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, 1996.

/_/        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 34621
               (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 14, 1996
-----                                         --------------------------------

Common stock $0.03 par value                             7,432,061

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, 1996

                                      INDEX

Part I.    FINANCIAL INFORMATION                                            PAGE

           Item 1.  Consolidated Financial Statements                          3

                    Consolidated Balance Sheets as of September  30, 1996      3
                    (unaudited) and December 31, 1995

                    Consolidated Statements of Operations                      4
                    (unaudited) for the three months and nine months ended
                    September 30, 1996 and 1995

                    Consolidated Statements of Cash Flows                      5
                    (unaudited) for the nine  months ended
                    September 30, 1996 and 1995

                    Notes to Financial Statements (unaudited)             6 - 10

           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


<PAGE>
                    LASERGATE SYSTEMS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                     ASSETS
                                                                                   September 30,   December 31,
                                                                                       1996            1995
                                                                                   ------------    ------------
                                                                                    (Unaudited)
<S>                                                                                <C>             <C>         
Current assets
        Cash and cash equivalents                                                  $  2,537,579    $    656,506
        Accounts receivable, net of allowance for
          doubtful accounts of  $93,771 and $36,127                                     933,185         439,311
        Account receivable, related party                                                   -0-         199,359
        Inventories                                                                      92,920         325,664
        Prepaid expenses                                                                 28,967          84,392
                                                                                   ------------    ------------
              Total current assets                                                    3,592,651       1,705,232
Property and equipment, net                                                             292,282         246,568
Systems and software costs, net                                                         188,888       1,416,667
Goodwill, net                                                                         2,415,952       2,515,694
Customer lists and support contracts, net                                               301,042         354,167
Other assets, net                                                                       145,376         167,908
                                                                                   ------------    ------------

Total Assets                                                                       $  6,936,191    $  6,406,236
                                                                                   ============    ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
        Note payable, related party                                                $        -0-    $    300,000
        Notes payable, other:                                                            29,556          21,757
        Accounts payable, trade                                                         166,268         634,863
        Deferred revenues                                                               677,367         729,406
        Accrued product costs                                                           470,684         297,000
        Accrued expenses                                                              1,008,156         272,104
                                                                                   ------------    ------------
             Total current liabilities                                                2,352,031       2,255,130
Promissory notes payable, stockholders with conversion futures                              -0-       2,324,335
Common stock subject to put options                                                     140,000         140,000
                                                                                   ------------    ------------
Total liabilities                                                                     2,492,031       4,719,465

Stockholders' equity:
        Preferred stock, $.03 par value, 2,000,000 shares authorized,  8,000 and
             387,750 shares issued and outstanding at
             September 30, 1996 and December 31, 1995,  respectively                        240          11,633
        Common stock, $.03 par value, 20,000,000 shares authorized,
             7,432,061 and 3,125,013 issued and outstanding at
             September 30, 1996 and December 31, 1995 , respectively                    222,961          93,751
        Additional paid-in capital                                                   19,835,419      14,065,743
        Less:  Common stock, $.03 par value, 20,000 shares and 20,000
             shares at September  30, 1996 and December 31, 1995, respectively,
             subject to put options                                                    (140,000)       (140,000)
             Note receivable, shareholders                                                  -0-       (559,000)
        Accumulated deficit                                                         (15,474,460)    (11,785,356)
                                                                                   ------------    ------------
             Total stockholders' equity                                               4,444,160       1,686,771
                                                                                   ------------    ------------
Total Liabilities and Stockholders' Equity                                         $  6,936,191    $  6,406,236
                                                                                   ============    ============
</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,
                                               --------------------------------   -------------------------------
                                                        1996           1995           1996           1995
                                                    -----------    -----------    -----------    -----------
<S>                                                 <C>            <C>            <C>            <C>        
Revenues                                            $ 1,005,860    $   777,895    $ 3,575,790    $ 2,268,344

Operating expenses:

             Cost of Revenues                           481,203        542,590      2,273,254      1,599,246
             Development                                150,821         98,048        312,884        571,713
             Selling, general and administrative
             (Including write-down of software in
             June 1996 of $1,075,000)                   946,694        964,288      4,674,753      2,620,707
                                                    -----------    -----------    -----------    -----------

                        Operating Loss                 (572,858)      (827,031)    (3,685,101)    (2,523,322)

Other income (expense)                                   36,965         (6,535)        (4,003)       (20,742)
                                                    -----------    -----------    -----------    -----------

                       Net loss                     ($  535,893)   ($  833,566)   ($3,689,104)   ($2,544,064)
                                                    ===========    ===========    ===========    ===========

Net loss per common share                           ($     0.07)   ($     0.28)   ($     0.65)   ($     0.84)
                                                    ===========    ===========    ===========    ===========

Weighted Average Common Stock Outstanding             7,428,274      3,023,013      5,656,674      3,023,013
                                                    ===========    ===========    ===========    ===========
</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,
                                                                  1996           1995
                                                              -----------    -----------
<S>                                                           <C>            <C>         
Cash flows from operating activities:

Net loss                                                      ($3,689,104)   ($2,544,064)
       Adjustments to reconcile net loss
            to cash used in operating activities:
        Depreciation, write-down  and amortization              1,490,775        440,003
        Increase in provision for doubtful accounts                57,644        150,733
        Stock-based compensation                                  244,988        326,250
        Decrease (increase) in:
            Accounts receivable, trade                           (551,520)      (572,394)
            Inventories                                           232,744         71,888
            Prepaid expense                                        55,425         38,911
            Other current assets                                  (87,375)        40,009
            Other assets                                           77,790           --
        Increase (decrease) in:
            Accounts payable and accrued expenses                 308,663       (151,149)
            Accrued Product Costs                                 173,684        (21,394)
            Deferred revenue                                      (52,039)       551,259
                                                              -----------    -----------

Net cash used in operating activities                          (1,738,325)    (1,669,948)
                                                              -----------    -----------

Cash flows from investing activities:
        (Additions) to, disposal of, property and equipment      (123,725)       (82,666)
        Note receivable, stockholders                                --         (559,000)
        Other                                                        --           29,657
                                                              -----------    -----------

 Net cash provided (used) in investing activities                (123,725)      (612,009)
                                                              -----------    -----------

Cash flows from financing activities:
        Proceeds from loans, related parties                         --          859,505
        Repayment of loans, related parties                      (300,000)          --
        Proceeds from loans                                        30,200           --
        Repayment of loans, other                                 (29,067)       (74,910)
        Repayment of obligations under capital leases             (31,092)        (8,651)
        (Settlement)/Procceds 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                       3,743,123        775,944
                                                              -----------    -----------

Net increase (decrease) in cash and cash equivalents            1,881,073     (1,506,013)

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

Cash and cash equivalents, end of period                      $ 2,537,579    $    83,824
                                                              ===========    ===========
</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, 1996


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, 1995. 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,
1995  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, 1996,  the Company used  $1,738,325 of
cash in operating  activities and incurred a loss of $3,689,104.  It also has an
accumulated  deficit at September 30, 1996 of  $15,474,460.  In recent years the
Company has had to rely on proceeds from private placements and public offerings
of its securities, and loans (some of which were converted to stock) in order to
fund its operations.

The  Company's  financial  statements  have been  prepared  in  conformity  with
generally accepted  accounting  principles.  In view of the matters described in
the preceding paragraph, 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.  As more fully  described in the Company's
Annual Report on Form 10- KSB for 1995 and its  Quarterly  Report on Form 10-QSB
for the quarter  ending June 30,  1996,  management  has taken  various  actions
intended to eventually  increase operating  efficiencies and increase sales. The
most  significant of these actions were the  commencement  of a rewriting of the
products and an increase in marketing and advertising  expenses including hiring
additional sales personnel.  Management believes that, when viewed in connection
with  the  capital  raised  during  1996  (see  below),  these  actions  will be
sufficient to provide the Company with the ability to continue in existence.

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  parties.  These  shares  were  potentially
convertible into 2,636,126 shares of common stock had they not been redeemed.

In order to simplify  the  Company's  capital and debt  structure,  on March 11,
1996, the Company and GIS Systems Limited  Partnership  ("GIS") agreed to, among
other things,  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 GIS returning to the company for  retirement  the 109,333  shares of Common
Stock and

                                       -6-

<PAGE>



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.  The  payment  of  $1,550,000  was  principally  provided  from the
proceeds of the Series E Private Placement.

Revenue Recognition

The Company's revenue  recognition policy is fully explained in the notes to the
Company's  financial  statements  in its Annual  Report on Form 10-KSB for 1995.
During the quarter  ended  September  30, 1996,  the Company had three  customer
installations  which had been  contracted  to require  more than  ninety days to
effect, and accordingly, the percentage of completion method was used to account
for income.

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.  While the Company
believes that the estimated direct costs are reasonably stated and classified in
all material  respects,  the Company intends to further refine its procedures of
capturing and reporting this information in 1996. Such refinement could, to some
extent, affect the comparability of the information being reported on.

For  quarterly  reporting in 1995,  cost of revenues  included  principally  the
hardware and  software  acquired for  customer  installations  and support.  The
estimated direct costs  associated with  engineering and installing  systems and
providing  customer  support were not  specifically  categorized and reported as
cost of revenues  as is being done in 1996.  For the  purposes  of this  report,
these types of costs were  separately  identified  and  reclassified  as cost of
revenues  in order to  report  the  results  of  operations  for 1995 on a basis
consistent with that used in 1996. These costs were  approximately  $202,000 and
$594,000 for the three months and nine months ending September 30, 1995.

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, 1996, there were options
and warrants  outstanding to purchase  3,031,067 common shares at prices ranging
from $1.00 to $5.50 per  share,  in  addition  8,000  Series F shares  which can
convert into as many as 17,777,778 common shares (see Note 5).

NOTE 2 - SYSTEMS AND SOFTWARE COSTS

The Company markets products that typically require substantial customization in
order to meet the customers' particular requirements.  Near the end of 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  the  referred to  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  which  define the  current
products remain competitive in the marketplace.





                                       -7-

<PAGE>



The  Company  has  concluded  as a result of the  assessment,  that  instead  of
marketing products that require  substantial  customization,  it will 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 products,  incorporating the modular concept,  will
be available for sale by the second quarter of 1997.  The current  software will
continue to be marketed until that time and the Company will continue to support
the present  software for some period beyond the introduction of the new product
for those customers who intend to continue using the current software.

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 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 products  incorporating the
modular  concept  will total  approximately  $250,000  to $400,000 by the second
quarter of 1997.  To date,  the Company has  incurred  approximately  $60,000 of
development costs for these products.

The Company installed a beta version consisting of three modules during November
1996, and anticipates  selling this  configuration  to a different  customer and
installing it during  December 1996. The Company  anticipates  the completion of
additional modules at an average rate of one per month until approximately June,
1997,  when the Company  anticipates  having the entire product line  rewritten.
Additional  beta sites will be selected so each module can be fully  tested in a
"live" environment and new  configurations  with additional modules will be sold
before general release of the full product.

As a result of this development effort and new product introduction, the Company
expects  to  achieve  cost  reductions  beginning  in 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.

NOTE 3 - DEPRECIATION AND AMORTIZATION

Depreciation and  Amortization  Expense for the three months ended September 30,
1996  and  1995  was  $101,000  and  $148,000.   Accumulated   depreciation  and
amortization as of September 30, 1996 and 1995 was $2,268,000 and $644,000.
This includes a write-down at June 30, 1996 of $1,075,000.

NOTE 4  - PRODUCT COST LIABILITY (WARRANTY ALLOWANCE)

At June 30, 1996 the  company had an accrued  warranty  allowance  of  $481,000,
which had been  provided to cover the cost of  enhancements  to be made (free of
charge) to systems installed in prior periods. During the third quarter, $60,000
was  spent  for  these  enhancements  and  subsequently   charged  against  this
allowance. Management has reviewed warranty costs incurred within the past year,
which  had  been  provided  for  by  estimating  and  recording  known  warranty
liabilities  each  quarter.  Based on this  review,  management  has  decided to
provide for unknown  warranty  costs by providing a warranty  allowance of 5% of
revenues.  For the third quarter, this amounted to $50,000. Thus, the balance of
the accrued  warranty  allowance at September 30, 1996 was $471,000.  Management
believes 5% is a conservative estimate of these costs (which are unknown at time
of sale)

                                       -8-

<PAGE>



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.

NOTE 5 - STOCKHOLDERS' EQUITY

Issuance of Stock

 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 June 30, 1996, 150,000 Series E shares had
converted into 2,453,686  common shares.  On July 3, 1996, the remaining  12,500
Series E shares were converted into 174,216 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, bears
a 4% cumulative  dividend,  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, 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.  In
addition,  the cumulative dividend on these shares is convertible into shares of
common stock in the same manner as the Series F shares.

Paid-in capital has also increased in 1996 by approximately $245,000 as a result
of the recording of stock-based compensation.

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 of 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  that 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.






                                       -9-

<PAGE>



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.

NOTE 7 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Interest And Income Taxes Paid:

                                                             Nine Months Ended
                                                             1996         1995
                                                             ----         ----

Interest                                                    $29,359      $ 2,043

Income Taxes                                                    -0-          -0-

Non-Cash Investing And Financing Activities:

1995:

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

In order to simplify  the  Company's  capital and debt  structure,  on March 11,
1996,  the Company and GIS agreed to, among other  things,  settle the remaining
obligation to GIS totaling  $2,324,335  by the Company  making a cash payment to
GIS of  $1,550,0000,  canceling  the  $559,000  note  receivable  from GIS,  and
canceling the $199,359  account  receivable  from GIS, and with GIS returning to
the Company 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.  The
payment of $1,550,000 was principally provided from the proceeds of the Series E
Private Placement.



                                      -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.

NEW DEVELOPMENTS AFFECTING OPERATIONS

The Company markets products that typically require substantial customization in
order to meet the customers' particular requirements.  Near the end of 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  the  referred to  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  which  define the  current
products remain competitive in the marketplace.

The  Company  has  concluded,  as a result of the  assessment,  that  instead of
marketing products that require  substantial  customization,  it will 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 products,  incorporating the modular concept,  will
be available for sale by the second quarter of 1997.  The current  software will
continue to be marketed until that time and the Company will continue to support
the present  software for some period beyond the introduction of the new product
for those customers who intend to continue using the current software.

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 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 products  incorporating the
modular  concept  will total  approximately  $250,000  to $400,000 by the second
quarter of 1997.  To date,  the Company has  incurred  approximately  $60,000 of
development costs for these products.

The Company installed a beta version consisting of three modules during November
1996, and anticipates  selling this  configuration  to a different  customer and
installing it during  December 1996. The Company  anticipates  the completion of
additional modules at an average rate of one per month until approximately June,
1997,  when the Company  anticipates  having the entire product line  rewritten.
Additional  beta sites will be selected so each module can be fully  tested in a
"live" environment and new  configurations  with additional modules will be sold
before general release of the full product.


                                      -11-

<PAGE>



As a result of this development effort and new product introduction, the Company
expects to achieve  cost  reductions  beginning  in 1997 in the 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.

RESULTS OF OPERATIONS

THREE MONTHS ENDED  SEPTEMBER  30, 1996 VERSUS THREE MONTHS ENDED  SEPTEMBER 30,
1995

Revenues:

Revenues increased 29% to $1,005,860 for the third quarter of 1996 from $777,895
for the third quarter of 1995. The continuing  increase in revenues is primarily
attributable  to marketing  activities  by a larger  sales  staff,  and from the
Company's enhanced products.  Maintenance revenues represented approximately 11%
of total revenues for the three months ended September 1996 and September 1995.

Classification of Expenses:

Cost of revenues for the third  quarter of 1996  includes  the costs  associated
with the hardware and software  acquired  for the  Company's  customers  and the
estimated  direct costs  associated with the engineering and installation of the
systems,  and the cost of customer  support.  In the Company's  Annual Report on
Form 10-KSB for the year ended December 31, 1995,  cost of revenues was reported
on a basis consistent with 1996. However,  for quarterly reporting in 1995, cost
of revenues included principally the hardware and software acquired for customer
installations  and  support,  but the  estimated  direct costs  associated  with
engineering  and  installing  systems and  providing  customer  support were not
specifically  categorized  and  reported as cost of revenues as is being done in
1996.  For the  purposes of this  report,  these types of costs were  separately
identified  and  reclassified  from  Development  or SG&A to cost of revenues in
order to report the results of operations  for 1995 on a basis  consistent  with
that used in 1996.

Cost of Revenues:

Cost of  revenues  for the third  quarter of 1996  decreased  to  $481,203  from
$542,590  for the third  quarter of 1995.  Cost of revenues  represented  48% of
revenues  during the third  quarter of 1996 as  compared to 70% during the third
quarter of 1995.  The decrease  resulted  primarily from a reduction in warranty
costs and improved efficiency of installations and support,  offset partially by
increased activity due to increased sales.

Development Costs:

Development  costs  increased  to  $150,821  for the third  quarter of 1996 from
$98,048 for the third  quarter of 1995,  an  increase  of $52,773,  or 54% . The
Company intends to continue developing products and to enhance existing products
to ensure competitive viability in the marketplace, (See Note 2 to the financial
statements).

Selling, General and Administrative:

Selling,  general and  administrative  expenses (SG&A) decreased to $946,694 for
the  third  quarter  of 1996  from  $964,288  for the  third  quarter  of  1995,
representing a $17,594 or 2% decrease.  These amounts  represent 94% of revenues
in 1996  and  124% of  revenues  in  1995.  The  decrease  resulted  from  lower
expenditures for several items, including professional fees,  amortization,  and
travel, partially offset by an increase in compensation expense.






                                      -12-

<PAGE>



Legal and other professional services decreased $76,000, to $59,000 in 1996 from
$135,000 in 1995. Legal fees represent  $19,000 of the decrease,  and consulting
fees represent $57,000 of the decrease.

Amortization  decreased  $43,000 due to a write-down of capitalized  software in
June 1996. Other expenses decreased $130,000,  including bad debt of $65,000 and
travel of $28,000

Employee  compensation  expenses  increased to $514,000 for the third quarter of
1996 from $282,000 for the third  quarter of 1995,  an increase of $232,000.  Of
this amount,  $100,000  represents a provision for  cash-based  and  stock-based
incentive  compensation that is planned for the executive group and managers for
1996. For the same period last year, no amounts had been accrued.  The remainder
of  the  increase  in  compensation  expense,  $132,000,   represents  increased
commissions  of $23,000  due to  increased  sales,  and  increased  salaries  of
$109,000 due to increased headcount.

Net loss  decreased  to $535,893  ($0.07 a share) for the third  quarter of 1996
from $833,564  ($0.28 a share) for the third quarter of 1995.  The components of
the decrease in the Company's net loss are explained above.



NINE MONTHS ENDED SEPTEMBER 30, 1996 VERSUS NINE MONTHS ENDED SEPTEMBER 30, 1995

Revenues:

Revenues  increased 58% to $3,575,790  for the nine months ended  September 1996
from  $2,268,344  for the nine  months  ended  September  1995.  The  continuing
increase in revenues is  primarily  attributable  to marketing  activities  by a
larger  sales  staff,  and from the  Company's  enhanced  products.  Maintenance
revenues represent approximately 11% of total revenues for the nine months ended
September 1996 and September 1995.

Cost of Revenues:

Cost of revenues  increased to  $2,273,254  for the nine months ended  September
1996 from  $1,599,246 for the nine months ended  September 1995. This represents
64% of revenues for the nine months ended  September  1996,  and 71% of revenues
for the nine months ended  September  1995.  This  improvement  (as a percent of
revenues)  represents  more  efficient  installations  and support of  products,
partially  offset by a write-off  of $104,000 of obsolete  inventory at June 30,
1996.

Development Costs:

Development costs decreased to $312,884 for the nine months ended September 1996
from $571,713 for the nine months ended  September 1995, a decrease of $258,829,
or 45%.  This is a result of  development  efforts in early 1996 being  directed
towards providing  enhancements to previously installed systems, and higher than
usual  development  costs in 1995  due to the  integration  of the new  products
acquired from Delta and GIS. This trend of lower reported  development costs was
reversed  during the third  quarter of 1996,  and is expected to continue due to
development efforts remaining at the present level or higher.

During  1996,  development  personnel  were  used  to  enhance  certain  systems
previously  installed in 1995 or earlier.  These related costs of  approximately
$263,000  were charged  against a product  cost  (warranty)  reserve,  which was
created by charging  the expense to cost of revenues.  Accordingly,  since these
costs were previously  anticipated and charged to cost of revenues,  development
costs for 1996 have been favorably impacted.

During 1995, the Company dedicated  significant  resources  towards  integrating
acquired  products  and  resolving  technical  difficulties  involved  with  the
installation and maintenance of the products.






                                      -13-

<PAGE>



The  Company  intends to  continue  to develop  products  and  enhance  existing
products to ensure competitive viability in the marketplace,  (See Note 2 to the
financial statements).

Selling, General and Administrative:

Selling,  general and administrative expenses (SG&A) increased to $4,674,753 for
the nine months ended  September 1996 from  $2,620,707 for the nine months ended
September  1995,  representing  a  $2,054,046  or 78%  increase.  These  amounts
represent  131% of revenues in 1996 and 116% of revenues in 1995.  The  increase
was due to several items, including a write-down of capitalized software.

Capitalized  software  was written down  $1,075,000  at June 30, 1996 due to the
development of a replacement  product which is expected to be available for sale
in the second quarter of 1997 (see Note 2 to the financial statements).  SG&A in
1995 did not include any write-downs or write-offs.

Employee  compensation expenses increased to $996,000 from $490,000, an increase
of $506,000. One component of this is an increase of $400,000 due to a provision
for cash-based and stock-based  incentive  compensation  that is planned for the
executive  group and managers in 1996. For the same period last year, no amounts
had been  accrued.  Other  components  of the  increase  include an  increase in
commissions  expense of $115,000 due to increased sales, an increase in salaries
of $153,000 due to increased headcount, and a decrease in consulting expenses of
$162,000.

Shareholder  relations expenses totaled $139,000 in 1996 versus $19,000 in 1995.
This increase of $120,000 includes a $100,000 payment to a public relations firm
engaged to inform  the  Company's  shareholders  and  others  interested  in the
Company's activities.

Accounting,  legal  and  other  professional  services  increased  $112,000,  to
$405,000 in 1996 from $293,000 in 1995.

Net loss  increased  to  $3,689,104  ($0.65) a share for the nine  months  ended
September 30, 1996,  from  $2,544,064  ($0.84) a share for the nine months ended
September 30, 1995. The components of the increase in the Company's net loss are
explained above.

LIQUIDITY AND CAPITAL RESOURCES

For the nine months ended  September  30, 1996,  the Company used  $1,738,325 of
cash in  operating  activities  and incurred a loss of  $3,689,104.  It has also
accumulated  a deficit of  $15,474,460  from its inception in March 1985 through
September 30, 1996. In recent years the Company has had to rely on proceeds from
private and public  placements and loans (some of which were converted to stock)
in order to fund its operations.

The Company estimates the cost of developing the new products  incorporating the
modular  concept  will total  approximately  $250,000  to $400,000 by the second
quarter of 1997.  To date,  the Company has  incurred  approximately  $60,000 of
development costs for these products.

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,  typically  with some type of  financial
assurance such as a deposit. As of September 30, 1996 and December 31, 1995, the
Company's backlog was approximately $700,000 and $1,200,000, respectively.

While  no  assurances  can  be  given,  management  believes  that  the  current
organization infrastructure and the Company's products are sufficient to support
higher  levels of revenue than those  achieved in 1996.  In  addition,  while no
assurances  can be given,  management  believes  that the  Company's  operations
should  continue to progress  throughout 1996 and that the net proceeds from the
completion of the April 1996 and June 1996 Private  Placements and the operating
revenues  from sales in 1996 should be  sufficient  to fund  operations  through
1997. See "Operational and Funding Matters and Reporting Basis" of Note 1 to the
financial statements.


                                      -14-

<PAGE>



Part II-Other Information

Item 6-Exhibits and Reports on Form 8-K

(a)  Exhibits:

      27.1   Financial Data Schedule

(b)  Reports  on Form 8-K:  The  Company  has not filed any  reports on Form 8-K
during the quarter ended September 30, 1996.

All  other  items  required  in Part II have  been  previously  filed or are not
applicable for the quarter ended September 30, 1996.













































                                      -15-

<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, 1996              /s/ Philip P. Signore
                                     --------------------------
                                     PHILIP P. SIGNORE
                                     Vice President and
                                     Chief Financial Officer





                                      -16-