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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C.  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, 1998
                                     ------------------------------

                                       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
         (State or other jurisdiction of (IRS Employer Identifications No.)
         incorporation or organization)

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

                                    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  15, 1998 there were issued and  outstanding  6,670,567  Class A
Common Shares of the Company.



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                                     PART I

                              FINANCIAL INFORMATION

Item 1.  Interim Financial Statements - (Unaudited)

         Contents:                                                      Page

            Consolidated Statements of Operations - Going Concern Basis
            for the three and nine month periods ended September 30, 1998 and
            September 30, 1997.                                           3

            Consolidated Statement of Assets and Liabilities in Liquidation
            as of September 30, 1998.                                     4

            Consolidated Statements of Cash Flows - Going Concern Basis
            for the nine month periods ended September 30, 1998
            and September 30, 1997.                                       5

            Notes to Interim Consolidated Financial Statements.           6

            Management's Discussion and Analysis or Plan of
            Operation.                                                    7




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                   AW COMPUTER SYSTEMS, INC. DEBTOR IN POSSESSION
                        CONSOLIDATED STATEMENTS OF OPERATIONS
                                 GOING CONCERN BASIS

         FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 1998 AND
                                 SEPTEMBER 30, 1997
                                     (UNAUDITED)
<TABLE>

                                    Three months ended        Nine months ended
                                       September 30,             September 30,
                                       -------------             -------------
                                    1 9 9 8     1 9 9 7      1 9 9 8       1 9 9 7
                                    -------     -------      -------       -------

<S>                              <C>         <C>           <C>          <C>
Revenues                         $        -- $   385,228   $  304,626   $   816,020

Cost of revenues                          --     289,540      367,069       969,798
                                 ----------- -----------   ----------   -----------

  Gross profit (loss)                     --      95,688      (62,443)     (153,778)
                                 ----------- -----------   ----------   -----------

Selling, general and administrative
  expenses                           134,391     486,267      727,693     1,941,024

Development expense                       --      11,141           --        40,621

Interest expense                       2,612      28,327       40,624        54,846
Other (income) - net                    (766)         (  1,297)  (974)       (8,818)

Loss on Sale of Fixed Assets              --          --        9,880            --
                                 ----------- -----------   ----------   -----------

                                     136,237     524,438      777,223     2,027,673
                                 ----------- -----------   ----------   -----------

  Loss before income tax            (136,237)   (428,750)    (839,666)   (2,181,451)

Income tax (benefit)                      --          --           --            --
                                 ----------- -----------   ----------   -----------

  Net loss                       $  (136,237)$  (428,750)  $ (839,666)  $(2,181,451)
                                 =========== ===========   ==========   ===========

Per share statistics:
   Net loss per share            $     (.02) $      (.07)  $     (.13)  $      (.33)
                                 ==========  ===========   ==========   ===========


Average shares outstanding         6,670,567   6,670,567    6,670,567     6,659,703
                                 =========== ===========   ==========   ===========

</TABLE>

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



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                   AW COMPUTER SYSTEMS, INC. DEBTOR IN POSSESSION
           CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES IN LIQUIDATION

                              AS OF SEPTEMBER 30, 1998
                                     (UNAUDITED)

  ASSETS

Current Assets:
  Cash and cash equivalents                                        $    62,110
  Accounts and contract receivables, less allowance for doubtful
   accounts of $6,162                                                       --
                                                                   -----------

  Total Current Assets                                                  62,110

Property and equipment, net                                              1,000

   Total Assets                                                    $    63,110
                                                                   ===========
                        LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:
  Accounts  payable and Accrued Expenses-Post Petition             $     9,505
  Current portion of long-term debt-secured                             95,448
                                                                   -----------

                                                                       104,953

  Liabilities Subject to Chapter 11:
   Accounts payable                                                    206,881
   Accrued liabilities                                                 857,721
   Accrued compensation                                                611,191
   Deposits                                                            100,000
   Note payable                                                        773,750
   Redeemable Preferred Stock                                          913,700
   Deferred compensation payable                                       194,578
                                                                   -----------

   Total Liabilities subject to Chapter 11                           3,657,821
                                                                   -----------

  Total Liabilities                                                  3,762,774

Commitments and contingent liabilities                                      --

  Net Liabilities- Liquidation Basis                               $(3,699,664)


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




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                   AW COMPUTER SYSTEMS, INC. DEBTOR IN POSSESSION
                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 GOING CONCERN BASIS

                FOR THE NINE MONTH PERIODS ENDED SEPTEMBER  30, 1998
                               AND SEPTEMBER  30, 1997
                                     (UNAUDITED)

                                                           Nine months ended
                                                            September  30,
                                                         1 9 9 8       1 9 9 7
                                                         -------       -------

Cash flows, from operating activities:
  Net loss:                                            $ (839,666)  $(2,181,451)
Adjustments to reconcile net income to net
  cash providedby/(used in) operating activities:
  Depreciation and amortization                                --       180,669

  Decrease (increase) in:
   Accounts receivable                                    178,826      (152,312)
   Costs and estimated earnings
     on uncompleted contracts                                  --       200,015
   Inventories                                                 --         5,000
   Prepaid expenses                                        23,861        11,487

  Increase (decrease) in:
   Accounts payable                                       124,418       (42,342)
   Accrued liabilities                                    192,896       118,368
   Accrued cost                                                --      (100,000)
   Other liabilities                                      235,837        58,855
                                                       ----------   -----------

  Net cash (used in) operating activities                 (83,828)   (1,901,711)
                                                       ----------   -----------

Cash flows, from investing activities:
  Capital (expenditures) disposals                         39,000        12,864
                                                       ----------   -----------

Cash flows, from financing activities: Net
  borrowing (payments):
   Long-term debt and lease obligations                        --      (474,920)
   Net (advances) repayments of note payables                  --       773,750
  Proceeds from issuance of common shares                      --        34,240
  Proceeds from issuance of preferred shares                   --       635,600
  Payment of dividend                                          --       (20,075)
  Additional paid in capital from debt exchange                --        69,720
                                                       ----------   -----------

  Net cash provided by (used in) financing activities          --     1,018,315
                                                       ----------   -----------

  Decrease in cash and cash equivalents                   (44,828)     (870,532)

Cash and cash equivalents:
  Beginning of period                                     106,938       919,621
                                                       ----------   -----------

  End of period                                        $   62,110   $    49,089
                                                       ==========   ===========

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


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               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

                               SEPTEMBER  30, 1998
                                   (UNAUDITED)

1.    On May 5, 1998 AW Computer  Systems,  Inc filed for court protection under
      Chapter 11 of the Federal  Bankruptcy  Code. On March 10, 1998 the Company
      adopted  liquidation  basis  accounting.   The  accompanying  consolidated
      statement  of assets and  liabilities  as of  September  30, 1998 has been
      prepared using that basis.

2.    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 1997 Annual Report on
      Form 10-KSB.





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Item 2  Management's Discussion and Analysis or Plan of Operation

        On May 5, 1998 AW  Computer  Systems,  Inc.,  a New Jersey  corporation,
filed for court protection  under Chapter 11 of the Federal  Bankruptcy Code. As
previously reported AW discontinued  operations on March 10, 1998. The Company's
efforts  to  obtain  long term  financing  had not been  successful  nor was the
company able to increase the sales of its  products.  The  Company's  efforts to
sell or  franchise  its  software  products  have been  hindered  by its current
position in Chapter 11. The Company  continues its efforts to realize value from
its software products.  Subsequently,  the Company has reached an agreement with
the  landlord to return the leased  property for a full release for all past due
and future rent  obligations.  This agreement has been finalized and the company
has  vacated  the  property.  The  Company  has  sold  substantially  all of its
furniture and office equipment.



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                                     PART II

                                OTHER INFORMATION


Item 1. Legal Proceedings
         On May 5, 1998 AW  Computer  Systems,  Inc  filed for court  protection
under Chapter 11 of the Federal Bankruptcy Code.

Item 2. Changes in Securities - None.

Item 3. Defaults Upon Senior Securities.
         The Company did not make the required  payment of $95,448 plus interest
on its secured debt due December 31, 1997 and has not made the required interest
payments.  The facility is  collateralized  by  substantially  all the company's
assets.

         The Company did not make the required payment of $773,750 plus interest
on its unsecured note due March 19, 1998.

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

        a.  Exhibits: None

        b.  Reports on Form 8-K -May 6,1998




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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.


                            AW COMPUTER SYSTEMS, INC.
                                        (REGISTRANT)



Date: December 17, 1998                 \s\ Charles J. McMullin
      ------------------                ---------------------------------
                                           Charles J. McMullin
                                           Chairman


Date: December 17, 1998                 \s\ Charles F. Trapp
     -------------------                ---------------------------------
                                           Charles F. Trapp
                                           Vice President, Finance
                                           Principal Financial Officer