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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549



                                    FORM 10-K
        [X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                 SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
                           COMMISSION FILE NO. 1-9158



                             MAI SYSTEMS CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


                 DELAWARE                                      22-2554549
         (State or other jurisdiction                       (I.R.S. Employer
        of incorporation or organization)                   Identification No.)

            9600  Jeronimo Road
             Irvine, California                                   92718
    (Address of principal executive offices)                   (Zip Code)

       Registrant's telephone number, including area code: (714) 580-0700

                        -------------------------------

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

                        -------------------------------

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

                     Common Stock, $.01 par value per share

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

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

     The registrant's Certificate of Incorporation authorizes the issuance of
25,000,000 shares of $.01 par value Common Stock. As more fully described in
this report, shares of Common Stock are currently being distributed by the
registrant to its former creditors pursuant to its Chapter 11 Plan of
Reorganization. At March 25, 1997, the number of issued and outstanding shares
of the Company's Common Stock was 8,643,776 shares. The aggregate market value
of all of the shares of Common Stock held by non-affiliates of the registrant as
of March 25, 1997 was approximately $ 39,360,266. Directors and officers and ten
percent or greater stockholders are considered affiliates for the purposes of
this calculation but should not necessarily be deemed affiliates for any other
purpose.

     Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [X]  No [ ]

                         -------------------------------

                       DOCUMENTS INCORPORATED BY REFERENCE

     Portions of registrant's 1994 Annual Report on Form 10-K are incorporated
herein by reference in Part I; portions of registrant's 1996 Annual Report are
incorporated herein by reference in Part II; and portions of registrant's
definitive Proxy Statement to be delivered to stockholders in connection with
the Annual Meeting of Stockholders to be held May 20, 1997 are incorporated
herein by reference into Part III.

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<PAGE>   2



                                     PART I

ITEM 1. BUSINESS

                                   THE COMPANY

         MAI Systems Corporation provides total information technology solutions
primarily to the hospitality, resort and destination industry and to midsized
process manufacturers. The solutions provided by the Company typically include
applications software, computer hardware, peripherals and wide and local area
network design, implementation, installation and support. The software
applications are generally the Company's proprietary software, or software which
is licensed to the Company on an exclusive or non-exclusive basis. The hardware,
peripherals and networking systems are generally third-party products which the
Company distributes. Directly and through its arrangement with Olivetti North
America and Olivetti Canada Ltd., the Company provides on-site service and
support to users of its network and systems hardware.

         The Company was incorporated under the laws of the State of Delaware on
September 6, 1984. The Company's name was changed from MAI Basic Four, Inc. to
MAI Systems Corporation on November 6, 1990. As used herein, the terms the
"Company" and "MAI" include MAI Systems Corporation and its subsidiaries unless
the context indicates otherwise. The Company commenced operations on January 29,
1985.

                           DESCRIPTION OF THE BUSINESS

         MAI's mission is to put in place long-term information technology
partnerships with its customers by designing, installing and supporting
customer-specific total information management solutions. Focusing primarily on
the hotel, motel and resort destinations industry and solutions for midsized
process manufacturers, it designs, sells, installs and supports information
management solutions featuring complex wide area networks ("WANs") and local
area networks ("LANs"). It provides a wide array of products and services to its
installed base of approximately 7,000 customers and continues to make direct
sales of products and services which enhance, upgrade and extend the useful life
of the Company's legacy systems.

         MAI markets its products and services primarily through a team selling
approach, which utilizes the Company's nationwide network of sales offices. The
Company also markets certain products and services through a limited number of
distributors, independent value-added resellers ("VARs"), authorized service
representatives and independent software vendors ("ISVs").

         The Company's activities are conducted principally in the United
States, Canada, the United Kingdom, the Netherlands, Hong Kong, Singapore and
Mexico. The Company also operates subsidiaries in Puerto Rico and Venezuela and
operates offices in the People's Republic of China and Malaysia. Additionally,
the Company sells its products through indirect channels in the United States
and abroad. These independent channels include VARs, distributors, ISVs and
local sales agents.

         The Company provides on-site service and help support desk services to
its customers in the United States, Canada, the United Kingdom, the Netherlands,
Puerto Rico and Venezuela. In the United States and Canada, the Company and its
subcontractors, Olivetti North America, Inc. and Olivetti Canada, Ltd.
(sometimes collectively referred to as "Olivetti"), provide on-site services to
the Company's new and legacy system customers. The company's foreign
distributors provide support services to their customers in countries where the
Company does not have its own support organization.

PRODUCTS AND SERVICES

         In 1996, the Company's revenue was derived from the following sources:


<TABLE>
<CAPTION>
                                                                    Percentage of Total
                                                                           Revenue
<S>                                                                          <C>
Software, networks and professional services                                   %
  Software sales .................................................           12.0%
  Network and computer equipment .................................           24.7%
  Professional services ..........................................           19.9%
    Total ........................................................           56.6%
Legacy systems ...................................................           43.4%
                                                                             -----
</TABLE>









                                      -2-
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<TABLE>
<S>                                                                         <C>
Total ..................................................                    100.0%
                                                                            ======
</TABLE>


         Products and Services

         MAI designs, implements, maintains and supports total information
system solutions utilizing complete WANs and LANs. In conjunction with these
solutions, the Company's approach is to analyze a customer's information system
requirements, propose a solution and then design, integrate, install and
maintain the system. One of the principal objectives of the Company is to help
its customers utilize their data across their entire enterprise so that
information that was once limited to one area of a business can now be available
to other areas where it can be utilized for new purposes. Once a system is
on-line, the Company typically continues its relationship with the customer by
providing around-the-clock telephonic support and, through its partnership with
Olivetti, on-site field support. The systems designed by the Company utilize the
Company's industry-leading property management system for hotels, resorts and
destinations and enterprise resource planning ("ERP") applications software for
midsize process manufacturers, which the Company markets with industry-standard
hardware and software products from leading technology vendors including Cisco
Systems, Compaq Computer, Hewlett Packard, IBM, Larscom, Microsoft and Novell.
Additionally, the Company resells telecommunication services and equipment,
including wide bandwidth T1 lines, which enable its customers to achieve maximum
utilization of their networks.

         Products for Hotels, Resorts and Destinations

         The Company markets three property management systems. Hotel
CompuSystem II has been marketed by the Company since 1990, when the Company
acquired Computerized Lodging Systems ("CLS"). In August 1996 the Company
acquired Hotel Information Systems, Inc. ("HIS") and began marketing its Paragon
product line. In October 1996, the Company became the exclusive distributor of
the Lodging Touch International products from Enhanced Hospitality Solutions.
Each of the product lines has features which make it particularly well-suited to
a different segment of the hospitality marketplace. In addition, the Company
markets the Gaming Systems International ("GSI") products for the gaming
industry.

         Hotel CompuSystem II, which targets hotels and resorts in the 300 to
1,000 room range, runs under UNIX. Hotel CompuSystem II is full-featured and
provides customers with front desk, night audit, housekeeping and numerous other
functions. Additionally, the CLS products interface to more than 250 other
hospitality-related information system products, such as point-of-sale systems,
telephone call monitoring systems and minibar maintenance systems. The ease of
connectivity with third-party products is one of the system's competitive
advantages. Hotel CompuSystem II is installed in over 2,000 sites worldwide.

         The Paragon property management system, from HIS, is designed to serve
the needs of larger hotels and resorts. Running on IBM AS/400 or System 36
minicomputers, the Paragon product line provides the full range of features and
functionality required by premier properties, such as Disneyland Paris or
Renaissance Hotels International. Paragon is installed in more than 1,200 hotels
and resorts around the world, and is a major presence in the Pacific Rim.

         The Lodging Touch International ("LTI") products comprise a
state-of-the-art suite of products designed to take full advantage of the
versatility of Microsoft's Windows 95 and Windows NT operating systems. They are
the industry's first fully graphical products and the only ones to fully utilize
the features of the Windows operating system. With the LTI products, MAI has
been named a Microsoft Solutions Partner.

         GSI's on-line slot accounting and player tracking product is comprised
of a proprietary circuit board which is installed inside electronic slot
machines, and database software which gathers and maintains data collected by
the circuit boards. The Company utilizes Novell-based LANs to link the slot
machines. The GSI system monitors the activity in the individual gaming machines
in real time, providing information on the activity of each machine, the amount
of money in the machine, whether or not the machine is operating properly and
alerting the casino management if the machine has been tampered with. The
software modules include stand-alone player tracking, cage/pit management, table
games accounting, slot maintenance, employee time and attendance, and numerous
other functions.






                                      -3-
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Products for Process Manufacturing

         MAI develops and markets MANBASE and CIMPRO, both of which are ERP
applications, used by midsize process manufacturers. The Company's typical
customer generally has annual revenues between $50 million and $500 million.
These manufacturers convert raw materials into finished goods or into products
used to manufacture other goods. Typical users of the Company's ERP product
would be manufacturers who convert raw milk into cheese and other dairy
products, or pharmaceutical manufacturers who convert raw chemicals into
medicinal products. These process manufacturers have unique requirements in
quality control, regulatory compliance, inventory control and production
planning that require an integrated application and system solution.

         CIMPRO, which the Company acquired from Datalogix International, Inc.,
a subsidiary of Oracle Corporation, in March 1997, offers a fully integrated
modular system for complete support of process manufacturing planning and
tracking, including inventory, production, supply chain management, costing,
accounting, electronic data interchange ("EDI") and regulatory compliance.
CIMPRO's customer base is primarily food, chemical and pharmaceutical
manufacturers.

         MANBASE, the rights to which the Company reacquired in May 1996, also
offers a fully integrated ERP application for process manufacturers. MANBASE has
been sold primarily to food manufacturers and has many features which are
tailored for the unique requirements of this industry.

         The Company intends to provide continuing support for its MANBASE
customers but will concentrate its sales efforts on the CIMPRO product.

         Other Solutions

          In certain instances, the Company will provide customers outside its
core markets with integration and implementation services. These customers
utilize the Company's professional services, consulting, network and system
products and/or partner products, to rehost their legacy application to modern
client/server technology. These customers do not use the Company's hospitality
or process manufacturing applications, but have an in-house or third party
application. Since this is a highly competitive business, the Company provides
this service only to customers with a long-standing relationship to the Company
whose needs are uniquely matched to its services. MAI's products and services
give these customers a single-source network and system solution with rapid
implementation and integration.

         Legacy/ Maintenance

         The Company continues to provide principally maintenance services to
its installed base of customers. These products and services are designed to
enable customers to benefit from their investment in the Company's host-based
information systems. The Company's OpenBASIC application environment permits
customers using application software written in the Business BASIC programming
language to continue to use such application software on selected hardware
platforms designed for the UNIX, MS-DOS and Novell environments. Optional
OpenBASIC modules permit developers to enhance their Business BASIC applications
by integrating them with popular UNIX and MS-DOS/Microsoft Windows software.

         With its own personnel and through an outsource agreement with Olivetti
North America, Inc. in the United States and with Olivetti Canada Ltd. in
Canada, and directly in Venezuela and Puerto Rico, the Company offers on-site
repair and warranty service and around-the-clock telephonic support to its
customers. The Company also provides a range of customer education, training and
consulting services for its application software packages and hardware and
horizontal software products. These services are offered to the Company's
customers as part of the Company's strategy of supplying the total information
solution to its customers.

         The Company markets a family of upgradeable, industry-standard
platforms based upon IBM RISC and Intel Corporation microcomputer technology and
featuring the Company's OpenBASIC application environment running under various
UNIX-based operating systems. These products provide cost-effective, multi-user
solutions for customers whose needs range from entry-level systems to midsize,
multiprocessor systems that support up to 500 users.




                                      -4-
<PAGE>   5



MARKETING AND SALES

         MAI markets its products and services primarily through a team-selling
approach, which utilizes the Company's nationwide network of sales office and
its Irvine, California-based account representatives. The Company also markets
certain products and services through a limited number of VARs, authorized
service representatives and ISVs.

         In the United States, the Company's systems are marketed by a direct
sales and marketing organization which included, as of February 28, 1997, 113
sales and marketing personnel located in the corporate headquarters and five
satellite offices. In addition, the Company markets its systems internationally
through its subsidiaries which operate in Canada, the Netherlands (and in the
United Kingdom through a branch office), Mexico, Hong Kong, Singapore, Puerto
Rico and Venezuela and through various distributors that are exclusive in their
jurisdictions. The Company's international subsidiaries employed, as of February
28, 1997, 86 sales and marketing personnel who are engaged in the marketing of
MAI products from sales offices in Canada, Mexico, the United Kingdom, the
Netherlands, Hong Kong, Singapore, Malaysia, the People's Republic of China and
Venezuela. Additionally, the Company also sells its products through indirect
channels both within and outside the United States. These indirect channels
include VARs, distributors, ISVs and local sales agents.

         During 1996, the Company's aggregate revenue was derived from
geographic areas as follows:

<TABLE>
<CAPTION>
                                                                    Percentage of Total
                                                                           Revenues
<S>                                                                          <C>
United States ............................................                   85.6%
Canada ...................................................                    9.2%
Pacific Rim ..............................................                    2.7%
Other Areas ..............................................                    2.5%
                                                                            -----
         Total ...........................................                  100.0%
                                                                            =====
</TABLE>


         The financial performance of the Company is affected by the fluctuation
in value of the US dollar in relation to the local currencies of the countries
in which the Company does business. In addition, the Company's foreign
operations are subject to the usual risks that may affect such operations,
including possible expropriation or other governmental actions, taxes and
political changes. However, as only 5.2% of the Company's 1996 revenues were
generated outside the United States and Canada, the risk associated with these
foreign operations in relation to the Company's overall financial performance is
low.

SUPPORT AND MAINTENANCE

         The provision of around-the-clock customer service is a cornerstone of
the Company's business. As of February 28, 1997, the Company had software
support agreements with approximately 3,000 customers. Additionally, it had
hardware maintenance agreements with approximately 4,000 other customers. The
Company employs approximately 40 technicians to provide support for the
Company's applications software products.

         Telephonic support, which is primarily to assist licensees of the
Company's applications products, is provided from the Company's response centers
located in Irvine, California, Dallas, Texas, Singapore and the United Kingdom.
The Company utilizes the latest developments in telephony and artificial
intelligence-enhanced technology to enable its support technicians to quickly
identify and resolve customers' software related computing problems.

         The Company's maintenance services are generally provided pursuant to
individual maintenance contracts with customers, although time and material
services are provided in some areas. Such support and maintenance are of varying
duration, provide annual cancellation rights and require advance payment of fees
to the Company. Substantially all of the revenue earned by maintenance
operations is invoiced to customers in advance.

PRODUCTION AND PROCUREMENT





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<PAGE>   6



         In response to market demand for standardized hardware and software
products, all of the Company's current systems offerings utilize open systems
architecture, which means that they will operate on a wide variety of
third-party hardware equipment. At present, the Company has relationships with a
number of suppliers including Cisco Systems, Compaq Computer, Hewlett Packard
and IBM and distributors such as MicroAge and Ingram Micro. Management believes
that these relationships have enabled the Company to reduce product costs,
permit earlier availability of new technology and offer customers products with
superior performance at competitive prices. The Company no longer manufactures
proprietary hardware products.

         Delay or failure in the delivery of products or components purchased
from third parties could adversely affect shipments by the Company and its
ability to conclude sales. The Company has purchased many products and
components from single sources of supply. Because the Company's current products
are industry standard, or are comprised of industry-standard components,
management believes that alternative sources of supply of similar products would
be available to the Company in the event of any interruption of delivery of a
single source supplier.

ORDER, SHIPMENT AND BACKLOG

         The Company records and enters into backlog a purchase order for
equipment and software when it receives a customer's written order requesting
delivery within six months, and systems configuration and contract provisions
are verified. In the United States, a deposit is also required from a customer
before the order is recorded and entered into backlog. Orders that are canceled
by the customer and orders that are not shipped within one year are removed from
backlog. Orders that are removed from backlog for non-shipment are restored if
they are reinstated by the customer.

         Set forth below is certain information concerning orders, shipments and
         backlog for 1996 and 1995:

<TABLE>
<CAPTION>
                                                                     (dollars in millions)
                                                                           1996  1995
                                                                           ----   ----
        <S>                                                               <C>    <C>
        Orders received (net of cancellations) .......................    $32.8  $22.8
        Shipments (net of equipment returns) .........................     23.8   24.9
        Backlog (at period end) ......................................     15.7   3.0
</TABLE>

         The Company's backlog is not necessarily indicative of future revenues.
         The 1996 Backlog reflects unfulfilled orders acquired from HIS recorded
         as a backlog adjustment by the Company.

RESEARCH AND DEVELOPMENT

         The Company's research and development activities are focused on the
development of products for the hospitality, resort and destination industry and
for products for midsize process manufacturers. The Company also maintains and
expands OpenBASIC, an operating system which enables users of the Company's
proprietary environment, BusinessBASIC, to run their applications under UNIX.
The Company's use of the OpenBASIC application environment and its system
integration capability permits it to have substantial independence from
individual hardware manufacturers and minimizes the need for hardware research
and development.

         As of February 28, 1997, the Company employed 36 engineers, programmers
and other technical personnel in research and development activities. During
1994, 1995 and 1996, the Company incurred $2,698,000, $2,667,000 and $3,117,000,
respectively, for research and development activities. The Company's research
and development expenditures related primarily to support and enhancement of
existing software products.

CUSTOMERS

         The Company's customers are generally hotels and resorts with fifty or
more rooms, casinos with electronic gaming equipment such as slot machines, and
midsize process manufacturers. During 1996, no single customer accounted for ten
percent or more of the Company's revenues.

COMPETITION

         Competition is vigorous in all sectors of the worldwide market for
computer-based applications systems, networked solutions and the maintenance and
support of the software and hardware which comprise








                                      -6-
<PAGE>   7

those systems. The Company has numerous competitors (and potential competitors,
including the manufacturers of products which the Company distributes) varying
widely in their size, capabilities, market segment and geographic area, many of
which are larger and have financial resources far greater than the Company.

         Within its targeted application markets, the Company has positioned
itself to sell complete solutions featuring WANs and LANs to its customers.
Within this marketplace, competition comes primarily from vendors of competing
information technology in the markets in which the Company competes. There are
several providers of information technology to the hotel, resort and destination
industry against which the Company regularly competes. The competition in the
ERP market is diffuse and new or different competitors often appear with each
sales opportunity. The Company also competes with local VARs and ISVs who
usually resell hardware or networking products of larger original equipment
manufacturers. These VARs and ISVs are typically smaller organizations that are
usually dependent on one or two specialized software application products
targeted for specific industry market segments. Although certain of these
suppliers have national (or international) capability, most are regional and
unable to provide the full range of technical support and maintenance services
offered by the Company.

         The Company also competes with independent service organizations
("ISOs"), which provide service to end users of the Company's software products,
and third-party maintenance organizations ("TPMs"), which provide service to
users of the Company's hardware products.

TRADEMARKS, COPYRIGHTS AND LICENSES

         The Company is the owner or licensee of certain trademarks, copyrights
and other property rights associated with its businesses, including rights
associated with its proprietary application software. The Company owns or has
licensing rights, generally with terms of three years (although the term of the
license to the LTI software is perpetual), to the principal application software
products marketed by the Company. Such licensing rights are generally renewable.
Although there is some risk that independent vendors who own such products may
elect not to renew their licensing agreements with the Company and enter into
exclusive arrangements with, or elect to install their software on systems sold
by competitors of the Company, such vendors generally tend to continue to
support the Company's marketing efforts so long as the Company's systems provide
a good opportunity for them to market their products.

         The Company is party to license agreements with IBM relating to a
variety of patents, with Novell, Inc. relating to UNIX and with a number of
other suppliers of software products. These licenses are terminable at the
Company's option and certain of the licenses require the Company to make royalty
payments.

         OpenBASIC and certain other intellectual property formerly owned by the
Company is currently owned by Tripple P management BV ("Triple P"), a
corporation organized under the laws of the Netherlands, which acquired the
rights from Application Systems, Inc., a Delaware corporation controlled by the
Company's former bank lenders (the "Banks"), which held the stock of certain of
the Company's former European subsidiaries, originally acquired by the Banks in
connection with the foreclosure described under "Chapter 11 Bankruptcy
Proceedings". MAI retained an exclusive license to use OpenBASIC and other
intellectual property in the western hemisphere and has a nonexclusive license
to use it in certain other parts of the world. The license is perpetual and
royalty-free, but subject to termination under certain conditions.

EMPLOYEES

         As of February 28, 1997, the Company had 551 employees, of which 364
were employed in the United States, 33 in Canada, 14 in Mexico, 11 in Puerto
Rico, 13 in the Netherlands, 60 in Asia (Hong Kong, Indonesia, Malaysia,
Singapore and the People's Republic of China) and 56 in Venezuela. Many of the
Company's former field service engineers are now employed by Olivetti in the
United States and Canada. The Company has not experienced any work stoppages and
considers its relationship with its employees to be good.

                        CHAPTER 11 BANRUPTCY PROCEEDINGS

         Prior to its Chapter 11 bankruptcy proceedings, the Company had
followed certain business strategies that eventually led to its defaulting on
its and its Canadian subsidiary's US and Canadian Credit Agreements (the "Credit
Agreements"). Thereafter, shortly before the Company filed for bankruptcy
protection, the Company's banks, parties to the Credit Agreements, foreclosed on
all of the outstanding capital stock of certain





                                      -7-
<PAGE>   8

of the Company's former European subsidiaries (the "Foreclosure") in
satisfaction of all amounts due under the Credit Agreements, which, at such date
amounted to approximately $84,500,000.

         The business strategies of the Company that led to the Foreclosure
reflected the nature of the information technology industry as it existed at
that time. Historically, organizations relied upon proprietary, host-based
computing systems to implement software applications, accounting and financial
functions. The Company, like others in the industry, manufactured and serviced
its own host-based information system. However, with the declining costs of the
personal computer and developments in the design and implementation of WANs and
LANs, the information technology industry shifted away from centralized,
host-based information system to a system of workstations or personal computers
sharing data and networked resources over WANs and LANs. This occurred when the
Company had become highly leveraged due to the leveraged acquisition of a
computer maintenance business that the Company had previously owned. Eventually,
the Company and its subsidiary were in default under its Credit Agreements,
which indebtedness matured on November 16, 1992.

EMERGENCE FROM CHAPTER 11 BANKRUPTCY PROCEEDINGS

         On November 18, 1993, the United States Bankruptcy Court for the
District of Delaware (the "Bankruptcy Court") entered an order confirming the
Company's Plan of Reorganization. The Company had been operating under Chapter
11 protection since April 12, 1993. The order was not appealed and became final
and nonappealable on November 29, 1993. On January 27, 1994, the Bankruptcy
Court entered an order which fixed January 27, 1994 as the effective date (the
"Effective Date") of the Plan of Reorganization. The summary of the material
features of the Plan of Reorganization contained in the Company's Annual Report
on Form 10-K for the year ended December 31, 1993 under the heading, "CHAPTER 11
BANKRUPTCY PROCEEDINGS" is included herein by this reference.

         The Plan of Reorganization provided for, among other things, (i) the
satisfaction of substantially all of the unsecured (non-priority) indebtedness
of MAI, Brooke Acquisition Corporation and CLS Software, Inc., the Company's
wholly-owned subsidiaries which were parties to the bankruptcy proceeding (all
of which are collectively referred to as the "Debtors"), through the issuance of
the company's Common Stock and (ii) the cancellation of existing equity
interests in the Debtors. The Plan of Reorganization also provided for the
substantive consolidation and merger of the Debtors and the corresponding
extinguishment of intercompany liabilities and contracts among the Debtors. At
December 31, 1996, the aggregate amount of tax claims had been reduced to
approximately $1,010,000 and the Company continues to dispute certain tax
claims.

         The Company commenced distribution of Common Stock to holders of
unsecured claims on April 14, 1994. The Common Stock is issued pursuant to
section 1145 of the Bankruptcy Code, which contains an exemption from
registration under the Securities Act of 1933, as amended. Through December 31,
1996, the Company had distributed 6,728,256 shares of Common Stock to its former
creditors and the Company estimated that an additional 75,000 shares will be
issued in settlement of other creditor claims. The Plan of Reorganization
provided holders of unsecured claims the right to elect a limited cash recovery,
and through December 31, 1996, $74,570 in cash had been distributed pursuant to
such provision.

         Under the Plan of Reorganization, there is no recovery for holders of
the Company's $0.01 par value old Common Stock, and all classes of Preferred
Stock outstanding prior to the Effective Date. The interests evidenced by these
securities were extinguished by operation of the Plan of Reorganization on the
Effective Date.

         Pursuant to the terms of the Plan of Reorganization, the Company filed
an Amended Certificate of Incorporation pursuant to which new Common Stock were
authorized for issuance. Such shares are being issued to holders of allowed
unsecured claims as described above and will also be issued to optionees under
the Company's stock option plans.

                     FACTORS THAT MAY AFFECT FUTURE RESULTS

The following discussion should be read in conjunction with the audited
consolidated financial statements incorporated herein by reference to the
Company's 1996 Annual Report. In addition to the factors set forth herein, there
may be other factors, or factors which arise in the future which may affect the
future performance of the Company.

COMPETITION

                                      -8-
<PAGE>   9

         Competition is vigorous in all sectors of the market for computer-based
solutions and support and maintenance services which the Company offers. The
Company has numerous competitors in each of its business lines, which vary
widely in their size, capabilities, market segments and geographic areas, many
of which are larger and have financial resources far greater than the Company.
Within its markets, competition comes primarily from vendors of competing
information technology in the markets in which it competes. There are several
providers of information technology to the hotel, resort and destination
industry against which the Company regularly competes. The competition in the
ERP market is diffuse and new or different competitors often appear with each
sales opportunity. The Company also competes against local VARs and ISVs, who
usually resell hardware or networking products of larger original equipment
manufacturers, ISOs, which provide service to end users of the Company's
software products, and TPMs, which provide service to users of the Company's
hardware products. Many of the Company's services are also provided by in-house
MIS departments. There can be no assurance that the Company can effectively
compete with any or all of its competitors in any of its business lines.

PRODUCTION AND PROCUREMENT

         The networking products and services implemented, maintained and
supported by the Company utilize hardware and software products from technology
vendors. Accordingly, the Company is and will remain dependent on the demand for
products from such vendors. In addition, delay or failure in the delivery of
products or components purchased from third parties could adversely affect
shipments by the Company and its ability to conclude sales. The Company has
purchased many products and components from single sources of supply. Because
the Company's current products are industry standard, management believes that
alternative sources of supply of similar products would be available to the
Company in the event of any interruption of delivery from a single source
supplier. However, there can be no assurances that any such products will be
available or be accepted by the Company's customers.

LIMITED HISTORY OF PROFITABILITY

         Prior to the bankruptcy the Company incurred significant operating
losses. While the Company has generally experienced positive operating income
since emerging from bankruptcy, there can be no assurance that the Company will
be able to achieve or maintain profitability or avoid losses on a quarterly or
annual basis in the future.

FLUCTUATIONS IN OPERATING RESULTS

         A variety of factors may cause period-to-period fluctuations in the
Company's operating results, including the timing of significant orders, the
timing of product enhancements and new product introductions by the Company, its
technology vendors and its competitors, the pricing of the Company's products
and services, competitive conditions and general economic conditions. Many of
the Company's systems sales involve lengthy sales cycles and installations.
Consequently, it is not possible to predict with any reliability the periods
within which a sale may close or revenue will be recognized. As a result, the
operating results of the Company may be materially skewed if a single
transaction is completed earlier or later than expected. The Company has
experienced fluctuations in its operating results and expects to continue to
experience such fluctuations. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Quarterly Results of
Operations" incorporated herein by reference to the Company's 1996 Annual
Report. Fluctuations in operating results may also result in volatility in the
market price of the Common Stock.

LIQUIDITY; VOLATILITY OF STOCK PRICE

         Historically, trading volume of the Company's Common Stock has been
small, and the market for the Common Stock has been less liquid than that of
many other publicly traded companies. In August 1995 the Company's Common Stock
became listed on the AMEX under the symbol "NOW". Nevertheless, there can be no
assurance that a stockholder who desires to sell shares of Common Stock can sell
all of the shares that the stockholder desires to sell, either at all or at the
desired times or prices. Like the stock of other technology companies, the
market price of the Common Stock has been and may continue to be volatile.
Factors such as quarterly fluctuations in the Company's results of operations,
trading volume, the announcement of technological innovations or new products by
the Company or its competitors, general conditions in the computer hardware and
software industries, economic conditions generally, the Company's ability to
successfully increase its market share with its existing products while
expanding its product base into other markets, the strength of the Company's
distribution channels, variances between actual results of operations







                                      -9-
<PAGE>   10

and the results expected by securities analysts, and the factors mentioned under
"Fluctuations in Operation Results", among other factors, may have significant
impact on the market price of the Common Stock.

RISKS OF CONTRACT SERVICES BUSINESS

         The Company is subject to the risks associated with a contract services
business, including dependence on reputation with existing customers, volatility
of workload and dependence on ability to retain qualified technical personnel.
The Company is party to an agreement with Olivetti pursuant to which Olivetti
performs certain field engineering services for the Company. If the quality of
services provided by Olivetti is not perceived as comparable to that previously
provided by the Company, there is a probability that some of the Company's field
service customers will terminate their service agreements. Additionally, the
Company has recently inaugurated a program to bill its service customers with a
single annual invoice. This program may adversely impact the Company's contract
services business.

RAPID TECHNOLOGICAL CHANGE; DEPENDENCE ON NEW PRODUCTS AND MARKETS

         The Company expects that the market for hospitality, resort and
destination information management systems and information systems for midsize
process manufacturers will continue to be subject to frequent and rapid changes
in technology and customer preferences. Customers may delay purchases in
anticipation of technological changes. In addition, the Company's ability to
develop and market information management and network systems and other new
products is dependent upon its ability to attract and retain qualified
employees. Any failure by the Company to anticipate or respond adequately to the
changes in technology and customer preferences, or to develop and introduce new
products in a timely fashion, could materially adversely affect the Company's
business and operating results.

DEPENDENCE ON PROPRIETARY TECHNOLOGY

         The Company's success is dependent upon its proprietary application
software and its licensing rights to the principal application software products
marketed by it. The Company relies on a combination of contractual rights,
copyrights, trademarks and other property rights to establish or protect its
proprietary rights in its products. There can be no assurance that the steps
taken by the Company in this regard will be adequate to deter misappropriation
of its proprietary rights or independent third party development of functionally
equivalent technology. Although the Company does not believe that it is
infringing on the intellectual property rights of others, there can be no
assurance that such a claim will not be asserted against the Company in the
future or that any attempt to protect its technology will not be challenged.

DEPENDENCE ON KEY PERSONNEL

         Competition for qualified personnel in the software industry is intense
and there can be no assurance that the Company will be able to attract and
retain a sufficient number of qualified employees. As the business of the
Company grows, it may become increasingly difficult for it to hire, train and
assimilate the new employees needed. The Company's success depends to a
significant degree upon the continued contributions of its key management,
marketing, product development and operational personnel.

         The services of Richard S. Ressler, Chairman of the Board and Director
of the Company, are provided on a non-exclusive basis pursuant to an agreement
which expires in August 1997. There can be no assurances that Mr. Ressler will
continue with the Company after such date or that the Company will be able to
find a replacement in the event that either the Company or Mr. Ressler
determines not to continue their relationship.

RISK OF FOREIGN OPERATIONS

         The financial performance of the Company is affected by the fluctuation
in the value of the US dollar in relation to the local currencies of the
countries in which the Company does business. In addition, the Company's foreign
operations are subject to the usual risks that may affect such operations,
including import and export restrictions, possible expropriation or other
governmental actions, taxes and political changes.

ITEM 2.  PROPERTIES

         As of February 28, 1997, the principal properties utilized by the
Company were as follows:



                                      -10-
<PAGE>   11


<TABLE>
<CAPTION>
                                                                     Approximate Total
          Type of Facility                                            Square Footage          Location
          ----------------                                            ----------------          --------
<S>                                                                        <C>             <C>
Headquarters, warehousing, administration, marketing and sales             44,538         Irvine, California
Headquarters, software development and support, training and
    engineering                                                            32,518         Irvine, California
Product development, sales and support                                     36,632         Concord, California
Product development, sales and support                                      6,028         Irving, Texas
Product development, sales and support                                      8,500         Valhalla, New York(*)
Gaming Systems International headquarters, marketing, sales,
    development, support and warehousing                                   12,150         Las Vegas, Nevada
MAI Canada Ltd Administration, sales, education, warehousing,
    test and repair                                                        24,150         Marham, Ontario, Canada
Hotel Information Systems (Ltd) Hong Kong headquarters,
    marketing, sales, support                                               3,638         Hong Kong
Hotel Information Systems (Ltd) Singapore sales and support                 4,527         Singapore
</TABLE>

(*)Valhalla, New York commenced March 6, 1997 with the acquisition of CIMPRO

         All of the properties noted above were occupied by the Company pursuant
to leases with various expiration dates. The lease for the Company's
headquarters expired December 31, 1996 and the Company is currently holding over
until the completion of its new 50,210 square foot consolidated facility, which
it expects to occupy on or about April 1997. In addition to the premises
identified above, the Company leases offices in three additional locations in
the United States, one additional location in Canada, seven other locations
around the world. Generally such leases are for terms of five years or less,
although several of the leases in the United States are for terms of one year or
less.

ITEM 3.  LEGAL PROCEEDINGS

         The Company has filed and will continue to file objections to claims
asserted in its Chapter 11 bankruptcy proceedings. The majority of these claims
would, if upheld, give rise to allowed unsecured claims entitling respective
claimants to distributions of new Common Stock. A number of filed objections in
respect of secured claims, priority claims, tax claims, convenience claims and
cure claims are still outstanding at December 31, 1996. To the extent the
Company's objections to such claims are not sustained, the Company will be
obligated to pay such claims in a lump sum in the case of convenience claims and
administrative claims, and in the case of secured claims, priority claims, tax
claims and cure claims, on a deferred basis over six to seven years, depending
on the type of claim, at an interest rate of 6% in accordance with the Plan of
Reorganization. The Company does not believe the outcome of these objections
will be material.

         The Company is also involved in various other legal proceedings which
are incident to its business. Management believes the ultimate outcome of these
matters will not have a material adverse effect on the consolidated financial
position, results of operations or liquidity of the Company.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         None.







                                      -11-
<PAGE>   12



                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

         The Company's shares are traded on the American Stock Exchange, Inc.
under the AMEX symbol "NOW". Prior to listing on the AMEX, which occurred August
29, 1995, the Company's shares were traded over-the-counter by various market
makers under the ticker symbol "MAIS".

         The Company's Common Stock was issued pursuant to an order of the
Bankruptcy Court dated January 27, 1994. In addition, all previously outstanding
equity interests were canceled. Until April 10, 1993, the principal market for
the Company's previously outstanding common stock (the "Old Common Stock") was
the New York Stock Exchange, where the common stock was traded under the ticker
symbol "MCO". Thereafter, until November 18, 1993, the Company's Old Common
Stock was traded over-the-counter by various market makers.

         No cash dividends have been paid to date on the Common Stock. At
February 28, 1997, there were 594 stockholders of record.

         Reference is made to the table entitled "Quarterly Data" in the 1996
Annual Report which is incorporated herein by reference.

ITEM 6.  SELECTED FINANCIAL INFORMATION

         The information required by this item is incorporated by reference to
the Company's 1996 Annual Report under the heading, "Selected Financial
Information".

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

         The information required by this item is incorporated by reference to
the Company's 1996 Annual Report under the heading, "Management's Discussion and
Analysis of Financial Condition and Results of Operations".

ITEM 8.  CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The information required by this item is incorporated by reference to
the Company's 1996 Annual Report under the headings, "Consolidated Balance
Sheets", Consolidated Statements of Operations", "Consolidated Statements of
Stockholders' Equity (Deficiency)", "Consolidated Statements of Cash Flows",
"Notes to Consolidated Financial Statements" and "Independent Auditors' Report".

         Schedule II Valuation and Qualifying Accounts is set forth in Schedule
II in this Annual Report on Form 10-K.

         All other schedules and financial statements are omitted because they
are not applicable or the required information is shown in the consolidated
financial statements or notes thereto.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

         None.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         Information required by this Item with respect to Directors may be
found in the section captioned "Election of Directors" appearing in the
definitive Proxy Statement to be delivered to stockholders in connection with
the Annual Meeting of Stockholders to be held May 20, 1997. Information required
by this Item with respect to executive officers may be found in the section
captioned "Proposal 1--Election of Directors,






                                      -12-
<PAGE>   13

--Executive Officers" appearing in the definitive Proxy Statement to be
delivered to stockholders in connection with the Annual Meeting of Stockholders
to be held May 20, 1997. Such information is incorporated herein by reference.

ITEM 11.  EXECUTIVE COMPENSATION

         Information with respect to this Item may be found in the section
captioned "Executive Compensation" appearing in the definitive Proxy Statement
to be delivered to stockholders in connection with the Annual Meeting of
Stockholders to be held May 20, 1997. Such information is incorporated herein by
reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         Information with respect to this Item may be found in the section
captioned "Security Ownership of Management" appearing in the definitive Proxy
Statement to be delivered to stockholders in connection with the Annual Meeting
of Stockholders to be held May 20, 1997. Such information is incorporated herein
by reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Information with respect to this Item may be found in the section
captioned "Executive Compensation--Employment Contracts and Change of Control
Arrangements; --Certain Transactions with Management" appearing in the
definitive Proxy Statement to be delivered to stockholders in connection with
the Annual Meeting of Stockholders to be held May 20, 1997. Such information is
incorporated herein by reference.

                                     PART IV

ITEM 14. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULE AND REPORTS ON
         FORM 8-K

         (a) (1)  Financial Statements

                  The consolidated financial statements of the Company, the
notes thereto and the Independent Auditors' Report are incorporated herein by
reference to the Company's 1996 Annual Report.

             (2)  Financial Statement Schedule

                  Schedule II--Valuation and Qualifying Accounts

             (3)   Exhibits:

Number   Exhibit
------   -------

2.1      First Amended Joint Chapter II Plan of Reorganization of MAI systems
         Corporation, Brooke Acquisition Corp. and CLS Software, Inc., as
         confirmed by the United States Bankruptcy Court for the District of
         Delaware, on November 13, 1993, filed as Exhibit 2.1 to the
         Registrant's Current Report on Form 8-K dated January 15, 1994.

2.2      Consent Order Modifying Confirmed Plan of Reorganization and Fixing
         Effective Date, as entered by the United States Bankruptcy Court for
         the district of Delaware on January 27, 1994, as filed as Exhibit 2.2
         to the Registrant's Current Report on form 9-K dated February 9, 1994.

3.1      Amended and Restated Certificate of Incorporation of MAI Systems
         Corporation filed as Exhibit 2(a) to the Registrant's Registration
         Statement on Form 8-A/A filed with the Securities and Exchange
         Commission on February 24, 1994.

3.2      Amendment No. 1 to the Amended and Restated Certificate of
         Incorporation of MAI Systems Corporation filed as Appendix "A" to the
         Registrants Notice of Annual Meeting and Proxy Statement filed with the
         Securities and Exchange Commission on April 26, 1996.

3.3      By-laws of MAI Systems Corporation, filed as Exhibit 2(b) to the
         Registrant's Registration Statement on Form 8-A/A filed with the
         Securities and Exchange Commission on February 24, 1994.



                                      -13-
<PAGE>   14
10.1**   Equipment Service Subcontract dated December 2, 1996 between MAI
         Systems Corporation and Olivetti North America, Inc. [**Confidential
         treatment has been requested for certain portions of this document and
         the confidential portions of Exhibit 10.1 have been filed separately
         with the Securities and Exchange Commission.]

10.2**   Equipment Service Subcontract dated February 21, 1997 between MAI
         Canada Ltd. and Olivetti Canada Ltd. [ ** Confidential treatment has
         been requested for certain portions of this document and the
         confidential portions of Exhibit 10.2 have been filed separately with
         the Securities and Exchange Commission].

10.3**   Software License Agreement dated October 1, 1996 between MAI Systems
         Corporation and Enhanced Hospitality Solutions filed as Exhibit 10.1 to
         the Registrant's 10-Q/A filed with the Securities and Exchange
         Commission on January 10, 1996. [ ** Confidential treatment has been
         requested for certain portions of this document and the confidential
         portions of Exhibit 10.3 have been filed separately with the Securities
         and Exchange Commission].

10.4     Lease Agreement dated January 2, 1997 between MAI Systems Corporation
         and the Irvine Company, a Michigan corporation.

10.5     MAI Systems Corporation Amended 1993 Stock Option Plan

10.6     Consulting Agreement dated as of August 15, 1994, as amended as of
         October 17, 1994 and October 16, 1996 by and between the Registrant and
         Orchard Capital Corporation, relating to the services of Richard S.
         Ressler, Chairman and Chief Executive Officer of the Company. The
         original agreement and the October 17, 1994 amendment are incorporated
         herein by reference to the Company's 1994 Annual Report on Form 10-K.

11.1     Computation of Income (Loss) Per Share

13.1     The Company's Annual Report to Stockholders for the year ended December
         31, 1996, but only to the extent such report is expressly incorporated
         by reference into Items 5, 6, 7, 8 and 14(a)(1) of this report and such
         report is not otherwise deemed to be filed as part of this Annual
         Report on Form 10- K.

21.1     Subsidiaries of MAI Systems Corporation

23.1     Consent of KPMG Peat Marwick LLP

27.1     Financial Data Schedule

















                                      -14-
<PAGE>   15


                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
and Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

                                                     MAI SYSTEMS CORPORATION


                                                     By:/s/ Richard S. Ressler
                                                        ------------------------
                                                        Richard S. Ressler
                                                        Chairman
Dated:

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated on [date].

              Signatures                                          Title

/s/Richard S. Ressler                 Chairman, Director
-----------------------------------
Richard S. Ressler

/s/George G. Bayz                    President and Chief Executive
-----------------------------------  Officer, Director
George G. Bayz

/s/Alan A. Gleicher                  Director
-----------------------------------
Alan A. Gleicher

/s/Morton O. Schapiro                Director
-----------------------------------
Morton O. Schapiro

/s/Lewis H. Stanton
-----------------------------------  Executive Vice President and Chief
Financial Lewis H. Stanton           Operating and Officer (Chief Accounting
                                     Officer)













                                      -15-