<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                    FORM 10-Q

       QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998


                           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)


                               9601 Jeronimo Road
                            Irvine, California 92618
                     (Address of Principal Executive Office)


       Registrant's telephone number, including area code: (949) 598-6000

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

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  X    No
    ---      ---

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
    ---      ---

As of November 10, 1998 , 10,629,052 shares of the registrant's Common Stock,
$0.01 par value, were outstanding.

<PAGE>   2

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                           MAI Systems Corporation

                    Condensed Consolidated Balance Sheets
                                 (Unaudited)

<TABLE>
<CAPTION>
                                                                        December 31,    September 30,
                                                                            1997            1998
                                                                        -----------     ------------
                                                                           (dollars in thousands)
<S>                                                                      <C>             <C>      
ASSETS
Current assets:
     Cash and cash equivalents                                           $   2,051       $   2,027
     Receivables, less allowance for doubtful accounts of
       $1,983 in 1997 and $2,063 in 1998                                    12,268          11,329
     Inventories                                                             1,838           1,360
     Prepaids and other assets                                               1,935           2,771
                                                                         ---------       ---------
              Total current assets                                          18,092          17,487

Furniture, fixtures and equipment, net                                       4,355           3,834
Intangibles, net                                                            10,723          10,155
Other assets                                                                 1,443           1,110
                                                                         ---------       ---------
              Total assets                                               $  34,613       $  32,586
                                                                         =========       =========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY

Current liabilities:
     Line of credit                                                      $   1,452       $   2,879
     Current portion of long-term debt                                         682             910
     Accounts payable                                                        6,863           5,706
     Customer deposits                                                       1,776           2,393
     Accrued liabilities                                                     6,477           7,264
     Income taxes payable                                                      571             355
     Unearned revenue                                                       11,967          11,432
                                                                         ---------       ---------
              Total current liabilities                                     29,788          30,939

Long-term debt                                                               5,230           5,103
Other liabilities                                                              261             261
                                                                         ---------       ---------

              Total liabilities                                             35,279          36,303

Stockholders' deficiency:
     Preferred Stock, par value $0.01 per share;
       1,000,000 shares authorized, none issued and outstanding                 --              --
     Common Stock, par value $0.01 per share; authorized 25,000,000
       shares; 10,298,539 and 10,731,470 shares issued and issuable
       at December 31, 1997 and September 30, 1998, respectively               105             110
     Additional paid-in capital                                            219,379         219,766
     Accumulated other comprehensive income                                    503             585
     Accumulated deficit                                                  (220,653)       (224,178)
                                                                         ---------       ---------
              Total stockholders' deficiency                                  (666)         (3,717)
                                                                         ---------       ---------
     Commitments and contingencies

              Total liabilities and stockholders' deficiency             $  34,613       $  32,586
                                                                         =========       =========
</TABLE>


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


                                      -2-
<PAGE>   3

                             MAI Systems Corporation

                 Condensed Consolidated Statements of Operations
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                   For the Three Months Ended     For the Nine Months Ended
                                                          September 30,                 September 30,
                                                   --------------------------     -------------------------
                                                      1997            1998          1997            1998
                                                   ----------      ----------     ---------       ---------
                                                     (dollars in thousands,        (dollars in thousands,
                                                     except per share data)         except per share data)
<S>                                                  <C>            <C>            <C>            <C>
Revenue
  Software, networks and professional services:
           Software sales                            $  1,735       $  2,708       $  5,804       $  6,150
           Network and computer equipment               4,158          1,850         10,615          4,841
           Professional  services                       6,997          6,221         20,932         19,714
                                                     --------       --------       --------       --------
                                                       12,890         10,779         37,351         30,705

     Legacy revenue                                     4,769          3,954         15,545         13,345
                                                     --------       --------       --------       --------
                    Total revenue                      17,659         14,733         52,896         44,050

Direct costs                                            9,462          7,779         31,356         24,662
                                                     --------       --------       --------       --------
                    Gross profit                        8,197          6,954         21,540         19,388

Selling, general and administrative expenses            6,907          4,774         19,661         16,996
Research and development costs                          1,464          1,245          4,118          3,228
Amortization of intangibles                               687            610          1,602          1,925
Restructuring costs                                       900             --            900             --
Other operating (income) expense                          284              9            160            125
                                                     --------       --------       --------       --------
                    Operating income (loss)            (2,045)           316         (4,901)        (2,886)

Equity in net (loss) of
unconsolidated subsidiaries                                --            (32)            --            (18)
Interest income                                            39             43             94            146
Interest (expense)                                       (290)          (274)          (825)          (767)
                                                     --------       --------       --------       --------
            Income (loss) before income taxes          (2,296)            53         (5,632)        (3,525)
                                                     --------       --------       --------       --------
Provision for income taxes                                 --             --             --             --
                                                     --------       --------       --------       --------
Net income (loss)                                    $ (2,296)      $     53       $ (5,632)      $ (3,525)
                                                     ========       ========       ========       ========
Income (loss) per share:

     Basic income (loss) per share                   $  (0.24)      $   0.01       $  (0.61)      $  (0.34)
                                                     ========       ========       ========       ========
     Diluted income (loss) per share                 $  (0.24)      $     --       $  (0.61)      $  (0.34)
                                                     ========       ========       ========       ========
Weighted average common shares used in
  determining income (loss) per share:

     Basic                                              9,559         10,731          9,114         10,541
                                                     ========       ========       ========       ========
     Diluted                                            9,559         10,852          9,114         10,541
                                                     ========       ========       ========       ========
</TABLE>

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


                                      -3-
<PAGE>   4

                             MAI Systems Corporation

                Condensed Consolidated Statements of Cash Flows
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                               For the Nine Months Ended 
                                                                     September 30,       
                                                               ------------------------- 
                                                                  1997           1998    
                                                               ---------       --------- 
                                                                 (dollars in thousands)  
<S>                                                             <C>            <C>       
Net cash used in operating activities                           $ (4,071)      $   (197) 
                                                                --------       --------  
Cash flows from investing activities:

       Capital expenditures                                         (704)          (500) 
       Purchase of businesses                                     (6,228)            --  
       Capitalized software costs                                     --           (885) 
                                                                --------       --------  
Net cash used in investing activities                             (6,932)        (1,385) 
                                                                --------       --------  
Cash flows from financing activities:                                                    
       Short-term borrowings, net                                  1,183          1,617  
       Payments received on notes receivable                         234             --  
       Proceeds from issuance of common stock, net                 2,300             --  
       Proceeds from issuance of subordinated notes payable        6,000             --  
       Increase in note receivables                                  (25)            --  
       Repayments of term and other long-term debt                  (134)           (89) 
       Proceeds from the exercise of stock options                                       
         and warrants                                              2,207             54  
                                                                --------       --------  
Net cash provided by financing activities                         11,765          1,582  
                                                                --------       --------  
Effect of exchange rate changes on cash and cash equivalents         (49)           (24) 
                                                                --------       --------  
Net change in cash and cash equivalents                              713            (24) 
                                                                --------       --------  
Cash and cash equivalents at beginning of period                   3,857          2,051  
                                                                --------       --------  
Cash and cash equivalents at end of period                      $  4,570       $  2,027  
                                                                ========       ========  
</TABLE>

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


                                      -4-
<PAGE>   5

                             MAI Systems Corporation

              Notes to Condensed Consolidated Financial Statements
                      Nine months ended September 30, 1998
                                  (Unaudited)

1.      BASIS OF PRESENTATION

        Companies for which this report is filed are MAI Systems Corporation 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, in the opinion of Company
        management, to present fairly the condensed consolidated financial
        statements for the interim period. All significant intercompany
        transactions and accounts have been eliminated in consolidation.

        Although the Company believes that the disclosures in these financial
        statements are adequate to make the information presented not
        misleading, certain information and footnote disclosures normally
        included in financial statements prepared in accordance with generally
        accepted accounting principles have been condensed or omitted pursuant
        to the rules and regulations of the Securities and Exchange Commission
        (the "SEC"), and these financial statements should be read in
        conjunction with the financial statements included in the Company's
        Annual Report on Form 10-K for the year ended December 31, 1997, which
        is on file with the SEC.

2.      INVENTORIES

        Inventories are summarized as follows:

<TABLE>
<CAPTION>
                                                 December 31,       September 30,
                                                    1997                1998
                                                 ------------       ------------
                                                     (dollars in thousands)
<S>                                                <C>                 <C>   
               Finished goods                      $1,068              $  748
               Replacement parts                      770                 612
                                                   ------              ------
                                                   $1,838              $1,360
                                                   ======              ======
</TABLE>

3.      PLAN OF REORGANIZATION

        In 1993, the Company emerged from a voluntary proceeding under the
        bankruptcy protection laws. Notwithstanding the confirmation and
        effectiveness of its Plan of Reorganization (the "Plan"), the Bankruptcy
        Court continues to have jurisdiction to resolve disputed pre-petition
        claims against the Company to resolve matters related to the
        assumptions, assignment or rejection of executory contracts pursuant to
        the Plan and to resolve other matters that may arise in connection with
        the implementation of the Plan.Shares of common stock may be distributed
        by the Company to its former creditors. As of November 12, 1998,
        6,755,751 shares of Common Stock had been issued pursuant to the Plan
        and were outstanding. The Company estimates that approximately 6,820,338
        shares will have been issued to creditors at completion of the Plan.

4.      BUSINESS ACQUISITIONS

        GAMING SYSTEMS INTERNATIONAL ("GSI"):

        In March 1997, the Company acquired options to purchase 3.5% of Gaming
        Systems International ("GSI") Common Stock from two individuals in
        exchange for 14,930 shares of the Company's Common Stock valued at
        $104,500 and notes payable of $104,500. The transaction resulted in an
        increase in goodwill of $209,000.

        In May 1998, in accordance with the stock purchase agreement and option
        cancellation agreements pursuant to which the Company acquired the
        remaining 30% minority interest and remaining options in GSI in May 1996
        and March 1997, respectively, the Company issued 45,424 additional
        shares of Common Stock valued at par.

                                      -5-

<PAGE>   6

        HOTEL INFORMATION SYSTEMS, INC. ("HIS"):

        During 1996, the Company entered into arbitration proceedings regarding
        the purchase price of HIS. The Company placed approximately 1,100,000
        shares of Common Stock issued in connection with the acquisition of HIS
        in an escrow account to be released in whole, or in part, upon final
        resolution of post closing adjustments.

        In November 1997, the purchase price for the acquisition of HIS was
        reduced by $931,000 pursuant to arbitration proceedings. As a result,
        goodwill was reduced $931,000 and approximately 100,650 price protected
        shares will be released from the escrow account and returned to the
        Company. In addition, further claims relating to legal costs and certain
        disbursements currently estimated at approximately $650,000 are
        presently pending. Resolution of such claims may result in release of
        additional escrow shares to the Company. The amount and number of shares
        will be determined based on the final resolution of such claims.
        Accordingly, as of September 30, 1998, the final purchase price has not
        been determined.

        In April 1998, in accordance with the purchase agreement and related
        documents pursuant to which the Company acquired HIS in August 1996, the
        Company issued 246,453 additional shares of Common Stock valued at par.

        The Company will, as needed, pursuant to the asset purchase agreement
        and related documents, issue additional shares of Common Stock in order
        that the recipients ultimately receive shares worth a fair value of
        $9.25 per share (subject to increase in such amount to approximately
        $10.52 per share). This adjustment applies to a maximum of 590,785
        shares of Common Stock. As of September 30, 1998, the market price of
        the Company's Common Stock was $2.25 per share, which would result in
        approximately 2,171,463 additional shares being issued.

5.      INCOME (LOSS) PER SHARE OF COMMON STOCK

        Effective December 31, 1997, the Company adopted SFAS No. 128, "Earnings
        Per Share". This statement replaces the previously reported primary and
        fully diluted earnings per share with basic and diluted earnings per
        share. Unlike primary earnings per share, basic earnings per share
        excludes any dilutive effects of options. Diluted earnings per share is
        very similar to the previously reported fully diluted earnings per
        share. All loss per share amounts for all periods have been presented
        and restated to conform to the SFAS No. 128 requirements.

        Basic and diluted loss per share is computed using shares of common
        stock issued to date and expected to be issued in accordance with the
        Plan of Reorganization ("Common Stock") as discussed in Note 3, and the
        weighted average shares of Common Stock issued outside the Plan of
        Reorganization. As of September 30, 1998, 6,755,751 shares had been
        issued pursuant to the Plan of Reorganization. All outstanding options
        and warrants have been excluded from diluted loss per share for loss
        periods presented as their effect would be anti-dilutive.

6.      NEW ACCOUNTING PRONOUNCEMENTS

        In June 1997, the Financial Accounting Standards Board ("FASB") issued
        Statements of Financial Accounting Standards No. 130 ("SFAS No. 130")
        "Reporting Comprehensive Income," which establishes standards for
        reporting and disclosures of comprehensive income and its components
        (revenues, expenses, gains and losses) in a full set of general purpose
        financial statements. SFAS No. 130 is effective for fiscal years
        beginning after December 15, 1997 and requires reclassification of
        financial statements for earlier periods to be provided for comparative
        purposes. The Company has not determined the manner in which it will
        present the information required by SFAS No. 130 in its annual
        consolidated financial statements for the year ending December 31, 1998.
        The Company's total comprehensive income (loss) for all periods
        presented herein would not have differed materially from those amounts
        reported as net income (loss) in the consolidated statements of
        operations.

        Also, in June 1997, the FASB issued SFAS No. 131, "Disclosure About
        Segments of an Enterprise and Related Information." The Statement
        establishes standards for the manner in which public business
        enterprises report information about operating segments in annual
        financial statements and requires those enterprises to report selected
        information about operating segments in interim financial reports issued
        to shareholders. This Statement is effective for annual financial
        statements for periods beginning after December 15, 1997, and for
        interim periods after the first year of adoption.


                                      -6-

<PAGE>   7

        In October 1997, the American Institute of Certified Public Accountants
        ("AICPA") released Statement of Position 97-2, "Software Revenue
        Recognition" ("SOP 97-2"). Among other things, SOP 97-2 eliminates the
        distinction between significant and insignificant vendor obligations
        promulgated by SOP 91-1 and requires each element of a software
        arrangement to meet certain criteria in order to recognize revenue
        allocated to that element. Additionally, SOP 97-2 requires that total
        fees under an arrangement be allocated to each element in the
        arrangement based upon vendor specific objective evidence, as defined.
        SOP 97-2 is effective for software transactions entered into by the
        Company in fiscal 1998 and subsequent periods.

        In June 1998, the Financial Accounting Standards Board issued Statement
        of Financial Accounting Standards No. 133, "Accounting for Derivative
        Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 is effective
        for all fiscal quarters or fiscal years beginning after June 15, 1999.
        SFAS 133 establishes accounting and reporting standards for derivative
        instruments embedded in other contracts and for hedging activities.
        Application of SFAS 133 is not expected to have a material impact on the
        Company's consolidated financial position, results of operations or
        liquidity.

7.      RECLASSIFICATIONS

        Certain reclassifications have been made to the 1997 condensed
        consolidated financial statements to conform to the 1998 presentation.


                                      -7-

<PAGE>   8

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS

LIQUIDITY AND CAPITAL RESOURCES

At September 30, 1998, the Company's working capital deficit increased from
$11,696,000 at December 31, 1997 to $13,452,000. Excluding unearned revenue of
$11,432,000, the Company's working capital deficit at September 30, 1998 would
be $2,020,000 or a ratio of current assets to current liabilities of .896 to
1.0. The comparable ratio at December 31, 1997 was 1.02 to 1.0. The decline in
the Company's working capital position, excluding unearned revenue, is primarily
due to operating losses.

Cash and cash equivalents were $2,027,000 at September 30, 1998, as compared to
$2,051,000 as of December 31, 1997. The Company continues to have a $5,000,000
secured revolving credit facility. The computation of the availability of this
line of credit is based on a calculation using a rolling average of certain cash
collections. At September 30, 1998, approximately $2,879,000 was available and
drawn down under this facility.

Net cash used for investing activities in the nine months ended September 30,
1998, totaled $1,385,000. Capitalized software costs comprised $885,000. No
costs were capitalized during the comparable period ended September 30, 1997.

Stockholders' deficiency increased $3,051,000 at September 30, 1998, as compared
to December 31, 1997, due principally to the net loss of $3,525,000 for the
period. At September 30, 1998, there was a stockholders' deficit of $3,717,000.

The Company believes it will continue to have sufficient cash available to fund
its operating and capital requirements for the next twelve months.

RESULTS OF OPERATIONS

Three Months Ended September 30, 1997 Compared to Three Months Ended
September 30, 1998

<TABLE>
<CAPTION>
                                      Three months ended   Percentage    Three months ended    Percentage
                                      September 30, 1997   of Revenues   September 30, 1998    of Revenue
                                      ------------------   -----------   ------------------    ----------
<S>                                       <C>                  <C>            <C>                 <C>  
Revenues:
    Hospitality                           $ 8,661              49.1%          $ 7,750             52.6%
    Process Manufacturing                   2,356              13.3%            2,530             17.2%
    Gaming                                  1,533               8.7%              499              3.4%
    Legacy                                  4,769              27.0%            3,954             26.8%
    Other                                     340               1.9%               --              --
Total revenue                              17,659             100.0%           14,733            100.0%
Gross profit                                8,197              46.4%            6,954             47.2%
Selling, general and
   administrative expenses                  6,907              39.1%            4,774             32.4%
Research and development costs              1,464               8.3%            1,245              8.5%
Amortization of intangibles                   687               3.9%              610              4.1%
Restructuring costs                           900               5.1%               --               --
Other operating expense                       284               1.6%                9              0.1%
</TABLE>

The quarter-to-quarter decrease in revenue of 16.6% was due primarily to a
decrease in hardware sales, consistent with the Company's strategy to focus on
providing software and services to its vertical markets, as well as a 17.1%
decline in the Company's Legacy revenue.

Gross profit increased to 47.2% from 46.4% due to higher gross margins from an
increase in software sales. Revenue on lower margin functions such as hardware
and legacy declined.

Selling, general and administrative expenses ("SG&A") decreased 30.9% to
$4,774,000. The decrease is related to the implementation of several cost
reduction measures.


                                      -8-


<PAGE>   9

Research and development costs decreased 15.0% over the comparable period in
1997. There was an increase in costs capitalized for the quarter ended September
30, 1998, as there were certain of the Company's products which had reached
technological feasibility.

The 11.2% decrease in amortization of intangibles versus the comparable period
of 1997 is related to a write down of intangibles which occurred in the fourth
quarter of 1997.

The Company incurred restructuring costs of $900,000 for the three months ended
September 30, 1997 in connection with a restructuring plan to eliminate
operations and related expenses which were not required to support the Company's
operations of software sales and professional services. The costs were recorded
to recognize severance, benefits and other related costs for employees to be
terminated. There were no comparable costs for the three months ended September
30, 1998.

Other operating expense for the three months ended September 30, 1998 was
principally from foreign exchange losses.

<TABLE>
<CAPTION>
                                      Nine months ended    Percentage    Nine months ended     Percentage
                                      September 30, 1997   of Revenues   September 30, 1998    of Revenue
                                      ------------------   -----------   ------------------    ----------
<S>                                       <C>                  <C>            <C>                 <C>  
Revenues:
    Hospitality                           $23,644             44.7%          $22,688             51.5%
    Process Manufacturing                   9,496             18.0%            6,353             14.4%
    Gaming                                  3,378              6.4%            1,350              3.1%
    Legacy                                 15,545             29.4%           13,345             30.3%
    Other                                     833              1.5%              314              0.7%
Total revenue                              52,896            100.0%           44,050            100.0%
Gross profit                               21,540             40.7%           19,388             44.0%
Selling, general &
   administrative expenses                 19,661             37.2%           16,996             38.6%
Research and development costs              4,118              7.8%            3,228              7.3%
Amortization of intangibles                 1,602              3.0%            1,925              4.4%
Restructuring costs                           900              1.7%               --               --
Other operating expense                       160              0.3%              125              0.3%
</TABLE>

The year-to-year decrease in revenue of 16.7% for the nine months ended
September 30, 1998 over the comparable period was due primarily to the Company
continuing to transition from its Legacy business to the sale of software and
related professional services, and a corresponding decrease in hardware sales.
This is evidenced by a 14.2% decline in the Company's Legacy revenue. This is
consistent with the Company's strategy to focus on its core business of
providing software and services to its vertical markets.

Gross profit increased to 44.0% from 40.7% due to higher gross margins achieved
in the Company's core business of Hospitality sales of software and professional
services.

Selling, general and administrative expenses ("SG&A") decreased 13.6% to
$16,996,000. The decrease is principally attributable to the implementation of
several cost reduction measures.

Research and development costs decreased 21.6% over the comparable period in
1997 as there was less work required on the Lodging Touch product line and less
activity relating to the Company's Legacy customers.

The 20.2% increase in amortization of intangibles is primarily related to the
expensing of a full period of goodwill and other intangibles in 1998 relating to
the acquisition of CIMPRO in March 1997.

                                      -9-

<PAGE>   10

The Company incurred restructuring costs of $900,000 for the nine months ended
September 30, 1997 in connection with restructuring plan to eliminate operations
and related expenses which were not required to support the Company's operations
of software sales and professional services. The costs were recorded to
recognize severance, benefits and other related costs for employees to be
terminated. There were no comparable costs for the nine months ended September
30, 1998.

Other operating expense for the nine months ended September 30, 1998 and 1997
was principally from foreign exchange losses.


NEW ACCOUNTING STANDARDS

In June 1997, the Financial Accounting Standards Board issued SFAS Nos. 130 and
131, "Reporting Comprehensive Income" ("SFAS 130") and "Disclosures about
Segments of an Enterprise and Related Information" ("SFAS 131"), respectively
(collectively, the "Statements"). The Statements are effective for fiscal years
beginning after December 15, 1997. SFAS 130 establishes standards for reporting
of comprehensive income and its components in annual financial statements. SFAS
131 establishes standards for reporting financial and descriptive information
about an enterprise's operating segments in its annual financial statements and
selected segment information in interim financial reports. Reclassification or
restatement of comparative financial statements or financial information for
earlier periods is required upon adoption of SFAS 130 and SFAS 131,
respectively. Application of the Statements' requirements is not expected to
have a material impact on the Company's consolidated financial position, results
of operations or income (loss) per share data as currently reported. Effective
January 1, 1998, the Company adopted SFAS 130 and SFAS 131.

In October 1997, the American Institute of Certified Public Accountants
("AICPA") released Statement of Position 97-2, "Software Revenue Recognition"
("SOP 97-2"). Among other things, SOP 97-2 eliminates the distinction between
significant and insignificant vendor obligations promulgated by SOP 91-1 and
requires each element of a software arrangement to meet certain criteria in
order to recognize revenue allocated to that element. Additionally, SOP 97-2
requires that total fees under an arrangement be allocated to each element in
the arrangement based upon vendor specific objective evidence, as defined. SOP
97-2 is effective for software transactions entered into by the Company in
fiscal 1998 and subsequent periods.

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"). SFAS 133 is effective for all fiscal
quarters or fiscal years beginning after June 15, 1999. SFAS 133 establishes
accounting and reporting standards for derivative instruments embedded in other
contracts and for hedging activities. Application of SFAS 133 is not expected to
have a material impact on the Company's consolidated financial position, results
of operations or liquidity.


                                      -10-

<PAGE>   11

YEAR 2000 COMPLIANCE RISKS

The Year 2000 compliance issue arises from the fact that a significant
percentage of the software utilized by United States businesses relies on
two-digit date codes to perform computations and decision-making functions.
Commencing on January 1, 2000, these computer programs may fail from an
inability to interpret date codes properly, misinterpreting "00" as the year
1900 rather than 2000. The Company has completed an evaluation of both its
information technology systems and its non-technology systems, such as equipment
containing microprocessors. The Company believes that all information technology
and non-technology systems in its corporate home office in Irvine, California
and in its branch or subsidiary offices in the United States and internationally
have been, or by March 31, 1999 will have been, modified to address Year 2000
issues. The Company does not believe that the costs associated with implementing
its Year 2000 compliance plan for its corporate offices are material to the
Company's financial condition or operations.

The Company has designed and tested the most current versions of its products to
be Year 2000 compliant. The Company has established a Year 2000 "task force"
which prepared and released its Year 2000 products readiness report on the
Company's "Web Page" (www.maisystems.com) and plans to make a mailing of this
report to its customer base before the end of the calendar year. The report
breaks down the Company's products into four categories: "product is ready,"
"product is scheduled to be tested," "product is not ready (but has some Year
2000 functionality)," and "product will not be tested (and is not ready)." At
the present time, of the eighty-nine products listed in the Company's Year 2000
readiness report, twenty-four remain to be tested, and thirty-six fall in the
final category of products that will not be tested or ready. Of those products
in the latter category, many of these are older products that have been replaced
by newer versions of software. The Company has announced that it will complete
the entire Year 2000 readiness process by December 31, 1998 at which time all
products scheduled for testing will have been tested and all products which the
Company intends to be Year 2000 "ready" will have been brought into compliance.
Although the Company has been encouraging its customers to upgrade to current
product versions, no assurance can be given that all of them will do so in a
timely manner, if at all.

The costs incurred by the Company to date to implement its Year 2000 readiness
plan for its products have not been material to the Company's financial
condition or operations.

The Company also relies on certain software that it licenses from third parties,
including software that is integrated with internally developed software and is
used in the Company's products to perform key functions. The Company has
undertaken joint compliance review of such software in certain cases where the
product is believed to be material to the Company's financial performance, such
as its "LodgingTouch" product that is licensed from Enterprise Hospitality
Solutions. The Company believes that in such selective cases the licensed
software and any related integrated software product is Year 2000 compliant.
There can be no assurance, however, that all third party software presently
utilized by the Company will be free of errors and defects or be Year 2000
compliant.

The Company's present "reasonably likely worst case scenario" for Year 2000
problems involves potential product liability claims by substantial customers
involving collateral (business interruption) damages. Although the Company has
not experienced any product liability claims to date regarding Year 2000
compliance, there can be no assurance that errors or defects, whether associated
with Year 2000 functions or otherwise, will not result in product liability
claims against the Company in the future. The Company's license agreements with
customers typically contain provisions designed to limit the Company's exposure
to potential product liability claims; however, it is possible that such
limitation of liability provisions may not be effective under the laws of
certain jurisdictions. Defective products or releases could result in loss of
revenues, increased service and warranty costs and product liability claims, and
could adversely affect the Company's market penetration and reputation, any of
which could have a material adverse effect on the Company's business, financial
condition and results of operations.

The Company presently does not have a written Year 2000 contingency plan to
handle the worst case Year 2000 scenario. The Company intends to implement a
written contingency plan by December 31, 1998.

The Company is in the process of compiling information concerning the Year 2000
compliance of its key suppliers through the process of issuing questionnaires
and monitoring responses. In the event that any of the Company's key suppliers
do not successfully and timely achieve Year 2000 compliance, the Company's
business or operations could be adversely affected. The Company's Year 2000
compliance plan includes encouraging and/or requiring Year 2000 compliance by
all key suppliers.

                                      -11-

<PAGE>   12

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        Not applicable.




                                      -12-


<PAGE>   13

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

        As a consequence of the commencement of the Company's bankruptcy
        proceedings, the Company has filed objections to a large number of
        proofs of claim. Sums determined to be due to claimants, as a result of
        settlement or judicial determinations, will be treated under the Plan of
        Reorganization as claims and claimants will receive either cash or
        shares of common stock in exchange for their claims. The Company does
        not believe the outcome of these objections to be material.

        Further, the Company instituted several adversary proceedings prior to
        the effective date of the Plan of Reorganization. None of those
        proceedings involve allegations of material claims against the Company.
        
        On October 5, 1998, CSA Private Limited ("CSA") filed a lawsuit against
        the Company in the U.S. District Court for the Central District of
        California. CSA is a shareholder of the Company. At the time of the
        Company's purchase of assets of Hotel Information Systems, Inc. ("HIS")
        in 1996, CSA was a shareholder of HIS and, in connection with the
        purchase, the Company issued and agreed to issue to CSA shares of the
        Company's common stock worth approximately $4,800,000 (plus accrued
        interest until such time as the shares are registered and sold), and
        also granted CSA certain demand registration rights with respect to such
        stock. CSA subsequently requested registration of its shares and, in
        October, 1996, the Company filed an S-3 registration statement with the
        Securities and Exchange Commission ("SEC") for the purpose of
        registering these shares. The SEC, however, required an auditor's
        consent to the use of the HIS financial statements in the S-3, which
        consent HIS's auditors were unwilling to provide. When this impediment
        to registration was removed in April, 1998, CSA again demanded
        registration of its shares. The Company has delayed registration based
        upon a provision in its agreements with CSA allowing the Company to
        defer such registration under certain circumstances provided that,
        during the period of such delay, an increased interest rate is applied
        in calculating the dollar value of shares of the Company's common stock
        to which CSA is ultimately entitled. In its lawsuit, CSA alleges that
        the Company's failure to register its shares has deprived it of its
        ability to realize approximately $5,000,000 from sale of the shares to
        which it is entitled and requests (a) money damages in an amount not
        less than $5,000,000, (b) injunctive relief directing the Company to
        register CSA's shares, and (c) specific performance of the registration
        rights agreement.

        The initial delay in registration of CSA's shares was the result of the
        refusal on the part of HIS's auditors to consent to the inclusion of
        HIS's financial statements in the S-3, a factor for which the Company
        was not responsible, and the subsequent delay, has been the result of
        the Company's good-faith exercise of its rights under its agreements
        with CSA to defer registration. Accordingly, the Company believes that
        it is in full compliance with all of its obligations under its
        agreements with CSA.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

        (a) None.

        (b) None.

        (c) On or about July 30, 1998, the Company issued 110,638 shares of
            the Company's Common Stock to Christian Rivadalla d/b/a
            Enterprise Hospitality Solutions ("EHS") in satisfaction of the
            Company's obligations to EHS pursuant to the License Agreement,
            dated as of October 1, 1996 (the "License Agreement"), between
            the Company and EHS. The issuance was made to EHS in lieu of a
            payment in the amount of $325,000 then due to EHS under the
            License Agreement.

            The foregoing issuance was made in a transaction exempt under
            Section 4(2) under the Securities Act of 1933, as a transaction not
            involving any public offering. The shares issued were legended and
            appropriate representations were obtained from the recipients of the
            shares.

        (d) None.

                                      -13-

<PAGE>   14

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

        None.


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

        (a) None.

        (b) None.

        (c) None.

        (d) None.

ITEM 5. OTHER INFORMATION

        None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

        (a) Exhibits.

            27  --  Financial Data Schedule.

        (b) Reports on Form 8-K.

            None.

                                      -14-

<PAGE>   15

                                   SIGNATURES


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

                                           MAI  SYSTEMS CORPORATION
                                           (Registrant)


Date: November 13, 1998                    /s/Lewis H. Stanton
                                           -------------------------------------
                                           Lewis H. Stanton
                                           Executive Vice President and
                                           Chief Operating and Financial Officer
                                           (Chief Accounting Officer)



                                      -15-


<PAGE>   16

                                  EXHIBIT INDEX


EXHIBIT
NUMBER               DESCRIPTION
-------              -----------
  27                 Financial Data Schedule