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 September 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 incorporation         (I.R.S. Employer 
or organization)                                     Identification No.)

2 Robbins Road Westford, MA                                     01886
---------------------------                                     -----
(Address of principal executive offices)                      (Zip Code)

                                  978-392-8626
--------------------------------------------------------------------------------
              (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____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 November 14, 1997,

           Class                                Outstanding at November 14, 1997
--------------------------------------          --------------------------------
Common Stock, $.01 par value per share                       4,713,319







<PAGE>

                              AUGMENT SYSTEMS, INC.

                                      INDEX


                                                                           PAGES

PART I               FINANCIAL INFORMATION

         Item 1      Financial Statements

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

                     Results of Operations for the three months
                       and nine months ended September 30, 1997 and 1996       4

                     Statements of Cash Flows for the nine months
                       ended September 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        8-10

PART II              OTHER INFORMATION

         Item 1      Legal Proceedings                                        11
         Item 2      Changes in Securities                                    11
         Item 3      Defaults Upon Senior Securities                          11
         Item 4      Submission of  Matters to a Vote of Security-Holders     11
         Item 5      Other Information                                        11
         Item 6      Exhibits and Reports or Form 8-K                         11

         Signatures                                                           12



                                      -2-





<PAGE>

                              AUGMENT SYSTEMS, INC.
                                 BALANCE SHEETS
<TABLE>
<CAPTION>


                                                                                  SEPTEMBER 30,   DECEMBER 31,
                                                                                      1997            1996
                                                                                  -------------   ------------
                             ASSETS

<S>                                                                               <C>             <C>
Current Assets:
    Cash                                                                           $    219,615    $    452,753
    Accounts receivable, net                                                          1,164,870            --
    Inventories                                                                       1,098,004         589,351
    Prepaid expenses                                                                    135,027          97,500
                                                                                   ------------    ------------
          Total current assets                                                        2,617,516       1,139,604
Property and equipment, net                                                             360,835         348,889
Capitalized software costs                                                              265,000            --
Deferred financing costs, net                                                              --           176,815
Other assets                                                                            100,548          13,745
                                                                                   ------------    ------------
          Total assets                                                             $  3,343,899    $  1,679,053
                                                                                   ============    ============

         LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:
    Accounts payable                                                               $  1,538,220    $    601,274
    Accrued expenses                                                                    105,883         196,104
    Short term promissory notes                                                         350,000       1,051,248
    Short term advance                                                                     --           575,000
    Current portion of capital lease obligations                                         17,115          19,013
    Deferred revenue                                                                     53,279            --
                                                                                   ------------    ------------
          Total current liabilities                                                   2,064,497       2,442,639
Convertible promissory notes                                                             41,495          62,248
Capital lease obligations, less current portion                                          15,386          27,530
                                                                                   ------------    ------------
          Total liabilities                                                           2,121,378       2,532,417
                                                                                   ------------    ------------

Commitments
Stockholders' Equity (deficit):
    Common stock, $.01 par value;  30,000,000 shares  authorized;  4,713,319 and
      2,865,512 shares issued and outstanding at
      September 30, 1997 and December 31, 1996, respectively                             47,133          28,655
    Additional paid-in capital                                                       13,874,710       6,177,194
    Accumulated deficit                                                             (12,699,322)     (7,059,213)
                                                                                   ------------    ------------
          Total stockholders' equity (deficit)                                        1,222,521        (853,364)
                                                                                   ------------    ------------
          Total liabilities and stockholders' equity                               $  3,343,899    $  1,679,053
                                                                                   ============    ============
</TABLE>


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



                                       -3-


<PAGE>

                              AUGMENT SYSTEMS, INC.
                              RESULTS OF OPERATIONS



<TABLE>
<CAPTION>

                                                    THREE MONTHS ENDED                          NINE MONTHS ENDED
                                                       SEPTEMBER 30,                              SEPTEMBER 30,
                                                  1997               1996                    1997               1996
                                            -----------------  -----------------       -----------------  -----------------

<S>                                                <C>              <C>                     <C>                    <C> 
Sales                                            $   776,387       $         -             $  1,343,610       $        -         
Cost of sales                                        325,341                 -                  572,822                -
                                            -----------------                          -----------------
Gross margin                                         451,046                 -                  770,788                -
Operating expenses:
         Research and development                    728,409          1,204,958               1,855,329          1,720,109
         General and administrative                1,452,791            225,556               2,522,089            636,603
         Sales and marketing                         651,023            231,261               1,893,110            231,261
                                            -----------------  -----------------       ----------------   -----------------
                Total cost and expenses          $ 2,832,223       $  1,661,775            $  6,270,528       $  2,587,973
                                            -----------------  -----------------       -----------------  -----------------
Loss from operations                             $(2,381,177)      $ (1,661,775)           $ (5,499,740)      $ (2,587,973)
                                            -----------------  -----------------       -----------------  -----------------

Other (income) expense:
         Net interest (income) expense              $ (3,533)      $     24,031            $    140,369       $     75,374
                                            -----------------  -----------------       -----------------  -----------------
                Total other (income) 
                  expense, net                      $ (3,533)      $     24,031            $    140,369       $     75,374
                                            -----------------  -----------------       -----------------  -----------------

Net loss                                         $(2,377,644)      $ (1,685,806)           $ (5,640,109)      $ (2,663,347)
                                            =================  =================       =================  =================



Net loss per common share                              (0.50)             (0.98)                  (1.47)             (1.96)
                                            =================  =================       =================  =================

Weighted average common and common
    equivalent shares outstanding                  4,713,319          1,714,701               3,849,583          1,359,812
                                            =================  =================       =================  =================
         

</TABLE>










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



                                       -4-

<PAGE>

                              AUGMENT SYSTEMS, INC.
                             STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>


                                                                                            NINE MONTHS ENDED
                                                                                    SEPTEMBER 30,         SEPTEMBER 30,
                                                                                        1997                   1996
                                                                                    ------------          -------------

<S>                                                                                   <C>                  <C>
Cash flows from operating activities:
         Net loss                                                                     (5,640,109)           (2,663,347)
         Adjustments to reconcile net loss to net cash
             used in operating activities:
             Loss on disposal of fixed assets                                              8,850                  --
             Depreciation and amortization                                               128,854               186,340
         (Increase) decrease in operating assets and liabilities:
             Accounts receivable                                                      (1,164,870)                 --
             Inventories                                                                (508,653)             (149,451)
             Prepaid expenses                                                            (37,527)              (61,662)
             Capitalized software                                                       (265,000)                 --
             Other assets                                                                (86,803)                 -- 
             Accounts payable                                                            936,946               488,457
             Accrued expenses                                                            (90,221)              217,827
             Deferred revenue                                                             53,279                  --
                                                                                      ----------            ----------
                  Net cash used in operating activities                               (6,665,254)           (1,981,836)
                                                                                      ----------            ----------

Cash flows from investing activities:
         Capital expenditures                                                           (149,650)              487,265
                                                                                      ----------            ----------
                  Net cash provided by (used for) investing activities                  (149,650)              487,265
                                                                                      ----------            ----------

Cash flows from financing activities:
         Proceeds from issuance of common stock                                        8,985,240             2,518,364
         Proceeds from issuance of convertible promissory notes                             --                 249,858
         Proceeds from noninterest bearing loans from stockholders                          --                    --
         Proceeds from issuance of short-term promissory notes                         3,125,000                  --
         Payments on short-term promissory notes                                      (3,826,248)             (150,000)
         Repayment of short-term advance                                                (575,000)                 --
         Principal payments on capital lease obligations                                 (14,042)                 --
         Payment on long-term convertible promissory notes                               (20,753)                 --
         Purchase of treasury stock                                                         --                  (7,000)
         Deferred financing costs                                                     (1,092,431)             (165,143)
                                                                                      ----------            ----------
                  Net cash provided by financing activities                            6,581,766             2,446,079
                                                                                      ----------            ----------
Net increase (decrease) in cash                                                         (233,138)              (23,022)
Cash at beginning of period                                                              452,753               242,669
                                                                                      ----------            ----------
Cash at end of period                                                                    219,615               219,647
                                                                                      ==========            ==========

</TABLE>


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


                                       -5-

<PAGE>


                              AUGMENT SYSTEMS, INC.

                          NOTES TO FINANCIAL STATEMENTS

                               September 30, 1997

1. NATURE OF BUSINESS AND BASIS OF PRESENTATION

During the fiscal year ended  December 31, 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 development of
high-end file management  network systems  designed to move large image and text
files rapidly and  efficiently  over computer  networks.  The Company's  initial
target  market is the  electronic  publishing  industry.  In September  1997 the
Company  introduced a Windows  NT-based client for its file  management  network
systems and plans to introduce  UNIX client  support  during 1998  providing for
multi-platform  networks  comprised  of  Macintosh,  Windows  NT and  UNIX-based
workstations.  The Company also plans to  introduce  in 1998 a Windows  NT-based
super  server  targeted  to meet  the  growing  demand  for a  Windows  NT-based
high-performance file management network system.

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 nine month periods ended  September 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 three or nine month  period  ended  September  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.



                                      -6-




<PAGE>

                              AUGMENT SYSTEMS, INC.

                          NOTES TO FINANCIAL STATEMENTS

                               September 30, 1997



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 the  Company's  initial  public  offering,  after  deducting
underwriting discounts and commissions and certain 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 by the Company in connection  with the  cancellation of
these warrants.


4.   SHORT-TERM PROMISSORY NOTES

In September  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  $350,000 in
consideration  for $350,000.  The promissory note bears interest at 9% per annum
with interest and principal  payable at maturity on December 1, 1997 or upon the
Company  completing  a  financing  resulting  in net  proceeds to the Company of
$2,000,000.  In addition,  the Company issued to Venture  Management a five year
warrant to purchase  100,000  shares of the Company's  Common Stock at $3.00 per
share.  The  principal  balance and interest on this note were repaid in October
1997.


5.   SUBSEQUENT EVENTS

In October 1997, the Company  obtained a $750,000 loan from Fleet National Bank.
The loan is secured by all of the Company's assets,  bears interest at the Fleet
Bank's Prime Rate plus 2%, with  principal and interest  payable by December 31,
1997 or upon completion of a financing  resulting in net proceeds to the Company
of at least  $5,000,000.  The  $3,000,000  working  line of credit  the  Company
secured in July from Fleet National Bank has been  temporarily  suspended  until
the Company can secure a financing  resulting in net proceeds of  $5,000,000  or
more. When the Company  completes its anticipated  financing,  borrowings on the
facility will bear interest at prime plus 0.50%.  Borrowings  are limited to 75%
of eligible  domestic  accounts  receivable and are secured by all assets of the
Company.




                                      -7-



<PAGE>

                              AUGMENT SYSTEMS, INC.

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

 THREE AND NINE MONTH PERIOD ENDED SEPTEMBER 30, 1997 COMPARED TO THE THREE AND
                   NINE MONTH PERIOD ENDED SEPTEMBER 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 file  management network systems,  until
February  1997.  During the second  quarter  ended June 30,  1997,  the  Company
commenced  commercial  shipment  of its server  product and  recognized  initial
revenue in April 1997.

The Company's initial target market is the electronic publishing industry, which
requires  the rapid and  efficient  movement  of large image and data files over
networks. In September 1997 the Company introduced a Windows NT-based client for
its file  management  network systems and plans to introduce UNIX client support
during 1998  providing  for  multi-platform  networks  comprised  of  Macintosh,
Windows NT and UNIX-based  workstations.  The Company also plans to introduce in
1998 a Windows  NT-based super server  targeted to meet the growing demand for a
Windows NT-based high-performance file management network system.

RESULTS OF OPERATION

During the three and nine month  periods ended  September 30, 1997,  the Company
recognized  initial  product  revenues of $776,387 and $1,343,610  respectively.
Gross  product  margins on product  sales  were 58% and 57%,  respectively.  The
Company  anticipates  increased  revenues  for  the  balance  of 1997  with  the
continued development of its sales channel.  Gross product margins may vary 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 any revenue.

The Company recognized a net loss of $2,377,644 and $5,640,109 for the three and
nine  month  periods  ended  September  30,  1997 as  compared  to net losses of
$1,685,806  and  $2,663,347  for the same periods in 1996.  The increases in net
loss  of  $691,838  and  $2,976,762  for  the  three  and  nine  month  periods,
respectively,  are primarily attributable to an increase in personnel to support
research and development,  sales and marketing and administration activities. In
addition,  the Company  increased  the level of spending to support  engineering
development of its file management  network systems 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 nine  month  periods  ended
September  30, 1997 were $728,409 and  $1,855,329 as compared to $1,204,958  and
$1,720,109  for the same  periods in 1996.  The  $476,549  decrease in the three
month period ended  September  30, 1997 compared to the three month period ended
September  30,  1996  is  primarily  due  to  the   capitalization  of  software
development  costs  related to the  Company's  development  of Windows NT Client
support. The $135,220 increase in the nine month period ended September 30, 1997
compared  to the  nine  month  period  ended  September  30,  1996 is  primarily
attributable   to  additional   engineering   personnel  and  increased  use  of
consultants  associated  with product  development.  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.

                                      -8-

<PAGE>



General  and  administrative  costs for the three and nine month  periods  ended
September 30, 1997 were  $1,452,791  and  $2,522,089 as compared to $225,556 and
$636,603 for the same periods in 1996. The  $1,227,235 and $1,885,486  increases
for the three and nine month periods,  respectively,  are primarily attributable
to additional  administrative support,  increased spending for outside legal and
accounting support and other normal operating expenses.

Selling and marketing costs for the three and nine month periods ended September
30, 1997 were  $651,023 and  $1,893,110 as compared to $231,261 and $231,261 for
the same periods in 1996. The $419,762 and $1,661,849 increases are attributable
to an  increase  in  marketing  support and sales  personnel,  participation  in
various  trade shows and increased  spending on sales  promotion  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 42 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  $15,045,000.
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  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.  In
each of April 1997 and May 1997 the  Company  issued to Venture  Management,  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  had an  interest  rate of 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 and the related  interest  were 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.

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
0.50%.  Borrowings are limited to 75% of eligible domestic  accounts  receivable
and are secured by all assets of the Company.  In October 1997,  the use of this
facility  was  temporarily  suspended  until the Company can  complete a minimum
financing of $5,000,000.

In  September  1997 the  Company  issued to  Venture  Management,  of which Fred
Chanowski,  a director of the Company, is a 20% member, a promissory note in the
principal amount of $350,000 in consideration for $350,000.  The promissory note
carried an interest rate of 9% per annum with interest and principal  payable at
maturity  on  December  1,  1997 or upon  the  Company  completing  a  financing
resulting in net proceeds to the Company of $2,000,000. In addition, the Company
issued to Venture  Management a five year warrant to purchase  100,000 shares of
the  Company's  Common  Stock at $3.00 per  share.  The  principal  balance  and
accrued interest on this note were repaid in October 1997.



                                      -9-

<PAGE>


In October 1997, the Company  obtained a $750,000 loan from Fleet National Bank.
The loan is secured by all of the  Company's  assets,  bears  interest at 9% per
annum with principal and interest payable on the earlier of December 31, 1997 or
upon  completion  of a financing  resulting in net proceeds to the Company of at
least $5,000,000.

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, were expected to meet the Company's funding needs for at least 12 months
from the date of the offering.  While initial  shipments of the Company's server
systems met customers  expectations with a limited number of clients attached to
a network,  larger  installations  with more clients caused systems  crashes and
loss of data.  The Company  subsequently modified its software and hardware as
well as its vendors software and hardware to support larger  networked  systems.
This unanticipated  extension in the development of the Company's initial server
system  severely  impacted  development  of the  Company's  sales  channels  and
anticipated  revenues.  The funds  generated  from the Company's  initial public
offering will not be sufficient  to fund the Company's  activities.  The Company
will need to raise additional funds through equity or debt financing.  There can
be no assurance  that the Company will be able to obtain  additional  funding on
terms favorable to the Company,  if at all. If adequate funds are not available,
there will be a material adverse affect on the Company's ability to continue its
operations as a going concern.

In October 1997,  the Company  entered into an agreement  with Oscar Gruss & Son
Incorporated,  a New York  based  investment  banking  operation,  to act as its
exclusive agent for a period of six months in connection with a proposed private
placement.

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 that 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.






                                      -10-

<PAGE>


                           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. The lawsuit was subsequently
                  settled by the Company in September 1997 for $55,000.

                  In September 1997 a lawsuit was filed  against  the Company in
                  Middlesex  Superior  Court  (Massachusetts)  by a third  party
                  alleging  a breach of  contract  and  seeking  damages  in the
                  amount of $40,000.

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)  10.22 - Placement Agent Agreement with  Oscar Gruss & Son
                       Incorporated.

                  (b)  No  Reports  on  Form  8-K  were filed during the quarter
                       ended September 30, 1997.


                                      -11-

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


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





                                      -12-