SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB


[X]        Quarterly  report  pursuant to Section 13 or 15(d) of the  Securities
           Exchange Act of 1934 for the  quarterly  period ended  September  30,
           1997.

[_]        Transition  report  pursuant to 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.
              (Exact name of small business issuer in its charter)

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

               28050 US 19 N, Suite 502, Clearwater, Florida 34761
               ---------------------------------------------------
               (Address of principal executive office) (Zip Code)

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



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

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

Class                                           Outstanding at November 12, 1997
-----                                           --------------------------------

Common stock $0.03 par value                               7,462,061

Transitional Small Business Disclosure Format (check one)

Yes [_]  No [X]


<PAGE>


                    LASERGATE SYSTEMS, INC. AND SUBSIDIARIES

              FORM 10-QSB FOR THE QUARTER ENDED SEPTEMBER 30, 1997

                                      INDEX

Part I.             FINANCIAL INFORMATION                                   PAGE

        Item 1.     Consolidated Financial Statements                         3

                    Consolidated Balance Sheets as of September  30, 1997     3
                    (unaudited) and December 31, 1996

                    Consolidated Statements of Operations                     4
                    (unaudited) for the three months and nine months ended
                    September  30, 1997 and 1996

                    Consolidated Statements of Cash Flows                     5
                    (unaudited) for the nine  months ended
                    September 30, 1997 and 1996

                    Notes to Financial Statements (unaudited)                 6

        Item 2.     Management's Discussion and Analysis or Plan             11
                    of Operation

Part II.            OTHER INFORMATION

        Item 6.     Exhibits and Reports on Form 8-K                         15

        Signature                                                            16


                                       -2-

<PAGE>

                    LASERGATE SYSTEMS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                     ASSETS
                                                                                   September 30,   December 31,
                                                                                       1997            1996
                                                                                   ------------    ------------
                                                                                   (Unaudited)
<S>                                                                                <C>             <C>         
Current assets
      Cash and cash equivalents                                                    $    239,672    $  1,924,825
      Accounts receivable, net of allowance for
        doubtful accounts of $161,980 and $147,124                                      528,214         868,931
      Inventories                                                                       148,572         254,901
      Prepaid expenses                                                                   57,839          40,966
                                                                                   ------------    ------------
            Total current assets                                                      3,089,623         974,297

Property and equipment, net                                                             309,344         304,024
Note receivable-trade                                                                   153,910            --
Systems and software costs, net of amortization of $1,581,427
   and $1,525,856                                                                       445,612         242,739
Goodwill, net of amortization of $365,310 and $265,568                                2,282,963       2,382,705
Customer lists and support contracts, net of amortization of
   $425,000 and $141,667                                                                   --           283,333
Other assets, net                                                                        10,733         134,521
                                                                                   ------------    ------------

Total Assets                                                                       $  4,176,859    $  6,436,945
                                                                                   ============    ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
      Notes payable, bank:                                                               24,888          28,628
      Accounts payable, trade                                                           655,073         542,671
      Deferred revenues                                                               1,100,640         909,516
      Accrued product costs                                                             546,697         570,919
      Accrued expenses                                                                  774,866       1,128,658
           Total current liabilities                                                  3,102,164       3,180,392
Common stock subject to put options                                                     140,000         140,000
                                                                                   ------------    ------------

Total liabilities                                                                     3,242,164       3,320,392

Stockholders' equity:
      Preferred stock, $.03 par value,  2,000,000 shares  authorized,
           7,945 and 8,000 shares issued and outstanding at
           September 30, 1997 and December 31, 1996,  respectively                          238             240
      Common stock, $.03 par value, 20,000,000 shares authorized,
           7,462,061 and 7,362,061 issued and outstanding at
           September 30, 1997 and December 31, 1996,  respectively                      223,862         220,862
      Additional paid-in capital                                                     19,815,771      19,818,769
      Less:  Common stock, $.03 par value, 20,000 shares
           at September 30, 1997 and December 31, 1996, respectively,
           subject to put options                                                      (140,000)       (140,000)
      Accumulated deficit                                                           (18,965,176)    (16,783,318)
                                                                                   ------------    ------------
           Total stockholders' equity                                                   934,695       3,116,553
                                                                                   ------------    ------------
Total Liabilities and Stockholders' Equity                                         $  4,176,859    $  6,436,945
                                                                                   ============    ============
</TABLE>

        The accompanying notes are an integral part of these statements.


                                       -3-

<PAGE>

                    LASERGATE SYSTEMS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                Three Months Ended September 30,   Nine Months Ended September 30,
                                                --------------------------------   -------------------------------
                                                         1997           1996           1997           1996
                                                     -----------    -----------    -----------    -----------
<S>                                                  <C>            <C>            <C>            <C>        
Revenues                                             $ 1,042,114    $ 1,005,860    $ 3,346,578    $ 3,575,790

Operating expenses:

           Cost of Revenues                              735,349        481,203      2,536,414      2,273,254
           Development                                   106,578        150,821        316,264        312,884
           Selling, general and administrative
           (Including write-down of intangibles of
           $1,075,000 in June 1996 and $285,000
           in September 1997)                          1,040,877        946,694      2,704,792      4,674,753
                                                     -----------    -----------    -----------    -----------

                      Operating Loss                    (840,690)      (572,858)    (2,210,892)    (3,685,101)

Other income (expense)                                    10,509         36,965         29,034         (4,003)
                                                     -----------    -----------    -----------    -----------

                     Net loss                        ($  830,181)   ($  535,893)   ($2,181,858)   ($3,689,104)
                                                     ===========    ===========    ===========    ===========

Net loss per common share                            ($      .11)   ($     0.07)   ($      .29)   ($     0.65)
                                                     ===========    ===========    ===========    ===========

Weighted Average Common Stock Outstanding              7,462,061      7,428,274      7,452,537      5,656,674
                                                     ===========    ===========    ===========    ===========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                       -4-

<PAGE>

                    LASERGATE SYSTEMS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                 Nine Months Ended
                                                                 -----------------
                                                            September 30,  September 30, 
                                                                1997           1996
                                                            -------------  ------------- 
<S>                                                         <C>            <C>         
Cash flows from operating activities:

Net loss                                                    ($2,181,858)   ($3,689,104)
       Adjustments to reconcile net loss
          to cash used in operating activities:
      Depreciation, write-down  and amortization                568,803      1,490,775
      Increase in provision for doubtful accounts                14,856         57,644
      Stock-based compensation                                     --          244,988
      Decrease (increase) in:
          Accounts receivable, trade                            325,861       (551,520)
          Inventories                                           106,329        232,744
          Prepaid expense                                       (16,873)        55,425
          Other current assets                                  102,538        (87,375)
          Other assets                                             --           77,790
      Increase (decrease) in:
          Accounts payable and accrued expenses                (241,384)       308,663
          Accrued product costs                                 (24,222)       173,684
          Deferred revenue                                      191,124        (52,039)
                                                            -----------    -----------

Net cash used in operating activities                        (1,154,826)    (1,738,325)
                                                            ===========    ===========

Cash flows from investing activities:
      (Additions) to, disposal of, property and equipment      (114,227)      (123,725)
      Capitalized software development costs                   (258,445)          --
                                                            -----------    -----------

 Net cash provided (used) in investing activities              (372,672)      (123,725)
                                                            -----------    -----------

Cash flows from financing activities:
      Issuance of note receivable                              (153,910)          --
      Repayment of loans, related parties                          --         (300,000)
      Proceeds from loans                                          --           30,200
      Repayment of loans, other                                  (3,745)       (29,067)
      Repayment of obligations under capital leases                --          (31,092)
      (Settlement)of acquisition obligations                       --       (1,550,000)
      Net proceeds from issuance of  stock                         --        6,623,082
      Redemption of Preferred Stock                                --       (1,000,000)
                                                            -----------    -----------
Net cash provided by financing activities                      (157,655)     3,743,123

Net increase (decrease) in cash and cash equivalents         (1,685,153)     1,881,073

Cash and cash equivalents, beginning of period                1,924,825        656,506
                                                            -----------    -----------
                                                                               

Cash and cash equivalents, end of period                    $   239,672    $ 2,537,579
                                                            ===========    ===========
</TABLE>

        The accompanying notes are an integral part of these statements.


                                       -5-

<PAGE>

                    LASERGATE SYSTEMS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1997


NOTE 1 - FINANCIAL STATEMENT PRESENTATION AND OTHER INTERNAL PRESENTATION

INTERIM PRESENTATION

The interim consolidated  financial  statements of Lasergate Systems,  Inc. (the
"Company") are unaudited and should be read in conjunction with the consolidated
financial  statements  and notes  thereto in its Form  10-KSB for the year ended
December 31, 1996. In the opinion of management,  the accompanying  consolidated
financial  statements (with all explanations  contained in these Notes ) contain
all adjustments  necessary for a fair  presentation of the results of operations
for this interim period.  Interim results are not necessarily  indicative of the
results for a full fiscal year.

OPERATIONAL AND FUNDING MATTERS AND REPORTING BASIS

The information  contained in Note 3 to the Financial Statements included in the
Company's  Annual  Report on Form 10-KSB for the fiscal year ended  December 31,
1996  remains  current  related  to the  status  of  certain  of  the  Company's
operational  and  funding  matters  and,  accordingly,  should be referred to in
conjunction with this Form 10-QSB.

The  Company's  financial  statements  have been  prepared  in  conformity  with
generally accepted accounting principles,  which contemplate continuation of the
Company as a going  concern.  For the nine months ended  September 30, 1997, the
Company  incurred  a loss  of  $2,181,858  and  has an  accumulated  deficit  of
$18,965,176 and used cash in operating  activities of $1,154,826 during the nine
months of 1997.

In recent  years the Company has relied upon  proceeds  from  private and public
placements  and  loans  (some of which  were  converted  to stock)  from  former
principal stockholders to fund its operations.

In view of the matters described in the preceding paragraphs,  recoverability of
a major portion of the recorded  asset  amounts  shown in the Company's  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 Company is presently  seeking one or more potential  strategic  partners who
can complement the Company's  marketing and development efforts and increase its
financial  stability.  As part of any  arrangement,  the Company would require a
capital  infusion in the Company which could result in a further dilution of the
present shareholders' equity interests. Management believes this is necessary in
order to increase the Company's revenues.

On March 27, 1996, the Company  commenced the Private Placement 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 Convertible  Preferred Stock  successfully
closed with the  Company  receiving  total  proceeds,  net of offering  costs of
$1,450,582.

On June 10, 1996, the Company  commenced a Private Placement of 8,000 shares, at
$750  per  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 shares of preferred stock.

On June 27,  1996,  the Company  used  $329,359 of the  proceeds of the Series F
Private Placement to repay the entire Note Payable-Related Party of $300,000 and
the interest  accrued  through that date.  In addition,  on June 28, the Company
used  $1,000,000 of the proceeds to redeem 95,950 shares of Series A Convertible
Preferred Stock held by the same related parties who held the $300,000 in notes.
These shares were potentially  convertible into 2,636,126 shares of common stock
had they not been  redeemed.  On  January  27,  1997,  55 shares of the Series F
Preferred  Stock  were  converted  into  100,000  shares  of  Common  Stock at a
conversion price of $.55 per share.

On November 4, 1997,  the Company sold 7,500 shares of Series G Preferred  Stock
to RBB Bank,  AG  ("RBB")  for  $7,500,000  pursuant  to an  exemption  from the
registration  requirements  of the  Securities  Act of 1933,  as amended,  under
Regulation S promulgated  thereunder.  Pursuant to the transaction,  the Company
redeemed 7,945 shares of the Company's Series F Preferred Stock owned by RBB for
$6 million,  leaving the Company with  $1,447,500  of net proceeds  after giving
effect to expenses of the offering. No sales commissions were paid.


                                       -6-

<PAGE>

REVENUE RECOGNITION

Revenues  from the sale of  equipment  and  software  licenses,  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  the sale of  equipment  and  software  licenses  with a  planned
installation  period exceeding 90 days are accounted for using the percentage of
completion method.

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

CLASSIFICATION OF EXPENSES

Cost of revenues  includes the costs  associated  with the hardware and software
acquired for the Company's  customers and the estimated  direct costs associated
with the engineering  (mostly  software  customization)  and installation of the
system.  Cost of revenues also includes the estimated direct cost related to the
support and  maintenance of the Company's  service  contracts.  Amortization  of
capitalized software development costs and other intangible assets is classified
as Selling, General and Administrative Expense.

NET LOSS PER COMMON SHARE

The net loss per common share amount is based on the weighted  average number of
common 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  are  antidilutive.  At
September  30, 1997,  there were options and  warrants  outstanding  to purchase
3,015,000  common shares at prices ranging from $0.2391 to $5.50 per share,  and
7,945 Series F shares which can convert into as many as 17,655,556 common shares

NOTE 2 - SYSTEMS AND SOFTWARE COSTS

Historically,   the  Company  has  marketed   products  that  typically  require
substantial   customization   in  order  to  meet  the   customers'   particular
requirements.  During  1996,  the Company  changed its  strategy  and decided to
design  products in a modular  fashion.  The modules  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.  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.  Accordingly,  the Company  commenced  the
development of this new product.

As of June 1997,  the Company had installed  limited  functionality  versions at
four different sites. These versions had fully functional  ticketing modules and
some additional  features,  but not all of the features  planned for the general
release  version.  As of May 13,  1997 the  Company  had  completed  the general
release version of the new general  admission product and has since installed it
at 16 sites  including all sites which had earlier  versions.  During June 1997,
the  development  effort was focused on two groups of  applications  for the ski
industry.  The first group of ski applications was released on July 1, 1997, and
the second group of ski applications was released on September 30, 1997.  Future
development  efforts  will  be  focused  on  a  reserved  seating  module  which
management expects to release during the first quarter of 1998.

As a result of this development effort and new product introduction, the Company
expects to achieve cost  reductions  beginning in the fourth  quarter of 1997 in
areas of product development and customer support. In addition, the product will
have a new  appearance  which 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.

The Company estimates the cost of developing the new general admission  products
incorporating the modular concept will total approximately $400,000 to $450,000.
In the third quarter of 1997, $73,000 of development costs were incurred for the
new general admission  products,  and this entire amount was capitalized.  Since
inception,  development  costs of the new products  incurred for the new general
admission  products total $389,000 of which $283,000 has been  capitalized.  The
Company  estimates the cost of developing a reserved  seating module for the new
product  will total  approximately  $75,000 to  $125,000 by the end of the first
quarter of 1998,  of which  $15,000  has been  incurred,  none of which has been
capitalized.

NOTE 3 -  AMORTIZATION

Amortization  Expense for the nine months ended  September 30, 1997 and 1996 was
$460,000  and  $2,268,000  including  write-downs  of $248,000  and  $1,075,000,
respectively.  Because of  certain  strategic  decisions  described  above,  the
Company reviewed the valuation of the


                                       -7-

<PAGE>

current software cost 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, at June 30, 1996, a write-down of $1,075,000 was made to
the software's  carrying value. The software's net carrying value as adjusted of
$459,970 at September  30, 1997 is expected to be fully  realized  (recoverable)
through  future  revenues.  As a result of the  Company's  quarterly  review for
potential  impairment of intangibles at September 30, 1997 and a review of costs
associated with customers acquired through the acquisitions of Delta Information
Services Inc. and GIS Information Systems, Inc., the remaining value of Customer
Lists and Support Contracts (approximately $248,000) was written off.

NOTE 4 - NOTE RECEIVABLE-TRADE

In  connection  with an early sale of the  Company's  new  product,  the Company
accepted a note receivable from a customer in the amount of $144,856 with a term
of 3 years and  bearing  interest  at the rate of 10% per annum.  Nine months of
interest,  amounting  to $9,054 has been  accrued  bringing  the note balance to
$153,910.  Payments of  principal  and  interest  are to be made on December 31,
1997,  1998,  and  1999  in  the  amounts  of  $50,000,   $61,185,  and  $65,000
respectively.

NOTE 5  - PRODUCT COST LIABILITY (WARRANTY ALLOWANCE)

Management has reviewed  warranty costs incurred  within the past year, and as a
result has decided to provide for known and unknown  warranty costs by recording
a warranty  allowance at the time of sale. As of December 31, 1996,  the balance
of the warranty allowance account was $570,919.  During the first three quarters
of 1997,  $78,064 was accrued as an allowance,  and $102,286 was spent for these
enhancements  and  subsequently  charged  against  this  allowance.   Management
believes the  allowance of $546,697 as of September  30, 1997 is a  conservative
estimate  of these costs but will  continue  to monitor  them to ensure they are
provided  for on a  current  basis in order to match  the cost  with  associated
revenue.

NOTE 6 - LEGAL PROCEEDINGS

The Company's  founder and former  President and Chief  Executive  Officer,  has
commenced  an action  against the  Company in Florida  state  court.  The former
president 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  that the former  president's  suit is without  merit and
intends to vigorously defend the action.  There have been no significant changes
regarding this action since last quarter.

On or about June 27,  1997, a class  action was  commenced in the United  States
District Court for the Eastern District of New York (CV 97-3775) by Andrew Petit
and Michael A. Lepera,  on behalf of themselves  individually,  and on behalf of
all others similarly situated against inter alia, the Company,  Sterling Foster,
& Co., Inc. ("Sterling Foster"),  the Company's former underwriter,  counsel for
Sterling Foster and certain issuer  defendants for whom Sterling Foster acted as
underwriter.  The Complaint  alleges that in connection  with an offering of the
Company's securities which became effective on October 17, 1994, Sterling Foster
engaged in a campaign to inflate the price of the Company's  stock,  to create a
short  position at the  inflated  price and then cover the short  position  with
shares  from   shareholders  who  had  been  secretly  released  from  "lock-up"
agreements. With respect to the Company, the Complaint alleges that it failed to
disclose  in its  Registration  Statement  that  prior to the date the  offering
became  effective,  Sterling  Foster  had  secretly  agreed to  release  certain
shareholders from"lock-up" agreements for the purpose of selling their shares to
Sterling Foster at reduced prices. The Plaintiffs claims allege that the Company
violated Sections 11 and 12(2) of the Securities Act of 1933,  Sections 10(b) of
the  Securities  Exchange  Act of 1934 and Rule  10b-5  promulgated  thereunder,
Section   349  of  the  New   York   General   Business   Law,   and   negligent
misrepresentation. The Company believes that it has defenses to these claims and
intends  to  vigorously  defend  itself  in  this  action.  There  have  been no
significant changes regarding this action since last quarter.

In early  1997,  Derek Betty and James  Potter  instituted  actions  against 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 were
brought in the Circuit Court of the Sixth  Judicial  Circuit in and for Pinellas
County,  Florida.  The Betty Action  alleged  that the Company  failed to return
shares of the  Company's  stock  which were 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
alleged 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  sought  damages in an amount in excess of $15,000.  The Potter
Action  also  alleged  a  breach  of the  Registration  Rights  and  Put  Option
Agreement.  Moreover,  the Potter Action included  allegations  concerning James
Potter's Consulting Agreement with the Company and a Non- Compete Agreement. The
Potter  Action sought a declaratory  judgment  determining  that the Company and
1103065  Ontario,  Inc.  ("Ontario")  were in material breach of the Non-Compete
Agreement  and that Potter be relieved of all  obligations  to perform under the
Non-Compete  Agreement.  The  Company  succeeded  in  consolidating  all  of the
proceedings in arbitration. On November 7, 1997, the Company signed a settlement
agreement  with  Derek  Betty  and  James  and  Marion  Potter  which  ended the
arbitration proceeding.  The settlement agreement,  among other things, canceled
the  outstanding  put options,  left the  Non-Compete  Agreement  in place,  and
required the Company to make a cash payment of $30,000.

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.

                                       -8-
<PAGE>



NOTE 7 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

                                                             Nine Months Ended
                                                             -----------------
INTEREST AND INCOME TAXES PAID:                            1997            1996
                                                          ------         -------

      Interest                                            $2,192         $29,359
      Income Taxes                                          -0-             -0-

NON-CASH INVESTING AND FINANCING ACTIVITIES:

      1996 and 1997:    None.

NOTE 8 - SUBSEQUENT EVENTS

SALE OF SECURITIES

On  October  30,  1997,  the  Board of  Directors  authorized  a new  series  of
convertible  preferred stock, par value $.03, designated as Series G Convertible
Preferred  Stock ("Series G Shares").  The  authorized  number of such shares is
8,000.  Each  share has a face  value of $1,000  and is  convertible  into 4,354
shares of Common Stock (a conversion  price of $0.22967 per Common  Share).  The
Series G shares  limit the  rights of the  holders  of Common  Stock or Series F
Convertible  Preferred  Shares  (Series F Shares)  by  providing  a  liquidation
preference  of $1,000  per Series G Share.  The Series G Shares  rank pari passu
with the Series F Shares.

On November 4, 1997,  the Company sold 7,500 shares of Series G Preferred  Stock
to RBB Bank,  AG  ("RBB")  for  $7,500,000  pursuant  to an  exemption  from the
registration  requirements  of the  Securities  Act of 1933,  as amended,  under
Regulation S promulgated  thereunder.  Pursuant to the transaction,  the Company
redeemed 7,945 shares of the Company's Series F Preferred Stock owned by RBB for
$6 million,  leaving the Company with  $1,447,500  of net proceeds  after giving
effect to expenses of the offering. No sales commissions were paid.

Under the terms of the subscription agreement, the Company will pay a penalty of
5% of the face value of outstanding  Series G Shares  ($375,000) if shareholders
have not approved an increase in the  authorized  number of Common  Shares in an
amount sufficient to allow for conversion of all Series G Shares within 120 days
of the subscription  agreement (by March 4, 1998). An additional  penalty of 10%
will be  incurred  for each 120 days  beyond  March 4, 1998  until  shareholders
approve  an  increase  in the  authorized  number of Common  Shares in an amount
sufficient to allow for conversion of all Series G Shares.  Such penalties shall
be payable in cash.  If  sufficient  cash is not  available  to legally  pay the
penalty,  the  Company  will  issue a note  payable  to RBB in the amount of the
penalty, bearing interest at a rate of 20% per annum.







                                       -9-

<PAGE>
NOTE 8 - SUBSEQUENT EVENTS (CONTINUED)

The  following  table  sets  forth a pro  forma  condensed  balance  sheet as of
September 30, 1997, as if the subsequent  events described above had occurred at
September 30, 1997.

<TABLE>
<CAPTION>
                                                        September 30, 1997
                                            -------------------------------------------
                                                             Pro forma       Pro forma
                                            Historical      Adjustments     As Adjusted
                                            ----------      -----------     -----------
ASSETS:
<S>                                        <C>             <C>             <C>         
Cash                                       $    239,672    $  1,497,500    $  1,737,172
Other current assets                            734,625         (50,000)        684,625
                                           ------------                    ------------

Total current assets                            974,297                       2,421,797
Non-current assets                            3,202,562                       3,202,562
                                           ------------                    ------------
Total assets                               $  4,176,859                    $  5,624,359
                                           ============                    ============


LIABILITIES AND STOCKHOLDERS' EQUITY:
Total current liabilities                  $  3,102,164                    $  3,102,164
Common stock subject to put option              140,000                         140,000
                                           ------------                    ------------
Total liabilities                             3,242,164                       3,242,164
                                           ------------                    ------------

Preferred Stock                                     238             (13)            225
Common Stock                                    223,862                         223,862
Additional paid-in capital                   19,815,771       1,447,513      21,263,284
Common Stock subject to put option             (140,000)                       (140,000)
Accumulated deficit                         (18,965,176)                    (18,965,176)
                                           ------------                    ------------
Total Stockholders' Equity                      934,695                       2,382,195
                                           ------------                    ------------
Total Liabilities & Stockholders' Equity   $  4,176,859                    $  5,624,359
                                           ============                    ============
</TABLE>

                                      -10-
<PAGE>

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

The  following  discussions  should be read in  conjunction  with the  financial
statements  and notes  thereto,  and is  qualified  in its entirety by reference
thereto.

The  statements  contained in or  incorporated  by reference into this Quarterly
Report which are not historical  facts contain forward looking  information with
respect  to  plans,  projections  or  future  performance  of the  Company,  the
occurrence of which involve certain risks and uncertainties that could cause the
Company's  actual  results  to differ  materially  from  those  expected  by the
Company,  including  the  history of  operating  losses;  uncertainty  of future
financial  results;  possible  negative  cash  flow from  operating  activities;
additional  financing  requirements;  no  assurance  of  successful  and  timely
development of new products;  risks inherent in software  development;  customer
acceptance;  employee turnover; litigation;  dependance on regulatory approvals;
uncertainty of software and hardware pricing or profitability;  unpredictability
of  patent  protection;  rapid  technological  change;  competition;  and  other
uncertainties detailed in the Company's Annual Report on Form 10-KSB.

RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 1997 VERSUS THREE MONTHS ENDED
SEPTEMBER 30, 1996

REVENUES:

Revenues were  $1,042,114  and $1,005,860 for the third quarter of 1997 and 1996
respectively,  representing  an increase of $36,254 or 4%. Revenue for the third
quarter of 1997  included  $596,000  of revenue  recognized  on a contract  with
American  Skiing  Company (ASC) based on the  percentage  completion  method and
$169,000  of revenue  from other  sales to ASC.  Activities  during the  quarter
included  substantial  completion  of  installations  at six ASC resorts and the
commencement  of the  delivery of  proximity  cards which will be used by ASC as
annual  passes.  Proximity  scanning is a new  technology  which the Company has
integrated  into the product that utilizes radio  frequencies to "scan" a ticket
instead of laser scanning or magnetic strip reading. Of the $1,755,000 of orders
from ASC which were in the  Company's  backlog at August 15,  1997,  $765,000 of
deliveries were completed during the third quarter,  $932,000 of deliveries were
postponed  to the fourth  quarter,  and  $58,000 of orders  were  canceled.  The
Company  continues  to receive  orders from ASC and as of November  12, 1997 the
Company has received orders  totaling more than  $2,400,000  with  approximately
$700,000 of these orders unfilled.

Maintenance  revenues  represented  12% and 11% of total  revenues for the three
month periods ended September 30, 1997 and September 30, 1996, respectively.

COST OF REVENUES:

Cost of revenues  were  $735,349 and $481,203 for the third  quarter of 1997 and
1996 respectively, representing 71% of revenues during the third quarter of 1997
as compared to 48% during the third quarter of 1996. This increase was caused by
the Company  accepting ASC orders with a lower gross profit  percentage  than it
normally  receives.  This was  partially due to the size of the contract but was
primarily  due to it being  the first  sale of the  complete  general  admission
product  (all  modules of the new  Windows(C)  based  system,  including  access
control using proximity scanning).

DEVELOPMENT COSTS:

Development  costs were  $106,578 and $150,821 for the third quarter of 1997 and
1996  respectively,  representing  a decrease of $44,243,  or 29% .  Development
costs for the third quarter of 1997 do not include $72,879 of capitalized  costs
related  to the  new  product  or  $12,000  of  costs  charged  to the  warranty
allowance.  Development  costs  for the  third  quarter  of 1996 do not  include
$60,000 of costs charged to the warranty  allowance.  With the addition of these
amounts,  costs have  decreased  $19,364  between  years.  This  represents a 9%
decrease, which is primarily due to a decrease in the number of employees on the
development  staff.  The  Company  expects to  continue  development  efforts at
approximately  the same  level for the  remainder  of 1997 with the  development
effort  primarily  focused on a reserved  seating  module for its new Windows(C)
product (see Note 2 to the Financial Statements).

SELLING, GENERAL AND ADMINISTRATIVE:

Selling,  general and  administrative  expenses were $1,026,520 and $946,694 for
the third quarter of 1997 and 1996  respectively,  representing  a $79,826 or 8%
increase. The increase is due to the write-off of the customer list asset in the
amount  of  $247,916  partially  offset by  decreases  in  professional  fees of
$47,000, bad debt expense of $61,000 and other expenses of $60,090.

                                      -11-
<PAGE>

Net loss increased to $830,181 ($.11) a share for the third quarter of 1997 from
$535,893  ($.07) a share for the third  quarter of 1996.  The  components of the
decrease in the Company's net loss are explained above.

NINE MONTHS  ENDED  SEPTEMBER  30,  1997  VERSUS  NINE  MONTHS  ENDED
SEPTEMBER 30, 1996

REVENUES:

Revenues were  $3,346,578 and $3,575,790 for the nine months ended September 30,
1997 and 1996  respectively,  representing a decrease of $229,212 or 6%. Revenue
through the first three quarters of 1997 includes seven sales of the new general
admission product to several well- known customers  including the Art Gallery of
Ontario and Blackpool  Pleasure Beach  totaling  $1,149,000  plus  $1,238,000 of
revenue recognized on a contract with American Skiing Company (ASC) based on the
percentage completion method and $169,000 of revenue from other sales to ASC. Of
the $1,755,000 of orders from ASC which were in the Company's  backlog at August
15,  1997,  $765,000 of  deliveries  were  completed  during the third  quarter,
$932,000 of  deliveries  were  postponed to the fourth  quarter,  and $58,000 of
orders were  canceled.  As of November 12, 1997 $ the Company has received  more
than $2,400,000 of orders from ASC and approximately $700,000 of orders from ASC
are  unfilled  including  orders for two new resorts  recently  acquired by ASC.
Management  expects  these orders to be  substantially  complete by December 31,
1997. . Maintenance  revenues  represented 10% and 11% of total revenues for the
nine months ended September 30, 1997 and September 30, 1996, respectively.  This
was  primarily  due to less  customers  accepting  maintenance  contracts on the
legacy  products.  This trend  appears to be reversing now that sales of the new
products are consistently occurring and sales of the legacy products have almost
stopped.

COST OF REVENUES:

Cost of revenues  were  $2,536,414  and  $2,273,254  for the nine  months  ended
September 30, 1997 and 1996  respectively,  representing  76% of revenue  during
1997 and 64% during 1996..  This was primarily due to increased costs associated
with early  installations of the new general admission product and a lower gross
profit  percentage on ASC orders then it normally  receives.  This was partially
due to the size of the contract but was primarily due to it being the first sale
of the complete  general  admission  product (all modules of the new  Windows(C)
based system, including access control using proximity scanning).

DEVELOPMENT COSTS:

Development costs were $316,264 and $312,884 for the nine months ended September
30, 1997 and 1996  respectively,  representing  an  increase  of $3,380,  or 1%.
Development  costs for the nine months ended  September  30, 1997 do not include
$258,445 of  capitalized  costs  related to the new products  (see Note 2 to the
Financial  Statements)  or $108,527 of costs charged to the warranty  allowance.
Development  costs for the nine months ended  September  30, 1996 do not include
$341,000 of costs charged to the warranty allowance.  With the addition of these
amounts,  costs have  increased  $29,352  between  years.  This  represents a 4%
increase,  which is  primarily  due to an  increase  in the  average  number  of
employees on the development staff.

SELLING, GENERAL  AND ADMINISTRATIVE:

Selling,  general and administrative expenses were $2,704,792 and $4,674,753 for
the nine months ended September 30, 1997 and 1996  respectively,  representing a
$1,969,961 or 42% decrease.  These amounts represent 81% of revenues in 1997 and
130% of revenues in 1996. The decrease is  attributable  to a number of expenses
from 1996 that did not reoccur in 1997. First,  capitalized software was written
down  $1,075,000 at September 30, 1996 due to the  development  of a replacement
product (see Notes 2 and 3 to the financial statements). Other components of the
decrease  from year to year are a decrease  of $400,000  due to a provision  for
incentive  compensation  for the  executive  group and  managers in 1996,  and a
decrease of $225,000 due to a provision  for  contingent  legal  settlements  in
1996. No such  provisions  were made in 1997.  Other  components of the decrease
include  decreases  of  $109,000  in  investor  relations  expenses,  $67,000 in
accounting  and  auditing  expenses,  and $74,000 in legal  expenses.  These are
primarily due to the costs of the private  placements of Preferred  Stock of the
Company  during  1996.  Additional  components  of the  decrease are $247,000 of
non-cash  compensation  and $102,000 of bad debt expense.  These  decreases were
partially  offset by a write-down  of  intangible  assets asset at September 30,
1997 in the amount of $285,000 and increases in all other expenses of $44,039.

Net loss  decreased  to  $2,181,858  ($.29) a share  for the nine  months  ended
September  30, 1997 from  $3,689,104  ($.65) a share for the nine  months  ended
September 30, 1996. The components of the decrease in the Company's net loss are
explained above.

The FASB has  issued  Statement  of  Financial  Accounting  Standards  No.  128,
Earnings per Share,  which is effective  for financial  statements  issued after
December 15, 1997. Early adoption of the new standard is not permitted.  The new
standard  eliminates  primary and fully diluted  earnings per share and requires
presentation of basic and diluted earnings per share together with disclosure of
how the per share amounts were computed.

                                      -12-

<PAGE>

The adoption of this new  standard is not expected to have a material  impact on
the disclosure of earnings per share in the financial statements.  The effect of
adopting this new standard has not been determined.

LIQUIDITY AND CAPITAL RESOURCES

The  Company's  financial  statements  have been  prepared  in  conformity  with
generally accepted accounting principles,  which contemplate continuation of the
Company as a going  concern.  In the Company's  Annual Report on Form 10-KSB for
the fiscal year ended December 31, 1996, the Company's  auditors qualified their
opinion  as to a  going  concern.  The  information  contained  in Note 3 to the
Financial  Statements included in the Company's Annual Report on Form 10-KSB for
the fiscal year ended December 31, 1996 remains current related to the status of
certain of the  Company's  operational  and funding  matters  and,  accordingly,
should be referred to in conjunction with this Form 10-QSB.

For the nine months ended  September  30, 1997,  the Company used  $1,154,826 of
cash in  operating  activities  and  incurred  a loss  of  $2,181,858  From  its
inception in March 1985 through  September 30, 1997,  the Company has incurred a
cumulative  loss of  $18,965,176.  In recent  years the  Company has relied upon
proceeds  from  private  and  public  placements  and loans in order to fund its
operations.

The Company is presently  seeking one or more potential  strategic  partners who
can complement the Company's  marketing and development efforts and increase its
financial  stability.  As part of any  arrangement,  the Company would require a
capital  infusion in the Company which could result in a further dilution of the
present shareholders' equity interests. Management believes this is necessary in
order to increase revenue .

In order to procure a contract with American  Skiing  Company for  $1,375,000 of
software  and  hardware,  the  Company  decided to accept a lower  gross  profit
percentage than it normally receives.  This was partially due to the size of the
contract  but was  primarily  due to it being  the  first  sale of the  complete
general  admission  product (all  modules of the new  Windows(C)  based  system,
including access control using proximity  scanning).  This was the primary cause
of the  increase  in the  cost of  revenue  percentage  (cost  of  revenue  as a
percentage of revenue) from 67% in the first quarter of 1997 to 76% in the third
quarter of 1997.

Since the Company does not purchase  components  for its products until an order
is received,  there is  typically a backlog of orders for  systems.  The Company
defines  backlog as a signed contract or customer's  purchase  order,  typically
with some type of financial  assurance  such as a deposit.  As of September  30,
1997 and December 31, 1996, the Company's backlog was  approximately  $1,535,000
and $963,000, respectively.

During 1997, accounts  receivable  decreased $340,717 primarily due to increased
collection   efforts,   inventory  decreased  $106,329  due  to  more  efficient
management and fewer  installations  being in process at September 30, 1997 than
at December  31,  1996,  and  accounts  payable and accrued  expenses  decreased
$241,390  primarily  due to the payment of accrued  payroll,  payroll  taxes and
other expenses  which were accrued at year end. The decrease in accrued  payroll
and  payroll  taxes  arose  because  payroll  is payable on the last day of each
month,  but near year-end the Company changed its payroll  service  provider and
the new  provider  did not charge the Company for the  December 31, 1996 payroll
until  January 2, 1997.  At December 31, 1996 accrued  payroll and payroll taxes
were $210,000 and at September  30, 1997 accrued  payroll and payroll taxes were
$7,100.

Also,  during the first  quarter of 1997,  an  installation  was completed for a
customer who agreed to participate in the development  process by being an early
installation  site for the new product in exchange for extended payment terms on
approximately  half of their purchase.  As a result, the Company accepted a note
receivable  from the  customer  in the amount of  $144,856  with a term of three
years and bearing interest at the rate of 10% per annum.

The Company estimates the cost of developing the new general admission  products
incorporating the modular concept will total approximately $400,000 to $450,000.
In the first nine months of 1997,  $258,000 of development  costs were incurred,
and this entire  amount was  capitalized.  Since  inception,  development  costs
incurred  total  $389,000 of which  $283,000 has been  capitalized.  The Company
estimates the cost of developing a reserved  seating  module for the new product
will total approximately  $75,000 to $125,000 by the first quarter of 1998, none
of which has yet been incurred.

On November 4, 1997,  the Company sold 7,500 shares of Series G Preferred  Stock
to RBB Bank,  AG  ("RBB")  for  $7,500,000  pursuant  to an  exemption  from the
registration  requirements  of the  Securities  Act of 1933,  as amended,  under
Regulation S promulgated  thereunder.  Pursuant to the transaction,  the Company
redeemed 7,945 shares of the Company's Series F Preferred Stock owned by RBB for
$6 million,  leaving the Company with  $1,447,500  of net proceeds  after giving
effect to expenses of the offering. No sales commissions were paid.

Although  no  assurance  can be  given,  management  believes  that  the  recent
on-schedule  product  launch of the new Admits  general  admission  product will
enable the Company to achieve an increase  in  revenues  and a reduction  of the
operating   loss  by  the  end  of  1997  and  lay  the  foundation  for  future
profitability.  The foregoing is a forward-looking  statement and actual results
may differ materially based upon certain risk factors. These impacting

                                      -13-

<PAGE>

factors  include,  but are not  limited to  customer  acceptance,  technological
change,  employee  turnover,  third party  development  schedules,  installation
schedules, availability of sufficient working capital, and litigation.

Part II - Other Information

Item 6 - Exhibits and Reports on Form 8-K

(a)  Exhibits:   None.

(b)  Reports  on Form 8-K:  The  Company  did not file any  reports  on Form 8-K
     during the quarter ended September 30, 1997.

All  other  items  required  in Part II have  been  previously  filed or are not
applicable for the quarter ended September 30, 1997.




                                      -14-

<PAGE>






SIGNATURES

In accordance with the  requirements of the Exchange Act, the registrant  caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.

                                                 Lasergate Systems, Inc.

                                                 Registrant


Date: November 14, 1997                             /s/Philip P. Signore
                                                 -----------------------------
                                                  PHILIP P.  SIGNORE
                                                  Vice President and
                                                  Chief Financial Officer






                                      -15-