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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 10-QSB

              [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended September 30, 1996

                                       OR

              [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                          OF THE SECURITIES ACT OF 1934

                        For the transition period from to

                         Commission File Number 0-10329

                            AW COMPUTER SYSTEMS, INC.
             (Exact name of registrant as specified in its charter)

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

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

                                  609-234-3939
              (Registrant's telephone number, including area code)

                                       N/A
   (Former name, address and former fiscal year, if changed since last report)

Indicate by check mark whether the issuer (1) has filed all reports  required to
be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of 1934 during
the past 12 months (or for such shorter  period that the registrant was required
to file such reports),  and (2) has been subject to such filing requirements for
the past 90 days. Yes X No

As of November 11, 1996,  there were issued and  outstanding  6,603,567  Class A
Common Shares of the Company.

Traditional Small Business Disclosure Format (Check One): Yes X No
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                                     PART I

                              FINANCIAL INFORMATION
                                   (UNAUDITED)

Item 1.   Interim Financial Statements

          Contents:

          Statements  of  Operations  for three  and nine  month  periods  ended
          September 30, 1996 and 1995.

          Balance Sheets as of September 30, 1996 and December 31, 1995.

          Statements of Cash Flow for the nine month periods ended September 30,
          1996 and 1995.

          Notes to Interim Financial Statements.
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<TABLE>
<CAPTION>

                            AW COMPUTER SYSTEMS, INC.
                      COMPARATIVE STATEMENTS OF OPERATIONS
     FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND 1995
                                   (UNAUDITED)

           Three Months                                           Nine Months

     1996           1995                                    1996            1995

<S>            <C>            <C>                      <C>            <C>

$   238,470    $   878,317    Revenues                 $   714,462    $ 3,131,765

    587,591        600,828    Costs of revenues          1,575,690      2,040,563
    -------        -------                               ---------      ---------

 (  349,121)       277,489                              (  861,228)     1,091,202
 -----------       -------                              ----------      ---------

                              Selling, general and
    590,228        787,130     administrative            1,939,871      2,675,991
      1,434         51,114    Development                   84,906        108,202
     12,780         20,099    Interest                      51,211         78,423
     ------         ------                                  ------         ------
    604,442        858,343                               2,075,988      2,862,616
    -------        -------                               ---------      ---------

      2,987          8,558    Interest income               19,878         38,567
      -----          -----                                  ------         ------

 (  950,576)    (  572,296)   Loss before income taxes  (2,917,338)     1,732,847)

      ---            ---      Income tax benefit            ---        (  319,758)
-----------     -----------                             ----------     -----------

$(  950,576)   $(  572,296)   Net loss                 $(2,917,338)   $(1,413,089)
============   ============                            ============   ============ 


   $(.17)          ($.14)     Net loss per share          $(.58)          ($.34)

                              Average shares
5,734,306       3,989,957       outstanding             5,072,448       4,109,813

</TABLE>

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

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<TABLE>
<CAPTION>

                            AW COMPUTER SYSTEMS, INC.
                           CONSOLIDATED BALANCE SHEETS
                    SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
                                   (UNAUDITED)

                        ASSETS
                                                                      1996            1995
<S>                                                              <C>            <C>
Current assets:
   Cash and cash equivalents                                     $ 1,571,765    $ 1,848,560
   Accounts and contract receivables, less allowance 
     for doubtful accounts of $112,350 and $488,302 in
     1996 and 1995                                                   193,204        604,957
   Costs and estimated earnings in excess of billings on
     uncompleted contracts                                            66,926        458,237
   Inventories                                                       204,598        514,791
   Income taxes receivable                                             ---          280,445
   Prepaid and other current assets                                   54,851        101,558
                                                                      ------        -------
     Total current assets                                          2,091,344      2,808,548
                                                                   ---------      ---------

Property and equipment, net                                          536,844        669,194
Computer software, net                                               625,422        363,626
Other assets                                                         151,866         52,885
                                                                     -------         ------
     Total Assets                                                $ 3,405,476    $ 3,894,253
                                                                   =========      =========
</TABLE>
<TABLE>
<CAPTION>

                                      LIABILITIES AND SHAREHOLDERS' EQUITY
<S>                                                              <C>            <C>
Current liabilities:
   Line of credit                                                $     ---      $   550,000
   Current portion of long-term debt                                   ---          225,000
   Current portion of lease obligations                                5,288          6,918
   Accounts payable                                                  183,017        291,870
   Accrued liabilities                                               246,527        134,515
   Accrued compensation                                              127,728         71,984
   Billings in excess of costs and estimated earnings on
     uncompleted contracts                                             ---            ---
   Accrued contract costs                                            408,406        332,653
   Other current liabilities                                          81,780         51,057
                                                                      ------         ------
     Total current liabilities                                     1,052,746      1,663,997
                                                                   ---------      ---------

Long-term debt                                                       570,368          ---
Capitalized lease obligations                                          5,789          8,542
Pension costs                                                        164,224        135,258

Shareholder's Equity
   Common shares:
     Class A, $.01 par; authorized 25,000,000
        and 10,000,000 shares; 6,603,567 and 
        4,081,944 issued and outstanding in 1996 
        and 1995, respectively                                        66,036         44,676
   Additional paid-in capital                                      4,282,297      1,895,992
   Retained earnings                                              (2,735,984)       181,354
   Deferred compensation                                              ---        (   35,566)
                                                                   --------       --------- 
   Total shareholders' equity                                      1,612,349      2,086,456
                                                                   ---------      ---------
   Total liabilities and shareholders' equity                    $ 3,405,476    $ 3,894,253
                                                                 ===========    ===========
</TABLE>

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

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                                    <TABLE>
                                   <CAPTION>

                            AW COMPUTER SYSTEMS, INC.
                            STATEMENTS OF CASH FLOWS
                  FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30,
                                  1996 AND 1995
                                   (UNAUDITED)
                                                                 Nine Months
                                                           1996              1995

<S>                                                    <C>            <C>
Cash flows, operating activities:
Net loss:                                              $(2,917,338)   $(1,413,089)
Adjustments to reconcile net loss to net cash
   provided by/(used) in operating activities:
     Depreciation and amortization                         227,620        287,354
     Amortization of unearned compensation                  35,566         29,237
     Deferred income taxes                                   ---             ---
     Decrease (increase) in:
         Accounts receivable                               411,753     (  790,843)
       Costs and estimated earnings on
          uncompleted contracts                            391,311        509,528
       Inventories                                         310,193        147,540
       Income tax receivable                               280,445        325,678
       Prepaid expenses                                     46,707         21,272
       Other assets                                     (   98,981)         ---
     Increase (decrease) in:
     Accounts payable                                   (  108,853)           294
     Accrued liabilities                                   140,978        116,572
     Accrued cost                                           75,753        234,999
     Billing in excess of cost and estimated
         earnings on uncompleted contracts                    ---      (    8,582)
     Other current liabilities                              86,467     (   16,360)
                                                            ------     ---------- 
Net cash provided by (used in)
   operating activities                                 (1,118,379)    (  556,400)
                                                        ----------     ----------- 
Cash flows, investing activities:
   Capital expenditures                                 (   95,270)    (   77,103)
   Computer software capitalized                        (  261,796)    (  241,368)
                                                        -----------    ----------- 
Net cash (used in) investing activities                 (  357,066)    (  318,471)
                                                        -----------    ----------- 
Cash flows, financing activities:
Net borrowing (payments):
     Proceeds from long-term debt                          570,368           ---
     Payments on long-term debt and lease
         obligations                                    (  779,383)    (  356,213)
   Proceeds from issuance of common shares               2,407,665        302,022
                                                         ---------     ----------
Net cash provided by (used in) financing activities      2,198,650     (   54,191)
                                                         ---------     ----------
Increase (decrease), cash and cash equivalents             723,205     (  929,062)
Cash and cash equivalents:
   Beginning of period                                     848,560      1,468,778
                                                           -------      ---------
   End of period                                       $ 1,571,765    $   539,716
                                                       ===========    ===========

</TABLE>

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

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                            AW COMPUTER SYSTEMS, INC.
                      NOTES TO INTERIM FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1996
                                   (UNAUDITED)


1.   The consolidated  financial  statements include the accounts of the Company
and its wholly-owned subsidiary.  All significant intercompany  transactions and
balances  have  been  eliminated.  All  adjustments  consisting  only of  normal
recurrent  adjustments which, in the opinion of management,  are necessary for a
fair  statement of the results for this interim  period have been made. 

2.   Prior year  financial  statements  have been restated to conform to present
year presentation.

3.   These  statements  should  be read  in  conjunction  with  the  Summary  of
Significant  Accounting  Policies  and  other  notes  included  in the  Notes to
Consolidated  Financial  Statements in the Company's  1995 Annual Report on Form
10-KSB.

4.   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,  as listed in the table
below.  The  price  per  share  was  $1.00,  or an  aggregate  consideration  of
$1,678,023.  The  proceeds  of the  private  placement  will be used to  finance
on-going operations and the development of new products.  The securities sold in
this private transaction are not registered for public sale under the Securities
Act of 1933 or any state  securities  law. The purchasers  were granted  certain
registration rights commencing on or after September 1, 1997.

     
5.   On October 25, 1996, the Company entered into a letter agreement with Fleet
Bank N.A.,  (the "Bank")  pursuant to which the Bank agreed to extend the period
for  repayment  of the  outstanding  indebtedness  in the  aggregate  amount  of
$570,368.00  owing to the Bank by the Company from December 31, 1996 to December
31, 1997. As  consideration  for the  aforesaid  extension,  the Company  issued
warrants  to the Bank to  purchase  50,000  of its  Class A Common  Shares.  The
warrants are  exercisable  at $1.25 per share and expire on August 31, 1998.  In
addition, the Bank is entitled to certain piggyback registration rights.

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Item 2.   Management's Discussion and Analysis of Financial Condition and
          Results of Operations.

          AW's  ability to continue as going  concern is  dependent on the sales
and receipt of a significant  deposit on an order(s) for the Company's  recently
completed  product,  the  Wizard  of  Point-of-Sale  ("Wizard"),  and/or  on the
Company's ability to generate sales from the the Checker  Productivity  Analyzer
("CPA")  product which is still under  development.  On September 20, 1996,  the
Company  received  $1,678,023 in proceeds from a private  placement of 1,678,023
shares of Class A Common Stock.  On October 25, 1996,  the Company  extended the
period for repayment of the outstanding bank debt in the amount of $570,368 from
December 31, 1996 to December 31,  1997.  The Company  expects that its existing
capital resources may enable it to maintain operations through the third quarter
of 1997.  Thereafter,  the  Company  will need to raise  substantial  additional
capital to remain in business.  There can be no assurance  that the Company will
be able to generate  significant sales of its Wizard and/or CPA products or that
additional financing will be available on acceptable terms or at all.

          Based on the size of the  backlog of firm orders for  delivery  within
one year, the Company believes that the volume of operations will remain nominal
until  market  acceptance  of  the  Wizard  and/or  the  completion  and  market
acceptance of CPA. Acceptance of either or both of these products would generate
future  revenues,  however,  there can be no assurance that the Company will not
continue to experience delays in the development of the CPA products or that the
Wizard marketing  efforts will be successful.  The Company is also attempting to
make  arrangements  with its customers to perform special  programming  tasks in
order to generate immediate revenues,  although there is no assurance that these
efforts will be successful.

           Results of Operations.

          Revenues for the three and ninth month  periods  ended  September  30,
1996 were $238 thousand or 73% lower,  and $714 thousand or 77% lower,  than the
corresponding  periods in 1995. The  comparative  decrease for the quarter ended
September  30, 1996 was caused by the absence of sales in 1996 compared with the
delivery of AWare  equipment  plus an increase  in software  services  income in
1995.

          Gross profit  (loss) for the third quarter and nine months of 1996 was
$(349)  thousand and $(861) thousand  respectively,  a decrease of $627 thousand
and a decrease  of $1,952  thousand  compared to the same  periods in 1995.  The
negative  gross  profit  margins  experienced  during 1996 was the result of the
continuing  significant  effort expended under a fixed price contract to produce
the CPA product without corresponding revenue. In the third quarter of 1995, the
gross profit margins were higher than the year to date period because the second
quarter had a higher percentage of equipment and software services revenue which
generally produce higher gross margins.

          For the three months ended September 30, 1996, Selling,  General,  and
Administrative  Expenses (S.G.&A.) decreased $197 thousand (32%), as compared to
1995,  primarily  due to an expense  reduction  program  which  included a staff
reduction  of 19% on  June  5,  1996.  For  the  year-to-date  periods,  S.G.&A.
decreased $736 thousand (28%), as compared to 1995. At September 30 1996, AW had
30 employees compared with 49 at September 30, 1995.
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          Loss  before  income  tax  benefit  increased  for the  quarter  ended
September  30, 1996  compared  to the same period in 1995 by $378  thousand to a
loss of $951  thousand,  while  the  1996  year-to-date  loss  increased  $1,184
thousand to a loss of $2,917 thousand. The net loss for the three and nine month
periods ended  September 30, 1996 was $951 thousand and $2,917 million  compared
to net  losses in the  comparable  1995  periods  of $572  thousand  and  $1,413
million,  respectively.  The loss for the  quarter and nine months was caused by
the absence of sales  during  1996 while the 1995  periods  benefitted  from the
delivery of AWare equipment plus an increase in software services.

          Liquidity.

          During the first nine months of 1996,  working capital  decreased $107
thousand to $1.038  million  compared to $1.145  million at December  31,  1995.
Current  assets  decreased  $718 thousand  resulting from decreases in all asset
categories except cash and cash equivalents.  Current  liabilities  decreased by
$389 thousand.

          During  the  first  nine  months  of 1996,  cash and cash  equivalents
increased $723  thousand.  The primary factor in this increase was $2,407,665 in
new equity.


           Financial Resources.

          The  Company  expects  to  require   continued   significant   product
development effort on the CPA product and capital  expenditures for equipment in
1996. The Company believes its future success is dependent on the development of
new proprietary  hardware and software  products.  Expenditures  for these items
will be funded from working capital and from potential  future  financing as can
be arranged.  The Company  raised  $500,000 in March of 1996 and  $1,678,023  in
September  1996 with the  balance of the funds  generated  from the  exercise of
stock options.  There can be no assurance of revenues from the Wizard and/or CPA
products.  The  Company  will need to raise  substantial  additional  capital to
remain in business and there can be no assurance that additional  financing will
be available on acceptable terms or at all.

          The  primary  source of funds in the near future is expected to be the
Company's operations,  cash, and accounts receivable.  At September 30, 1996 the
company had $1,765  million in cash and accounts  receivable  compared to $1,053
million in total liabilities.  The Company's principal fixed payment obligations
at September 30, 1996 were the lease for its  facilities and the payments on the
bank loans.

          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 March 8, 996,  the  Company, through a  private  cash  transaction,
vested $500,000 through the sale of 250,000 Class A Common Shares.

          Uncertainty of Forward-Looking Statements

          This report on Form 10-QSB  contains  forward-looking  statements that
involve results and uncertainties. The Company's actual risks and could differ
materially.  Factors that could cause or contribute to such differences include,
but are not limited to, the factors  described  above as well as those discussed
elsewhere  in the  Company's  reports  filed with the  Securities  and  Exchange
Commission.
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                                     PART II

                                OTHER INFORMATION


Item 1.    Legal Proceedings - None.

Item 2.    Changes in Securities.

           A.       Current Report on Form 8-K dated September 27, 1996

Item 3.    Defaults Upon Senior Securities - None.

Item 4.    Submission of Matters to a Vote of Security Holders - None.

Item 5.    Other Information - None.

Item 6.    Exhibits and Reports on Form 8-K.

           A.       Current Report on Form 8-K dated October 24, 1996
           B.       Current Report on Form 8-K dated October 25, 1996

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                                   Signatures

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




Dated:   November 11, 1996                        AW COMPUTER SYSTEMS, INC.




                                                  /s/Charles W. Welch
                                                  Charles W. Welch
                                                  CEO/President






                                                  /s/Charles F. Trapp
                                                  Charles F. Trapp
                                                  Vice President, Finance