SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


   
                                 AMENDMENT NO.2
    

                                       ON

                                  FORM 10-QSB/A



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

/_/      Transition  report  pursuant  to Section 13 or 15(d) of the  Securities
         Exchange Act of 1934 for the transition period from  _______________ to
         _____________

Commission file number 0-15873

                             LASERGATE SYSTEMS, INC.
              ----------------------------------------------------
              (Exact name of small business issuer in its charter)

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


         2189 Cleveland Street, Suite 230 Clearwater, Florida    33765
         -------------------------------------------------------------
            (Address of principal executive office)      (Zip Code)

                    Issuer's telephone number: (813) 803-1754



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 January 26, 1998
-----                                          -------------------------------
Common stock $0.03 par value                   7,462,061


Transitional Small Business Disclosure Format (check one)

Yes [_]        No [X]




<PAGE>



                    LASERGATE SYSTEMS, INC. AND SUBSIDIARIES

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

                                      INDEX

Part I.            FINANCIAL INFORMATION PAGE

         Item 1.   Consolidated Financial Statements                           3

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

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

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

                   Notes to Financial Statements (unaudited)                   6

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



         Signature                                                            15




                                       -2-

<PAGE>


                    LASERGATE SYSTEMS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                     ASSETS
                                                                          June 30,      December 31,
                                                                            1997            1996
                                                                        ------------    ------------
                                                                        (Unaudited)
<S>                                                                     <C>             <C>         
Current assets
      Cash and cash equivalents                                         $    135,678    $  1,924,825
      Accounts receivable, net of allowance for
        doubtful accounts of $149,479 and $147,124                           713,604         868,931
      Inventories                                                            127,072         254,901
      Prepaid expenses                                                        82,507          40,966
                                                                        ------------    ------------
            Total current assets                                           1,058,861       3,089,623

Property and equipment, net                                                  330,415         304,024
Note receivable-trade                                                        148,477            --
Systems and software costs, net of amortization of $1,553,100
   and $1,525,856                                                            401,060         242,739
Goodwill, net of amortization of $332,063 and $265,568                     2,316,211       2,382,705
Customer lists and support contracts, net of amortization of
   $177,083 and $141,667                                                     247,917         283,333
Other assets, net                                                             37,726         134,521
                                                                        ------------    ------------

Total Assets                                                            $  4,540,667    $  6,436,945
                                                                        ============    ============


                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
      Notes payable, bank:                                                    26,162          28,628
      Accounts payable, trade                                                715,465         542,671
      Deferred revenues                                                      385,172         909,516
      Accrued product costs                                                  533,938         570,919
      Accrued expenses                                                       975,053       1,128,658
                                                                        ------------    ------------
           Total current liabilities                                       2,635,790       3,180,392
Common stock subject to put options                                          140,000         140,000
                                                                        ------------    ------------
Total liabilities                                                          2,775,790       3,320,392

Stockholders' equity:
      Preferred stock, $.03 par value,  2,000,000 shares  authorized,
           7,945 and 8,000 shares issued and outstanding at
           June 30, 1997 and December 31, 1996,  respectively                    238             240
      Common stock, $.03 par value, 20,000,000 shares authorized,
           7,462,061 and 7,3621,061 issued and outstanding at
           June 30, 1997 and December 31, 1996,  respectively                223,862         220,862
      Additional paid-in capital                                          19,815,771      19,818,769
      Less:  Common stock, $.03 par value, 20,000 shares
           at June 30, 1997 and December 31, 1996, respectively,
           subject to put options                                           (140,000)       (140,000)
      Accumulated deficit                                                (18,134,994)    (16,783,318)
                                                                        ------------    ------------
           Total stockholders' equity                                      1,764,877       3,116,553
                                                                        ------------    ------------
Total Liabilities and Stockholders' Equity                              $  4,540,667    $  6,436,945
                                                                        ============    ============
</TABLE>


        The accompanying notes are an integral part of these statements.


                                       -3-

<PAGE>



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



<TABLE>
<CAPTION>
                                                  Three Months Ended June 30,    Six Months Ended June 30,
                                                  ---------------------------    -------------------------
                                                      1997           1996           1997           1996
                                                  -----------    -----------    -----------    -----------
<S>                                               <C>            <C>              <C>          <C>        
Revenues                                          $ 1,025,888    $ 1,103,940      2,304,464    $ 2,569,929

Operating expenses:

           Cost of Revenues                           947,766      1,040,161      1,801,066      1,792,051
           Development                                 77,048        129,533        209,685        156,209
           Selling, general and administrative
           (Including write-down of software in
           June 1996 of $1,075,000)                   796,831      2,870,100      1,663,914      3,733,911
                                                  -----------    -----------    -----------    -----------

                      Operating Loss                 (795,757)    (2,935,854)    (1,370,201)    (3,112,242)

Other income (expense)                                  6,879        (53,401)        18,525        (40,968)
                                                  -----------    -----------    -----------    -----------

                     Net loss                        (788,878)   ($2,989,255)    (1,351,676)   ($3,153,210)
                                                  ===========    ===========    ===========    ===========

Net loss per common share                         ($     0.11)   ($     0.60)   ($     0.18)   ($     0.67)
                                                  ===========    ===========    ===========    ===========

Weighted Average Common Stock Outstanding           7,462,061      4,972,207      7,447,617      4,738,483
                                                  ===========    ===========    ===========    ===========
</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>
                                                                  Six Months Ended
                                                           June 30, 1997  June 30, 1996
                                                            -----------    -----------
<S>                                                          <C>           <C>         
Cash flows from operating activities:
      Net loss                                               (1,351,676)   ($3,153,210)
      Adjustments to reconcile net loss
          to cash used in operating activities:
      Depreciation, of property and equipment                    70,347         46,073
      Amortization of intangibles                               143,322      1,343,614
      Increase in provision for doubtful accounts                 2,355         54,043
      Stock-based compensation                                     --          198,113
      Decrease (increase) in:
          Accounts receivable, trade                            152,972       (646,285)
          Inventories                                           127,829        125,523
          Prepaid expense                                       (41,541)        50,533
          Other current assets                                     --             --
          Other assets                                           82,629         77,790
   
          Note receivable plus accrued interest                (148,477)          --
    
      Increase (decrease) in:
          Accounts payable and accrued expenses                  19,192        349,108
          Accrued product costs                                 (36,981)       183,807
          Deferred revenue                                     (524,344)       283,407
                                                            -----------    -----------

   
          Net cash used in operating activities              (1,504,373)    (1,087,484)
                                                            -----------    -----------
    

Cash flows from investing activities:
      (Additions) to, disposal of, property and equipment       (96,738)       (51,998)
      Capitalized software development costs                   (185,565)          --
                                                            -----------    -----------
Net cash used  in investing activities                         (282,303)       (51,998)
                                                            -----------    -----------


Cash flows from financing activities:

       

      Repayment of loans, related parties                          --         (300,000)
      Repayment of loans, other                                  (2,471)
                                                                               (18,649)
      Repayment of obligations under capital leases                --           (2,108)
      Settlement of acquisition obligations                        --       (1,550,000)
      Net proceeds from issuance of  stock                         --        6,623,082

      Redemption of Preferred Stock                                --       (1,000,000)
                                                            -----------    -----------

   
      Net cash (used in) provided by financing activities        (2,471)     3,752,325
                                                            -----------    -----------
    

Net increase (decrease) in cash and cash equivalents         (1,789,147)     2,612,843

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



Cash and cash equivalents, end of period                    $   135,678    $ 3,269,349
                                                            ===========    ===========
</TABLE>


        The accompanying notes are an integral part of these statements.


                                       -5-

<PAGE>



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


NOTE 1 - FINANCIAL STATEMENT PRESENTATION AND OTHER INTERNAL PRESENTATION

INTERIM PRESENTATION

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

OPERATIONAL AND FUNDING MATTERS AND REPORTING BASIS

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

   
The  Company's  financial  statements  have been  prepared  in  conformity  with
generally accepted accounting principles,  which contemplate continuation of the
Company as a going concern.  For the six months ended June 30, 1997, the Company
incurred a loss of $1,351,676 and has an accumulated  deficit of $18,134,994 and
used cash in operating activities of $1,504,373 during the first half of 1997.
    

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

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

The Company is presently  seeking one or more potential  strategic  partners who
can complement the Company's  marketing and development efforts and increase its
financial  stability.  As part of any  arrangement,  the Company would require a
capital  infusion in the Company which could result in a further dilution of the
present shareholders' equity interests. Management believes this is necessary in
order to continue increasing revenue each year. Moreover,  if a capital infusion
is not made by a potential  strategic  partner,  alternative  financing  will be
required by the Company prior to year-end to even  continue  operations at their
current level. The ability to obtain, as well as the costs of obtaining any such
capital or credit are uncertain at this time.

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  

                                      -6-
<PAGE>



$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.

REVENUE RECOGNITION

Revenues  from the sale of  equipment  and  software  licenses,  which have been
predominately  under short-term  contracts during the periods  presented herein,
are recognized  upon the acceptance of the system by the customer  provided that
no significant  vendor or post-contract  support  obligations remain outstanding
and  collection of the resulting  receivable is probable.  Revenues from special
sales sold under  evaluation  periods are  recognized at the end of this period.
Revenues  from  the sale of  equipment  and  software  licenses  with a  planned
installation  period exceeding 90 days are accounted for using the percentage of
completion method.

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

CLASSIFICATION OF EXPENSES


Cost of revenues  includes the costs  associated  with the hardware and software
acquired for the Company's  customers and the estimated  direct costs associated
with the engineering  (mostly  software  customization)  and installation of the
system.  Cost of revenues also includes the estimated direct cost related to the
support and maintenance of the Company's service contracts,  and amortization of
capitalized software costs.


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 June 30,
1997, there were options and warrants  outstanding to purchase  2,951,067 common
shares at prices  ranging  from  $0.2391 to $5.50 per share,  and 7,945 Series F
shares which can convert into as many as 17,655,556 common shares

NOTE 2 - SYSTEMS AND SOFTWARE COSTS

Historically,   the  Company  has  marketed   products  that  typically  require
substantial   customization   in  order  to  meet  the   customers'   particular
requirements.  During  1996,  the Company  changed its  strategy  and decided to
design  products in a modular  fashion.  The modules  will  consist of a primary
product with optional  pre-developed  modules and a configuration  layer to meet
specific  customer needs that would require limited or no  customization  by the
Company.  The  implementation  of this  project  will  afford  the  Company  the
opportunity to use the same development tool (high level  programming  language)
for each module,  thus providing a certain degree of consistency  and efficiency
in the product  development  process.  Accordingly,  the Company  commenced  the
development of this new product.

As of June 1997,  the Company had installed  limited  functionality  versions at
four different sites. These versions had fully functional  ticketing modules and
some additional  features,  but not all of the features  planned for the general
release  version.  

As of May 13, 1997 the Company had completed the general  release version of the
new general  admission  product and has since installed it at 10 sites including
all sites which had earlier versions. The development effort was then focused on
two  groups  of  applications  for the ski  industry.  The  first  group  of ski
applications  was  released  on  July  1,  1997,  and the  second  group  of ski
applications is scheduled for release on September 1, 1997.  Future  development
efforts will be focused on a reserved seating module which management expects to
release during the fourth quarter.

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


                                      -7-
<PAGE>



place when  updating  the  product to a new  revision  level.  As a result,  the
Company expects its new products to be more competitive in the market.

The Company estimates the cost of developing the new general admission  products
incorporating the modular concept will total approximately  $400,000 to $450,000
by the  third  quarter  of 1997.  In the  second  quarter  of 1997,  $94,000  of
development costs were incurred for the new general admission products, and this
entire amount was capitalized. Since inception, development costs incurred total
$317,000 of which $211,000 has been capitalized.

NOTE 3 -  AMORTIZATION

Amortization  Expense  for the six  months  ended  June  30,  1997  and 1996 was
$143,322  and  $1,343,614.  This  includes  a  write-down  at June  30,  1996 of
$1,075,000.  Because of certain strategic decisions described above, the Company
reviewed the valuation of the current  software cost in accordance  with the net
realizable value  determination  provisions under SFAS No. 86 "Computer Software
to be Sold,  Leased,  or  Otherwise  Marketed".  As a result,  a  write-down  of
$1,075,000  was  made to the  software's  carrying  value.  The  software's  net
carrying  value as adjusted of $401,060 at June 30, 1997 is expected to be fully
realized (recoverable) through future revenues.

NOTE 4 - NOTE RECEIVABLE-TRADE

In  connection  with an early sale of the  Company's  new  product,  the Company
accepted a note receivable from a customer in the amount of $144,856 with a term
of 3 years and  bearing  interest  at the rate of 10% per  annum.  Six months of
interest,  amounting  to $3,621 has been  accrued  bringing  the note balance to
$148,477.  Payments of  principal  and  interest  are to be made on December 31,
1997,  1998,  and  1999  in  the  amounts  of  $50,000,   $61,185,  and  $65,000
respectively.

NOTE 5  - PRODUCT COST LIABILITY (WARRANTY ALLOWANCE)

Management has reviewed  warranty costs incurred  within the past year, and as a
result has decided to provide for known and unknown  warranty costs by recording
a warranty  allowance at the time of sale. As of December 31, 1996,  the balance
of the warranty allowance account was a $570,919.  During the first two quarters
of 1997,  $60,929 was accrued as an  allowance,  and $97,910 was spent for these
enhancements  and  subsequently  charged  against  this  allowance.   Management
believes  the  allowance  of  $533,938  as of June  30,  1997 is a  conservative
estimate  of these costs but will  continue  to monitor  them to ensure they are
provided  for on a  current  basis in order to match  the cost  with  associated
revenue.

NOTE 6 - LEGAL PROCEEDINGS

The Company's  founder and former  President and Chief  Executive  Officer,  has
commenced  an action  against the  Company in Florida  state  court.  The former
president alleges,  among other things,  that he was wrongfully  terminated from
his employment and seeks damages which in the aggregate could exceed $1,000,000.
The  Company  believes  that the former  president's  suit is without  merit and
intends to vigorously defend the action.  There have been no significant changes
regarding this action since 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

                                      -8-
<PAGE>



inflated price and then cover the short  position with shares from  shareholders
who had been secretly  released from "lock-up"  agreements.  With respect to the
Company,  the Complaint  alleges that it failed to disclose in its  Registration
Statement that prior to the date the offering became effective,  Sterling Foster
had secretly agreed to release certain shareholders from"lock-up" agreements for
the purpose of selling their shares to Sterling  Foster at reduced  prices.  The
Plaintiffs  claims allege that the Company violated Sections 11 and 12(2) of the
Securities Act of 1933,  Sections  10(b) of the Securities  Exchange Act of 1934
and Rule  10b-5  promulgated  thereunder,  Section  349 of the New York  General
Business Law; and negligent misrepresentation.  The Company believes that it has
defenses to these claims and intends to vigorously defend itself in this action.

Derek Betty and James Potter have instituted  actions  against the Company.  The
first action is entitled  Derek Betty v.  Lasergate  Systems,  Inc.  ("the Betty
Action") and the second action is entitled  James Potter v.  Lasergate  Systems,
Inc. and 1103065 Ontario,  Inc. ("the Potter Action").  Both actions are pending
in the Circuit Court of the Sixth Judicial  Circuit in and for Pinellas  County,
Florida.  The Betty Action  alleges that the Company has failed to return shares
of the Company's  stock which are being held in escrow  pursuant to a Collateral
Stock Pledge Agreement executed in connection with the sale of Delta Information
Services,  Inc. ("Delta") to the Company. The Betty Action also alleges a breach
of the terms and  conditions of a Registration  Rights and Put Option  Agreement
executed in connection  with the sale of Delta to the Company.  The Betty Action
seeks  damages  in an amount in excess  of  $15,000,  which is the  jurisdiction
amount,  but it is anticipated  that damages could be in excess of $25,000.  The
Potter  Action also alleges a breach of the  Registration  Rights and Put Option
Agreement.  Moreover,  the Potter Action includes  allegations  concerning James
Potter's Consulting Agreement with the Company and a Non-Compete Agreement.  The
Potter  Action seeks a  declaratory  judgment  determining  that the Company and
1103065  Ontario,  Inc.  ("Ontario")  are in material  breach of the Non-Compete
Agreement  and that Potter is relieved of all  obligations  to perform under the
Non-Compete  Agreement.  The  Company has moved to dismiss  both  actions and to
compel  arbitration  pursuant to an arbitration  provision in the Stock Purchase
Agreement  relating to the acquisition of Delta.  The Company's motion to compel
arbitration with regard to the Betty Action was granted on May 2, 1997, and with
regard to the Potter  Action on May 14,  1997.  On June 13,  1997,  the  Company
initiated an  arbitration  proceeding  against  Derek Betty and James and Marion
Potter  claiming   misrepresentation  in  connection  with  the  Stock  Purchase
Agreement  which  was  executed  in  connection  with  the  sale of Delta to the
Company.  The Company seeks  damages in the amount of $200,000.  The Company has
succeeded in  consolidating  all three  arbitration  proceedings  and intends to
vigorously  pursue  damages  while  defending the claims of the Potter and Betty
actions.

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




                                       -9-

<PAGE>



NOTE 7 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

                                                             Six Months Ended
                                                             ----------------
INTEREST AND INCOME TAXES PAID:                            1997            1996
                                                         -------         -------
      Interest                                           $ 1,534         $29,359
      Income Taxes                                             0               0

NON-CASH INVESTING AND FINANCING ACTIVITIES:

      1996 and 1997:    None.





                                      -10-

<PAGE>



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

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

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

RESULTS OF OPERATIONS

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

REVENUES:

Revenues were  $1,025,888 and $1,103,940 for the second quarter of 1997 and 1996
respectively,  representing  a decrease of $78,052 or 7%. Revenue for the second
quarter of 1996  included an additional  two sales of the new general  admission
product to World of Coca Cola and Regal Cinemas totaling  $209,000 plus $642,000
of revenue  recognized on a large contract with American Skiing Company based on
the percentage  completion method.  This contract and the additions to it have a
total revenue value of $2,397,000.  As of August 15, 1997, the remaining portion
of these orders amounts to $1,755,000.  Management  expects this installation to
be substantially complete by September 30, 1997.

Maintenance  revenues  represented  11% of total  revenues for each of the three
month periods ended June 30, 1997 and June 30, 1996.

COST OF REVENUES:

Cost of revenues were $947,766 and $1,040,161 for the second quarter of 1997 and
1996  respectively,  representing a decrease of $92,395,  or 9% due primarily to
lower revenues.  Cost of revenues  represented 92% of revenues during the second
quarter of 1997 as compared to 94% during the second quarter of 1996.

DEVELOPMENT COSTS:

Development  costs were $77,048 and $129,533 for the second  quarter of 1997 and
1996  respectively,  representing  a decrease of $52,485,  or 41% .  Development
costs for the second quarter of 1997 do not include $94,000 of capitalized costs
related  to the  new  product  or  $55,000  of  costs  charged  to the  warranty
allowance.  Development  costs for the  second  quarter  of 1996 do not  include
$78,000 of costs charged to the warranty  allowance.  With the addition of these
amounts,  costs have  increased  $18,515  between  years.  This  represents a 9%
increase,  which is  primarily  due to an increase in the number of employees on
the development staff. Assuming the Company can secure additional funding within
the next few months,  the Company  expects to  continue  development  efforts at
approximately  the same level for the remainder of 1997 with the majority of the
development  effort  focused  on its new  modular  products  (see  Note 2 to the
Financial Statements).



                                      -11-

<PAGE>




SELLING, GENERAL AND ADMINISTRATIVE:

Selling,  general and  administrative  expenses were $796,831 and $2,870,100 for
the second quarter of 1997 and 1996  respectively,  representing a $2,073,269 or
72% decrease.  These amounts represent 97% and 260% of revenues in 1997 and 1996
respectively.  The decrease is  attributable  to a number of expenses  from 1996
that did not reoccur in 1997.  First,  capitalized  software  was  written  down
$1,075,000 at June 30, 1996 due to the development of a replacement product (see
Notes 2 and 3 to the financial  statements).  There were no  write-downs  of any
assets  during 1997.  Other  components  of the decrease from year to year are a
decrease  of $365,000  due to a provision  for  incentive  compensation  for the
executive  group  and  managers  in 1996 and a  decrease  of  $225,000  due to a
provision for contingent legal settlements in 1996. No such provisions were made
in 1997.  Other  components  of the  decrease  include  decreases of $107,000 in
investor  relations  expenses,  $34,000 in accounting and auditing  expenses and
$91,000 in legal  expenses.  These are primarily due to the costs of the private
placements of Preferred Stock of the Company during 1996.

Net loss  decreased  to $788,878  ($.11) a share for the second  quarter of 1997
from $2,989,255 ($.60) a share for the second quarter of 1996. The components of
the decrease in the Company's net loss are explained above.

SIX MONTHS ENDED JUNE 30, 1997 VERSUS SIX MONTHS ENDED JUNE 30, 1996

REVENUES:

Revenues were  $2,304,464  and $2,569,929 for the six months ended June 30, 1997
and 1996  respectively,  representing a decrease of $265,465 or 10%. Revenue for
the first half of 1997 includes seven sales of the new general admission product
to several  well-known  customers  including  the Art  Gallery  of  Ontario  and
Blackpool Pleasure Beach totaling $1,149,000 plus $642,000 of revenue recognized
on a large  contract  with  American  Skiing  Company  based  on the  percentage
completion  method.  Management  expects this  installation to be  substantially
complete by September 30, 1997.

Maintenance  revenues  represented  9% and 11% of total  revenues  for the three
months ended June 30, 1997 and June 30, 1996,  respectively.  This was primarily
due to less customers  accepting  maintenance  contracts on the legacy products.
This  trend  appears to be  reversing  now that  sales of the new  products  are
exceeding sales of the legacy products.

COST OF REVENUES:

Cost of revenues were  $1,801,066  and  $1,792,051 for the six months ended June
30, 1997 and 1996  respectively,  representing an increase of $9,015 or 1%. As a
percentage of revenues,  cost of revenues  increased to 78% from 70% for the six
months ended June 30, 1997. This was primarily due to increased costs associated
with early installations of the new general admission product.

DEVELOPMENT COSTS:

Development  costs were  $209,685 and $156,209 for the six months ended June 30,
1997 and  1996  respectively,  representing  an  increase  of  $53,476,  or 34%.
Development costs for the six months ended June 30, 1997 do not include $186,000
of  capitalized  costs  related to the new products (see Note 2 to the Financial
Statements) or $95,000 of costs charged to the warranty  allowance.  Development
costs for the six months  ended June 30, 1996 do not  include  $281,000 of costs
charged to the warranty  allowance.  With the addition of these  amounts,  costs
have increased $53,476 between years.  This represents a 12% increase,  which is
primarily  due to an  increase  in the number of  employees  on the  development
staff.

SELLING, GENERAL  AND ADMINISTRATIVE:

Selling,  general and administrative expenses were $1,663,914 and $3,733,911 for
the six  months  ended  June  30,  1997 and 1996  respectively,  representing  a
$2,069,997 or 55% decrease.  These amounts represent 79% of revenues in 1997 


                                      -12-

<PAGE>


and 145% of  revenues  in 1996.  The  decrease  is  attributable  to a number of
expenses from 1996 that did not reoccur in 1997. First, capitalized software was
written down $1,075,000 at June 30, 1996 due to the development of a replacement
product  (see  Notes  2  and 3 to  the  financial  statements).  There  were  no
write-downs  of any assets  during 1997.  Other  components of the decrease from
year to year  are a  decrease  of  $365,000  due to a  provision  for  incentive
compensation  for the  executive  group and managers in 1996,  and a decrease of
$225,000 due to a provision for  contingent  legal  settlements in 1996. No such
provisions were made in 1997. Other components of the decrease include decreases
of $131,000 in investor relations  expenses,  $44,000 in accounting and auditing
expenses, and $52,000 in legal expenses. These are primarily due to the costs of
the private placements of Preferred Stock of the Company during 1996.

Net loss  decreased to  $1,351,676  ($.18) a share for the six months ended June
30, 1997 from $3,153,210  ($.67) a share for the six months ended June 30, 1996.
The components of the decrease in the Company's net loss are explained above.

The FASB has  issued  Statement  of  Financial  Accounting  Standards  No.  128,
Earnings per Share,  which is effective  for financial  statements  issued after
December 15, 1997. Early adoption of the new standard is not permitted.  The new
standard  eliminates  primary and fully diluted  earnings per share and requires
presentation of basic and diluted earnings per share together with disclosure of
how the per share  amounts were  computed.  The adoption of this new standard is
not expected to have a material  impact on the  disclosure of earnings per share
in the  financial  statements.  The effect of adopting this new standard has not
been determined.

LIQUIDITY AND CAPITAL RESOURCES

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

   
For the six months ended June 30, 1997,  the Company used  $1,504,373 of cash in
operating  activities and incurred a loss of  $1,351,676.  From its inception in
March 1985 through June 30, 1997, the Company has incurred a cumulative  loss of
$18,134,994.  In recent years the Company has relied upon  proceeds from private
and public placements and loans in order to fund its operations.
    


The Company is presently  seeking one or more potential  strategic  partners who
can complement the Company's  marketing and development efforts and increase its
financial  stability.  As part of any  arrangement,  the Company would require a
capital  infusion in the Company which could result in a further dilution of the
present shareholders' equity interests. Management believes this is necessary in
order to continue increasing revenue each year. Moreover,  if a capital infusion
is not made by a potential  strategic  partner,  alternative  financing  will be
required by the Company prior to year-end to even  continue  operations at their
current  level.  The ability to obtain,  as well as the costs of obtaining,  any
such capital or credit are uncertain at this time.

In order to procure the  contract  with  American  Skiing  Company,  the Company
decided to accept a lower gross profit  percentage than it normally  receives on
smaller  contracts.  This was the primary  cause of the  increase in the cost of
revenue  percentage (cost of revenue as a percentage of revenue) from 67% in the
first  quarter of 1997 to 92% in the second  quarter of 1997. A secondary  cause
was lower than expected margins on maintenance revenue.

Since the Company does not purchase  components  for its products until an order
is received,  there is  typically a backlog of orders for  systems.  The Company
defines  backlog as a signed contract or customer's  purchase  order,  typically
with some type of financial assurance such as a deposit. As of June 30, 1997 and
December  31, 1996,  the  Company's  backlog was  approximately  $1,614,000  and
$963,000, respectively.


During the first half of 1997, accounts receivable  decreased $155,327 primarily
due to increased collection efforts and inventory decreased $127,829 due to more
efficient  management and fewer  installations being in process at June 30, 1997
than at December 31, 1996.  Accounts payable increased $172,794 primarily due to
the extension


                                      -13-

<PAGE>




of payment terms by several  professional  service firms,  and accrued  expenses
decreased  $153,605  primarily  due to the payment of accrued  payroll,  payroll
taxes and other expenses which were accrued at year end. The decrease in accrued
payroll and payroll  taxes arose  because  payroll is payable on the last day of
each month,  but near year-end the Company changed its payroll service  provider
and the new  provider  did not charge the  Company  for the  December  31,  1996
payroll until January 2, 1997. At December 31, 1996 accrued  payroll and payroll
taxes were $210,000 and at June 30, 1997 accrued  payroll and payroll taxes were
$9,656. All other accounts payable and accrued expenses increased $46,536 during
1997.

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

The Company estimates the cost of developing the new general admission  products
incorporating the modular concept will total approximately  $400,000 to $450,000
by the third  quarter  of 1997.  In the first six  months of 1997,  $186,000  of
development costs were incurred,  and this entire amount was capitalized.  Since
inception,  development costs incurred total $317,000 of which $211,000 has been
capitalized.

Warranty  costs accrued during the first half of 1997 were $60,929 and the value
of warranty work  performed was $97,910.  Management  continues to monitor these
costs to  ensure  that  sufficient  provisions  have been  recorded  in order to
reasonably  match these costs with the associated  revenues as well as to ensure
that this work is performed as efficiently as possible.

Although no  assurance  can be given,  management  believes  that,  assuming the
Company is able to secure additional  financing within the next few months,  the
recent  on-schedule  product launch of the new Admits general  admission product
will enable the Company to achieve an  increase in revenues  and a reduction  of
the  operating  loss by the  end of 1997  and  lay  the  foundation  for  future
profitability.  The foregoing is a forward-looking  statement and actual results
may differ  materially based upon certain risk factors.  These impacting factors
include the risk of not  obtaining  sufficient  financing in the next few months
which would materially  impact the Company's  ability to continue  operations at
their  current  levels.  These  factors  also  include,  but are not  limited to
customer  acceptance,  technological  change,  employee  turnover,  third  party
development schedules, installation schedules, and litigation.


                                      -14-

<PAGE>






                                    SIGNATURE

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: February 13, 1998                      /s/Philip P. Signore
                                             ---------------------------
                                             PHILIP P. SIGNORE
                                             Vice President and
                                             Chief Financial officer
    




                                      -15-