SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC  20549

                                   FORM 10-KSB

           [ X ]  ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 1997

                                       OR

         [   ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

                         SECURITIES EXCHANGE ACT OF 1934

      For the transition period from to _________________ to _________________

                         Commission File Number 0-10329

                             AW COMPUTER SYSTEMS, INC.
                  (Name of Small Business Issuer in its Charter)

      New Jersey                                      22-1991981
(State or other jurisdiction of               (IRS Employer Identification No.)
incorporation or organization)

          9000A Commerce Parkway, Mt. Laurel, New Jersey         08054
              (Address of principal executive offices)        (Zip Code)

                                  609-234-3939
                 Issuer's telephone number, including area code

      Securities registered pursuant to Section 12(b) of the Exchange Act:
                                      None

          Securities registered pursuant to Section 12(g) of the Act:

                Class A Common Shares, par value $.01 per share
                                (Title of Class)

Check  whether  the issuer  (1) has filed all  reports  required  to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past twelve  months (or for
such shorter  period that the  registrant was required to file such reports) and
(2) has been subject to such filing requirements for the past ninety days. Yes X
No ____

Check if disclosure of delinquent  filers pursuant to Item 405 of Regulation S-B
is not contained in this form, and no disclosure will be contained,  to the best
of  registrant's  knowledge,  in  definitive  proxy  or  information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB. [ X ]

Check  whether the issuer has filed all  documents  and  reports  required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the  distribution  of
securities under a plan confirmed by a court. Yes No N/A X

Issuer's revenues for its most recent fiscal year:   $1,151,256

As of April 9, 1998,  the aggregate  market value (based on the average  closing
bid and  asked  quotations)  of the  5,379,733  Class A  Common  Shares  held by
non-affiliates  of  the  Company  was  approximately  $215,000  and a  total  of
6,670,567 Class A Common Shares of the Company were issued and outstanding.

Documents Incorporated by Reference:
See Item 13 - Exhibits, Financial Statements and Reports on Form 8-K.


<PAGE>




                                     PART I

Item 1.  Business.

On March 10, 1998 AW Computer  Systems,  Inc.,  a New Jersey  corporation,  (the
"Company" or "AW") announced that it was discontinuing operations. The company's
efforts  to obtain  long term  financing  have not been  successful  nor has the
Company  been  able to  increase  the  sales of its  products.  There  can be no
assurance that the Company will be able to resume its' operations.  See Item 6 -
Management  Discussion  and  Analysis  of  Financial  Condition  and  Results of
Operations.

Since its inception in 1973,  AW has provided  retailers  with  custom-designed,
high-performance,  computer-based systems to upgrade their Point-of-Sale ("POS")
operations.   AW  has   developed   two  new  products  to  provide   additional
functionality  to POS  systems.  These  products  are the  Checker  Productivity
Analyzer ("CPA") and the Wizard of POS ("Wizard").  Historically,  AW's products
integrate a wide  variety of POS  terminals  into the current  store's  computer
systems  offered by the three  largest  POS system  manufacturers  in the United
States. AW had established  relationships with the IBM Corporation  ("IBM"), NCR
Corporation  ("NCR"),  and  Fujitsu-ICL  Systems,  Inc.  ("FJ-ICL")  to  provide
interfaces  with their new POS systems,  known as the 4690 Store System for IBM,
UNITY for NCR,  ISS400 for FJ-ICL,  and  existing  popular cash  registers.  The
ability of the  Company's  personnel to produce de novo  interface  hardware and
software,  customized  to  retailers'  requirements,  is a  critical  factor  in
successful operations.

The Company's  target market  includes  nation-wide  chains of retail stores and
supermarkets.  Because  of the large  size of these  customers  relative  to the
Company,  many of the Company's  contracts for sale of its proprietary  hardware
and licensing of its proprietary  software comprise a significant portion of the
Company's  revenues in any given year. For example,  in 1997, revenue from three
customers   accounted   for  82%  of  total  revenue  (see  Notes  to  Financial
Statements).

         Products.

         AW has developed two products to provide  additional  functionality  to
POS systems.  They are the Checker Productivity  Analyzer ("CPA") and the Wizard
of POS  ("Wizard")  Family of  Products,  specifically  the  Tutor,  Eureka  and
Scrolling Receipt and Merchandiser.

         The CPA Project was developed  under contract and completed on December
31,  1997 with a large  supermarket  chain.  That  contract  did not include any
guaranteed minimum purchase. The Company has received an order to install eleven
(11) CPA systems for that  supermarket  chain.  Notwithstanding  the  successful
installation  of two systems,  the Company's  customer  cancelled their purchase
order with AW on March 9, 1998 and on the same date  advised the Company that it
was  unwilling to enter into a second order that was  necessary in order for the
Company to raise  additional  capital.  At that time, the Company  determined to
discontinue its' operations.

                                        2

<PAGE>





         The CPA system  protects  supermarkets  against losses due to theft and
inaccuracies  at the  checkout  counter.  It is real-time  security  system that
interfaces with the POS system "listening to" register  transactions as they are
transmitted  over the register  loop.  Scanned or keyed  information  is used to
obtain product  descriptions  that are known to the system and stored in memory.
The system consists of cameras strategically mounted above the checkout counters
and AW's proprietary software.  Visual images of products and shopping carts are
captured  by cameras at the  checkstand  and  converted  to a form that  enables
comparison  with the  known  product  and  cart  descriptions.  When the  system
determines there is a mismatch between camera data and database  representations
of the product or cart  descriptions,  an "event" is  declared.  An event is the
recognition  by the CPA system of the  occurrence at a checkout  station or lane
that deviates from the  established  norm.  (The CPA system differs from that of
normal  security  systems in the fact that it records  abnormal  actions  events
only; most security  systems record  everything,  prompting the store manager to
view hours of video tape in the hope of finding evidence of fraud).  An event is
usually  reported  by an  "alert",  which is  defined  as a signal to prompt the
checker to check the  non-empty  cart,  print a message on the register  journal
printer,  write a description  of the event to the CPA  Controller  Log and save
video as  specified,  and/or to lock the  register  until a manager  override is
performed.  Alerts are specified by the store manager in any combination for any
detected  event  or no  alerts  need  be  specified  (e.g.  while a  cashier  is
training).

         Currently,  CPA's supermarket database typically contains 55,000 items.
The full storage requirement is approximately 350-600 megabytes. The database is
dynamic, always "learning" new images as presented to the system.

         The Company has  received a purchase  order to install  eleven (11) CPA
systems for a supermarket chain.  Notwithstanding the successful installation of
two systems,  the Company's  customer  cancelled their purchase order with AW on
March 9, 1998 and on the same date advised the Company that it was  unwilling to
enter into a second  order that was  required  in order for the Company to raise
additional   capital.  At  that  time  the  Company  determined  to  discontinue
operations.

         The AW Wizard of POS Family of Products  ("Wizard"),  specifically  the
Tutor,  Eureka,  and Scrolling Receipt and Merchandiser bring the familiarity of
Microsoft's  graphical Windows  environment to the retail POS operation.  Unlike
existing  graphical  POS systems  that demand total  replacement  of a retailers
hardware  and  software,  the  Wizard  adds  graphical  capability  to  existing
environments.

         The AW  Wizard  Tutor  is an  easy-to-use,  hands-on  cashier  guidance
system.  It actually tutors new sales  associates while they assist customers at
the checkout line. The Tutor presents  consistent  on-line help screens to sales
associates.  Service  is  improved  by  reducing  cashier  calls for  supervisor
assistance. The Tutor is an interactive tool that is available 24 hours a day, 7
days per week. It is a handy,  immediate reference to remind recent hires of the
POS operation.  Leading retail chains are experiencing a quick six to nine month
return with the Tutor.

         The Tutor  addresses  the cost and  effectiveness  of making  the sales
associates productive quickly. The Tutor guides new cashiers on keying sequences
and store  policy in an easy to  understand,  concise  approach.  The  system is
designed  and  developed  for  the  popular  IBM  4683/4684  and  4693/4694  POS
terminals.

         The Tutor provides cashiers with a user-friendly graphical interface to
the POS terminal.  The Tutor  operates on MS-Windows  3.1, MS Windows 95, or IBM
OS/2 platforms, and passively monitors all POS terminal peripheral activity such
as scanning,  keyboard  entry,  and displays.  The Tutor  software then provides
graphical help on a video graphics  adaptor ("VGA") display panel.  This display
shows  a  keyboard  with  valid  keys  highlighted  and  a  text  area  provides
instructions  to the  operator.  The Tutor  allows new  cashiers  to become self
proficient  in the POS  operation  and  eliminates  the  prolonged  expense of a
high-cost, experienced person in the traditional buddy system method.

                                        3

<PAGE>





         The AW Wizard Eureka is an electronic produce flip chart which displays
digital images of the fruits and vegetables at the store.  Using a touch screen,
the cashier can quickly  identify the correct fruit or vegetable,  its PLU code,
and optionally have the code entered automatically. Eureka reduces delays at the
cash  register and improves  customer  service by  eliminating  cumbersome  flip
charts and time consuming  searches.  Also shrinkage is reduced from errors made
in misidentifying fancy imported fruits and vegetables as less expensive items.

         Eureka's   versatile   interface   provides   fast  access  to  product
information,  regardless  of the  cashier's  level of knowledge  or  experience.
Produce can be identified by group ("top  sellers"),  by category index ("citrus
fruits"  or "leafy  vegetables"),  by word  index,  by  interactive  description
("orange,  oval-shaped, size of tennis ball, with thorns") or by simply browsing
through  the  digital  images.  Eureka  can  display  a blow-up  of the  digital
photograph  and its PLU, give a brief  description  of that item, and optionally
insert the PLU code into the IBM  4683/4693  POS  terminal.  Eureka will also be
developed for applications with mass merchandisers.

         AW's Scrolling Receipts & Merchandiser  application provides timely and
readable  information  to customers  concerning  their  purchases at the time of
check-out.  An  electronic  scrolling  receipt is  displayed  at the register to
customers on the AW Wizard screen while  merchandising  messages of the retailer
are simultaneously  presented on the same display.  This Wizard application also
enables you to use PC-compatible thermal printers with your front-end POS system
to print clean customer receipts.  The Company also presently derives additional
revenue from contract programming to provide system enhancements and maintenance
agreements covering all of AW's POS systems.

         The Company's historical main product,  known as AWare, enables the use
of existing popular, but older, cash registers with the POS systems manufactured
by IBM,  NCR,  and FJ-ICL.  If AWare is used, a retail chain can upgrade its POS
system while  postponing  the  replacement  of cash  registers,  a major cost of
upgrading to current on-line POS operations,  and mix older and newer models and
different makes of cash registers. AW has developed AWare for use in supermarket
chains, mass merchandising stores, and department stores.

         AW has developed a family of programmable microprocessor adapter boards
for the IBM,  the NCR,  and the FJ-ICL  computers  that  serve as cash  register
controller  units.  They  allow  various  NCR,  Datachecker,  and older IBM cash
registers to operate effectively with IBM's 4680 Store Controller,  the NCR, and
the FJ-ICL POS systems (the "Major Store Systems").

         Customers and Markets.

         On March 10, 1998 AW Computer Systems,  Inc., a New Jersey corporation,
(the "Company" or "AW")  announced  that it was  discontinuing  operations.  The
company's efforts to obtain long term financing have not been successful nor has
the Company  been able to increase  the sales of its  products.  There can be no
assurance  that the Company will be able to resume its'  operations.  See Item 6
Management  Discussion  and  Analysis  of  Financial  Condition  and  Results of
Operations.

         The  Company  marketed  the  Checker   Productivity   Analyzer  to  the
supermarket  grocery  industry.  The Company had installed the system in a pilot
store and  received  an order for  eleven  (11)  additional  systems  at a major
supermarket  grocery chain.  Two of the eleven (11) systems were installed prior
to the Company  being  advised of the  customer's  cancellation  of the purchase
order for the eleven stores.

         The  Company  offered its Wizard of POS to three  segments of the  
retailer market: 1) large general merchandise retailers,  2) large discount
retail operators,  and 3) supermarket grocery stores. In general,  the Company's
POS systems are  attractive  to any retailer  with a large number of stores or a
large number of checkout counters.

                                        4

<PAGE>





         The Company's business historically centered on a small number of large
clients  in any given  year.  See Note 5 of Notes to  Financial  Statements  for
information  concerning the most recent two years. In 1997,  revenues included a
concentration  of 82%  attributed  to three  customers.  The Company has derived
substantially all of its revenues from North America during the last two years.

         Customer Backlog.

         At April 9, 1998,  the total  amount of the  Company's  firm orders for
delivery  within  one year for  systems,  maintenance  services,  hardware,  and
software  was $0,  compared  to a total of  approximately  $570,000 at March 25,
1997.

         Competition.

         The  Company is not aware of any  product on the market that is similar
to CPA or the  Wizard.  However,  there  are  numerous  security  companies  and
software firms that are potential competitors and they may develop products that
are more efficient or less costly than the Company's  products.  These potential
competitors are large,  well financed,  established  companies that have greater
resources for research and  development,  manufacturing  and marketing  than the
Company.

         Marketing.

         The Company  marketed its products  through its own personnel  from its
offices in Mount Laurel, New Jersey to its customers and prospects.  The Company
does not offer  financing  or  leasing  for its  systems,  nor is such a program
contemplated.

         Suppliers.

         Manufacture of the Company's  hardware  products  principally  involves
circuit design, selection, and the assembly of purchased electronic,  electrical
and  peripheral   components  (such  as  custom-made   printed  circuit  boards,
custom-manufactured   enclosures,   custom-manufactured   application   specific
integrated  circuits,   standard  integrated  circuits,   components  and  power
supplies). The Company also makes use of programmable array logic chips in order
to  minimize  physical  size  and to  protect  against  reverse  engineering  by
competitors. Agreements exist with the Company's suppliers to restrict them from
selling to others any custom  components  supplied to the  Company.  Most of the
components  of  the  Company's   hardware   products  are  commonly   available,
industry-standard material.

         From time-to-time,  the electronics  industry has experienced  periodic
shortages in the supply of certain  standard  semiconductor  devices.  It is the
Company's policy to maintain alternate sources for all important components,  as
well as to adjust  inventories,  in  anticipation  of  delayed  delivery  times.
Currently,  however,  some  components  utilized in the  Company's  products are
available only from a single source.

         Research and Development.

         The  Company   operated  in  an  industry  that  is  subject  to  rapid
technological change. The Company's ability to compete depends upon, among other
things, its ability to offer its customers state-of-the-art computer systems.

         The  Company  protected  its  investment  in  software  through  use of
unregistered copyrights and by reliance on trade secrecy laws. The Company's use
of custom  application  specific  integrated  circuits ("ASIC") and programmable
array logic  chips  ("PAL")  presents  technological  barriers  to  unauthorized
copying of the Company's products.  The Company requires all technical personnel
to sign nondisclosure  agreements with respect to the Company's products.  There
can be no  assurance  that others  will not  unauthorizedly  copy the  Company's
products  despite these protective  devices.  The Company believes that the most
effective  protection  of its trade  secrets is rapid  development  of  improved
hardware and software which makes use of the latest technology.

                                        5

<PAGE>





         Employees.

         On April 9, 1998, the Company employed 3 full-time persons: 3 in sales,
management, and administration; compared to the 30 full-time persons employed at
March 22, 1997 (7 in sales, management, and administration; 4 in hardware design
and  production;  and 19 in software  development and  production).  None of the
Company's  employees  is  represented  by a  labor  union.  As a  result  of the
Company's  inability to obtain long term  financing and to increase  sales,  the
Company was required to reduce its workforce from 30 to 3.

Item 2.  Properties.

         The Company leases its administrative offices and sales and programming
facilities  (containing  approximately  30,000  square  feet of  space) in Mount
Laurel, New Jersey. The Company pays approximately $27,000 per month,  including
its share of taxes,  insurance and other expenses  customarily borne by a tenant
under a "net" lease, which has been extended to March 15, 1999. The Company does
not own,  and leases no other,  real  property.  The Company  believes  that its
facilities are satisfactorily maintained.

Item 3.  Legal Proceedings.

         None.

Item 4.  Submission of Matters to a Vote of Security Holders.

         None.

                                        6

<PAGE>



                                    PART II

Item 5. Market for the Registrant's Common Equity and Related Stockholder 
        Matters.

         The  following  table  shows  the  quarterly  range of  prices  for the
Company's  Class A Common  Shares,  as reported by the National  Association  of
Securities  Dealers  Automated  Quotation  system for the period January 1, 1996
through December 31, 1997. Prices shown represent actual trades.

                                                   High           Low

First Quarter 1997                                 1 5/16          7/8
Second Quarter 1997                                1 11/16          1/2
Third Quarter 1997                                  1 1/4         9/16
Fourth Quarter 1997                                1 7/16         9/16

First Quarter 1996                                   4 1/2          9/16
Second Quarter 1996                                3 13/16          2
Third Quarter 1996                                  3 1/8           1
Fourth Quarter 1996                                1 5/16           1


         The Company's Class A Common Shares are listed on the  Over-the-Counter
("OTC") Electronic Bulletin Board since August 28, 1996 and on April 4, 1998 the
"bid price" was $.04 per share.  Prior to that August 28, 1996,  the shares were
listed on the NASDAQ National Market Systems.

      Holders. On April 9, 1998, there were approximately 260 holders of Class A
Common Shares, including holders of record and participants in security position
listings.

     Dividends.  The  Company  has not  paid any cash  dividends  on its  Common
Shares. The Company's credit agreements,  with its bank, prohibit the payment of
dividends.

Item 6.  Management's Discussion and Analysis of Financial Condition and 
         Results of Operations.

         Results of Operations.

         On March 10, 1998 AW Computer Systems,  Inc., a New Jersey corporation,
(the "Company" or "AW")  announced  that it was  discontinuing  operations.  The
company's efforts to obtain long term financing have not been successful nor has
the Company  been able to increase  the sales of its  products.  There can be no
assurance that the Company will be able to resume its' operations.

         AW's ability to continue as a going concern is dependent on the receipt
of a  significant  capital  investment  and an order or orders for the Company's
Wizard of POS and/or the CPA system.  During  1997,  in order to raise funds for
the  continued  development  of the CPA  product  and for the support of ongoing
operations,  certain officers and directors of the Company and other individuals
purchased a total of 8,947 shares of Series A 10% Redeemable Preferred Stock and
Warrants for $894,700.  The Company expects that its existing capital  resources
may  enable  it to  maintain  operations  beyond  the  first  quarter  of  1998.
Thereafter,  the Company will need to raise  substantial,  additional capital to
resume  operations.  There can be no assurance  that the Company will be able to
resume operation.

         Most all customer system  installations  are contingent upon successful
test store or pilot  implementations,  therefore,  the backlog of total revenues
from a  customer  project  cannot be  considered  firm  until the pilot has been
accepted by the  customer.  At April 9 1998, AW had a backlog of firm orders for
delivery within one year of $0 compared to $570,000 at March 25, 1997.

                                        7

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      The CPA Project was  developed  under  contract  with a large  supermarket
chain, which does not include any guaranteed  minimum purchase.  The Company has
received  an  order  for  eleven  (11)  systems  and they  are  currently  being
installed.  Notwithstanding  the  successful  installation  of two systems,  the
Company's  customer  cancelled their purchase order with AW on March 9, 1998 and
on the same date  advised  the  Company  that it was  unwilling  to enter into a
second  order that was  required  in order for the  Company to raise  additional
capital. At that time the Company determined to discontinue operations.

      The CPA  system  protects  supermarket  against  losses  due to theft  and
inaccuracies   at  the  checkout   counter.   The  system  consists  of  cameras
strategically mounted above the checkout counters and AW's proprietary software.
The CPA system  employs vision  technology to interact  visual images and relate
them to the transaction being processed at the cash register.  The Wizard brings
the familiarity of Microsoft's  graphical Windows  environment to the retail POS
operation.  Unlike existing  graphical POS systems that demand total replacement
of a retailer's hardware and software,  the Wizard adds graphical  capability to
existing  environments.  The Eureka version is an electronic  product flip chart
that displays  digital  images of the produce or products in a grocery or retail
store.  The  Scrolling  Receipt  and  Merchandiser  version  provides a readable
detailed  receipt  to  customers  concerning  their  purchases  at the  time  of
check-out.

      The  Company  has lost  money for the past  three  years and  discontinued
operations on March 10, 1998. The Company has paid operating expenses during the
past years with funds raised from the sale of common stock, redeemable preferred
stock and borrowed funds. AW's ability to restart operations is dependent on the
successful  completion  of future  financings  and the  ability to  attract  key
personnel.

         Revenues.

             1997.

             In 1997 revenue increased $151,000 to $1,151,000 from $1,000,000 in
1996.  The  increase in sales was  primarily  the result of  completing  the CPA
contract.  Software  revenue,  maintenance  fees and contract  programming  also
contributed to the 1997 revenue and were approximately the same as 1996.

             The CPA  Development  Contract  incurred  costs  in  excess  of its
$1,700,000  contractual  budget and the Company recognized a loss of $777,000 on
the contract in 1997.  Under the terms of this contract with a well  established
supermarket chain, ownership of the products will be transferred to the contract
partner while exclusive marketing rights remain with AW.

             1996.

             Revenues in 1996 declined $2,424,000 to $1,000,000. The decrease in
sales was primarily caused by the reduction in sales of AWare related  equipment
and software because of technical obsolescence.  Software revenues,  maintenance
fees  and  contract  programming  also  contributed  to 1996  revenue  and  were
approximately the same as 1995.

             The CPA  Development  Contract  incurred  costs  in  excess  of its
$1,700,000 contractual budget and the Company recognized a loss of $1,104,000 on
the contract  during 1996.  The 1996 loss included a loss  provision of $400,000
representing the estimated cost to complete the contract.

                                        8

<PAGE>





         Costs.

             1997.

             The Company  incurred  direct cost in excess of revenues  primarily
from the costs  related  to the  completion  of the CPA  contract.  The  Company
recognized a loss of $777,000 on the contract in 1997.

             1996.

             The Company  incurred  direct cost in excess of revenues  primarily
from the costs related to the  development  contract for the CPA  contract.  The
Company recognized a loss of $1,104,000 on the contract in 1996 including a loss
provision of $400,000.

         Expenses.

             1997.

             The  Selling,   General  and   Administrative   expenses  decreased
$933,000,  or 29.4%,  mainly  because of a reduction in the number of employees,
reduced salaries for the remaining  employees,  and reduced  occupancy  expenses
from the sublet of excess office space.

             1996.

             Selling, General and Administrative expenses increased $206,000, or
6%, in 1996 as compared to 1995 due primarily to increased employee compensation
and related expenses.

         Research and Development.

         The data processing  industry is characterized  by rapid  technological
advances.  The Company  spent $46,000 and $111,000 on  development  for 1997 and
1996, respectively.

         Operating Results.

             1997.

             Costs  incurred in excess of contract  revenues for the CPA project
caused   expenses  to  exceed  revenue   causing  a  negative  gross  profit  of
approximately  $534,000.  After Selling,  General and  Administrative  expenses,
Development expenses and Interest expenses,  the loss before and after taxes was
approximately  $3,001,000.  The Company  anticipates  that losses will  continue
until such time, if ever, that it can generate sufficient revenues from the sale
of products to cover operating costs.

             1996.

             Costs  incurred in excess of contract  revenues for the CPA project
caused   expenses  to  exceed  revenue   causing  a  negative  gross  profit  of
approximately $419,000.  After Selling, General and Administrative expenses, the
loss before and after taxes was approximately $3,862,000.

         Financial Position and Capital Resources.

         On March 10, 1998 AW Computer Systems,  Inc., a New Jersey corporation,
(the "Company" or "AW")  announced  that it was  discontinuing  operations.  The
company's efforts to obtain long term financing have not been successful nor has
the Company  been able to increase the sales of its  products.  At April 9, 1998
the  Company has  $29,000 in cash  $2,000,000  in  Liabilities  and  $100,000 in
Assets.

                                        9

<PAGE>





         In 1997,  operations  were  funded by the sale of  Preferred  Stock and
Loans because cash flow generated from operations were not sufficient to sustain
the Company.  AW's needs for cash arise  principally  from  salaries,  sales and
marketing expenses, research and development expenses and occupancy expenses.

         During April and May of 1997, the Company raised $250,000 from the sale
of 2,500 shares of Series A 10% Redeemable Preferred Stock and two year Warrants
to purchase  500,000  Class A Common Shares for $.50 per share sold to a limited
number of qualified  investors,  including certain officers and directors of the
Company.

         On June 28, 1997, the Company  consummated an exchange with an investor
group,  including  certain  officers and directors of the Company.  The investor
group  purchased the Company's Bank Debt and exchanged  $474,900 of secured debt
and  $22,000 of accrued  interest  for 3,822  shares of Series A 10%  Redeemable
Preferred Stock, two year Warrants to purchase 764,400 Class A Common Shares for
$.50 per share and a $45,000 cash  payment.  The exchange  resulted in a gain of
$69,700 and was recorded as Additional Paid-in Capital.

         In December of 1997, the Company raised $262,500 from the sale of 2,625
shares of Series A 10%  Redeemable  Preferred  Stock  and two year  Warrants  to
purchase  787,500  Class A Common  Shares  for $.40 per share  sold to a limited
number of qualified  investors,  including certain officers and directors of the
Company.

         During 1997,  working capital  decreased  $1,164,000 to $(1,487,000) as
compared to $(323,000) at December 31, 1996.  Current assets decreased  $970,000
due to decreases in cash,  cost and estimated  earnings in excess of billings on
uncompleted  contracts,  inventory,  and prepared assets of $803,000,  $200,000,
$47,000, and $10,000, respectively, offset by an increase in accounts receivable
of $100,000.  Current liabilities increased $194,000 due to an increase in notes
payable of $773,000,  customer  deposits  $100,000 and accrued  compensation  of
$193,000  offset by  decrease  of  $475,000  in the line of credit,  $408,000 in
accrued  contract  costs,  $62,000 in accrued  liabilities  and $16,000 in other
liabilities.

         Cash and cash equivalents necessary to operate at the Company's current
capacity  beyond the first  quarter of 1998 will be dependent on the  successful
completion of financing to provide working capital.

         The results of operations  in 1997 have affected the Company's  debt to
equity relationship as can be seen in the following table:

                                     1997        1996       1995       1994
                                     ----        ----       ----       ----

Total liabilities                 $ 1,936,823 $1,776,965  $1,807,797 $1,809,775

Total Shareholders' equity 
 (deficit)                        $(1,248,044)$  817,732  $2,086,456 $4,074,047

Total liabilities divided by
      shareholders' equity                N/A       2.17        0.87       0.44

                                       10

<PAGE>





         Liquidity.

         The Company requires significant working capital in order to be able to
restart  operations in 1998.  Such resumption of operations will be dependent on
the Company securing external financing and on the successful sale of either the
CPA Product or the Wizard Product.

         In  order to  raise  funds  for the  continued  development  of the CPA
product  and for  the  support  of  ongoing  operations,  certain  officers  and
directors of the Company and other individuals purchased a total of 8,947 shares
of Series A 10%  Redeemable  Preferred  Stock and warrants  for $894,700  during
1997.  Dividends  are  payable in cash or in  additional  shares of Series A 10%
Redeemable  Preferred  Stock,  at the discretion of the Board of Directors.  All
dividends  paid  during  1997 were paid with shares of  Preferred  Stock  except
fractional shares, which were paid in cash.

         During April and May of 1997, the Company raised $250,000 from the sale
of 2,500 shares of Series A 10% Redeemable Preferred Stock and two year Warrants
to purchase 500,000 Class A Common Shares for $.50 per share.

         On June 28, 1997, the Company  consummated an exchange with an investor
group,  including  certain  officers and directors of the Company.  The investor
group  purchased the Company's Bank Debt and exchanged  $474,900 of secured debt
and  $22,000 of accrued  interest  for 3,822  shares of Series A 10%  Redeemable
Preferred Stock, two year Warrants to 764,400 Class A Common Shares for $.50 per
share and a $45,000 cash payment. The exchange resulted in a gain of $69,700 and
was recorded as Additional Paid-in Capital.

         In December 1997,  the Company  raised  $262,500 from the sale of 2,625
shares of Series A 10%  Redeemable  Preferred  Stock  and two year  Warrants  to
purchase  787,500  Class A Common  Shares  for $.40 per share  sold to a limited
number of qualified  investors,  including certain officers and directors of the
Company.

         On September 20, 1996, the Company consummated the private placement of
$1,678,023  Class A Common  Shares to a limited  number of qualified  investors,
including certain officers and directors of the Company. The price per share was
$1.00,  or an  aggregate  consideration  of  1,678,023.  The funds were used for
working  capital for the  development  of new products  and to support  on-going
operations.

         On March 8, 1996,  the  Company,  in a private cash  transaction,  sold
250,000 Class A Common Shares for $2.00 per share to Winn-Dixie Stores,  Inc. As
additional  consideration  for the purchase of the shares by Winn-Dixie  Stores,
Inc.,  the  Company  modified  the  exercise  price  of  the  warrants  held  by
Winn-Dixie,  pursuant to a Warrant  Agreement dated October 28, 1993,  which was
entered  into in  consideration  of the Company  receiving  exclusive  marketing
rights to the CPA product,  from the previously amended price of $3.062 to $2.00
per share. By operation of anti-dilution  provisions of the warrants, the number
of shares into which  Winn-Dixie  could convert the warrants  automatically  and
without  additional  consideration  increased from 200,000 to 236,773 on May 15,
1995,  as a result of the private  placement to certain  officers and  directors
noted above.

         In October  1996,  the Company  negotiated a one year  extension of the
Line of Credit  until  December  31,  1997.  In  consideration  for the one year
extension,  the Company issued to Fleet Bank a Warrant  expiring August 31, 1998
to purchase 50,000 Class A Common Shares at $1.25 per share.

         During  1996,  the Company  maintained  a $550,000  Line of Credit with
interest  at the Bank's  prime rate  (8.25% at  December  31,  1996) plus 1%. In
October 1996, the credit facility was increased by $20,368 with an interest rate
of prime plus 2% to fund the requirements of a Letter of Credit presented to the
Bank. The Line of Credit had an outstanding  balance of $570,368 on December 31,
1996.

                                       11

<PAGE>





         In order to raise funds for the development of new products and for the
support of on-going  operations,  on May 15, 1995 certain officers and directors
of the Company and other  individuals  purchased a total of 394,000 units,  each
consisting of one share of the Company's Class A Common Stock and one warrant to
purchase an  additional  share of Class A Common  Stock at an exercise  price of
$2.00 per share.  The warrants are  exercisable  for five years from the date of
grant. The purchase price was $0.55 per unit. The total proceeds to the Company,
net of expenses,  were  $206,000.  The  securities  sold are not  registered for
public sale under the Securities Act of 1933 or any state securities law and the
purchasers acquired no registration rights with respect thereto.

         Stock Options and Warrants.

         The Company adopted  Statement of Financial  Accounting  Standards No. 
123, Accounting for Stock-Based Compensation beginning in 1996.

Item 7.  Financial Statements.

         Financial  statements,  together  with  the  report  of  the  Company's
independent accountants thereon, are presented under Item 13 of this report.

Item 8.  Changes  in  and  Disagreements  with  Accountants  on  Accounting  and
         Financial Disclosure. None

                                       12

<PAGE>




                                    PART III
                             EXECUTIVE COMPENSATION

Summary Compensation
The following  table sets forth a summary of the aggregate  compensation  earned
for services  rendered in all  capacities  to the Company  during the years 1995
through 1997 by the Chief Executive Officer, and by each of the three other most
highly compensated  executive officers earning over $100,000 in 1997 (the "Named
Officers").

                           SUMMARY COMPENSATION TABLE

                             Long-Term Compensation1
                                                      Awards      Payouts
                                          Other                            All
                                         AnnualRestricted       Long-Term Other
    Name and       Fiscal                Compen- Stocks NumberofIncentiveCompen-
Principal Position  Year  Salary   Bonus sation2 Awards Opitons  Payoutssation3

Charles J. McMullin 1997 $140,0004   -- $ 6,560    --  $250,000     --  $2,060
Chairman and Chief  1996 $140,000    -- $ 7,073    --   100,000     --  $2,060
Operating Officer   1995 $140,000    -- $ 7,750    --    25,000     --  $2,152

Charles Welch       1997 $168,1505   -- $ 4,023    --        --     --  $1,146
President and Chief 1996 $168,150    -- $ 3,782    --        --     --  $3,831
Executive Officer   1995 $168,150    -- $15,400    --    10,000     --  $3,105

Charles F. Trapp    1997 $120,0006   --   5,304    --   150,000     --  $3,000
Vice President,     1996 $ 41,153    -- $ 2,235    --    60,000     --  $3,000
  Finance 

P. Michel Lutze     1997 $137,2307   --      --    --       --      --     --
Vice President      1996 $126,800    -- $ 3,759    --       --      --     --
                    1995 $126,800    -- $16,450    --   12,500      --     --

(1) During three years,  1995 through  1997,  no Named  Officer  received  stock
    appreciation  rights,  restricted  stock awards or Long-Term  Incentive Plan
    payouts.
(2) Other Annual Compensation includes the following:
     For Mr. McMullin:  in 1997,  $6,560  automobile  benefit;  in 1996,  $7,073
       automobile benefit; and in 1995, $7,750 automobile benefit.
     For Mr.  Welch:  in  1997,  $4,023  automobile  benefit;  in  1996,  $3,782
       automobile benefit; and in 1995, $6,150 gain on exercise of options and 
       $9,250 automobile benefit.
     For Mr.  Trapp:  in 1997,  $5,304  automobile  benefit and in 1996,  $2,235
       automobile benefit.
     For Mr. Lutze: in 1997, $0 automobile  benefit;  in 1996, $3,759 automobile
       benefit;  and in 1995,  $8,200  gain on  exercise  of  options  and  
       $8,250 automobile benefit.
(3) All Other  Compensation  is comprised  of life  insurance  premiums  paid on
    behalf of the respective individuals.
(4)  Includes  $45,000 of  deferred  salary.  
(5)  Includes  $88,150 of deferred salary.  
(6)  Includes  $20,000 of  deferred  salary.  
(7)  Includes  $44,850 of deferred salary.

                                       13

<PAGE>




                           STOCK OPTION GRANTS IN 1997


     Name and              Options    Options GrantedExercise   Expiration
Principal Position         Granted     To Employees    Price       Date

Charles J. McMullin         250,000        21.5%     $   .65    April 6, 2002
Chairman and Chief
Operating Officer

Charles F. Trapp            150,000        12.9%     $   .65    April 2, 2002
Vice President, Finance

Exercise of Stock  Options and Aggregate  Outstanding  Stock Options at December
31, 1997 The following  table sets forth  information  concerning  stock options
which were exercised  during 1997 by the Chief  Executive  Officer and the other
Named  Officers and the amounts of their  respective  unexercised  options as of
December 31, 1997.

                 AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                           AND FISCAL YEAR-END OPTIONS

                                    Number of
                             Shares Value of In-the-
                                                    Underlying        Money
                                                    Unexercised    Unexercised
                                                    Options at     Options at
                                                     12/31/97       12/31/97
   Name and            Shares Acquired             Exercisable/   Exercisable/
Principal Position       on ExerciseValue Realized Unexercisable  Unexercisable

Charles J. McMullin        - 0 -         - 0 -         435,000/0     --/--
Chairman and Chief
Operating Officer

Charles Welch              - 0 -        - 0 -         121,000/0      --/--
President and Chief
Executive Officer

Charles F. Trapp           - 0 -        - 0 -         210,000/0      --/--
Vice President, Finance


P. Michael Lutze
Senior Vice President      - 0 -        - 0 -         26,500/0       --/--

Bonus Plans
The Board of Directors  adopted a bonus plan for Mr. Welch under which a varying
percentage  of the  Company's  net profits in a  particular  year are paid as an
annual bonus if certain profit objectives  established by the Board of Directors
for that  year are  achieved.  Under the plan now in  effect,  Mr.  Welch  would
receive 2.5% of the first $99,999 of the Company's annual pre-tax profit,  3.75%
of the next  $100,000  of the  Company's  annual  pre-tax  profit  and 5% of the
Company's  annual pre-tax profit in excess of $199,999.  No bonus was paid under
this plan for 1997.

On April 25, 1997,  the Company and Charles J.  McMullin  renewed an  employment
agreement  that  provides for a term of  employment  of three years at an annual
salary of  $140,000  and a cash  bonus of 1.25% of the first  $99,999 of the net
income of the Company  before  charges for  officers'  bonuses and income  taxes
("EBOBAT"),  1.875% of the next  $100,000 of EBOBAT and 2.5% of EBOBAT in excess
of $200,000. No bonus was paid under this plan for 1997.

                                       14

<PAGE>





Since the  organization  of the  Company in 1973,  it has been the policy of the
Company to award an annual bonus to the Company's  officers and  employees.  The
amount of the bonus  awarded to an officer or employee in a  particular  year is
discretionary  and has been dependent upon the officer's or employee's  level of
performance  during the year,  his length of service with the  Company,  and the
Company's earnings during the year. No discretionary  bonuses were paid in 1997.
Under the Company's current  discretionary bonus arrangement,  Messrs.  McMullin
and Welch are not  eligible  for  discretionary  bonuses.  The Company may award
discretionary bonuses for 1998 and subsequent years.

Employment Agreements
The  Company  has  renewed an  agreement  with Mr.  McMullin  providing  for his
employment  in an executive  capacity from April 25, 1997 through April 24, 2000
at an annual minimum base salary of $140,000.  If the employment of Mr. McMullin
is  terminated by the Company  prior to the end of his  employment  term without
cause, the Company will continue to pay Mr. McMullin his salary until the end of
such term, his death, or his employment with another organization, at which time
the Company shall be only obligated to pay Mr.  McMullin the difference  between
his  compensation  from the new  employer and his current  compensation.  During
1997, Mr. McMullin deferred receipt of $45,000 of salary.

The Company has entered  into an  agreement  with Mr.  Welch  providing  for his
employment in an executive  capacity from October 1, 1995 through  September 30,
1998, at an annual minimum base salary of $168,150.  The agreement requires that
this minimum base salary be adjusted  annually during the second and third years
of the contract to reflect the average  percentage salary increase awarded other
senior and  executive  employees  of the  Company  during the  preceding  twelve
months. If the employment of Mr. Welch is terminated by the Company prior to the
end of his employment  term without cause,  the Company will continue to pay Mr.
Welch  his  salary  until the end of such  term,  or the date on which he begins
competing  with, or begins working for an  organization  which competes with the
Company.

During 1997, Mr. Welch deferred receipt of $88,150 of salary.

The Company has entered  into an  agreement  with Mr.  Trapp  providing  for his
employment  in an executive  capacity  from August 29, 1996  through  August 28,
1999, at an annual minimum base salary of $120,000.  The agreement requires that
this minimum base salary be adjusted  annually during the second and third years
of the contract to reflect the average  percentage salary increase awarded other
senior and  executive  employees  of the  Company  during the  preceding  twelve
months. If the employment of Mr. Trapp is terminated by the Company prior to the
end of his employment  term without cause,  the Company will continue to pay Mr.
Trapp  his  salary  until the end of such  term,  or the date on which he begins
competing  with, or begins working for an  organization  which competes with the
Company.
During 1997, Mr. Trapp deferred receipt of $20,000 of salary.

The Company has entered  into an  agreement  with Mr.  Lutze  providing  for his
employment in an executive  capacity from February 15, 1996 through February 14,
1999 at an annual  minimum base salary of  $126,800.  If the  employment  of Mr.
Lutze is  terminated  by the  Company  prior to the end of his  employment  term
without  cause,  the Company will continue to pay Mr. Lutze his salary until the
end of such term, his death,  or his employment  with another  organization,  at
which time the Company shall be only  obligated to pay Mr. Lutze the  difference
between his  compensation  from the new employer  and his current  compensation.
During 1997, Mr. Lutze deferred receipt of $44,850 of salary. Mr. Lutze resigned
as Vice President December 1, 1997.

                                       15

<PAGE>





                                    PART IV

Item 13. Exhibits, Financial Statements and Reports on Form 8-K.

         (a) The following documents are filed as a part of this report:

              (1) Financial Statements:

                  A.   Reports of Independent Accountants.

                  B.   Consolidated  Statements of Operations  for the Two Years
                       Ended December 31, 1997.

                  C.   Consolidated  Statement  of  Assets  and  Liabilities  in
                       Liquidation, December 31, l997.

                  D.   Consolidated   Statement   of   Changes   in  Net  Assets
                       (Liabilities)  Liquidation  Basis  for the  period  ended
                       December 31,1997.

                  E.   Consolidated Statements of Shareholders' Equity (Deficit)
                       for the Two Years Ended December 31, 1997.

                  F.   Consolidated  Statements  of Cash Flows for the Two Years
                       Ended December 31, 1997.

                  G.   Notes to Consolidated Financial Statements.

              (2) Exhibits:

                  3A    The  Company's  Restated   Certificate of Incorporation.
                        Exhibit 3A to the Company's  Registration Statement No.
                        2-68939 is incorporated herein by reference.

                  3A-1  Amendment  to  the  Company's  Restated  Certificate  of
                        Incorporation  dated June 30, 1987.  Exhibit 3A-1 to the
                        Company's  Quarterly Report on Form 10-Q for the quarter
                        ended June 30, 1987 is incorporated herein by reference.

                  3B    The Company's Amended and Restated  By-Laws.  Exhibit 3B
                        to the  Company's  Annual  Report on Form 10-KSB for the
                        year ended December 31, 1994 is  incorporated  herein by
                        reference.

                  3C-1  The  Company's   Registration  Statement  on  Form  S-8.
                        Exhibit 3C-1 to the Company's  Quarterly  Report on Form
                        10-QSB  for the  quarter  ended  September  30,  1995 is
                        incorporated herein by reference.

                  4F    Specimen Certificate for Class A Common Shares.  Exhibit
                        4F to the Company's Annual Report on Form 10-KSB for the
                        year ended December 31, 1994 is  incorporated  herein by
                        reference.

                  10D-4 Supplemental  Employment and Retirement  Agreement dated
                        March 1, 1993 between  Nicholas Ambrus and the Company .
                        Exhibit  10D-4 to the  Company's  Annual  Report on Form
                        10-KSB  for  the  year  ended   December   31,  1993  is
                        incorporated herein by reference.

                  10E   Employment  Agreement  dated  October  1,  1985  between
                        Charles  Welch  and  the  Company.  Exhibit  28C  to the
                        Company's   Registration   Statement   No.   33-1898  is
                        incorporated herein by reference.

                                       16

<PAGE>





               10E-1    Amendment Number Two to the Employment Agreement between
                        the  Company and Charles  Welch dated  August 31,  1995.
                        Exhibit 10E-1 on Form 10-KSB for the year ended December
                        31, 1995 is incorporated herein by reference.

               10F      Employment  Agreement between the Company and Charles J.
                        McMullin  dated  April  25,  1994.  Exhibit  10F  to the
                        Company's  Annual  Report  on Form  10-KSB  for the year
                        ended  December  31,  1994  is  incorporated  herein  by
                        reference.

               10G      Employment  Agreement between the Company and P. Michael
                        Lutze dated  February  15, 1996.  Exhibit  10E-1 on Form
                        10-KSB  for  the  year  ended   December   31,  1995  is
                        incorporated herein by reference.

               10H      Lease between Linpro Industrial  Limited and the Company
                        dated  August 12,  1983.  Exhibit  10H to the  Company's
                        Annual  Report on Form 10-K for the year ended  December
                        31, 1983 is incorporated herein by reference.

               10H-1    Amendment  dated  August 1,  1986 to the  Lease  between
                        Linpro Industrial Limited and the Company. Exhibit 10H-1
                        to the Company's Annual Report on Form 10-K for the year
                        ended  December  31,  1986  is  incorporated  herein  by
                        reference.

               10H-2    Amendment  dated  December 2, 1986 to the Lease  between
                        Linpro Industrial Limited and the Company. Exhibit 10H-2
                        to the Company's Annual Report on Form 10-K for the year
                        ended  December  31,  1986  is  incorporated  herein  by
                        reference.

               10H-3    Sixth Amendment dated November 27, 1991 to Lease between
                        Linpro South Jersey, Inc. and the Company. Exhibit 10H-3
                        of the Company's Annual Report on Form 10-K for the year
                        ended  December  31,  1991  is  incorporated  herein  by
                        reference.

               10H-4    Seventh  Amendment  dated June 7, 1992 to lease  between
                        Linpro  Greentree  Business  Centre  Partnership and the
                        Company. Exhibit 10H-4 to the Company's Annual Report on
                        Form  10-KSB for the year  ended  December  31,  1992 is
                        incorporated herein by reference.

               10H-5    Eighth  Amendment  dated  February  15,  1994  to  lease
                        between Linpro Greentree Business Centre Partnership and
                        the  Company.  Exhibit  10H-5  to the  Company's  Annual
                        Report on Form 10-KSB for year ended  December  31, 1994
                        is incorporated herein by reference.

               10M-16   Addendum   to  the   Referral   Agreement   between  NCR
                        Corporation  and the Company  dated  December  10, 1993.
                        Exhibit  10M-16 to the  Company's  Annual Report on Form
                        10-KSB  for  the  year  ended   December   31,  1994  is
                        incorporated herein by reference.

               10M-18   Solution    Provider    Agreement    between   Microsoft
                        Corporation  and the Company dated August 1995.  Exhibit
                        10E-1 on Form  10-KSB  for the year ended  December  31,
                        1995 is incorporated herein by reference.

               10N-2    The Company's  October 1992 Stock Option and Stock Grant
                        Plan (as amended). Exhibit 10N-2 of the Company's Annual
                        Report on Form  10-KSB for the year ended  December  31,
                        1992 is incorporated herein by reference.

                                       17

<PAGE>





               10P-1    Addendum  to Warrant  Agreement  between the Company and
                        Winn-Dixie  Stores,  Inc.  dated March 8, 1996.  Exhibit
                        10E-1 on Form  10-KSB  for the year ended  December  31,
                        1995 is incorporated herein by reference.

               10V      Agreement for the  Procurement of Life  Insurance  dated
                        May 13, 1986  between the Company and  Nicholas  Ambrus.
                        Exhibit 10V to the Company's  Annual Report on Form 10-K
                        for the year ended  December  31,  1986 is  incorporated
                        herein by reference.

               10W      Agreement for the  Procurement of Life  Insurance  dated
                        May 13, 1986  between  the  Company  and Charles  Welch.
                        Exhibit 10W to the Company's  Annual Report on Form 10-K
                        for the year ended  December  31,  1986 is  incorporated
                        herein by reference.

               21       Subsidiaries of the Registrant.

               27       Financial Data Schedules, electronically filed, as per 
                        Regulation SB.

               (b)      No reports on Form 8-K were filed by the Company  during
                        the last quarter of 1997.

                                       18

<PAGE>




                          INDEPENDENT AUDITOR'S REPORT


To the Shareholders and Board of Directors of
  AW Computer Systems, Inc.

            We  have  audited  the  accompanying   consolidated   statements  of
operations,  shareholders'  equity  (deficit),  and cash  flows  of AW  Computer
Systems,  Inc. and its  subsidiary for each of the two years in the period ended
December 31, 1997. In addition,  we have audited the  accompanying  consolidated
statement of assets and liabilities in liquidation of AW Computer Systems,  Inc.
and its  subsidiary  as of  December  31,  1997.  These  consolidated  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

            We  conducted  our  audits in  accordance  with  generally  accepted
auditing  standards.  Those standards require that we plan and perform the audit
to  obtain  reasonable  assurance  about  whether  the  consolidated   financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting principles
used and  significant  estimates made by  management,  as well as evaluating the
overall  consolidated  financial  statement  presentation.  We believe  that our
audits provide a reasonable basis for our opinion.

            As described in Note 1 to the financial  statements,  liquidation of
the Company appears imminent.  Accordingly, the Company has changed its basis of
accounting  as of  December  31,  1997  from  the  going  concern  basis  to the
liquidation basis.

            In our opinion,  the consolidated  financial  statements referred to
above present fairly,  in all material  respects,  the  consolidated  results of
operations,  and changes in shareholders' equity (deficit), and cash flows of AW
Computer  Systems,  Inc.  and its  subsidiary  for each of the two  years in the
period  ended  December  31,  1997,  and  their   consolidated  net  assets  and
liabilities on a liquidation  basis as of December 31, 1997, in conformity  with
generally  accepted  accounting  principles  applied on the bases of  accounting
described in the preceding paragraph.






                                          /s/Moore Stephens, P.C.
                                          MOORE STEPHENS, P.C.
                                          Certified Public Accountants

Cranford, New Jersey
March 17, 1998

                                       19

<PAGE>



AW COMPUTER SYSTEMS, INC. AND SUBSIDIARY
------------------------------------------------------------------------------


CONSOLIDATED STATEMENTS OF OPERATIONS
GOING CONCERN BASIS
------------------------------------------------------------------------------



<TABLE>
                                                                 Years ended
                                                                 December 31,
                                                             1 9 9 7       1 9 9 6
                                                             -------       -------

<S>                                                        <C>          <C>        
Revenues                                                   $1,151,256   $ 1,000,319

Cost of Revenues                                            1,685,117     1,420,089
                                                           ----------   -----------

  Gross Loss                                                 (533,861)     (419,770)
                                                           ----------   -----------

Expenses:
  Selling, General and Administrative                       2,367,230     3,300,394
  Development                                                  45,681       111,028
  Interest                                                     76,633        69,536
                                                           ----------   -----------

  Total Expenses                                            2,489,544     3,480,958
                                                           ----------   -----------

Other Income                                                   22,542        38,865
                                                           ----------   -----------

Loss Before Income Taxes                                   (3,000,863)   (3,861,863)

Income Tax Benefit                                                 --            --
                                                           ----------   -----------

  Net Loss                                                 $(3,000,863) $(3,861,863)
                                                           ===========  ===========

Basic Loss Per Share Computation:
  Net Loss                                                 $(3,000,863) $ 3,861,863)
  Preferred Stock Dividend Requirements                        42,916            --
                                                           ----------   -----------

  Net Loss Available to Common Stockholders                $(3,043,779) $(3,861,863)
                                                           ===========  ===========

  Basic Loss Per Share                                     $     (.46)  $      (.71)
                                                           ==========   ===========

  Average Common Shares Outstanding                         6,670,567     5,458,978
                                                           ==========   ===========



The Accompanying Notes are an Integral Part of the Consolidated Financial Statements.
</TABLE>

                                         20

<PAGE>



 AW COMPUTER SYSTEMS, INC. AND SUBSIDIARY
------------------------------------------------------------------------------


CONSOLIDATED  STATEMENT OF ASSETS AND  LIABILITIES IN LIQUIDATION AS OF DECEMBER
31, 1997.
------------------------------------------------------------------------------



<TABLE>

Assets:
<S>                                                                     <C>        
  Cash and Cash Equivalents                                             $   106,938
  Accounts Receivable, Less Allowance for Doubtful Accounts
   of $51,465                                                               178,826
  Property and Equipment                                                     40,000
  Other Assets                                                               23,861
                                                                        -----------

  Total Assets                                                              349,625

Liabilities:
  Note Payable - Related Party                                              773,750
  Note Payable - Related Party                                               95,448
  Customer Deposits                                                         100,000
  Accounts Payable                                                           91,968
  Accrued Liabilities                                                       664,825
  Accrued Compensation                                                      370,798
  Deferred Compensation Payable                                             173,578
  Other Liabilities                                                          25,556
                                                                        -----------

  Total Liabilities                                                       2,295,923

Commitments and Contingencies                                                    --

Redeemable Preferred Stock                                                  913,700

  Net Liabilities - Liquidation Basis                                   $(2,859,998)
                                                                        ===========



The Accompanying Notes are an Integral Part of the Consolidated Financial Statements.
</TABLE>

                                         21

<PAGE>



AW COMPUTER SYSTEMS, INC. AND SUBSIDIARY
------------------------------------------------------------------------------


CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
------------------------------------------------------------------------------


<TABLE>

                                                            Class A Common Stock
                                                             Number
                                                            of Shares      Amount


<S>                  <C> <C>                                <C>         <C>        
  Balance - December 31, 1995                               4,467,544   $    44,676

Issuance of Stock Grants                                       30,000           300
Exercise of Stock Options                                     212,500         2,125
Private Placement                                           1,928,023        19,280
Non Cash Compensation                                              --            --
Common Stock Subscribed                                            --            --
Compensation Expense                                               --            --
Net Loss                                                           --            --
                                                           ----------   -----------

  Balance - December 31, 1996                               6,638,067        66,381

Issuance of Stock                                              32,500           325
Exercise of Preferred Stock for Debt                               --            --
Non Cash Compensation                                              --            --
Dividends on Redeemable Preferred
  Stock - $10 Per Share                                            --            --
Net Loss                                                           --            --
                                                           ----------   -----------

  Balance - December 31, 1997                               6,670,567   $    66,706
                                                           ==========   ===========

                                             (Table Continues on Following Page)



The Accompanying Notes are an Integral Part of the Consolidated Financial Statements.
</TABLE>

                                         22

<PAGE>



AW COMPUTER SYSTEMS, INC. AND SUBSIDIARY
------------------------------------------------------------------------------


CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
------------------------------------------------------------------------------

<TABLE>

(Table Continued from Pervious Page)


                                                         Stock
                             Additional    Retained  Subscription               Total
                               Paid-in     Earnings    Related    Deferred  Stockholders'
                               Capital     (Deficit)    Party  Compensation   Equity

  Balance - December 31, 
<S>                           <C>        <C>         <C>       <C>        <C>       
   1995                       $1,895,992 $   181,354  $      -- $ (35,566) $ 2,086,456

Issuance of Stock Grants          33,450          --         --        --       33,750
Exercise of Stock Options        201,594          --         --        --      203,719
Private Placement              2,189,166          --         --        --    2,208,446
Non Cash Compensation            111,658          --         --        --      111,658
Common Stock Subscribed               --          --    (95,000)       --      (95,000)
Compensation Expense                  --          --         --    35,566       35,566
Net Loss                              --  (3,861,863)        --        --   (3,861,863)
                              ---------- -----------  --------- ---------  -----------

  Balance - December 31, 1996  4,431,860  (3,680,509)   (95,000)       --      722,732

Issuance of Stock                 33,915          --         --        --       34,240
Exercise of Preferred Stock 
 for Debt                         69,720          --         --        --       69,720
Non Cash Compensation             32,500          --         --        --       32,500
Dividend on Redeemable 
 Preferred Stock - $10 
 Per Share                            --     (20,073)        --        --      (20,073)
Net Loss                              --  (3,000,863)        --        --   (3,000,863)
                              ---------- -----------  --------- ---------  ----------

  Balance - December 31, 1997 $4,567,995 $(6,701,445) $ (95,000)$      --  $(2,161,744)
                              ========== ===========  ========= =========  ===========



The Accompanying Notes are an Integral Part of the Consolidated Financial Statements.
</TABLE>

                                         23

<PAGE>



AW COMPUTER SYSTEMS, INC. AND SUBSIDIARY
------------------------------------------------------------------------------


CONSOLIDATED STATEMENTS OF CASH FLOWS
GOING CONCERN BASIS
------------------------------------------------------------------------------

<TABLE>
                                                                 Years ended
                                                                 December 31,
                                                             1 9 9 7       1 9 9 6
                                                             -------       -------

Cash Flows from Operating Activities:
<S>                                                       <C>           <C>         
  Net Income (Loss)                                       $(3,000,863)  $(3,861,863)
  Adjustments to Reconcile Net Income (Loss) to Net Cash
   Provided by (Used for) Operating Activities:
   Depreciation and Amortization                              229,879       299,958
   Amortization of Unearned Compensation                           --        35,566
   Provision for Doubtful Accounts                             11,498       (70,162)
   Provisions for Inventory                                        --        57,366
   Non Cash Compensation                                       32,500       145,408
   Gain on Capital Disposition                                     --        (4,127)
   Computer Software Expensed                                 669,351            --
   Adjustment to Liquidation Basis of Fixed Assets            228,836            --
   Liquidation Basis Adjustments                             (698,254)           --

   Decrease (Increase) in:
     Accounts Receivable                                     (111,944)      596,740
     Costs and Estimated Earnings on Uncompleted Contracts    200,015       258,222
     Inventories                                               56,589       400,836
     Income Taxes Receivable                                       --       280,445
     Prepaid Expenses and Other Assets                         40,301        50,281

   Increase (Decrease) in:
     Accounts Payable                                         (55,227)     (144,675)
     Accrued Liabilities                                      445,454       134,856
     Accrued Costs                                           (408,406)       75,753
     Customer Deposits                                         50,000            --
     Other Current Liabilities                                (16,199)       (9,302)
     Accrued Compensation                                     193,436       105,378
     Pension Costs                                             11,070        27,250
                                                           ----------   -----------

  Net Cash  (Used in) Operating Activities                 (2,121,964)   (1,622,070)
                                                           ----------   -----------

Cash Flows in Investing Activities:
  Capital Expenditures                                         (5,663)     (147,808)
  Capital Disposals                                            18,527         9,592
  Computer Software Capitalized                                    --      (305,725)
                                                           ----------   -----------

  Net Cash Provided by (Used in) Investing Activities          12,864      (443,941)
                                                           ----------   -----------

Cash Flows Financing Activities:
  Borrowings (Payments):
   Proceeds from Note Payable - Related Party                 773,750            --
   Line of Credit                                                  --        20,368
   Issuance of Preferred Stock                                534,500            --
   Payments on Long Term Debt                                 (45,000)     (225,000)
   Lease Obligations                                               --       (15,460)
   Advances - Related Party Loans                                  --       (55,000)
   Issuance of Common Stock                                    34,240     2,412,164
   Dividends Paid on Redeemable Preferred Stock                (1,073)           --
                                                           ----------   -----------

  Net Cash Provided by Financing Activities                 1,296,417     2,137,072
                                                           ----------   -----------

  Increase (Decrease) in Cash and Cash equivalents           (812,683)       71,061

Cash and Cash Equivalents - Beginning of Years                919,621       848,560
                                                           ----------   -----------

  Cash and Cash equivalents - End of Years                 $  106,938   $   919,621
                                                           ==========   ===========

The Accompanying Notes are an Integral Part of the Consolidated Financial Statements.

</TABLE>
                                         24

<PAGE>



AW COMPUTER SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
------------------------------------------------------------------------------


1.   Basis of Presentation:

        Description of Business:

        Historically,  AW Computer Systems, Inc. and its wholly-owned subsidiary
        (the   "Company")  is  in  the  business  of  developing  and  marketing
        specialized   computer-based   POS  systems  consisting  of  proprietary
        hardware and  software.  The Company  derived  revenues from selling the
        hardware  and  installing  the  software  for  licensed  use by clients.
        Because of rapid  technological  advances in the  computer  systems upon
        which  the  Company  based  its  products  and  the  changing  needs  of
        customers,  new software and hardware  must  constantly  be developed in
        order  to  deliver  products  that  use the  current  industry  standard
        equipment.  Substantially  all of the  Company's  revenues come from the
        retail sector of the economy and its  customers  are located  throughout
        the United States.

        Going Concern and Liquidation Basis:

        As a result of the  Company's  significant  recurring net losses and its
        inability  to  obtain  debt  or  equity  financing  needed  to  continue
        operations,  the Company  cannot be  classified as a going  concern.  At
        March  10,  1998,  the  Company  decided  to  adopt   liquidation  basis
        accounting.  The  accompanying  consolidated  statement  of  assets  and
        liabilities  in  liquidation  as of December 31, 1997 have been prepared
        using that basis.

        It is not presently determinable whether the amounts realizable from the
        disposition of the remaining  assets or the amounts that creditors agree
        to accept  in any  settlement  of the  obligation  due them will  differ
        materially from the accompanying financial statements.

        Adjustments of Estimated Values

        The following assets have been reduced to liquidation values:

                                             Historical     Estimated
                                               Basis     Liquidation Value

        Prepaids                             $  25,552     $        0
        Inventories                              9,766              0
        Property and Equipment, net            268,836         40,000
                                             ---------     ----------

           Total                             $ 304,154     $   40,000
                                             =========     ==========

        The Company  estimates  liquidation  costs to  approximate  $434,100 and
        these costs have been accrued for as of December 31, 1997.

2.   Summary of Significant Accounting Policies:

        Principals of Consolidation:

        The  consolidated  financial  statements  include  the  accounts  of the
        Company and its wholly-owned  subsidiary.  All significant  intercompany
        transactions and balances have been eliminated.

                                       25

<PAGE>





        Accounting Estimates:

        The  preparation  of financial  statements in conformity  with generally
        accepted accounting principles requires management to make estimates and
        assumptions  that effect the reported  amounts of assets and liabilities
        and disclosure of contingent  assets and  liabilities at the date of the
        financial  statements and the reported  amounts of revenues and expenses
        during the  reporting  period.  Actual  results  could differ from those
        estimates.

        Revenue Recognition:

        Revenue and costs are  recognized  on  fixed-price  contracts  using the
        percentage of completion  method.  The percentage of completion is based
        upon the  percentage  of total cost of labor  performed to the estimated
        total labor costs to be incurred under the contract. This method is used
        because  management  considers  labor performed to be the best available
        measure of progress on these contracts.

        Contract  costs include all direct labor,  material and overhead  costs.
        Revisions to estimated costs and contract  profitability  are recognized
        in the period the revisions  are  determined.  Provisions  for estimated
        losses on  contracts  are  recorded  in the period  such  losses  become
        evident.

        Revenue from the licensing of computer  software is recognized  when the
        software is accepted by the customer.

        Revenue under  maintenance  contracts is  recognized  ratably over the
        life of the contract.

        Cash and Cash Equivalents:

        For purposes of the statements of cash flows, the Company  considers all
        highly liquid debt  instruments  purchased  with original  maturities of
        three  months  or less  to be  cash  equivalents.  The  carrying  amount
        reported in the balance sheet approximates its fair value.

        Property and Equipment:

        The  carrying  amount of property  and  equipment  was  adjusted  from a
        historical  basis to  reflect  the  amount of cash  expected  from their
        realization and  settlement.  When assets are sold, the related cost and
        accumulated  depreciation  are removed from the accounts and any gain or
        loss  from  such  disposition  is  included  in  operations.   Leasehold
        improvements are capitalized and amortized over the term of the lease.

        Computer Software:

        Costs incurred subsequent to establishment of technological  feasibility
        to  produce  the  finished  product  are  capitalized.  Maintenance  and
        upgrades are expensed as incurred.

        During 1997, the Company expensed  $669,351 of software costs previously
        capitalized  because the product failed to generate  revenue since being
        developed.

        Capitalized  software costs are amortized using the straight-line method
        over the estimated economic life of the product. Amortization expense of
        computer software costs was $0 in 1997 and 1996. Costs capitalized prior
        to 1995 have been fully  amortized as of 1995.  The following is a table
        as of December 31, 1997.

        Computer Software                   $ 1,780,521
        Accumulated Amortization            (1,111,170)
        Write Off                             (669,351)
                                            ----------

           Computer Software, Net           $        0
                                            ==========

                                       26

<PAGE>





           Impairment:

           Certain  long-term  assets  of the  Company  are  reviewed  at  least
           annually  as to whether  their  carrying  value has become  impaired,
           pursuant to guidance established in Statement of Financial Accounting
           Standards  ("SFAS")  No.  121,  "Accounting  for  the  Impairment  of
           Long-Lived  Assets  and for  Long-Lived  Assets to be  Disposed  Of."
           Management  considers  assets to be  impaired if the  carrying  value
           exceeds  the future  projected  cash flows  from  related  operations
           (undiscounted and without interest charges).  If impairment is deemed
           to exist,  the assets will be written down to fair value or projected
           discounted  cash  flows  from  related  operations.  Management  also
           re-evaluates  the  periods  of  amortization  to  determine   whether
           subsequent  events and  circumstances  warrant  revised  estimates of
           useful lives.

           Stock Options Issued to Employees:

           The  Company  adopted  SFAS  No.  123,  "Accounting  for  Stock-Based
           Compensation,"  on  January  1,  1996 for  financial  statement  note
           disclosure  purposes and will continue to apply the  intrinsic  value
           method of  Accounting  Principles  Boards  ("APB")  Opinion  No.  25,
           "Accounting for Stock Issued to Employees,"  for financial  reporting
           purposes.

           Depreciation and Amortization:

           Property   and   equipment  is   depreciated   or  amortized  on  the
           straight-line  method over the  estimated  useful lives of the assets
           (ranging from five to seven years).

           Income Taxes:

           Income taxes are provided  based upon the  provisions of Statement of
           Financial  Accounting Standards No. 109 "Accounting for Income Taxes"
           ("SFAS 109"), which requires  recognition of deferred tax liabilities
           and assets for the expected  future tax  consequences  of events that
           have been included in the financial statements or tax returns.  Under
           this method, deferred tax liabilities and assets are determined based
           on the  difference  between the financial  statement and tax bases of
           assets and liabilities using enacted tax rates in effect for the year
           in which  the  differences  are  expected  to  reverse.  A  valuation
           allowance  is provided if it is more likely than not that some or all
           of the deferred tax asset will not be realized.

           Net Loss Per Class A Common Share:

           The  Financial  Accounting  Standards  Board has issued  Statement of
           Financial  Accounting  Standards  ("SFAS")  No.  128,  "Earnings  per
           Share";  which is  effective  for  financial  statements  issued  for
           periods  ending after  December 15, 1997.  Accordingly,  earnings per
           share data in the financial  statements  for the year ended  December
           31, 1997,  have been calculated in accordance with SFAS No. 128. SFAS
           No. 128 did not have an effect on the loss per share calculations for
           the year ended December 31, 1996.

           SFAS No. 128 supersedes  Accounting  Principles Board Opinion No. 15,
           "Earnings  per Share," and  replaces  its primary  earnings per share
           with a new  basic  earnings  per  share  representing  the  amount of
           earnings  for the  period  available  to each  share of common  stock
           outstanding during the reporting period.


                                       27

<PAGE>




           Net Loss Per Class A Common Stock [Continued]

           SFAS No. 128 also requires a dual  presentation  of basic and diluted
           earnings per share on the face of the statement of operations for all
           companies with complex capital structures. Diluted earnings per share
           reflects  the amount of  earnings  for the period  available  to each
           share of common stock outstanding during the reporting period,  while
           giving  effect to all  dilutive  potential  common  shares  that were
           outstanding  during  the  period,  such as common  shares  that could
           result from the potential  exercise or conversion of securities  into
           common stock.

           The  computation  of  diluted  earnings  per  share  does not  assume
           conversion, exercise, or contingent issuance of securities that would
           have an antidilutive  effect on earnings per share (i.e.,  increasing
           earnings per share or reducing loss per share).  The dilutive  effect
           of  outstanding  options  and  warrants  and  their  equivalents  are
           reflected in dilutive  earnings per share by the  application  of the
           treasury stock method which recognizes the use of proceeds that could
           be  obtained  upon  exercise of options  and  warrants  in  computing
           diluted  earnings per share.  It assumes  that any proceeds  would be
           used to purchase  common stock at the average market price during the
           period.  Options and warrants  will have a dilutive  effect only when
           the  average  market  price of the  common  stock  during  the period
           exceeds the exercise price of the options or warrants.

           Advertising:

           Advertising Costs which are immaterial are expensed as incurred.

           Concentration of Credit Risk:

           The Company  sells  primarily  to  customers  in the retail  industry
           throughout  the  United  States.  The  financial  instruments,  which
           potentially  subject the Company to a  concentration  of credit risk,
           are cash and cash  equivalents  and  accounts  receivable.  To reduce
           credit  risk,  the  Company  performs  a  credit  evaluation  of  its
           customers'  financial  conditions  and has  generally  short  payment
           terms.  The  Company  does not  require  collateral  on its  accounts
           receivable  and its losses on  accounts  receivable  have been within
           management's  expectations.  The Company  maintains its cash and cash
           equivalents primarily in two financial institutions.  At December 31,
           1997,  the  Company  had no  credit  risk  related  to cash  and cash
           equivalents.

                                       28

<PAGE>





3.   Statement of Cash Flows:

     Supplemental disclosure of cash flow information:

     Cash paid during the years for:
                                          1997          1996
                                          ----          ----

     Interest                          $  55,043     $   64,994
     Taxes                             $      --     $       --


     Supplemental disclosure of non-cash investing and financing activities:

                                              1997          1996
                                              ----          ----

     Issuance of stock grants               $     --     $   33,750
     Issuance of common stock for
        Notes receivable                          --         95,000
     Issuance of Preferred Stock in
        Satisfaction of Line of Credit       429,920             --
     Preferred Dividends Paid in Preferred
        Stock                                 19,000             --

4.   Contracts Requiring Development:

     The  fixed  price  contracts  by  which  the  Company  recognizes  revenues
     frequently  involve  development of new software  programs  and/or hardware
     components.  The Company retains ownership of the products  developed under
     most  of  these  contracts.  Revenues  and  costs  recognized  under  these
     contracts have been:

                                         1997           1996
                                         ----           ----

     Contract revenues                 $ 192,000    $   88,000
     Cost of contract revenues         $ 969,000     1,003,980

     The Company has completed a contract to provide research and development to
     one of its major  customers  pursuant to an  Application  System  Prototype
     Development Agreement (CPA Project).  Through December 31, 1997, $1,770,000
     and  $4,470,000  have been  recognized  as  revenues  and cost  under  this
     Agreement,   respectively.   The  Project  has  exceeded   its   $1,700,000
     contractual  budget and the Company has  recognized a loss of $2,770,000 of
     which  $1,020,000 and $1,353,000  have been  recognized for the years ended
     December 31, 1997 and 1996, respectively. Under this Agreement, the Company
     retains  sole  marketing  rights of the  technology  and is required to pay
     royalties.

                                       29

<PAGE>





5.   Major Customers:

     Information concerning major customers is as follows:


                                                        Revenues
       Year ended            Number of            attributable to each
      December 31,         major customers          major customer

          1997                Three         $461,000; $270,000; and $216,000
          1996                Three         $420,000; $320,000; and $130,000

6.    Income Taxes:

      The provision (benefit) for income taxes consists of the following:

                                  1997           1996
                                  ----           ----

      Current:
         Federal              $        --    $        --
         State                $        --             --
                              -----------    -----------

                                       --             --

      Deferred                         --             --
                              -----------    -----------

                              $        --    $        --
                              ===========    ===========

      Deferred tax assets (liabilities)  comprised the following at December 31,
1997:

      Excess book over tax basis of
         property and equipment              $    39,042
      Excess tax over book basis of
         computer software                      (267,740)
      Excess book basis over tax basis of
         bad debt and inventory allowance         20,586
      Write down of Net Assets                   105,661
      Excess  book basis over tax basis of
         non-qualified defined pension            69,431
      Net operating loss carryforwards         2,718,000

      Deferred Tax Asset                       2,684,980
      Valuation allowance for deferred 
       tax asset                              (2,684,980)

         Net Deferred Tax Asset              $        --
                                             ===========

       The Company has a net  operating  loss ("NOL")  carry forward for federal
       tax purposes of $6,795,000 of which $801,000 expires in the year 2010 and
       $3,724,000  expires in the year 2011 and  $2,270,000  expires in the year
       2012.  The valuation  allowance of  $2,684,980  represents an increase of
       $754,162 from the preceding year.

                                       30

<PAGE>





       Reconciliation of the federal  statutory rate to the Company's  effective
       tax rate for the years ended December 31, 1997 and 1996 is as follows:

                                      1997         1996

       Federal statutory rate         (34.0)%      (34.0)%
       State income tax rate, net of
         federal income tax benefit    (6.0)        (6.0)
       Deferred tax asset
         valuation allowance           40.0         40.0
                                 ----------  -----------

         Effective tax rate              (0)%         (0)%


7.     Property and Equipment:

       Property and equipment consists of the following at December 31, 1997:

       Furniture and equipment             $  797,093
       Automotive equipment                    70,334
       Leasehold improvements                 353,627
       Property under capital lease            59,321

                                            1,280,375
       Less:  accumulated depreciation
                 and amortization           1,011,539

       Write down of Net Assets               228,836

       Net Property and Equipment          $   40,000

       Depreciation  expense  was  $229,879  and  $299,958  for the years  ended
       December 31, 1997 and 1996, respectively.

8.     Benefit Plans:

       The Company has a 401(k) defined contribution retirement plan that covers
       substantially all employees.  Eligible employees may contribute up to 15%
       of compensation with matching  contributions at the Company's option. The
       Plan does not require a matching contribution by the Company. The Company
       did not make a contribution  to the plan or incur any expenses in 1997 or
       1996.

9.     Debt:

       The Company borrowed $750,000 at 9.5%, per annum, due September 20, 1997,
       from its largest  shareholder.  The Note,  including interest of $23,750,
       was extended until March 19, 1998. (See Note 15).

                                       31

<PAGE>





       In June  1997,  the  Company  exchanged  3,822  shares  of  Series  A 10%
       Redeemable  Preferred Stock, two year Warrants to purchase 764,400 shares
       of Class A Common  Stock at $.50 per share and  $45,000 in  exchange  for
       cancellation of approximately  $474,900 of secured debt under the Company
       line of credit and $22,000 of accrued interest. The Company also extended
       the Warrants to purchase 50,000 shares of stock at $1.25 per share issued
       to the bank  scheduled  to expire  August 31, 1998 until August 31, 2006.
       The  transaction  resulted  in a gain of $69,700  and was  recorded as an
       increase to Additional Paid-in Capital. The remaining balance of $95,448,
       with interest,  at the Bank's prime rate (8.5% at December 31, 1997) plus
       one percent matured December 31, 1997.

       The Company did not make the  required  payment on December  31, 1997 but
       the debt  holders  have not made a demand  for  payment  and the  Company
       continues to work to restructure the notes.

       During  1996,  the  Company  maintained  a $550,000  Line of Credit  with
       interest at the Bank's  prime rate (8.25% at December  31, 1996) plus one
       percent.  In October 1996,  the credit  facility was increased by $20,368
       with an interest rate of prime plus two percent to fund the  requirements
       of a Letter of Credit  presented  to the Bank.  The Line of Credit had an
       outstanding balance of $570,368 on December 31, 1996.

       In  consideration  for a one year  extension from December 31, 1996 until
       December  31,  1997,  the Company  issued to the Bank a Warrant  expiring
       August 31,  1998 to purchase  50,000  shares of stock at $1.25 per share.
       The Company  recorded  $31,300 as Additional  Paid-in Capital and Finance
       Expenses in connection with the loan extension.

10.    Leases:

       The Company leases office  facilities  under a lease,  as amended,  which
       expires in 1999.  The  Company  has the option to extend the lease in one
       year intervals for five years.  The Company also leases office  equipment
       under  operating  leases which expire in 2001. The rental expense for the
       operating  lease  totaled  $275,536  and  $267,518  for the  years  ended
       December 31, 1997 and 1996, respectively. Contingent rentals are provided
       on the Company's  office  facilities  based on CPI increases of operating
       expenses, as defined.

       At  December  31,  1997,  annual  future  minimum  lease  payments  under
       operating  leases and the present value of minimum lease  payments are as
       follows:

              Minimum Lease Payment               Operating Lease

                      1998                          $   276,241
                      1999                               62,431
                      2000                                5,868
                      2001                                5,868
                                                    -----------

                      Total minimum lease payments  $   350,408

        In  accordance  with the  preparation  of  financial  statements  on the
        liquidation   basis,  the  Company  has  included  $303,000  in  accrued
        liabilities at December 31, 1997  representing  the minimum future lease
        payments relating to the Company's  commitment under the non-cancellable
        office facilities lease.

                                       32

<PAGE>





11.   Commitments and Contingencies:

      The  Company  has  entered  into  an  Amended  Employment  and  Retirement
      Agreement  effective July 1, 1996 with its former  Chairman under which he
      is retained as a  consultant  to the Company at a cost of $4,675 per month
      until December 1, 1998.  Effective January 1, 1999, the Company will pay a
      retirement  benefit of $4,675 per month until  December 1, 2003. The total
      present  value as of December 31, 1997 for the  non-qualified,  retirement
      benefit was  $173,578;  total  expense was $11,070 and $27,250 in 1997 and
      1996, respectively.

      On April 1, 1997, the Company  ceased making  payments under the Agreement
      while it  researches  the  validity  of the  Agreement.  Since the Company
      ceased making payment,  it has recorded an expense of $42,075 and included
      that amount in Accrued Liabilities.  Additionally,  in accordance with the
      preparation of financial  statements on the liquidation basis, the Company
      has  included  $56,100  in  accrued   liabilities  at  December   31,1997,
      representing  the future  payments  relating to the  Company's  commitment
      under the consulting agreement.

      The Company  has  historically  satisfied  claims for its  products  under
      warranty.  It is not  possible to determine  the future cost,  if any, for
      future costs under warranty.

12.   Stockholders Equity [Deficit]:

      On  November  1, 1996,  the  shareholders  approved  an  amendment  to the
      Company's Restated Certificate of Incorporation to provide for an increase
      in the  authorization  of Class A Common  Shares,  $.01  par  value,  from
      10,000,000 to 25,000,000 shares.

      In order to raise funds for the continued  development  of the CPA product
      and for the support of ongoing  operations,  on September 20, 1996 certain
      officers and  directors of the Company and other  individuals  purchased a
      total of 1,678,023  shares of the Company's  Class A Common Stock at $1.00
      per share. The total proceeds to the Company were $1,678,023.

      On May 8, 1996,  the  Company,  in a private  cash  transaction,  received
      $500,000 from the sale of 250,000 Class A Common Shares.

13.   Redeemable Preferred Stock:

      On  November  1, 1996,  the  shareholders  approved  an  amendment  to the
      Company's  Restated  Certificate  of  Incorporation  to  provide  for  the
      creation of a new class of 5,000,000 shares of Preferred Stock.

      During 1997, in order to raise funds for the continued  development of the
      CPA product and for the support of ongoing  operations,  certain  officers
      and  directors of the Company and other  individuals  purchased a total of
      8,947  shares of Series A 10%  Redeemable  Preferred  Stock  with a stated
      value of $100 per share, and Warrants for $894,700.  Dividends are payable
      in cash or in  additional  shares  of  Series A 10%  Redeemable  Preferred
      Stock, at the discretion of the Board of Directors.  Dividends paid during
      1997 were paid with 190 shares of Series A 10% Redeemable  Preferred Stock
      with a stated value of $19,000 except fractional  shares,  which were paid
      in cash. The Preferred Stock is mandatorily  redeemable by the Company one
      year from the date of issuance.

      During April and May of 1997, the Company raised $250,000 from the sale of
      2,500  shares  of  Series A 10%  Redeemable  Preferred  Stock and two year
      Warrants to purchase 500,000 Class A Common Shares for $.50 per share.

                                       33

<PAGE>





      On June 28, 1997,  the Company  consummated  an exchange  with an investor
      group,  including  certain  officers and  directors  of the  Company.  The
      investor group purchased the Company's Bank Debt and exchanged $474,900 of
      secured debt and $23,000 of accrued  interest for 3,822 shares of Series A
      10%  Redeemable  Preferred  Stock,  two year Warrants to purchase  764,400
      Class A Common Shares for $.50 per share and a $45,000 cash  payment.  The
      exchange  resulted  in a gain of $69,700 and was  recorded  as  Additional
      Paid-in Capital.

      In December,  1997,  the Company  raised  $262,500  from the sale of 2,625
      shares of Series A 10% Redeemable Preferred Stock and two year Warrants to
      purchase  787,500  Class A Common  Shares  for $.40  per  share  sold to a
      limited  number of qualified  investors,  including  certain  officers and
      directors of the Company.

14.   Stock Options and Warrants:

      The Company has various  incentive  plans.  Under these  plans,  incentive
      stock options,  non-qualified stock options and stock grants may be issued
      to officers and key employees.  Incentive stock options are exercisable at
      a price equal to the fair market value of the shares at the date of grant.
      Non-qualified  stock options will be exercisable at a price, not less than
      $0.50 per share,  determined  by the Board of  Directors.  All options are
      exercisable  for no longer than ten years from the date of the grant.  The
      plans  also  provide  for  grants of stock  subject to at least six months
      deferred  vesting.  The options generally vest or become fully exercisable
      over periods ranging from one to four years.

      Stock  option and warrant  transactions  for the years ended  December 31,
      1997 and 1996 are as follows:

<TABLE>

                                                  Weighted    Non-               Weighted
                                      Weighted    Average  Qualified   Weighted   Average
                            Incentive Average    Remaining  Options    Average   Remaining
                              Stock   Exercise  Contractual   and     Exercise  Contractual
                             Options    Price       Life    Warrants   Price       Life

      Balance, December 31, 
        <S>                <C>         <C>        <C>         <C>      <C>      <C>      
        1995                 335,200   $1.07      3.1 years   761,873  $1.92    4.0 years
      Granted                277,500   $1.03      4.2 years   287,500  $1.04    4.5 years
      Expired                (59,250)  $1.05        --            --     --       --
      Exercised             (212,500)  $1.10        --            --     --       --

      Balance, December 31, 
       1996                  340,950   $1.02      3.7 years 1,049,373  $1.68    3.6 years
      Granted              1,070,000   $ .68        5 years 2,601,900  $ .50    2.7 Years
      Expired                     --      --         --            --     --       --
      Exercised                   --      --         --            --     --       --
      Shares exercisable
      December 31, 1997    1,410,950   $ .76      3.9 years 3,651,273  $ .84    2.7 years

</TABLE>

      The  Company  applies  Accounting  Principles  Board  Opinion  No. 25,
      "Accounting for Stock Issued to Employees," and related  interpretations 
      in accounting for stock options issued to employees and directors.

      In 1997 and 1996, the Company recorded $32,500 and $31,300,  respectively,
      in expense with respect to options granted to non-employees.

                                       34

<PAGE>





      Had compensation  cost for the Company's stock options issued to employees
      and directors been determined  based upon the fair value at the grant date
      for stock  options  issued under these plans  pursuant to the  methodology
      prescribed under Statement of Financial  Accounting Standards ("SFAS") No.
      123, Accounting for Stock-Based  Compensation,  the Company's net loss and
      loss per  share  would  have been  increased,  on a pro  forma  basis,  by
      $153,436,  or $.02 per  share for the year  ended  December  31,  1997 and
      $258,083 or $.04 per share for December 31, 1996.  Pro forma  amounts were
      calculated using the Black-Scholes option-pricing model with the following
      assumptions:

                                             December 31,
                                        1997             1996

      Risk-free interest rate           6.18%            6.198%
      Expected life                    2 years           2 years
      Expected volatility              99.84%            97.2  %
      Expected dividends                 N/A               N/A

      The  weighted  average  exercise  price and fair  value of  options  is as
follows at December 31:


                                  Weighted Average     Weighted Average
                                   Exercise Price         Fair Value

                                  1997       1996        1997       1996
Options Whose Price:
      Exceeds Market                -        $1.25         -        $.63
       Equals Market              $ .65      $1.06       $ .36      $.57
      Is Less Than Market           -        $1.07         -        $.64

The  following  table  summarizes  information  about  incentive  stock  options
outstanding at December 31, 1997:
                                         Weighted
                                          Average      Weighted
  Range of                               Remaining      Average
Exercise Price            Shares     Contractual Life Exercise Price

$.65 - $.75              1,020,000         4.28          $.66
$1.00 - $1.25              387,450         3.54          $1.00
$3.00- $3.25                 3,500         3.30          $3.25

          The following table summarizes  information about  non-qualified stock
options and warrants outstanding at December 31, 1997:

                                         Weighted
                                          Average      Weighted
  Range of                               Remaining      Average
Exercise Price            Shares     Contractual Life Exercise Price

 $.40 - $.50             2,051,900         4.67          $.46
 $.50-$.75                 550,000         4.25          $.65
 $1.00-$1.25               287,500          3.7          $1.04
 $1.75-$2.00               761,873          2.3          $1.92

                                       35

<PAGE>





Net loss and net loss per  share as  reported,  and on a pro  forma  basis as if
compensation  cost had been  determined  on the basis of fair value  pursuant to
SFAS No. 123, is as follows:

                              December 31,
                           1997            1996

Net Loss
 As reported           $(3,043,779)     $(3,861,863)
  Pro forma            $(3,197,215)     $(4,119,946)

Loss per share
 As reported              $(.46)          $(.71)
  Pro forma               $(.48)          $(.75)

15.   Related Party Transactions:

      In March 1997, the Company  borrowed  $750,000 due September 1997 from its
      principal  shareholder with an interest rate of prime rate (8.5%) plus one
      percent  (1%).  Upon  maturity,  the interest of $23,750 and the principal
      were  extended  until March 19,  1998.  The Company is in  discussions  to
      extend the note.

      During April and May of 1997, the Company raised $250,000 from the sale of
      2,500  shares  of  Series A 10%  Redeemable  Preferred  Stock and two year
      Warrants to purchase  500,000  Class A Common Shares for a $.50 per share.
      Officers and  directors  purchased  1,900  shares of  Preferred  Stock and
      380,000 Warrants.

      On June 28, 1997,  the Company  consummated  an exchange  with an investor
      group,  including  certain  officers and  directors  of the  Company.  The
      investor group purchased the Company's Bank Debt and exchanged $474,900 of
      secured debt and $22,000 of accrued  interest for 3,822 shares of Series A
      10%  Redeemable  Preferred  Stock,  two year  Warrants to 764,400  Class A
      Common Shares for $.50 per share and a $45,000 cash payment.  The exchange
      resulted  in a gain of $69,700  and was  recorded  as  Additional  Paid-in
      Capital.  Officers  and  directors  exchanged  $283,900  of Bank  Debt and
      accrued interest for 2,184 shares of Preferred Stock and 436,800 Warrants.

      Officers and directors are currently due $49,995 of the remaining  secured
      debt of $95,448.  The note matured December 31, 1997 and bears interest at
      prime rate (8.5%) plus one percent (1%). The secured note holders have not
      made a demand for  payment  and the  Company  continues  to  negotiate  to
      restructure the notes.

      In December  1997,  the  Company  raised  $262,500  from the sale of 2,625
      shares of Series A 10% Redeemable Preferred Stock and two year Warrants to
      purchase  787,500  Class A Common  Shares  for $.40  per  share  sold to a
      limited  number of qualified  investors,  including  certain  officers and
      directors of the Company. Officers and directors purchased 1,275 shares of
      Preferred Stock and 382,500 Warrants.

      In order to raise funds for the continued  development  of the CPA product
      and for the support of ongoing  operations,  on September 20, 1996 certain
      officers and  directors of the Company and other  individuals  purchased a
      total of 1,678,023  shares of the Company's  Class A Common Stock at $1.00
      per share. The total proceeds to the Company were $1,678,023.

      At December 31, 1997 and 1996, the Company has three notes receivable from
      officers of the Company totaling $95,000 which are included as a reduction
      of capital in the  stockholders'  equity section of the Balance Sheet. The
      notes are for  $20,000,  $35,000  and  $40,000,  are  non-recourse  to the
      borrower  and are  secured  by  20,000,  35,000  and  40,000  shares of AW
      Computer Systems, Inc. Class A Common Stock, respectively.  The notes have
      an interest rate of 6.1% and mature October 1, 1999.

                                       36

<PAGE>






16.   Fair Value of Financial Instruments

      In assessing the fair value of financial instruments at December 31, 1997,
      the  Company  was  required  to make  assumptions,  which  were  based  on
      estimates of market  conditions  and risks  existing at that time. For its
      cash equivalents,  and accounts  receivable amount approximates fair value
      because they have been written down to estimated  liquidation basis. Based
      on the financial condition of the Company,  however, it is not practicable
      to determine the fair value of the companies liabilities.

17.   New Authoritative Accounting Pronouncements

      The  FASB  has  issued  SFAS No.  130,  "Reporting  Comprehensive
      Income."  SFAS No. 130 is  effective  for the fiscal  years  beginning
      after   December  15,  1997.   Earlier   application   is   permitted.
      Reclassification  of the financial  statements for the earlier periods
      provided for comparative  purposes is required.  SFAS No. 130 will not
      have an effect upon the  Company's  results of  operations as it is an
      income statement presentation accounting pronouncement only.

      The FASB has  issued  SFAS  No.  131,  "Disclosure  about  Segments  of an
      Enterprise  and Related  Information."  SFAS No. 131 changes how operating
      segments are reported in the annual financial  statements and required the
      reporting of selective  information  about  operating  segments in interim
      financial  reports issued to  shareholders.  SFAS No. 131 is effective for
      periods beginning after December 15, 1997, and comparative information for
      earlier  years is to be  restated.  SFAS No.  131 need not be  applied  to
      interim  financial  statements  in the  initial  year of its  application.
      Management is in the process of evaluating  the  disclosure  requirements.
      SFAS No.131 will not have an effect on the Company's results of operations
      as it is a disclosure accounting pronouncement only.

18.   Loss Per Share:

      The calculation of net loss per share attributable to common  stockholders
      for the year ended December 31, 1997 and 1996, includes the undeclared and
      unpaid  dividends on preferred stock of $22,843 and $-0- which  represents
      the quarterly dividends of $2.50 and $-0- per share, respectively.

      Stock  options and warrants  outstanding  at December 31, 1997 and 1996 to
      purchase  5,062,223 and  1,390,323,  respectively,  shares of common stock
      were not  included  in the  computation  of  earnings  per share  assuming
      dilution because the options and warrants would be anti-dilutive, however,
      the options and warrants could be dilutive in the future.

19.   Stockholders' Deficit Reconciliation

      The following table reconciles  stockholders' deficit at December 31,1997,
      from the going concern basis to the liquidation basis


      Stockholders' Deficit at December 31, 1997
      (Going Concern - Basis)                                       $(2,161,744)

      Adjustment to Reflect Change to Liquidation Basis of
      Accounting (Note 1)                                              (264,154)

      Estimated Cost to be Incurred During Period of Liquidation
      (Note 1)                                                         (434,100)

      Ending Net Liabilities - Liquidation Basis                    $(2,859,998)
                                                                    ===========



                                       37

<PAGE>




                                   SIGNATURES

In  accordance  with  Section 13 or 15(d) of the Exchange  Act,  the  registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.



                                          AW COMPUTER SYSTEMS, INC.
                                          (Registrant)


                                          By:/s/ Charles Welch
                                          Charles Welch
                                          Chief Executive Officer/President

                                          By:/s/ Charles F. Trapp
                                          Charles F. Trapp
                                          Vice President, Finance
                                         (Principal Financial Officer)

Dated:April 23, 1998

In  accordance  with the Exchange  Act, this report has been signed below by the
following  persons on behalf of the  registrant and in the capacities and on the
dates indicated.



         Signature                     Title                      Date
   /s/ Charles McMullin      Chairman/Chief Operating        April 23, 1998
       Charles McMullin            Officer/Director
   /s/ Charles Welch          CEO/President/Director         April 23, 1998
       Charles Welch




                                       38

<PAGE>




Supplemental  Information to be furnished with Reports Filed Pursuant to Section
l5(d) of the Act by Registrants Which Have Not Registered Securities Pursuant to
Section l2 of the Act.


                                 Not Applicable.


                                       39

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                                EXHIBIT INDEX
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                                                 PAGE NUMBERED IN SEQUENTIAL
                                                     NUMBERING SYSTEM AS
  EXHIBIT                                          DESCRIBED IN RULE 0-3(b)
   INDEX     DESCRIPTION OF INDEX               WHERE EXHIBIT CAN BE FOUND
    3A   Amendment to the Company's    Exhibit 3A-1 to the Company's Quarterly
         Restated Certificate of       Report on Form 10-Q for the quarter ended
         Incorporation dated           June 30, 1987 is incorporated herein by 
         June 30, 1987.                reference at page 21.

   3A-1  Amendment to the Company's    Exhibit 3A-1 to the Company's  Quarterly
         Restated Certificate of       Report on Form 10-Q for the quarter ended
         Incorporation dated           June 30, 1987 is incorporated herein by 
         June 30, 1987.                reference at page 21.

   3B    The Company's Amended and     Exhibit 3B to the Company's Annual Report
         Restated By-Laws.             on Form 10-KSB for the year ended
                                       December  31, 1994 is  incorporated
                                       herein by reference at page 21.

   3C-1  The Company's Registration    Exhibit 3C-1 to the Company's Quarterly
         Statement on Form S-8.        Report on Form 10-QSB for the quarter
                                       ended September 30, 1995 is incorporated
                                       herein by reference at page 21.

  4F     Specimen Certificate for      Exhibit 4F to the Company's Annual Report
         Class A Common Shares.        on Form 10-KSB for the year ended
                                       December  31, 1994 is  incorporated
                                       herein by reference at page 22.

 10D-4   Supplemental  Employment      Exhibit 10D-4 to the Company's  Annual
         and Retirement  Agreement     Report on Form 10-KSB for the year ended
         dated March 1, 1993 between   December  31,  1993  is incorporated 
         Nicholas  Ambrus  and the     herein by reference at page 22.
         Company.

 10E     Employment Agreement dated    Exhibit 28C to the Company's Registration
         October 1, 1986 between       Statement No. 33-1898 is incorporated
         Charles Welch and the         herein by reference.  Exhibit 10E to the
         Company.                      Company's  Annual  Report  on  Form
                                       10-K  for the year  ended  December
                                       31, 1990 is incorporated  herein by
                                       reference at page 22.


                                       40

<PAGE>






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                                                 PAGE NUMBERED IN SEQUENTIAL
                                                     NUMBERING SYSTEM AS
 EXHIBIT                                          DESCRIBED IN RULE 0-3(b)
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10E-1  Amendment  Number  Two to       Exhibit  10P-1  to the  Company's  Annual
       Employment  Agreement between   Report on Form 10-KSB for the year ended
       the Company and Charles Welch.  December 31, 1995 is  incorporated
                                       herein by reference at page 22.

10F    Employment Agreement between    Exhibit 10F to the Company's Annual
       the Company and Charles J.      Report on Form 10-KSB for the year ended
       McMullin dated April 25, 1994.  December 31, 1994 is incorporated herein
                                       by reference at page 22.

10G    Employment  Agreement  between  Exhibit  10P-1 to the  Company's Annual
       Company and P. Michael Lutze    Report on Form 10-KSB for the year ended 
       dated February 15, 1996.        December 31, 1995 is incorporated
                                       herein by reference at page 22.

10H    Lease between Linpro Industrial Exhibit 10H to the Company's Annual
       Limited and the Company dated   Report on Form 10-K for the year ended
       August 12, 1983.                December 31, 1983 is incorporated herein
                                       by reference at page 22.

10H-1  Amendment  dated  August 1,1986 Exhibit  10H-1 to the  Company's Annual
       to the Lease between Linpro     Report on Form 10-K for the year  ended
       Industrial Limited  and  the    December  31, 1986 is incorporated herein
       Company.                        by reference at page 23.

10H-2  Amendment dated December 2,1986 Exhibit  10H-2 to the  Company's Annual
       to the Lease between  Linpro    Report on Form 10-K for the year ended
       Industrial   Limited  and  the  December  31, 1986 is incorporated herein
       Company                         by reference at page 23.

10H-3  Sixth Amendment dated November  Exhibit 10H-3 to the Company's Annual
       27, 1991 to Lease  between      Report on Form 10-K for the year ended
       Linpro South  Jersey,  Inc.     December  31, 1991 is incorporated herein
       and  the  Company               by reference at page 23.

10H-4  Seventh Amendment dated June 7, Exhibit  10H-4 to the  Company's Annual
       1992 to lease  between  Linpro  Report on Form 10-KSB for the year ended
       Greentree  Business Centre      December 31, 1987 is incorporated herein
       Partnership and the Company.    by reference at page 23.


                                       41

<PAGE>






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                                                     NUMBERING SYSTEM AS
 EXHIBIT                                          DESCRIBED IN RULE 0-3(b)
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10H-5  Eighth Amendment dated February  Exhibit 10H-5 to the Company's Annual
       15, 1994 to lease between Linpro Report on Form 10-KSB for the year ended
       Greentree  Business  Centre      December 31, 1994 is incorporated herein
       Partnership and the Company.     by reference at page 23.

10M-16 Addendum to the  Referral        Exhibit  10M-16 to the  Company's Annual
       Agreement between NCR            Report on Form 10-KSB for the year ended
       Corporation and the Company      December 31, 1994 is incorporated herein
       dated  December 10, 1993.        by reference at page 23.

10M-18 Solution  Provider  Agreement    Exhibit  10P-1 to the  Company's Annual
       between Microsoft  Corporation   Report on Form 10-KSB for the year ended
       and the Company  dated  August   December 31, 1995 is incorporated herein
       1995.                            by reference at page 23.

10N-2  The  Company's  October 1992     Exhibit  10N-2 to the  Company's Annual
       Stock Option and Stock Grant     Report on Form 10-KSB for the year ended
       Plan (as amended).               December 31, 1992 is incorporated herein
                                        by reference at page 24.

10P-1  Addendum to Warrant  Agreement   Exhibit 10P-1 to the Company's Annual
       between  the  Company and Winn-  Report on Form 10-KSB for the year ended
       Dixie  Stores,  Inc.  dated      December 31, 1995 is incorporated herein
       March  8, 1996.                  by reference at page 24.

10V    Agreement for the Procurement of Exhibit 10V to the Company's Annual
       Life  Insurance  dated May 13,   Report on Form 10-K for the year ended
       1986 between  the  Company  and  December 31, 1986 is incorporated herein
       Nicholas Ambrus.                 by reference at page 24.

10W    Agreement for the Procurement of Exhibit 10W to the Company's Annual
       Life  Insurance  dated May 13,   Report on Form 10-K for the year ended
       Nicholas between  the  Company   December 31, 1986 is incorporated herein
       and  Charles Welch.              by reference at page 24.

21     Subsidiaries of the Registrant.  Page 55.



                                       42

<PAGE>






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                                                     NUMBERING SYSTEM AS
 EXHIBIT                                          DESCRIBED IN RULE 0-3(b)
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    27      Financial Data Schedules,            CE
            electronically filed, as per 
            Regulation SB.

            No reports on Form 8-K were filed 
            by the Company during the last 
            quarter of 1997.



                                       43

<PAGE>




                                                                    EXHIBIT 21

                         SUBSIDIARIES OF THE REGISTRANT

AW Computer Systems - Florida, Inc.        Incorporated in the State of Florida

     Conducts business under the name of AW Computer Systems - Florida, Inc.






                                       44