SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-QSB



X     Quarterly  Report  Pursuant  to  Section  13 or  15(d)  of the  Securities
      Exchange Act of 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999

                                       OR

      Transition  Report  Pursuant  to  Section  13 or 15(d)  of the  Securities
      Exchange Act of 1934 For the transition period from ____________ to
      --------------

                          Commission File No: 00-113959

                                CPS SYSTEMS, INC.
             (Exact name of registrant as specified in its charter)

                TEXAS                                      75-1607857
    (STATE OR OTHER JURISDICTION OF      (I.R.S. EMPLOYER IDENTIFICATION NO.)
    INCORPORATION OR ORGANIZATION)

                           3400 CARLISLE, SUITE 500
                            DALLAS, TEXAS 75204
                                 (214) 855-5277

       (Address, including zip code, and telephone number, including area
                   code, of Registrant's principal executive offices)


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

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

                  CLASS                     OUTSTANDING AS OF  MAY 07, 1999
                  -----                     ---------------------------------
             Common stock
         Par value $.01 per share                      6,754,576



                                        1
<PAGE>
PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                        CPS SYSTEMS, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
                      CONDENSED CONSOLIDATED BALANCE SHEETS

                (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

                                                                                                                             
                                                             As of       As of
                                                           03/31/99    12/31/98 
                                                         (unaudited)
<S>                                                      <C>         <C>        
ASSETS  
CURRENT ASSETS 
     Cash ............................................   $    461    $    296   
     Accounts receivable .............................      2,435       2,852
     Deferred income tax .............................      1,132         907   
     Inventory .......................................        202         201   
     Refundable income taxes .........................         89         267   
     Prepaid expense and other current assets ........        446         564   
                                                         --------    --------   
                 Total current assets: ...............      4,765       5,087   
PROPERTY AND EQUIPMENT ...............................        765         790   
SOFTWARE DEVELOPMENT COST ............................      5,258       4,167   
OTHER ASSETS
     Costs in excess of net assets acquired ..........      1,552       1,623   
     Debt issue costs ................................         58          79   
     Other assets ....................................         23          29   
                                                         --------    --------   
                                                                     --------   
                                                            1,633       1,731   
                                                                     --------   
                                                         $ 12,421    $ 11,775   
                                                         ========    ========   
LIABILITIES  AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
     Current portion of long term debt ...............   $  2,050    $  1,050   
     Accounts payable ................................      1,310       1,066   
     Accrued income tax payable ......................         27        --     
     Other accrued expenses ..........................        380         437   
     Customer deposits, unearned revenue .............      3,929       4,013   
                                                         --------    --------   
                 Total current liabilities: ..........      7,696       6,566   
OTHER LIABILITIES
     Long-term debt ..................................      1,027       1,023   
     Unearned revenue ................................         14          14   
     Other liabilities ...............................       --          --     
                                                         --------    --------   
                 Total long term debt: ...............      1,041       1,037   
                                                         --------    --------   
                 Total Liabilities: ..................      8,737       7,603   

COMMITMENTS AND CONTINGENCIES ........................       --          --     
SHAREHOLDERS' EQUITY
     Preferred stock, $.01 par value; authorized
        10,000,000 shares, none issued and outstanding       --          --     
     Common stock, $.01 par value, 50,000,000 shares
        authorized; 6,743,902 shares issued in 1999
        and 6,734,928 shares issued in 1998 ..........         67          67   
     Additional paid-in capital ......................      6,812       6,805   
     Accumulated deficit .............................     (3,195)     (2,700)  
                                                         --------    --------   
                                                                     --------   
                 Total Shareholders' Equity: .........      3,684       4,172   
                                                                     --------   
                                                         $ 12,421    $ 11,775   
                                                         ========    ========   
</TABLE>

      The accompanying notes are an integral part of these balance sheets.


                                        2

<PAGE>
                        CPS SYSTEMS, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                   (UNAUDITED)


                                                  THREE MONTHS ENDED MARCH 31,
                                                        1999       1998
                                                        ----       ----
Revenue
<S>                                                  <C>        <C>    
           License fees ..........................   $   357    $   198
           Recurring maintenance and service fees      1,011      1,076
           Product sales .........................       385        643
           Other service fees ....................       149        281
                                                     -------    -------
                                                       1,902      2,198

Cost of Revenue
           Product Sales .........................       287        499
           Purchased software ....................       288        147
           Distribution ..........................         5          4
                                                     -------    -------
                                                         580        650

                Gross profit .....................     1,322      1,548
                                                     -------    -------

Operating Expenses
           Support and customer service ..........     1,091        934
           Selling and marketing .................       233        471
           Research and development ..............       123        102
           General and administrative ............       433        459
           Amortization of intangible goodwill ...        70         71
                                                     -------    -------
                                                       1,950      2,037

                Earnings(loss) from operations ...      (628)      (489)
                                                     -------    -------

Interest and financing costs .....................        84        245
                                                     -------    -------
                Earnings(loss) before income taxes      (712)      (734)

Income tax expense(benefit) ......................      (217)      (260)
                                                     -------    -------
                Net Earnings(loss) ...............   $  (495)   $  (474)
                                                     =======    =======


Net earnings(loss) per common share
     Basic and Diluted ...........................   ($ 0.07)   ($ 0.11)
Weighted average shares used in computing net
earnings(loss) per common share:
     Basic and Diluted ...........................     6,744      4,140


</TABLE>

        The accompanying notes are an integral part of these statements.

                                        3
<PAGE>
                        CPS SYSTEMS, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                  (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                   (UNAUDITED)


                                                                    THREE MONTHS ENDED MARCH 31,
                                                                          1999       1998
                                                                       -------------------
<S>                                                                    <C>        <C>     
Cash flows from operating activities:
     Net income(loss) ..............................................   $  (495)   $  (476)
     Adjustments to reconcile net income(loss) to net cash:
        Depreciation and amortization ..............................       188        178
        Adjustment to put warrants .................................      --          125
        Loss on disposal of property and equipment .................      --            1
        Accrued interest to shareholders ...........................      --            2
        Changes in assets and liabilities, net of business acquired:
            Accounts receivable ....................................       417       (245)
            Refundable income taxes ................................       178         75
            Inventories ............................................        (1)      (232)
            Deferred income tax expense ............................      (225)      (508)
            Prepaid expenses and other current assets ..............       118        (31)
            Accounts payable .......................................       244        (59)
            Accrued expenses .......................................       (51)       253
            Customer deposits, and unearned revenue ................       (84)       931
            Income taxes payable ...................................        27         97
            Other liabilities ......................................      --            1
                                                                       ------------------
                          Net cash provided by operating activities    $   316    $   111

Cash Flows from investing activities:
     Purchase of property and equipment ............................       (38)       (94)
     Software development costs ....................................    (1,124)      (537)
                                                                       ------------------
                          Net cash used by investing activities ....   $(1,162)   $  (631)

Cash flows from financing activities:
     Principal payment on long-term debt ...........................         4        (23)
     Proceeds from notes payable - Tyler Corporation ...............     1,000       --
     Proceeds from employee stock purchase plan ....................         7       --
     Proceeds from public offering, net of offering cost ...........      --        6,434
                                                                       ------------------
                          Net cash provided by financing activities    $ 1,011    $ 6,411

Net increase(decrease) in cash .....................................       165      5,891
Cash at beginning of period ........................................       296        327
                                                                       ------------------
Cash at end of period ..............................................   $   461    $ 6,218

Supplementary Cash Flow Disclosure:
     Interest and financing costs paid .............................   $    63    $    92
     Income taxes paid (refunded), net .............................   $  (180)   $  --

</TABLE>

        The accompanying notes are an integral part of these statements.

                                        4

<PAGE>
                        CPS SYSTEMS, INC. AND SUBSIDIARY
                 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                             MARCH 31, 1999 AND 1998

        (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)


NOTE A - BASIS OF PRESENTATION

The interim condensed  consolidated  financial  statements  included herein have
been  prepared  by the  Company  without  audit.  These  statements  reflect all
adjustments which are, in the opinion of management, necessary to present fairly
the consolidated  financial  position as of March 31, 1999, and the consolidated
results of  operation  and cash flows for the three  months ended March 31, 1999
and  1998.  All such  adjustments  are of a  normal  recurring  nature.  Certain
information and footnote  disclosures  normally included in financial statements
prepared in accordance with generally accepted  accounting  principles have been
condensed or omitted.  The Company believes that the disclosures are adequate to
make the  information  presented  not  misleading.  It is  suggested  that these
consolidated  financial  statements  and notes be read in  conjunction  with the
audited consolidated  financial statements and notes for the year ended December
31, 1998,  included in the  Company's  Form 10-K filed with the  Securities  and
Exchange Commission on April 15, 1999.

NOTE B - REVENUE RECOGNITION

The Company  licenses  its  software  products.  Pursuant to AICPA  Statement of
Position 97-2,  "Software  Revenue  Recognition",  revenue from software license
fees is  recognized  when an  agreement  has been  executed,  software  has been
delivered and installed,  all significant  contractual obligations have been met
and  collection of the related  receivable is probable.  Post contract  customer
support  revenue,   consisting  of  continuing  maintenance  and  service  fees,
including  that bundled with initial  license fees,  is deferred and  recognized
ratably over the contractual  periods the services are provided.  Product sales,
consisting  primarily of computer hardware,  are recognized upon delivery of the
product.

NOTE C - INITIAL PUBLIC OFFERING

On March 30,  1998,  the  Company  successfully  completed  its  initial  public
offering  ("IPO") of common stock. The Company issued 1,900,000 shares of common
stock in connection with its IPO at $4.00 per share,  which, upon payment of all
offering costs resulted in net proceeds of approximately $5,767, net of issuance
costs of approximately  $1,833. In April 1998, the underwriters  exercised their
option  to  purchase  285,000   additional  shares  of  common  stock  to  cover
over-allotments.  All of the over-allotment  shares were sold by certain selling
shareholders,  resulting  in no proceeds to the  Company.  However,  the Company
incurred  additional  issuance  cost of $148.  Net  proceeds  subsequent  to the
exercise of the over-allotment option was $5,619.

In connection  with the IPO, all of the Company's  outstanding put warrants were
converted  into common stock.  The exercise of the put warrants  resulted in the
issuance of 927,766  common shares and proceeds to the Company of  approximately
$2.  Upon  exercise  of the put  warrants,  their  recorded  value  of $367  was
reclassified to paid in capital.

NOTE D- SENIOR TERM LOAN

On December  31, 1999,  the current  portion,  approximately  $1,100 of a $2,100
senior note payable to Hanifen Imhoff  Mezzanine Fund, L.P. (the "Hanifen Loan")
becomes due. As of December  31, 1998,  the Company was in violation of the note
agreement  with Hanifen Imhoff  Mezzanine  Fund,  L.P.,  relating to the Hanifen
Loan. The violation pertains to the ratio of cash flow to total contractual debt
service.  Hanifen Imhoff  Mezzanine  Fund, L.P has waived through  September 30,
1999 compliance with this ratio.


                                        5

<PAGE>
                        CPS SYSTEMS, INC. AND SUBSIDIARY
                                 MARCH 31, 1999


NOTE E- MERGER AGREEMENT AND TERM LOAN

On March 30, 1999,  the Company  executed an  Agreement  and Plan of Merger with
Tyler  Corporation  ("Tyler")  pursuant to which the Company will merge with and
into a wholly owned  subsidiary of Tyler. In addition,  on March 30, 1999, Tyler
loaned $1,000 to the Company, evidenced by a secured promissory note (the "Tyler
Loan").  The Tyler Loan is due on October 30, 1999,  and has an interest rate of
2% over the prime rate. An interest payment is due June 30, 1999, and the entire
principal balance and accrued interest is then due on October 30, 1999. The note
is secured by a lien on the Company's assets, subordinate to the Hanifen Loan.

NOTE F- Backlog

The  Company   currently   has  a  backlog  of  seven   contracts   representing
approximately  $4,300 in  initial  license  fees and  $1,100 in  average  annual
recurring  maintenance  revenue.  These seven  contracts  are for the  Company's
property tax billing and collection product and computer-assisted mass appraisal
system.


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

This  section  of the  Report  contains  forward-looking  statements  within the
meaning of Section  21E of the  Securities  Exchange  Act of 1934,  as  amended.
Actual results for future periods could differ  materially  from those discussed
in this  section as a result of the various  risks and  uncertainties  discussed
herein. A comprehensive  summary of such risks and uncertainties can be found in
the Company's  filings with the Securities and Exchange  Commission from time to
time,  including  the  Company's  annual report on Form 10-K for the fiscal year
ended  December 31, 1998 filed with the  Securities  and Exchange  Commission on
April 15, 1999 and the  registration  statement  on Form SB-2 filed on March 25,
1998 (File No. 333-39173). All dollar amounts are expressed in thousands, except
per  share  amounts.  The  financials  results  reflected  in  this  item  2 are
unaudited.


                                        6
<PAGE>
                        CPS SYSTEMS, INC. AND SUBSIDIARY

                                 MARCH 31, 1999

RESULTS OF OPERATIONS

The following  table sets forth,  for the periods  indicated,  the percentage of
total revenues represented by certain revenue, expense and income items:
<TABLE>
<CAPTION>
                                                           THREE MONTHS ENDED MARCH 31,
                                                                1999        1998
                                                                ----        ----
<S>                                                             <C>          <C> 
Revenue
           License fees ................................        18.8%        9.0%
           Recurring maintenance and service fees ......        53.2%       49.0%
           Product sales ...............................        20.2%       29.2%
           Other service fees ..........................         7.8%       12.8%
                                                               -----       -----
                Total Revenue: .........................       100.0%      100.0%
                                                               -----       -----

Cost of Revenue
           Product Sales ...............................        15.1%       22.7%
           Purchased software ..........................        15.1%        6.7%
           Distribution ................................         0.3%        0.2%
                                                               -----       -----
                Total Cost of Sales: ...................        30.5%       29.6%
                                                               -----       -----

                Gross profit: ..........................        69.5%       70.4%

Operating Expenses:
           Support and customer service ................        57.3%       42.5%
           Selling and marketing .......................        12.3%       21.4%
           Research and development ....................         6.5%        4.6%
           General and administrative ..................        22.7%       20.9%
           Amortization of intangible goodwill .........         3.7%        3.2%
                                                               -----       -----
                 Total Operating Expense: ..............       102.5%       92.6%
                                                               -----       -----

                Earnings(loss) from operations .........       (33.0)%     (22.2)%

Interest and financing costs ...........................         4.4%       11.1%
                                                               -----       -----
                Earnings(loss) before income taxes .....       (37.4)%     (33.3)%

Income tax expense(benefit) ............................       (11.4)%     (11.8)%
                                                               -----       -----
                Net Earnings(loss) .....................       (26.0)%     (21.5)%
                                                               -----       -----

</TABLE>

                                        7


<PAGE>
                        CPS SYSTEMS, INC. AND SUBSIDIARY

                                 MARCH 31, 1999


COMPARISON OF THREE MONTHS ENDED MARCH 31, 1999 AND MARCH 31, 1998

REVENUE

The Company's  revenue includes revenue of license fees,  recurring  maintenance
and service fees, product sales, and other service fees.

 The  Company's  total  revenue was $1,902 for the three  months ended March 31,
1999 compared to $2,198 for the three months ended March 31, 1998, a decrease of
$296 or 13.5%.  This  decrease  was  primarily  due to a decrease in  remittance
processing ("RPS") hardware,  software and installation  sales. The decrease was
partially  offset  by an  increase  in city and  municipal("City")  sales and an
increase in our hardware parts and repair group ("Systems Engineering")sales.

 License Fees.  The  Company's  revenue from license fees was $357 for the three
months  ended March 31, 1999  compared to $198 for the three  months ended March
31, 1998, an increase of $159 or 80.3%.  The increase was primarily due to a new
property tax billing and collection system  ("Collections")  installation.  This
increase was partially  offset by a decrease in RPS third party software  sales.
The  Company   currently   has  a  backlog  of  seven   contracts   representing
approximately $4,300 in initial license fees.

 Recurring  Maintenance  and Service Fees. The Company's  revenue from recurring
fees was $1,011 for the three months ended March 31, 1999 compared to $1,076 for
the three months  ended March 31, 1998, a decrease of $65 or 6.0%.  The decrease
was  primarily  due to a  decline  in  hardware  maintenance.  This  decline  is
associated with hardware  manufacturers  offering  longer  extended  warranties,
declining  costs of hardware  and the  Company's  belief that some  customers no
longer view hardware  maintenance as a mission critical need for all components.
The  Company   currently   has  a  backlog  of  seven   contracts   representing
approximately $1,100 in average annual recurring maintenance revenue.

 Product  Sales.  Revenue from product sales was $385 for the three months ended
March 31, 1999  compared to $643 for the three  months  ended March 31,  1998, a
decrease of $258 or 40.1%.  This  decrease is primarily due to a decrease in RPS
product sales and, to a lesser  extent,  product sales for  Collection  systems.
This decrease was partially  offset by an increase in product sales for our City
and Systems Engineering groups.

 Other  Service  Fees.  Revenue  from other  service fees was $149 for the three
months  ended March 31, 1999  compared to $281 for the three  months ended March
31,  1998,  a decrease of $132 or 47.0%.  This  decrease  was  primarily  due to
decreased RPS installation sales.

COST OF REVENUE

 The Company's cost of revenue  includes the cost of hardware product sales, the
cost of  purchased  software,  amortization  of  software  development  cost and
distribution costs.

The total cost of revenue  was $580 for the three  months  ended  March 31, 1999
compared to $650 for the three months ended March 31, 1998, a decrease of $70 or
10.8%.  This yielded a gross  profit  margin of 69.5% for the three months ended
March 31, 1999  compared to a gross profit  margin of 70.4% for the three months
ended March 31, 1998. The decrease was associated with a decrease in the sale of
product  sales,  partially  offset  by an  increase  in  cost  of  RPS  software
installations.  The decrease also resulted from additional  costs to correct RPS
third-party software issues for existing customers incurred by the Company.


                                        8

<PAGE>
                        CPS SYSTEMS, INC. AND SUBSIDIARY

                                 MARCH 31, 1999


Product  Sales.  The cost of product sales was $287, or  approximately  74.6% of
product  sales,  for the three months ended March 31, 1999  compared to $499, or
approximately 77.6% of product sales, for the three months ended March 31, 1998,
a decrease of $212 or 42.5%.  This  decrease was  primarily due to a decrease in
product  sales  revenue  of 40.1%  for the three  months  ended  March 31,  1999
compared to the three months ended March 31, 1998.

 Software.  Cost  of  software  includes  purchased  software  as  well  as  the
amortization of capitalized software development costs. The cost of software was
$288 or  approximately  80.7% of license fees,  for the three months ended March
31, 1999 compared to $147, or approximately 74.2% of license fees, for the three
months ended March 31,  1998,  an increase of $141 or 95.9%.  This  increase was
largely due to the increase in cost of RPS software  installations.  The Company
has incurred  additional  costs to correct RPS  third-party  software issues for
existing  customers.  Amortization of software  development cost was $33 for the
three  months  ended March 31, 1999 and $33 for the three months ended March 31,
1998.

 Distribution.  The costs  associated  with  distribution  were $5 for the three
months ended March 31, 1999  compared to $4 for the three months ended March 31,
1998, an increase of $1 or 25.0%.

OPERATING EXPENSES

The Company's operating expenses includes support and customer service,  selling
and  marketing,  research  and  development,  general  and  administrative,  and
amortization of intangible goodwill.

 Support and Customer Service.  Expenses related to support and customer service
were $1,091 for the three months  ended March 31, 1999  compared to $934 for the
three months ended March 31, 1998,  an increase of $157 or 16.8%.  This increase
resulted from an increase in salaries and hiring to enhance customer service and
support future growth.

 Selling and Marketing.  The Company's selling and marketing  expenses were $233
for the three months ended March 31, 1999  compared to $471 for the three months
ended March 31,  1998, a decrease of $238 or 50.5%.  This  decrease was due to a
decrease in the numbers of sales  personnel  and expenses  related to developing
new markets. In November 1998, the Company decided to focus on its core products
and core markets in an effort to grow these areas.

 Research and Development.  Research and development  expenses were $123 for the
three  months  ended March 31, 1999  compared to $102 for the three months ended
March 31,  1998,  an  increase of $21 or 20.6%.  These  expenses  are  comprised
primarily  of  salaries  as  well as  amounts  paid to  outside  consultants  to
supplement  continuing product enhancement  efforts.  The increase resulted from
movement  of  personnel  from  the  capitalization   projects  to  research  and
development expensed assignments.

 General and Administrative.  General and administrative  expenses were $433 for
the three  months  ended  March 31, 1999  compared to $459 for the three  months
ended March 31, 1998, a decrease of $26 or 5.7%. This decrease was primarily due
to a decrease in legal  expenses  related to claims arising out of the Company's
operations in the normal course of business.

 Amortization of Goodwill.  The Company  incurred a non-cash  expense related to
the 1994  acquisition of the Company by a private  investor group of $70 for the
three  months  ended March 31, 1999  compared to $71 for the three  months ended
March 31, 1998, a decrease of approximately $1 or 1.4%.



                                        9

<PAGE>
                        CPS SYSTEMS, INC. AND SUBSIDIARY

                                 MARCH 31, 1999


EARNINGS FROM OPERATIONS

Loss from  operation was $628 or (33.0%) of revenue,  for the three months ended
March 31, 1999,  compared to a loss from  operations  of $489 or (22.2%) for the
three months ended March 31, 1998.  This decrease in earnings from operations of
$139 was  primarily  due to the decrease of 13.5% in total revenue for the three
months  ended March 31, 1999  compared to the three months ended March 31, 1998.
To a lesser  extent,  the  decrease  resulted  from a reduction  in gross profit
margin to 69.5% for the three  months  ended  March 31,  1999 from 70.4% for the
three months ended March 31, 1998

NON-OPERATING EXPENSES

 Interest and Financing Costs. The Company's  interest expense for its long term
debt was $84 for the three months ended March 31, 1999  compared to $245 for the
three months ended March 31,  1998, a decrease of $161 or 65.7%.  This  decrease
was primarily  attributed to a put warrant adjustment for the three months ended
March 31, 1998. The put warrant  adjustment is primarily  based on the operating
earnings of the Company for the previous twelve month period, which increased in
the first quarter of 1998. There was no put warrant adjustment made in 1999.

Provisions for Income Taxes. The Company's  provision for income tax benefit was
$217 for the three  months  ended March 31, 1999  compared to $260 for the three
months ended March 31, 1998, a decrease of $43. This  decrease was  attributable
primarily to decreased  earnings  from  operations.  The income tax provision is
higher than income taxes  determined by applying the applicable  statutory rates
primarily due to non-deductible  amortization of goodwill and non-deductible put
warrant adjustments.

LIQUIDITY AND CAPITAL RESOURCES

 The Company was acquired by an international private investor group on December
30, 1994 for approximately  $4,600 in a leveraged  transaction.  The acquisition
was  financed  with a $1,500  senior term loan due  December  1998,  provided by
FINOVA Capital  Corporation (the "Finova Loan") and a $2,100 senior subordinated
note due in two  installments  in December 1999 and December  2000,  provided by
Hanifen Imhoff  Mezzanine  Fund, L.P. (the "Hanifen  Loan").  The balance of the
acquisition  funding  was  provided by certain  officers  and  directors  of the
Company in the form of equity capital.

Since that time, the Company has funded its business  solely with cash generated
from operations.  However, on March 30, 1998 the Company successfully  completed
an initial  public  offering  ("IPO") of $1,900 shares of its common stock.  Net
proceeds of the IPO less all issuance costs were approximately $5,619.

 From March 25, 1998 through March 31, 1999,  the Company  applied the following
amounts  of its net  proceeds  from  the IPO  pursuant  to the IPO  registration
statement:

Construction of plant, building and facilities               $
Purchase and installation of machinery and equipment
Purchases of real estate
Acquisitions of other business(es)
Repayment of indebtedness                                          855 Working
capital                                                                  1,401
Temporary investments
Other uses of at least $100,000 (research and development expenses)      3,363
                                                                         -----

Total                                                                   $5,619

                                       10
<PAGE>
                        CPS SYSTEMS, INC. AND SUBSIDIARY

                                 MARCH 31, 1999


In May 1997, some of the Company's  shareholders advanced approximately $123,000
to CDP Systems, Inc., the Company's wholly owned subsidiary("CDP"), to cover CDP
expenses  (the  "CDP  Loans").  As of April 8,  1998,  there  was  approximately
$128,000 in principal and accrued interest  outstanding  under the CDP Loans. On
that date,  the CDP Loans were paid from proceeds of the IPO. With the exception
of the  repayment  of the CDP  Loans,  none of the uses  constituted  direct  or
indirect payments to the Company's directors,  officers or general partners,  or
associates thereof, persons owning 10% or more of any class of securities or any
affiliates of the Company.

The Company's cash balances were $461 and $6,218 as of March 31, 1999, and March
31, 1998, respectively. The Company's operating activities provided cash of $316
and $111  during  the three  months  ended  March 31,  1999 and March 31,  1998,
respectively.  The Company's  source of cash during the three months ended March
31, 1999 was  primarily  attributable  to a decrease in accounts  receivable  of
$417,  decrease in  refundable  income tax of $178,  and an increase to accounts
payable of $244. These increases to cash were offset by a decrease to net income
of $495 and an increase to deferred income tax of $225.

The Company  used cash of $1,162 and $631 for  investing  activities  during the
three months ended March 31, 1999 and March 31,  1998,  respectively.  Investing
activities  have  consisted  principally  of the  acquisition  of  property  and
equipment and capitalized  software  development  cost. The increase of $531 was
primarily attributable to increases in capitalized software development cost

The Company's financing  activities provided cash of $1,011 for the three months
ended March 31, 1999 and $6,411 for the three months  ended March 31,  1998.  On
March 30,  1999,  the  Company  executed  an  Agreement  and Plan of Merger (the
"Merger   Agreement")  with  Tyler   Technologies   (formerly  known  as  "Tyler
Corporation"  and  referred to  hereinafter  as  "Tyler")  pursuant to which the
Company will merge with and into a wholly owned  subsidiary  of Tyler.  Also, on
March 30,  1999,  Tyler  loaned  $1,000 to the  Company,  evidenced by a secured
promissory  note  (the  "Tyler  Loan").  As of March  31,  1998,  the  Company's
aggregate  net proceeds  were $6,411 from the sale of 1,900,000  share of common
stock through its initial  public  offering.  Subsequent to March 31, 1998,  the
Company paid $761 to retire the outstanding  principal amount of its senior term
loan including  interest and prepayment  fees on the Finova Loan,  $128 in loans
from shareholders to the Company and $148 for over-allotment issuance cost.

On December 31,  1999,  the current  portion,  $1,050,  of a $2,100  senior note
payable to Hanifen Imhoff  Mezzanine  Fund,  L.P. under the Hanifen Loan becomes
due. As of December 31, 1998, the Company was in violation of the note agreement
with Hanifen Imhoff Mezzanine Fund, L.P. The violation  pertains to the ratio of
cash flow to total contractual debt service. Hanifen Imhoff Mezzanine Fund, L.P.
has waived through September 30, 1999 compliance with this ratio.

The Tyler Loan,  originally  due on  September  30, 1999,  has been  extended by
agreement of the parties  until  October 30, 1999.  The interest rate remains 2%
over the prime rate.  An interest  payment is still due June 30,  1999,  but the
entire  principal  balance and accrued interest is next due on October 30, 1999.
The  note is  secured  by a lien on the  Company's  assets,  subordinate  to the
Hanifen Loan.  The Company  believes that the proceeds of this Tyler Loan,  when
combined with its cash balances and cash generated from operations, will satisfy
the Company's  working  capital,  business  development and capital  expenditure
requirements  through  September 30, 1999. There can be no assurances,  however,
that the  Company  will have  sufficient  working  capital to satisfy all of the
anticipated  needs  until  September  30,  1999.   Increased  costs,  delays  in
receivable collections and


                                       11

<PAGE>
                        CPS SYSTEMS, INC. AND SUBSIDIARY

                                 MARCH 31, 1999


opportunities  for growth or  expansion  may  increase  the  demand for  working
capital,  thereby making an additional  infusion of capital  necessary  prior to
September 30, 1999. After September 30, 1999, the Company will have insufficient
resources  to  satisfy  all  of  its  obligations,   working  capital,  business
development  and capital  expenditure  requirements.  The Company  will  require
additional  sources of  liquidity  which may include  equity  offerings  or debt
financing. The Company believes that the merger with Tyler, if consummated, will
permit it to satisfy these obligations,  working capital,  business  development
and capital expenditure requirements.  If the Merger Agreement is not closed and
the  merger  consummated,  then  the  Company  will not be able to  satisfy  its
obligations  or fulfill its  requirements  absent  additional  equity  offerings
and/or debt financings.

YEAR 2000 COMPLIANCE

There  is  significant  uncertainty  in the  software  industry  concerning  the
potential effects  associated with compliance with Year 2000 ("Y2K") date codes.
Potential effects include, but are not limited to, product compliance,  internal
systems  compliance,  impact upon the Company's  revenue,  and expenses  related
thereto.

Product  Compliance.  Most of the Company's  current products are Y2K compliant,
based upon results of successful tests on its software.  Those products that are
not presently Y2K compliant are presently under development. These products will
be made Y2K compliant  prior to December 31, 1999.  Therefore,  the Company does
not  anticipate  its products will be adversely  affected by date changes in the
Y2K. However,  there can be no assurance that the Company's products contain all
features or functions deemed necessary by customers, distributors, resellers and
systems integrators to be Y2K compliant. While the Company continuously enhances
its software to ensure availability of desired features and functions, there can
be no assurance that such features and functions will be timely  available.  The
Company's products may also rely upon the products of other vendors that may not
be Y2K  compliant.  Such  reliance  may prevent  the  Company's  customers  from
achieving  all of the  Company's  desired  features and  functions.  The Company
anticipates  the  software  industry  will  generally  be  subject  to  material
litigation. Such claims against the Company, with or without merit, could have a
material  adverse  effect  on the  Company's  business,  operating  results  and
financial condition.

Internal Systems.  The Company has assessed the impact of Y2K issues with regard
to its  internal  reporting  systems  and  operations  and  determined  that the
remaining costs associated with addressing such issues will not be material. The
Company expects all of its internal systems to be Y2K compliant prior to January
1,  2000.  The  Company  is  contacting  its own key  suppliers  and  vendors to
ascertain  the extent to which their systems are Y2K compliant and the extent to
which the Company could be adversely  affected by the failure of such systems to
be Y2K  compliant.  Management  does not  believe  that  the  cost to bring  its
software  products and internal systems into Y2K compliance will have a material
adverse  effect on the Company's  results of operations or financial  condition.
However,  a failure to fully  identify  all Y2K  dependencies  in the  Company's
systems or in the systems of its suppliers,  vendors, and financial institutions
could have material  adverse effect upon the Company,  including but not limited
to operating results,  financial condition and delays in the delivery or sale of
products. The Company believes that the likelihood of a disruption in operations
related to Y2K issues is remote.

Impact on Revenue.  The Company believes the purchasing patterns of existing and
potential  customers may be affected by Y2K issues. Many companies are expending
substantial  resources  to repair,  in some  cases  temporarily,  their  current
software  systems  for Y2K  compliance.  These  expenditures  may  result  in an
increase  in  demand  for  the  Company's  products.  However,  there  can be no
assurance that such increase in

                                       12
<PAGE>
                        CPS SYSTEMS, INC. AND SUBSIDIARY

                                 MARCH 31, 1999

demand will be realized or that any increase can be sustained  beyond the end of
the current fiscal year. Consequently, changes in purchasing patterns could have
a material  adverse effect upon the Company's  business,  operating  results and
financial condition.

Expenses  Related to Y2K  Compliance.  The Company has not incurred  significant
expense in becoming Y2K  compliant.  Future costs related to Y2K  compliance are
not  expected  to have a  material  adverse  effect on the  Company's  operating
results or financial condition.


                           PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

The Company is presently involved in significant litigation. Five law suits have
been filed  against the Company  during the period from  December  1998  through
January 1999 seeking class  certification  and recovery for, among other things,
violations of federal securities laws associated with the Company's registration
statement  and its Form  10-Qs for the first and second  quarter of 1998.  These
lawsuits  were filed  following  the  Company's  November 4, 1998 press  release
announcing that it was restating its first and second quarter  revenues for 1998
in light of AICPA Statement of Position 97-2, for software  revenue  recognition
requirements. The Company intends to vigorously defend the lawsuits.

The  Company is also a  defendant  in  Continental  Pacific  Corporation  v. CPS
Systems Inc., et al., pending in the Circuit Court for Lee County, Florida. This
suit alleges that three former  employees of the plaintiff joined the employment
of the  Company  in  violation  of their  non-competition  agreement,  and seeks
injunctive and monetary relief for the defendants'  breaches of the irrespective
employment agreements and for the Company's role in soliciting their employment.
The three former  employees of the plaintiff left the plaintiff and sought other
employment due to financial  difficulties facing the plaintiff,  which caused it
to  discontinue  paying salary and employment  benefits to the three  individual
defendants.   Accordingly,  the  defendants  contend  that  the  non-competition
agreements at issue in the case are unenforceable.  In a preliminary  injunction
hearing held in the case, the Company and the individual  defendants  prevailed.
The Court refused to enjoin the individual  defendants  from  continuing to work
for the Company.  The case is presently in discovery,  and several key witnesses
remain to be deposed.  The Company and the  individual  defendants  have filed a
motion for  summary  judgment  asking the Court to dismiss the case based on the
lack of a  genuinely  disputed  issue of material  fact that  remains for trial.
Although the motion is presently pending,  the Company and the defendants do not
expect a ruling until discovery in the case has been completed.

The Company has also been  notified by Peoria  County,  Illinois of the County's
termination of the contract  between the Company and the county and the county's
intention to recover the customer deposit of $340,000 and to receive a credit of
an  outstanding  receivable  of  $170,650.  The  outstanding  receivable  is not
recognized  as current  income but is instead  booked to deferred  revenue.  The
Company has reviewed the notice and the  contract  and  determined  the county's
termination was not warranted.

From time to time,  the  Company is  involved  in other  litigation  relating to
claims arising out of its operations in the normal course of business. Except as
set  forth  above,  the  Company  is not a party to any legal  proceedings,  the
adverse  outcome  of  which,  individually  or in the  aggregate,  would  have a
material  adverse  effect on the  Company's  results of  operations or financial
position.

                                       13
<PAGE>
                        CPS SYSTEMS, INC. AND SUBSIDIARY

                                 MARCH 31, 1999

ITEM 2.  CHANGES IN SECURITIES

The Company  has  established  an equity  participation  plan (the "1997  Equity
Participation  Plan")  to  enable  executive  officers,   other  key  employees,
independent  directors and consultants of CPS to participate in the ownership of
the  Company.  The 1997  Equity  Participation  Plan  provides  for the award to
executive officers,  other key employees,  independent directors and consultants
of the Company of a broad variety of stock-based compensation  alternatives such
as nonqualified  stock options,  incentive stock options,  restricted  stock and
performance awards and provides for the grant to executive  officers,  other key
employees,  independent directors and consultants of nonqualified stock options.
Awards under the 1997 Equity  Participation  Plan may provide  participants with
rights to acquire  shares of common stock.  A total of 600,000  shares of Common
Stock are reserved for issuance pursuant to the 1997 Equity  Participation Plan,
of which  options  to  purchase  556,600  shares  have been  granted  to certain
directors,  officers and  employees  as of March 31, 1999.  For the three months
ended  March 31,  1999,  15,000  options  were  granted.  Options  shall  become
exercisable in three cumulative equal installments.  The first installment shall
become  exercisable on the first anniversary of the date the option was granted.
Neither these options, nor the underlying securities, have been registered under
the Securities Act of 1933, as amended (the "Securities Act").

The Company has also established the CPS Systems,  Inc.  Employee Stock Purchase
Plan (the "Employee Stock Purchase Plan") to assist  employees of the Company in
acquiring a stock  ownership  interest in CPS and to encourage them to remain in
the  employment  of the  Company.  The  Employee  Stock  Purchase  Plan  permits
employees to purchase  shares of Common Stock  through  payroll  deductions at a
price equal to 85% of fair  market  value.  A total of 100,000  shares of Common
Stock are reserved for issuance  pursuant to the Employee Stock Purchase Plan. A
total of 100,000  shares of Common Stock are  reserved for issuance  pursuant to
the Employee  Stock  Purchase  Plan.  For the three months ended March 31, 1999,
employees have purchased 8,974 shares. Shares purchased under the Employee Stock
Purchase  Plan are  restricted  for one year  from the date of  purchase.  These
shares have not been registered under the Securities Act.


ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

As of December 31, 1998, the Company was in violation of the note agreement with
Hanifen Imhoff  Mezzanine Fund, L.P.  relating to the Hanifen Loan The violation
pertains to the ratio of cash flow to total  contractual  debt service.  Hanifen
Imhoff Mezzanine Fund, L.P has waived through September 30, 1999 compliance with
this ratio.


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

None


ITEM 5.  OTHER INFORMATION

The Company's  common stock is listed on the American  Stock  Exchange under the
symbol "SYS". Trading in the stock began on March 25, 1998.

                                       14
<PAGE>
                        CPS SYSTEMS, INC. AND SUBSIDIARY

                                 MARCH 31, 1999


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits

Exhibit 2.1    Agreement  and Plan of Merger dated March 30, 1999 between  Tyle
               Corporation and CPS Systems, Inc.

Exhibit 2.2    Agreement and Plan of Merger Amendment No. 1 dated April 20, 1999
               between Tyler Corporation and CPS Systems, Inc.

Exhibit 27.1   Financial Data Schedule


(c) No reports on Form 8-K were filed by CPS  SYSTEMS,  INC.  during the quarter
ended March 31, 1999.



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


Date:  May 17, 1999

                                   /s/ PAUL E. KANA
                                -----------------------------------------------
                                Paul E. Kana
                                CHAIRMAN OF THE BOARD OF DIRECTORS,
                                CHIEF EXECUTIVE OFFICER
                                AND DIRECTOR (PRINCIPAL EXECUTIVE OFFICER)


                                   /s/ KEVIN L. FIGGE
                                -----------------------------------------------
                                Kevin L. Figge
                                VICE PRESIDENT, CHIEF FINANCIAL OFFICER
                                (PRINCIPAL FINANCIAL OFFICER)


                                       15