<PAGE>
                                       

 


                     SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
                            ---------------------

                                 FORM 10-Q/A


 QUARTERLYREPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES  EXCHANGE ACT
          OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996.

                          COMMISSION FILE NO. 1-9158
                           ------------------------

                           MAI SYSTEMS CORPORATION
            (Exact name of Registrant as Specified in its Charter)


              DELAWARE                                 22-2554549
      (State of Incorporation)          (I.R.S. Employer Identification Number)


                              9600 Jeronimo Road
                           Irvine, California 92718
                   (Address of Principal Executive Office)


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

Indicate  by 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     No
/X/    / / 

Indicate  by check mark  whether  the  registrant  has filed all  documents  and
reports  required  to be filed by  Sections  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     No
/X/    / /

As of August 12, 1996,  8,167,069 shares of the registrant's Common Stock, $0.01
par value, were outstanding.




<PAGE>


ITEM 5.     FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS

      (a)   Financial Statements of Business Acquired.

            Attached are the financial  statements for the business  acquired by
            the Registrant from Hotel Information Systems,  Inc. for the periods
            specified in rule 3-05(b) of Regulation S-X.

      (b)   Pro Forma Financial Information (Unaudited).

            Attached  is the pro forma  financial  information  relative  to the
            Registrant's  acquisition  of the business  previously  conducted by
            Hotel Information Systems, Inc.



                   [Signature Page to Form 10-Q/A Follows]


                                        2

<PAGE>



                                  SIGNATURES


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

Date: October 23, 1996


                                    MAI SYSTEMS CORPORATION
                                    (Registrant)



                                                By:   /s/ William Brian Kretzmer
                                                      William Brian Kretzmer
                                                      Vice President, Chief
                                                      Financial Officer
                                                      and Treasurer


                                       3
<PAGE>














                        CONSOLIDATED FINANCIAL STATEMENTS

                        HOTEL INFORMATION SYSTEMS, INC.
                                  
                        Years ended December 31, 1995 and 1994
                        with Report of Independent Auditors






























<PAGE>














                       HOTEL INFORMATION SYSTEMS, INC.

                      Consolidated Financial Statements
                     Years ended December 31, 1995 and 1994




                                   CONTENTS

Report of Independent Auditors...............................................1

Audited Consolidated Financial Statements

Consolidated Balance Sheets..................................................2
Consolidated Statements of Operations........................................3
Consolidated Statements of Shareholders' Equity (Capital Deficiency).........4
Consolidated Statements of Cash Flows........................................5
Notes to Consolidated Financial Statements...................................6



<PAGE>





                        Report of Independent Auditors





The Board of Directors
Hotel Information Systems, Inc.

We have audited the consolidated  balance sheets of Hotel  Information  Systems,
Inc. as of December 31, 1995 and 1994, and the related  consolidated  statements
of operations, shareholders' equity (capital deficiency), and cash flows for the
years then ended.  These  financial  statements  are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company will  continue as a going  concern.  The Company has incurred  recurring
operating  losses and has working  capital  and  stockholders'  deficits.  These
conditions raise  substantial doubt about the Company's ability to continue as a
going  concern.  The  financial  statements  do not include any  adjustments  to
reflect the possible future effects on the  recoverability and classification of
assets or the amounts and classification of liabilities that may result from the
outcome of this  uncertainty.  In June, the Company entered into an agreement to
sell  substantially  all of the  Company's  assets  and the  Board of  Directors
approved a plan for liquidation.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the consolidated financial position of Hotel Information
Systems, Inc. at December 31, 1995 and 1994, and the consolidated results of its
operations  and its cash  flows  for the years  then  ended in  conformity  with
generally accepted accounting principles.



/s/ Ernst & Young LLP
July 31, 1996

                               
                                       1
<PAGE>

<TABLE>
<CAPTION>
                       Hotel Information Systems, Inc.

                         Consolidated Balance Sheets

                                                               DECEMBER 31
                                                             1995      1994

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

ASSETS
Current assets:
  Cash and cash equivalents                             $1,294,900 $1,509,900
  Accounts receivable, less allowance for
   doubtful accounts of $276,000 in 1995 and
   $641,200 in 1994                                      5,121,100  5,689,400
  Inventories                                               71,500    140,900
  Receivables from related parties                         233,300    194,200
  Prepaid expenses and other current
   assets                                                  669,400    538,300
                                                        ---------- ----------
Total current assets                                     7,390,200  8,072,700

Furniture and equipment, net                             1,030,300    942,400
Capitalized software, net of accumulated
  amortization of $6,617,400 in 1995 and
  $5,270,100  in 1994                                       54,300  1,401,600
Other assets                                               183,400    215,700
                                                         --------- ----------
Total assets                                            $8,658,200$10,632,400
                                                        ---------- ----------
                                                        ---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY (CAPITAL
   DEFICIENCY)
Current liabilities:
  Accounts payable                                    $  2,710,300 $3,531,900
  Accrued compensation and related
  expenses                                               1,020,500    786,200
  Dividends payable                                        736,800    399,800
  Other accrued liabilities                                857,700  1,074,000
  Current portion of notes payable and capital
  lease obligations                                      1,103,500     92,900
  Income taxes payable                                     564,500    578,800
  Deferred revenues                                      6,842,400  5,723,000
                                                        ---------- ----------
Total current liabilities                               13,835,700 12,186,600

Notes payable and capital lease
   obligations                                             238,400    136,000
Deferred rent                                                    -    136,400
Convertible subordinated debentures                      1,037,000  1,037,000

Commitments and contingencies

Shareholders' equity (capital deficiency):
  Convertible preferred stock, no par value;
   10,000,000 shares authorized:
   Series A redeemable convertible preferred
     stock; 790,500 shares authorized issued and
     outstanding in 1995 and 1994 (liquidation
     preference - $1,000,000)                            1,121,000  1,008,300
   Series B convertible preferred stock; 5,000,000
     shares authorized; 2,700,000 shares issued
     and outstanding in 1995 and 1994 (liquidation
     preference - $3,213,000)                            3,143,000  3,143,000
  Common stock, no par value;  authorized
    100,000,000 shares; 11,168,700 shares issued
    and outstanding in 1995 and 10,987,200 shares
    in 1994                                                193,600    172,100
  Accumulated deficit                                  (10,844,300)(7,117,700)
  Notes receivable from shareholders                       (56,400)   (76,500)
  Accumulated foreign currency
  translation adjustments                                   (9,800)     7,200
                                                          --------- ----------
Total shareholders' equity (capital
   deficiency)                                          (6,452,900)(2,863,600)
                                                        ----------  ----------
Total liabilities and shareholders' equity
   (capital deficiency)                               $  8,658,200 $10,632,400
                                                        ----------  ----------
                                                        ----------  ----------
</TABLE>
 See accompanying notes.

                                       2



<PAGE>

<TABLE>
<CAPTION>




                       Hotel Information Systems, Inc.

                    Consolidated Statements of Operations



                                                      YEAR ENDED DECEMBER 31
                                                         1995         1994
                                                    ------------------------
<S>                                                <C>           <C>  
Revenues                                           $ 25,854,400  $ 27,302,700
Cost of revenues                                     15,145,500    17,105,900
                                                     ----------    ----------
Gross profit                                         10,708,900    10,196,800

Selling, general and
   administrative expenses                            9,715,700     9,819,400
Product development expenses                          2,465,700     2,672,200
                                                     ----------    ----------
Total operating expenses                             12,181,400    12,491,600
                                                     ----------    ----------
Loss from operations                                 (1,472,500)   (2,294,800)
Loss on investments, principally
   unconsolidated subsidiaries                         (968,900)   (3,895,000)
Loss on sale of subsidiary                             (466,300)            -
Interest expense (income), net                          (68,200)      (78,700)
                                                      ----------   ----------
Loss before income taxes                             (2,975,900)   (6,268,500)
Provision for income taxes                              301,000       290,900
                                                      ----------   ----------
Net loss                                            $(3,276,900)  $(6,559,400)
                                                      ----------   ----------
                                                      ----------   ----------

See accompanying notes.

</TABLE>
                                       3
<PAGE>

<TABLE>
<CAPTION>


                             Hotel Information Systems, Inc.

           Consolidated Statements of Shareholders' Equity (Capital Deficiency)

                         Years ended December 31, 1995 and 1994

                                                               
                                                                                               ACCUMULATED  TOTAL
                                                                       RETAINED  NOTES        FOREIGN      SHAREHOLDERS'
                              PREFERRED STOCK      COMMON STOCK        EARNINGS  RECEIVABLES  CURRENCY     EQUITY
                             -----------------  -------------------  (ACCUMULATED FROM         TRANSLATION  (CAPITAL
                              SHARES   AMOUNT    SHARES      AMOUNT    DEFICIT)  SHAREHOLDERS ADJUSTMENTS  EFICIENCY) 
                             -------- --------   -------     -------- --------------------------------------------
<S>                         <C>       <C>        <C>          <C>       <C>        <C>        <C>        <C>

Balance at December 31,
1993                        3,490,500 $4,047,000 10,324,300   $118,200   $(116,900)  $(65,500)  $11,400  $3,994,200
   Issuance of common stock
     related to Hogadata
     purchase                      -        -       643,600    128,700         -           -        -        128,700
   Exercise of stock options       -        -       212,800     21,900         -       (11,000)     -         10,900
   Redemption of stock             -        -      (193,500)   (96,700)        -           -        -        (96,700)
   Accretion of preferred  
     stock dividends               -     104,300       -           -       (441,400)       -        -       (337,100)
   Net loss                        -        -          -           -     (6,559,400)       -        -     (6,559,400)
   Equity adjustment from 
     foreign currency
     translation                   -        -          -           -           -           -     (4,200)      (4,200)
                               -------- ---------  ---------   --------- -----------   -------- --------    ----------
Balance at December 31,
1994                          3,490,500 4,151,300  10,987,200   172,100 (7,117,700)  (76,500)   7,200    (2,863,600)


   Exercise of stock options       -        -        181,500    21,500        -      (11,000)      -          10,500
   Accretion of preferred
     stock dividends               -    112,700         -         -       (449,700)      -         -        (337,000)
   Payments received on
     shareholder notes
     receivable                    -        -           -         -           -        31,100      -          31,100
   Net loss                        -        -           -         -      (3,276,900)      -        -      (3,276,900)
   Equity adjustment from  
     foreign currency
     translation                   -        -           -         -           -           -     (17,000)     (17,000)
                               -------- ---------    --------- --------   -----------  --------  --------   ----------
Balance at December 31,
1995                          3,490,500 $4,264,000 $11,168,700 $193,600  $(10,844,300) $(56,400)  $(9,800)$(6,452,900)
                               -------- ---------   --------- ----------  ------------ ---------- --------- ----------
                               -------- ---------   --------- ----------  ------------ ---------- --------- ----------


</TABLE>
See accompanying notes.



                                       4
<PAGE>

<TABLE>
<CAPTION>


                                      Hotel Information Systems, Inc.

                                   Consolidated Statements of Cash Flows


                                                       YEAR ENDED DECEMBER 31
                                                          1995        1994
                                                 ------------------------------
<S>                                              <C>            <C>    

OPERATING ACTIVITIES
Net loss                                          $  (3,276,900) $ (6,559,400)
Adjustment to reconcile net loss to 
net cash provided by operating
  activities:
   Depreciation and amortization                      1,562,800     2,707,200
   Deferred income taxes                                   -         (357,000)
   Losses from Hogadata                               1,051,500     3,927,500
   Equity earnings in joint venture                     (82,500)      (32,500)
   Loss on disposition of subsidiary                    466,300             -
   Net book value of retirement of furniture 
   and equipment                                         45,600             -
   Change in operating assets and 
   liabilities net of disposition of
     subsidiary:
       Accounts receivable                              252,000       (19,000)
       Inventories                                       69,400        44,400
       Receivables from related parties                 (39,100)      (41,900)
       Prepaid expenses and other current assets       (131,100)      (26,700)
       Accounts payable                                (821,600)    1,201,300
       Accrued compensation and related expenses        234,300       185,200
       Other accrued liabilities                       (366,300)      349,400
       Income taxes payable                             (14,300)      369,600
       Deferred revenues                              1,119,400      (768,200)
                                                     ----------     ----------
Net cash provided by operating activities                69,500       979,900

INVESTING ACTIVITIES
Capitalized software development costs                        -      (805,600)
Purchase of furniture and equipment                           -      (317,500)
Payments for investment in Hogadata                  (1,051,500)   (3,798,800)
Other assets                                            114,800       515,600
                                                      ----------    ----------
Net cash used in investing activities                  (936,700)   (4,406,300)

FINANCING ACTIVITIES
Proceeds from issuance of notes payable                 879,500             -
Repayment of borrowings and payments under 
capital lease obligations                              (115,500)     (169,000)
Decrease in deferred rent                              (136,400)     (111,200)
Proceeds from payments on notes 
receivable from shareholders                             31,100             -
Redemption of common stock                                    -       (96,700)
Proceeds from issuance of common stock                   10,500        10,900
                                                     ----------     ----------
Net cash provided by (used in) financing activities     669,200      (366,000)
Effect of foreign exchange rate changes on cash         (17,000)       (4,200)
                                                     ----------     ----------
Net decrease in cash and cash equivalents              (215,000)   (3,796,600)
Cash and cash equivalents at beginning of year        1,509,900     5,306,500
                                                     ----------     ----------
Cash and cash equivalents at end of year             $1,294,900    $1,509,900
                                                     ----------     ----------
                                                     ----------     ----------

Supplemental disclosures:
  Cash paid for interest                                $44,637      $104,000
                                                     ----------    ----------
                                                     ----------    ----------
  Cash paid for income taxes                           $315,300             -
                                                     ----------    ----------
                                                     ----------    ----------
  Assets acquired under capital lease obligations      $349,000      $135,400
                                                     ----------    ----------
                                                     ----------    ----------
</TABLE>


See accompanying notes.

                                       5
<PAGE>

                        HOTEL INFORMATION SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               DECEMBER 31, 1995



1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION, OPERATIONS AND BASIS OF PRESENTATION

The consolidated  financial statements include the accounts of Hotel Information
Systems, Inc. and its wholly owned subsidiaries (the "Company"). All significant
intercompany balances and transactions have been eliminated in consolidation.

The Company develops, markets and supports computer software systems and related
services for the hospitality industry.  The systems are principally front office
(reservations,   registration,  cashiering  and  guest  services),  back  office
(accounting,   purchasing,   receiving,   inventory   and   sales   management),
reservations and guest history,  yield  management and interfaces.  Services are
principally  installation,   training,   professional  consulting  and  software
maintenance.  The Company has agreements  with  International  Business  Machine
Corporation,  Hewlett  Packard  and AT&T  (NCR) to sell  their  hardware  to its
customers and is an authorized  reseller on both an exclusive and  non-exclusive
basis for several independent software developers.

The consolidated  financial  statements have been prepared  assuming the Company
will continue as a going concern.  The Company has incurred recurring  operating
losses, has working capital and stockholders'  deficits.  Management's plans are
discussed below.

SALE OF ASSETS TO MAI SYSTEMS CORPORATION

In June 1996, the Company entered into an agreement to sell substantially all of
its assets to MAI  Systems  Corporation  ("MAI").  MAI agreed to assume  certain
liabilities of the Company and to issue to shareholders of the Company 1,178,380
shares of its  common  stock.  Portions  of the  consideration  are  subject  to
adjustment based on the closing balance sheet and the price realized on the sale
of MAI  common  stock by former HIS  shareholders.  The Board of  Directors  has
approved a plan of liquidation of the Company.

In connection with the contemplated sale of assets to MAI, the holders of Series
A and B preferred  stock  (Note 5) of the  Company  agreed to accept as the full
redemption  price for their  shares and  accrued  dividends  118,569 and 394,400
shares of MAI common stock. In addition, the holders of Series A preferred stock
agreed to cancel  warrants to purchase  228,005  shares of the Company's  common
stock,  and the  subordinated  convertible  debenture  holder (Note 4) agreed to
accept 122,919 shares of MAI common stock as the full redemption price including
accrued interest.



                                       6
                                       
<PAGE>
                         HOTEL INFORMATION SYSTEMS, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
                               

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

SALE OF HOGADATA AND HOTEL INFORMATION SYSTEMS LIMITED

In May 1994,  the Company  entered into an agreement to acquire all of the stock
of Hogadata  GmbH and related  entities  ("Hogadata"),  a software  and services
vendor with  principal  locations in Austria and Germany.  Under the  agreement,
which was accounted for as a purchase,  the Company issued 643,600 shares of its
common stock, paid $1,095,800 in cash, assumed  liabilities and placed 1,050,000
shares of its common  stock in escrow to be  released to the sellers of Hogadata
on achievement of certain operating results and incurred other acquisition costs
totaling $1,350,700.  The Company also received notes in the amount of $500,000.
Control of this entity was  temporary  and  therefore it was accounted for under
the equity method.

In connection with the agreement to acquire Hogadata, the Company also agreed to
acquire  Hogadata  Benelux NV and  issued  approximately  400,000  shares of its
common stock, paid $500,000 in cash and placed 700,000 shares of common stock in
escrow to be released to the sellers of Hogadata  Benelux NV upon achievement of
certain operating results.  In November 1994,  Hogadata Benelux NV was sold back
to its former owners,  in return for the common stock issued and cancellation of
the escrow share agreement.  Cash paid on purchase and subsequent  advances were
converted to a note payable to the Company.  The Company has fully  provided for
all cash advances at the time made.

At December  1994,  the net  investment and the notes were fully reserved by the
Company due to continuing  operating  losses of Hogadata.  On December 29, 1995,
the Company sold its entire interest in Hogadata for a nominal  consideration to
Nikolaus  Wishaber,  the owner  prior to the  purchase  by the  Company who is a
director of the Company,  and also sold to the same purchaser Hotel  Information
Systems,  Limited ("Limited"),  a UK subsidiary of the Company. In addition, the
parties  cancelled the shares held in escrow and entered into a  cross-licensing
arrangement which permitted each party to distribute certain products.

                                       7
<PAGE>
                         HOTEL INFORMATION SYSTEMS, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
                               


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

SALE OF HOGADATA AND HOTEL INFORMATION SYSTEMS LIMITED (CONTINUED)

The following is a summary of activity related to losses incurred on investments
which includes Hogadata and Hogadata Benelux NV:

1994:
   Purchase price:
     Cash investment                                           $  1,095,800
     Fair market value of common stock at $.20 per share            128,700
     Acquisition related costs and expenses                       1,350,700
                                                                 ----------
                                                                  2,575,200
   Additional cash advances during the year                       1,352,300
                                                                 ----------
   Total investment (charged to operations)                       3,927,500
   Equity earnings in MSC                                            32,500
                                                                 ----------
   Loss on investments                                         $  3,895,000
                                                                 ----------
                                                                 ----------

1995:
   Additional investment during the year                       $  1,017,700
   Selling expenses, net of proceeds                                 33,800
                                                                 ----------
                                                                  1,051,500
   Equity earnings in MSC                                            82,600
                                                                 ----------
   Loss on investments                                        $     968,900
                                                                 ----------
                                                                 ----------

As part of the sale of Limited,  all  inter-company  receivables,  payables  and
notes were forgiven. Also royalty on certain maintenance revenue was forgiven by
the  Company for a period of three  years,  and  distribution  rights to certain
Company  products  were  retained by Limited.  The following is a summary of the
loss incurred on the sale of Limited:

Intercompany receivables, net of liabilities                  $     265,200
Investment in subsidiary                                             46,900
Cost of software support and maintenance 
to be provided without charge                                       150,000
Net assets sold                                                       4,200
                                                                 ----------
Net loss on sale                                              $     466,300
                                                                 ----------
                                                                 ----------

                                       8
<PAGE>

                         HOTEL INFORMATION SYSTEMS, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
                              

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

SALE OF HOGADATA AND HOTEL INFORMATION SYSTEMS LIMITED (CONTINUED)

Limited was  included in the results of  operations  for 1994 and for the period
January 1, 1995 through  December 29, 1995, and was included in the consolidated
balance sheet at December 31, 1994.

METRO SYSTEMS CORPORATION LIMITED

The Company is a joint venture  partner with Metro Systems  Corporation  Limited
("MSC") for the purpose of  marketing  and  selling  the  Company's  software in
Thailand. The Company has a 49.9% interest in the joint venture and accounts for
this  investment  using the equity  method of  accounting.  Condensed  unaudited
financial  information  of MSC as of and for the year ended December 31, 1995 is
as follows:

                 Total assets                $ 1,965,800
                 Total liabilities             1,593,500
                 Revenues                      3,109,500
                 Net income                      162,400

USE OF ESTIMATES

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Actual results could differ from those estimates.  Significant estimates made in
preparing these financial statements include the allowance for doubtful accounts
and valuation of deferred tax assets.

CASH EQUIVALENTS

The Company  invests its excess cash in money market and other demand  accounts.
The Company considers all highly liquid investments with original  maturities of
three months or less to be cash equivalents.

                                       9
<PAGE>
                         HOTEL INFORMATION SYSTEMS, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
                               


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

INVENTORIES

Inventories, which consist primarily of purchased computer equipment, are stated
at the lower of cost or market. Cost is determined using the first-in, first-out
("FIFO") method.

FURNITURE AND EQUIPMENT

Furniture  and  equipment  are stated at cost.  Depreciation  on  furniture  and
equipment is calculated using the straight-line method over the estimated useful
lives of the assets,  generally three to five years.  Leasehold improvements are
amortized using the  straight-line  method over the shorter of the lease term or
estimated useful lives of the assets.

SOFTWARE DEVELOPMENT COSTS

Software  development  costs  are  capitalized  and  carried  at  the  lower  of
unamortized cost or net realizable value. Capitalized costs are amortized on the
straight-line method over the shorter of the period significant revenues will be
generated or five years.  Amortization expense for software development costs in
1995 and 1994 amounted to $1,160,800 and $2,340,600, respectively, which amounts
are included in cost of revenues.

REVENUE RECOGNITION

The Company  licenses  software  under  noncancellable  license  agreements  and
provides services such as system installation, training, professional consulting
services and  software  maintenance.  Software  license fee revenue is generally
recognized  upon  shipment  of  the  product  to  the  end  user.  Revenue  from
installation and other consulting  services is generally  recognized as services
are performed.  Software license and consulting revenues for contracts requiring
significant   implementation  services  are  recognized  on  the  percentage  of
completion basis. Revenue from the sale of hardware is recognized at the time of
shipment.

The  Company  provides  maintenance  for its  computer  software  systems  under
maintenance agreements,  generally with a term of one year. Maintenance revenues
are recognized using the straight-line method over the term of the agreements.

The Company's revenue  recognition policy is in compliance with the provision of
the American  Institute of Certified  Public  Accountants  Statement of Position
91-1, "Software Revenue Recognition."

                                       10
<PAGE>

                         HOTEL INFORMATION SYSTEMS, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
                               

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

REVENUE RECOGNITION (CONTINUED)

Deferred revenue includes deferred  maintenance revenue and the deferred portion
of software license revenue.

The Company  does not  require  collateral  for its  receivables.  Reserves  are
maintained for potential credit losses, and such losses to date have been within
management's  expectations.  Actual credit  losses may differ from  management's
estimates and such  differences  could be material to the financial  statements.
The Company's customers include hotels located throughout the world.

FOREIGN CURRENCY TRANSLATION

Assets and liabilities of foreign  operations are translated  into U.S.  dollars
using current exchange rates, and revenues and expenses are translated into U.S.
dollars using average exchange rates. The cumulative effects of foreign currency
translation  adjustments are included as a separate  component of  stockholders'
equity (capital deficiency).

Exchange  gains and losses arising from  transactions  denominated in currencies
other than the functional  currency are included in operations and have not been
material.

ACCOUNTING FOR STOCK-BASED COMPENSATION

In October  1995,  the  Statement of  Financial  Accounting  Standards  No. 123,
"Accounting  for  Stock-Based  Compensation"  ("FAS  123")  was  issued  and  is
effective  for the  Company's  1996  fiscal  year.  The  Company  has elected to
continue to follow current  practice but FAS 123 requires pro forma  disclosures
of net income and earnings per share computed as if the fair value-based  method
had been applied.
                                       11
<PAGE>
<TABLE>
<CAPTION>

                         HOTEL INFORMATION SYSTEMS, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
                               
2. FURNITURE AND EQUIPMENT

Furniture and equipment consists of the following:

                                                             DECEMBER 31
                                                         1995         1994
<S>                                                <C>          <C>   
                                                    ------------------------
Furniture and equipment:
   Computer equipment                              $  2,896,500  $  2,550,200
   Office furniture and equipment                       972,100       860,300
   Leasehold improvements                               144,100       239,600
   Automobiles                                           14,400        73,600
                                                      ----------   ----------
                                                      4,027,100     3,723,700
   Less accumulated depreciation and amortization    (2,996,800)   (2,781,300)
                                                      ----------   ----------
Net furniture and equipment                        $  1,030,300  $    942,400
                                                      ----------   ----------
                                                      ----------   ----------

</TABLE>

                                       12

<PAGE>

<TABLE>
<CAPTION>
                         HOTEL INFORMATION SYSTEMS, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
                              

3. NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS

Notes payable consist of the following:

                                                             DECEMBER 31
                                                         1995         1994
                                                      ------------------------
<S>                                                 <C>            <C>    

Term note payable, unsecured, due in 
monthly installments of $4,110 including
interest at 6.0% per annum through June 1997          $   70,600     $ 114,200

Term note  payable to bank,  secured  
by  equipment,  due in  monthly  
principal installments  of $2,400 plus  
interest at prime plus 1.75% per annum  
through October 1995 (10.25% at December 31,1994)              -        21,600

Term note  payable to bank,  secured  
by  equipment,  due in  monthly  principal
installments  of $833 plus  interest  at 
prime plus  1.75% per annum  through September 
1997, paid in full in 1995 (10.25% at 
December 31, 1994)                                            -         27,500

Term note payable to shareholder, 
unsecured, due in monthly installments 
of $943 including interest at 11% per 
annum through October 1997                                 18,700           -

Borrowings under $500,000 line of 
credit with bank, secured by assets of parties
related to shareholders of the Company, accruing 
interest at prime plus 1.0%, maturing  June 30,  
1997. The Company  has  pledged  all of its  
maintenance contracts  and proceeds  therefrom  
to the  shareholders  that have  provided 
security in support of this loan                          341,900            -

Borrowings  under  $500,000  line of 
credit  with  shareholder,  secured  by the
Company's  accounts  receivable,  with interest
at 10% per annum.  Under this line the 
shareholder will advance the Company the lesser 
of 75% of designated accounts receivable or 
$500,000. This advance is due in July 1996               500,000             -

Note payable to shareholder, unsecured, 
with interest at 10% per annum, maturing
December 18, 1995 and was paid in full in 
March 1996                                                18,900             -

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

Total notes payable                                      950,100         163,300

Less current portion                                     916,800          75,200
                                                         --------       --------
                                                      $   33,300      $   88,100
                                                         --------       --------
                                                         --------       --------
</TABLE>

                                       13
<PAGE>

<TABLE>
<CAPTION>
                         HOTEL INFORMATION SYSTEMS, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
                               

3. NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS (CONTINUED)

Capital lease obligations  represent the present value of future rental payments
under various lease agreements for computer equipment and vehicles. Depreciation
on the relevant  assets is charged to  depreciation  expense.  Net book value of
computer equipment,  furniture and equipment,  and vehicles under capital leases
was $384,600 and $85,600 at December 31, 1995 and 1994, respectively.

Maturities of notes  payable and future  minimum  lease  payments  under capital
leases are as follows:

                                                    NOTES          CAPITAL
YEAR ENDING DECEMBER 31                            PAYABLE         LEASES
                                                  ----------     ----------
<S>                                               <C>             <C>   

1996                                                $916,800       $238,800
1997                                                  33,300        132,300
1998                                                       -         97,600
1999                                                       -         30,000
                                                      -------       -------
                                                     $950,100       498,700
                                                      -------
                                                      -------
Less amount representing interest                                   106,900
                                                                    -------

Present value of minimum lease payments                             391,800
Current portion                                                     186,700
                                                                    -------
Long-term portion                                                  $205,100
                                                                    -------
                                                                    -------

</TABLE>

4. CONVERTIBLE SUBORDINATED DEBENTURE

In October 1993,  the Company  issued 8%  convertible  subordinated  debentures.
Interest  accrues at the rate of 8% per annum and is payable upon declaration of
dividends on Series B preferred  stock. The debentures plus accrued interest are
convertible  at any time,  at the option of the holders  into Series B preferred
stock at a rate of $1.19 per share in accordance  with the original terms of the
agreement (see Note 1).


                                       14

<PAGE>
                         HOTEL INFORMATION SYSTEMS, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
                               


5. SHAREHOLDERS' EQUITY

PREFERRED STOCK

The Company has 10,000,000 shares of convertible  preferred stock authorized for
issuance,  of which 790,513 shares are designated  Series A and are  redeemable,
5,000,000  shares are  designated  Series B and are not redeemable and 4,209,487
shares are undesignated.

The  holders of the Series A  preferred  stock may require the Company to redeem
their  shares at any time  after  December  31,  1995 at $1.265  per share  plus
accrued  dividends and a redemption  premium equal to 10% of the issuance  price
per annum.

Dividends  cumulate annually on the Series A and Series B preferred stock at the
rate of $0.101 and $0.095 per share, respectively,  and are payable in cash upon
the redemption, conversion or repurchase of the preferred shares, declaration of
dividends  on  common  shares,  or  the  acquisition,   merger,  liquidation  or
dissolution  of the Company.  Dividends of $180,000 and $556,800,  respectively,
are accrued on the Series A and Series B preferred stock at December 31, 1995.

Subject  to certain  provisions  per the  agreement,  each share of Series A and
Series B preferred  stock is  convertible  into one share of common stock at any
time at the option of the  stockholder.  The shares  automatically  convert upon
completion  of an initial  public  offering of the  Company's  common stock at a
price not less than $3.00 per common share and for  aggregate  proceeds  greater
than  $7,500,000.  The holders of the preferred stock are entitled to the number
of votes  equal to the  number  of  shares  of common  stock  into  which  their
preferred stock is convertible.

In the event of  liquidation,  dissolution,  or winding up of the  Company,  the
holders of Series A and Series B preferred  stock have a liquidation  preference
over holders of common stock equal to $1.265 and $1.19 per share,  respectively,
plus any unpaid dividends (see Note 1).

COMMON STOCK

Common stock has been issued to founders, certain employees and investors of the
Company.  Such  common  shares are subject to certain  repurchase  rights by the
Company in the event of termination of employment, death or disability.

                                       15
<PAGE>
                    HOTEL INFORMATION SYSTEMS, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
     

5. SHAREHOLDERS' EQUITY (CONTINUED)

WARRANTS

In September 1993, warrants to purchase  approximately  128,005 shares of common
stock at $0.25 per share  were  issued in  connection  with the sale of Series A
preferred stock. The warrants expire in September 1998.

In June 1995,  warrants to purchase  100,000 shares of common stock at $0.20 per
share, were issued to a Series A preferred  stockholder as partial  compensation
for consulting services provided to the Company.  Also in June 1995, warrants to
purchase  50,000  shares of  common  stock at $0.50  per  share  were  issued in
connection  with a  Securities  Loan  Agreement  pertaining  to the bank line of
credit dated June 15, 1995. The warrants expire in 2000.

STOCK OPTIONS

The Board has  granted  non-qualified  stock  options to  employees  to purchase
common stock of the Company.  The options vest ratably over a three to five year
period.  The Company has the right to repurchase  all shares issued  pursuant to
exercise of options upon termination of employment, death or disability.

In January 1994, the Board of Directors approved the Incentive Stock Option Plan
(the "Plan") for eligible employees.  The Plan provides for the issuance of both
qualified and  non-qualified  stock options,  restricted  stock,  stock purchase
rights and performance stock options.  All options have an exercise period of 10
years and generally vest over a period of 4 years. The Board authorized  options
to purchase up to 400,000 shares of common stock to be issued at the fair market
value at the time of grant.

                                       16
<PAGE>

<TABLE>
<CAPTION>
                         HOTEL INFORMATION SYSTEMS, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
                               



5. SHAREHOLDERS' EQUITY (CONTINUED)

The following  summarizes stock option activity for the two years ended December
31, 1995:

                                                                  OPTION PRICE
                                                      SHARES        PER SHARE
                                                    ----------  --------------
<S>                                               <C>          <C>   
Outstanding December 31, 1993                       2,030,100  $ 0.023 - 0.250
   Granted                                            646,000            0.200
   Expired                                           (309,600)   0.085 - 0.131
   Cancelled                                         (366,700)   0.023 - 0.250
                                                     ---------    ------------
Outstanding December 31, 1994                       1,999,800   $0.023 - 0.250
   Granted                                             25,000$           0.200
   Exercised                                         (181,500)   0.085 - 0.200
   Cancelled                                         (128,300)   0.200 - 0.250
                                                     ---------    ------------
Outstanding December 31, 1995                       1,715,000   $0.023 - 0.250
                                                     ---------    ------------
                                                     ---------    ------------
Exercisable December 31, 1995                         864,600   $0.023 - 0.250
                                                     ---------    ------------
                                                     ---------    ------------

</TABLE>

6. INCOME TAXES

The Company has adopted  Statement of Financial  Accounting  Standards  No. 109,
"Accounting for Income Taxes" ("FAS 109").  Under FAS 109, the liability  method
is used in accounting for income taxes.  Under this method,  deferred tax assets
and liabilities are determined based on differences  between financial reporting
and tax basis of assets and  liabilities  and are measured using the enacted tax
rates and laws  that will be in effect  when the  differences  are  expected  to
reverse.

                                       17
<PAGE>


<TABLE>
<CAPTION>
                         HOTEL INFORMATION SYSTEMS, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
                               


6. INCOME TAXES (CONTINUED)

Significant components of the provision for income taxes are as follows:

                                                      YEARS ENDING DECEMBER 31
                                                         1995         1994
                                                     -------------------------
<S>                                                <C>             <C>    
Current:
   Federal                                                    -             -
   State                                                      -             -
   Foreign                                              301,000       648,000
                                                     ----------    ----------
Total current                                           301,000       648,000

Deferred:
   Federal                                           (1,074,000)   (2,641,000)
   State                                                (86,000)     (233,000)
   Foreign                                              (14,000)      (68,000)
   Effect of valuation allowance adjustment           1,174,000     2,585,000
                                                     ----------    ----------
Total deferred                                                -      (357,000)
                                                     ----------    ----------
Total provision                                   $     301,000 $     291,000
                                                     ----------    ----------
                                                     ----------    ----------
</TABLE>

Income  tax  expense  for 1994 and 1995  differs  from the  amount of income tax
expense that would result from applying  U.S.  statutory tax rates to the pretax
loss from operations as a result of foreign income and  withholding  taxes which
cannot be offset by the Company's U.S. net operating losses for 1994 and 1995.

                                       18
<PAGE>

<TABLE>
<CAPTION>


                         HOTEL INFORMATION SYSTEMS, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
                               

6. INCOME TAXES (CONTINUED)

Deferred  income  taxes  reflect  the net tax effects of  temporary  differences
between the carrying  amounts of assets and liabilities for financial  reporting
purposes and the amounts used for income tax purposes. Significant components of
the  Company's  deferred  tax  assets  (liabilities)  as of  December  31 are as
follows:

                                                         1995         1994
                                                       ------------------------
<S>                                                 <C>           <C>   
Deferred tax assets:
   Net operating loss and credit carryforwards       $1,009,000      $675,000
   Capital loss carryforwards                         2,042,000             -
   Reserves and other accruals                          420,000       565,000
   Equity investments                                         -     1,474,000
   Other                                                288,000       313,000
                                                     ----------    ----------
Total deferred tax assets                             3,759,000     3,027,000
Valuation allowance                                  (3,759,000)   (2,585,000)
                                                     ----------    ----------
                                                              -       442,000

Deferred tax liabilities:
   Capitalized software                                       -      (442,000)
                                                     ----------     ----------
Net deferred tax                                              -              -
                                                     ----------     ----------
                                                     ----------     ----------
</TABLE>

At December  31,  1995,  the Company  had federal and state net  operating  loss
carryforwards totaling  approximately  $2,911,000 which expire in the years 2006
through 2011. In addition,  in December 1995, the Company realized losses on the
sale of its  investment in Hogadata and related  entities and on the sale of its
wholly  owned  subsidiary  in the United  Kingdom,  Hotel  Information  Systems,
Limited. These sales resulted in capital losses for income tax purposes that may
only be offset against  future capital gains.  At December 31, 1995, the Company
had capital loss carryforwards of approximately  $5,441,000 for both federal and
state tax purposes.  The capital loss  carryforward for federal purposes expires
in the year  2000  while the  carryforward  for state  purposes  may be  carried
forward  indefinitely.  Due to the "change of  ownership"  provisions of the Tax
Reform Act of 1986,  utilization of the Company's net operating loss and capital
loss  carryforwards  against  taxable income in future years may be subject to a
substantial annual limitation.

                                       19
<PAGE>
                         HOTEL INFORMATION SYSTEMS, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
                               


7. RELATED PARTY TRANSACTIONS

The Company has an agreement  with a major  shareholder  whereby the Company has
the  exclusive  and  perpetual  right to market and sell front  office  software
systems (the "System")  developed by the shareholder.  In consideration for such
rights,  the Company has agreed to pay the  shareholder a royalty of $75,000 per
year in  perpetuity  as long as the  Company  has the right to market the System
unless the  Company  exercises  its option to acquire  the  System.  The royalty
expense is included in cost of revenues.

Royalty  revenue from product sales and services  provided  through MSC totalled
$142,900 in 1995  ($219,000 in 1994).  Royalties due from MSC totalled  $118,600
and $82,900 at December 31, 1995 and 1994, respectively.

The Company has two  unsecured  notes  payable to  shareholders  with a combined
balance at December 31, 1995 of $37,600 (see Note 3).

The  Company  also has a $500,000  line of credit with a bank that is secured by
assets of parties related to shareholders. The balance of this line of credit at
December  31, 1995 is $341,900.  Warrants to purchase  50,000 of common stock at
$0.50 per share were  issued to these  parties in  connection  with this line of
credit.

In June 1995, the Company  entered into an agreement with a shareholder in which
the  shareholder  will  advance to the Company  the lesser of 75% of  designated
accounts  receivable or $500,000 secured by the Company's  accounts  receivable.
The agreement  calls for the Company to pay the  shareholder a commitment fee of
$10,000 plus 10% per annum on the  outstanding  balance.  This advance is due in
July 1996.

                                       20
<PAGE>

<TABLE>
<CAPTION>
                         HOTEL INFORMATION SYSTEMS, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
                               

8. INTERNATIONAL OPERATIONS

A summary of the Company's operations by geographic area is as follows:

                                                      YEARS ENDING DECEMBER 31
                                                         1995         1994
                                                     -------------------------
<S>                                               <C>           <C>   
Revenues:
   United States                                    $14,701,100   $18,149,700
   Europe                                             2,837,100     2,772,900
   Far East                                          10,144,500     8,336,200
   Adjustments and eliminations                      (1,828,300)   (1,956,100)
                                                     ----------    ----------
Consolidated                                        $25,854,400   $27,302,700
                                                     ----------    ----------
                                                     ----------    ----------

Operating income (loss):
   United States                                   $ (1,723,700) $ (2,803,000)
   Europe                                               (37,300)     (107,200)
   Far East                                             288,500       616,500
                                                     ----------    ----------
Consolidated                                       $ (1,472,500) $ (2,293,700)
                                                     ----------    ----------
                                                     ----------    ----------

Identifiable assets, end of year:
   United States                                   $  4,268,300  $  6,517,300
   Europe                                                     -     1,618,300
   Far East                                           6,779,200     4,971,700
   Adjustments and eliminations                      (2,389,300)   (2,474,900)
                                                     ----------    ----------
Consolidated                                       $  8,658,200   $10,632,400
                                                     ----------    ----------
                                                     ----------    ----------

</TABLE>
                                       21
<PAGE>

<TABLE>
<CAPTION>
                         HOTEL INFORMATION SYSTEMS, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
                               

9. COMMITMENTS AND CONTINGENCIES

OPERATING LEASE COMMITMENTS

The Company has noncancelable  operating leases for office space,  furniture and
equipment  that expire over the next five years.  Future  minimum lease payments
under operating leases are as follows:

YEARS ENDING DECEMBER 31
<S>                                                          <C>   
1996                                                             $1,117,900
1997                                                                998,400
1998                                                                274,800
1999                                                                 68,800
Thereafter                                                           34,400
                                                                   ---------
                                                                 $2,494,300
                                                                   ---------
                                                                   ---------
</TABLE>

Rent expense was $1,045,200 and $1,026,500 in 1995 and 1994, respectively.

VENDOR CLAIM

In June 1996,  the  Company  received a letter from a hardware  vendor  claiming
$950,000 relating to alleged  obligations of former subsidiaries of the Company.
The Company believes that it has no  responsibility  to honor claims against its
former  subsidiaries and intends to vigorously contest the claim.  However,  the
outcome of this matter is not determinable at this time, its ultimate resolution
could have a material  adverse  effect on the financial  position and results of
operations of the Company.

PURCHASE COMMITMENT

At  December  31,  1995,  the  Company  is  committed  to  purchase a minimum of
$1,260,000 in services related to a customer contract.


10. EMPLOYEE SALARY DEFERRAL 401(K) PLAN

The Company  sponsors  an  Employee  Salary  Deferral  401(k) Plan for  eligible
employees.  The Company made  matching  contributions  of $26,400 and $48,100 in
1995 and 1994, respectively.



                                       22
<PAGE>












                        CONSOLIDATED FINANCIAL STATEMENTS

                         HOTEL INFORMATION SYSTEMS, INC.
                                AND SUBSIDIARIES

                     Years ended December 31, 1993 and 1992
                       with Report of Independent Auditors





































<PAGE>



                         HOTEL INFORMATION SYSTEMS, INC.
                                AND SUBSIDIARIES

                       Consolidated Financial Statements



                     Years ended December 31, 1993 and 1992











                                    CONTENTS

Report of Independent Auditors...............................................1

Audited Consolidated Financial Statements

Consolidated Balance Sheets..................................................2
Consolidated Statements of Operations........................................3
Consolidated Statements of Shareholders' Equity (Capital Deficiency).........4
Consolidated Statements of Cash Flows........................................5
Notes to Consolidated Financial Statements...................................6



<PAGE>











                         Report of Independent Auditors




The Board of Directors
Hotel Information Systems, Inc.

We have audited the  consolidated  balance sheet of Hotel  Information  Systems,
Inc.  as of  December  31,  1993,  and the related  consolidated  statements  of
operations,  shareholders' equity (capital  deficiency),  and cash flows for the
year then  ended.  These  financial  statements  are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audit. The consolidated balance sheet of Hotel
Information  Systems,  Inc. as of December 31, 1992 and the related consolidated
statements of operations,  shareholders' equity (capital  deficiency),  and cash
flows for each of the two years in the period  ended  December  31,  1992,  were
audited by other  auditors  whose report dated  February 26, 1993,  except as to
Note 12 which is as of April 26, 1993, expressed an unqualified opinion on those
statements prior to restatement.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards  require that we plan and perform the audit to obtain reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the consolidated financial position of Hotel Information
Systems,  Inc.  at  December  31,  1993,  and the  consolidated  results  of its
operations  and its cash  flows  for the year  then  ended  in  conformity  with
generally accepted accounting principles.

We also  audited  the  adjustments  described  in Note 12 that were  applied  to
restate the 1992 and 1991 financial statements. In our opinion, such adjustments
are appropriate and have been properly applied.



/s/ Ernst & Young LLP
May 31, 1994
                                  
                                       1

<PAGE>
<TABLE>
<CAPTION>
                         HOTEL INFORMATION SYSTEMS, INC.
                                AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                                         DECEMBER 31
                                                        1993       1992
                                                 --------------------------
<S>                                           <C>            <C>   
ASSETS
Current assets:
  Cash and cash equivalents                     $  5,306,500 $   417,900
  Accounts receivable, less allowance 
  for doubtful accounts
  of $298,900 in 1993 and $86,100 in 1992          5,670,400   4,290,300
  
Inventories                                          185,300     620,400
Receivables from related parties                     152,300           -
Deferred income taxes                                575,000           -
Prepaid expenses and other current assets            511,600     285,600
                                                  ----------   ----------
Total current assets                              12,401,100   5,614,200

Furniture and equipment, net of accumulated 
depreciation of $2,498,800 in 1993 and 
$2,278,800 in 1992                                   772,000     746,700

Capitalized software, net of accumulated 
amortization of $2,845,400 in 1993 and 
$2,019,300 in 1992                                 3,020,700    2,708,700
Other assets                                         636,100      383,300
                                                     -------      -------
Total assets                                     $16,829,900   $9,452,900
                                                 ===========   ==========
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY (CAPITAL DEFICIENCY) 
<S>                                           <C>            <C>    
  Current liabilities:
  Accounts payable                              $  2,330,600  $1,193,900
  Accrued compensation and related expenses          601,000     334,500
  Other accrued liabilities                          724,600   1,512,100
  Short-term borrowings                                    -      74,700
  Current portion of notes payable 
  and capital lease obligations                       86,400      89,600
  Income taxes payable                               209,200      44,700
  Deferred revenues                                6,491,200    6,164,20
                                                  ----------   ---------
Total current liabilities                         10,443,000   9,413,700

Notes payable and capital lease obligations          176,100     124,000
Deferred income taxes                                932,000      76,000
Deferred rent                                        247,600     276,400
Convertible subordinated debentures                1,037,000           -
Commitments and contingencies

Shareholders' equity (capital deficiency):
  Convertible preferred stock, no 
  par value;10,000,000 shares authorized:

   Series A redeemable  convertible  
   preferred stock; 790,500 shares authorized;
   790,500  shares issued and  outstanding in 1993  
   (liquidation  preference $1,000,000)                 903,900          -

   Series B convertible preferred stock; 
   5,000,000 shares authorized;  2,700,000
   shares issued and outstanding in 1993 
   (liquidation preference $3,213,000)                 3,143,100         -

  Common stock, no par value.  Authorized 
  100,000,000 shares, 10,324,300 shares 
  issued and outstanding in 1993 and
  9,868,500 shares in 1992                               118,200      81,500
 
  Accumulated deficit                                   (116,900)   (521,300)
 
  Notes receivable from shareholders                     (65,500)    (37,700)

  Accumulated foreign currency translation adjustments     11,400     40,300

                                                        ---------   ---------
  Total shareholders' equity (capital deficiency)       3,994,200   (437,200)
                                                        ---------   ---------
  Total liabilities and shareholders' 
  equity (capital deficiency)
                                                       $16,829,900  $9,452,900
                                                       ===========  ==========
</TABLE>
See accompanying notes.
                                       2










<PAGE>

<TABLE>
<CAPTION>


                         HOTEL INFORMATION SYSTEMS, INC.
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS


                                                 YEAR ENDED DECEMBER 31
                        


                                           1993         1992          1991
                                      -----------------------------------------

<S>                                    <C>          <C>           <C>        
Revenues                               $23,273,100  $17,815,400   $15,955,700
Cost of revenues                        11,622,300    8,727,200     7,743,200
                                        ----------   ----------    ----------
Gross profit                            11,650,800    9,088,200     8,212,500

Selling, general and administrative 
expenses                                 9,092,400    8,249,400     8,199,200
Product development expenses             1,481,000    1,127,200     1,355,000
                                         ----------   ----------   ----------
Total operating expenses                10,573,400    9,376,600     9,554,200
                                         ----------   ----------   ----------
Income (loss) from operations            1,077,400     (288,400)   (1,341,700)
Interest expense (income), net               7,400        8,200        (3,200)
                                         ----------   ----------   ----------
Income (loss) before income taxes        1,070,000     (296,600)   (1,338,500)
Provision for income taxes (benefit)       576,800      119,400       (42,500)
                                         ----------   ----------   ----------
Net income (loss)                         $493,200    $(416,000) $ (1,296,000)
                                         ----------   ----------   ----------
                                         ----------   ----------   ----------
</TABLE>

See accompanying notes.


                                       3
<PAGE>



<TABLE>
<CAPTION>
                                                                            


                                             HOTEL INFORMATION SYSTEMS, INC.
                                                    AND SUBSIDIARIES

                          CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (CAPITAL DEFICIENCY)

                                      YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991

                                                                                                    Accumulated  Total
                                                                          Retained     Notes        Foreign      Shareholders
                                Preferred Stock      Common Stock         Earnings     Receivable   Currency     Equity
                                ----------------   ------------------    (Accumulated  from         Translation  (Capital 
                                Shares   Amount    Shares   Amount        Deficit)     Shareholders Adjustments  Deficiency)
                                -----  ---------   ------- -----------   ---------    -----------   --------     ---------
<S>                            <C>    <C>        <C>        <C>          <C>           <C>          <C>          <C>       
Balance at December 31, 1990     -          -    9,675,000   $81,500     $1,190,700    $(37,700)    $29,900      $1,264,400
   Common stock issued
   in exchange for
   minority interest in
   subsidiary                    -          -      193,500       -             -            -           -               -
   Net loss                      -          -          -         -       (1,296,000)        -           -        (1,296,000)
   Equity adjustment                                                                                    
     from foreign
     currency
     translation                 -          -          -         -             -            -        14,300          14,300
                              -------    -------    -------  --------       -------      -------     -------     -----------

Balance at December 31,
   1991                          -          -    9,868,500    81,500       (105,300)    (37,700)     44,200         (17,300)
   Net loss                      -          -          -         -         (416,000)        -           -          (416,000)
   Equity adjustment
     from foreign
     currency
     translation                 -          -          -         -             -            -        (3,900)         (3,900)
                              -------    -------    -------    ------      -------       -------    --------        --------

Balance at December 31,
1992                             -          -    9,868,500    81,500       (521,300)     (37,700)     40,300         (437,200)
   Issuance of Series A
     preferred stock at
     $1.265 per share,
     net of issuance
     costs                   790,500    877,800       -          -             -            -             -           877,800
   Issuance of Series B
     preferred stock at
     $1.19 per share,
     net of issuance
     costs                 2,700,000  3,143,100       -          -             -            -             -         3,143,100
   Exercise of stock
     options                     -          -      455,800    36,700           -        (27,800)          -             8,900
   Accretion of
     preferred stock
     dividends                   -      26,100        -          -         (88,800)          -            -           (62,700)
   Net income                    -         -          -          -         493,200           -            -           493,200
   Equity adjustment
     from foreign
     currency
     translation                 -         -          -          -             -             -         (28,900)       (28,900)
                            ---------  ---------  ----------  ---------   ---------     ---------     ---------     ----------
Balance at December 31,
1993                       3,490,500  $4,047,000  10,324,300 $ 118,200   $(116,900)     $(65,500)      $11,400      $3,994,200
                            ========= ==========  ==========  =========   =========     =========     =========     ==========

</TABLE>
See accompanying notes.

                                                                4
<PAGE>
<TABLE>
<CAPTION>
                         Hotel Information Systems, Inc.
                                and Subsidiaries
                      Consolidated Statements of Cash Flows


                                                     YEAR ENDED DECEMBER 31

                                               1993          1992        1991
                                        ---------------------------------------
<S>                                      <C>              <C>       <C>       
OPERATING ACTIVITIES

Net income (loss)                            $493,200    $(416,000) $(1,296,000)

Adjustments to reconcile net 
earnings (loss) to net cash
provided by operating activities:

     Depreciation and amortization            1,073,300   1,361,500    1,066,000
     Loss on disposal of equipment                    -           -      (8,100)
     Deferred income taxes                      281,000     (70,500)   (373,400)
     Equity in joint venture losses (income)     13,300     (33,500)    (21,000)

     Change in operating assets and liabilities:

       Accounts receivable                   (1,380,100)    173,800     877,900
       Related party receivable                (152,300)          -           -
       Inventories                              435,100    (525,400)     93,600
       Prepaid expenses and other 
       current asset                           (226,000)    (98,000)    207,400
       Accounts payable and accrued expenses  1,340,500     663,400  (1,265,300)
       Income taxes payable                     164,500     (82,200)    302,000
       Deferred revenue                         327,000     127,500   1,676,800
       Other liabilities                       (816,300)     94,700     104,500
                                              ---------  ----------     -------
Net cash provided by operating activities     1,553,200   1,195,300   1,364,400

INVESTING ACTIVITIES
Capitalized software development costs         (963,100)   (780,300) (1,269,300)
Purchase of furniture and equipment            (241,700)   (189,300)   (390,600)
Proceeds from disposal of 
 furniture and equipment                              -           -       12,400
Other assets                                   (293,300)          -           -
                                              ----------   ---------  ----------
Net cash used in investing activities        (1,498,100)   (969,600) (1,647,500)

FINANCING ACTIVITIES
Proceeds from issuance of 
 convertible debentures                        1,037,000          -           -

Proceeds from borrowings                           2,500    124,700      310,500
Repayment of borrowings and
 payments under capital leases                  (206,900)  (628,800)   (105,600)

Proceeds from issuance of preferred stock, net 4,020,900          -          -

Proceeds from issuance of common stock             8,900          -          -

Net cash provided by (used in)                 ---------    ---------  ---------
 financing activities                          4,862,400    (504,100)    204,900

Effect of foreign exchange 
 rate changes on cash                            (28,900)     (3,900)     14,300

Net increase (decrease) in cash                ----------   ---------  ---------
 and cash equivalents                           4,888,600   (282,300)   (63,900)

Cash and cash equivalents 
 at beginning of year                             417,900    700,200     764,100
                                               ----------   --------- ----------

Cash and cash equivalents at end of year       $5,306,500   $417,900    $700,200
                                               ==========   ========= ==========
Supplemental disclosures:
   Interest paid                                  $48,300    $44,800     $38,000
                                               ==========  =========  ==========

   Income taxes paid                             $131,300   $272,100    $142,000
                                               ==========  =========  ==========

   Assets acquired under capital leases            $3,600    $14,600     $96,900
                                               ==========  =========  ==========

Supplemental disclosures of noncash 
investing and financing activities:
   Note issued for purchased software           $175,000    $  -       $  -
                                               ==========  =========   =========
</TABLE>
See accompanying notes.


                                       5
<PAGE>

                         HOTEL INFORMATION SYSTEMS, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1993


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


PRINCIPLES OF CONSOLIDATION AND OPERATIONS

The consolidated  financial statements include the accounts of Hotel Information
Systems,  Inc. and its wholly owned subsidiaries (the Company).  All significant
intercompany balances and transactions have been eliminated in consolidation.

The Company develops, markets and supports computer software systems and related
services for the hospitality industry.  The systems are principally front office
(reservations,   registration,  cashiering  and  guest  services),  back  office
(accounting,  purchasing,  receiving,  inventory  and sales  management),  yield
management and  interfaces.  Services are principally  installation,  education,
professional  consulting  services  and  software  maintenance.  The Company has
agreements with International Business Machine Corporation,  Hewlett Packard and
AT&T (NCR) to sell their hardware to its customers.

In September  1991, the Company  entered into a joint venture with Metro Systems
Corporation Limited to form HIS MSC Company Limited for the purpose of marketing
and selling the Company's software in Thailand. The Company has a 49.9% interest
in the joint venture and accounts for this  investment  using the equity method.
Condensed unaudited  financial  information of HIS MSC Company Limited as of and
for the year ended December 31, 1993 is as follows:

Total assets               $   796,800
Total liabilities              745,100
Revenues                     1,949,800
Net loss                       (50,200)

CASH EQUIVALENTS

The Company  invests its excess cash in money market and other demand  accounts.
The Company considers all highly liquid investments with original  maturities of
three months or less to be cash equivalents.

INVENTORIES

Inventories which consist primarily of purchased computer equipment,  are stated
at the lower of cost or market. Cost is determined using the first-in, first-out
(FIFO) method.

                                       6
<PAGE>

                         HOTEL INFORMATION SYSTEMS, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

FURNITURE AND EQUIPMENT

Furniture  and  equipment  are stated at cost.  Depreciation  on  furniture  and
equipment is calculated using the straight-line method over the estimated useful
lives of the assets,  generally three to five years.  Leasehold improvements are
amortized using the  straight-line  method over the shorter of the lease term or
estimated useful lives of the assets.

SOFTWARE DEVELOPMENT COSTS

Software  development  costs  are  capitalized  and  carried  at  the  lower  of
unamortized cost or net realizable value. Capitalized costs are amortized on the
straight-line  method  over five  years.  The  total  amortization  expense  for
software  development  costs in 1993,  1992 and 1991 was $821,900,  $858,600 and
$568,800, respectively, and is included in cost of revenues.

REVENUE RECOGNITION

The Company  licenses  software  under  noncancellable  license  agreements  and
provides services such as system installation, training, professional consulting
services and  software  maintenance.  Software  license fee revenue is generally
recognized  upon  shipment  of  the  product  to  the  end  user.  Revenue  from
installation and other consulting  services is generally  recognized as services
are performed.  Software license and consulting revenues for contracts requiring
significant   implementation  services  are  recognized  on  the  percentage  of
completion basis. Revenue from the sale of hardware is recognized at the time of
shipment.

The  Company  provides  maintenance  for its  computer  software  systems  under
maintenance agreements,  generally with a term of one year. Maintenance revenues
are recognized using the straight-line method over the term of the agreements.

Deferred revenue includes deferred  maintenance revenue and the deferred portion
of software license revenue.

The Company  does not  require  collateral  for its  receivables.  Reserves  are
maintained for potential credit losses, and such losses to date have been within
management's  expectations.  The  Company's  customers  include  hotels  located
throughout the world.  The Company is directly  affected by the financial cycles
of the hotel industry,  however,  management does not believe significant credit
risk exists at December 31, 1993.

                                       7
<PAGE>

                         HOTEL INFORMATION SYSTEMS, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                    

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

FOREIGN CURRENCY TRANSLATION

Assets and liabilities of foreign  operations are translated  into U.S.  dollars
using current exchange rates, and revenues and expenses are translated into U.S.
dollars using average exchange rates. The cumulative effects of foreign currency
translation  adjustments are included as a separate  component of  stockholders'
equity (capital deficiency).

Exchange  gains and losses arising from  transactions  denominated in currencies
other than the  functional  currency  are included in  operations  have not been
material.

RECLASSIFICATIONS

Certain  prior year balances  have been  reclassified  to conform to the current
year presentation.

<TABLE>
<CAPTION>

2. FURNITURE AND EQUIPMENT

Furniture and equipment consists of the following:

                                                             DECEMBER 31
                                                         1993         1992
                                                     --------------------------
<S>                                               <C>            <C>  
   Computer equipment                              $  2,190,300  $  1,991,700
   Office furniture and equipment                       713,500       618,300
   Leasehold improvements                               191,600       165,100
   Automobiles                                          175,400       250,400
                                                     ----------      ----------
                                                      3,270,800     3,025,500
   Less accumulated depreciation and amortization    (2,498,800)   (2,278,800)
                                                     ----------      ----------
Net furniture and equipment                       $     772,000 $     746,700
                                                     ----------      ----------
                                                     ----------      ----------
</TABLE>



                                       8
<PAGE>
<TABLE>
<CAPTION>

                        HOTEL INFORMATION SYSTEMS, INC.
                                AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                    
3. NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS

Notes payable consists of the following:

                                                             DECEMBER 31
                                                         1993          1992
                                                       ------------------------
<S>                                                    <C>              <C>    
in monthly  installments of $4,110 
including interest accrued at 6.0% 
per annum through June 1997                            $    155,400      $    -

Term note  payable to bank,  secured
by equipment,  due in  monthly  principal
installments  of $2,400 plus  interest  
accrued at prime plus 1.75% per annum
through October 1995 (7.75% at December 31, 1993)            46,000       79,000

Term note  payable to bank,  secured  
by equipment,  due in  monthly  principal
installments  of $833 plus  interest  accrued
at prime  plus 1.75% per annum through September 
1997 (7.75% at December 31, 1993)                            29,200       47,500

Borrowings  under  credit  agreement  
with bank,  $255,000  maximum,  secured by 
equipment,  due in monthly  principal  
installments  of $7,300 plus  interest
accrued at prime plus 1.75% per annum 
through March 1993                                             -          14,700
                                                           --------     --------

Total notes payable                                         230,600      141,200

Less current portion                                         71,400       53,400
                                                           --------     --------
                                                          $ 159,200    $  87,800
                                                           --------     --------
                                                           --------     --------
</TABLE>

Capital lease obligations  represent the present value of future rental payments
under various lease agreements for computer equipment and vehicles. Depreciation
on the  relevant  assets is charged to  depreciation  expense.  Cost of computer
equipment  and  vehicles  under  capital  leases are  $115,100  and  $111,500 at
December 31, 1993 and 1992, respectively.

                                       9
<PAGE>

<TABLE>
<CAPTION>

                        HOTEL INFORMATION SYSTEMS, INC.
                                AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                    
3. NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS (CONTINUED)

Maturities of notes  payable and future  minimum  lease  payments  under capital
leases are as follows:

                                                       NOTES         CAPITAL
YEAR ENDING DECEMBER 31                               PAYABLE        LEASES
                                                      --------       --------
<C>                                                    <C>           <C>    
1994                                                   $71,400       $21,300
1995                                                    72,700         9,500
1996                                                    54,500         4,000
1997                                                    32,000            -
                                                      --------        ------
                                                      $230,600        34,800
                                                      --------        ------
Less amount representing interest                                      2,900
                                                                      ------
Present value of minimum lease payments                               31,900
Current portion                                                       15,000
                                                                      ------
Long-term portion                                                    $16,900
                                                                      ------
                                                                      ------

</TABLE>

4. CONVERTIBLE SUBORDINATED DEBENTURE

In October 1993, the Company issued 8% convertible  subordinated  debentures due
January  1,  2010.  Interest  accrues at the rate of 8% per annum and is payable
upon  declaration of dividends on Series B preferred  stock.  The debentures are
convertible  at any time at the option of the  holders  into  Series B preferred
stock at a rate of $1.19 per share in accordance  with the original terms of the
agreement.


5. SHAREHOLDERS' EQUITY

PREFERRED STOCK

The Company has 10,000,000 shares of convertible  preferred stock authorized for
issuance,  of which approximately 790,500 shares are designated Series A and are
redeemable,  5,000,000 shares are designated Series B and are not redeemable and
4,209,487 shares are undesignated.

                                       10
<PAGE>

                        HOTEL INFORMATION SYSTEMS, INC.
                                AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                    

5. SHAREHOLDERS' EQUITY (CONTINUED)

PREFERRED STOCK (CONTINUED)

In September 1993, the Company issued  approximately  790,500 shares of Series A
redeemable,  convertible  preferred  stock to various  investors in exchange for
cash at $1.265 per share.  Proceeds totalled $877,800,  net of issuance costs of
$122,200. The holders of the Series A preferred stock may require the Company to
redeem their shares at any time after December 31, 1995 at $1.265 per share plus
accrued  dividends and a redemption  premium equal to 10% of the issuance  price
per annum.

In October 1993,  the Company  issued  2,700,000  shares of Series B convertible
preferred  stock to various  investors  in exchange for cash at $1.19 per share.
Proceeds totalled $3,143,100, net of issuance costs of $45,900.

Dividends  cumulate annually on the Series A and Series B preferred stock at the
rate of $0.101 and $0.095 per share, respectively,  and are payable in cash upon
the redemption, conversion or repurchase of the preferred shares, declaration of
dividends  on  common  shares,  or  the  acquisition,   merger,  liquidation  or
dissolution of the Company. Dividends of $20,000 and $42,700,  respectively, are
accrued on the Series A and Series B preferred stock at December 31, 1993.

Subject  to certain  provisions  per the  agreement,  each share of Series A and
Series B preferred  stock is  convertible  into one share of common stock at any
time at the option of the  stockholder.  The shares  automatically  convert upon
completion  of an initial  public  offering of the  Company's  common stock at a
price not less than $3.00 per common share and for  aggregate  proceeds  greater
than  $7,500,000.  The holders of the preferred stock are entitled to the number
of votes  equal to the  number  of  shares  of common  stock  into  which  their
preferred stock is convertible.

In the event of  liquidation,  dissolution,  or winding up of the  Company,  the
holders of Series A and Series B preferred  stock have a liquidation  preference
over holders of common stock equal to $1.265 and $1.19 per share,  respectively,
plus any unpaid dividends.

                                       11
<PAGE>

                        HOTEL INFORMATION SYSTEMS, INC.
                                AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                    

5. SHAREHOLDERS' EQUITY (CONTINUED)

COMMON STOCK

Common stock has been issued to founders, certain employees and investors of the
Company.  Such  common  shares are subject to certain  repurchase  rights by the
Company in the event of termination of employment, death or disability.

WARRANTS

In September 1993, warrants to purchase  approximately  128,000 shares of common
stock at $0.25 per share  were  issued in  connection  with the sale of Series A
preferred stock. The warrants expire in September 1998.
<TABLE>
<CAPTION>

STOCK OPTIONS

The Board has granted nonqualified stock options to employees to purchase common
stock of the Company. The options vest ratably over a three to five year period.
The Company has the right to repurchase  all shares issued  pursuant to exercise
of options upon termination of employment, death or disability.

The following  summarizes option activity for the three years ended December 31,
1993:

                                                                  OPTION PRICE
                                                      SHARES        PER SHARE
                                                     --------     ------------
<S>                                                   <C>      <C>       
Outstanding December 31, 1990                         375,400  $ 0.129 - 0.137
   Granted                                            851,300    0.083 - 0.131
   Expired                                           (185,700)           0.137
                                                    ---------    -------------
Outstanding December 31, 1991                       1,041,000    0.083 - 0.131
   Cancelled                                         (305,700)   0.129 - 0.131
                                                    ---------    -------------
Outstanding December 31, 1992                         735,300    0.083 - 0.131
   Granted                                          1,591,500    0.023 - 0.250
   Exercised                                         (296,700)   0.023 - 0.131
                                                    ---------    -------------
Outstanding December 31, 1993                       2,030,100  $ 0.023 - 0.250
                                                    ---------     ------------
                                                    ---------     ------------
Exercisable, December 31, 1993                         64,500          $ 0.131
                                                    ---------     ------------
                                                    ---------     ------------
</TABLE>

                                       12
<PAGE>

<TABLE>
<CAPTION>

                        HOTEL INFORMATION SYSTEMS, INC.
                                AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                    
6. INCOME TAXES

Effective January 1, 1993. the Company adopted Statement of Financial Accounting
Standards No. 109,  "Accounting for Income Taxes" (FAS 109).  Under FAS 109, the
liability  method is used in  accounting  for income  taxes.  Under this method,
deferred tax assets and liabilities are determined based on differences  between
financial  reporting  and tax basis of assets and  liabilities  and are measured
using the enacted tax rates and laws that will be in effect when the differences
are expected to reverse.  Prior to the  adoption of FAS 109,  income tax expense
was  determined  using the  deferred  method.  Deferred tax expense was based on
items of  income  and  expense  that were  reported  in  different  years in the
financial statements and tax returns and were measured at the tax rate in effect
in the years the difference originated.

As permitted  by FAS 109,  the Company has elected not to restate the  financial
statements  of any prior years.  The effect of the change on the  provision  for
income taxes for 1993 and the cumulative effect of the change were not material.

The provisions (benefits) for income taxes consist of the following:

                                          LIABILITY
                                           METHOD         DEFERRED METHOD
                                          --------   ----------------------
                                            1993         1992         1991
                                          --------     ---------    --------
<S>                                       <C>          <C>          <C>    
Federal:
   Current                                 $17,000          $ -          $ -
   Deferred                                258,000      (70,500)    (252,300)
                                          --------      --------    ---------
                                           275,000      (70,500)    (252,300)

State:
   Current                                  11,000         2,400       2,400
   Deferred                                 23,000            -      (28,000)
                                           -------       -------     --------
                                            34,000         2,400     (25,600)

Foreign:
   Current                                 267,800       187,500     235,400
                                           --------     --------     --------
Total                                      $576,800     $119,400    $(42,500)
                                           --------     --------     --------
                                           --------     --------     --------

</TABLE>
                                       13
<PAGE>

<TABLE>
<CAPTION>

                        HOTEL INFORMATION SYSTEMS, INC.
                                AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                    
6. INCOME TAXES (CONTINUED)

The reconciliation of income tax provision (benefit)  attributable to continuing
operations computed at the U.S. federal statutory rates to income tax expense is
as follows:

                                         LIABILITY
                                          METHOD           DEFERRED METHOD
                                         --------       ----------------------
                                           1993          1992         1991
                                         --------       ---------   --------
<S>                                     <C>           <C>           <C>   

Tax at U.S. statutory rate               $ 363,800    $(100,900)    $(455,100)
State taxes net of federal benefit          22,400        1,600       (15,000)
Unrecognized loss of foreign subsidiary          -       63,900             -
Net operating losses not utilized                -       28,700       284,700
Foreign income and withholding taxes       207,000      131,000       132,900
Other                                      (16,400)      (4,900)       10,000
                                           --------     --------    ---------
Total                                    $ 576,800      $119,400    $(42,500)
                                           --------     --------    ---------
                                           --------     --------    ---------

</TABLE>
                                       14
<PAGE>

<TABLE>
<CAPTION>
                        HOTEL INFORMATION SYSTEMS, INC.
                                AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                    

6. INCOME TAXES (CONTINUED)

Deferred  income  taxes  result from  timing  differences  between  years in the
recognition of certain revenue and expense items for financial and tax reporting
purposes.  The source of timing  differences  and  resulting  tax effects are as
follows (deferred method):

                                                         1992            1991
                                                       ---------       --------
<S>                                                    <C>           <C>    

Depreciation and amortization                            $8,000       $(14,500)
Capitalized software                                     26,600        270,700
Deferred revenue                                              -        (28,600)
Accrued expenses                                         26,600        (63,200)
Allowance for doubtful accounts                           6,700             -
Foreign tax credits                                           -             -
Net operating losses not utilized                      (138,400)      (443,000)
Utilization of net operating loss                             -             -
Other                                                         -         (1,700)
                                                        --------       --------
                                                       $(70,500)      $(280,300)
                                                        --------       --------
                                                        --------       --------

</TABLE>
                                       15
<PAGE>

<TABLE>
<CAPTION>

                        HOTEL INFORMATION SYSTEMS, INC.
                                AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                    
6. INCOME TAXES (CONTINUED)

Significant components of the Company's deferred tax assets and liabilities were
as follows at December 31, 1993 (liability method):

<S>                                                               <C>     
Deferred tax assets:
   Foreign tax deductions                                            $189,000
   Deferred revenue                                                   318,000
   Accrued expenses                                                   219,000
   Allowance for doubtful accounts                                    116,000
   Other                                                              102,000
                                                                    ---------
Total deferred tax assets                                             944,000

Deferred tax liabilities:
   Capitalized software                                             1,079,000
   Other                                                              222,000
                                                                    ---------
Total deferred tax liabilities                                      1,301,000
                                                                    ---------
Net deferred tax liabilities                                         $357,000
                                                                    ---------
                                                                    ---------

Recorded in the accompanying financial statements as:
   Net current deferred tax assets                                   $575,000
   Net noncurrent deferred tax liabilities                            932,000
                                                                    ---------
   Net deferred tax liabilities                                      $357,000
                                                                    ---------
                                                                    ---------
</TABLE>

No provision has been made for federal  income taxes on  unrequited  earnings of
certain  of  the  Company's  foreign  subsidiaries  (approximately  $300,000  at
December  31,  1993) since the Company  plans to  permanently  reinvest all such
earnings.  However, if such earnings were remitted, foreign tax credits would be
available to substantially offset the resulting U.S. income tax.

                                       16
<PAGE>


                        HOTEL INFORMATION SYSTEMS, INC.
                                AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                    
6. INCOME TAXES (CONTINUED)

At  December  31,  1993,  the  Company  had  research  and  development   credit
carryforwards  of  approximately   $60,000  for  federal  income  tax  reporting
purposes.  The research and development credits expire from 2001 to 2004. During
1993,  the Company  utilized  approximately  $1,300,000  in net  operating  loss
carryforwards for federal income tax reporting purposes.  A change in ownership,
as defined  by the  "change in  ownership"  provisions  of the Tax Reform Act of
1986,  of more than 50% of the value of the  Company's  stock may have  occurred
during the year ended  December  31,  1993.  The Company has not  completed  the
analysis  required to determine if a "deemed"  change in ownership has occurred.
However,  the amount of the net operating loss carryforward  utilized subsequent
to the  potential  change  in  ownership  is not  material  to the  consolidated
financial statements.


7. RELATED PARTY TRANSACTIONS

The Company has an agreement  with a major  shareholder  whereby the Company has
the  exclusive  and  perpetual  right to market and sell front  office  software
systems  developed by the  shareholder.  In consideration  for such rights,  the
Company has agreed to pay the  shareholder  a royalty of $75,000  per year.  The
royalty expense is included in cost of revenues.

Royalty revenue from product sales and services provided through HIS MSC Company
Limited (49.9% owned company) totalled $333,800 in 1993 ($210,000 and $16,800 in
1992 and 1991,  respectively).  Royalties due from HIS MSC Company Limited total
$152,300 at December 31, 1993 (none at December 31, 1992).

                                       17
<PAGE>

<TABLE>
<CAPTION>

                        HOTEL INFORMATION SYSTEMS, INC.
                                AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                    
8. INTERNATIONAL OPERATIONS

No single  customer  accounted  for more than 10% of revenues  in 1993,  1992 or
1991.

A summary of the Company's  operations  by  geographic  area for the three years
ended December 31, 1993 follows:

                                    1993         1992          1991
                                 ----------    ----------   ----------
<S>                            <C>           <C>           <C> 
Revenues:
   United States                $16,041,200  $12,132,000   $10,201,900
   Europe                         3,062,000    4,076,700     4,043,000
   Far East                       5,541,200    3,217,800     3,168,000
   Adjustments and eliminations  (1,371,300)  (1,611,100)   (1,457,200)
                                  ----------  ----------    ----------
Consolidated                    $23,273,100  $17,815,400   $15,955,700
                                  ----------  ----------    ----------
                                  ----------  ----------    ----------

Operating income (loss):
   United States                    932,400       35,300    (1,451,200)
   Europe                           181,200     (156,400)       19,700
   Far East                         (35,200)    (180,500)       92,700
                                  ----------   ----------    ----------
Consolidated                      1,078,400     (301,600)    (1,338,800)
                                  ----------   ----------    ----------
                                  ----------   ----------    ----------

Identifiable assets:
   United States                $13,012,500 $  5,933,400  $  6,277,400
   Europe                         1,593,800    1,829,200     2,349,400
   Far East                       3,341,400    2,899,700     1,725,700
   Adjustments and eliminations  (1,117,800)  (1,209,400)     (723,100)
                                 ----------   ----------    ----------
Consolidated                    $16,829,900 $  9,452,900  $  9,629,400
                                 ----------   ----------    ----------
                                 ----------   ----------    ----------
</TABLE>

                                       18
<PAGE>

<TABLE>
<CAPTION>

                        HOTEL INFORMATION SYSTEMS, INC.
                                AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                    
9. COMMITMENTS

OPERATING LEASE COMMITMENTS

The Company has noncancelable  operating leases for office space,  furniture and
equipment that expire over the next five years.

Future minimum lease payments under operating leases are as follows:

YEAR ENDING DECEMBER 31

<S>                                                              <C>       
1994                                                             $1,068,900
1995                                                                960,700
1996                                                                804,900
1997 and thereafter                                                 517,500
                                                                  ---------
                                                                 $3,352,000
                                                                  ---------
                                                                  ---------
</TABLE>

EMPLOYEE MEDICAL COVERAGE

The Company is partially  self-insured for medical expenses incurred with a stop
loss of $25,000 per individual or family per year for employees participating in
the standard medical plan.  Medical  expenses  incurred beyond the $25,000 level
are insured under a stop-loss coverage insurance plan. Amounts accrued under the
standard  medical  plan were  approximately  $86,700 and $77,900 at December 31,
1993 and 1992, respectively.


10. EMPLOYEE SALARY DEFERRAL 401(K) PLAN

The Company  sponsors  an  Employee  Salary  Deferral  401(k) Plan for  eligible
employees.  The Company has not  historically  matched  employee  contributions;
however,  the Plan  allows  for such  matching  upon  approval  by the  Board of
Directors.
There were no contributions made in 1993, 1992 and 1991.



                                       19
<PAGE>

                        HOTEL INFORMATION SYSTEMS, INC.
                                AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                    

11. SUBSEQUENT EVENT

In May 1994,  the Company  entered into an agreement to acquire all of the stock
of a software  and  services  vendor  with  locations  in  Austria,  Germany and
Belgium.  Under the agreement,  the Company will issue  2,750,000  shares of its
common  stock and pay  $500,000  in cash.  1,750,000  of the  shares are held in
escrow to be released  upon  resolution  of  contingencies  as  specified in the
agreement  and upon  attainment by the acquiree  company of certain  performance
criteria  as  defined.  Additionally,  the  Company  has  agreed  to loan to the
acquiree  up to  $1,000,000  at 4% per annum to fund the  completion  of certain
development projects.  The transaction will be accounted for as a purchase.  The
results of  operations  of the  acquiree  will be included  in the  consolidated
results of operations for periods subsequent to the acquisition date.

In January 1994, the Board of Directors approved the Incentive Stock Option Plan
for eligible employees. The Plan provides for the issuance of both qualified and
non-qualified  stock  options,  restricted  stock,  stock  purchase  rights  and
performance stock options. All options will have an exercise period of 10 years.
The Board authorized options to purchase up to 400,000 shares of common stock to
be issued at the fair market value at the time of grant.


12. RESTATEMENT OF PRIOR YEAR FINANCIAL STATEMENTS

During  1992,  and 1991,  the  Company  recognized  revenue  from  nonrefundable
deposits received upon the signing of its license  agreements with its customers
prior to delivery of the related  software and services.  The  Company's  policy
requires  that  software be  delivered  and  services be  performed  in order to
recognize  revenue for amounts  received  upon signing of the contract  with the
customer.  Also during 1992, the Company did not recognize  certain license fees
that were billed and collected  under normal payment terms for software that was
delivered  prior to year end with no  significant  vendor  obligations  or other
contingencies.  The financial statements for 1992 and 1991 have been restated to
properly record revenues for these periods. The effect of the restatement was to
decrease  previously  reported net loss by $170,400 for the year ended  December
31,  1992,  and to  increase  previously  reported  net loss for the year  ended
December 31, 1991 by  $837,200.  The  restatement  reduced  previously  reported
retained  earnings by  $666,800  and  $837,200  at  December  31, 1992 and 1991,
respectively.

                                       20

<PAGE>







                        CONSOLIDATED FINANCIAL STATEMENTS

                         HOTEL INFORMATION SYSTEMS, INC.
                                   (unaudited)

                         For the Six Month Periods ended
                             June 30, 1996 and 1995





























<PAGE>


<TABLE>
<CAPTION>


                         HOTEL INFORMATION SYSTEMS, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEET
                                   (Unaudited)

                                  June 30, 1996
                             (dollars in thousands)


<S>                                                          <C>   
ASSETS
   Current assets:
      Cash and cash equivalents                                $   2,241
      Receivables, net                                             3,509
      Inventories                                                     62
      Deferred income tax                                            719
      Prepaids                                                     1,203
                                                               ---------
         Total current assets                                      7,734

   Furniture, fixtures and equipment, net                            824
   Other assets                                                      213
                                                                --------
         Total assets                                             $8,771
                                                               =========
LIABILITIES AND STOCKHOLDERS' EQUITY
   Current Liabilities:
      Short-term borrowings                                        1,047
      Accounts payable                                             1,413
      Accrued liabilities                                          1,763
      Income taxes payable                                           171
      Dividends payable                                              905
      Unearned revenue                                             7,702
                                                               ---------
         Total current liabilities                                13,001

   Deferred income taxes                                             726
   Long-term debt                                                  1,162
                                                               ---------
         Total liabilities                                        14,889
                                                               =========

Shareholders' equity:
   Common stock                                                      199
   Preferred Stock                                                 4,264
   Notes receivable from shareholders                                (56)
   Cumulative translation adjustment                                 (19)
   Accumulated deficit                                           (10,506)
                                                               ----------
         Total shareholders' equity                               (6,118)
                                                               ----------
      Total liabilities and stockholders' equity                   $8,771
                                                               ==========

</TABLE>

         The accompanying notes are an integral part of these condensed
                       consolidated financial statements


                                       1
<PAGE>



<TABLE>
<CAPTION>



                         HOTEL INFORMATION SYSTEMS, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

                                                       For the Six-Months Ended
                                                               June 30,
                                                           1996        1995

                                                        (dollars in thousands)

<S>                                                       <C>         <C>    
Revenues                                                  $8,580      $13,329

Direct costs                                               4,195        7,781
                                                          ------      ---------

Gross profit                                               4,385        5,548

Selling, general and administrative expenses               2,813        4,781
Research and development costs                             1,110        1,247
Other operating expense (income)                              96          (91) 
                                                           ------      --------
      Operating income (loss)                                366         (389)

Loss on investments, principally unconsolidated                           400
subsidiary
Interest expense, net                                        198           17
                                                           ------      --------
      Income before income taxes                             168         (806)

Provision for income taxes                                    -            91
                                                           ------      --------

      Net income                                           $ 168        $(897)
                                                           =======     ========


</TABLE>

              The accompanying notes are an integral part of these
                   condensed consolidated financial statement




                                       2
<PAGE>

<TABLE>
<CAPTION>

                          Hotel Information Systems, Inc.
                 Condensed Consolidated Statements of Cash Flows
                                   (Unaudited)

                                                           For the Six-Months
                                                                  Ended
                                                                June 30,
                                                              1996      1995

                                                               (dollars in
                                                               thousands)

<S>                                                        <C>        <C>     
Net cash provided by operating activities                  $     992  $    328

Cash flows from investing activities:
   Payments for investment in Hogadata                             -      (260)
   Capital expenditures                                          (42)      (31)
                                                           ---------- ---------

Net cash used in investing activities                            (42)     (291)

Cash flows from financing activities:
       Proceeds from the issuance of common stock                  5         -
                                                           ---------  --------

Net cash generated  from financing activities                      5         -
                                                           ---------  --------

Effect of exchange rate changes on cash and cash                  (9)       55
equivalents

Net change in cash and cash equivalents                          946        92

Cash and cash equivalents at beginning of period               1,295     1,510
                                                           ---------  --------

Cash and cash equivalents at end of period                 $   2,241  $  1,602
                                                           =========  =========


</TABLE>


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



                                       3
<PAGE>





                         HOTEL INFORMATION SYSTEMS, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

                         Six Months Ended June 30, 1996



(1)   Basis of Presentation

     Companies  for which this  report is filed are Hotel  Information  Systems,
Inc.  and  its  wholly  owned  subsidiaries  (the  "Company").  The  information
contained  herein is unaudited,  but gives effect to all adjustments  (which are
normal   recurring   accruals)   necessary  to  present   fairly  the  condensed
consolidated  financials statements.  All significant  intercompany balances and
transactions have been eliminated in consolidation. These condensed consolidated
financial  statements  do not  include the effect of certain  proposed  purchase
price adjustments of approximately  $2.6 million which have been proposed by MAI
and which are being reviewed by the Company. See, note (2) below.

    The  consolidated  financial  statements  have been  prepared  assuming  the
Company will continue as a going concern.

(2)   Subsequent Event

     On August 9, 1996, the Company sold  substantially all of its assets to MAI
Systems Corporation  ("MAI"). As consideration,  MAI assumed certain liabilities
of the Company and issued to shareholders of the Company 1,178,380 shares of its
common stock.  The final  consideration is subject to adjustments (if any) based
on the Company's closing balance sheet as of August 9, 1996.


                                       4
<PAGE>




                PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS


The following unaudited pro forma combined financial data presents the Pro Forma
Combined  Balance Sheet on June 30, 1996,  giving effect to the  acquisition  of
Hotel  Information  Systems,  Inc.  ("HIS") as if they were  consummated on that
date. Also presented are the Pro Forma Combined Statements of Operations for the
six months  ended June 30,  1996,  and the fiscal year ended  December 31, 1995,
after giving effect to the  acquisitions as if they were  consummated on January
1, 1995.  The pro forma data is based on the historical  consolidated  financial
statements of MAI Systems  Corporation,  and the historical financial statements
of HIS giving effect to the  transaction  under the  assumptions and adjustments
outlined in the  accompanying  Notes to Unaudited Pro Forma  Combined  Financial
Data.

The unaudited pro forma data is provided for comparative  purposes only. It does
not purport to be indicative of the results that actually would have occurred if
the  acquisition  had been  consummated  on the date  indicated  or which may be
obtained in the future.  The pro forma combined financial data should be read in
conjunction  with the notes thereto  contained  elsewhere herein and the audited
financial  statement of HIS and the related  notes thereto  contained  elsewhere
herein and the audited consolidated  financial statements of the Company and the
related notes thereto incorporated herein by reference.


                                       
<PAGE>

<TABLE>
<CAPTION>

                             MAI Systems Corporation
                        Pro Forma Combined Balance Sheet
                                   (Unaudited)

                                  June 30, 1996
                             (dollars in thousands)


                                                         Pro Forma
                                     Historical         Adjustments
                                   =============  ==============================
                                                   Increase   Adjust   Combined
                                    MAI      HIS  (Decrease)  Refer.   Total 
<S>                               <C>     <C>       <C>     <C>      <C>     
ASSETS
 Current assets:
 Cash and cash equivalents                                      
                                  10,664    2,241   (1,466) a(i)         9,738
                                                    (1,701) a(ii)           
 Receivables, net                  7,353    3,509     (756) a(v)        10,106
 Inventories                       4,297       62        -               4,359
 Deferred income taxes                 -      719     (719) a(i)           -
 Prepaids                          1,148    1,203        -               2,351
                                  ------   ------    ------             ------
         Total current assets     23,462    7,734   (4,642)             26,554

 Furniture, fixtures and           
  equipment, net                   3,783      824     (191)              4,416
 Goodwill and other                
  intangibles                      3,336        -    20,832  a(iv)      24,168
 Other assets                        599      213        -                 812
                                  ------    -----  --------          ---------
         Total assets           $ 31,180    8,771   $15,999            $55,950
                                 =======    =====  ========          =========
LIABILITIES AND STOCKHOLDERS'
EQUITY
  Current Liabilities:
     Current portion of         
      long-term debt            $  1,276        -        -               1,276
 
     Short-term borrowings             -    1,047     (919)  a(ii)         128
     Customer deposits             1,151        -        -               1,151
     Accounts payable              5,062    1,413        -               6,475
     Accrued liabilities           3,688    1,763     (100)  a(iii)      7,681
                                                     3,009   a(v)
                                                      (679)  a(i)
     Income taxes payable            157      171     (171)  a(i)          157
     Dividends payable                 -      905     (905)  a(i)           -
     Unearned revenue              3,354    7,702      123   a(v)       11,179
                                  ------    -----    -------            -------
         Total current            14,688   13,001      358              28,047
          liabilities
     Deferred income taxes            15      726      (726) a(i)           15
     Long-term debt                1,072    1,162    (1,037) a(iii )     1,197
     Other liabilities               767        -         -                767
                                 -------  -------    --------          -------
         Total liabilities
                                  16,542   14,889     (1,405)           30,026
                                 -------  -------    --------         --------
Stockholders' equity:                     
     Common stock                     75      199       (199)  a(i)         88
                                                          13   a(iii)       
     Preferred Stock                   -     4,264    (4,264)  a(i)         -
     Additional paid-in capital  200,367        -     11,273   a(iii)  211,640
     Note receivable from              
      stockholders                     -      (56)        56   a(i)         -
     Cumulative translation          (82)     (19)        19   a(i)       (82)
      adjustment
     Accumulated deficit        (185,722) (10,506)    10,506   a(i)   (185,722)
                                ---------  --------   -------        ---------
    Total stockholders'equity     14,638   (6,118)    17,404            25,924
                                ---------  --------   -------        ---------
     Total liabilities and
      stockholders' equity       $ 31,180    8,771     15,999           55,950 
                                 ========  ========   ========         ========
</TABLE>
                                      
     See accompanying notes to Pro Forma Combined Financial Statements.

                                       1
<PAGE>

<TABLE>
<CAPTION>


                             MAI Systems Corporation
                   Pro Forma Combined Statement of Operations
                                   (Unaudited)

                     For the six months ended June 30, 1996
                    (dollars in thousands, except share data)


                                                             Pro Forma
                                      Historical
                                     ============      =========================
                                                                Adjustments
                                                       Increase  Adjust.Combined
                                     MAI         HIS   (Decrease) Refer.   Total
 <S>                                 <C>         <C>    <C>       <C>    <C>   
Revenue:
Software, networks and
professional services:
     Software Sales     5           $2,155     $1,955   $(1,355)  b(vii)  $2,755
     Network and computer            
      equipment                      6,467      1,189        -             7,656
     Professional services           4,952      5,436        -            10,388
                                   ---------------------------------   ---------
     Total                          13,574      8,580       (1,355)       20,799


Legacy revenue                       16,191       -           -           16,191
                                    -------    -------      -------      -------
      Total revenue                  29,765      8,580      (1,355)       36,990

Direct costs                         18,390      4,195        (518) b(iv) 22,067
                                    -------    -------      -------      -------

      Gross profit                   11,375      4,385        (837)       14,923

Selling, general and                  6,478      2,813      (1,320) b(iv)  7,971
administrative expenses
Research and development costs          989      1,110        (171) b(iv)  1,928
Other operating (income) expense     (7,294)        96           -       (7,198)
Goodwill amortization                    -          -         1,474 b(v)   1,474
                                     -------      -------     -------    -------

      Operating Income               11,202         366        (820)      10,748

Interest expense-net                    (95)       (198)         85 b(vi)  (208)
Minority interest in consolidated                                          
subsidiary                               165         -         -             165
                                     -------      -------    ------      -------
      Income before income taxes      11,272        168       (735)       10,705

Provision (benefit) for income taxes     -          -           -            -
                                    --------      --------   --------  ---------

      Net Income                    $11,272         $168      $(735)     $10,705
                                    ========      ========   ========   ========

Pro forma primary income per share
                                     1.34                                  1.10 
                                    -----                                 -----

Pro forma fully diluted income
per share                            1.33                                  1.10
                                    -----                                 -----

</TABLE>




     See accompanying notes to Pro Forma Combined Financial Statements.

                                       2
<PAGE>
<TABLE>

<CAPTION>


                             MAI Systems Corporation
             Pro Forma Combined Consolidated Statement of Operations
                                   (Unaudited)

                      For the year ended December 31, 1995
                    (dollars in thousands, except share data)

                             HISTORICAL                PRO FORMA
                             ============ ======================================
                             MAI      HIS Disposed       Adjustment  
                                          Operations     Increase/Adj.  Combined
                                          Adj. Ref.b(i)  (Decrease)   Ref. Total
                             

                                        
<S>                            <C>      <C>       <C>      <C>          <C>
Revenue:
 Software, networks and     
professional services:
      Software Sales ....... 4,250     5,591      (544)       -            9,297
                                                                         
      Network and computer  
       equipment            16,602     7,734      (146)       -           24,190
      Professional services  9,528     12,529    (2,147)      -           19,910
                          --------    --------    -------                -------
      Total ................30,380     25,854     (2,837)     -           53,397
      Legacy revenue .......35,914       -           -        -           35,914 
                           -------    -------     -------  -------       -------
      Total revenue ........66,294     25,854     (2,837)     -           89,311

 Direct costs ..............41,249     15,145     (1,962) (1,035)b(iv)    53,397
                           -------    -------     ------- --------       -------
      Gross profit ........ 25,045     10,709      (875)    1,035         35,914


 Selling, general and       
 administrative expenses ...12,979      9,716      (912)    (2,639) b(iv) 19,144
 Research and development....2,667      2,465        -      (1,161) b(iii) 3,628
                                                              (343) b(iv)    -
 Goodwill amortization .....   -          -          -        2,948 b(v)  2,948
                            -------    -------    -------    -------     -------
    Operating Income (loss)  9,399     (1,472)      37       2,230        10,194

 Loss on investments,
   principally unconsolidated  
   subsidiaries and disposal of 
   subsidiary                    -     (1,435)      -         1,435  b(ii)   -  
 Interest expense-net ......   (228)      (68)      11         170         (115)
 Minority interest in 
 consolidated subsidiary ...   (165)      -         -           -          (165)
                             -------    ------   -------     -------     -------
 Income before income taxes   9,006    (2,975)      48        3,835        9,914

 Provision for income taxes     383       301       -           -            684
                              ------   -------   -------     -------    --------
 Income before extraordinary  8,623    (3,276)      48        3,835        9,230
 item

 Extraordinary item ........   1,566        -       -           -          1,566
                              -------   -------  -------     -------     -------

      Net Income ........... $10,189    $(3,276)    $48       $3,835     $10,796
                             =======    ========  ========   =======   =========
</TABLE>
                                                                  
Pro forma primary and fully
diluted income per share:
      
Income before
Extraordinary item              1.04                                       0.96
                                
Extraordinary item
                                0.19                                       0.16
                                
      Net Income                ----                                       -----
                                1.23                                       1.12
                                ====                                       =====

                                    




                                      3
<PAGE>



                             MAI SYSTEMS CORPORATION

              Notes to Unaudited Pro Forma Combined Financial Data
                                   (Unaudited)
                             


(a)   The pro forma  combined  balance  sheet has been  prepared  to reflect the
      acquisition by the Company of HIS. The  acquisition is reflected under the
      purchase method of accounting.  As  consideration  for the assets acquired
      from  HIS,  MAI  issued   1,307,305   shares  of  common  stock  and  paid
      approximately $1,750,000 in cash.

      The pro forma  combined  balance  sheet has been  adjusted  to reflect the
      above acquisition transactions as follows:

       (i)  To adjust the pro forma  combined  balance  sheet to  eliminate  
            the assets and  liabilities  of HIS not  acquired  by the Company 
            and to eliminate the equity of HIS.

      (ii)  To record the  payment of  estimated  costs and  liabilities  
            assumed related to the acquisition of HIS.

      (iii) To record the issuance of common stock related to the acquisition.

      (iv)  To record goodwill generated from the acquisition of HIS.

      (v)   To  adjust  acquired  assets  of  HIS  to  fair  market  value  at 
            the acquisition  date,  including  certain  proposed  purchase price
            adjustments of approximately $2.6 million.

     (b)    The pro forma  combined  statement  of  operations  give  effect 
            to the following pro forma adjustments to reflect:

      (i)   On  December  29,  1995,  HIS  disposed of Hotel  Information  
            Systems Limited, a UK subsidiary of the Company.

      (ii)  In  1995,  HIS  incurred   non-recurring  losses  of  $1,435,200  in
            connection with  investments in Hogadata Gmbh and related  entities,
            Hogadata Benelux N.V., and the disposal of Hotel Information Systems
            Limited.

      (iii) In 1995, HIS recorded  amortization expense for software development
            costs  of  $1,160,800.   Amortization   expense  subsequent  to  the
            acquisition  of HIS will be nil as the software was fully  amortized
            by August 9, 1996.

     (iv)   Estimated  costs savings that will arise from the  integration of 
            the respective businesses.

      (v)   The amortization of goodwill for the six months ended June 1996, and
            the  twelve  months  ended  December  31,  1995  of  $1,474,000  and
            $2,948,000, respectively. The amortization period is seven years.

      (vi)  The reduction of interest expense reflects the repayment of notes 
            payable and the issuance of MAI Systems Corporation Common Stock in
            satisfaction of the outstanding debenture on August 9, 1996.

      (vii) To adjust for the difference in revenue recognition  policy between
            MAI and HIS.

      
(c)   The pro forma  combined  financial data may not include all potential fair
      value  adjustments  and  opening  balance  sheet  accruals  which  will be
      identified within the twelve months succeeding the acquisitions.



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