================================================================================

                       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, 1999

( )      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 small business issuer as specified in its charter)


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

 790 Turnpike Street North Andover, MA                           01845
----------------------------------------                      ----------
(Address of principal executive offices)                      (Zip Code)

                                  978-725-8156
              -----------------------------------------------------
              (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  X   NO
                                             ---     ---

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, 1999,


                  Class                              Outstanding at Aug 15, 1999
--------------------------------------               ---------------------------
Common Stock, $.01 par value per share                        11,898,952

================================================================================


<PAGE>


                              AUGMENT SYSTEMS, INC.

                                      INDEX
<TABLE>

                                                                                 PAGES
                                                                                 -----
<S>                                                                              <C>
PART I            FINANCIAL INFORMATION

         Item 1            Financial Statements

                           Balance Sheets as of December 31, 1998
                                     and June 30, 1999                              3

                           Results of Operations for the three months and
                             Six months ended June 30, 1999 and 1998                4

                           Statements of Cash Flows for the three months
                             and six months ended June 30, 1999 and 1998            5

                           Notes to Financial Statements                           6-8

         Item 2            Management's Discussion and Analysis of
                             Financial Condition and Results of Operations         9-11

PART II           OTHER INFORMATION

         Item 1            Legal Proceedings                                        12
         Item 2            Changes in Securities                                    12
         Item 3            Defaults Upon Senior Securities                          12
         Item 4            Submission of Matters to a Vote of Security-Holders      12
         Item 5            Other Information                                        12
         Item 6            Exhibits and Reports on Form 8-K                         12

         Signatures                                                                 13

</TABLE>


<PAGE>



                              AUGMENT SYSTEMS, INC.
                                 Balance Sheets
<TABLE>
<CAPTION>
                                                                                      June 30,            December 31,
                                                                                        1999                 1998
                                                                                        ----                 ----
                                                                                     (unaudited)

                                     ASSETS
<S>                                                                                 <C>                   <C>
Current Assets:
         Cash                                                                        $    103,683          $    187,815
         Accounts receivable, net of allowance
         for doubtful accounts of  $331,628                                                    -
         -    Inventory, net of allowance of $326,455                                                        -
         -
         Prepaid expenses                                                                   1,500                27,936
         Assets held for sale                                                               2,500                75,000
                                                                                     ------------          ------------

                  Total assets                                                       $    107,683         $     290,751
                                                                                     ============         =============

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:
         Accounts payable                                                            $     65,500          $    377,935
         Accrued expenses                                                                 135,000               182,012
         Bridge financing                                                               1,500,000             1,395,701
         Convertible promissory notes                                                       7,252                20,743
         Current portion of capital lease obligations                                      46,760               123,301
                                                                                     ------------          ------------
                  Total liabilities                                                     1,754,512             2,099,692

Commitments
Stockholders' Equity (deficit):
         Common stock, $.01 par value; 50,000,000 shares authorized; 11,898,951
         shares issued and outstanding at June 30, 1999, and December 31, 1998,
         respectively                                                                     118,989           118,989
         Additional paid-in capital                                                    21,750,867        21,750,867
         Accumulated deficit                                                          (23,516,685)       (23,678,797)
                                                                                      -------------------------------
                  Total stockholders' equity (deficit)                                 (1,646,829)          (1,808,941)
                                                                                     -------------         ------------
Total liabilities and stockholders' equity                                           $    107,683     $     290,751
                                                                                     =============     =============

</TABLE>

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


                                      -3-

<PAGE>



                              AUGMENT SYSTEMS, INC.
                            Statements of Operations
<TABLE>
<CAPTION>


                                                     Three Months Ended            Six Months Ended
                                                           June 30,                     June 30,
                                                     1999              1998      1999             1998
                                                     ----------------------      ---------------------
<S>                                              <C>            <C>            <C>           <C>
Sales                                             $  175,000     $   330,464    $  175,000    $  805,978
Cost of sales                                              -         140,356             -       369,755
                                                  ----------     -----------    ----------    ----------
Gross margin                                         175,000         190,108       175,000       436,223
Operating expenses:
         Research and development                          -         697,443             -     1,417,466
         General and administrative                   35,500         477,081       234,969       706,014
Sales and marketing                                        -         482,771             -     1,206,450
                                                  ----------      ----------    ----------     ---------
                  Total cost and expenses         $  139,500     $ 1,657,295    $  234,969   $ 3,329,930
                                                  ----------     -----------    -----------    ---------
Profit (loss) from operations                     $  139,500     $(1,467,187)   $  (59,969)  $(2,893,707)
                                                  ----------     ------------   -----------    ----------

Other income (expense):
         Net interest expense                     $   29,583     $    (2,244)   $  222,081   $   (26,187)
                                                  ----------     ------------   ----------   ------------
                  Total other expense, net        $   29,583     $    (2,244)   $  222,081   $   (26,187)
                                                  ----------     ------------   ----------   ------------

Net profit (loss)                                 $  169,083     $(1,469,431)   $  162,112   $(2,919,894)
                                                  ----------     ------------   ----------   ------------


Net profit (loss) per common share                       .01           (0.13)          .01         (0.28)

Weighted average common and common                11,898,952       11,485,824   11,898,952    10,318,545
equivalent shares outstanding

</TABLE>

                                      -4-

<PAGE>



                              AUGMENT SYSTEMS, INC.
                            Statements of Cash Flows

<TABLE>
<CAPTION>

                                                                            Six Months Ended
                                                                       June 30,         June 30,
                                                                         1999             1998
                                                                         ----             ----
<S>                                                                   <C>             <C>
Cash flows from operating activities:
         Net profit (loss)                                             162,112        (2,919,894)
Adjustments to reconcile net loss to net cash
             used in operating activities:
                  Depreciation and amortization                           --             136,516
         (Increase) decrease in operating assets and liabilities:
Accounts receivable                                                       --            (418,974)
                  Inventory                                               --             189,633
                  Other assets                                          98,936          (267,873)
                  Accounts payable                                    (312,435)       (1,164,041)
                  Accrued expenses                                    ( 32,745)         (626,698)
                                                                      ---------         ---------
                           Net cash used in operating activities      ( 84,132)       (5,071,331)
                                                                      ---------       -----------

Cash flows from investing activities:
         Purchase of property and equipment                                 --           (41,677)
                                                                      ---------       -----------
                           Net cash used for investing activities           --           (41,677)
                                                                      ---------       -----------

Cash flows from financing activities:
         Proceeds from issuance of common stock                             --         5,967,736
         Proceeds from issuance of short-term promissory notes              --               --
         Proceeds from bridge financing                                     --           500,000
         Repayment of bridge financing                                      --          (200,000)
                           Net cash provided by financing activities        --         6,267,736
                                                                      ---------        ----------
Net increase (decrease) in cash                                        (84,132)        1,154,728
                                                                      ---------        ----------
Cash at beginning of period                                            187,815            47,224
                                                                      ---------        ----------
Cash at end of period                                                  103,683         1,201,952
                                                                      ---------        ----------


</TABLE>

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

                                      -5-

<PAGE>



                              AUGMENT SYSTEMS, INC.

                           NOTES TO FINANCIAL STATEMENTS

                                  June 30, 1999

1. NATURE OF BUSINESS AND BASIS OF PRESENTATION

         Prior to January 15,  1999,  Augment  Systems,  Inc.,  (the  "Company")
designed,  developed and sold fibre  channel  based network file server  systems
designed to increase  data  transfer and file storage on computer  networks.  In
September 1998, the Company  obtained  $1,500,000 in bridge financing of secured
convertible promissory notes and common stock purchase warrants, in anticipation
of a private placement of the Company's Common Stock. The Company used a portion
of the proceeds of the bridge  financing to repay in full its  indebtedness to a
major lending  institution.  In November  1998,  the Company was informed by the
investment bank that provided the bridge financing, that they would be unable to
secure the additional  funding required to repay the outstanding bridge loan and
provide the Company with the necessary working capital to support implementation
of its  business  plan  and  ongoing  operations.  The  Company  began  to  seek
alternative  financing,  but, was unable to secure the funds or a commitment for
the additional  funding necessary to maintain ongoing  operations and transition
its products  from a  proprietary  platform to standard  hardware and  software.
While the Company  experienced  initial  success  with the  introduction  of its
products to customers,  long-term  viability was dependent in part, on migrating
its technology to standard hardware and software.  However,  without  additional
capital, the Company was unable to complete research and development, maintain a
sales force and requisite administrative support.

         On January 15, 1999,  the Board of Directors of the Company  elected to
discontinue all ongoing  operations,  layoff all but one of its employees,  seek
buyers for its  technology  and  inventory  and look for a merger  partner.  The
Company has ceased sales,  marketing and distribution of its products.  On March
31, 1999, two of the remaining three members of the Board of Directors  resigned
to pursue other interests.  As of August 15, 1999, the Company's Chief Financial
Officer, and only active board member, was engaged in the disposition of assets,
settlement  of  outstanding  debts,  sale  of  the  Company's  technology,   and
exploration of potential  mergers.  There are substantial risks that the Company
will not be able to settle its debts or find a suitable merger transaction.  The
Company may be compelled to voluntarily  file for bankruptcy or be forced by its
creditors into an involuntarily bankruptcy.

         On June 22, 1999, the Company signed a letter of intent with Bring Luck
Holdings Limited ("BLH").  Under the terms of the letter of intent,  the Company
will sell to BLH,  Series A  Convertible  Preferred  Stock of the Company.  Upon
conversion  of the Preferred  Stock,  BLH will own 85% of the Company on a fully
diluted basis.  The BLH  transaction is subject to the execution of a definitive
agreement.

         Bring Luck Holdings  Limited is a manufacturer  and  distributor  for a
family of  audio-visual  products  under the  "MIYAKO"  brand  name.  The MIYAKO
products  are sold  primarily in the Far East and include  products  such as VCD
players,  DVD players,  mini TVs, color televisions,  air conditioners and other
electronic  appliances.  BLH  plans on  broadening  its  product  offerings  and
expanding  its sales  channel for  distribution  of its products into the United
States and Europe. Upon completion of this transaction,  BLH will seek relisting
with NASDAQ.  It is anticipated that this transaction  would be completed by the
end of the third quarter in 1999.


                                      -6-

<PAGE>



                              AUGMENT SYSTEMS, INC.

                          NOTES TO FINANCIAL STATEMENTS

                                  JUNE 30, 1999


         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 Form 10-KSB for
the fiscal year ended December 31, 1998 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-month  and six-month  period ended June 30,
1999 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

         The  Company  follows  Statement  of  Financial   Accounting  Standards
("SFAS")  No.  128,  Earnings  per  Share,  issued by the  Financial  Accounting
Standards Board.



3.   STOCKHOLDERS' EQUITY

         In December 1998, the Board of Directors  authorized the issuance of an
additional  3,592,816  shares  of  Common  Stock to  sixty-six  (66)  accredited
investors who  participated in private  placements of the Company's Common Stock
during January and May 1998. The issuance of the shares was pursuant to specific
terms of the private placement  relating to missing certain revenue  milestones.
As of August 15, 1999, the Company had not issued those shares.

         In December  1998,  the Board of Directors  authorized  the issuance of
warrants to purchase 359,282 shares of Common Stock to the underwriter  involved
in private  placements of the Company's Common Stock during January 1998 and May
1998. The issuance of the warrants was pursuant to specific terms of the private
placement relating to missing certain revenue milestones. As of August 15, 1999,
the Company had not issued those warrants.


                                      -7-

<PAGE>
                              AUGMENT SYSTEMS, INC.

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

         THREE AND SIX MONTHS ENDED JUNE 30, 1999  COMPARED TO THE THREE AND SIX
MONTHS ENDED JUNE 30, 1998


INTRODUCTION

         Prior to January 15,  1999,  Augment  Systems,  Inc.,  (the  "Company")
designed,  developed and sold fibre  channel  based network file server  systems
designed to increase  data  transfer and file storage on computer  networks.  In
September 1998, the Company  obtained  $1,500,000 in bridge financing of secured
convertible promissory notes and common stock purchase warrants, in anticipation
of private  placement of the Company's  Common Stock. The Company used a portion
of the proceeds of the bridge  financing to repay in full its  indebtedness to a
major lending  institution.  In November  1998,  the Company was informed by the
investment bank that provided the bridge financing, that they would be unable to
secure the additional  funding required to repay the outstanding bridge loan and
provide the Company with the necessary working capital to support implementation
of its  business  plan  and  ongoing  operations.  The  Company  began  to  seek
alternative  financing,  but, was unable to secure the funds or a commitment for
the additional  funding necessary to maintain ongoing  operations and transition
its products  from a  proprietary  platform to standard  hardware and  software.
While the Company  experienced  initial  success  with the  introduction  of its
products to customers,  long-term  viability was dependent in part, on migrating
its technology to standard hardware and software.  However,  without  additional
capital, the Company was unable to complete research and development, maintain a
sales force and requisite administrative support.

         On January 15, 1999, the Board of Directors  elected to discontinue all
ongoing  operations,  layoff all but one of its  employees,  seek buyers for its
technology and inventory and look for a merger  partner.  The Company has ceased
sales, marketing and distribution of its products. On March 31, 1999, two of the
remaining  three  members of the Board of  Directors  resigned  to pursue  other
interests. As of April 15, 1999, the Company's Chief Financial Officer, and only
active board member,  was engaged in the  disposition  of assets,  settlement of
outstanding  debts,  sale  of  the  Company's  technology,  and  exploration  of
potential mergers. There are substantial risks that the Company will not be able
to settle its debts or find a suitable  merger  transaction.  The Company may be
compelled to voluntarily  file for bankruptcy or be forced by its creditors into
an involuntarily bankruptcy.

         Prior to January 15, 1999, Augment Systems,  Inc.  designed,  developed
and sold fibre  channel-based  network file server systems  designed to increase
data  transfer and file storage on computer  networks.  The  Company's  products
addressed the increasing  demand for the rapid transfer and efficient storage of
very large image and text files within computer networks.  The Company's initial
target  market was the  electronic  printing and  publishing  industry  which is
rapidly  converting to digital  technology,  but suffered from critical workflow
bottlenecks  due to the very large file sizes of color  images  which  cannot be
efficiently  transported  over  conventional  networks.  The Company  sold fibre
channel-based  network  file  server  systems  which  included  (i)  one or more
end-to-end high speed fibre channel arbitrated loop ("FC-AL") interfaces; (ii) a
file server, the AFX 410, that performs a central file management function, high
speed  large  capacity  storage,  and  high  speed  interconnects  to the  FC-AL
interfaces;  and (iii) PCI cards and software for each client  workstation to be
connected to the file server.

         On June 22, 1999, the Company signed a letter of intent with Bring Luck
Holdings Limited ("BLH").  Under the terms of the letter of intent,  the Company
will sell to BLH,  Series A  Convertible  Preferred  Stock of the Company.  Upon
conversion  of the Preferred  Stock,  BLH will own 85% of the Company on a fully
diluted basis.  The BLH  transaction is subject to the execution of a definitive
agreement.

                                      -8-
<PAGE>

         Bring Luck Holdings  Limited is a manufacturer  and  distributor  for a
family of  audio-visual  products  under the  "MIYAKO"  brand  name.  The MIYAKO
products  are sold  primarily in the Far East and include  products  such as VCD
players,  DVD players,  mini TVs, color televisions,  air conditioners and other
electronic  appliances.  BLH  plans on  broadening  its  product  offerings  and
expanding  its sales  channel for  distribution  of its products into the United
States and Europe. Upon completion of this transaction,  BLH will seek relisting
with NASDAQ.  It is anticipated that this transaction  would be completed by the
end of the third quarter in 1999.

RESULTS OF OPERATIONS

During  the  three  and  six-month  period  ended  June 30,  1999,  the  Company
recognized $175,000 in revenues as compared to $330,464 and $805,978 in revenues
for the three and  six-month  period ended June 30,  1998.  The Company does not
anticipate  shipping any product for the foreseeable future and is concentrating
its efforts on the disposition of assets,  settlement of outstanding debts, sale
of the Company's technology,  and exploration of potential mergers. The revenues
recognized by the Company during the first six months of 1999 were the result of
a sale of software  license  rights to Avid  Technologies.  The Company does not
anticipate any additional sales of software to Avid or any other third party.

The Company  recognized a net income of approximately  $169,083 and $162,112 for
the three and six-month period ending June 30, 1999 as compared to a net loss of
$1,469,431  and  $2,919,894  for the three and six months  ended June 30,  1998,
respectively. The recognition of net income is the result of settling debts with
creditors  below  the  amount  recognized  at the  time of  indebtedness,  and a
one-time sale of software license to Avid Technologies.

Research and  development  costs for the three and six-month  periods ended June
30, 1999 were $0 as compared to $697,443 and $1,417,466, respectively, the three
and  six-month  periods  ended  June 30,  1998.  The  Company is  currently  not
conducting any research and  development  activities and does not anticipate any
such efforts in the foreseeable future.

General and administrative  costs for the three and six-month periods ended June
30, 1999 were $35,000 and  $234,969,  respectively,  as compared to $477,081 and
$706,014, respectively, for the three and six-month periods ended June 30, 1998.
The decrease is a result of a reduction of headcount during the first quarter of
1999. The Company  currently has one employee and expects further  reductions in
spending, as the first quarter results include severance pay.

Selling and marketing  costs for the three and six-months  period ended June 30,
1999 were $0 as compared to $482,771 and $1,206,450, respectively, for the three
and  six-month  periods  ended  June 30,  1998.  The  Company is  currently  not
conducting  any sales and marketing  activities and does not anticipate any such
efforts in the foreseeable future.

The Company  currently has one full-time  employee engaged in the disposition of
assets,  settlement of outstanding debts, sale of the Company's technology,  and
exploration of potential mergers.

LIQUIDITY AND CAPITAL RESOURCES

         The Company has funded its operations  since October 1995,  principally
from  a  combination  of  debt  and  equity  financings  totaling  approximately
$22,975,000.  Prior to May 1997, 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  was
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.


                                      -9-
<PAGE>

         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 $8,220,000.

         In October  1997,  the  Company  obtained  a  $750,000  loan from Fleet
National  Bank.  The loan  was  secured  by all of the  Company's  assets,  bore
interest at Fleet National Bank's prime rate plus 2% and was originally  payable
by December 31, 1997 or upon completion of a financing resulting in net proceeds
to the Company of at least  $5,000,000.  Pursuant to the terms of the loan,  the
Company issued detachable warrants to purchase 100,000 shares of Common Stock at
an exercise price of $1.00 per share  exercisable over five years. This loan was
extended  through and until July 31, 1998. On July 31, 1998,  the Company made a
payment in the amount of $300,000 to Fleet  National Bank and the final $450,000
balance was retired on August 31, 1998.

         During December 1997 and January 1998, the Company  secured  $1,000,000
in bridge financing from  institutional and private investors in anticipation of
the private  placement  of the  Company's  Common  Stock.  The bridge  financing
promissory  notes  accrued  interest at 8% per annum with interest and principal
payable  at  maturity  on the  initial  closing  of the  private  placement.  In
addition,  the Company issued to bridge investors five year warrants to purchase
up to 750,000 shares in the aggregate of the Company's Common Stock at $1.00 per
share. In February 1998, the Company repaid $200,000 of these  promissory  notes
plus interest and the holders of $800,000 of these  promissory  notes  converted
their notes into shares of the  Company's  Common  Stock at $1.00 per share.  In
January 1998, the Company closed on an initial amount of $6,180,000 of a private
placement  initiated in December  1997. In early May 1998, the Company closed on
an additional $575,000 and terminated the offering started in December 1997. The
aforementioned  funds  were used to repay  outstanding  accounts  payable  debts
incurred  during 1997 of  approximately  $1.400,000,  repay bridge  financing of
approximately $200,000 and bank debt of approximately $300,000, support research
and  development  expenses  of  approximately  $2,000,000,  sales and  marketing
expenses of approximately  $1,700,000,  and $675,000 in administrative and other
expenses.


         In September 1998, the Company obtained  $1,500,000 in bridge financing
of secured convertible  promissory notes and common stock purchase warrants. The
Company used a portion of the proceeds of the bridge  financing to repay in full
its  indebtedness to Fleet National Bank. The convertible  promissory notes were
due and payable  upon the earlier of the closing of a financing  of a minimum of
$4,000,000 or in September  1999. In November  1998, the Company was informed by
the  investment  bank,  that provided the bridge  financing,  that they would be
unable to secure the additional funding required to repay the outstanding bridge
loan and provide the Company with the necessary  working  capital to support its
business  plan and ongoing  operations.  The Company  began to seek  alternative
financing,  but, was unable to secure the funds necessary.  On January 15, 1999,
the Board of Directors  decided to shut down operations,  lay-off all but one of
its employees,  liquidate assets,  seek buyers for the Company's  technology and
look for merger partners.

         These factors raise  substantial  doubt about the Company's  ability to
continue as a going  concern.  The Company is dependent on its ability to settle
substantially  all debts with  creditors,  attract  purchasers  of the Company's
technology and attract potential merger partners,  which will undoubtedly result
in  substantial  dilution to  existing  shareholders.  Although  the Company has
effectively  ceased  operations,   there  are  numerous  secured  and  unsecured
creditors who could commence litigation against the Company.

         The  Company  is  authorized  to issue up to  50,000,000  shares of its
Common Stock and up to 2,000,000  shares of  Preferred  Stock.  As of August 15,
1999,  there were  11,898,952  shares of the  Company's  Common Stock issued and
outstanding  and no  Preferred  Stock  issued and  outstanding.  The  Company is
obligated  to issue  additional  3,592,816  shares  of Common  Stock to  certain
investors who  participated in private  placements of the Company's Common Stock
during January 1998 and May 1998. The shares had been authorized for issuance by
the Board of Directors during 1998.


                                      -10-

<PAGE>

The Company does not have any material  commitments for capital  expenditures at
this time.

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 that could adversely affect future results.





                                      -11-

<PAGE>



                           PART II. OTHER INFORMATION



Item 1.           Legal Proceedings

         In March 1998,  the Company's  former  President and CEO,  Lorrin Gale,
left the Company at the request of the Board of Directors.  On May 29, 1998, Mr.
Gale  filed a  complaint  against  the  Company  in the  Superior  Court  of the
Commonwealth  of  Massachusetts  seeking  relief  for  breach  of an  employment
contract.  In September  1998, the Company  reached a settlement  with Mr. Gale,
which  required that the Company pay $150,000 in severance pay and an additional
$45,000 in  increments  of $15,000 over the next three years  commencing in July
1999.  In the event the Company  does not make  payments  under the terms of the
settlement  agreement or is unable to work out an arrangement  for payment,  Mr.
Gale could obtain a judgement  against the Company,  which would have a material
adverse affect on the prospects of the Company.

         The Company is not involved in any other  material  legal  proceedings.
Although  the Company has  effectively  ceased  operations,  there are  numerous
secured  and  unsecured  creditors  who could  commence  litigation  against the
Company. In the event that the Company has insufficent funds to settle or defend
these  matters,  the  Company  or its  creditors  could  cause  the  filing of a
bankruptcy proceeding.

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

                  (a) There were no Form 8-Ks filed  during  the  quarter  ended
June 30, 1999.



                                      -12-
<PAGE>



                                   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 15, 1999            By: /s/Duane A. Mayo
                                    --------------------------------------------
                                 Duane A. Mayo
                                 Chief Financial Officer, Treasurer and Director
                                 (Principal Financial & Accounting Officer)





                                      -13-