SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   FORM 10-QSB
(Mark One)

(X)      QUARTERLY REPORT UNDER 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   0-22341

                              AUGMENT SYSTEMS, INC.
                              ---------------------
             (Exact name of registrant as specified in its charter)

           Delaware                                             04-3089539
           --------                                             ----------
(State or other jurisdiction of                             (I. R. S. Employer
 incorporation or organization)                             Identification No.)

     2 ROBBINS ROAD WESTFORD, MA                                     01886
     ---------------------------                                     -----
(Address of principal executive offices)                          (Zip Code)

                                  508-392-8626
                                  ------------
              (Registrant's telephone number, including area code)

Transitional Small Business Disclosure Format:

         Yes               No     X
               -------         -------

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirement for the past 90 days.

         YES               NO     X
               -------        ---------

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
Stock, as of the latest practicable date: As of August 15, 1997,

             Class                                Outstanding at August 15, 1997
             -----                                ------------------------------
Common Stock, $.01 par value per share                        4,713,739






                              AUGMENT SYSTEMS, INC.

                                      INDEX


                                                                           PAGES

PART I              FINANCIAL INFORMATION

       Item 1           Financial Statements

                        Balance Sheets as of June 30, 1997
                            and December 31, 1996                              3

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

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

                        Notes to Financial Statements                        6-7

       Item 2           Management's Discussion and Analysis of
                          Financial Condition and Results of Operations      8-9

PART II             OTHER INFORMATION

       Item 1           Legal Proceedings                                     10
       Item 2           Changes in Securities                                 10
       Item 3           Defaults Upon Senior Securities                       10
       Item 4           Submission of  Matters to a Vote of Security-Holders  10
       Item 5           Other Information                                     10
       Item 6           Exhibits and Reports or Form 8-K                      10

       Signatures                                                             11





                                 BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                    JUNE 30,         DECEMBER 31,
                                                                      1997               1996
                                                                ----------------   ----------------
<S>                                                             <C>                <C> 
                                     ASSETS

Current Assets:
    Cash                                                        $      2,688,391   $        452,753
    Accounts Receivable                                                  513,761   $           -
    Inventories                                                        1,644,932            589,351
    Prepaid expenses                                                     115,700             97,500
                                                                ----------------   ----------------               
          Total current assets                                         4,962,784          1,139,604
Property and equipment, net                                              329,199            348,889
Deferred financing costs, net                                               -               176,815
Other assets                                                              13,745             13,745
                                                                ----------------   ----------------    
          Total assets                                          $      5,305,728   $      1,679,053
                                                                ================   ================

                      LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
    Accounts payable                                            $      1,089,862   $        601,274
    Accrued expenses                                                      91,796            196,104
    Short term promissory notes                                          400,000          1,051,248
    Short term advance                                                      -               575,000
    Deposits from Customers                                               22,951
    Current portion of capital lease obligations                          19,395             19,013
                                                                ----------------   ---------------- 
          Total current liabilities                                    1,624,005          2,442,639
Convertible promissory notes                                              41,495             62,248
Capital lease obligations, less current portion                           17,938             27,530
Deferred Revenue                                                          22,125
                                                                ----------------   ----------------
          Total liabilities                                            1,705,563          2,532,417
                                                                ----------------   ----------------
Commitments
Stockholders' deficit:
    Common stock, $.01 par value;  30,000,000 shares  authorized; 
      4,713,319 and 2,865,512 shares issued and outstanding at
      June 30, 1997 and December 31, 1996, respectively                   47,133             28,655
    Additional paid-in capital                                        13,874,710          6,177,194
    Accumulated Deficit                                              (10,321,678)        (7,059,213)
                                                                ----------------   ----------------              
          Total stockholders' deficit                                  3,600,165           (853,364)
                                                                ----------------   ----------------               
          Total liabilities and stockholders' deficit           $      5,305,728   $      1,679,053
                                                                ================   ================               

</TABLE>

The accompanying notes are an integral part of the financial statements.

                                       -3-







                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                          THREE MONTHS ENDED                     SIX MONTHS ENDED
                                                               JUNE 30,                              JUNE 30,
                                                         1997           1996                   1997           1996
                                                     -----------     -----------           -----------     -----------  
<S>                                                  <C>             <C>                   <C>             <C> 
Sales                                                $   567,223     $     --              $   567,223     $     --     
Cost of sales                                            247,481           --                  247,481           --
                                                     -----------                           -----------
Gross margin                                             319,742           --                  319,742           --
Operating expenses:
         Research and development                        662,873         383,809             1,126,920         515,151
         General and administrative                      580,160         255,873             1,069,298         411,047
         Sales and marketing                             700,400           --                1,242,087           --
                                                     -----------     -----------           -----------     -----------  
  
                Total cost and expenses              $ 1,943,433     $   639,682           $ 3,438,305     $   926,198
                                                     -----------     -----------           -----------     -----------   
Loss from operations                                 $(1,623,691)    $  (639,682)          $ 3,118,563     $   926,198
                                                     -----------     -----------           -----------     -----------      

Other expense:
         Net interest expense                        $    49,771     $    36,272           $   143,902     $    51,343
                                                     -----------     -----------           -----------     -----------      
                Total other expense, net             $    49,771     $    36,272           $   143,902     $    51,343
                                                     -----------     -----------           -----------     -----------   
Net loss                                             $(1,673,462)    $  (675,954)          $(3,262,465)    $  (977,541)
                                                     ===========     ===========           ===========     ===========   


Net loss per common share                                  (0.43)          (0.54)                (0.96)          (0.84)
                                                     ===========     ===========           ===========     ===========   

Weighted average common and common                     3,902,330       1,241,262             3,410,557       1,166,627
                                                     ===========     ===========           ===========     ===========   
         equivalent shares outstanding
</TABLE>

The accompanying notes are an integral part of the financial statements.

                                       -4-






<TABLE>
<CAPTION>
                             STATEMENTS OF CASH FLOW

                                                                            SIX MONTHS ENDED
                                                                       JUNE 30,          JUNE 30,
                                                                         1997              1996
                                                                      ----------        ----------
<S>                                                                   <C>               <C>
Cash flows from operating activities:
         Net loss                                                     (3,262,465)         (977,541)
         Adjustments to reconcile net loss to net cash
            used in operating activities:
             Depreciation and amortization                                42,033            55,083
         (Increase) decrease in operating assets and liabilities:
             Prepaid expenses                                            (18,200)         (107,300)
             Accounts receivable                                        (513,761)             --
             Inventory                                                (1,055,581)           (6,822)
             Other assets                                                   --              (1,934)
             Accounts payable                                            488,588            74,793
             Accrued expenses                                           (104,308)          216,142
                                                                      ----------        ----------
                  Net cash used in operating activities               (4,423,694)         (747,579)
                                                                      ----------        ----------

Cash flows from investing activities:
         Purchase of property and equipment                               57,493           182,463
                                                                      ----------        ----------
                  Net cash used for investing activities                  57,493           182,463
                                                                      ----------        ----------

Cash flows from financing activities:
         Proceeds from issuance of common stock                        8,985,240         1,054,862
         Proceeds from issuance of convertible promissory notes             --             791,662
         Proceeds from noninterest bearing loans from stock-
         holders                                                            --               3,392
         Proceeds from issuance of short-term promissory notes         2,775,000              --
         Repayment of short-term advance                                (575,000)             --
         Payments on capital lease obligations                            (9,210)             (739)
         Payments on short-term promissory notes                      (3,585,000)         (150,000)
         Payment on long-term convertible promissory notes               (20,753)             --
         Interest on short-term promissory notes                        (137,283)             --
         Purchase of treasury stock                                         --              (7,000)
         Deferred financing costs                                       (716,170)         (114,971)
                                                                      ----------        ----------
                  Net cash provided by financing activities            6,716,825         1,577,206
                                                                      ----------        ----------
Net increase (decrease) in cash                                        2,235,638           647,164
Cash at beginning of period                                              452,753           242,734     
                                                                      ----------        ----------   
Cash at end of period                                                  2,688,391           889,898
                                                                      ==========        ==========

</TABLE>

The accompanying notes are an integral part of the financial statements.

                                       -5-





                              AUGMENT SYSTEMS, INC.

                           NOTES TO FINANCIAL STATEMENTS

                                  JUNE 30, 1997

1. NATURE OF BUSINESS AND BASIS OF PRESENTATION

In fiscal year 1996, and for the first three months of fiscal year 1997, Augment
Systems,  Inc. (the  "Company"),  formerly Augment Systems  Incorporated,  was a
development  stage  company  engaged in the development of high-end super server
products  designed  to move large image and text files  rapidly and  efficiently
over computer networks.  The Company's initial target markets are the electronic
publishing  industry  and the  Internet/Intranet  market.  The Company  plans to
introduce in 1997 a Windows  NT-based super server  targeted to meet the growing
demand for Windows  NT-based high performance  Internet/Intranet  World Wide Web
servers and a super server system  designed to support  multi-platform  networks
comprised of Macintosh, Windows NT and UNIX-based workstations.

The accompanying unaudited financial statements are presented in accordance with
the requirements for Form 10-QSB and do not include all the disclosures required
by generally accepted accounting  principles for complete financial  statements.
Reference  should be made to the  Company's  Prospectus  for its initial  public
offering declared effective on May 12, 1997 for additional disclosures including
a summary of the Company's accounting policies.

In the opinion of management of the Company,  the financial  statements  include
all adjustments,  consisting of only normal recurring accruals,  necessary for a
fair presentation of the financial position of Augment Systems, Inc. The results
of  operations  for the three and six month  periods  ended June 30, 1997 or any
other  interim  period,  are not  necessarily  indicative  of the  results to be
expected for the full year.



2.   NET LOSS PER SHARE OF COMMON STOCK

In February  1997,  the  Financial  Accounting  Standards  Board  (FASB)  issued
Statement  of  Financial  Accounting  Standards  (SFAS) No. 128,  "Earnings  per
Share,"  which the  Company is  required  to adopt for both  interim  and annual
periods ending after December 15, 1997. SFAS No. 128 simplifies the earnings per
share ("EPS")  calculation by replacing primary EPS with basic EPS. Basic EPS is
computed by dividing  reported  earnings  available  to common  stockholders  by
weighted average shares outstanding.  Fully-diluted EPS, now called diluted EPS,
is still required. Early application is prohibited, although footnote disclosure
of proforma EPS amounts computed is required. Under SFAS 128, proforma basic EPS
and  diluted EPS for the six months  ended June 30, 1997 would not have  changed
from the amount reported. All other EPS amounts for the periods presented remain
the same.  Common  stock  equivalents  issued prior to this period have not been
included since their effect would be anti-dilutive.



3.    STOCKHOLDERS EQUITY

In April 1997, the Board of Directors  declared a  three-for-four  reverse stock
split of the Company's Common Stock. All Common Stock and per share  information
discussed  in the  financial  statements  and notes have been  adjusted  to give
effect for this stock split.

On May 16, 1997, the Company  completed its initial public offering of 1,800,000
shares  of its  Common  Stock  at a price  of  $5.50  per  share  and  2,070,000
Redeemable Common Stock Purchase  Warrants at $.15 per warrant.  Each Redeemable
Common  Stock  Purchase  Warrant  entitles  the holder to purchase  one share of
Common Stock for $6.60 during the four year period  commencing May 12, 1998. The
net proceeds from


                                       -6-




the Company's initial public offering,  after deducting  underwriting  discounts
and commissions and estimated expenses payable by the Company were approximately
$8,484,000.

In May 1997,  certain warrant holders agreed to the  cancellation of warrants to
purchase  235,878  shares of Common Stock issued in  connection  with Short Term
Promissory   Notes  issued   between   November  1996  and  February   1997.  No
consideration was given in connection with the cancellation of these warrants.



4.   SHORT-TERM PROMISSORY NOTES

In April  1997,  the  Company  issued to  Venture  Management  Consultants,  LLC
("Venture  Management"),  of which Fred L. Chanowski, a director of the Company,
is a 20%  member,  a  promissory  note in the  principal  amount of  $200,000 in
consideration for $200,000.  The promissory note bears interest at 18% per annum
with interest and principal  payable at maturity on May 31, 1998.  The principal
balance of this note was repaid in August 1997.

In May 1997, the Company issued to Venture  Management a promissory  note in the
principal amount of $200,000 in consideration for $200,000.  The promissory note
bears interest at 18% per annum with interest and principal  payable at maturity
on June 30, 1998. The principal balance of this note was repaid in August 1997.



5.   SUBSEQUENT EVENTS

In July 1997,  the Company  obtained a  $3,000,000  working  line of credit from
Fleet National Bank. Borrowings on the facility will bear interest at prime plus
 .50%.  Borrowings are limited to 75% of eligible domestic  accounts  receivable,
and are secured by all assets of the Company.


                                       -7-




                              AUGMENT SYSTEMS, INC.

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS

THREE AND SIX MONTH  PERIOD  ENDED JUNE 30,  1997  COMPARED TO THE THREE AND SIX
                        MONTH PERIOD ENDED JUNE 30, 1996


INTRODUCTION

Since October 1995 and through March 1997,  the Company had been  operating as a
development  stage  company and had been  engaged  principally  in research  and
development,  recruitment of personnel and financing activities. The Company had
engaged in limited  marketing  activities and did not commence  shipments of its
initial  products,  which are  high-end  Macintosh-based  super  servers,  until
February  1997.  During the second  quarter  ended June 30,  1997,  the  Company
commenced  commercial  shipment  of its server  product and  recognized  initial
product revenue in April 1997.

The initial  target  market for the  Company's  super  server is the  electronic
publishing  industry,  both for the creation and preparation of printed material
(prepress) and for  electronic  publishing  via the  Internet/Intranet.  Each of
these markets requires the rapid and efficient  movement of large image and data
files over  networks.  During  1997,  the Company  plans to  introduce a Windows
NT-based server targeted to meet the growing demand for high performance Windows
NT-based  Internet/Intranet  WEB  servers.  Additionally,  the Company  plans to
introduce a super server  system  designed to support a  multi-platform  network
comprised of Macintosh, Windows NT and UNIX-based workstations.

RESULTS OF OPERATION

During the three  months  ended June 30, 1997,  the Company  recognized  initial
product  revenues of $567,223.  Gross product margins on product sales were 56%.
The  Company  anticipates  increased  revenues  for the balance of 1997 with the
continued  development  of its sales  channels.  Gross product  margins may vary
slightly with the distribution of products into OEM's, third party resellers and
end users.  Prior to the second  quarter ended June 30, 1997,  the Company was a
development stage company and had not recognized revenues.

The Company  recognized a net loss of $1,673,462 and  $3,262,465,  respectively,
for the three and six month  periods  ended  June 30,  1997 as  compared  to net
losses of $675,954 and  $977,541  for the same periods in 1996. The increases in
net loss of  $997,508  and  $2,284,924  for the  three  and six  month  periods,
respectively,  are attributable primarily to an increase in personnel to support
research and development,  sales and marketing and administration.  In addition,
the Company increased the level of spending to support  engineering  development
of its server products,  began a marketing program consisting of attending trade
shows and  distributing  promotional  sales  material  and began to  establish a
worldwide sales organization.

Research and  development  costs for the three and six month  periods ended June
30, 1997 were  $662,873 and  $1,126,920 as compared to $383,809 and $515,151 for
the same periods in 1996. The $279,064 and $611,769  increases for the three and
six month  periods,  respectively,  are  attributable  primarily  to  additional
engineering  personnel  and  increased use of  consultants  associated  with the
development of the Company's server product. The Company also increased spending
for  associated  engineering  supplies  and  prototype  materials  used  in  the
development of its server  product.  The Company  anticipates  that research and
development  costs will  continue  to  increase  through  the balance of 1997 as
compared to comparable  periods in 1996. These costs are expected to be incurred
in connection with the development of additional  products to support Windows NT
and Unix platforms.


General and administrative  costs for the three and six month periods ended June
30, 1997 were  $580,160 and  $1,069,298 as compared to $255,873 and $411,047 for
the same periods in 1996. The $324,287 and $658,251  increases for the three and
six month periods, respectively, are primarily attributable to additional


                                       -8-





administrative  support,  increased  spending for outside  legal and  accounting
support and other normal operating expenses.

Selling and  marketing  costs for the three and six month periods ended June 30,
1997 were $700,400 and $1,242,087.  The $541,687  increase is attributable to an
increase in  marketing  support and sales  personnel,  participation  in various
trade shows and increased  spending on sales promotional  material.  The Company
anticipates  that  selling  and  marketing  expenses  will  continue to increase
through the balance of 1997 as the Company  develops its sales and  distribution
channels and expands its marketing efforts.

The Company currently has 50 full-time employees and 12 independent  contractors
and plans to hire an  additional  50 full-time  employees in various  capacities
over the next 12 months.  Additional  personnel may be required depending on the
level of  business  activity.  The Company  expects,  however,  to continue  its
current  practice of utilizing  independent  consultants  on an as-needed  basis
rather than exclusively hiring additional full time employees.

LIQUIDITY AND CAPITAL RESOURCES

The Company has funded its  operations  since  October 1995  principally  from a
combination of debt and equity financings  totaling  approximately  $18,280,000.
From October 1995 through April 1996, the Company issued convertible  promissory
notes in the aggregate principal amount of approximately $864,000. Approximately
$802,000 of the  principal  balance of these notes plus  accrued  interest  were
converted into shares of Common Stock in November 1996 at a conversion  price of
$4.00 per share.  In December 1996 and February  1997,  the Company raised gross
proceeds of  $3,585,000 in a private  placement of  promissory  notes and common
stock purchase  warrants.  The  promissory  notes,  bearing  interest at 12% per
annum,  were  repaid  from the  proceeds  of its  initial  public  offering.  In
addition,  from September 1995 through August 1996, the Company issued 1,653,623
shares of its Common Stock for  approximately  $3,372,000 in gross proceeds.  In
each of April  1997  and May  1997 the  Company  issued  to  Venture  Management
Consultants,  LLC, of which Fred Chanowski,  a director of the Company, is a 20%
member,  a promissory note in the principal  amount of $200,000 in consideration
for  $200,000.  The  promissory  notes both bear  interest at 18% per annum with
interest  and  principal  payable at maturity on May 31, 1998 and June 30, 1998,
respectively. The principal balance of these notes was repaid in August 1997.

On May 16, 1997, the Company  completed its initial public offering of 1,800,000
shares  of its  Common  Stock  at a price  of  $5.50  per  share  and  2,070,000
Redeemable Common Stock Purchase  Warrants at $.15 per warrant.  Each Redeemable
Common  Stock  Purchase  Warrant  entitles  the holder to purchase  one share of
Common Stock for $6.60 during the four year period  commencing May 12, 1998. The
net  proceeds  from the  Company's  initial  public  offering,  after  deducting
underwriting  discounts and  commissions and estimated  expenses  payable by the
Company were approximately $8,484,000. The net proceeds of the Company's initial
public offering plus cash  anticipated to be generated from operations and funds
available under the Company's line of credit, are expected to meet the Company's
funding  needs to achieve its  objectives  and growth  strategy for at least the
next 12 months.

In July 1997,  the Company  obtained a  $3,000,000  working  line of credit from
Fleet National Bank. Borrowings on the facility will bear interest at prime plus
 .50%. Borrowings are limited to 75% of eligible domestic accounts receivable and
are secured by all assets of the Company.

As a result of the  Company's  recurring  losses,  the  Company's  auditors have
expressed  substantial  doubt about the Company's ability to continue as a going
concern.  The accompanying  financial  statements do not include any adjustments
relating to the recovery and  classification  of recorded  asset  amounts or the
amounts and  classifications  of liabilities  that might be necessary should the
Company be unable to continue as a going concern.

FORWARD LOOKING STATEMENTS

This report  contains  forward-looking  statements  that  describe the Company's
business prospects.  These statements involve risks and uncertainties including,
but not limited to, rapid technology changes,  regulatory uncertainty,  level of
demand for the Company's  products and services,  product  acceptance,  industry
wide competitive  factors,  timing of completion of major equipment projects and
political, economic or other conditions.  Furthermore, market trends are subject
to changes which could adversely affect future results. Reference should be made
to the Company's  Prospectus for its initial public offering declared  effective
on May 12, 1997 for additional discussion concerning such risk factors.


                                       -9-




                           PART II. OTHER INFORMATION



ITEM 1.           LEGAL PROCEEDINGS
                  In November  1996 a lawsuit  was filed  against the Company in
                  Suffolk  Superior  Court   (Massachusetts)   by  an  executive
                  recruitment  agency  alleging a breach of contract and seeking
                  damages  in the  amount of  $50,000.  In  connection  with the
                  lawsuit,  one of the Company's bank accounts has been attached
                  in the  amount  of  $50,000  pending  the  resolution  of this
                  matter.

ITEM 2.           CHANGES IN SECURITIES
                  None

ITEM 3.           DEFAULTS UPON SENIOR SECURITIES
                  None

ITEM 4.           SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
                  None

ITEM 5.           OTHER INFORMATION
                  None

ITEM 6.           EXHIBITS AND REPORTS ON FORM 8-K

                  10.20 -  Loan Letter Agreement with Fleet Bank
                  
                  10.21 -  $3,000,000 Promissory Note issued to Fleet Bank


                                      -10-





                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.


                              AUGMENT SYSTEMS, INC.

Date: August 14, 1997                    By: /s/Lorrin G. Gale
                                             -----------------
                                             Lorrin G. Gale
                                             President & Chief Executive Officer
                                             (Principal Executive Officer)


Date: August 14, 1997                    By: /s/Duane A. Mayo
                                             ----------------
                                             Duane A. Mayo
                                             Chief Financial Officer,  Treasurer
                                             and Secretary  (Principal Financial
                                             & Accounting Officer)



                                      -11-