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                       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               June 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 August 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 six month periods ended June 30, 1998 
            and June 30, 1997.                                            3

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

            Consolidated Statements of Cash Flows - Going Concern Basis
            for the six month periods ended June 30, 1998 and 
            June 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 SIX MONTH PERIODS ENDED JUNE 30, 1998 AND JUNE 30, 1997
                                     (UNAUDITED)

                                Three months ended        Six months ended
                                     June 30,                  June 30,
                                     --------                  --------
                                1 9 9 8     1 9 9 7      1 9 9 8       1 9 9 7
                                -------     -------      -------       -------

Revenues                     $        -- $   241,938   $  304,626   $   430,792

Cost of revenues                      --     370,652      367,069       680,258
                             ----------- -----------   ----------   -----------

  Gross profit (loss)                 --    (128,714)     (62,443)     (249,466)
                             ----------- -----------   ----------   -----------

Selling, general and 
 administrative expenses         124,894     640,871      593,302     1,454,757

Development expense                   --      11,123           --        29,480

Interest expense                  16,557      13,402       38,012        26,519

Other (income) - net                  --      (2,326)        (208)       (7,521)

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

                                 151,331     663,070      640,986     1,503,235
                             ----------- -----------   ----------   -----------

  Income (loss) before 
   income tax                   (151,331)   (791,784)    (703,429)   (1,752,701)

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

  Net (loss)                 $  (151,331)$  (791,784)  $ (703,429)  $(1,752,701)
                             =========== ===========   ==========   ===========

Per share statistics:
   Net loss per share        $      (.02)$      (.12)  $     (.11)  $      (.26)
                             =========== ===========   ==========   ===========

Average shares outstanding     6,670,567   6,649,031    6,670,567     6,654,271
                             =========== ===========   ==========   ===========


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 JUNE 30, 1998
                                     (UNAUDITED)

                                       ASSETS

Current Assets:
  Cash and cash equivalents                                         $    69,206
  Accounts and contract receivables, less allowance for doubtful
   accounts of $6,817                                                     4,113
                                                                    -----------

  Total Current Assets                                                   73,319

Property and equipment, net                                               1,000

   Total Assets                                                     $    74,319
                                                                    ===========
                        LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
  Accounts  payable-Post Petition                                   $     7,977
  Current portion of long-term debt-secured                              95,448

  Liabilities Subject to Chapter 11
   Accounts payable                                                     206,881
   Accrued liabilities                                                  857,721
   Accrued compensation                                                 501,191
   Deposits                                                             100,000
   Note payable                                                         773,750
   Redeemable Preferred Stock                                           913,700
   Deferred compensation payable                                        181,078
                                                                    -----------

   Total Liabilities subject to Chapter 11                            3,534,321
                                                                    -----------

  Total Liabilities                                                   3,637,746

Commitments and contingent liabilities

  Net Liabilities- Liquidation Basis                                $(3,563,427)


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 SIX MONTH PERIODS ENDED JUNE 30, 1998 AND JUNE 30, 1997
                                     (UNAUDITED)

                                                           Six months ended
                                                               June 30,
                                                         1 9 9 8       1 9 9 7
                                                         -------       -------

Cash flows, from operating activities:
  Net income (loss):                                   $ (703,429)  $(1,752,701)
Adjustments to reconcile net income to net 
  cash provided by/(used in) operating activities:
  Depreciation and amortization                                --       108,765

  Decrease (increase) in:
   Accounts receivable                                    174,713         6,202
   Costs and estimated earnings
     on uncompleted contracts                                  --       (58,205)
   Inventories                                                 --         5,000
   Prepaid expenses                                        23,861        (3,370)
   Other assets                                                --            --

  Increase (decrease) in:
   Accounts payable                                       122,890       (53,582)
   Accrued liabilities                                    192,896        55,530
   Accrued cost                                                --       (50,000)
   Other liabilities                                      112,337        99,832
                                                       ----------   -----------

  Net cash provided by (used in) operating activities     (76,732)   (1,642,529)
                                                       ----------   -----------

Cash flows, from investing activities:
  Capital (expenditures) disposals                         39,000        (5,663)
  Computer software capitalized                                --            --
                                                       ----------   -----------

  Net cash (used in) investing activities                  39,000        (5,663)
                                                       ----------   -----------

Cash flows, from financing activities: Net borrowing 
 (payments):
   Long-term debt and lease obligations                        --      (474,920)
   Net (advances) repayments of note payables                  --       750,000
  Proceeds from issuance of common shares                      --        45,050
  Proceeds from issuance of preferred shares                   --       635,600
  Payment of dividend                                          --        (4,183)
  Additional paid in capital from debt exchange                --        69,720
                                                       ----------   -----------

  Net cash provided by (used in) financing activities          --     1,021,267
                                                       ----------   -----------

  Increase (decrease), cash and cash equivalents          (37,732)     (626,925)

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

  End of period                                        $   69,206   $   292,696
                                                       ==========   ===========

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


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               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

                                  JUNE 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 June 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, 1998 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: September 2, 1998                \s\ Charles J. McMullin
                                           Charles J. McMullin
                                           Chairman


Date: September 2, 1998                 \s\ Charles F. Trapp
                                            Charles F. Trapp
                                            Vice President, Finance
                                            Principal Financial Officer