Page 1

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549




                                    FORM 10-Q

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

                    For the quarterly period ended December 31, 1996

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

                         Commission file number 0-25832


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

                                   MAXIS, INC.
             (Exact name of registrant as specified in its charter)
                  --------------------------------------------


           DELAWARE                                       94-3128369
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)


                     2121 NORTH CALIFORNIA BLVD., SUITE 600
                           WALNUT CREEK, CA 94596-3572
                    (Address of principal executive offices)
                         TELEPHONE NUMBER (510) 933-5630




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 (or for such shorter period that the
registrant was required to file such reports),  and (2) has been subject to
such filing requirements for the past 90 days.

Yes    X       No
     -----         ----- 



As of January 31, 1997 there were 11,256,321 shares of the Registrant's 
Common Stock, $.0001 par value, outstanding.

                                  ------------
                                     Page 1
<PAGE>
<TABLE>
                                   MAXIS, INC.


                                TABLE OF CONTENTS
<CAPTION>


PART I.  Financial Information                                                   Page
<S>                                                                               <C>
         Item 1.  Condensed Consolidated Financial Statements (unaudited)

                  Condensed Consolidated Balance Sheets

                        At December 31, 1996 and March 31, 1996 ...............    3
                  Condensed Consolidated Statements of Operations
                        Three and nine months ended December  31, 1996 and 1995    4
                  Condensed Consolidated Statements of Cash Flows
                        Nine months ended December  31, 1996 and 1995 .........    5
                  Notes to Condensed Consolidated Financial Statements ........    6

         Item 2.  Management's Discussion and Analysis of Financial
                        Condition and Results of Operations ...................    8


PART II.  Other Information

         Item 6.  Exhibits and Reports on Form 8-K ............................   13

         Signature ............................................................   14

</TABLE>


                                     Page 2
<PAGE>

<TABLE>

PART I.   FINANCIAL INFORMATION
ITEM 1.   CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                   MAXIS, INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (In thousands)
                                   (Unaudited)

<CAPTION>

ASSETS                                                            December  31, 1996       March 31, 1996
------                                                            ------------------       --------------
<S>                                                                       <C>                 <C>    
Current assets:

     Cash and cash equivalents                                            $10,241             $20,102
     Marketable securities                                                 19,427              22,788
     Accounts receivable, less allowance for returns and doubtful
         accounts of $7,852 and $5,607                                     14,958               6,991
     Inventories                                                            1,911               1,543
     Income taxes refundable                                                  749                 227
     Deferred income taxes                                                  2,808               2,808
     Other current assets                                                     906                 872
                                                                          -------             -------
Total current                                                              51,000              55,331
Furniture and equipment, net                                                3,986               3,243
Deferred income taxes                                                       2,023               2,023
Long-term marketable securities                                            10,532               6,119
Other assets                                                                  688                 584
                                                                          -------             -------
                                                                          $68,229             $67,300
                                                                          =======             =======

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Accounts payable                                                   $   1,555            $  1,607
     Payable to affiliate partners                                            887                 631
     Royalties payable                                                      1,121               1,373
     Accrued compensation                                                   1,658               1,685
     Accrued advertising                                                    2,110               1,538
     Other accrued liabilities                                              2,830               2,585
     Accrued rent                                                             547                 647
                                                                          -------             -------
Total current liabilities                                                  10,708              10,066
                                                                          -------             -------
Commitments
Stockholders' equity:
     Common stock, $.0001 par value; authorized shares,
          40,000,000;  issued and outstanding, 11,231,686 and
          10,989,906                                                       52,486              50,514
     Notes receivable from stockholders                                     (161)               (269)
     Retained earnings                                                      5,241               7,128
     Deferred compensation                                                   (45)               (139)
                                                                          -------             -------
Total stockholders' equity                                                 57,521              57,234
                                                                          -------             -------
                                                                          $68,229             $67,300
                                                                          =======             =======
<FN>
                             See accompanying notes.
</FN>
</TABLE>
                                     Page 3
<PAGE>
<TABLE>

                                   MAXIS, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                      (In thousands, except per share data)
                                   (Unaudited)

<CAPTION>


                                             Three months ended      Nine months ended
                                                 December 31            December 31
                                             -------------------    -------------------
<S>                                          <C>        <C>        <C>         <C>
                                               1996       1995       1996        1995
                                             --------   --------   --------    --------


Net revenues                                 $ 19,768   $ 20,111   $ 35,880    $ 43,222
     Cost of revenues                           7,126      7,199     13,669      14,032
                                             --------   --------   --------    --------

Gross profit                                   12,642     12,912     22,211      29,190
                                             --------   --------   --------    --------


Operating expenses:
     Research and development                   3,284      2,188      9,160       6,144
     Sales and marketing                        5,070      3,879     12,277       9,649
     General and administrative                 1,430      1,500      5,087       4,108
                                             --------   --------   --------    --------

Total operating expenses                        9,784      7,567     26,524      19,901
                                             --------   --------   --------    --------

Income (loss) from operations                   2,858      5,345     (4,313)      9,289

Interest income                                   435        433      1,243       1,063
                                             --------   --------   --------    --------

Income (loss) from operations before taxes      3,293      5,778     (3,070)     10,352

Provision (benefit) for income taxes            1,268      2,237     (1,183)      3,957
                                             --------   --------   --------    --------

Net income (loss)                            $  2,025   $  3,541   $ (1,887)   $  6,395
                                             ========   ========   ========    ========

Net income (loss) per share                  $    .18   $    .31   $   (.17)   $    .59
                                             ========   ========   ========    ========

Shares used in per share calculations          11,232     11,455     11,162      10,918
                                             ========   ========   ========    ========











<FN>

                             See accompanying notes.
</FN>
</TABLE>
                                     Page 4

<PAGE>
<TABLE>


                                   MAXIS, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                   (Unaudited)
<CAPTION>
                                                                                Nine  months ended
                                                                                    December 31
                                                                              ------------------------

                                                                                 1996             1995
                                                                                 ----             ----
<S>                                                                           <C>             <C>                                 
OPERATING ACTIVITIES
   
Net income (loss)                                                             $(1,887)        $  6,395
Adjustments to reconcile net income to net cash
    (used in) provided by operating activities:
       Provision for returns and doubtful accounts                               2,245           3,333
       Depreciation                                                              1,107             670
       Deferred income taxes                                                        --           (696)
       Amortization of deferred compensation                                        94             295
       Changes in operating assets and liabilities                            (10,598)         (6,372)
                                                                              --------        --------
    Net cash (used in) provided by operating activities                        (9,039)           3,625
INVESTING ACTIVITIES
Purchases of held-to-maturity securities                                      (18,521)        (16,948)
Maturities of held-to-maturity securities                                       17,253           3,821
Sales of available-for-sale  securities                                                          1,943
Additions to fixed assets,                                                     (1,850)         (1,944)
Other                                                                              216             100
                                                                              --------        --------
    Net cash used in investing activities                                      (2.902)        (13,028)
FINANCING ACTIVITIES
Proceeds from exercise of stock options                                            204              64
Proceeds from issuance of ESPP stock                                               341              --
Net proceeds from issuance of common stock                                          --          35,493
Tax benefit from exercise of stock options                                       1,441           1,095
Repayment of notes receivable from stockholders                                    101              74
Repurchase of common stock                                                         (7)             (7)
Other                                                                               --              14
                                                                              --------        --------
    Net cash provided by financing activities                                    2,080          36,733
                                                                              --------        --------
Net (decrease) increase  in cash and cash equivalents                          (9,861)          27,330
Cash and cash equivalents at beginning of period                                20,102           2,610
                                                                              --------        --------
Cash and cash equivalents at end of period                                    $ 10,241        $ 29,940
                                                                              ========        ========
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES:
    Accretion of preferred stock                                              $     --        $     87
                                                                              ========        ========
    Conversion of preferred stock to common stock                             $     --        $ 11,450
                                                                              ========        ========
    Forgiveness of note receivable from stockholder                           $    (8)        $     --
                                                                              ========        ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
    Income tax payments                                                       $    335        $  2,251
                                                                              ========        ========

<FN>

                             See accompanying notes.

</FN>
</TABLE>
                                     Page 5

<PAGE>

                                   MAXIS, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


1.   Basis of Presentation

     The condensed  consolidated  financial  statements for the three months and
     nine months ended  December 31, 1996 and 1995 are unaudited and reflect all
     adjustments, consisting only of normal recurring adjustments, which are, in
     the opinion of management, necessary for a fair presentation of the results
     for the interim periods.  These condensed consolidated financial statements
     should  be read in  conjunction  with the  financial  statements  and notes
     thereto in Maxis'  Annual  Report on Form 10-K for the year ended March 31,
     1996. The results of operations for the three- and nine-month periods ended
     December  31, 1996 are not  necessarily  indicative  of the results for the
     entire year.

     Per Share Data
     Per share data is based on the weighted average number of common shares and
     dilutive common stock equivalents outstanding for the period. Common shares
     outstanding  includes  weighted average common  equivalent shares as if all
     shares  of  preferred  stock  were  converted  into  common  stock on their
     respective   dates  of  issuance.   Pursuant  to  Securities  and  Exchange
     Commission  Staff  Accounting  Bulletin No. 83, options to purchase  common
     stock (using the treasury  stock method)  granted by the Company during the
     12 months immediately  preceding the initial public offering date have been
     included in the  calculation  of weighted  average  number of common shares
     outstanding as if the underlying  shares were  outstanding  for all periods
     presented.

2.   Issuance of Common Stock

     On June 1, 1995,  the Company  consummated  an initial  public  offering of
     3,450,000 shares of common stock which raised  approximately $35.5 million,
     net of expenses. Of the 3,450,000 shares of common stock,  2,450,000 shares
     were  sold by the  Company  and  1,000,000  shares  were  sold  by  selling
     stockholders.  Immediately prior to the offering, all outstanding shares of
     preferred stock were converted into 2,094,000 shares of common stock.

<TABLE>

3.   Marketable Securities

     At December 31, 1996, the Company's held-to-maturity and available-for-sale
     debt securities consist of the following (in thousands):
<CAPTION>
                                                                     Held-to-maturity securities
                                                             ------------------------------------------
                                                                        Gross       Gross      Estimated
                                                                     unrealized   unrealized     fair
                                                               Cost     gains       losses       value
                                                               ----     -----       ------       -----
<S>                                                          <C>        <C>         <C>         <C>    
Municipal bonds . . . . . . . . . . . . . . . . . . .        $26,459    $ 112       $  --       $26,571
Municipal notes . . . . . . . . . . . . . . . . . . .          1,000       14          --         1,014
                                                               -----    -----       -----       -------
                                                             $27,459    $ 126       $  --       $27,585
                                                             =======    =====       =====       =======
</TABLE>
<TABLE>
<CAPTION>
                                                                    Available-for-sale securities
                                                             ------------------------------------------
                                                                        Gross       Gross      Estimated
                                                                     unrealized   unrealized     fair
                                                               Cost     gains       losses       value
                                                               ----     -----       ------       -----
<S>                                                          <C>        <C>         <C>         <C>    
U.S. corporate securities . . . . . . . . . . . . . .        $10,600    $  36       $  --       $10,636
Money market funds  . . . . . . . . . . . . . . . . .            746       --          --           746
                                                             -------    -----       -----       -------
                                                             $11,346    $  36       $  --       $11,382
                                                             =======    =====       =====       =======
Total  . . . . . . . . . . . . . . . . . . . . . . ..        $38,805    $ 162       $  --       $38,967
                                                             =======    =====       =====       =======
</TABLE>
                                     Page 6
<PAGE>


                                   MAXIS, INC.

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                                   (Unaudited)


3.   Marketable Securities - (continued)

     Such  debt  and  equity  securities  have  been  recorded  as cash and cash
     equivalents  ($8,846,000),  short-term marketable securities ($19,427,000),
     and  long-term  marketable   securities   ($10,532,000).   The  contractual
     maturities of held-to-maturity  and  available-for-sale  debt securities at
     December 31, 1996 are all two years or less.  Realized  gains and losses on
     sales of available-for-sale securities have not been material.


4.   Inventories

     Inventories  consist  primarily  of  software  media,  manuals  and related
     packaging materials as follows (in thousands):
                                                    December 31      March 31
                                                        1996            1996

     Raw materials and work in process               $   468          $   356
     Finished goods                                    1,443            1,187
                                                     -------          -------
                                                     $ 1,911          $ 1,543
                                                     =======          =======



                                     Page 7

<PAGE>



                                   MAXIS, INC.

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

     The  following   information   should  be  read  in  conjunction  with  the
     consolidated  financial statements and the notes thereto and in conjunction
     with  Management's  Discussion  and  Analysis of  Financial  Condition  and
     Results of Operations  in the Company's  Annual Report on Form 10-K for the
     fiscal year ended March 31, 1996. The operating results for any quarter are
     not necessarily indicative of results for any future period.


     Overview


     Maxis  was  founded  in  1987  to  develop   software   for  the   consumer
     entertainment market. In North America,  Maxis currently sells its software
     products,   including   affiliate   partner   products,   through  software
     distributors, major computer and software retailing organizations, consumer
     electronics  stores,  discount  warehouse  stores and mail order companies.
     Internationally,  the Company sells its products  through a combination  of
     distribution, direct retail and licensing arrangements. Maxis' products are
     available for multiple  platforms,  including Windows,  Windows 95, DOS and
     Macintosh.  Certain of the Company's  products are also available for video
     game consoles such as the Sega Saturn and the Sony PlayStation.

<TABLE>

     The  following   table  sets  forth,  as  a  percentage  of  net  revenues,
     consolidated statement of operations data for the periods indicated:
<CAPTION>

                                                    Three months ended             Nine months ended
                                                        December 31                    December 31
                                                   --------------------            --------------------
<S>                                                 <C>           <C>               <C>           <C>  
                                                     1996          1995              1996          1995
                                                     ----          ----              ----          ----

     Net revenues                                   100.0%        100.0%            100.0%        100.0%
        Cost of revenues                             36.0          35.8              38.1          32.5
                                                     ----          ----              ----          ----
     Gross profit                                    64.0          64.2              61.9          67.5
                                                     ----          ----              ----          ----

     Operating expenses:
        Research and development                     16.6          10.9              25.5          14.2
        Sales and marketing                          25.6          19.3              34.2          22.3
        General and administrative                    7.2           7.5              14.2           9.5
                                                     ----          ----              ----          ----
     Total operating expenses                        49.5          37.6              73.9          46.3
                                                     ----          ----              ----          ----

     Income (loss) from operations                   14.5          26.6            (12.0)          21.5
     Interest income                                  2.2           2.2              3.5            2.5
                                                     ----          ----              ----          ----
     Income (loss) from operations before taxes      16.7          28.7             (8.6)          24.0
     Provision (benefit) for income taxes             6.4          11.1             (3.3)           9.2
                                                     ----          ----              ----          ----
     Income (loss) from continuing operations        10.2%         17.6%            (5.3)%         14.8%
                                                     ====          ====              ====          ====

</TABLE>
                                     Page 8

<PAGE>


                                   MAXIS, INC.


     Net Revenues

     The Company's net revenues  decreased from $20,111,000 in the third quarter
     of fiscal 1996 to  $19,768,000  in the third  quarter of fiscal  1997.  Net
     revenues also decreased from $43,222,000 in the first nine months of fiscal
     1996 to  $35,880,000  in the first  nine  months of fiscal  1997.  Although
     SimCity 2000 for personal  computers  remained the  Company's  best-selling
     group of  products,  the  Company  experienced  lower  revenues  from these
     products  during the three- and nine-month  periods ended December 31, 1996
     as compared to the same periods last year.  The lower sales of SimCity 2000
     for PCs were  partially,  but not  completely,  offset by  higher  sales of
     SimCity 2000 for game consoles,  specifically  the Sony Playstation and the
     Sega  Saturn.  SimCity 2000 was  released  initially  for the DOS format in
     October 1993. Also, the Company released SimTower for Windows in April 1995
     and SimCity  2000 for  Windows 95 in August  1995.  Both of these  products
     contributed  to higher net revenues  during the first nine months of fiscal
     1996 as compared to the first nine months of fiscal 1997.

     During the third quarter of fiscal 1997, the Company  released  several new
     products, including SimCopter, SimGolf, SimPark, SimTunes and Full Tilt II.
     Although the Company  released  four new  Sim-branded  products  during the
     quarter,  the two most  significant  releases,  SimGolf and SimCopter  were
     shipped in  mid-November  - relatively  late in the holiday  buying season.
     Additionally,  SimCopter  was released  approximately  one month later than
     planned,  resulting in a significant  shortfall in anticipated  revenue for
     the quarter.  During the same quarter in fiscal 1996,  the Company also had
     several new product releases, including Full Tilt and Marty and the Trouble
     with  Cheese.  During the first nine months of fiscal 1997,  the  Company's
     best-selling  products included SimCity 2000 for PCs,  SimCopter,  SimGolf,
     SimCity 2000 for the Sony Playstation and SimPark.

     CD-ROM (vs. floppy disk and game console) products accounted for 79% of the
     Company's  net revenues in the third  quarter of fiscal 1997 as compared to
     78% in the same  quarter in fiscal  1996.  During the first nine  months of
     fiscal 1997, CD-ROM products  accounted for 77% of net revenues as compared
     to 75% of net revenues in the first nine months of fiscal 1996.

     Cost of Revenues

     Cost of  revenues  includes  all  costs  of  media,  manuals,  duplication,
     packaging  materials,  assembly and freight.  In  addition,  royalties  are
     included in cost of revenues.  Gross profit as a percentage of net revenues
     was 64.0% in the third quarter of fiscal 1997,  essentially  unchanged from
     the third quarter of fiscal 1996. On a year-to-date basis, the gross profit
     percentage  decreased from 67.5% in the first nine months of fiscal 1996 to
     61.9% in the first nine months of fiscal 1997. The decrease in gross profit
     in fiscal  1997 was due to several  factors.  During  the third  quarter of
     fiscal  1997,  the  Company  commenced  shipments  in  Germany  under a new
     distribution  arrangement.   The  arrangement  requires  payment  of  fixed
     selling/distribution  fees and customer  discounts,  generally resulting in
     lower gross margins.  Also, the Company derived a higher  percentage of net
     revenues from game console products, due primarily to sales of SimCity 2000
     for the Sony  Playstation.  During the first nine months of fiscal 1997 the
     percentage  of revenues from game consoles was 16% as compared to 4% in the
     same period of fiscal 1996. Cost of goods sold generally is higher for game
     console products than for PC-based Maxis products. In addition, the Company
     experienced  lower  average  selling  prices  because of an increase in the
     percentage of revenues from sales of the Company's lower-priced Collector's
     Series  products  and lower  average  selling  prices for some of its older
     products.  Finally,  the  Company  included  sales  premiums in its initial
     shipments of the four  Sim-branded  titles released in the third quarter of
     1997 (see "Net Revenues" above),  thereby increasing the cost of goods sold
     for these products.  The Company  expects that the gross profit  percentage
     will continue to fluctuate on a quarterly basis.


                                     Page 9
<PAGE>


                                   MAXIS, INC.


     Research and Development

     Research and  development  expenses  consist  primarily  of  personnel  and
     equipment costs required to conduct the Company's  development  efforts and
     to  fund  third-party  software  development  costs.  Third-party  software
     development costs may include advance product development  payments,  which
     are  expensed  as paid.  The Company  increased  research  and  development
     expenses from  $2,188,000 in the third quarter of fiscal 1996 to $3,284,000
     in the third  quarter of fiscal  1997.  As a  percentage  of net  revenues,
     research  and  development  increased  from 10.9% for the third  quarter of
     fiscal 1996 to 16.6% for the third  quarter of fiscal  1997.  Research  and
     development  expenses  for the first nine months of fiscal  1996  increased
     from  $6,144,000,   representing  14.2%  of  net  revenues  to  $9,160,000,
     representing   25.5%  of  net  revenues.   The  increase  in  research  and
     development  expenses was due primarily to hiring additional  employees and
     the associated salaries,  benefits and facilities costs. Also,  operational
     costs related to  Cinematronics  were included in the Company's  results of
     operations  for the first nine  months of fiscal  1997.  There were no such
     costs  in  the  same  period  last  year   because  the  Company   acquired
     Cinematronics  in March  1996.  Furthermore,  during  the third  quarter of
     fiscal  1997,  the Company made  significant  advance  product  development
     payments that were expensed as paid. The Company  believes that significant
     investment in research and  development is required to remain  competitive,
     and the Company  intends to continue to  increase  its  investment  in this
     area.  Therefore,  the Company expects research and development expenses to
     increase in absolute dollars.

     Sales and Marketing

     The Company  increased  its sales and  marketing  expenses,  which  include
     customer support  services,  from $3,879,000 in the third quarter of fiscal
     1996 to  $5,070,000 in the third quarter of fiscal 1997. As a percentage of
     net revenues,  sales and  marketing  expenses  increased  from 19.3% in the
     third  quarter of fiscal 1996 to 25.6% in the third quarter of fiscal 1997.
     Sales and marketing  expenses  increased in the first nine months of fiscal
     1996 from  $9,649,000,  representing  22.3% of net revenues to $12,277,000,
     representing 34.2% of net revenues in the first nine months of fiscal 1997.
     The increase in sales and marketing expenses was due primarily to expansion
     of the Company's  domestic and European sales and marketing  organizations.
     Also,  during the first quarter of fiscal 1997, the Company opened a sales,
     marketing and development office in Tokyo,  Japan. There were no comparable
     costs during the first nine months of fiscal 1996. In addition, the Company
     increased  expenditures for product advertising,  trade shows and marketing
     programs with customers.

     Competition  for retail  shelf space is extremely  competitive,  as well as
     increasingly  costly.  Therefore,  in order to continue to distinguish  the
     Company  and its  products  in the  marketplace,  the  Company  expects  to
     continue aggressive marketing and sales programs. Consequently, the Company
     expects  marketing  and sales  expenses to continue to increase in absolute
     dollars.

     General and Administrative

     General and administrative  expenses decreased from $1,500,000 in the third
     quarter of fiscal 1996 to  $1,430,000  in the third quarter of fiscal 1997.
     The  decrease  was due  primarily  to  lower  accrued  bonuses  for  senior
     management of the Company,  offset by higher  insurance  costs and a higher
     allowance  for doubtful  accounts.  On a  year-to-date  basis,  general and
     administrative  expenses increased from $4,108,000 in the first nine months
     of fiscal 1996 to $5,087,000  in the first nine months of fiscal 1997.  The
     year-to-date  increase  in  general  and  administrative  expenses  was due
     primarily to bad debt expenses  related to the  bankruptcies  of two of the
     Company's customers.

     Interest income

     Interest income increased  slightly from $433,000 for the third quarter of
     fiscal 1996 to $435,000  for the third  quarter of fiscal  1997.  Interest
     income increased from $1,063,000 in the first nine months of fiscal
                                    
                                    Page 10
<PAGE>


                                   MAXIS, INC.

     Interest income (Cont.)

     1996 to  $1,243,000 in the nine months of fiscal 1997 because the Company's
     initial public offering proceeds were invested for a full nine-month period
     in fiscal 1997, as opposed to only seven months in fiscal 1996.

     Liquidity and Capital Resources

     As of December  31,  1996,  the  Company's  principal  sources of liquidity
     included cash and short-term  investments of $29,668,000.  The Company also
     has longer-term  investments totaling  $10,532,000.  The Company's cash and
     investments are available to meet seasonal  working  capital  requirements.
     The Company uses its working capital to finance ongoing operations, to fund
     the  development  and  introduction  of new products and to acquire capital
     equipment.  The Company's  operating  activities used cash of $9,039,000 in
     the first nine months of fiscal 1997 and provided cash of $3,625,000 in the
     first nine months of fiscal 1996.  Seasonal revenue increases  generated by
     the holiday buying season usually result in higher accounts  receivable and
     allowances for returns and doubtful accounts at December 31.

     From  time to time,  the  Company  evaluates  acquisitions  of  businesses,
     products or technologies that complement the business of Maxis. The Company
     has no present  understandings,  commitments or agreements  with respect to
     any material  acquisitions of other  businesses,  products or technologies.
     Any such transactions,  if consummated,  may use a portion of the Company's
     working capital or require the issuance of equity.

     The Company believes that existing working capital and cash from operations
     will satisfy the Company's liquidity and capital  requirements for at least
     the next year.

     Risk Factors Affecting Future Earnings and Stock Price

     Sections of this Report,  particularly the last paragraph on page nine, the
     first and third  paragraphs on page ten and the statements  under Liquidity
     and Capital Resources contain forward-looking statements within the meaning
     of  Section  27A of the  Securities  Act of  1933  and  Section  21E of the
     Securities  Exchange Act of 1934.  Actual  results could differ  materially
     from those projected in the forward-looking  statements as a result of many
     factors,  including  the risk factors set forth below and elsewhere in this
     Report.

     The  Company  has  experienced,  and  expects to  continue  to  experience,
     significant  fluctuations in operating results due to a variety of factors,
     including  the size and rate of growth  of the  consumer  software  market,
     market  acceptance of the Company's  products and those of its competitors,
     development and promotional  expenses  relating to the  introduction of new
     products or new versions of existing products,  seasonality,  projected and
     actual  changes in computing  platforms,  the timing and success of product
     introductions,  product returns, changes in pricing policies by the Company
     or its  competitors,  the  accuracy  of  retailers'  forecasts  of consumer
     demand, the timing of orders from major customers and order cancellations.

     The Company's  operating  results also may fluctuate  significantly  due to
     changes in product plans or delays in completing and shipping products. For
     example,  in July 1996 the Company  discontinued the development of the The
     Mindwarp,  an  action  game  scheduled  to  ship  during  fiscal  1997.  In
     connection  with this  decision,  the Company  closed its Utah  development
     office. In mid-November 1996, the Company released SimCopter  approximately
     one month  later than  originally  planned.  Due to the  importance  of the
     holiday  buying  season,  the delay in  shipping  SimCopter  resulted  in a
     significant  shortfall  in  the  Company's  anticipated  revenues  for  the
     quarter.   Such  risks  apply  to  all  of  the  Company's  products  under
     development.

     Sales to a limited number of  distributors  and retailers have  constituted
     and are anticipated to continue to constitute a substantial majority of the
     Company's net  revenues.  The loss of, or  significant  reduction in, sales
     attributable  to any of the Company's  principal  distributors or retailers
     could materially adversely affect the Company's business, operating results
     and financial condition. Distribution and retailing businesses in

                                    Page 11
<PAGE>


                                   MAXIS, INC.


     Risk Factors Affecting Future Earnings and Stock Price (Cont.)

     the  computer  industry  from  time to time  have  experienced  significant
     fluctuations  in their  businesses and there have been a number of business
     failures among such entities.  For example,  NeoStar,  a retailer with over
     650 retail  stores,  filed for Chapter 11 bankruptcy in September  1996. In
     connection  with this event,  the Company  incurred an expense for bad debt
     during the quarter ended September 30, 1996.  Although the Company performs
     periodic  credit  evaluations of its customers,  the insolvency or business
     failure  of any  significant  distributor  or  retailer  of  the  Company's
     products could have a material  adverse  effect on the Company's  business,
     operating results and financial condition.

     The consumer software business is highly seasonal.  Net revenues  typically
     are significantly  higher during the third fiscal quarter, due primarily to
     the increased  demand for consumer  software  during the calendar  year-end
     holiday buying season.  Net revenues in other quarters  generally are lower
     and vary  significantly as a result of new product  introductions and other
     factors.  The Company  expects its net  revenues and  operating  results to
     continue to reflect significant seasonality. There can be no assurance that
     the Company will achieve consistent  profitability on a quarterly or annual
     basis.

     The Company's success depends on the timely  introduction of successful new
     products to replace declining revenues from older products.  In response to
     competitive pressures the Company may take certain pricing and/or marketing
     actions. The Company has in the past, and will likely in the future, reduce
     the price of older  products and offer  promotions to extend the life cycle
     of its  products.  Such  actions  could  materially  adversely  affect  the
     Company's business,  operating results and financial condition. The Company
     may be required to pay fees in advance or to guarantee royalties, which may
     be substantial,  to obtain  licenses to intellectual  properties from third
     parties before products  incorporating such properties have been introduced
     or have achieved market acceptance.

     Products generally are shipped as orders are received,  and accordingly the
     Company  operates with little  backlog.  The Company's  expense  levels are
     based,  in part,  on its  expectations  regarding  future  sales and,  as a
     result, operating results would be disproportionately adversely affected by
     a decrease in sales or a failure to meet the Company's sales  expectations.
     Defective  products may result in higher customer support costs and product
     returns.

     The Company's  gross profit is affected by the mix of sales among  products
     that are  developed  or  licensed  by the  Company  and  products  that are
     developed by third-party affiliate partners and distributed by the Company.
     Gross profit and operating  expenses are  significantly  lower on affiliate
     partner  products  because  the  Company's  services  with  respect to such
     products   generally  are  limited  to  sales,   distribution  and  related
     functions.  Effective  April 1, 1996, the Company changed the offered terms
     of its affiliate partner program,  granting,  among other things, a greater
     share of affiliate  sales receipts to affiliate  partners.  There can be no
     assurance that the Company's  current share of receipts on affiliate  sales
     for  distribution  services or the current mix of affiliate  partner  sales
     will be sustained.

     The  market  price  of the  Company's  Common  Stock  could be  subject  to
     significant  fluctuations in response to variations in quarterly  operating
     results as well as other factors,  such as announcements of new products by
     the  Company or its  competitors  and  changes in  financial  estimates  by
     securities  analysts or other events.  The stock market and many technology
     companies  recently have been trading at or near historic highs and reflect
     price/earning ratios above historic norms.  Moreover,  the stock market has
     experienced  extreme  volatility that has particularly  affected the market
     prices of equity  securities  of many high  technology  companies  and that
     often  has  been  disproportionate  to the  operating  performance  of such
     companies.  Broad market  fluctuations,  as well as economic  conditions in
     general and in the software  industry in particular,  may adversely  affect
     the market price of the Company's  Common Stock.  There can be no assurance
     that the Company's stock price will remain at or near its current level.

                                    Page 12

<PAGE>


                                   MAXIS, INC.


PART II.     OTHER INFORMATION

ITEM 6.      EXHIBITS AND REPORTS ON FORM 8-K

               (a) Exhibits

                     11.1       Statement of Computation of Earnings per Share

                     27.1       Financial Data Schedule


               (b) Reports on Form 8-K

                     No reports on Form 8-K were filed during the quarter ended
                     December 31, 1996.

                                    Page 13
<PAGE>


                                   MAXIS, INC.


                                    SIGNATURE

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.


                                                         MAXIS, INC.
                                                         (Registrant)



Date:    February 12, 1997                      By:      /S/ Fred M. Gerson
                                                         ------------------
                                                         Vice President,
                                                         Chief Financial Officer

                                    Page 14
<PAGE>
<TABLE>



                                   MAXIS, INC.

                                INDEX TO EXHIBITS

<CAPTION>


     EXHIBIT                                                                       SEQUENTIALLY
     NUMBER                  DESCRIPTION OF EXHIBIT                                NUMBERED PAGE


      <S>                    <C>                                                        <C>
      11.1                   Statement of Computation of  Earnings per Share            16

      27.1                   Financial Data Schedule                                    17

</TABLE>
                                    Page 15