1

<PAGE>



                    Lasergate Systems, Inc. and Subsidiaries

                           CONSOLIDATED BALANCE SHEETS

                                  December 31,

<TABLE>
<CAPTION>
                                                                                        1996            1995
                                                                                    ------------    ------------
<S>                                                                                 <C>             <C>         
                                     ASSETS
Current assets:
   Cash and cash equivalents                                                        $  1,924,825    $    656,506
   Accounts receivable, net of allowance for
    doubtful accounts of $147,000 and $36,000                                            868,931         439,311
   Account receivable, related party                                                        --           199,359
   Inventories                                                                           254,901         325,664
   Prepaid expenses                                                                       40,966          84,392
                                                                                    ------------    ------------
                        Total current assets                                           3,089,623       1,705,232
                                                                                    ------------    ------------

Property and equipment, net                                                              304,024         246,568
Systems and software costs, net of write down and amortization
    of $1,525,856 and $283,333                                                           242,739       1,416,667
Goodwill, net of amortization of $265,568 and $132,579                                 2,382,705       2,515,694
Customer lists and support contracts, net of amortization of $141,667 and $70,833        283,333         354,167
Other assets, net                                                                        134,521         167,908
                                                                                    ------------    ------------
                        Total assets                                                $  6,436,945    $  6,406,236
                                                                                    ============    ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Notes payable, related parties                                                   $       --      $    300,000
   Notes payable, other                                                                   28,628          21,757
   Accounts payable, trade                                                               542,671         634,863
   Deferred revenues                                                                     909,516         729,406
   Accrued warranty costs                                                                570,919         297,000
   Accrued expenses                                                                    1,128,658         272,104
                                                                                    ------------    ------------
                        Total current liabilities                                      3,180,392       2,255,130

Promissory notes payable, stockholders with conversion futures                              --         2,324,335
Obligations to issue common stock                                                        140,000         140,000
                                                                                    ------------    ------------
                        Total liabilities                                              3,320,392       4,719,465

Commitments and contingencies                                                               --              --

Stockholders' equity:
   Preferred stock, $.03 par value, 2,000,000 shares
     authorized, 8,000 and 387,750 shares issued and
     outstanding at December 31, 1996 and 1995, respectively                                 240          11,633
   Common stock, $.03 par value, 20,000,000 shares authorized,
     7,362,061 and 3,125,013 issued and outstanding at
     December 31, 1996 and 1995, respectively                                            220,862          93,751
   Additional paid-in capital                                                         19,818,769      14,065,743
   Less: Common stock, $.03 par value, 20,000 shares
     at December 31, 1996 and 1995, respectively,
     subject to put options                                                             (140,000)       (140,000)
    Notes receivable, stockholders                                                          --          (559,000)
   Accumulated deficit                                                               (16,783,318)    (11,785,356)
                                                                                    ------------    ------------
                        Total stockholders' equity                                     3,116,553       1,686,771
                                                                                    ------------    ------------
                        Total liabilities and stockholders' equity                  $  6,436,945    $  6,406,236
                                                                                    ============    ============
</TABLE>



        The accompanying notes are an integral part of these statements.


                                       F-2

<PAGE>



                    Lasergate Systems, Inc. and Subsidiaries

                      CONSOLIDATED STATEMENT OF OPERATIONS

                            Years ended December 31,


                                                        1996            1995
                                                    -----------     -----------

Revenues                                            $ 4,204,626     $ 2,835,206

Operating Expenses:
  Cost of revenues                                    2,937,269       2,619,436
  Development                                           460,709         348,352
  Selling, general and administrative                 4,715,513       4,122,914
  Write down of capitalized software costs            1,075,000            --
                                                    -----------     -----------
            Operating loss                           (4,983,865)     (4,255,496)

Other income (expense)
            Interest income (expense)                    53,577         (45,061)
Other, net                                              (67,674)         93,775
                                                    -----------     -----------

            Loss before income taxes                 (4,997,962)     (4,206,782)

Income taxes                                               --              --
                                                    -----------     -----------
            Net loss                                $(4,997,962)    $(4,206,782)
                                                    ===========     ===========

Net loss per common share                           $      (.82)    $     (1.39)
                                                    ===========     ===========

Weighted Average Common Stock Outstanding             6,063,633       3,023,346
                                                    ===========     ===========





        The accompanying notes are an integral part of these statements.


                                       F-3

<PAGE>
                    Lasergate Systems, Inc. and Subsidiaries

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

                     Years ended December 31, 1996 and 1995
[PART 1 OF 2]
<TABLE>
<CAPTION>
                                                                      Preferred Stock                   Common Stock         
                                                                ----------------------------    ---------------------------- 
                                                                                                                             
                                                                                                                             
                                                                                   Par                             Par       
                                                                   Shares          Value           Shares          Value     
                                                                ------------    ------------    ------------    ------------ 
<S>                                                                   <C>              <C>         <C>                <C>    
BALANCE, DECEMBER 31, 1994                                            36,364           1,091       2,913,680          87,412 
                                                                ------------    ------------    ------------    ------------ 
Issuance of common stock at $7.00 a share and
  preferred stock at $5.00 per share in
  connection with GIS acquisition                                    111,800           3,353         109,333           3,279 
Less: note receivable collateralized by preferred
  stock                                                                 --              --              --              --   
Issuance of preferred stock in Private Placement at
  $10 per share less offering expenses of $215,024                   208,600           6,258            --              --   
Grants of stock options for 1994 and 1995
  executive compensation                                                --              --              --              --   
Conversion of preferred to common stock                              (28,600)           (858)        110,000           3,300 
Issuance of preferred  stock for satisfaction of
  notes payable, related party                                        79,950           2,400            --              --   
Exchange of preferred stock: Shares redeemed                         (36,364)         (1,091)
                             Shares issued                            16,000             480            --              --   
Issuance of common stock under stock option plan                        --              --             2,000              60 
Exercise of common stock put option                                     --              --           (10,000)           (300)
Net loss                                                                --              --              --              --   
                                                                ------------    ------------    ------------    ------------ 
BALANCE, DECEMBER 31, 1995                                           387,750    $     11,633       3,125,013    $     93,751 
                                                                ------------    ------------    ------------    ------------ 

Retirement of stock in settlement of acquisition
   obligations                                                      (111,800)         (3,355)       (109,333)         (3,279)
Issuance of Series E preferred stock                                 162,500           4,875            --              --   
Issuance of Series F preferred stock                                   8,000             240            --              --   
Redemption of preferred stock                                        (95,950)         (2,878)           --              --   
Conversion of preferred to  common stock                            (342,500)        (10,275)      4,301,381         129,040 
Issuance of common stock as compensation                                --              --            45,000           1,350 
Grant of stock options for
    Executive compensation                                              --              --              --              --   
Net loss                                                                --              --              --              --   
                                                                ------------    ------------    ------------    ------------ 

BALANCE, DECEMBER 31, 1996                                             8,000             240       7,362,061         220,862 
                                                                ============    ============    ============    ============ 
</TABLE>

[PART 2 OF 2]
<TABLE>
<CAPTION>
                                                                 
                                                                                    Common
                                                                                    Stock           Notes
                                                                   Additional       Subject         Receivables
                                                                   Paid-In          to Put          Stock-        Accumulated
                                                                   Capital          Option          holders         Deficit
                                                                 ------------    ------------    ------------    ------------
<S>                                                                 <C>              <C>                           <C>        
BALANCE, DECEMBER 31, 1994                                          9,258,563        (210,000)           --        (7,578,574)
                                                                 ------------    ------------    ------------    ------------
Issuance of common stock at $7.00 a share and
  preferred stock at $5.00 per share in
  connection with GIS acquisition                                   1,317,697            --              --              --
Less: note receivable collateralized by preferred
  stock                                                                  --              --          (559,000)           --
Issuance of preferred stock in Private Placement at
  $10 per share less offering expenses of $215,024                  1,864,718            --              --              --
Grants of stock options for 1994 and 1995
  executive compensation                                              937,250            --              --              --
Conversion of preferred to common stock                                (2,442)           --              --              --
Issuance of preferred  stock for satisfaction of
  notes payable, related party                                        757,106            --              --              --
Exchange of preferred stock: Shares redeemed                    
                             Shares issued                                611            --              --              --
Issuance of common stock under stock option plan                        1,940            --              --              --
Exercise of common stock put option                                   (69,700)         70,000            --              --
Net loss                                                                 --              --              --        (4,206,782)
                                                                 ------------    ------------    ------------    ------------
BALANCE, DECEMBER 31, 1995                                       $ 14,065,743    $   (140,000)   $   (559,000)   $(11,785,356)
                                                                 ------------    ------------    ------------    ------------

Retirement of stock in settlement of acquisition
   obligations                                                         22,609            --           559,000            --
Issuance of Series E preferred stock                                1,445,707            --              --              --
Issuance of Series F preferred stock                                5,172,260            --              --              --
Redemption of preferred stock                                        (997,121)           --              --              --
Conversion of preferred to  common stock                             (118,765)           --              --              --
Issuance of common stock as compensation                               40,836            --              --              --
Grant of stock options for
    Executive compensation                                            187,500            --              --              --
Net loss                                                                 --              --              --        (4,997,962)
                                                                 ------------    ------------    ------------    ------------

BALANCE, DECEMBER 31, 1996                                         19,818,769        (140,000)           --       (16,783,318)
                                                                 ============    ============    ============    ============
</TABLE>


        The accompanying notes are an integral part of these statements.



                                       F-4

<PAGE>



                    Lasergate Systems, Inc. and Subsidiaries

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                            Years ended December 31,

<TABLE>
<CAPTION>

                                                                                       1996           1995
                                                                                   -----------    -----------
<S>                                                                                <C>            <C>         
Cash flows from operating activities:
   Net loss                                                                        $(4,997,962)   $(4,206,782)
   Adjustments to reconcile net loss to cash used in operating activities:
      Depreciation and amortization                                                    513,153        575,985
      Write down of capitalized software costs                                       1,075,000           --
      (Gain) loss in joint venture                                                      77,790        (48,060)
      Increase in allowance for doubtful accounts                                      110,997         19,000
      Obligations to issue options granted as                                             --          (75,000)
        compensation for services
      Compensation recognized from issuance  of stock and grand of stock options       229,686        562,250
      Decrease (increase) in:
         Accounts receivable, trade                                                   (540,617)      (305,782)
         Accounts receivable, related party                                               --         (199,359)
         Inventories                                                                    70,763       (115,022)
         Prepaid expenses                                                               43,426         53,028
         Other                                                                         (83,598)        87,025
      Increase (decrease) in:
         Accounts payable and accrued expenses                                         764,362        136,149
         Accrued warranty costs                                                        273,919         15,925
         Deferred revenue                                                              180,110        667,406
                                                                                   -----------    -----------
                        Net cash used in operating activities                       (2,282,971)    (2,833,237)
                                                                                   -----------    -----------


Cash flows from investing activities:
   Net additions to property, equipment, and software costs                           (228,663)      (121,772)
   Loans to GIS stockholders related to GIS acquisition                                   --         (559,000)
   Other acquisition costs                                                                --          (28,145)
                                                                                   -----------    -----------
                        Net cash used in investing activities                         (228,663)      (708,917)
                                                                                   -----------    -----------

Cash flows from financing activities:
   Proceeds from secondary public or private offering, net of                        6,623,082      1,870,976
     offering costs
   Proceeds from exercise of warrants/stock options                                       --            2,000
   Repurchase of common stock subject to put option                                       --          (70,000)
   Redemption of preferred stock                                                    (1,000,000)          --
   Settlement of acquisition obligations                                            (1,550,000)          --
   Proceeds from loans, other                                                           30,200         36,924
   Repayment of loans, other                                                           (23,329)       (90,077)
   Proceeds from loans, related parties                                                   --          859,000
   Repayment of loans, related parties                                                (300,000)          --
                                                                                                  -----------
                        Net cash provided by financing activities                    3,779,953      2,608,823
                                                                                   -----------    -----------

Net increase (decrease) in cash and cash equivalents                                 1,268,319       (933,331)
                                                                                   -----------    -----------

Cash and cash equivalents, beginning of year                                           656,506      1,589,837
                                                                                   -----------    -----------

Cash and cash equivalents, end of year                                             $ 1,924,825    $   656,506
                                                                                   ===========    ===========
</TABLE>



        The accompanying notes are an integral part of these statements.



                                       F-5

<PAGE>



                    Lasergate Systems, Inc. and Subsidiaries

                CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

                     Years ended December 31, 1996 and 1995


SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

INTEREST AND INCOME TAXES PAID:


                                                       Year ended December 31,
                                                     ---------------------------
                                                       1996                1995
                                                     -------             -------
Interest                                             $17,494             $31,155
Income taxes                                            --                  --

NON-CASH INVESTING AND FINANCING ACTIVITIES:


1995:

            The  Company  acquired  substantially  all the assets of GIS Systems
Limited Partnership for total consideration of approximately  $3,700,000 (common
stock  of  $765,331,  preferred  stock  of  $559,000,  and  promissory  note  of
$2,324,335)  and  recorded  assets  at  aggregate  fair  value of  approximately
$3,750,000, with assumed payables of approximately $50,000 (see Note 4).

            The Company issued 79,950 shares of preferred  stock in satisfaction
of related party notes payable of $759,505.


1996:

            In March 1996, the Company settled its  acquisition  obligation with
GIS (see Note 10) as follows:


Promissory notes payable, stockholders                                $2,324,335
Less:
            Cash payment                                               1,550,000
                                                                      ----------
            Accounts receivable canceled                                 199,359
            Note receivable canceled                                     559,000
            Retirement of common and preferred stock                      15,976
                                                                      ----------
                                                                      $     --  
                                                                      ==========



        The accompanying notes are an integral part of these statements.



                                       F-6

<PAGE>


                    Lasergate Systems, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1996 and 1995


NOTE 1 - DESCRIPTION OF BUSINESS

            Lasergate   Systems,   Inc.  (the   "Company")   was  organized  and
incorporated  in the State of  Florida  in 1985.  The  Company is engaged in the
development,  assembly,  marketing,  servicing  and  installation  of  admission
control and revenue  accounting  systems for both general admission and reserved
seating. These systems are used primarily at amusement parks, theme parks, water
parks, museums,  aquariums,  zoos, casinos, ski resorts,  night clubs, theaters,
professional and university athletic and multi-purpose  arenas, and other public
facilities, including state, county and local fairs, movie theaters, race tracks
and golf courses.

            The Company's principal products "Select-a-Seat",  "Admits Platinum"
and "Admits Gold", represent approximately 33%, 35% and 16% of revenues in 1996,
respectively, and 42%, 30%, and 12% of revenues in 1995, respectively.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

            The  accompanying  consolidated  financial  statements  include  the
accounts of the  Company  and its wholly  owned  subsidiaries.  All  significant
intercompany accounts and transactions have been eliminated.

USE OF ESTIMATES IN FINANCIAL STATEMENTS

            In preparing  financial  statements  in  conformity  with  generally
accepted accounting principles,  management makes estimates and assumptions that
affect the  reported  amounts  of assets  and  liabilities  and  disclosures  of
contingent  assets and liabilities at the date of the financial  statements,  as
well as the  reported  amounts of revenues  and  expenses  during the  reporting
period.  These  estimates  are a major factor in providing  for warranty  costs,
doubtful accounts valuation of intangibles  litigation,  and certain taxes which
are further  described  herein.  While  actual  results  could differ from those
estimates,  management does not expect the variances, if any, to have a material
effect on the financial statements.

CASH EQUIVALENTS

            The Company considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents.

ACCOUNTS RECEIVABLE, NET

            Accounts  receivable  are  reported  net of  allowance  for doubtful
accounts.  At least quarterly,  management  reviews the collection status of its
accounts and provides an  appropriate  allowance,  if necessary.  Based on these
reviews, management believes that its accounts at December 31, 1996 and 1995 are
reasonably stated.



                                       F-7

<PAGE>


                    Lasergate Systems, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1996 and 1995






NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

INVENTORIES

            Inventories  are  stated at the lower of cost or  market,  with cost
being determined principally by the use of the first-in, first-out method.

PROPERTY AND EQUIPMENT

            Property and  equipment  are stated at cost.  Depreciation  is being
provided using the straight-line method over the estimated economic useful lives
(3-5 years) for financial statement and income tax purposes.

SYSTEMS AND SOFTWARE COSTS

            Systems and software  costs  represent  the fair values  assigned in
connection with the Company's  acquisition of Delta and GIS in December 1994 and
January  1995 (see Note 4) as adjusted by a one-time  write-down  of  $1,075,000
during 1996. Such costs are amortized on a product-by-product  basis. The annual
amortization  expense is the greater of the amount computed using the ratio that
current  gross  revenues  for each  product  bear to the  total of  current  and
anticipated  future gross revenues for that product or the straight-line  method
over the remaining estimated economic life (6 years) of the product.

            All development costs are capitalized once technological feasibility
has been  achieved on a product  until the product is released for general sale,
at which time,  only the costs of  development  of  significant  additions  to a
product's features and functions are capitalized.  Technological  feasibility is
determined on a project by project basis.  For the software which the Company is
reporting  upon,  technological  feasibility  is defined to be the creation of a
working  model  which  was  created  by  December  1996.   Thus,  the  Company's
expenditures  related to the  development  of its systems and software  prior to
December 1996,  along with the cost to integrate GIS and Delta products with the
Company's  products  in 1996 and  1995,  have  been  expensed  and  included  in
development  costs. No amounts have been  capitalized by the Company during 1996
and 1995,  except those recorded as a result of the GIS and Delta  acquisitions,
and approximately  $25,000 during the fourth quarter of 1996 (See Note 7), since
either the amounts  qualifying for  capitalization  under Statement of Financial
Accounting Standards (SFAS) No. 86 "Accounting for Costs of Computer Software to
be Sold,  Leased or  Otherwise  Marketed"  once  technological  feasibility  (as
defined) has been achieved, have been insignificant or the customer specifically
funded the development of the unique and discrete  systems and software  through
the customer contract.

            During 1996,  the Company  decided to convert all of their  products
into one modular Windows(R) based product.  Accordingly,  the softwares carrying
values were written down $1,075,000 to approximately $200,000,  representing the
software's  estimated net realizable value. (See Note 7.) Amortization of system
and  software  costs in 1996 and 1995,  exclusive  of the write  down  discussed
above, was $167,523, and $283,333 and is included in Selling G & A expenses.



                                       F-8

<PAGE>


                    Lasergate Systems, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1996 and 1995



NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

INTANGIBLES

            Intangibles  which were  recognized in connection with the Company's
acquisition of GIS and Delta in 1995 and 1994,  respectively,  relate to systems
and software costs (see above),  non-competition  agreements,  customer list and
support  contracts,  and goodwill.  Such costs have been and are being amortized
using the  straight-line  method over their  respective  estimated useful lives:
systems and software costs (see above),  non-competition  agreements--three  (3)
years, customer list and support  contracts--six (6) years, and goodwill--twenty
(20) years.  Amortization  expense (exclusive of software) for 1996 and 1995 was
$232,156 and $231,745,  and is included in selling,  general and  administrative
expenses.  Management reviews, at least on a quarterly basis, whether or not any
impairment  has occurred with respect to such acquired  intangibles  which could
warrant an adjustment to the carrying values. Undiscounted cash flow projections
associated  with  the  acquired  business  is the  primary  focal  point  in the
assessment  and  analysis for  potential  impairment.  During 1996 and 1995,  no
impairment  was  identified  exclusive  of the  write  down  of  software  costs
discussed above.

INVESTMENT IN JOINT VENTURE

            The  Company  uses  the  equity  method  of  accounting  for its 50%
investment in Lasergate Systems  Asia-Pacific Pty. Limited. At December 31, 1996
and 1995, and for the years then ended, the joint venture's assets,  liabilities
and results of operations are not significant.  The Company's share of the joint
venture's  net  (loss)  from  operations  for 1996 and  1995 was  ($77,790)  and
$48,060,  respectively,  and  was  classified  in  other  income/expense  in the
accompanying  consolidated  financial  statements  for  1996 and  1995.  The net
carrying value of the Company's  investment  in/advances to the joint venture at
December  31,  1996,  and  1995,  was  $0 and  $77,790,  respectively,  and  was
classified  in other  assets.  The Company has not  guaranteed  any of the joint
venture's  liabilities  nor does the Company  have any  commitments  to fund its
operations.  The Company  intends to dissolve  this joint venture as of June 30,
1997.

WARRANTY COSTS AND WARRANTY LIABILITY (ALLOWANCE)

            The Company has historically  offered a three month warranty for its
products.  For the period  commencing after the end of the warranty period,  the
Company had offered its  customers a  maintenance  and service  contract  for an
annual fee. However, both companies acquired,  Delta and GIS, offered a one year
warranty  period  followed by a maintenance  and service  contract.  The Company
continued the one year warranty  practice into 1996.  Effective June 1, 1996 the
Company  returned to its original 90-day warranty  period.  This warranty period
primarily  relates to  telephone  support of  customers.  The related  costs are
charged to cost of revenues as incurred.

            At December 31, 1995, the Company had an accrued warranty  liability
(warranty  allowance) of $297,000,  which had been provided to cover the cost of
enhancements to be made (free of charge) to systems  installed in prior periods.
However, some of these modifications were more costly to perform than originally
estimated,  and the Company  has  committed  to make  similar  enhancements  for
additional  customers.  As a result,  an additional  $487,000 was accrued during
1996 in order to provide for the cost of completing all known  warranty  claims.
In addition, during 1996, management reviewed all warranty costs incurred within
the past year,


                                       F-9

<PAGE>


                    Lasergate Systems, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1996 and 1995


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

which  had  been  provided  for  by  estimating  and  recording  known  warranty
liabilities each quarter. Based on this review and management's expectation that
the number of installations will continue to grow and,  therefore,  make it more
difficult to review all installations  individually,  management began providing
for warranty  costs by accruing a warranty  allowance of 5% of revenues.  During
1996, this amounted to $81,000. The balance of the accrued warranty allowance at
December  31,  1996,  was  $571,000.  Management  believes 5% is a  conservative
estimate of these costs (which are unknown at time of sale) but will continue to
monitor  them to ensure  they are  provided  for on a current  basis in order to
match the cost with the associated revenue.

            Provisions  for the warranty  allowance  are  classified  as cost of
revenues.

            While warranty  modifications are often enhancements that may result
in future product and service  revenues,  no absolute  assurance can be given at
this time.

FAIR VALUE OF FINANCIAL INSTRUMENTS

            At December 31, 1996, and December 31, 1995, the carrying  amount of
cash,  accounts  receivable,  accounts  payable and accrued  expenses  and notes
payable,  approximate  fair value because of the short-term  maturities of these
assets and liabilities.

REVENUE RECOGNITION

            Revenues from the sale of equipment,  which have been  predominately
under short-term  contracts during the periods presented herein,  are recognized
upon the  acceptance of the system by the customer  provided that no significant
vendor or post-contract support obligations remain outstanding and collection of
the  resulting  receivable  is probable.  Revenues from special sales sold under
evaluation periods are recognized at the end of this period.

            Revenues  from  post  contract  customer  support   maintenance  are
recognized ratably over the maintenance period if collectibility is probable.

            Revenues  include  product  sales  and  service  revenues.   Service
revenues represent approximately 14% and 11%, respectively, of total revenues in
1996 and 1995.

            Deferred revenues include customer deposits of $335,467 and $384,731
and advanced billings in accordance with contract terms of $418,063 and $344,675
at December 31, 1996 and 1995, respectively.

            Cost of revenues includes the costs associated with the hardware and
software  acquired for the  Company's  customers  and the  estimated  full costs
associated with the engineering (mostly software customization) and installation
of the system. Cost of revenues also includes the estimated full cost related to
support and  maintenance.  The Company  refined its procedures for capturing and
reporting such information in 1996. This refinement  affected the  comparability
of the information being reported.  Thus, cost of revenues,  development  costs,
and selling,  general and  administrative  expenses were  reclassified for 1995,
using the same


                                      F-10

<PAGE>


                    Lasergate Systems, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1996 and 1995


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

basis as that used for 1996. The Company  believes that the estimated full costs
are reasonably stated and classified in all material respects.

            During  1996 and  1995,  certain  of the  Company's  contracts  with
customers  afforded the Company the  opportunity  to develop  products for their
customers  which were also new products for the Company not subject to exclusive
arrangements  with those  customers.  The  resulting  cost of those  products is
included  in  development  costs  versus  cost  of  revenues  along  with  other
development  costs related to  enhancement  of the Company's  existing  products
during 1996 and 1995.

INCOME TAXES

            Under the  liability  method  specified  in  Statement  of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes," deferred tax
assets and  liabilities  are  determined  based on the  difference  between  the
financial  statement and tax basis of assets and  liabilities as measured by the
enacted tax rates which will be in effect when these differences reverse.

NET LOSS PER COMMON SHARE

            Net loss per common share is based on the weighted average number of
shares  outstanding  during the periods.  Common stock equivalents  (options and
warrants) and the effect of the convertible  securities were not included in the
calculation of net loss per share because they were antidilutive.

NEW ACCOUNTING PRONOUNCEMENTS ADOPTED

            Effective   January  1,  1996,  the  Company  adopted  Statement  of
Financial  Accounting Standards (SFAS) No. 121, Accounting for the Impairment of
Long-Lived  Assets and for  Long-Lived  Assets to Be  Disposed  Of. SFAS No. 121
requires that long-lived  assets and certain  identifiable  intangibles held and
used by an entity along with goodwill should be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may  not  be  recoverable.  If  the  sum  of  the  expected  future  cash  flows
(undiscounted  and without  interest)  is less than the  carrying  amount of the
asset, an impairment loss is recognized. Measurement of that loss would be based
on the fair value of the asset. SFAS No. 121 also generally requires  long-lived
assets and certain identifiable  intangibles to be disposed of to be reported at
the lower of the  carrying  amount  or the fair  value  less  cost to sell.  The
adoption of SFAS No. 121 had an insignificant  effect on the Company's financial
statements.

            Effective  January  1,  1996,  the  Company  adopted  SFAS No.  123,
Accounting for Stock Based  Compensation.  For employee stock awards, as allowed
by SFAS No. 123, the Company has elected to continue using the accounting method
promulgated by the Accounting  Principals  Board Opinion No. 25.  Accounting for
Stock  Issued to Employees to measure  compensation.  As a result,  SFAS No. 123
proforma disclosures are required in these financial statements. The adoption of
SFAS No. 123's accounting and reporting  provisions had an insignificant  effect
on the Company's financial statements (see Note 13).



                                      F-11

<PAGE>


                    Lasergate Systems, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1996 and 1995



NOTE 3 - OPERATIONAL AND FUNDING MATTERS

            The Company has a net loss for 1996 of $4,997,962,  and a history of
operating losses that have accumulated to $16,783,318,  at December 31, 1996. In
view of these matters,  recoverability  of a major portion of the recorded asset
amounts  shown in the  accompanying  balance sheet is dependent  upon  continued
operation of the Company,  which in turn is dependent upon the Company's ability
to succeed in its future operations. The financial statements do not include any
adjustments  relating to the recoverability and classification of recorded asset
amounts or amounts and  classification  of  liabilities  that might be necessary
should the Company be unable to continue in existence.  The following commentary
addresses  the  Company's  operations  for 1996 and its plan to  improve  future
results.

            Since the second  quarter of 1994,  a number of  significant  events
have had a material impact upon the Company's  operating results and its current
and future  prospects.  In addition to a change in control and a public offering
of its securities, the changes included replacement of the majority of the Board
of  Directors  during  1996  and  over  the  course  of 1995 and 1996 all of the
Company's senior executives,  including the President/CEO (October 1994) as well
as most of its other personnel.  They also included two acquisitions  (Delta and
GIS Systems Limited Partnership (GIS)) with a combined customer base of over 200
sites, and various product integration and development efforts.

            These changes  required more than two years of sustained  effort and
substantial  amounts of capital.  At the beginning of 1996, the Company had very
little working  capital.  This situation grew worse during the first half of the
year, resulting in shipments to customers falling behind schedule because orders
for their product were not placed with vendors, in that the Company had utilized
all credit extended to it by its vendors. Given these circumstances, the Company
undertook two private placements of convertible preferred stock during that time
period,  for which the Company  received a combined total of $6,623,082,  net of
commissions and offering expenses.  That capital infusion allowed the Company to
initiate two basic programs  designed to move the Company toward  profitability.
First was development of a new modular product (Admits)  allowing the product to
be customized  more easily and installed  more  efficiently.  Second  committing
additional funds to marketing  efforts,  including a doubling of the sales force
aimed at substantially  increasing  revenues and potentially  moving the Company
beyond the break-even point and towards profitability in the future.

            The  development  effort was  immediately  focused  upon the general
admission  product  since it would most  likely  yield the  fastest  and largest
payback.  The core of the product was developed  earlier than planned and was in
Beta testing by November 1996. The  experience of the  development  team and the
ability to forego the creation of a detailed  program  design by  utilizing  the
software   programs  of  legacy  products  as  a  production  plan   accelerated
development.  With the  Company's  efforts to satisfy new and existing  customer
demands for programming changes to the Delta and GIS products (see discussion of
warranty  costs and warranty  liability in Note 2 of the financial  statements),
required keeping a substantial  portion of the Company's  resources dedicated to
the legacy products in all areas: development,  installation,  customer support,
training,  documentation,  and marketing.  However, the Company kept the general
admission  development  effort on  schedule.  At the  present  time,  management
believes  the  Company  will  have  the new  Admits  general  admission  product
available for general release by June 1997.



                                      F-12

<PAGE>


                    Lasergate Systems, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1996 and 1995






NOTE 3 - OPERATIONAL AND FUNDING MATTERS (CONTINUED)

            For most of 1996 the  Company  employed  three or four  field  sales
representatives.  During the fourth quarter of 1996, two systems  engineers were
dedicated to providing  pre-sales  support and an inside  sales  department  was
organized with two inside sales representatives hired initially. During February
and March of 1997,  two  additional  field  sales  representatives  were  hired,
bringing the total to six sales  personnel.  Thus, for most of 1997, the Company
plans to have ten employees dedicated to sales efforts compared to three or four
during 1996.

            The result for the Company  expanding its sales force and delivering
the new Admits general  admission  product on schedule should  favorably  impact
upon  revenue  during the latter part of 1997.  Management  believes it can thus
achieve  a  reduction  of the  operating  loss by the  end of  1997  and lay the
foundation  for  future  profitability.  Although  no  assurance  can be  given,
management believes that sustained expenditure and cash controls, would maintain
adequate  working capital through 1997,  based upon the further premise that the
new general  admission Admits product will be completed as planned by June 1997.
Nevertheless,  the  Company  intends  to seek and  actively  pursue  a  possible
relationship with a strategic partner,  which would include an equity investment
in the Company and may review other financing opportunities.

            Although revenues increased to $4,204,626 in 1996 from $2,835,206 in
1995, increased costs more than offset the increased revenues, such that the net
loss  increased  from  $4,206,782  in 1995 to  $4,997,962  in 1996.  The largest
component of the increase was a one-time  write-down of capitalized  software in
the amount of $1,075,000.

            Although no assurances  can be given,  based on actual sales for the
first  three  months of 1997  (unaudited)  and  committed  sales  orders to date
(unaudited),  revenues for 1997 will be at least at the level  achieved in 1996,
with  greater  revenues  being  targeted.  The  foregoing  is a forward  looking
statement  contingent  upon no  cancellation  of existing  sales  orders and the
receipt of future sales orders at the current rate.

            The Company  continues to incur net losses and negative  cash flows.
However,  management  still  expects to realize the  carrying  value of goodwill
($2,382,705  at  December  31,  1996)  through  the receipt of future cash flows
(undiscounted).  The elements of goodwill  still remain.  These are the value of
the  acquired  market  share,  market  acceptance,   product  name,  proprietary
knowledge,  and  industry  expertise  which the  Company  has  acquired  and has
substantially  maintained.  Management's  last  quarterly  review of intangibles
indicated no new events which would  necessitate  changes to the carrying values
or useful lives of any intangible assets.

NOTE 4 - ACQUISITION OF BUSINESSES

            On February  15, 1995,  effective  January 1, 1995 (the date control
transferred),  the  Company  acquired  substantially  all of the  assets  of GIS
Systems Limited Partnership  ("GIS"). The purchase price for the acquisition was
valued at  approximately  $3,700,000.  The purchase  price  consisted of 109,333
shares of the Company's  common stock valued at $765,331,  111,800 shares of the
Company's Series B Preferred Stock valued at $559,000,  the Company's promissory
note in the  principal  amount  of  $591,000  (see  Note  9) and  the  Company's
promissory note in the principal amount of $1,733,335 (see Note 9). In addition,
the Company agreed to assume certain  liabilities of GIS  (aggregating  $45,718)
and loaned GIS $559,000 (see paragraph below). Direct


                                      F-13

<PAGE>


                    Lasergate Systems, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1996 and 1995


NOTE 4 - ACQUISITION OF BUSINESSES (CONTINUED)

acquisition costs aggregating  $82,744  (principally  legal and accounting fees)
were incurred in connection with the acquisition. The promissory notes, totaling
$2,324,335,  were  convertible  into preferred stock and derived their valuation
from the underlying  preferred  stock.  The common stock  valuation of $7.00 per
share  and the  preferred  stock  valuation  of $5.00 per  share  reflected  the
agreed-upon  price  between  the  buyer  and  sellers  and was  approved  by the
Company's  Board  of  Directors  after  giving  effect  to such  factors  as the
restrictions and the size of the blocks of common and preferred stock.

            The loan of  $559,000  to GIS  evidenced  by a  promissory  note was
secured by the 111,800 shares of the Company's  Series B Preferred Stock and was
due March 31, 1996. The sellers had the option of returning  preferred  stock if
the assignable call provision of $5.00 per share was not exercised. Accordingly,
the note receivable was presented as a reduction of stockholders' equity.

            See Note 9 for discussion  about the  settlement of the  acquisition
obligations.

            The total purchase price of GIS was allocated based on fair value of
net  tangible  assets  acquired,  with  the  excess  allocated  to  identifiable
intangible  components based on their  individual  estimated fair values and the
remainder was allocated to goodwill.

            The purchase  price,  including the direct  acquisition  costs,  was
allocated as follows:


            Inventory                                   $    85,962
            Prepaid expenses and other current assets        20,472
            Fixed assets                                     87,581
            Accounts payables assumed                       (45,718)
            Systems and software costs                    1,200,000
            Customer list and support contracts             300,000
            Goodwill                                      2,083,113
                                                        -----------
                                                        $ 3,731,410
                                                        ===========

            On  December  22,  1994,   Lasergate   Systems   Canada   Company  a
wholly-owned  subsidiary  of the Company,  acquired  the capital  stock of Delta
Information   Services,   Inc.,  a  Canadian  company  ("Delta")  for  aggregate
consideration  of $1,200,000.  The purchase price  consisted of cash of $500,000
and a promissory note of $700,000,  convertible into 100,000 unregistered shares
of the  Company's  Common  Stock  valued at $7.00 per share.  The  Common  Stock
valuation  reflected the agreed-upon  price between the buyer and seller and was
also determined by the Board of Directors after giving effect to such factors as
the  restrictions  on  resale  and the size of the block of  Common  Stock.  The
promissory note was immediately  converted into Comon Stock in December 1994. In
addition, the Company incurred approximately $46,919 in direct acquisition costs
(principally  legal and accounting fees). At the date of acquisition,  Delta had
no tangible  assets nor liabilities  that were  transferred to or assumed by the
Company. However, the Delta product was a well-known general admission ticketing
system  within the ski industry  and the  technical  "know-how"  included in the
product was considered relatively valuable.




                                      F-14

<PAGE>


                    Lasergate Systems, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1996 and 1995


NOTE 4 - ACQUISITION OF BUSINESSES (CONTINUED)

The purchase price,  including the direct  acquisition  costs,  was allocated as
follows:


Computer software                                                     $  500,000
Non-competition agreement                                                 85,000
Customer list and support contracts                                      125,000
Goodwill                                                                 536,919
                                                                      ----------
                                                                      $1,246,919
                                                                      ==========

            In  connection  with the  acquisition  of Delta,  the  sellers  were
granted a put  option to sell to the  Company  up to 10,000 of the shares of the
Company's  common  stock at $7.00 per share each year for the next three  years.
The put option which had an aggregate  value of $210,000 has been  classified as
common  stock  subject to put  options in the  consolidated  balance  sheets and
represents  the  amount  the  Company  would be  required  to pay if all the put
options were exercised.  During 1995, 10,000 options were exercised resulting in
$70,000 of common  stock  (10,000  shares)  being  retired,  leaving a remaining
balance  subject to put options at December 31, 1995, of $140,000.  During 1996,
an additional  10,000  options were  presented by the option holders in order to
exercise them. However,  the Company did not allow them to be exercised due to a
disagreement with the sellers regarding the stock purchase agreement.  (See Note
12.)

NOTE 5 - INVENTORIES

            Inventories as of December 31, consist of the following:



                                                        1996              1995
                                                      --------          --------

Installations-in-process                              $199,561          $172,411
Parts and systems                                       55,340           153,253
                                                      --------          --------
                                                      $254,901          $325,664
                                                      ========          ========



                                      F-15

<PAGE>


                    Lasergate Systems, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1996 and 1995


NOTE 6 - PROPERTY AND EQUIPMENT

            Property and equipment as of December 31, consist of the following:


                                                         1996             1995
                                                       --------         --------
           
           Furniture and equipment                     $507,311         $357,346
           Purchased software                            19,244           12,231
           Test equipment                                52,902           49,812
                                                       --------         --------
                                                        579,457          419,389
           Less accumulated depreciation                275,433          172,821
                                                                        --------
                                                       $304,024         $246,568
                                                       ========         ========

NOTE 7 - SYSTEMS AND SOFTWARE COSTS

            The Company  markets  products that  typically  require  substantial
customization in order to meet the customers' particular  requirements.  In June
1996, the Company  commenced an assessment of its marketing  strategy related to
the Company's current software products.  While the Company has reduced the cost
of installing, customizing, and servicing (maintaining) the customized software,
these costs have remained higher than desired levels. With anticipated increased
revenues,  though no assurances are given, the company continues to believe that
it would  successfully  generate profits from the current software.  The Company
commissioned an assessment to determine whether the Company's  computer products
could be  modified in order to provide  more  product  options to its  customers
without  incurring  substantial  customization  costs.  Although the  assessment
principally  focused on the conceptual  design of the products to be offered and
was not an inquiry  as to whether  any  technological  innovations  needed to be
implemented in order for the Company to competitively  market its products,  the
Company's  marketing and  development  personnel  confirmed  that the ticketing,
access control,  and other  technologies that define the current products remain
competitive in the marketplace.

            The Company concluded as a result of the assessment, that instead of
marketing products that require substantial  customization,  to design and offer
its products in a modular  fashion.  They will consist of a primary product with
optional  pre-developed  modules  and a  configuration  layer  to meet  specific
customer needs that would require  limited or no  customization  by the Company.
Additionally,  the  implementation  of this  project will afford the Company the
opportunity to use the same development tool (high level  programming  language)
for each module,  thus providing a certain degree of consistency  and efficiency
in the  product  development  process.  Although  no  assurances  can be  given,
management  expects that applying the Company's  proprietary  technology in this
fashion will be a highly effective method of providing business solutions to the
entertainment industry.

            Accordingly,  the Company has commenced the  development of this new
marketing approach and expects the new general admission products, incorporating
the modular  concept,  will be available for sale by the second quarter of 1997.
As of March 1997, the Company has installed  limited  functionality  versions of
the new product in four different  sites.  The current software will continue to
be marketed  and the Company will  continue to support the present  software for
some period beyond the  introduction  of the new general  admission  product for
those customers who intend to continue using the current software.


                                      F-16

<PAGE>


                    Lasergate Systems, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1996 and 1995


NOTE 7 - SYSTEMS AND SOFTWARE COSTS (CONTINUED)


            Because  of the  recent  strategic  decision  described  above,  the
Company  reviewed the  valuation of the current  software  cost  (pre-write-down
amortized  balance of $1,275,000  at June 30, 1996) in  accordance  with the net
realizable value determination provisions under SFAS No. 86 Computer Software to
be Sold, Leased, or Otherwise Marketed.  As a result, a write-down of $1,075,000
has been made to the software's  carrying  value.  The software's  estimated net
realizable value as adjusted of $200,000 at June 30, 1996,  principally  relates
to the Company's  engineers'  estimate of the  recoverable  value of the current
products proven program and product design,  which will be incorporated into the
new product concept and is expected to be fully realized  (recoverable)  through
future revenues.

            The  Company  estimates  the  cost of  developing  the  new  general
admission  products  incorporating the modular concept will total  approximately
$400,000  to $500,000 by the second  quarter of 1997.  To date,  the Company has
incurred  approximately  $131,000 in development  costs for these  products,  of
which approximately $25,000 has been capitalized at December 31, 1996.

NOTE 8 - OTHER ASSETS

            Other assets as of December 31, consist of the following:


                                                            1996          1995
                                                          --------      --------

Non-competition agreement net of
 amortization $56,667 and $28,333                         $ 28,333      $ 56,667
Investment in and advances to joint venture                   --          77,790
Other                                                      106,188        33,451
                                                          --------      --------
                                                          $134,521      $167,908
                                                          ========      ========

NOTE 9 - NOTES PAYABLE

            At December  31,  1995,  the Company had an  outstanding  balance of
$21,757 under a premium financing agreement,  which was paid off during 1996, at
an annual interest rate of 9.25%.

            At December  31,  1996,  the Company had an  outstanding  balance of
$28,628  due to a bank.  The note  matures  on August  23,  2001,  has an annual
interest rate of 10% and is collateralized with office equipment.




                                      F-17

<PAGE>


                    Lasergate Systems, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1996 and 1995


NOTE 10 - ACQUISITION OBLIGATIONS

            At December 31, 1995, the  "promissory  notes payable,  stockholders
with conversion features" totaling $2,324,335, which was associated with the GIS
acquisition (see Note 4) were, at the Company's election, either payable in cash
or by conversion  into  preferred and common stock prior to March 31, 1996.  The
promissory  notes for $591,000 were  convertible into 118,200 shares of Series B
Preferred Stock. The other promissory notes totaling $1,733,335 were convertible
into the number of common stock shares determined by dividing  $1,733,335 by the
quoted  market  value of the common stock near the date of the  conversion.  The
Company's  stated intent since the  acquisition  date of GIS and at December 31,
1995, was to satisfy the  obligations,  which are non-interest  bearing,  by the
issuance  of  preferred  stock  and  common  stock  and  not by a cash  payment.
Accordingly,  the promissory  notes at December 31, 1995, were not classified as
current  liabilities  as current  assets were not used to satisfy the promissory
notes.

            In order to simplify the Company's  capital and debt  structure,  on
March 11, 1996,  the Company and GIS agreed,  among other things,  to settle the
remaining  obligation to GIS totaling  $2,324,335  by the Company  making a cash
payment to GIS of $1,550,000,  canceling the $559,000 note  receivable from GIS,
and canceling  the $199,359  account  receivable  from GIS, and with the Company
redeeming for  retirement  the 109,333 shares of Common Stock and 111,800 shares
of Series B Preferred  Stock  previously  issued to GIS. On April 12, 1996,  the
transactions  contemplated by the March 11 agreement were  consummated.  Because
the promissory notes included conversion features and had other  characteristics
similar to capital stock, the settlement had no income effect and was recognized
through the related balance sheet accounts, including stockholders' equity. (See
Statements of Stockholders' Equity and Cash Flows).

            At December 31,  1995,  the balance  sheet  reflects  "common  stock
subject to put options" of $140,000.  This  obligation  is further  described in
Note 4 as it pertains to the Company's acquisition of Delta




                                      F-18

<PAGE>


                    Lasergate Systems, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1996 and 1995

NOTE 11 - INCOME TAXES

            The Company has a net  operating  loss (NOL) for income tax purposes
of approximately $12,000,000 at December 31, 1996, which begins to expire in the
year 2000.  The  deferred  tax  benefit is  determined  based on the  difference
between  the  financial  reporting  and tax bases of assets and  liabilities  as
measured by the enacted tax rate which will be in effect when these  differences
are realized.  The Company cannot reasonably predict when it can utilize the NOL
carry forward and, therefore, the Company has recognized an equivalent valuation
allowance against the deferred tax benefit.

            The principal  types of temporary  differences and their related tax
effects that give rise to the deferred tax assets are as follows:


                                                 December 31,
                                              1996           1995
                                          -----------    -----------
Basis difference in intangible assets     $    53,000    $    70,000
Warranty costs                                211,000        110,000
Bad debt allowance, employee
 vacation pay, and other accruals             326,000         80,000
Compensation related to stock options         415,000        350,000
Net operating loss carry forward (1)        4,310,000      3,340,000
                                          -----------    -----------
                                            5,315,000      3,950,000
Less valuation allowance                   (5,315,000)    (3,950,000)
                                          -----------    -----------
                                          $      --      $      --  
                                          ===========    ===========

(1)   Certain  transactions  involving the  beneficial  ownership of the Company
      have occurred which resulted in a stock  ownership  change for purposes of
      Section  382  of  the  Internal   Revenue   Code  of  1986,   as  amended.
      Consequently,  a portion of the Company's net operating loss carry forward
      is subject to limitation on their utilization against future income.

            The Company's  computed  effective tax rate differs from the Federal
statutory tax rate as follows:


                                                                  1996     1995
                                                                  ----     ----

Federal statutory rate                                             34 %     34 %
Effect of net operating losses (NOL) or NOL carry forward         (34)%    (34)%
Effective tax rate, after the effect of NOL                         0 %      0 %




                                      F-19

<PAGE>


                    Lasergate Systems, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1996 and 1995


NOTE 12 - COMMITMENTS AND CONTINGENCIES

OPERATING LEASE

            The Company  leases its office and  warehouse  facilities as well as
some office equipment under operating leases.

            Future minimum payments under these operating leases are as follows:


                       1997                      148,564
                       1998                      187,573
                       1999                       64,270
                       2000                        7,026
                       2001                         --
                                                --------
                                                $407,433
                                                ========
                                 
            Total lease  payments for the years ended December 31, 1996 and 1995
were $144,569 and $89,027, respectively.

LEGAL PROCEEDINGS

            On June 15, 1995,  the  Company's  founder and former  President and
Chief  Executive  Officer,  Donald  Turner,  has commenced an action against the
Company in the Circuit Court for Pinellas County,  Florida,  Civil Division. Mr.
Turner alleges,  among other things, that he was wrongfully  terminated from his
employment and seeks damages which in the aggregate could exceed $1,000,000. The
Company  believes  Mr.  Turner's  suit is without  merit and intends to continue
vigorously defending the action.

            In January  1997,  Derek Betty and James Potter  instituted  actions
against the Company arising  pursuant to agreements  entered into at the time of
the sale of Delta Information Services, Inc. ("Delta") to the Company.
 The first action is entitled Derek Betty v. Lasergate Systems, Inc. (the "Betty
Action") and the second action is entitled  James Potter v.  Lasergate  Systems,
Inc. and 1103065 Ontario, Inc. ( the "Potter Action").  Both actions are pending
in the Circuit Court of the Sixth Judicial  Circuit in and for Pinellas  County,
Florida.  The Betty Action  alleges that the Company has failed to return shares
of the Company's  stock which are being held in escrow  pursuant to a Collateral
Stock Pledge Agreement executed in connection with the sale of Delta Information
Services,  Inc. ("Delta") to the Company. The Betty Action also alleges a breach
of the terms and  conditions of a Registration  Rights and Put Option  Agreement
executed in connection  with the sale of Delta to the Company.  The Betty Action
seeks  damages  in an amount in excess  of  $15,000,  which is the  jurisdiction
amount,  but it is anticipated  that damages could be in excess of $25,000.  The
Potter  Action also alleges a breach of the  Registration  Rights and Put Option
Agreement.  Moreover,  the Potter Action includes  allegations  concerning James
Potter's Consulting Agreement with the Company and a Non-Compete Agreement.  The
Potter  Action seeks a  declaratory  judgment  determining  that the Company and
1103065  Ontario  Inc  ("Ontario")  are in  material  breach of the  Non-Compete
Agreement  and that Potter is relieved of all  obligations  to perform under the
Non-Compete  Agreement.  The  Company has moved to dismiss  both  actions and to
compel  arbitration  pursuant to an arbitration  provision in the Stock Purchase
Agreement relating to the acquisition of Delta. A


                                      F-20

<PAGE>


                    Lasergate Systems, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1996 and 1995


NOTE 13 - STOCKHOLDERS' EQUITY (CONTINUED)

hearing on the motion in the Potter Action is scheduled for April 1, 1997, and a
hearing  on the motion in the Betty  Action is  scheduled  for May 2, 1997.  The
Company intends to vigorously defend both actions.

            The Company is also involved in other legal actions. Management does
not believe that the  ultimate  resolution  of these and the above  matters will
have a material effect on the Company's financial position.

OTHER MATTERS

            Management is presently  reviewing the methods and  procedures  used
for determining  its sales tax reporting  obligations.  Management  believes the
reported sales tax liability as of December 31, 1996, is reasonably adequate.

NOTE 13  - STOCKHOLDERS' EQUITY

COMMON STOCK

            In December  1995, the Company's  authorized  shares of common stock
was increased from 5,000,000 to 20,000,000.

PREFERRED STOCK

            The  Company's  articles  of  incorporation  authorize  a  total  of
2,000,000   shares  preferred  stock.  The  Company's  Board  of  Directors  has
established Series A, B, D, E, and F convertible preferred stock.

<TABLE>
<CAPTION>
                                                            Series of Preferred Stock
                                   ---------------------------------------------------------------------------
                                        A            B            C            D            E            F
                                   ----------   ----------   ----------   ----------   ----------   ----------
<S>                                   <C>          <C>          <C>          <C>            <C>      <C>      
Total Authorized shares
   December 31, 1996                  200,000      230,000      350,000      350,000        8,000    1,138,000

Outstanding shares
   December 31, 1996                     --           --           --           --          8,000        8,000
   December 31, 1995                   95,950      111,800      180,000         --           --        387,750

Outstanding share amounts
   December 31, 1996                     --           --           --           --            240          240
   December 31, 1995               $    2,879   $    3,354   $    5,400         --           --     $   11,633
</TABLE>

            All series contain specific  provisions as to conversion into shares
of common stock and liquidation values. The shares are nonvoting and, except for
Series A, participate equally as to dividends declared with the Company's common
stock.  The Series A Preferred  Stock bears a  cumulative  dividend at an annual
rate of 8% of its  liquidation  value  ($959,500).  None of the preferred  stock
above have or had mandatory redeemable provisions.


                                      F-21

<PAGE>


                    Lasergate Systems, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1996 and 1995


NOTE 13 - STOCKHOLDERS' EQUITY (CONTINUED)

            The 95,950 Series A Shares issued were  convertible  into fully paid
and  nonassessable  shares of the  Corporation's  Common  Stock,  upon the terms
hereinafter set forth at the rate (the "conversion Rate") of one share of Common
Stock for each Conversion Factor Dollar Amount (as defined below) of Liquidation
Value represented by the shares of Series A Preferred Stock being converted. The
per share  Liquidation  Value was equal to $10.00  plus any  accrued  and unpaid
dividends on such share, subject to reduction if thereafter paid. The Conversion
Factor Dollar Amount was the lesser of (i) 70% of the average of the closing bid
prices of the  Corporation's  Common  Stock as  quoted  on  NASDAQ  for the five
trading days immediately  preceding  conversion,  (ii) 70% of the average of the
closing bid prices of the Corporation's Common Stock as quoted on NASDAQ for the
five trading  days of June 26, 1995 through June 30, 1995,  and (iii) the lowest
price at which shares of Common Stock were sold to third party investors  during
the period from July 1, 1995 to June 30, 1996.

            On  February  15,  1995,  the Company  issued all 111,800  shares of
Series B Preferred  Stock to GIS in connection with that  acquisition  (see Note
4). On April 12,  1996,  all  111,800  shares of Series B  Preferred  Stock were
redeemed by the  Company as part of the  settlement  of the related  acquisition
obligation. (See Note 10).

            In October 1995, the Company  completed the private placement of all
208,600 shares of Series D Convertible Preferred Stock. As of December 31, 1996,
all  208,600  Series D shares have  converted  into  1,664,463  shares of common
stock.

            For   discussion   of  Series  E  and  F  shares  see   Issuance  of
Stock--Private Placements.

ISSUANCE OF COMMON STOCK FOR SERVICES

            In June 1996, the Company issued 45,000 shares of restricted  common
stock to non-employee  directors as compensation for past services as directors.
Compensation  for the  services  totaled  approximately  $42,000  based upon the
market  value of the  Company's  common  stock which  approximated  the value of
services rendered.

ISSUANCE OF STOCK--PRIVATE PLACEMENTS

            On March 27,  1996,  the Company  commenced a private  placement  of
shares of the Company's newly established Series E Preferred Stock at $10.00 per
share.  On April 22,  1996,  162,500  shares  of the  Series E  Preferred  Stock
successfully   closed  with  the  Company  receiving  total  proceeds,   net  of
commissions and offering  costs, of $1,450,582.  As of July 3, 1996, all 162,500
Series E shares converted into 2,627,902 shares of common stock.

            On June 10, 1996, the Company commenced a private placement of 8,000
shares, at $750 a share, of the Company's newly established Series F Convertible
Preferred  Stock.  On June 27,  1996,  the  placement  closed  with the  Company
receiving $5,172,500,  net of commissions and offering expenses, for the sale of
8,000 shares of preferred stock. Each Series F share has a face value of $1,000,
and is  convertible  into  shares of common  stock  after  August 7,  1996,  at,
generally,  the  average  market  price  for the  five  trading  days  preceding
conversion.  However,  for any conversion effected on or after June 6, 1997, but
prior to June 6, 1998, the conversion  price shall be 96% of such average market
price, and on or after June 6, 1998, the conversion price shall be 94% of


                                      F-22

<PAGE>


                    Lasergate Systems, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1996 and 1995


NOTE 13 - STOCKHOLDERS' EQUITY (CONTINUED)

such average market price,  but if such average market price is more than $1.00,
the conversion  price will be $1.00,  and one preferred  share will convert into
1,000  shares of common  stock;  and if such  average  market price is less than
$0.45,  the conversion price will be $0.45, and one preferred share will convert
into  2,222  shares  of  common  stock.  Thus,  the  8,000  Series F shares  are
convertible  into between  8,000,000 and 17,777,778  shares of common stock. The
entire  Series F is  redeemable  at the  price of $1.00 per share any time on or
after June 7, 1999 at the  Company's  option  upon  giving 30 days notice to the
holders of the Series F  Preferred  Stock.  Series F shares  have a  liquidation
value of $1,000  per  share.  On  January  27,  1997,  55  Series F  convertible
preferred  shares  were  converted  into  100,000  shares of  common  stock at a
conversion  price of $0.55 a share.  The  conversion  price was calculated as of
September 30, 1996, the conversion request date.

RESERVATION AND AUTHORIZATION OF COMMON STOCK

            Upon the sale of 8,000  shares  of  Series F  Convertible  Preferred
Stock,  the Company  reserved  8,000,000  shares of common  stock to provide for
their conversion.  If the average market price of the Company's common stock for
the five  trading  days prior to  conversion  is less than $1.00 per share (thus
permitting the holders of the Company's Series F Preferred Stock to convert such
shares into more than 8,000,000  shares of common stock),  the Company would not
have a  sufficient  number  of  authorized  shares  of  common  stock to  permit
conversion to all the Series F Preferred  Stock. The Board of Directors plans to
recommend  to  the  Company's   stockholders  at  the  1996  Annual  Meeting  of
Stockholders  than they  approve  an  amendment  to the  Company's  Articles  of
Incorporation to increase the number of authorized  shares of common stock. Upon
approval of this amendment by the stockholders of the Company,  the Company will
reserve 9,777,778 additional shares to allow for the possibility of the Series F
shares converting into as many as 17,777,778 common shares.

STOCK OPTION PLANS

            In  February   1994,   the  Board  of   Directors   authorized   the
establishment  of the  Company's  1994 Stock Option  Plan.  The plan permits the
grant of  options  which  may be  either  incentive  stock  options  (ISO's)  or
non-qualified stock options (NQSO's). The total number of shares of common stock
for options which may be granted under the plan may not exceed 58,333 subject to
adjustment,  as defined. The Compensation/Stock Option Committee of the Board of
Directors is authorized  to determine  the number of options to be granted,  the
number of shares which will be subject to any option and the exercise price. The
exercise price for  non-qualified  stock options may not be less than 25% of the
fair market value of the common stock on the date of grant.

            At the 1995 annual meeting of  shareholders,  shareholders  approved
changes to the 1994 Stock Option Plan (the "Plan")  which  authorized  grants of
5,000  options per term year,  at an exercise  price of 85% of the market value,
for each  outside  Director.  The options  vest at the rate of 5,000  shares per
year,  at the  beginning  of each term year.  Accordingly,  Frank W. Swacker (an
outside Director) was granted 15,000 options on December 21, 1995 at an exercise
price of $2.76 of which 5,000 shares  vested on December 21, 1995,  5,000 vested
on December 21, 1996 and 5,000 will vest on December 21, 1997.

            The Company  granted 37,500  options  outside of the Plan to each of
John J.  Chluski  (an  outside  Director)  and Bruce D.  Barrington  (an outside
Director) shortly after their appointment to the Board of Directors as an


                                      F-23

<PAGE>


                    Lasergate Systems, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1996 and 1995


NOTE 13 - STOCKHOLDERS' EQUITY (CONTINUED)

inducement  for them to join the Board in  addition to the  automatic  grants of
5,000  options  each.  Their  options are  exercisable  for 10 years at exercise
prices ranging from $0.425 to $0.65625 and were immediately vested.

NON-QUALIFIED STOCK OPTIONS

            In October  1994,  the Board of  Directors  authorized  the grant of
375,000 non-qualified stock options at an exercise price of $2.00 per share were
granted to the  Company's  President and Chief  Executive  Officer in connection
with a three year employment  agreement.  Of the total options granted,  125,000
were granted as a signing bonus effective  October 31, 1994 and were immediately
exercisable  since their issuance was not  contingent on future  services as are
the remaining  250,000 options.  Accordingly,  compensation  expense of $375,000
representing  the  difference   between  the  fair  value  of  $5.00  per  share
(determined  by  the  Board  of  Directors   considering   various   factors  as
restrictions,  etc.) and the exercise  price,  was recorded in the  consolidated
statement of operations for 1994. In addition,  the corresponding  obligation to
issue (grant)  common stock options also has been reflected in the balance sheet
as of December 31, 1994. Of the remaining  balance of 250,000  options,  125,000
options  vested on October 31, 1995 and  125,000  options  vested on October 31,
1996.  In  accordance  with  accounting  provisions  of APB No. 25, the  Company
recorded compensation expense in 1995 of $562,500 and $187,500 in 1996.

            The Company  granted  options to purchase  120,000  shares of common
stock to an executive  officer for services  rendered during 1996. These options
vested on October 31,  1996.  This  consisted  of an option to  purchase  20,000
shares at an exercise price of $2.00 which is exercisable  through  December 31,
1997 and an option to  purchase  100,000  shares at an  exercise  price of $0.66
which is  exercisable  until the later of: a) December  31, 1997 or; b) one year
after  registration of the underlying  stock (the underlying  stock has not been
registered as of March 31, 1997).

            A summary of the status of the Company's  outstanding  stock options
as of December 31, 1996,  and 1995, and changes during the years ending on those
dates is presented below:


                                                                Weighted Average
                                               Shares            Exercise Price
                                               ------            --------------

Options outstanding, December 31, 1994          428,300              $ 1.88
                                                                       
Options granted                                  15,000              $ 2.76
                                                                       
Options canceled or forfeited                  (29,800)              $ 1.09
                                               --------             -------
                                                                       
Options outstanding, December 31, 1995          413,500              $ 1.97
                                                                       
Options granted                                 205,000              $  .78
                                                                       
Options canceled or forfeited                   (17,500)             $ 1.00
                                                                       
                                                                       
Options outstanding, December 31, 1996          601,000              $ 1.59
                                               ========             =======
                                                                      


                                      F-24

<PAGE>


                    Lasergate Systems, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1996 and 1995


NOTE 13 - STOCKHOLDERS' EQUITY (CONTINUED)

            The following  table  summarizes  information  concerning  currently
outstanding and exercisable stock options:

<TABLE>
<CAPTION>
                                                          Weighted Average    Weighted
                             Range of         Number     Remaining Contract   Average
                         Exercise Prices   Outstanding      Life (Years)      Exercise
                         ---------------   -----------      ------------      --------
<S>                        <C>    <C>        <C>                 <C>          <C>    
Outstanding Options:
                           $0.425-$0.66      185,000             5.1          $  0.64
                              $1.00            6,000             2.5          $  1.00
                           $2.00-$2.76       410,000             7.6          $  2.03
Exercisable Options:
                           $0.425-$0.66      185,000             5.1          $  0.64
                              $1.00            6,000             2.5          $  1.00
                           $2.00-$2.76       405,000             7.6          $  2.02
</TABLE>

            The Company has adopted only the disclosure  provisions of Financial
Accounting  Standard No. 123 A Accounting  of  Stock-Based  Compensation,  as it
relates to employment  awards.  It applies APB Opinion No. 25, A Accounting  for
Stock Issued to Employees,  and related  interpretations  in accounting  for its
plans  and  does  not  recognize   compensation   expense  for  its  stock-based
compensation  plans other than for restricted  stock. If the Company had elected
to recognize  compensation  expense  based upon the fair value at the grant date
for wards under these plans  consistent with the methodology  prescribed by SFAS
123, the Company's net loss per common share would be increased to the pro forma
amounts indicated below for the years ended December 31:


                                                        1996              1995
                                                       ------            ------

Net loss                  As reported                $4,997,562       $4,206,782
                          Pro forma (unaudited)      $5,092,962       $4,221,782

Loss per common share     As reported                $      .82       $     1.39
                          Pro forma (unaudited)      $      .84       $     1.39

            The fair  value of each  option  grant is  estimated  on the date of
grant   using   the   Binomial   options-pricing   model   with  the   following
weighted-average assumptions used for grants in 1996 and 1995, respectively,  no
dividend  yield  for all  years,  expected  volatility  of  approximately  112%;
rick-free   interest  rates  of  approximately   6.0%,  and  expected  lives  of
approximately  2.5  years.  The  Company's  common  stock  activity  has  had an
extremely   volatile   history  since  and  including   1994.   Because  of  the
insignificant  effect on the pro forma amounts  presented above, the Company has
elected  not to attempt to adjust  (lower)  the  volatility  factor  used.  Such
adjustment  would account for the various  factors or  conditions  that probably
impacted the Company's common stock prices and which are possibly non-recurring.
Such an adjustment  which would lower the  volatility  factor used would further
reduce the calculated fair value of the options.



                                      F-25

<PAGE>


                    Lasergate Systems, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1996 and 1995


NOTE 13 - STOCKHOLDERS' EQUITY (CONTINUED)

WARRANTS

            In  connection  with the  secondary  public  offering  completed  in
October 1994, the Company issued 1,840,000  redeemable warrants to purchasers of
the  Company's  common  stock.   These  redeemable   warrants  were  immediately
detachable  and  separately  tradable from the common stock with which they were
issued.  Each  redeemable  warrant expires on October 16, 1999, and entitles the
holder, commencing one year from the effective date of the offering, to purchase
one share of the  Company's  common  stock for $5.50,  the exercise  price.  The
redeemable  warrants  are subject to  redemption  commencing  one year after the
effective  date at a  price  of  $.05  per  redeemable  warrant  subject  to the
occurrence of certain events, as defined.

            Additionally,  a warrant  to  purchase  276,000  shares at $9.08 was
granted to the  underwriter,  exercisable  during the four years  commencing one
year from the closing date of the offering.

            The  Company  granted  warrants  to  purchase  4,167  shares  of the
Company's common stock at an exercise price of $4.50 per share,  which expire on
May 20, 1998 and granted warrants to purchase 900 shares of the Company's common
stock at an exercise  price of $3.75 per share,  which  expire in July 1997,  in
connection with financing activities in 1993.

            In  connection  with the private  placement of Series F  Convertible
Preferred Stock  completed in June 1996, the Company issued 500,000  warrants to
the placement  agent.  These warrants  expire on September 30, 2001, and entitle
the holder to purchase  one share of the  Company's  common stock at an exercise
price of the  lower of $1.00 or the  average  conversion  price of the  Series F
Convertible Preferred Stock (currently $0.55).

            The estimated fair value of these  warrants for the placement  agent
services rendered,  based on SFAS No. 123 provisions is approximately  $190,000,
determined by using a binomial  option-pricing  model with assumed volatility of
122%,  risk-free rate of 6.0%, and expected  holding period of three years.  For
financial  statement  purposes,  the  value of the  services  (compensation)  is
reflected  as a reduction  to the  proceeds  received  from the related  private
placement and,  accordingly,  a reduction to paid-in capital.  In addition,  the
value  assigned to the warrants is  reflected as an addition to paid-in  capital
(Stockholders'  Equity).  Because the reduction and increase to paid-in  capital
are offsetting  amounts of $190,000,  the Company has chosen not to reflect them
separately in the Statement of Stockholders' Equity.



                                      F-26

<PAGE>


                    Lasergate Systems, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1996 and 1995






NOTE 13 - STOCKHOLDERS' EQUITY (CONTINUED)

            A summary of the status of the Company's  outstanding warrants as of
December 31, 1996,  and 1995, and changes during the years ending on those dates
is presented below:


                                                                Weighted Average
                                                    Shares       Exercise Price
                                                    ------       --------------

Warrants outstanding, December 31, 1994            2,121,067       $   5.90
Warrants granted                                        --              --
Warrants canceled or forfeited                          --              --
Warrants outstanding, December 31, 1995            2,121,067       $   5.90

Warrants granted                                     500,000       $    .55
Warrants canceled or forfeited                          --              --
Warrants outstanding, December 31, 1996            2,621,067       $   4.88


The following table summarizes  information concerning currently outstanding and
exercisable warrants:

<TABLE>
<CAPTION>
                                                          Weighted Average    Weighted
                             Range of         Number     Remaining Contract   Average
                         Exercise Prices   Outstanding      Life (Years)      Exercise
                         ---------------   -----------      ------------      --------
<S>                        <C>              <C>                <C>            <C>   
Outstanding Warrants:
                              $0.55           500,000          4.5            $ 0.55
                           $3.75-$5.50      1,845,067          2.8            $ 5.50
                              $9.08           276,000          2.8            $ 9.08
Exercisable Warrants:                                                        
                              $0.55           500,000          4.5            $ 0.55
                           $3.75-$5.50      1,845,067          2.8            $ 5.50
                              $9.08           276,000          2.8            $ 9.08
                                                                                                             
</TABLE>


                                      F-27

<PAGE>


                    Lasergate Systems, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1996 and 1995


NOTE 14 - SALES TO MAJOR CUSTOMERS

            In 1996,  one  customer,  Bayindir  Insaat  Turizm  Ticare (a large,
indoor amusement park in Istanbul, Turkey) represented 12% of revenues.

            In  1995,  there  were  no  customers  representing  10% or  more of
revenues.

NOTE 15 - EMPLOYEE BENEFITS

            Effective July 1, 1995, the Lasergate  Systems,  Inc. Profit Sharing
401(k) Plan was established  covering  substantially all employees.  The Company
made no contribution to the Plan during 1995 or 1996.

            In order to reduce its overhead  costs,  the Company entered into an
employee leasing agreement  effective January 1, 1996, with a firm that provides
all  administrative  services  relating  to  payroll,   personnel  and  employee
benefits.  The Company signed an agreement with a new employee  leasing  company
effective  December 16, 1996.  Management  continues to hire,  dismiss,  set pay
rates, and supervise the employees.

NOTE 16 - RELATED PARTY TRANSACTIONS

            During  1996,  the  Company  made a cash  payment  of  $14,000 to an
outside Director of the Company for extensive business consulting services.  The
Company also paid  approximately  $20,000 to a vendor in which  another  outside
Director has a financial interest for programming services.





                                      F-28

<PAGE>




                                    PART III

ITEM 9.     DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
            COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

            The directors and executive officers of the Company are as follows:


                                YEAR
                               FIRST
                               BECAME                 PRESENT POSITION
NAME                     AGE  DIRECTOR  CLASS         WITH THE COMPANY
----                     ---  --------  -----         ----------------
Jacqueline E. Soechtig    47    1994     III    President, Chief Executive
                                                 Officer and Director
Philip P. Signore         38    1996      I     Vice President, Chief
                                                 Financial
                                                Officer, Treasurer, Secretary 
                                                 and Director
Bruce D. Barrington       54    1996      II    Director
John J. Chluski           73    1996      II    Director
Frank W. Swacker          74    1995     III    Director
John J. Lettieri, Jr.     40     --       --    Vice President - 
                                                 Ticketing Services
James H. Moore, Jr.       54     --       --    Vice President - Operations and
                                                 Assistant Secretary
Glenn W. Phillips         55     --       --    Vice President - Sales and
                                                 Marketing
William R. Stapleton      52     --       --    Vice President - Engineering and
                                                 Product Management

            The Company's  Articles of  Incorporation  and By-Laws provide for a
classified  Board  of  Directors.  The  Board  is  divided  into  three  classes
designated  Class I, Class II and Class III.  The term of each Class II Director
is to expire at the 1997 Annual Meeting,  the term of each Class III Director is
to expire at the 1998 Annual Meeting of Shareholders  and the term of each Class
I Director is to expire at the 1999 Annual Meeting.  Directors hold office until
their  respective  successors  are elected and duly  qualified,  or until death,
resignation  or removal.  Officers hold office until the meeting of the Board of
Directors  following  each  Annual  Meeting  of  Shareholders  and  until  their
successors have been chosen and qualified.

            JACQUELINE  E.  SOECHTIG  has been a director of the Company and the
Company's  President and Chief  Executive  Officer since October 31, 1994.  From
September 1994 until  immediately  prior to her  employment by the Company,  Ms.
Soechtig was a  consultant  to the Company.  During the  ten-month  period prior
thereto, Ms. Soechtig purchased and operated a restaurant in Clearwater, Florida
together with her spouse. From February 1992 through December 1993, Ms. Soechtig
was the  President  and Chief  Executive  Officer  of  Precision  Systems,  Inc.
("PSI"),  a  company  engaged  in the  production  and  sales of voice  and call
processing  systems.  Prior to her employment  with PSI, Ms.  Soechtig served as
vice  president  of business  development  for Sprint  Corp.  (May 1990  through
February   1992).   She  also  held  the  position  of  vice  president  of  MCI
Telecommunications  Corporation where she served in various sales, marketing and
technical capacities from May 1984 through May 1990. Both


                                      -25-

<PAGE>



Sprint and MCI are  engaged in the  telecommunications  industry.  Additionally,
from 1970 to 1983, Ms. Soechtig was employed by International  Business Machines
Corp. in various technical and sales positions.

            PHILIP P. SIGNORE has been the Company's  Vice  President - Finance,
Chief Financial  Officer,  Treasurer and Secretary since May 1996 and has been a
member of the Board of Directors  since June 1996.  Mr.  Signore served as Chief
Financial  Officer of Commercial  Design  Services,  Inc.,  an office  furniture
dealership,  from  March  1993 to May 1996.  From July 1989 to March  1993,  Mr.
Signore was the Operations  Controller for Briggs  Industries,  Inc., a plumbing
fixtures manufacturer. Previously, Mr. Signore held various financial management
positions  in the areas of financial  planning  and  analysis  while at Paradyne
Corporation  from 1983 to 1988 as well as internal  auditing at Moore  McCormack
Resources  from  1981 to  1983.  He began  his  career  working  as a CPA at the
international accounting firm of Peat Marwick Mitchell & Co. from 1979 to 1981.

            BRUCE D.  BARRINGTON  has been a member of the Board of Directors of
the Company  since  November 1, 1996 and has also served  since that time as the
Company's Chief Technology Advisor, a capacity in which he is able to contribute
to the direction of the  Company's  products.  Since 1982,  Mr.  Barrington  has
served  as the  Chairman  and CEO of Top  Speed  Corporation  (formerly  Clarion
Software  Corporation and prior thereto  Barrington  Systems,  Inc.), a software
company which develops and markets a sophisticated line of software  development
tools aimed at the  Windows(R)  environment.  Mr.  Barrington  founded Top Speed
Corporation in 1982.  From 1980 to 1983 Mr.  Barrington  served as a Director of
HBO & Company,  a publicly-held  software  solutions provider to the health care
industry which he co-founded in 1973. From 1973 to 1980, Mr.  Barrington  served
as Vice President of Research & Development for HBO & Company.  Previously,  Mr.
Barrington  was  employed  as a Manager  of  Hospital  Systems  Development  for
McDonnel Douglas  Automation  Company from 1967 to 1973 and as a Systems Analyst
for Caterpillar Tractor Company from 1965 to 1967.

            JOHN J.  CHLUSKI has been a member of the Board of  Directors of the
Company since November 1, 1996. Since 1988 Mr. Chluski has been an international
business  consultant  and  advisor.  He has served as an active  Board Member of
several ITT subsidiaries and is presently a Director of ITT Composants (France).
Mr. Chluski is also a Director of Howmet S.A. (France), and serves as Advisor to
the Chairman of Marceau  Investissements,  a Paris-based  investment  fund,  and
Advisor  to  Monitor  Company,  a  global  strategy  consulting  firm  based  in
Cambridge,  Massachusetts. From 1972 to 1988, Mr. Chluski held several executive
management  positions at ITT Corporation,  including Group  Executive-Engineered
Products-Europe,  and Senior Vice President and Executive  Representative of the
Chairman.

            FRANK W.  SWACKER has been a member of the Board of Directors of the
Company since May 3, 1995.  Mr.  Swacker has been engaged in the practice of law
for the  past 46  years,  more  than  the  last  five  of such  years  as a sole
practitioner under the name of Swacker & Associates, P.C. Between 1968 and 1978,
he was the International  Counsel for  Allis-Chalmers  Corporation in Milwaukee,
Wisconsin.  Mr. Swacker has published articles focusing on international foreign
trade and the financial,  antitrust and cross-cultural  aspects of transnational
business  and is the lead  author of the 1996 two volume  work  entitled  "World
Trade  Without   Barriers,"  a   comprehensive   treatise  on  the  World  Trade
Organization  and dispute  resolution.  Additionally,  he has advised the United
States House of Representatives  on international  trade treaties and has served
as Special  Assistant  Deputy Attorney  General for the State of New York. Since
1960,  Mr. Swacker has been a member of the National Panel of Arbitrators of the
American Arbitration Association.

            JOHN J.  LETTIERI,  JR. has been the  Company's  Vice  President  of
Ticketing  Services  since March 1997.  From  August 1980 to February  1997,  he
worked for the  Carnegie  Hall  Corporation,  serving as the first  Director  of
Ticket Operations from June 1989 until his departure.  Mr. Lettieri's management
responsibilities  included sales,  customer service, and technological  support.
Prior to August of 1980, Mr. Lettieri was employed by the Metropolitan  Opera in
New York City.


                                      -26-

<PAGE>



            JAMES H.  MOORE,  JR.  has  been the  Company's  Vice  President  of
Operations  since January 1995.  From April 1993 to December 1994, Mr. Moore was
the Vice President of Internal Operations of Precision Systems,  Inc. From March
1962 to February  1993, he worked for General  Motors  Corporation  serving from
March 1990 as Production Superintendent of its Arlington,  Texas assembly plant.
While at General Motors, Mr. Moore had production management  responsibility and
also served as a quality expert and consultant to various  General Motors plants
throughout North America.

            GLENN W. PHILLIPS has been the Company's Vice President of Worldwide
Sales and  Marketing  since  January  1996.  From May 1995 to December  1995 Mr.
Phillips was Vice  President of Sales and  Marketing  for Syntrex  Technologies,
Inc., a network systems  integrator.  From June 1994 to April 1995, Mr. Phillips
acted as a sales and marketing  consultant to various companies.  Prior thereto,
from October 1990, Mr. Phillips was employed by Software AG, a systems  software
provider,  as an Area Vice  President of Sales until  February  1993 and as Vice
President of Sales and Operations until May 1994.

            WILLIAM  R.  STAPLETON  has been the  Company's  Vice  President  of
Development  and Product  Management  since February 1997.  From October 1995 to
January 1997, Mr. Stapleton served as President (and Principal) of The Redington
Group, a business  management and marketing  consulting  firm. From June 1961 to
September  1995 he  worked  for  AT&T  Corporation,  holding  various  executive
management  positions,  most recently Corporate Director of Strategic  Marketing
and Business Planning.

COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT

            Section  16(a) of the  Securities  Exchange Act of 1934, as amended,
requires the Company's executive officers and directors, and any persons who own
more  than  10% of any  class  of the  Company's  equity  securities  which  are
registered  under the  Securities  and  Exchange  Act of 1934,  as amended  (the
"1934") to file certain  reports  relating to their ownership of such securities
and changes in such ownership  with the  Securities and Exchange  Commission and
NASDAQ, and to furnish the Company with copies of such reports. To the Company's
knowledge,  based solely on a review of the copies of such reports  furnished to
the Company, all Section 16 (a) filing requirements applicable to such officers,
directors and owners of over 10% of the Company's equity  securities  registered
under the 1934 Act,  during the year ended December 31, 1996, have been complied
with except as follows:  Bruce D. Barrington (a current Director of the Company)
and John J. Chluski (a current Director of the Company) were each  inadvertently
late in  filing a report  upon  becoming  a  Director  and in filing a report of
transactions;  Philip P. Signore (a current Officer and Director of the Company)
was  inadvertently  late in filing a report  upon  becoming  an  officer  of the
Company; and Frank W. Swacker (a current Director of the Company) and Jacqueline
E.  Soechtig  (a  current  Officer  and  Director  of  the  Company)  were  each
inadvertently  late in filing reports of  transactions.  Fred Maglione (a former
officer  of the  Company)  was  inadvertently  late in filing a report  upon the
termination of his employment with the Company. To the Company's knowledge, John
P.  Warnick (a former  officer of the  Company)  did not file a report  upon the
termination of his employment with the Company.

MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD

            The Board of Directors  has an Audit  Committee  and a  Compensation
Committee.  The  Audit  Committee  recommends  to the  Board  of  Directors  the
appointment  of  independent  auditors  to  audit  the  Company's   consolidated
financial  statements,  reviews the Company's  internal  control  procedures and
advises the Company on tax and other  matters  connected  with the growth of the
Company.  The Audit  Committee also reviews with management the annual audit and
other work performed by the independent  auditors.  The  Compensation  Committee
administers  the Company's 1994 Stock Option Plan and recommends to the Board of
Directors  the  nature and amount of  compensation  to be paid to the  Company's
Executive Officers.


                                      -27-

<PAGE>



            On June 28, 1996,  three members of the Board of Directors  resigned
as Directors of the Company (in connection  with the redemption of the Company's
Series A Convertible  Preferred Stock.) On the same day, Philip P. Signore,  the
Company's Vice President and Chief Financial  Officer was appointed to the Board
of Directors. As a result, there was only one non-employee director on the Board
of Directors from June 28, 1996 until October 21, 1996. During this period,  the
duties normally performed by the audit committee and compensation committee were
assumed  by the sole  remaining  non-employee  director,  Frank W.  Swacker.  On
December  16,  1996,  the  Company   established  new  audit  and   compensation
committees.  The Audit  Committee  consists of Messrs.  Barrington,  Chluski and
Swacker. The Compensation Committee consists of Messrs. Barrington,  Chluski and
Swacker.

            During  the  fiscal  year  ended  December  31,  1996,  the Board of
Directors of the Company held 18 meetings,  the Audit Committee held one meeting
and the  Compensation  Committee held four meetings.  Each director  attended at
least 75% of the aggregate  number of meetings of the Board of Directors and the
committees,  which were held during the period the  director  served as director
during the fiscal year ended December 31, 1996.

REMUNERATION OF NON-EMPLOYEE DIRECTORS

            Effective January 1, 1996, the Company commenced paying non-employee
Directors  fees equal to $1,000 per  meeting  attended  in person,  and $500 per
meeting attended by telephone.

            In addition,  upon the initial election and upon each re-election of
an outside Director to serve a term as a Director of the Company,  such Director
is entitled  under the Company's 1994 Stock Option Plan, to be granted an option
to purchase 5,000 shares of Common Stock for each year of such term,  with 5,000
of such options to vest at the beginning of each year of such term provided that
the Director  continues to serve in such  capacity at the time of the  scheduled
vesting.  The  exercise  price of such  options is set at 85% of market value at
time of grant.  During the fiscal year ended December 31, 1996,  each of Messrs.
Barrington  and Chluski were granted  options to purchase 5,000 shares under the
Company's 1994 Stock Option Plan at an exercise price of $.425 per share (85% of
the market value at time of grant). As a further inducement to their agreeing to
serve on the Board, they were each granted additional options to purchase 37,500
shares  outside of the 1994 Stock Option Plan at an exercise  price of $.656 per
share (the market value at time of grant).  All such options are exercisable for
10 years.





                                      -28-

<PAGE>



ITEM 10.   EXECUTIVE COMPENSATION

            The  following   table  sets  forth  certain   summary   information
concerning  compensation with respect to each person who served as the Company's
Chief Executive  Officer during the fiscal year ended December 31, 1996 and each
of the Company's  executive  officers whose total cash compensation for the year
ended December 31, 1996 exceeded $100,000:


                                                        AWARDS
                                                        ------
                                                                      PAYOUTS
                                                                      -------
                                                       SECURITIES
       NAME AND                                        UNDERLYING    ALL OTHER
  PRINCIPAL POSITION       YEAR   SALARY $   BONUS $   OPTIONS(#)  COMPENSATION
  ------------------       ----   --------   -------   ---------   ------------
                                                      
Jacqueline E. Soechtig(1)  1996   220,000    100,000      --           --
  President and Chief      1995   220,000     20,170      --           --
  Executive Officer        1994    54,347              375,000         --
                                                      
Glenn W. Phillips(2)       1996   130,950     50,000      --           --
  Vice President -         1995      --         --        --           --
  Sales & Marketing        1994      --         --        --           --
                                                      
James H. Moore, Jr.(3)     1996   100,000     50,000      --           --
  Vice President -         1995   100,000       --        --           --
  Operations, Assistant    1994      --         --        --           --
    Secretary                                         
                                                             
--------------
(1)   Ms.  Soechtig has been employed by the Company since October 31, 1994. Ms.
      Soechtig's  annual  salary is  currently  $220,000.  During the year ended
      December 31, 1994,  Ms.  Soechtig  was awarded  stock  options to purchase
      375,000 shares of Common Stock, all of which are presently exercisable. In
      addition,  a $20,170 bonus payable in 1994 upon Ms. Soechtig's  employment
      with the Company was paid during 1995.
(2)   Mr.  Phillips has been employed by the Company since  January,  1996.  Mr.
      Phillips=  annual  salary is  currently  $150,000.  During  the year ended
      December 31, 1996, Mr. Phillips was awarded a bonus of $50,000.
(3)   Mr.  Moore has been  employed  by the Company  since  January,  1995.  Mr.
      Moore's  annual  salary  is  currently  $100,000.  During  the year  ended
      December 31, 1996, Mr. Moore was awarded a bonus of $50,000.

            No options were granted during the Company's 1996 fiscal year to the
current and former executive  officers named in the Summary  Compensation  Table
above.



                                      -29-

<PAGE>



            The following  table sets forth certain  information  concerning the
number of shares of Common Stock  acquired  upon the  exercise of stock  options
during the year ended December 31, 1996 by, and the number and value at December
31, 1996 of shares of Common Stock subject to  unexercised  options held by, the
individuals listed in the Summary Compensation Table.

<TABLE>
<CAPTION>
                                                       NUMBER OF                    VALUE OF
                                                 SECURITIES UNDERLYING             UNEXERCISED
                                                      UNEXERCISED                 IN-THE-MONEY
                                       VALUE         OPTIONS/SARS                 OPTIONS/SARS
                                     REALIZED        AT FY-END (#)                AT FY-END ($)
NAME              ON EXERCISE (#)     ($)(1)   EXERCISABLE/UNEXERCISABLE    EXERCISABLE/UNEXERCISABLE
----              ---------------     ------   -------------------------    -------------------------
<S>                                                    <C>     <C>                     <C>
Jacqueline E.         --                --             375,000/0                       0/0
Soechtig
</TABLE>
----------------
(1)   Represents the closing bid price on the National Association of Securities
      Dealers  Automated  Quotation  System of the  underlying  shares of Common
      Stock on the date of exercise less the option exercise price.


EMPLOYMENT AGREEMENT

            Jacqueline E. Soechtig, President and Chief Executive Officer of the
Company, is a party to an employment agreement with the Company, which commenced
on October 31, 1994 for a term of three years.  Ms.  Soechtig's  base salary for
the entire  three-year  term is $220,000 per annum.  The agreement also provided
for incentive  compensation in the form of bonuses that were paid in the amounts
of and $100,000 for 1995 and 1996,  respectively.  Pursuant to the agreement and
as a signing bonus, Ms. Soechtig was paid $20,170 and was granted ten-year stock
options to purchase  375,000  shares of Common  Stock,  which are all  presently
exercisable  at an exercise price of $2.00 per share.  Ms.  Soechtig was granted
certain  registration  rights  with  respect  to  the  shares  of  Common  Stock
underlying  all of such options.  The fair value of the 375,000 shares of Common
Stock underlying Ms. Soechtig's options was determined by the Board of Directors
to be $5.00  per  share  at the time of the  option  grant  considering  various
factors such as restrictions  placed on the underlying  shares and their lack of
liquidity,  as well as their  quoted  market price on October 31, 1994 of $13.50
per share.  On July 30, 1997,  the Board of  Directors,  unanimously  approved a
resolution  (with Ms.  Soechtig  abstaining)  authorizing  an  amendment  to the
employment agreement which extends the term of the agreement to October 31, 2000
and increases her base salary to $235,000.

            No options were granted during the Company's 1996 fiscal year to the
current and former executive  officers named in the Summary  Compensation  Table
above.

ITEM 11.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

            The following  table sets forth certain  information as of April 28,
1997  regarding the  beneficial  ownership of shares of Common Stock by (I) each
person  (including  any "group" as that term is used in Section 13 (d)(3) of the
Securities  Exchange Act of 1934,  as amended) who is known by the Company to be
the  beneficial  owner of more than 5% of the  Common  Stock,  its only class of
voting securities (ii) each director and nominee,  (iii) each current and former
executive  officer  named  in  the  Summary  Compensation  table  herein  titled
"Executive  Compensation"  and (iv) all directors and executive  Officers of the
Company as a group.





                                      -30-

<PAGE>


<TABLE>
<CAPTION>
                                                                          AMOUNT OF              PERCENT OF
                                                                      PRESENTLY ISSUED        PRESENTLY ISSUED
                                                                       AND OUTSTANDING        AND OUTSTANDING
                                                                      COMMON STOCK PLUS      COMMON STOCK PLUS
                                                                        COMMON STOCK            COMMON STOCK
                                   AMOUNT AND        PERCENT OF         ISSUABLE UPON          ISSUABLE UPON
                                     NATURE       PRESENTLY ISSUED      CONVERSION OF          CONVERSION OF
     NAME AND ADDRESS             OF BENEFICIAL   AND OUTSTANDING        OUTSTANDING            OUTSTANDING
   OF BENEFICIAL OWNER            OWNERSHIP(1)      COMMON STOCK      PREFERRED SHARES      PREFERRED SHARES (2)
   -------------------            ------------      ------------      ----------------      --------------------
<S>                                  <C>                <C>                 <C>                       
Jacqueline E. Soechtig               398,500(3)         5.2%                398,500(3)               *
c/o Lasergate Systems, Inc.                                                                     
28050 U.S. 19 Highway North                                                                     
Suite 502                                                                                       
Clearwater, FL 34621                                                                            
                                                                                                
Bruce D. Barrington                   92,500(4)(5)      1.2%                 92,500(4)(5)            *
c/o Lasergate Systems, Inc                                                                      
28050 U.S. 19 Highway North                                                                     
Suite 502                                                                                       
Clearwater, FL 34621                                                                            
                                                                                                
John J. Chluski                       95,827(4)         1.3%                 95,827(4)               *
c/o Lasergate Systems, Inc                                                                      
28050 U.s. 19 Highway North                                                                     
Suite 502                                                                                       
Clearwater, FL 34621                                                                            
                                                                                                
Frank W. Swacker                      52,500(6)          *                   52,500(6)               *
c/o Lasergate Systems, Inc                                                                      
28050 U.s. 19 Highway North                                                                     
Suite 502                                                                                       
Clearwater, FL 34621                                                                            
                                                                                                
Eric T. Jager                        176,500(7)         2.4                 176,500(7)               *
c/o Lasergate Systems, Inc                                                                      
28050 U.s. 19 Highway North                                                                     
Suite 502                                                                                       
Clearwater, FL 34621                                                                            
                                                                                                
James H. Moore                            16             *                       16                  *
c/o Lasergate Systems, Inc                                                                      
28050 U.s. 19 Highway North                                                                     
Suite 502                                                                                       
Clearwater, FL 34621                                                                            
                                                                                                
Glenn W. Phillips                          *             *                        *                  *
c/o Lasergate Systems, Inc                                                                      
28050 U.s. 19 Highway North                                                                     
Suite 502                                                                                       
Clearwater, FL 34621                                                                            
                                                                                                
                                      -31-
<PAGE>

                                                                          AMOUNT OF              PERCENT OF
                                                                      PRESENTLY ISSUED        PRESENTLY ISSUED
                                                                       AND OUTSTANDING        AND OUTSTANDING
                                                                      COMMON STOCK PLUS      COMMON STOCK PLUS
                                                                        COMMON STOCK            COMMON STOCK
                                   AMOUNT AND        PERCENT OF         ISSUABLE UPON          ISSUABLE UPON
                                     NATURE       PRESENTLY ISSUED      CONVERSION OF          CONVERSION OF
     NAME AND ADDRESS             OF BENEFICIAL   AND OUTSTANDING        OUTSTANDING            OUTSTANDING
   OF BENEFICIAL OWNER            OWNERSHIP(1)      COMMON STOCK      PREFERRED SHARES      PREFERRED SHARES (2)
   -------------------            ------------      ------------      ----------------      --------------------

Philip P. Signore                          *             *                        *                  *
c/o Lasergate Systems, Inc                                                                      
28050 U.s. 19 Highway North                                                                     
Suite 502                                                                                       
Clearwater, FL 34621                                                                            
                                                                                                
RBB Bank, AG                         100,000            1.3              50,411,105                  87.1%
Burgring 16                                                                                     
8010 Graz                                                                                       
Austria                                                                                         
                                                                                                
All Directors and Executive          815,827(8)        10.3%                815,827(7)                1.4%
Officers of the Company as a                                                                    
group (10 persons)
</TABLE>

-------------------
*     LESS THAN 1%.
(1)   Unless otherwise noted, the Company believes that all persons named in the
      table have sole voting and investment  power with respect to all shares of
      Common Stock beneficially owned by them.
(2)   Assumes  full  conversion  of  (i)  the  Company's  Series  F  Convertible
      Preferred  Stock  (the  "Series  F  Preferred  Stock")  into  a  total  of
      17,755,556 shares of Common Stock based upon conversions  already effected
      plus  conversion  of  the  remaining   outstanding  Series  F  Convertible
      Preferred  Stock,  assuming  they were  converted  on August 26, 1997 at a
      price of $.45 per share of Common  Stock and (ii) the  Company's  Series G
      Convertible  Preferred  Stock into a total of 32,655,549  shares of Common
      Stock.  Pursuant to its agreement  with RBB Bank, AG ("RBB"),  the Company
      will  redeem the  shares of Series F  Preferred  Stock,  at which time RBB
      would have the right to acquire 81.4% of the Company's Common Stock.
(3)   Includes  375,000 shares of Common Stock which Ms.  Soechtig has the right
      to acquire pursuant to presently exercisable stock options.
(4)   Includes  42,500  shares of Common Stock which each of Messrs.  Barrington
      and Chluski has the right to acquire  pursuant  to  presently  exercisable
      stock options.
(5)   Includes  50,000  shares  of  Common  Stock  owned by a Trust of which Mr.
      Barrington acts as trustee.
(6)   Includes  47,500 shares of Common Stock which Mr. Swacker has the right to
      acquire pursuant to presently exercisable stock options.
(7)   Includes  (i) 124,000  shares of Common Stock owned by a mutual fund which
      Mr. Jager  manages and with  respect to which Mr. Jager has voting  power,
      (ii) 10,000  shares of Common Stock owned by Mr.  Jager's wife as to which
      Mr. Jager  disclaims  beneficial  ownership,  and (iii)  42,500  shares of
      common  stock  which  Mr.  Jager  has the  right to  acquire  pursuant  to
      presently exercisable stock options.
(8)   Includes  shares  of Common  Stock  which  such  Directors  and  Executive
      Officers have the right to acquire pursuant to presently exercisable stock
      options.



                                      -32-

<PAGE>



ITEM 12.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

            On  November  4, 1997,  the  Company  sold 7,500  shares of Series G
Preferred Stock to RBB for $7,500,000. Each share of Series G Preferred Stock is
convertible into 4,354 shares of Common Stock. Prior to the transaction, RBB was
the  beneficial  owner of 7,945  shares of Series F Preferred  Stock and 100,000
shares of Common  Stock.  Pursuant to the  transaction,  the Company will redeem
RBB's Series F Preferred Stock for $6 million.



                                      -33-

<PAGE>



                                     PART IV

ITEM 13. EXHIBITS LIST AND REPORTS ON FORM 8-K

(a)            Exhibits

3.1            Amended and Restated  Articles of Incorporation  (incorporated by
               reference  to Exhibit  3.1 of  Amendment  No. 1 to the  Company's
               Quarterly  Report  on Form  10-QSB,  File  No.  0-15873,  for the
               quarter ended June 30, 1996).

3.2            By-laws, as amended  (incorporated by reference to Exhibit 3.4 of
               the Company's  Annual Report on Form 10-K, File No. 0-15878,  for
               the year ended December 31, 1994).

4.1            Form of  Subscription  Agreement  for  Series D  Preferred  Stock
               (incorporated by reference to Exhibit 4.1 of the Company's Annual
               Report  on Form  10-KSB,  File No.  0-15873,  for the year  ended
               December 31, 1995).

4.2            Form of  Subscription  Agreement  for  Series E  Preferred  Stock
               (incorporated by reference to Exhibit 4.2 of the Company's Annual
               Report  on Form  10-KSB,  File No.  0-15873,  for the year  ended
               December 31, 1995).

4.3            Form of  Subscription  Agreement  for  Series F  Preferred  Stock
               (incorporated  by  reference  to  Exhibit  4.1 of  the  Company's
               Quarterly  Report  on Form  10-QSB,  File  No.  0-15873,  for the
               quarter ended June 30, 1996).

4.4            Form  of  Registration  Rights  Agreement  with  Respect  to  the
               Purchase of Shares of Series F Preferred Stock  (incorporated  by
               reference to Exhibit 4.2 of the  Company's  Annual Report on Form
               10-K, File No. 0-15873, for the year ended December 31, 1995).

10.1           Lease,  dated as of February  20,  1995,  between the Company and
               28050  Corporate  Square   Associates,   L.P.   (incorporated  by
               reference to Exhibit 10.2 of the Company's  Annual Report on Form
               10- K, File No. 0-15873, for the year ended December 31, 1994).

10.2           Stock Purchase Agreement by and among 1103065 Ontario Inc., Delta
               Information  Services,  Inc., James Potter,  Marion Audrey Potter
               and Derek Betty  (incorporated by reference to Exhibit 2.1 to the
               Company's Form 8-K dated December 22, 1994, File No. 0-15873).

10.3           Registration  Rights and Put Agreement by and among James Potter,
               Marion Audrey Potter,  Derek Betty and the Company  (incorporated
               by  reference  to Exhibit  10.1 to the  Company's  Form 8-K dated
               December 22, 1994, File No. 0-15873).

10.4           Asset  Purchase  Agreement  by and  between  the  Company and GIS
               Systems Limited Partnership (incorporated by reference to Exhibit
               2.1 to the Company's Form 8-K dated  February 15, 1995,  File No.
               0-15873).



                                      -34-

<PAGE>



10.5           Series B  Promissory  Note  made by the  Company  payable  to GIS
               Systems Limited Partnership (incorporated by reference to Exhibit
               99.1 to the Company's Form 8-K dated February 15, 1995,  File No.
               0-15873).

10.6           Series C  Promissory  Note  made by the  Company  payable  to GIS
               Systems Limited Partnership (incorporated by reference to Exhibit
               99.2 to the Company's Form 8-K dated February 15, 1995,  File No.
               0-15873).

10.7           Promissory Note made by GIS Systems Limited  Partnership  payable
               to the Company  (incorporated by reference to Exhibit 99.2 to the
               Company's Form 8-K dated February 15, 1995, File No. 0-15873).

10.8           The Series B Preferred  Stock  Pledge and Call  Agreement  by and
               among  the  Company,   GIS  Systems   Limited   Partnership   and
               NationsBank  of  Florida,  N.A.  (incorporated  by  reference  to
               Exhibit 99.4 to the Company's  Form 8-K dated  February 15, 1995,
               File No. 0-15873).

10.9           Consulting Agreement by and between the Company and Fred Maglione
               (incorporated  by reference to Exhibit 99.5 to the Company's Form
               8-K dated February 15, 1995, File No. 0-15873).

10.10          Consulting  Agreement between James Potter,  1103065 Ontario Inc.
               and the Company (incorporated by reference to Exhibit 10.2 to the
               Company's Form 8-K dated December 22, 1994, File No. 0-15873).

10.11          Letter   Agreement   among  the  Company,   GIS  Systems  Limited
               Partnership, Nicholas Flaskay, and Fred Maglione (incorporated by
               reference to Exhibit 10.17 of the Company's Annual Report on Form
               10- KSB, File No. 0-15873, for the year ended December 31, 1995).

10.12          Employment  Agreement of Jacqueline E. Soechtig  (incorporated by
               reference to Exhibit 10.17 of the Company's Annual Report on Form
               10-K, File No. 0-15873, for the year ended December 31, 1994).

21.1           Subsidiaries of the Company (incorporated by reference to Exhibit
               21.1 of the  Company's  Annual  Report  on Form  10-K,  File  No.
               0-15873, for the year ended December 31, 1994).

27.1*          Financial Data Schedule

--------------------
* Filed herewith.

            For the Company's financial statements for the period ended December
31, 1996, see Part II, Item 7 of this Report on Form 10-KSB.

(b) Reports on Form 8-K.

            None.



                                      -35-

<PAGE>


                                   SIGNATURES

            In  accordance  with  Section 13 or 15(d) of the  Exchange  Act, the
registrant  caused  this  report to be signed on its behalf by the  undersigned,
thereunto duly authorized.

                                                  LASERGATE SYSTEMS, INC.



                                                  By: /s/ JACQUELINE E. SOECHTIG
                                                     ---------------------------
                                                     Jacqueline E. Soechtig
                                                     President and Chief
                                                     Executive Officer

                                                  Date: November 5, 1997


                                      -36-