

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB


/X/    Quarterly  report  pursuant  to  Section  13 or 15(d)  of the  Securities
       Exchange Act of 1934 for the quarterly period ended June 30, 1996.

/ /    Transition  report  pursuant  to  Section 13 or 15(d)  of the  Securities
       Exchange Act of 1934 for the transition  period from  _______________  to
       _____________

Commission file number 0-15873

                             LASERGATE SYSTEMS, INC.
              ----------------------------------------------------
              (Exact name of small business issuer in its charter)

    Florida                                                  59-2543206
    -------                                                  ----------
(State or other jurisdiction of                           (I.R.S. employer 
 incorporation or organization)                           identification no.)


               28050 US 19 N, Suite 502, Clearwater, Florida 34621
               ---------------------------------------------------
               (Address of principal executive office) (Zip code)

                    Issuer's telephone number: (813) 725-0882


Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Securities  Exchange  Act  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  ___

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practical date.

Class                                             Outstanding at August 15, 1996
- -----                                             ------------------------------

Common stock $0.03 par value                       7,432,061

Transitional Small Business Disclosure Format (check one)

Yes      No    X
    ---       ---



<PAGE>




                    LASERGATE SYSTEMS, INC. AND SUBSIDIARIES

                 FORM 10-QSB FOR THE QUARTER ENDED JUNE 30, 1996

                                      INDEX

Part I.                  FINANCIAL INFORMATION                              PAGE

          Item 1.   Consolidated Financial Statements                          3

                    Consolidated Balance Sheets as of June  30, 1996           3
                    (unaudited) and December 31, 1995

                    Consolidated Statements of Operations                      4
                    (unaudited) for the three months and six months ended
                    June 30, 1996 and 1995

                    Consolidated Statements of Cash Flows                      5
                    (unaudited) for the six  months ended
                    June 30, 1996 and 1995

                    Notes to Financial Statements (unaudited)             6 - 10

          Item 2.   Management's Discussion and Analysis or Plan         11 - 16
                    of Operation

Part II.            OTHER INFORMATION

          Item 2.   Changes in Securities                                     16

          Item 6.   Exhibits and Reports on Form 8-K                          16

          Signature                                                           17


                                       -2-

<PAGE>



                    LASERGATE SYSTEMS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                     ASSETS
                                                                              June 30,       December 31,
                                                                                1996            1995
                                                                            ------------    ------------
                                                                             (Unaudited)
<S>                                                                         <C>             <C>         
Current assets
        Cash and cash equivalents                                           $  3,269,349    $    656,506
        Accounts receivable, net of allowance for
          doubtful accounts of  $90,170 and $36,127                            1,031,552         439,311
        Account receivable, related party                                            -0-         199,359
        Inventories                                                              200,140         325,664
        Prepaid expenses                                                          33,859          84,392
                                                                            ------------    ------------
              Total current assets                                             4,534,900       1,705,232
Property and equipment, net                                                      251,206         246,568
Systems and software costs, net                                                  200,000       1,416,667
Goodwill, net                                                                  2,449,200       2,515,694
Customer lists and support contracts, net                                        318,750         354,167
Other assets, net                                                                 66,371         167,908
                                                                            ------------    ------------

Total Assets                                                                $  7,820,427    $  6,406,236
                                                                            ============    ============


                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
        Note payable, related party                                         $        -0-    $    300,000
        Notes payable, other:                                                      3,108          21,757
        Accounts payable, trade                                                  410,409         634,863
        Deferred revenues                                                      1,012,813         729,406
        Accrued product costs                                                    480,807         297,000
        Accrued expenses                                                         840,111         272,104
                                                                            ------------    ------------
             Total current liabilities                                         2,747,248       2,255,130
Promissory notes payable, stockholders with conversion futures                       -0-       2,324,335
Common stock subject to put options                                              140,000         140,000
                                                                            ------------    ------------
Total liabilities                                                              2,887,248       4,719,465

Stockholders' equity:
        Preferred stock, $.03 par value, 2,000,000 shares
             authorized, 20,500 and 387,750 shares issued and
             outstanding at June 30, 1996 and December 31, 1995,
             respectively                                                            615          11,633
        Common stock, $.03 par value, 20,000,000 shares authorized,
             7,257,845 and 3,125,013 issued and outstanding at
             June 30, 1996 and December 31, 1995 , respectively                  217,735          93,751
        Additional paid-in capital                                            19,793,395      14,065,743
        Less:  Common stock, $.03 par value, 20,000 shares and 20,000
             shares at June 30, 1996 and December 31, 1995, respectively,
             subject to put options                                             (140,000)       (140,000)
             Note receivable, shareholders                                          (-0-)       (559,000)
        Accumulated deficit                                                  (14,938,566)    (11,785,356)
                                                                            ------------    ------------
             Total stockholders' equity                                        4,933,179       1,686,771
                                                                            ------------    ------------
Total Liabilities and Stockholders' Equity                                  $  7,820,427    $  6,406,236
                                                                            ============    ============
</TABLE>

        The accompanying notes are an integral part of these statements.



                                       -3-

<PAGE>

                    LASERGATE SYSTEMS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                    Three Months Ended June 30,    Six Months Ended June 30,
                                                       1996           1995           1996           1995
                                                    -----------    -----------    -----------    -----------
<S>                                                 <C>            <C>            <C>            <C>        
Revenues                                            $ 1,103,940    $   871,994    $ 2,569,929    $ 1,490,449

Operating expenses:

             Cost of Revenues                         1,040,161        475,011      1,792,051      1,056,656
             Development                                129,533        227,222        156,209        473,665
             Selling, general and administrative
             (Including write-down of software in
             June 1996 of $1,075,000)                 2,870,100        799,987      3,733,911      1,656,422
                                                    -----------    -----------    -----------    -----------

                        Operating Loss               (2,935,854)      (630,226)    (3,112,242)    (1,696,294)

Other income (expense)                                  (53,401)       (12,460)       (40,968)       (14,206)
                                                    -----------    -----------    -----------    -----------

                       Net loss                     ($2,989,255)   ($  642,686)   ($3,153,210)   ($1,710,500)
                                                    ===========    ===========    ===========    ===========

Net loss per common share                           ($     0.60)   ($     0.21)   ($     0.67)   ($     0.57)
                                                    ===========    ===========    ===========    ===========

Weighted Average Common Stock Outstanding             4,972,207      3,023,013      4,738,483      3,023,013
                                                    ===========    ===========    ===========    ===========
</TABLE>







        The accompanying notes are an integral part of these statements.



                                       -4-

<PAGE>

                    LASERGATE SYSTEMS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                   (Unaudited)

                                                                   Six Months Ended
                                                                   ----------------
                                                            June 30, 1996  June 30, 1995
                                                            -------------  -------------
<S>                                                           <C>            <C>         
Cash flows from operating activities:
        Net loss                                              ($3,153,210)   ($1,710,500)
        Adjustments to reconcile net loss
            to cash used in operating activities:
        Depreciation, write-down  and amortization              1,389,687        292,204
        Increase in provision for doubtful accounts                54,043         12,423
        Stock-based compensation                                  198,113        232,500
        Decrease (increase) in:
            Accounts receivable, trade                           (646,285)      (479,546)
            Inventories                                           125,523        (67,502)
            Prepaid expense                                        50,533         12,088
            Other current assets                                     --           25,798
            Other assets                                           77,790           --
        Increase (decrease) in:
            Accounts payable and accrued expenses                 349,108        (26,616)
            Accrued Product Costs                                 183,807        (21,394)
            Deferred revenue                                      283,407        283,849
                                                              -----------    -----------

            Net cash used in operating activities              (1,087,484)    (1,446,696)
                                                              -----------    -----------

Cash flows from investing activities:
        (Additions) to, disposal of, property and equipment       (51,998)       (81,460)
        Note receivable, stockholders                                --         (559,000)
        Other                                                        --           11,973
                                                              -----------    -----------
       Net cash provided (used) in investing activities           (51,998)      (628,487)
                                                                             -----------

Cash flows from financing activities:
        Proceeds from loans, related parties                         --          859,505
        Repayment of loans, related parties                      (300,000)          --
        Repayment of loans, other                                 (18,649)       (63,960)
        Repayment of obligations under capital leases              (2,108)        (6,702)
        Settlement of acquisition obligations                  (1,550,000)          --
        Net proceeds from issuance of  stock                    6,623,082           --
        Redemption of Preferred Stock                          (1,000,000)          --
                                                              -----------    -----------
        Net cash provided by financing activities               3,752,325        788,843
                                                              -----------    -----------

Net increase (decrease) in cash and cash equivalents            2,612,843     (1,286,340)

Cash and cash equivalents, beginning of period                    656,506      1,589,837
                                                              -----------    -----------

Cash and cash equivalents, end of period                      $ 3,269,349    $   303,497
                                                              ===========    ===========

</TABLE>

        The accompanying notes are an integral part of these statements.


                                       -5-

<PAGE>

                    LASERGATE SYSTEMS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 1996


NOTE 1 - FINANCIAL STATEMENT PRESENTATION AND OTHER INTERNAL PRESENTATION

INTERIM PRESENTATION

The interim consolidated  financial  statements of Lasergate Systems,  Inc. (the
"Company") are unaudited and should be read in conjunction with the consolidated
financial  statements  and notes  thereto in its Form  10-KSB for the year ended
December 31, 1995. In the opinion of management,  the accompanying  consolidated
financial  statements (with all explanations  contained in these Notes ) contain
all adjustments  necessary for a fair  presentation of the results of operations
for this interim period.  Interim results are not necessarily  indicative of the
results for a full fiscal year.

OPERATIONAL AND FUNDING MATTERS AND REPORTING BASIS

The information  contained in Note 3 to the Financial Statements included in the
Company's  Annual  Report on Form 10-KSB for the fiscal year ended  December 31,
1995  remains  current  related  to the  status  of  certain  of  the  Company's
operational  and  funding  matters  and,  accordingly,  should be referred to in
conjunction with this Form 10-QSB.

For the six months ended June 30, 1996,  the Company used  $1,087,484 of cash in
operating  activities  and  incurred  a  loss  of  $3,153,210.  It  also  has an
accumulated deficit at June 30, 1996 of $14,938,566. In recent years the Company
has had to rely on proceeds from private  placements and public offerings of its
securities,  and loans (some of which were  converted to stock) in order to fund
its operations. (See below).

The  Company's  financial  statements  have been  prepared  in  conformity  with
generally accepted  accounting  principles.  In view of the matters described in
the preceding paragraph, recoverability of a major portion of the recorded asset
amounts  shown in the  Company's  balance  sheet  is  dependent  upon  continued
operation of the Company,  which in turn is dependent upon the Company's ability
to succeed in its future  operations.  As more fully  described in the Company's
Annual Report on Form 10- KSB for 1995, management has taken various actions and
revised  its  operating  and  financial  requirements,  which  it  believes  are
sufficient to provide the Company with the ability to continue in existence (see
below).

 On March 27, 1996, the Company commenced the Private Placement of the Company's
newly  established  Series E Preferred  Stock at $10.00 per share.  On April 22,
1996,  162,500 shares of the Series E Convertible  Preferred Stock  successfully
closed with the  Company  receiving  total  proceeds,  net of offering  costs of
$1,450,582.

On June 10, 1996, the Company  commenced a Private Placement of 8,000 shares, at
$750  per  share,  of the  Company's  newly  established  Series  F  Convertible
Preferred Stock. On June 27, 1996, the Private Placement closed with the Company
receiving $5,172,500,  net of commissions and offering expenses, for the sale of
8,000 shares of preferred stock.

On June 27,  1996 the  Company  used  $329,359  of the  proceeds of the Series F
Private Placement to repay the entire Note Payable-Related Party of $300,000 and
the interest  accrued  through that date.  In addition,  on June 28, the Company
used  $1,000,000 of the proceeds to redeem 95,950 shares of Series A Convertible
Preferred  Stock  held  by the  same  parties.  These  shares  were  potentially
convertible into 2,636,126 shares of common stock had they not been redeemed.


                                       -6-

<PAGE>


REVENUE RECOGNITION

The Company's revenue  recognition policy is fully explained in the notes to the
Company's  financial  statements  in its Annual  Report on Form 10-KSB for 1995.
During  the  quarter  ended  March  31,  1996,  the  Company  had  one  customer
installation  which had been  contracted  to require  more than  ninety  days to
effect, and accordingly, the percentage of completion method was used to account
for income.  During the  quarter  ended June 30,  1996,  this  installation  was
completed. Accordingly, the remainder of the revenue, costs and resulting profit
have been recognized.

CLASSIFICATION OF EXPENSES

Cost of revenues  includes the costs  associated  with the hardware and software
acquired for the Company's  customers and the estimated  direct costs associated
with the engineering  (mostly  software  customization)  and installation of the
system.  Cost of revenues also includes the estimated direct cost related to the
support and maintenance of the Company's  service  contracts.  While the Company
believes that the estimated direct costs are reasonably stated and classified in
all material  respects,  the Company intends to further refine its procedures of
capturing and reporting this information in 1996. Such refinement could, to some
extent, affect the comparability of the information being reported on.

For  quarterly  reporting in 1995,  cost of revenues  included  principally  the
hardware and  software  acquired for  customer  installations  and support.  The
estimated direct costs  associated with  engineering and installing  systems and
providing  customer  support were not  specifically  categorized and reported as
cost of revenues  as is being done in 1996.  For the  purposes  of this  report,
these types of costs were  separately  identified  and  reclassified  as cost of
revenues  in order to  report  the  results  of  operations  for 1995 on a basis
consistent with that used in 1996. These costs were  approximately  $216,090 and
$392,580 for the three months and six months ending June 30, 1995.

NET LOSS PER COMMON SHARE

The net loss per common share amount is based on the weighted  average number of
common shares outstanding during the periods.

Common  stock  equivalents   (options  and  warrants)  and  the  effect  of  the
convertible  securities  were not  included in the  calculation  of net loss per
share because they are  antidilutive.  At June 30, 1996,  there were options and
warrants  outstanding to purchase 3,031,067 common shares at prices ranging from
$1.00 to $5.50 per share,  in addition to 12,500 Series E Shares which converted
on July 3, 1996 into 174,216  common  shares and 8,000 Series F shares which can
convert into as many as 17,777,778 common shares (see Note 7).

NOTE 2 - SETTLEMENT OF ACQUISITION OBLIGATION

In order to simplify  the  Company's  capital and debt  structure,  on March 11,
1996, the Company and GIS Systems Limited  Partnership  ("GIS") agreed to, among
other things,  settle the remaining obligation to GIS totaling $2,324,335 by the
Company making a cash payment to GIS of $1,550,000,  canceling the $559,000 note
receivable from GIS, and canceling the $199,359 account receivable from GIS, and
with GIS returning to the Company for  retirement  the 109,333  shares of Common
Stock and 111,800 shares of Series B Preferred Stock  previously  issued to GIS.
On April 12, 1996, the transactions  contemplated by the March 11 agreement were
consummated.  The  payment  of  $1,550,000  was  principally  provided  from the
proceeds of the Series E Private Placement.

NOTE 3 - SYSTEMS AND SOFTWARE COSTS

The Company markets products that typically require substantial customization in
order to meet the customers' particular requirements.  Near the end of June 1996
the Company  commenced an assessment of its  marketing  strategy  related to the
Company's current software  products.  While the Company has been able to reduce
the cost of installing,  customizing, and servicing (maintaining) the customized
software,   these  costs  have  remained  higher  than  targeted  levels.   With
anticipated  increased  revenues,  though no assurances  are given,  the Company
continues  to  believe  that it would  



                                       -7-

<PAGE>


successfully   generate   profits  from  the  current   software.   The  Company
commissioned  the  referred to  assessment  to determine  whether the  Company's
computer  products could be modified in order to provide more product options to
its customers without incurring  substantial  customization costs.  Although the
assessment  principally  focused on the conceptual  design of the products to be
offered  and was not an  inquiry  as to whether  any  technological  innovations
needed to be  implemented in order for the Company to  competitively  market its
products,  the Company's marketing and development  personnel confirmed that the
ticketing,  access  control  and other  technologies  which  define the  current
products remain competitive in the marketplace.

The Company has most  recently  concluded, as a result of the  assessment,  that
instead of marketing products that require  substantial  customization,  it will
design  and offer its  products  in a modular  fashion.  They will  consist of a
primary product with optional  pre-developed  modules to meet specific  customer
needs  that  would  require  limited  or  no   customization   by  the  Company.
Additionally,  the  implementation  of this  project will afford the Company the
opportunity to use the same development tool (high level  programming  language)
for each module,  thus providing a certain degree of consistency  and efficiency
in the  product  development  process.  Although  no  assurances  can be  given,
management  expects that applying the Company's  proprietary  technology in this
fashion will be a highly effective method of providing business solutions to the
entertainment industry.

Accordingly,  the Company has  commenced the  development  of this new marketing
approach and expects the new products,  incorporating the modular concept,  will
be available for sale by the second quarter of 1997.  The current  software will
continue to be marketed until that time and the Company will continue to support
the  software  for some period  beyond the  introduction  of the new product for
those customers who intend to continue using the current software.

Because of the recent strategic  decision  described above, the Company reviewed
the valuation of the current software cost (pre-write down amortized  balance of
$1,275,000  at June  30,  1996) in  accordance  with  the net  realizable  value
determination  provisions  under  SFAS No.  86  "Computer  Software  to be Sold,
Leased, or Otherwise Marketed". As a result, a write-down of $1,075,000 has been
made to the software's  carrying value. The software's  estimated net realizable
value as  adjusted  of  $200,000  at June 30,  1996  principally  relates to the
Company's engineers estimate of the value of the current products proven program
and product design which will be  incorporated  into the new product concept and
is expected to be fully realized (recoverable) through future revenues.

The Company expects to incur  approximately  $250,000 to $400,000 of new product
development  costs  by the  second  quarter  of 1997 in order  to  complete  the
development of the new product.

As a result of this development effort and new product introduction, the Company
expects to achieve  cost  reductions  beginning  in 1997 in the areas of product
development  and  customer  support.  In  addition,  the product will have a new
appearance which is more user friendly. As a result, the Company expects its new
products to be more competitive in the market.

NOTE 4 - DEPRECIATION AND AMORTIZATION

Depreciation and Amortization Expense for the six months ended June 30, 1996 and
1995 was $1,389,687 and $292,204. This includes a write-down at June 30, 1996 of
$1,075,000.  Accumulated  depreciation  and amortization as of June 30, 1996 and
1995 was $2,166,718 and $777,031.

NOTE 5  - PRODUCT COST LIABILITY

At December 31, 1995 the Company reserved $297,000 to provide enhancements, free
of charge,  on systems  installed in earlier years.  During the first quarter of
1996,  $203,000 was spent for these  enhancements.  All but one of the remaining
sites were  enhanced  during June and July,  1996 while product  shortages  were
occurring. However, some of these modifications were more costly to perform than
originally   estimated,   and  the  Company  has  committed  to  making  similar

                                       -8-

<PAGE>


enhancements to additional  customers.  As a result, an additional  $387,000 has
been accrued at June 30, 1996 in order to provide for the cost of completing all
enhancements committed.

NOTE 6 - NOTE PAYABLE, RELATED PARTY

On June 15, 1995,  the Company  borrowed  $300,000  under a Convertible  Secured
Promissory  Note due March 30, 1996,  advanced from a former  shareholder  at an
annual  interest  rate of 9.5%.  On June 27, 1996 the Company  used  $329,359 to
repay the entire Note Payable-Related Party of $300,000 and the interest accrued
through that date. In addition,  on June 28, 1996 the Company paid $1,000,000 to
the same related  party in order to redeem 95,950 shares of Series A Convertible
Preferred Stock. These shares were potentially convertible into 2,636,126 shares
of common stock had they not been redeemed.

NOTE 7 - STOCKHOLDERS' EQUITY

ISSUANCE OF STOCK

On March 27, 1996,  the Company  commenced a private  placement of shares of the
Company's  newly  established  Series E Preferred  Stock at $10.00 per share. On
April 22,  1996,  162,500  shares of the Series E Preferred  Stock  successfully
closed  with the  Company  receiving  total  proceeds,  net of  commissions  and
offering costs, of $1,450,582.  As of June 30, 1996, 150,000 Series E shares had
converted into 2,453,686  common shares.  On July 3, 1996, the remaining  12,500
Series E shares were converted into 174,216 shares of common stock.

On June 10, 1996, the Company  commenced a private placement of 8,000 shares, at
$750 a share, of the Company's newly established Series F Convertible  Preferred
Stock.  On June 27,  1996,  the  placement  closed  with the  Company  receiving
$5,172,500,  net of  commissions  and offering  expenses,  for the sale of 8,000
shares of preferred stock. Each Series F share has a face value of $1,000, bears
a 4% cumulative  dividend,  and is convertible into shares of common stock after
August 7, 1996 at generally,  the average market price for the five trading days
preceding conversion.  However, if such average market price is more than $1.00,
the conversion  price will be $1.00,  and one preferred  share will convert into
1,000  shares of common  stock;  and if such  average  market price is less than
$0.45,  the conversion price will be $0.45, and one preferred share will convert
into  2,222  shares  of  common  stock.  Thus,  the  8,000  Series F shares  are
convertible  into between  8,000,000 and 17,777,778  shares of common stock.  In
addition,  the cumulative dividend on these shares is convertible into shares of
common stock in the same manner as the Series F shares.

On  June  28,  1996  the  Company  used   $329,359  to  repay  the  entire  Note
Payable-Related Party of $300,000 and the interest accrued through that date. In
addition,  the Company paid  $1,000,000  to the same  related  party in order to
redeem 95,950 shares of Series A Convertible  Preferred Stock. These shares were
potentially  convertible into 2,636,126 shares of common stock had they not been
redeemed.

Paid-in capital has also increased in 1996 by approximately $198,000 as a result
of the recording of stock-based compensation.

RESERVATION AND AUTHORIZATION OF COMMON STOCK

Upon the sale of 8,000  shares  of Series F  Convertible  Preferred  Stock,  the
Company  reserved  8,000,000  shares  of  common  stock  to  provide  for  their
conversion.  If the average  market price of the Company's  common stock is less
than $1.00 per share  (thus  permitting  the holders of the  Company's  Series F
Preferred Stock to convert it into more than 8,000,000  shares of common stock),
the private  investors  which  purchased  the Series F shares have agreed to not
request  conversion of more preferred shares than the amount which would require
the  issuance  of  8,000,000  common  shares  until the  Company  increases  its
authorized  number of shares of common  stock.  The Board of  Directors  plan to
amend  the  Company's  Articles  of  Incorporation  to  increase  the  number of
authorized  shares of common  stock.  Upon  approval  of this  amendment  by the
shareholders  of the  Company,  the Company will  reserve  9,777,778  additional
shares to allow for the  possibility of the Series F shares  converting  into as
many as 17,777,778 common shares.



                                       -9-

<PAGE>


NOTE 8  - LEGAL PROCEEDINGS

The Company's  founder and former  President and Chief  Executive  Officer,  has
commenced  an action  against the  Company in Florida  state  court.  The former
president alleges,  among other things,  that he was wrongfully  terminated from
his employment and seeks damages which in the aggregate could exceed $1,000,000.
The  Company  believes  that the former  president's  suit is without  merit and
intends to vigorously defend the action.  There have been no significant changes
regarding this action since last quarter.

NOTE 9 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

INTEREST AND INCOME TAXES PAID:

                                                           Six Months Ended
                                                           ----------------
                                                      1996                 1995
                                                      ----                 ----

Interest                                            $29,359              $2,043

Income Taxes                                         -0-                    -0-

NON-CASH INVESTING AND FINANCING ACTIVITIES:

1995:

The  Company  acquired  substantially  all the  assets  of GIS  Systems  Limited
Partnership for total consideration of approximately $3,700,000 (common stock of
$765,331,  preferred stock of $559,000,  and promissory notes of $2,324,335) and
recorded  assets at  aggregate  fair  value of  approximately  $3,750,000,  with
assumed payables of approximately $50,000.


                                      -10-

<PAGE>




ITEM 2-MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The  following  discussions  should be read in  conjunction  with the  financial
statements  and notes  thereto,  and is  qualified  in its entirety by reference
thereto.

NEW DEVELOPMENTS AFFECTING OPERATIONS

The Company markets products that typically require substantial customization in
order to meet the customers' particular requirements.  Near the end of June 1996
the Company  commenced an assessment of its  marketing  strategy  related to the
Company's current software  products.  While the Company has been able to reduce
the cost of installing,  customizing, and servicing (maintaining) the customized
software,   these  costs  have  remained  higher  than  targeted  levels.   With
anticipated  increased  revenues,  though no assurances  are given,  the Company
continues  to  believe  that it would  successfully  generate  profits  from the
current  software.  The  Company  commissioned  the  referred to  assessment  to
determine whether the Company's  computer products could be modified in order to
provide more product  options to its  customers  without  incurring  substantial
customization  costs.  Although  the  assessment   principally  focused  on  the
conceptual  design of the  products  to be offered  and was not an inquiry as to
whether any technological  innovations needed to be implemented in order for the
Company to  competitively  market its  products,  the  Company's  marketing  and
development  personnel  confirmed that the  ticketing,  access control and other
technologies  which  define  the  current  products  remain  competitive  in the
marketplace.

The Company has most  recently  concluded, as a result of the  assessment,  that
instead of marketing products that require  substantial  customization,  it will
design  and offer its  products  in a modular  fashion.  They will  consist of a
primary product with optional  pre-developed  modules to meet specific  customer
needs  that  would  require  limited  or  no   customization   by  the  Company.
Additionally,  the  implementation  of this  project will afford the Company the
opportunity to use the same development tool (high level  programming  language)
for each module,  thus providing a certain degree of consistency  and efficiency
in the  product  development  process.  Although  no  assurances  can be  given,
management  expects that applying the Company's  proprietary  technology in this
fashion will be a highly effective method of providing business solutions to the
entertainment industry.

Accordingly,  the Company has  commenced the  development  of this new marketing
approach and expects the new products,  incorporating the modular concept,  will
be available for sale by the second quarter of 1997.  The current  software will
continue to be marketed until that time and the Company will continue to support
the  software  for some period  beyond the  introduction  of the new product for
those customers who intend to continue using the current software.

Because of the recent strategic  decision  described above, the Company reviewed
the valuation of the current software cost (pre-write down amortized  balance of
$1,275,000  at June  30,  1996) in  accordance  with  the net  realizable  value
determination  provisions  under  SFAS No.  86  "Computer  Software  to be Sold,
Leased, or Otherwise Marketed". As a result, a write-down of $1,075,000 has been
made to the software's  carrying value. The software's  estimated net realizable
value as  adjusted  of  $200,000  at June 30,  1996  principally  relates to the
Company's engineers estimate of the value of the current products proven program
and product design which will be  incorporated  into the new product concept and
is expected to be fully realized (recoverable) through future revenues.

The Company expects to incur  approximately  $250,000 to $400,000 of new product
development  costs  by the  second  quarter  of 1997 in order  to  complete  the
development of the new product.

As a result of this development effort and new product introduction, the Company
expects to achieve  cost  reductions  beginning  in 1997 in the areas of product
development  and  customer  support.  In  addition,  the product will have a new
appearance which is more user friendly. As a result, the Company expects its new
products to be more competitive in the market.





                                      -11-

<PAGE>



RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 1996 VERSUS THREE MONTHS ENDED JUNE 30, 1995

REVENUES:

Revenues  increased  27% to  $1,103,940  for the  second  quarter  of 1996  from
$871,994 for the second quarter of 1995. The continuing  increase in revenues is
primarily attributable to marketing activities by a larger sales staff, from the
Company's enhanced products,  and from new market  accessibility  resulting from
the acquisition of Delta Information  Services,  Inc. ("Delta") in December 1994
and GIS effective January 1995.  Maintenance revenues represented  approximately
11% of total  revenues  for the three  months  ended June 1996 and for the three
months ended June 1995.

CLASSIFICATION OF EXPENSES:

Cost of revenues for the second  quarter of 1996  includes the costs  associated
with the hardware and software  acquired  for the  Company's  customers  and the
estimated  direct costs  associated with the engineering and installation of the
systems,  and the provision of customer support.  In the Company's Annual Report
on Form  10-KSB for the year ended  December  31,  1995,  cost of  revenues  was
reported on a basis consistent with 1996.  However,  for quarterly  reporting in
1995, cost of revenues  included  principally the hardware and software acquired
for  customer   installations  and  support,  but  the  estimated  direct  costs
associated  with  engineering  and  installing  systems and  providing  customer
support were not specifically categorized and reported as cost of revenues as is
being done in 1996.  For the purposes of this report,  these types of costs were
separately  identified  and  reclassified  from  Development  or SG&A to cost of
revenues  in order to  report  the  results  of  operations  for 1995 on a basis
consistent with that used in 1996.

COST OF REVENUES:

Cost of revenues for the second  quarter of 1996  increased to  $1,040,161  from
$475,011 for the second  quarter of 1995. The increase  resulted  primarily from
the increased sales, and the additional accrual of product cost liabilities (see
Note 5 to  the  financial  statements).  Cost  of  revenues  represented  94% of
revenues  during the second quarter of 1996 as compared to 54% during the second
quarter of 1995.  However,  if this accrual is  excluded,  cost of revenues as a
percentage of revenues was 59% in 1996 compared to 54% of revenues in 1995. This
difference  was  primarily  caused  by  inefficiencies  in 1996  due to  product
shortages and delayed  shipments by vendors . This was the result of the Company
fully  utilizing  credit lines with vendors and having to delay the placement of
orders  with  vendors  until  cash  was  available   from  accounts   receivable
collections.  Shipment  interruptions  and delays  occurred from May through and
July, 1996. Normal shipments resumed in mid-July 1996,  shortly after completion
of the Series F private placement (see Note 7 of the financial statements).

DEVELOPMENT COSTS:

Development  costs  decreased  to $129,533  for the second  quarter of 1996 from
$227,222 for the second quarter of 1995, a decrease of $97,689, or 43% . Of this
amount,  $20,000 was the result of higher  allocations  to cost of revenue.  The
remaining  $77,689  decrease  is a result of  development  efforts in 1996 being
directed towards  providing  enhancements to previously  installed  systems (see
Note 5 to the financial  statements).  Accordingly,  these costs were charged to
the accrued  product cost  reserve.  The Company  intends to continue to develop
products and enhance existing  products to ensure  competitive  viability in the
marketplace, (See Note 3 to the financial statements).

SELLING, GENERAL AND ADMINISTRATIVE:

Selling,  general and administrative expenses (SG&A) increased to $2,870,100 for
the  second  quarter  of 1996 from  $799,987  for the  second  quarter  of 1995,
representing  a $2,070,113 or 259%  increase.  These amounts  represent  260% 


                                      -12-

<PAGE>


of revenues in 1996 and 92% of revenues in 1995. The increase was due to several
items,  including  a  write-down  of  capitalized  software,  and  increases  in
compensation  expense,  shareholder  relations  expense,  professional fees, and
other  expenses.  

Capitalized  software  was written down  $1,075,000  at June 30, 1996 due to the
development of a replacement  product which is expected to be available for sale
in the second quarter of 1997 (see Note 3 to the financial statements).  SG&A in
1995 did not include any write-downs or write-offs.

Employee  compensation  expenses increased to $750,000 for the second quarter of
1996 from $244,000 for the second  quarter of 1995, an increase of $506,000.  Of
this amount,  $365,000 represents a provision for one-half of the cash-based and
stock-based  incentive  compensation that is planned for the executive group and
managers  for 1996.  Since no provision  was made in the first  quarter of 1996,
one-half of the annual  amount was provided for in the second  quarter.  At this
time last year,  no amounts had been  accrued.  The remainder of the increase in
compensation expense, $141,000,  represents increased commissions of $71,000 due
to increased sales increased salaries of $20,000 due to increased  headcount and
decreased allocations to cost of revenues.

Shareholder  relations  expenses totaled $110,000 in 1996 versus $7,000 in 1995.
This increase of $103,000 includes a $100,000 payment to a public relations firm
engaged to inform the  Company's  shareholders,  and  others  interested  in the
Company's activities.

Accounting, legal and other professional services increased $83,000, to $189,000
in 1996 from $106,000 in 1995. Legal fees represent $46,000 of the increase,  of
which $13,000 represents services rendered in preparing the Company's defense to
a suit  brought  by a former  President/CEO  of the  Company  which the  Company
intends to vigorously  defend. The remaining $33,000 of the increased legal fees
relates primarily to the two private placements  completed.  No expenses related
to these placements have been capitalized.

Net loss  increased to $2,989,255  ($.60) a share for the second quarter of 1996
from $642,686  ($.21) a share for the second  quarter of 1995. The components of
the decrease in the Company's net loss are explained above.








                                      -13-

<PAGE>



SIX MONTHS ENDED JUNE 30, 1996 VERSUS SIX MONTHS ENDED JUNE 30, 1995

REVENUES:

Revenues  increased  72% to  $2,569,929  for the six months ended June 1996 from
$1,490,449 for the six months ended 1995. The continuing increase in revenues is
primarily attributable to marketing activities by a larger sales staff, from the
Company's enhanced products,  and from new market  accessibility  resulting from
the acquisition of Delta Information  Services,  Inc. ("Delta") in December 1994
and GIS Limited Partnership ("GIS") effective January 1995. Maintenance revenues
represent approximately 11% of total revenues for the six months ended June 1996
and June 1995.

COST OF REVENUES:

Cost of revenues  increased  to  $1,792,051  for the six months  ended 1996 from
$1,056,656  of the six  months  ended  1995.  The  increase  resulted  from  the
increased  sales,  and the additional  accrual of product cost  liabilities (see
Note 5 to the financial statements). This represents 70% of revenues for the six
months ended June 1996,  and 71% of revenues for the six months ended June 1995.
However,  if this  accrual is  excluded,  cost of  revenues as a  percentage  of
revenues  was 55% in 1996  compared to 71% of revenues  for the six months ended
June 1995. This difference was primarily caused by inefficiencies in 1995 due to
the integration of the new products acquired from Delta and GIS.

DEVELOPMENT COSTS:

Development  costs  decreased  to  $156,209  for the six months  ended 1996 from
$473,665 for the six months ended 1995, a decrease of $317,456, or 67% . Of this
amount,  $74,000 was the result of higher  allocations to cost of revenues.  The
remaining  $243,456 is a result of  development  efforts in 1996 being  directed
towards  providing  enhancements to previously  installed systems (see Note 5 to
the financial  statements),  and higher than usual development costs in 1995 due
to the integration of the new products acquired from Delta and GIS.

During the first quarter of 1996,  existing  development  personnel were used to
enhance certain systems previously  installed in 1995 or earlier.  These related
costs of  approximately  $203,000  were  charged  against a product cost reserve
established  at December  31, 1995 for this  purpose.  Accordingly,  since these
costs were previously  anticipated and expensed in 1995,  development  costs for
1996 have been favorably impacted.

During 1995, the Company dedicated  significant  resources  towards  integrating
acquired  products  and  resolving  technical  difficulties  involved  with  the
installation and maintenance of the products.

The   Company  intends to  continue to develop  products  and  enhance  existing
products to ensure competitive viability in the marketplace,  (See Note 3 to the
financial statements).

SELLING, GENERAL AND ADMINISTRATIVE:

Selling,  general and administrative expenses (SG&A) increased to $3,733,911 for
the six months  ended of 1996 from  $1,656,422  for the six months  ended  1995,
representing  a $2,077,489 or 125%  increase.  These amounts  represent  145% of
revenues in 1996 and 111% of revenues in 1995.  The  increase was due to several
items,   including  a  write-down  of  capitalized  software  and  increases  in
compensation  expense,  shareholder  relations  expense,  professional fees, and
other expenses.

Capitalized  software  was written down  $1,075,000  at June 30, 1996 due to the
development of a replacement  product which is expected to be available for sale
in the second quarter of 1997 (see Note 3 to the financial statements).  SG&A in
1995 did not include any write-downs or write-offs.


                                      -14-

<PAGE>


Employee  compensation  expenses  increased  to  $1,011,000  from  $630,000,  an
increase of $381,000.  One component of this is an increase of $365,000 due to a
provision for one-half of the cash-based and stock-based incentive  compensation
that is planned for the executive group and managers in 1996. In 1995, incentive
compensation  was  recorded  when  paid,  with none being paid in the six months
ended June 30. Other  components of the increase  include decrease in consulting
expenses  of  $94,000,  an  increase  in  commissions  expense of $92,000 due to
increased  sales  and an  increase  in  salaries  of  $18,000  due to  increased
headcount.

Shareholder  relations  expenses totaled $110,000 in 1996 versus $7,000 in 1995.
This increase of $103,000 includes a $100,000 payment to a public relations firm
engaged to inform  the  Company's  shareholders  and  others  interested  in the
Company's activities.

Accounting, legal and other professional services increased $93,000, to $302,000
in 1996 from  $209,000 in 1995.  Legal fees  increased  $29,000 of which $13,000
represents  services  rendered  related to preparing the Company's  defense to a
suit brought by a former  President/CEO of the Company which the Company intends
to vigorously defend. The remaining $16,000 of the increased legal fees consists
of a  decrease  I  fees  for  general  business  purposes  and  an  increase  of
approximately $33,000 due to the two private placements  completed.  No expenses
related to these placements have been capitalized.

Net loss  increased to  $3,153,210  ($.67) a share for the six months ended June
30, 1996 from $1,710,500  ($.57) a share for the six months ended June 30, 1995.
The components of the decrease in the Company's net loss are explained above.

LIQUIDITY AND CAPITAL RESOURCES

For the six months ended June 30, 1996,  the Company used  $1,087,484 of cash in
operating activities and incurred a loss of $3,153,210.  It has also accumulated
a deficit of $14,938,566 from its inception in March 1985 through June 30, 1996.
In recent years the Company has had to rely on proceeds  from private and public
placements  and loans (some of which were  converted  to stock) in order to fund
its operations.

In order to simplify  the  Company's  capital and debt  structure,  on March 11,
1996, the Company  executed an agreement with GIS in which the Company agreed to
make a cash payment of $1,550,000 and cancel the $559,000 note  receivable  from
GIS and the $199,359  account  receivable from GIS in exchange for GIS canceling
the Company's  promissory  notes in the aggregate  amount of $2,324,335  and GIS
returning  their  109,333  shares of Common  Stock and their  111,800  shares of
Series B Preferred  stock for  retirement.  On April 12, 1996, the  transactions
contemplated  by the March 11 agreement  were  consummated.  The cash payment of
$1,550,000  made to GIS was  principally  provided  from the net proceeds of the
Series E Private Placement described below.

On March 27, 1996, the Company  commenced a Private  Placement of 350,000 shares
of the Company's newly established Series E Preferred Stock at $10.00 per share.
162,500  shares of the Series E  Preferred  Stock  successfully  closed with the
Company receiving total proceeds, net of offering costs, of $1,450,582.

On June 10, 1996, the Company  commenced a Private Placement of 8,000 shares, at
$750  per  share,  of the  Company's  newly  established  Series  F  Convertible
Preferred Stock. On June 27, 1996, the Private Placement closed with the Company
receiving $5,172,500,  net of commissions and offering expenses, for the sale of
8,000 shares of preferred stock.

On June 27,  1996 the  Company  used  $329,359  of the  proceeds of the Series F
Private Placement to repay the entire Note Payable-Related Party of $300,000 and
the interest  accrued  through that date.  In addition,  on June 28, the Company
used  $1,000,000 of the proceeds to redeem 95,950 shares of Series A Convertible
Preferred  Stock  held  by the  same  parties.  These  shares  were  potentially
convertible into 2,636,126 shares of common stock had they not been redeemed.

The Company expects to incur  approximately  $250,000 to $400,000 of new product
development  costs  by the  second  quarter  of 1997 in order  to  complete  the
development of a new (replacement) product.



                                      -15-

<PAGE>



Since the Company does not purchase  components for its products until an order
is received,  there is  typically a backlog of orders for  systems.  The Company
defines  backlog as a signed  contract,  typically  with some type of  financial
assurance  such as a deposit.  As of June 30, 1996 and December  31,  1995,  the
Company's backlog was approximately $900,000 and $1,200,000, respectively.

While  no  assurances  can  be  given,  management  believes  that  the  current
organization infrastructure and the Company's products are sufficient to support
revenues  greater  than the  levels  achieved  in 1995.  In  addition,  while no
assurances  can be given,  management  believes  that the  Company's  operations
should  continue to progress  throughout 1996 and that the net proceeds from the
completion of the April 1996 and June 1996 Private  Placements and the operating
revenues  from sales in 1996 should be  sufficient  to fund  operations  through
1997. See "Operational and Funding Matters and Reporting Basis" of Note 1 to the
financial statements.

Part II-Other Information

Item 2 - Changes in Securities

On June 6, 1996,  the Board of  Directors  of the  Registrant  authorized  a new
series of preferred convertible stock, par value $.03, designated as the "Series
F Preferred  Stock." The authorized  number of such shares of the Series F Stock
is 8,000  (the  "Series F  Shares").  Each  Series F Share  has a face  value of
$1,000,  bears a 4% cumulative dividend (the "Dividend") and is convertible into
Common  Shares at the average  market price for the five trading days  preceding
conversion.  However,  if such  average  market  price is more than  $1.00,  the
conversion  price will be $1.00,  and one Series F Share will convert into 1,000
Common Shares;  if such average market price is less than $0.45,  the conversion
price  will be $0.45,  and one  Series F Share will  convert  into 2,222  Common
Shares.  Thus, the Series F. Shares are convertible  into between  8,000,000 and
17,777,778 Common Shares. Additionally,  the Dividend is convertible into Common
shares in the same manner as the Series F Shares.  The Series F Shares limit the
rights of the holders of shares of Common  Stock or other  series of  preference
shares by providing a liquidation  preference of $1,000 per Series F share.  The
Series  F.  Shares  rank pari  passu  with the  shares  of the  other  series of
preferred stock. On June 20, 1996, the Company  commenced a private placement of
the Series F Shares,  at $750 per share. On June 27, 1996, the private placement
closed with the Company  receiving  $5,172,500,  net of commissions and offering
expenses for the sale of the Series F Shares.

Item 6-Exhibits and Reports on Form 8-K

(a)  Exhibits:


           4.1        Form of Series F  Subscription  Agreement for the Purchase
                      of Shares of Series F Preferred Stock

           4.2        Form of Registration  Rights Agreement With Respect to the
                      Purchases of Shares of Series F Preferred Stock

           27.1       Financial Data Schedule

(b)  Reports  on Form 8-K:  The  Company  has not filed any  reports on Form 8-K
during the quarter ended June 30, 1996.

All  other  items  required  in Part II have  been  previously  filed or are not
applicable for the quarter ended June 30, 1996.




                                      -16-

<PAGE>



                                   SIGNATURES

In accordance with the  requirements of the Exchange Act, the registrant  caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.

                                                      Lasergate Systems, Inc.

                                                       Registrant



Date: August 19,  1996                                 /s/Philip P. Signore
                                                       --------------------
                                                       PHILIP P. SIGNORE
                                                        Vice President and
                                                       Chief Financial officer




                                      -17-

