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 March 31, 1998.

[_]   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.)

                2189 Cleveland Street, Clearwater, Florida 33765
               (Address of principal executive office) (Zip Code)

                    Issuer's telephone number: (813) 803-1574



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 May 14, 1998
-----                                                ---------------------------

Common stock $0.03 par value                                15,299,393

Transitional Small Business Disclosure Format (check one) Yes [_]      No [X]



<PAGE>




                    LASERGATE SYSTEMS, INC. AND SUBSIDIARIES
                FORM 10-QSB FOR THE QUARTER ENDED MARCH 31, 1997

                                      INDEX

Part I.   FINANCIAL INFORMATION                                             PAGE

          Item 1.  Consolidated Financial Statements                           3

                   Consolidated Balance Sheets as of March 31, 1998            3
                   (unaudited) and December 31, 1997

                   Consolidated Statements of Operations                       4
(unaudited) for the three months ended
                   March 31, 1998 and March 31, 1997

                   Consolidated Statements of Cash Flows                       5
                   (unaudited) for the three months ended
                   March 31, 1998 and March 31, 1997

                   Notes to Financial Statements (unaudited)                   6

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

Part II.  OTHER INFORMATION

          Item 6.  Exhibits and Reports on Form 8-K                           13

          Signature                                                           14



                                       2
<PAGE>


                    Lasergate Systems, Inc. and Subsidiaries
                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS

<TABLE>
<CAPTION>
                                                                             March 31,      December 31,
                                                                                1998            1997
                                                                           ------------    ------------
                                                                           (Unaudited)
<S>                                                                        <C>             <C>         
Current assets
     Cash and cash equivalents                                             $    162,851    $    390,760
     Accounts receivable, net of allowances
        of  $172,690 and $157,690                                               255,768         455,001
     Note receivable, current portion                                            50,251          50,251
     Inventories                                                                159,246         232,192
     Prepaid expenses                                                            21,163          30,838
                                                                           ------------    ------------
           Total current assets                                                 649,279       1,159,044

Property and equipment, net                                                     265,005         305,509
Note receivable, long-term portion                                               59,091          59,091
Systems and software costs, net of amortization of $1,637,253
 and $1,611,753                                                                 544,316         475,491
Goodwill, net of amortization of $431,804 and $398,557                        2,216,469       2,249,716
Other assets, net                                                                16,637          19,137
                                                                           ------------    ------------

Total assets                                                               $  3,750,797    $  4,267,988
                                                                           ============    ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
      Notes payable, bank                                                  $     22,222    $     23,575
     Accounts payable, trade                                                    623,061         780,271
     Deferred revenues                                                          310,078         356,471
     Accrued warranty costs                                                     551,427         554,497
     Accrued expenses                                                           915,130         912,190
                                                                           ------------    ------------
Total current liabilities                                                     2,421,918       2,627,004
                                                                           ------------    ------------
     Total liabilities                                                        2,421,918       2,627,004
Stockholders' equity:
     Preferred stock, $.03 par value, 2,000,000 shares authorized,
        7,500 shares issued and outstanding at
        March 31, 1998 and December 31, 1997,  respectively                         225             225
     Common stock, $.03 par value, 20,000,000 shares authorized,
        7,462,061 issued and outstanding at
        March 31, 1998 and December 31, 1997                                    223,862         223,862
     Additional paid-in capital                                              21,123,284      21,123,284
     Accumulated deficit                                                    (20,018,492)    (19,706,387)
                                                                           ------------    ------------
        Total stockholder's equity                                            1,328,879       1,640,984
                                                                           ------------    ------------

Total liabilities and Stockholders' equity                                 $  3,750,797    $  4,267,988
                                                                           ============    ============
</TABLE>


        The accompanying notes are an integral part of these statements.



                                       3
<PAGE>



                    Lasergate Systems, Inc. and Subsidiaries
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)


                                                   Three Months Ended March 31,
                                                      1998             1997
                                                   -----------      -----------

Revenues                                           $ 1,215,329      $ 1,278,576

Operating Expenses:
       Cost of revenues                                722,764          853,299
     Development                                        25,894          132,637
     Selling, general and administrative               781,835          867,083
                                                   -----------      -----------

          Operating loss                              (315,164)        (574,443)

Other income (expense)
     Interest                                            3,059           10,241
     Other, net                                           --              1,405
                                                   -----------      -----------
     Loss before income taxes                         (312,105)        (562,797)

Income taxes                                              --               --
                                                   -----------      -----------

     Net loss                                      $  (312,105)     $  (562,797)
                                                   ===========      ===========


Net loss per common share                          $      (.04)     $      (.08)
                                                   ===========      ===========


Weighted Average Common Stock Outstanding            7,462,061        7,362,061
                                                   ===========      ===========







        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>
                                                           Three Months Ended March 31,
                                                           ----------------------------
                                                               1998           1997
                                                            -----------    -----------
<S>                                                         <C>            <C>         
Cash flows from operating activities:
     Net loss                                               ($  312,105)   $  (562,797)
     Adjustments to reconcile net loss to cash
         used in operating activities:
     Depreciation of  property and equipment                     42,100         33,822
Amortization of intangibles                                      58,747         71,313
     Increase in accounts receivable allowances                  15,000         12,500
Decrease (increase) in:
         Accounts receivable, trade                             184,233         70,329
         Inventories                                             72,946        132,873
         Prepaid expense                                          9,678        (44,412)
         Other                                                    2,500         81,753
     Increase (decrease) in:
        Accounts payable and accrued expenses                  (154,270)      (311,915)
        Accrued product costs                                    (3,070)         7,443
    Deferred revenue                                            (46,393)      (486,364)
                                                            -----------    -----------

         Net cash used in operating activities                 (130,634)      (995,455)

Cash flows from investing activities:
     (Additions to), disposal of, property and equipment         (1,597)       (56,692)
     Capitalized software development costs                     (94,325)       (92,090)
                                                            -----------    -----------
     Net cash provided (used) in investing activities           (95,922)      (148,782)
                                                            -----------    -----------

Cash flows from financing activities:
     Issuance of note receivable                                   --         (144,856)
     Repayment of loans, other                                   (1,353)        (1,225)
                                                            -----------    -----------

 Net cash (used) for  financing activities                       (1,353)      (146,081)
                                                            -----------    -----------

     Net increase (decrease) in cash and cash equivalents      (227,909)    (1,290,318)

Cash and cash equivalents, beginning of period                  390,760      1,924,825
                                                            -----------    -----------

Cash and cash equivalents, end of period                    $   162,851    $   634,507
                                                            ===========    ===========
</TABLE>







        The accompanying notes are an integral part of these statements.


                                       5
<PAGE>



                    LASERGATE SYSTEMS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 1998


NOTE 1- FINANCIAL STATEMENT PRESENTATION AND OTHER INTERNAL PRESENTATION

INTERIM PRESENTATION

The interim consolidated  financial  statements of Lasergate Systems,  Inc. (the
ACompany@) 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, 1997. 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  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, 1997, 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, 1997 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 three months ended March 31, 1998,  the Company used $130,634 of cash in
operating  activities  and  incurred a loss of $312,105.  From its  inception in
March 1985 through March 31, 1998, the Company has incurred a cumulative loss of
$20,018,492.  In recent years the Company has relied upon  proceeds from private
and  public  placements  of  equity  securities  and loans  (some of which  were
converted into common stock) in order to fund its operations.

In view of these  matters,  recoverability  of a major  portion of the  recorded
asset  amounts  shown  in the  accompanying  balance  sheet  is  dependent  upon
continued  operation  of the  Company,  which  in turn  is  dependent  upon  the
Company's ability to succeed in its future operations.  The financial statements
do not include any adjustments relating to the recoverability and classification
of liabilities  that might be necessary should the Company be unable to continue
in existence.

Management  believes that having the Admits for Windows(R)  product installed at
several high profile  accounts  since  mid-1997 will improve its ability to sell
the  product  and expects  1998 sales  opportunities  to be at least the same as
those  experienced  in 1997.  However,  the  Company's  financial  stability has
affected its sales.  The Company  cannot  provide the  necessary  assurances  to
customers  that  development  of products will  continue.  For this reason,  the
Company  continues to seek and actively  pursue a possible  relationship  with a
strategic  partner who could  improve  customers'  perceptions  of the Company's
financial stability as well as the Company's actual financial position. Any such
relationship  would probably  include an equity  investment in the Company.  The
Company may also review other financing opportunities.

It should be noted that the  Company has been  seeking a  strategic  partner for
approximately  one year now, but has been unable to find a suitable partner that
is  willing  to  invest a  significant  amount  of  capital  on  terms  that are
acceptable to the Company. Presently, the Company is operating with minimal cash
and current  liabilities  exceed current assets by $1,772,639 at March 31, 1998.
These  circumstances  require  that the  Company  exercise  greater  caution  in
conducting its business and, at certain times, take extraordinary  measures.  In
the past,  such measures have included  asking certain vendors to extend payment
terms by as much as 120 days, and, on one occasion,  delaying payroll for senior
management.  Although Management recognizes the critical nature of the Company's
cash  position and attempts to 






                                       6
<PAGE>




manage  the  Company's  expenditures  accordingly,  there is a risk  that  under
certain  conditions,  immediate  financing  could  be  required.  The  costs  of
obtaining  such  financing  are unknown and the  likelihood  of  obtaining  such
financing is  uncertain.  However,  as part of any  financing  arrangement,  the
Company would require a capital  infusion in the Company which could result in a
further  dilution  of the  present  shareholders'  equity  interest.  Management
believes this is necessary in order to increase the Company's revenues.

Management  intends to continue to operate the Company in a conservative  manner
through its efforts to further reduce  operating  expenses and product costs and
to focus on higher margin sales  opportunities.  While  Management  believes the
Company  will be able to operate  without  interruption,  it intends to continue
discussions  with  certain  potential   partners  and  to  seek  out  additional
candidates  who can  potentially  enhance the Company's  financial  position and
marketing abilities.  However, no assurances can be made that a suitable partner
will be found or that  sufficient  capital  will be raised if necessary to allow
the Company to continue its operations.

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).

On November 4, 1997,  the Company sold 7,500 shares of Series G Preferred  Stock
to RBB Bank,  AG as nominee for its clients  (who are the  beneficial  owners of
such  shares) 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.  The Series G Shares are  convertible  into  32,655,549
common shares. Pursuant to the transaction, the Company redeemed 7,945 shares of
the company's Series F Preferred Stock 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
authorize  an  amendment  to the  Articles  of  Incorporation  to  increase  the
authorized  number  of  Common  Shares  in an  amount  sufficient  to allow  for
conversion  of all Series G Shares into Common  Shares (the  "Amendment").  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 the Series G
holders  in the  amount of the  penalty  bearing  interest  at a rate of 20% per
annum.

The  penalties  described  in the  preceding  paragraph  have  been  temporarily
suspended  by  the  Series  G  investors  on  the  condition  that  the  Company
expeditiously  propose  the  Amendment  to the  shareholders  at the 1998 Annual
Meeting of shareholders such that the Series G investors will be able to convert
all the Series G shares into common shares.  However, the Series G investors may
reinstate these penalties upon sixty days notice. On April 11, 1998, the Company
converted 1,800 of the 7,500 Series G Shares into 7,837,332 common shares.

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.



                                       7
<PAGE>




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  as  well  as
amortization of capitalized software.

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 period. Options and warrants and the effect
of the  convertible  securities are not included in the  calculation of net loss
per share because they are  antidilutive.  At March 31, 1998, there were options
and warrants  outstanding to purchase  3,009,167 common shares at prices ranging
from $0.24 to $5.50 per share,  and 7,500 Series G shares which can convert into
32,655,549 common shares.

NOTE 2 - SYSTEMS AND SOFTWARE COSTS

From June 1996 until June 1997 the Company rewrote its general admission product
in order to make it  Windows(R)  based.  Since June 1997,  the  Company has been
adding additional features and functions to the product.

As a result of this development effort and new product introduction, the Company
expects to achieve cost reductions in areas of product  development and customer
support.  In  addition,  the  product  has a new  appearance  which is more user
friendly and allows 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.

In the first quarter,  1997,  $94,325 of development costs were incurred for the
new general  admission  product,  and the entire amount was  capitalized.  Since
inception,  development  costs incurred for the new product total  approximately
$544,325 of which $438,325 has been capitalized.

The Company  estimates the cost of developing a reserved  seating module for the
new product will total approximately  $300,000 to $500,000, of which $15,000 has
been incurred, none of which has been capitalized.

NOTE 3 - PRODUCT COST LIABILITY (WARRANTY ALLOWANCE)

An accrued warranty allowance of $551,427 has been provided to cover the cost of
enhancements  to be made (free of charge) to systems  installed in prior periods
and to provide for Year 2000  compliance  of legacy  products.  During the first
quarter  of 1998,  $40,356  was spent for these  enhancements  and  subsequently
charged against this allowance.  Management has reviewed warranty costs incurred
within the past year,  and  believes  that the accrued  warrant  allowance  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.

Many currently  installed  computer  systems and software  products are coded to
accept only two-digit  entries in the date code field.  Beginning around January
1999, these date code fields will need to distinguish twenty-first century dates
from  twentieth  century  dates.  As a result,  in less than one year,  computer
systems and/or software used by many customers may need to be upgraded to comply
with  such  "Year  2000"  requirements.  Significant  uncertainty  exists in the
software  industry   concerning  the  potential  effects  associated  with  such
compliance. Although the Company's current products (its new Windows(R) products
and the  current  version  of its  reserved  seat  product,  Select-a-Seat)  are
designed  to be Year 2000  compliant,  some  legacy  products  are not Year 2000
compliant.  Many versions of non-compliant products have been sold and installed
in the past; however, the terms of their licenses may expire or the customer may
decide to replace  their system  before any  modifications  would be  necessary.
Thus,  some versions may have no impact on the Company,  but other  versions may
require  modifications or upgrades and the resources  





                                       8
<PAGE>



required  to complete  these  modifications  and  upgrades  may be  substantial.
Additionally,  there can be no absolute  assurance  that the Company's  software
products  that are designed to be Year 2000  compliant  are actually  compliant.
Management is currently evaluating the impact of Year 2000 requirements upon the
Company,  and  developing  a plan to limit the  Company's  exposure  and cost of
compliance.  Management  currently  estimates  the  cost  of  compliance  to  be
approximately  $100,000  and has  provided for this cost as part of its warranty
provision.

NOTE 4  - LEGAL PROCEEDINGS

On June 15, 1995, the Company's  founder,  former  President and Chief Executive
Officer,  Donald Turner (and four family members hereinafter  referred to as the
"Turners"),  commenced an action  against the  Company,  Jeffrey  Markowitz  and
Richard  Friedman  in the  Circuit  Court of  Pinellas  County,  Florida,  Civil
Division.  Trial is  currently  set for the week of June 22,  1998.  Mr.  Turner
alleges,  among  other  things,  that  he was  wrongfully  terminated  from  his
employment and seeks damages that in the aggregate could exceed $1,000,000.  The
Company believes Mr. Turner's suit is substantially without merit and intends to
continue vigorously  defending the action.  Management believes that the outcome
in this matter will not have a material  effect on the results of  operations of
the Company  and an  estimated  amount has been  provided  for in the  financial
statements.  There have been no significant  changes regarding this action since
the 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  and  Section  349 of the New York  General  Business  Law,  and made
negligent misrepresentations.  In February 1998 the Company moved to dismiss the
complaint in its  entirety.  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 the last quarter.

The Company is also involved in other legal actions. Management does not believe
that the ultimate  resolution of these other matters will have a material effect
on the Company's  financial  position.  However,  should the Turners prevail and
obtain a  judgment  against  the  Company,  the  Company  would  need to  obtain
immediate  financing of some nature. The costs of such financing are unknown and
the likelihood of obtaining such financing is uncertain.

NOTE - 5 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Interest And Income Taxes Paid:


                                                           Three Months Ended
                                                           ------------------
                                                         1998              1997
                                                        ------              ----

Interest                                                $1,534              $460
Income taxes                                              --                 --



                                       9
<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

REVENUES:

Revenues  were  $1,215,329  and  $1,278,576 in the first quarter of 1998 and the
first quarter of 1997  respectively,  representing  a decrease of $63,247 or 5%.
Product sales represented $1,061,140 and $1,184,595 in the first quarter of 1998
and 1997  respectively  and  revenue  from  maintenance  and support of existing
customers represented $154,189 and $93,981 in the first quarter of 1998 and 1997
respectively.  Revenue from product  sales in the first quarter of 1998 includes
$782,000 of revenue  recognized  on sales of the Admits for  Windows(R)  product
compared to revenue  recognized  in the first  quarter of 1997 of  $881,000  for
Admits for Windows(R)  product sales.  Revenue from  maintenance and support has
increased  due to new  product  sales of Admits  for  Windows(R)  and  increased
pricing for maintenance and support.

COST OF REVENUES:

Cost of revenues were $722,764 and $853,299 in the first quarter of 1998 and the
first quarter of 1997 respectively representing a $130,535, or 15%, decrease. As
a percentage of revenues,  cost of revenues in the first quarter of 1998 was 59%
of revenues  compared to 67% of revenues in the first quarter of 1997.  This was
primarily  due to the  increase in software  sales and  maintenance  and support
revenues  without a comparable  increase in the costs associated with such sales
and revenues. The ratio of cost of revenues-to-revenues is a function of whether
the sales or services are hardware or software intensive.  Hardware sales result
in lower gross margins as hardware is not developed by the Company, but acquired
for  customers,  as is a small  portion  of  software.  Sales  of the  Company's
software provide the Company with significantly higher gross margins.

DEVELOPMENT COSTS:

Development costs were $25,894 and $132,637 in the first quarter of 1998 and the
first quarter of 1997 respectively  representing a decrease of $106,743, or 80%.
Development  costs for the  first  quarter  of 1998 do not  include  $94,325  of
capitalized costs related to the new Admits for Windows(R)  product,  $24,500 of
costs charged to the warranty allowance, or $31,711 charged to cost of revenues.
Development  costs for the  first  quarter  of 1997 do not  include  $92,090  of
capitalized  software costs, $39,608 of costs charged to the warranty allowance,
or $25,669  charged to cost of  revenues.  With the  addition of these  amounts,
costs have decreased $113,574 in the first quarter of 1998 compared to the first
quarter of 1997. This  represents a 39% decrease,  which is due to a significant
reduction  in outside  contract  labor  ($9,098  in first  quarter  1998  versus
$127,658 in first  quarter  1997).  In early 1997,  the Company  used  extensive
contract  labor  associated  with  development  of the new Admits for Windows(R)
software.  The  Company  expects  to  continue  to develop  enhancements  to its
products for the remainder of 1998. Future  development  efforts will be focused
on a  reserved  seating  module  as soon as  resources  become  available  and a
customer is willing to purchase it.



                                       10
<PAGE>


SELLING, GENERAL AND ADMINISTRATIVE:

Selling,  general and administrative  expenses were $781,835 and $867,083 in the
first quarter of 1998 and the first quarter of 1997 respectively, representing a
$85,248 or 9.8% decrease. The decrease in SG&A expense is primarily attributable
to decreases in travel, employee recruitment,  rent (due to Company relocation),
and amortization expenses.

Net loss decreased to $312,105 ($.04 a share) for the first quarter of 1998 from
$562,797  ($.08 a share) for the first  quarter of 1997.  The  components of the
decrease in the Company's net loss are explained above.

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, 1997, 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, 1997 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 three months ended March 31, 1998,  the Company used $130,634 of cash in
operating  activities  and  incurred a loss of $312,105.  From its  inception in
March 1985 through March 31, 1998, the Company has incurred a cumulative loss of
$20,018,492.  In recent years the Company has relied upon  proceeds from private
and public placements and loans in order to fund its operations.

In view of these  matters,  recoverability  of a major  portion of the  recorded
asset  amounts  shown  in the  accompanying  balance  sheet  is  dependent  upon
continued  operation  of the  Company,  which  in turn  is  dependent  upon  the
Company's ability to succeed in its future operations.  The financial statements
do not include any adjustments relating to the recoverability and classification
of recorded  asset amounts or amounts and  classification  of  liabilities  that
might be necessary should the Company be unable to continue in existence.

During  the  first  quarter  of 1998,  accounts  receivable  decreased  $184,233
primarily due to increased collection efforts,  inventory decreased $ 72,946 due
to fewer  installations  being in process at March 31, 1998 than at December 31,
1997, and accounts payable  decreased $ 154,270  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 the
Company's  payroll service  provider did not charge the Company for the December
31, 1997 payroll until January 6, 1998. At December 31, 1997 accrued payroll and
payroll  taxes were  $67,253 and at March 31, 1998  accrued  payroll and payroll
taxes were $-0-.  All other  accounts  payable  and accrued  expenses  decreased
$87,017 during the first quarter of 1998.

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 March 31, 1998 and December  31, 1997,  the
Company's backlog was approximately $566,443 and $880,721, respectively.


                                       11
<PAGE>



Management  believes that having the Admits for Windows(R)  product installed at
several high profile  accounts  since  mid-1997 will improve its ability to sell
the  product  and expects  1998 sales  opportunities  to be at least the same as
those experienced in 1997. However,  Management believes that the Company's lack
of financial  stability has affected its sales.  The company  cannot provide the
necessary  assurances to customers  that  development of products will continue.
For this reason,  the Company  continues to seek and actively  pursue a possible
relationship with a strategic partner who could improve  customers'  perceptions
of the Company's  financial  stability as well as the Company's actual financial
position.  Any such relationship  would probably include an equity investment in
the Company. The Company may also review other financing opportunities.

It should be noted that the  Company has been  seeking a  strategic  partner for
approximately  one year now, but has been unable to find a suitable partner that
is  willing  to  invest a  significant  amount  of  capital  on  terms  that are
acceptable to the Company. Presently, the Company is operating with minimal cash
and current  liabilities  exceed current assets by $1,772,390 at March 31, 1998.
These  circumstances  require  that the  Company  exercise  greater  caution  in
conducting its business and, at certain times, take extraordinary  measures.  In
the past,  such measures have included  asking certain vendors to extend payment
terms by as much as 120 days, and, on one occasion,  delaying payroll for senior
management.  Although Management recognizes the critical nature of the Company's
cash  position and attempts to manage the  Company's  expenditures  accordingly,
there is a risk that under  certain  conditions,  immediate  financing  could be
required.  The costs of obtaining  such financing are unknown and the likelihood
of obtaining  such  financing is  uncertain.  However,  as part of any financing
arrangement,  the Company would require a capital  infusion in the Company which
could result in a further dilution of the present shareholders' equity interest.
Management  believes  this is  necessary  in order  to  increase  the  Company's
revenues.

Management  intends to continue to operate the Company in a conservative  manner
through its efforts to further reduce  operating  expenses and product costs and
to focus on higher margin sales  opportunities.  While  Management  believes the
Company  will be able to operate  without  interruption,  it intends to continue
discussions with certain potential partners and to seek out additional potential
candidates  who can  potentially  enhance the Company's  financial  position and
marketing abilities.  However, no assurances can be made that a suitable partner
will be found or that  sufficient  capital  will be raised if necessary to allow
the Company to continue its operations.





                                       12
<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 March 31, 1998.

All  other  items  required  in Part II have  been  previously  filed or are not
applicable for the quarter ended March 31, 1998.











                                       13
<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:   May 15, 1998                                  /s/Philip P. Signore
                                                     -------------------------
                                                      Philip P. Signore
                                                      Vice President
                                                      Chief Financial Officer



                                       14