CPS SYSTEMS INC, SB-2/A, 1998-03-19

CPS SYSTEMS INC
SB-2/A, 1998-03-19
COMPUTER INTEGRATED SYSTEMS DESIGN

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As filed with the Securities and Exchange Commission on March 19, 1998.
Registration No. 333-39173

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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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AMENDMENT NO. 4

FORM SB-2
REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

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CPS SYSTEMS, INC.
(NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
TEXAS 7379 75-1607857
(STATE OR OTHER (PRIMARY STANDARD (I.R.S EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
3400 CARLISLE
SUITE 500
DALLAS, TEXAS 75204
(214) 855-5277
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE
OFFICES AND PRINCIPAL PLACE OF BUSINESS)

PAUL E. KANA
CHIEF EXECUTIVE OFFICER
C/O CPS SYSTEMS, INC.
3400 CARLISLE
SUITE 500
DALLAS, TEXAS 75204
(214) 855-5277
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)

COPIES TO:
EDWARD H. BROWN, ESQ. MICHAEL J. ERICKSON, ESQ.
CHESTER J. HOSCH, ESQ. LAURA A. BERTIN, ESQ.
SCHREEDER, WHEELER & FLINT, LLP SUMMIT LAW GROUP, P.L.L.C.
1600 THE CANDLER BUILDING 1505 WESTLAKE AVENUE NORTH
127 PEACHTREE STREET, N.E. SUITE 300
ATLANTA, GEORGIA 30303 SEATTLE, WASHINGTON 98109
(404) 681-3450 (206) 281-9881
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this Registration Statement becomes effective.

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If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.

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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD, NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS

Subject to Completion Dated March 19, 1998

1,900,000 SHARES

LOGO
COMMON STOCK

CPS Systems, Inc. ("CPS" or the "Company") hereby offers 1,900,000 shares of
its common stock (the "Common Stock"). Prior to this offering, there has been
no public market for the Common Stock. See "Underwriting" for a discussion of
the factors to be considered in determining the initial public offering price.
The initial public offering price is $ per share. The Common Stock will be
quoted on the American Stock Exchange under the symbol "SYS" effective upon the
closing of this offering.

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THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 6 HEREOF.

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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

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<TABLE>
<S> <C> <C> <C>
UNDERWRITING
PRICE DISCOUNTS AND PROCEEDS TO
TO PUBLIC COMMISSIONS(1) COMPANY(2)
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Per share....................... $ $ $
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Total(3)........................ $ $ $
</TABLE>
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(1) Excludes a non-accountable expense allowance payable to Cruttenden Roth
Incorporated and Josephthal & Co. Inc., representatives of the Underwriters
(the "Representatives", and the value of warrants to purchase up to 190,000
shares of Common Stock at an exercise price of 165% of the public offering
price to be issued to the Representatives (the "Representatives' Warrant").
The Company and the selling shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting offering expenses, including the non-accountable expense
allowance in the amount of $313,500 ($360,525 if the Underwriters' over-
allotment option is exercised in full), estimated at $910,000, payable by
the Company.
(3) Certain shareholders have granted to the Underwriters a 45-day option to
purchase up to 285,000 additional shares of Common Stock on the same terms
and conditions as set forth above, solely to cover over-allotments, if any.
If such option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions and Proceeds to the Selling
Shareholders will be $ , $ and $ , respectively. See "Underwriting."

The shares of Common Stock are offered by the several Underwriters, when, as
and if delivered to and accepted by the Underwriters and subject to various
prior conditions, including their right to withdraw, cancel or modify such
offer and to reject orders in whole or in part. It is expected that delivery of
share certificates will be made against payment therefor at the offices of
Cruttenden Roth Incorporated in Irvine, California, or through the facilities
of The Depository Trust Company on or about , 1998.

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Cruttenden Roth Josephthal & Co. Inc.
Incorporated

THE DATE OF THIS PROSPECTUS IS , 1998.
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LOGO
[Map showing the locations of the Company's customer installations and of the
Company's personnel and sales offices.]

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING BY ENTERING STABILIZING BIDS, EFFECTING SYNDICATE COVERING
TRANSACTIONS OR IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."

The Company intends to furnish annual reports to shareholders containing
audited financial statements and make available quarterly reports and such
other periodic reports as it may determine to be appropriate or as may be
required by law.

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PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and Financial Statements,
including the Notes thereto, appearing elsewhere in this Prospectus. Except as
otherwise indicated, the information in this Prospectus (a) assumes that the
over-allotment option granted to the Underwriters has not been exercised and
(b) gives effect to the exercise of outstanding warrants to purchase an
aggregate of 927,766 shares of common stock, exercisable at a per share price
of $0.0026, which warrants will be exercisable on the earlier of December 31,
1999, or completion of an initial public offering. See "Underwriting."
Investors should carefully consider the information set forth under the heading
"Risk Factors."

THE COMPANY

CPS develops, markets, implements and supports fully integrated software
applications designed specifically for public sector organizations, including
states, counties, townships, city governments and other municipal agencies. The
Company's products address the following functional areas: (i) property tax
appraisal and assessment, (ii) property tax billing and collection, (iii) city
and municipal systems and (iv) remittance processing systems. Currently, the
Company's public sector software applications are installed in six states
(Colorado, Florida, North Carolina, New Mexico, Oklahoma and Texas),
representing more than 250 customers. The majority of its customers are county
governments with taxable parcel counts over 10,000 or cities with populations
between 5,000 and 35,000. The Company's focus on the public sector allows it to
design solutions that address the needs of these organizations.

The Company has identified three significant growth opportunities in the
public sector marketplace. First, CPS intends to geographically expand its core
product business to address the following functional areas: property tax
appraisal and assessment, property tax billing and collection and city and
municipal systems. This opportunity represents a key segment of the Company's
business strategy due to the growing recurring revenue streams generated by
license agreements entered into by customers of the Company's core business.
Second, the Company plans to leverage its 17 years of public sector experience
to capitalize on the opportunity created by the Year 2000 ("Y2K") problem. The
Y2K problem results from the inability of certain computer systems to properly
interpret dates for the year 2000 and beyond. For example, unless Y2K
compliance is completed in certain systems, public sector organizations cannot
properly (i) appraise, bill and collect property taxes, a principal revenue
source, (ii) record fines and deeds resulting from property sales, and (iii)
maintain and retain accurate law enforcement records. In addressing the Y2K
problem, public sector entities are faced with the prospect of competing with
the private sector for recruiting, hiring and retaining top data processing
talent, despite possessing limited ability to match competitive salaries for
attracting new hires or retaining existing staff. Although the Company began
integrating Y2K solutions and applications into its core products in 1995, the
Company believes the opportunity to leverage Y2K applications into additional
sales has only recently materialized. Third, CPS intends to leverage the
interoperability of the Company's core products to manage information flow
between departments as organizations shift from mainframe computers to
client/server systems.

The public sector marketplace is composed of state, county and city
governments, other municipal agencies and publicly owned utilities. This market
comprises over 3,000 counties and over 19,000 municipalities in the United
States. According to one industry source, state and local government agencies
spent approximately $34.5 billion on information technology and related
products in 1996. This total includes approximately $5.0 billion for software,
$6.7 billion for external services, $7.4 billion for hardware and $15.4 billion
for internal services (e.g., in-house management information systems
departments). Management estimates the remaining $1.9 billion was spent on the
software in the Company's core product areas. While the private sector is
taking steps to address the Y2K problem, the Company believes many public
sector organizations lack the resources to achieve a timely solution due to
budgetary and other constraints. One industry source estimates that the overall
cost of solving the Y2K problem worldwide will be in the range of $300 billion
to $600 billion. CPS believes the Y2K problem will cause many public sector
organizations

3
<PAGE>

to explore further the possibility of migrating all or portions of their legacy
systems to Y2K compliant client/server systems. As computing technology evolves
and information processing requirements expand, medium to large public sector
organizations are seeking to preserve the investment in their existing systems
by integrating or replacing mainframe computers with modern distributed
computer processing architectures, such as client/server systems.

CPS currently markets 41 applications to public sector organizations,
offering customers the following: (i) compliance with periodically changing
legislation, (ii) simplification of data entry, (iii) extensive security
features, (iv) flexible report configuration and (v) open system technology.
CPS has developed a proprietary tool that converts client data into a Y2K
compliant format that can be run by CPS applications which are Y2K compliant.
Management believes this tool offers a significant competitive advantage in
marketing software applications. The Company's application software products
are designed to be readily adaptable to meet a customer's initial needs and to
offer sufficient flexibility to respond to a customer's specific system
refinements and ongoing changes. The Company's tiered software architecture
enables CPS to utilize multiple platforms and effectively integrate new
technologies with existing software.

The Company views the Y2K market as an opportunity to become one of the
leaders in providing public sector solutions on a national basis. To accomplish
this, CPS plans to expand geographically the size of its direct sales and
marketing force and concurrently hire additional technical support and systems
personnel. Expansion benefits include the execution of additional long-term
service agreements, generating recurring revenue from continuing monthly
maintenance and service fees, typically at a rate equal to approximately 32% of
the software license fee. The Company believes that the public sector
marketplace is highly fragmented with many small, closely-held companies and
views acquisitions as a means of acquiring technology and application
expertise, broadening its customer base and expanding geographically. To
support its growth, the Company has entered into an alliance with an external
software developer and intends to enter into additional strategic alliances
with other external software developers and Y2K service providers enabling the
Company to provide the necessary technical resources in a timely manner. The
Company believes a substantial opportunity exists to sell additional products
to current customers who have only one installed CPS product. Moreover, CPS
believes its customer base offers considerable leverage to new business since
references from existing customers often result in future sales opportunities.

The Company was incorporated under the laws of the state of Texas in July
1978. The Company's executive offices are located at 3400 Carlisle, Suite 500,
Dallas, Texas 75204, and its telephone number is (214) 855-5277.

THE OFFERING

Common Stock offered by the 1,900,000
Company...........................

Common Stock to be outstanding
after this offering..............
6,732,502(1)

Use of Proceeds................... Repayment of certain indebtedness, working
capital, research and development,
potential acquisitions, certain investments
and other general corporate purposes. See
"Use of Proceeds."

Proposed American Stock Exchange SYS
Symbol............................
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(1) Does not give effect to (i) 335,000 shares of Common Stock reserved for
issuance upon exercise of outstanding options under the Company's 1997
Equity Participation Plan with a per share exercise price equal to the
initial offering price, (ii) 265,000 shares of Common Stock reserved for
issuance upon exercise of options reserved for future grant under the
Company's 1997 Equity Participation Plan, (iii) 100,000 shares of Common
Stock reserved under the Company's Employee Stock Purchase Plan and (iv)
190,000 shares (218,500 shares if the Underwriters' over-allotment option
is exercised in full) of Common Stock issuable upon exercise of the
Representatives' Warrant at an exercise price of $ per share. See
"Management--Employee Equity Plans," "Description of Capital Stock--
Warrants" and "Underwriting."

<PAGE>

SUMMARY FINANCIAL DATA

(amounts in thousands, except per share data)

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
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1997 1996
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<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenue............................................... $10,478 $8,363
Gross profit................................................ 7,306 6,496
Operating expenses.......................................... 7,158 5,758
Earnings from operations.................................... 148 738
Net loss.................................................... (247) (246)
Net loss per common share(1)
Basic....................................................... $ (0.06) $(0.06)
Diluted..................................................... $ (0.07) $(0.06)
Weighted average shares used in computing net loss per common
share(1)
Basic....................................................... 3,905 3,905
Diluted..................................................... 4,833 3,905
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1997
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ACTUAL AS ADJUSTED(/2/)
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<S> <C> <C>
BALANCE SHEET DATA:
Cash.................................................. $ 327 $
Working capital (deficit)............................. (489)
Total assets.......................................... 6,499
Long-term debt, net of current portion................ 2,137
Shareholders' equity.................................. 277
</TABLE>
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(2) Adjusted to give effect to the sale by the Company of 1,900,000 shares of
Common Stock offered hereby at the public offering price of $ per share
and the application of the estimated net proceeds therefrom. See "Use of
Proceeds."

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The Company desires to take advantage of the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995. Certain statements in this
Prospectus that are not historical fact constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
Discussions containing such forward-looking statements may be found in the
material set forth under "Summary," "Use of Proceeds," "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "Business,"
as well as within this Prospectus generally. In addition, when used in this
Prospectus, the words "believes," "anticipates," "expects" and similar
expressions are intended to identify forward-looking statements. Such
statements are subject to a number of risks and uncertainties. Actual results
could differ materially from those projected in the forward-looking statements
as a result of the risk factors set forth in this Prospectus and the matters
set forth in this Prospectus generally. The Company undertakes no obligation to
publicly release the result of any revisions to these forward-looking
statements that may be made to reflect any future events or circumstances.

5
<PAGE>

RISK FACTORS

In addition to the other information contained in this Prospectus, the
following risk factors should be considered carefully in evaluating the
Company and its business before purchasing any of the Common Stock offered
hereby.

RISKS ASSOCIATED WITH PUBLIC SECTOR MARKET

A substantial portion of the Company's revenue to date has been attributable
to sales of software and services to state, county and city governments and
other municipal agencies. The Company expects that sales to such public sector
customers will account for substantially all of the Company's revenue in the
future. Virtually all of these public sector organizations have existing
information processing systems. Accordingly, in order to continue to increase
its sales to this market, the Company must persuade these organizations to
replace or upgrade existing information processing systems. Change to an
organization's information system is a costly, time consuming and
operationally disruptive process for the customer. Conversion to a new
information processing system must typically be done without any disruption of
service and, accordingly, the Company's potential customers perceive a high
degree of risk in connection with the adoption of a new system. In addition,
the purchase of the Company's products involves a significant commitment of
capital, with attendant delays frequently associated with large capital
expenditures by an organization. For these and other reasons, the sales cycle
associated with the purchase of the Company's products is typically lengthy
and subject to a number of significant risks, including customers' budgetary
constraints and internal acceptance reviews, over which the Company has little
or no control. There can be no assurance that potential customers for the
Company's products in the public sector market will continue to make
information processing system replacement decisions at rates necessary to
maintain demand for the Company's products and sustain market growth or that
the Company's products will be accepted by public sector organizations that
consider replacing their current information processing systems. A significant
reduction in demand or acceptance of the Company's products could have a
material adverse effect on the Company's business, financial condition and
operating results.

UNCERTAINTY OF DEMAND FOR YEAR 2000 SOLUTIONS

The Company anticipates focusing a significant portion of its marketing and
sales efforts on products and solutions addressing the Y2K problem. The
Company's current plans involve developing solutions for existing and
potential customers based upon modifications to the Company's existing
software product lines. Although the Company believes that the market for Y2K
solutions will grow significantly as the year 2000 approaches, there can be no
assurance that the market will develop to the extent anticipated by the
Company. Moreover, the Company's efforts are directed at addressing the Y2K
problem within the framework of its traditional software products.
Consequently, the Company's market for its Y2K solution products is limited to
existing and potential public sector customers of the Company's existing
software products. In addition, the Company's customers may seek alternative
solutions for the Y2K problem. Many customers may attempt to resolve the
problem internally rather than purchase products and solutions from the
Company or may seek to solve the Y2K problem by retaining consultants or other
competitors who may address the Y2K problem through enterprise solutions
covering the customer's entire computer system. Due to these factors,
development of a market for the Company's Y2K solution is uncertain and
unpredictable. Furthermore, the demand for Y2K products and solutions is
likely to diminish after the year 2000. The failure of the market to increase,
or to increase more slowly than anticipated, could have a material adverse
effect on the Company's business, financial condition and operating results.
See "Business--Industry Overview."

COMPETITION

6
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Andersen Consulting, KPMG Peat Marwick and Oracle Corporation), (ii) companies
which focus on selected segments of the public sector market (including
Systems & Computer Technology Corporation, Manatron, Inc., H.T.E., Inc.,
American Management Systems Incorporated and BRC Holdings, Inc.) and (iii) a
significant number of smaller private companies. The Company also competes
with in-house management information services staff. In addition, within the
market for its Y2K solution products, the Company anticipates that it will
compete with companies who focus upon overall enterprise solutions to the Y2K
problem. Many of the Company's competitors are more established, benefit from
greater name recognition and have substantially greater resources than the
Company. Moreover, the Company could face additional competition as other
established and emerging companies enter the public sector software
application market and/or the Y2K market and new products and technologies are
introduced. Increased competition could result in price reductions, fewer
customer orders, reduced gross margins and loss of market share, any of which
could have a material adverse effect on the Company's business, financial
condition and operating results. In addition, current and potential
competitors may make strategic acquisitions or establish cooperative
relationships among themselves or with third parties, thereby increasing the
ability of their products to address the needs of the Company's prospective
customers. Accordingly, it is possible that new competitors or alliances among
current and new competitors may emerge and rapidly gain significant market
share. There can be no assurance that the Company will be able to compete
successfully against current and future competitors, and the failure to do so
would have a material adverse effect upon the Company's business, financial
condition and operating results. See "Business--Competition."

MANAGEMENT OF GROWTH

The Company has recently experienced a period of significant expansion in
the number of its employees, the scope of its operating and financial systems
and the geographic area of its operations, and anticipates that growth may
continue in the future. To accommodate future growth, if any, the Company must
continue to implement and improve information systems, procedures and controls
and hire and train management, technical and sales personnel. The Company
believes there is significant competition for software development
professionals with the skills and expertise necessary to perform services
offered by the Company. Although the Company invests, and plans to continue
investing, significant resources in retaining and expanding its management,
technical and sales force, the Company may experience difficulty in recruiting
and retaining capable personnel. There can be no assurance that the Company
will be able to expand successfully its management, technical or sales
personnel or that any such expansion will increase revenue. Failure by the
Company to implement and improve the Company's operational, financial and
management systems or maintain and expand personnel could have a material
adverse effect on the Company's business, financial condition and operating
results. See "Risk Factors--Dependence on Key Personnel" and "Business--
Employees."

POTENTIAL FLUCTUATIONS OF OPERATING RESULTS; FUTURE OPERATING RESULTS
UNCERTAINTY

The Company's revenue and operating results are subject to fluctuations
resulting from a variety of factors, including the effect of budgeting and
purchasing practices of its customers, the length of customer evaluation
processes for the Company's solutions, the timing of customer system
conversions, announcements of new products by the Company or its competitors
and the Company's sales practices. In addition, since a significant portion of
the Company's operating expenses is fixed, the Company may not be able to
adjust or reduce spending in response to sales shortfalls or delays. Many of
these factors are not within the Company's control. These factors can cause
significant variations in operating results from quarter to quarter, which may
also adversely affect and cause volatility in the market price of the
Company's common stock. The Company believes that quarter to quarter
comparisons of its financial results are not necessarily meaningful and should
not be relied upon as an indication of future quarterly performance. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Quarterly Results of Operations."

7
<PAGE>

ABILITY TO RESPOND TO TECHNOLOGICAL CHANGE

The Company's future success will depend significantly upon its ability to
enhance its current products, develop or acquire and market new products which
keep pace with technological developments, evolving industry standards and
legislative amendments and respond to changes in customer needs. There can be
no assurance that the Company will be successful in developing or acquiring
product enhancements or new products to address changing technologies and
customer requirements, or that its competitors will not develop products that
are superior to the Company's products or achieve greater market acceptance
than the Company's products. Failure by the Company to respond to
technological change or the development of superior products by its
competitors could have a material adverse effect on the Company's business,
financial condition and operating results. See "Business--Growth Strategy."

DEPENDENCE ON KEY PERSONNEL

The Company's continued success will depend upon the availability and
performance of its senior management team, particularly Paul E. Kana, Chairman
and Chief Executive Officer, and James K. Hoofard, Jr., President and Chief
Operating Officer, each of whom possess unique and extensive industry
knowledge and experience. While the Company currently maintains key-man life
insurance policies on Paul E. Kana and James K. Hoofard, Jr., the loss of
either man could have a material adverse effect on the Company's business,
financial condition and operating results. See "Management--Directors,
Executive Officers and Key Employees" and "--Executive Compensation."

PROPRIETARY RIGHTS AND RISKS OF INFRINGEMENT

The Company regards certain features of its internal operations, software
and documentation as confidential and proprietary, and relies on a combination
of contract and trade secret laws and other measures to protect its
proprietary intellectual property. Despite these precautions, it may be
possible for unauthorized parties to copy the Company's software or reverse
engineer or otherwise obtain and use information the Company regards as
proprietary. The Company has no patents and, under existing copyright laws,
has only limited protection. In addition, certain provisions of the license
agreements entered into by the Company, including provisions against
unauthorized use, transfer and disclosure, may be unenforceable under the laws
of certain jurisdictions. There can be no assurance that the steps taken by
the Company to protect its proprietary rights will be adequate to deter
misappropriation of its technology or independent development by others of
technologies that are substantially equivalent or superior to the Company's
technology. Any such misappropriation or development could have a material
adverse effect on the Company's business, financial condition and operating
results. As the number of competitors providing similar products increases,
overlapping methodologies used in such products will become more likely.
Although the Company's methodology has never been the subject of an
infringement claim, there can be no assurance that third parties will not
assert infringement claims against the Company in the future, that assertion
of such claims will not result in litigation or that the Company would prevail
in such litigation or be able to obtain a license for the use of any infringed
intellectual property from a third party on commercially reasonable terms.
Litigation, regardless of its outcome, could result in substantial cost to the
Company and divert resources and management from the Company's operations. Any
infringement claim or litigation against the Company could, have a material
adverse effect on the Company's business, financial condition and operating
results. See "Business--Intellectual Property, Proprietary Rights and
Licenses."

POTENTIAL PRODUCT LIABILITY AND RISK OF SOFTWARE DEFECTS

The Company markets to its customers complex, mission-critical applications.
Any failure in a customer's system could result in a claim for damages,
regardless of the Company's responsibility for such failure. The Company has
never been involved in product liability litigation, and the Company's license
agreements with its customers typically contain provisions designed to limit
the Company's exposure to potential product liability claims. However, there
can be no assurance that the limitation of liability provisions contained in
the

8
<PAGE>

Company's license agreements would be enforceable or would otherwise protect
the Company from liability for damages. The Company currently carries general
liability insurance protecting against product liability claims. There can be
no assurance that such insurance will continue to be available, or available
at a cost acceptable to Company, or that the policy's limits will be
sufficient to satisfy any judgment or claim. The successful assertion of one
or more large claims against the Company that exceed available insurance
coverage or changes in the Company's insurance policies, including premium
increases or the imposition of a large deductible or co-insurance requirements
could have a material adverse effect on the Company's business, financial
condition and operating results. Furthermore, litigation, regardless of its
outcome, could result in substantial cost to the Company and divert
management's attention from the Company's operations, which could have a
material adverse effect on the Company's business, financial condition and
operating results.

Software products as complex as those developed by the Company may contain
errors or defects, particularly when first introduced or when new versions or
enhancements are released. Errors, bugs or viruses could result in loss or
delay of market acceptance, a failure in a client's system or complete loss of
client data. Although the Company has not experienced material adverse effects
resulting from any such defects or errors to date, there can be no assurance
that defects and errors will not be found after commencement of product
shipments. Any such defects could have a material adverse effect upon the
Company's business, financial condition and operating results. See "Business--
Research and Development."

ACQUISITION RISK

As part of its growth strategy, the Company intends to evaluate the
acquisition of other companies, assets or product lines that would complement
or expand its existing business in attractive geographic or service markets or
that would broaden its customer relationships. Although the Company
periodically considers possible acquisitions, no specific acquisitions are
being negotiated. In addition, although the Company conducts due diligence
reviews of potential acquisition candidates, the Company may not be able to
identify all material liabilities or risks related to potential acquisition
candidates. There can be no assurance that the Company will be able to locate
and acquire any business, retain key personnel and customers of an acquired
business or integrate any acquired business successfully. Additionally, there
can be no assurance that financing for any acquisition, if necessary, will be
available on acceptable terms, if at all, or that the Company will be able to
accomplish its strategic objectives in connection with any acquisition. See
"Business--Growth Strategy."

DEPENDENCE ON KEY SUPPLIERS AND RELATIONSHIPS

The Company purchases certain key components of its products from limited
source suppliers. Establishing relationships with additional or replacement
suppliers for any of the components used in the Company's products, if
required, could involve significant additional costs. The Company is not a
party to any long-term agreements with any of these suppliers. The Company
believes no significant obstacles to replacing these suppliers exist. However,
the inability of any of the Company's suppliers to provide functional
components on a timely basis, or the inability of the Company to locate
qualified alternative suppliers or coding programmers on acceptable terms,
could have a material adverse effect on the Company's business, financial
condition and operating results. The Company may also need to establish
additional alliances and relationships in order to keep pace with evolutions
in technology and enhance its service offerings, and there can be no assurance
such additional alliances will be established. See "Business--Growth Strategy"
and "--Sales and Marketing."

NO PRIOR PUBLIC MARKET; POTENTIAL VOLATILITY OF STOCK PRICE

Prior to this offering, there has been no public market for the Company's
Common Stock, and there can be no assurance that an active trading market will
develop or be sustained after this offering. The initial public offering price
has been determined through negotiations between the Company and the
Representatives of the Underwriters based on several factors and may not be
indicative of the market price of the Common Stock after this offering. The
market price of the shares of Common Stock is likely to be highly volatile and
may be significantly affected by factors such as actual or anticipated
fluctuations in the Company's operating results,

9
<PAGE>

announcements of technological innovations, new products or new contracts by
the Company or its competitors, developments with respect to patents,
copyrights or proprietary rights, conditions and trends in the software and
other technology industries, adoption of new accounting standards affecting
the software industry, changes in financial estimates by securities analysts,
general market conditions and other factors. In addition, the stock market has
from time to time experienced significant price and volume fluctuations that
have particularly affected the market prices for the common stock of
technology companies. These broad market fluctuations may adversely affect the
market price of the Common Stock.

CONTROL BY PRINCIPAL SHAREHOLDERS, OFFICERS AND DIRECTORS

Upon completion of this offering, the six existing directors, executive
officers and principal shareholders of the Company and their affiliates will
beneficially own approximately 68% of the outstanding Common Stock (64% if the
over-allotment option is exercised in full). As a result, these shareholders
will be able to exercise control over all matters requiring shareholder
approval, including the election of directors and approval of significant
corporate transactions. Such concentration of ownership may have the effect of
delaying or preventing a change in control of the Company. In addition, each
of the Company's current shareholders has pledged his shares to secure certain
of the Company's outstanding indebtedness. The Company believes that operating
revenue and reserves will be sufficient to pay such indebtedness. However,
there can be no assurance that the Company will be able to repay such
indebtedness and failure to do so could result in a change of control of the
Company and/or have a material adverse effect on the Company's business,
financial condition and operating results. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources" and "Principal Shareholders."

BROAD MANAGEMENT DISCRETION AS TO USE OF PROCEEDS

The principal purposes of this offering are to retire certain indebtedness,
obtain additional working capital, fund expanding research and development
efforts, create a public market for the Company's Common Stock and facilitate
the Company's future access to public equity markets. The Company expects to
use most of the net proceeds of this offering for working capital, research
and development, possible acquisitions and general corporate purposes.
Accordingly, the Company's management will retain broad discretion as to the
allocation of a substantial portion of the net proceeds from this offering.
Pending such uses, the Company intends to invest the net proceeds in short-
term, investment-grade, interest-bearing securities. See "Use of Proceeds."

RISK OF LOW-PRICED STOCKS

The Company has applied to have its Common Stock listed on the American
Stock Exchange effective upon the closing of this offering. In order to be
listed on the American Stock Exchange, a company must meet certain financial
maintenance criteria. Although the Company's Common Stock has been approved
for listing (subject to the completion of this offering) the Company currently
does not meet these criteria. There can be no assurance that the Company will
continue to be allowed to be listed on the American Stock Exchange and/or that
it will meet these criteria in the future. Failure to meet these maintenance
criteria in the future and/or the delisting of the Common Stock from the
American Stock Exchange could result in the Common Stock being traded on the
over-the-counter market, in which case investors may find it more difficult to
dispose of, or to obtain accurate quotations as to the market value of, the
Common Stock. If the Company's Common Stock was delisted from the American
Stock Exchange, and the trading price of the Common Stock were less than $5.00
per share, the Common Stock might be considered "penny stock" and trading in
the Common Stock might be subject to the requirements of certain rules under
the Securities Exchange Act of 1934. These rules could adversely affect the
ability and willingness of broker-dealers to sell the Common Stock, which
could reduce the liquidity of the Common Stock and have a material adverse
effect on the trading market for the Common Stock.

SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS; POSSIBLE ADVERSE EFFECT
ON FUTURE MARKET PRICES

Sales of a substantial number of shares of Common Stock in the public market
following this offering could adversely affect the market price of the Common
Stock. Upon completion of this offering, the Company

10
<PAGE>

will have outstanding 6,732,502 shares of Common Stock, of which the 1,900,000
shares sold in this offering (2,185,000 shares if the Underwriters' over-
allotment option is exercised in full) will be freely tradeable. Approximately
4,832,502 (4,547,502 if the Underwriters' over-allotment option is exercised
in full) of the remaining shares are subject to agreements with the
Underwriters under which such shares may not be offered, sold or otherwise
disposed of for a period of one year after the date of this Prospectus without
the prior written consent of Cruttenden Roth, but will thereafter be eligible
for sale pursuant to Rule 144 of the Securities Act. Cruttenden Roth has no
present intention to release the locked-up shares prior to expiration of the
one-year period. The holders of 927,766 shares of Common Stock (832,374 if the
Underwriters' over-allotment option is exercised in full) are entitled to
include their shares of Common Stock in the registration, subject to the
ability of the underwriters to limit the number of shares included in the
registration to not more than 10% of the offering with respect to such shares.
By exercising their rights, such holders could cause additional shares to be
sold in the public market. Sales pursuant to Rule 144 or other exemptions from
registration, or pursuant to registration rights, may have an adverse effect
on the market price for the common stock and could impair the Company's
ability to raise capital through an offering of its equity securities. See
"Shares Eligible for Future Sale," "Underwriting" and "Description of Capital
Stock--Registration Rights of Certain Holders."

DILUTION

Investors purchasing shares of Common Stock in this offering will incur
immediate and substantial dilution in the net tangible book value of the
Common Stock from the initial public offering price and will incur additional
dilution upon the exercise of stock options and warrants. See "Dilution."

NO CASH DIVIDENDS

The Company intends to retain any future earnings for its business and does
not anticipate paying any cash dividends in the foreseeable future. See
"Dividend Policy."

EFFECT OF CERTAIN CHARTER AND BYLAW PROVISIONS; ANTITAKEOVER EFFECTS

Certain provisions of the Company's Articles of Incorporation, as amended
(the "Restated Articles"), may deter or frustrate a takeover attempt of the
Company that a shareholder might consider in his best interest. The Company's
Restated Articles or Bylaws, among other things, provide that (i) the annual
meeting of shareholders shall be held on such date and at such time fixed from
time to time by the Board of Directors, provided that there shall be an annual
meeting held every calendar year, (ii) any special meeting of the shareholders
may be called only by the Chairman of the Board, President or upon the
affirmative vote of at least a majority of the members of the Board of
Directors, or upon the written demand of the holders of not less than 50% of
the votes entitled to be cast at a special meeting, (iii) an advance notice
procedure must be followed for nomination of directors and for other
shareholder proposals to be considered at annual shareholders' meetings and
(iv) the Company's Board of Directors be divided into three classes, each of
which serves for different three-year periods, and for which shareholders have
no cumulative voting rights. In addition, the Company will be authorized to
issue additional shares of Common Stock and up to 10 million shares of
preferred stock in one or more series, having terms fixed by the Board of
Directors without shareholder approval, including voting, dividend or
liquidation rights that could be greater than or senior to the rights of
holders of Common Stock. Shareholders will have no preemptive rights with
respect to any additional common stock or preferred stock. Issuance of
additional shares of Common Stock or new shares of preferred stock could also
be used as an antitakeover device. Except as set forth herein, the Company has
no current intentions or plans to issue additional Common Stock or issue
preferred stock. See "Description of Capital Stock."

11
<PAGE>

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 1,900,000 shares of
Common Stock offered by the Company at the public offering price of $ per
share are estimated to be $8.3 million after deducting the estimated
underwriting discounts and commissions and other estimated offering expenses
payable by the Company (assuming the over-allotment option granted to the
Underwriters by certain selling shareholders is exercised). The Company will
not receive any proceeds from any shares sold by the selling shareholders in
the event the over-allotment option is exercised, but will incur additional
expenses of approximately $200,000 in the event such option is exercised in
full. The Company intends to use the net proceeds from this offering for the
following specific purposes in order of priority:

<TABLE>
<CAPTION>
IN DOLLARS AS A PERCENTAGE
(APPROXIMATE) OF NET PROCEEDS
------------- ---------------
<S> <C> <C>
Repayment of indebtedness(1)...................... $1,000,000 12.05%
Working capital................................... 2,100,000 25.30%
Research and development.......................... 2,400,000 28.92%
Acquisitions and investments(2)................... 2,400,000 28.92%
General corporate purposes........................ 400,000 4.81%
---------- ------
Total............................................. $8,300,000 100.00%
========== ======
</TABLE>
- --------

(1) As of December 31, 1997 the outstanding principal amount under the
Company's senior term loan with FINOVA Capital Corporation ("FINOVA") was
approximately $874,000, including certain prepayment fees, bearing
interest at prime plus 2 1/2% and maturing December 30, 1998, and the
loans from shareholders to the Company's subsidiary, CDP Systems, Inc.,
amounted to approximately $126,000, including interest bearing interest at
8% and maturing July 1, 2000. See "Risk Factors--Acquisition Risk,"
"Management's Discussion and Analysis of Financial Condition and Results
of Operations--Liquidity and Capital Resources" and "Certain
Transactions."
(2) The Company expects to use approximately $2.4 million from net proceeds
for possible acquisitions or investments in products, technologies or
businesses that broaden or enhance the Company's current product or
service offerings, working capital and for general corporate purposes.

There are no current agreements or understandings with respect to any
acquisitions, investments or other transactions. Pending the uses described
above, the Company intends to invest the remaining net proceeds in short-term,
investment grade, interest-bearing securities.

DIVIDEND POLICY

The Company has never declared or paid cash dividends on its Common Stock.
The Company intends to retain earnings, if any, for use in its business and to
support growth and does not anticipate paying cash dividends on its Common
Stock in the foreseeable future. The Company's credit facilities currently
place certain restrictions on the Company's ability to declare and pay
dividends.

12
<PAGE>

DILUTION

The net tangible book value of the Company as of December 31, 1997 was
approximately ($.79) per share of Common Stock. Net tangible book value per
share of the Common Stock is equal to the book value of the Company's total
tangible assets less the book value of its total liabilities, divided by the
total number of shares of Common Stock outstanding as of December 31, 1997.
After giving effect to the sale by CPS of the 1,900,000 shares of Common Stock
offered hereby, assuming the over-allotment option granted to the Underwriters
by the selling shareholders is exercised in full and the exercise of the put
warrants, and after deducting the underwriting discount and the estimated
offering expenses payable by CPS, the pro forma net tangible book value of CPS
at December 31, 1997 would have been $ , or $. per share. This
represents an immediate increase in the net tangible book value of $ per
share to existing holders of Common Stock and an immediate dilution of $
per share to the persons purchasing shares of Common Stock at the assumed
public offering price. The following table illustrates this per share
dilution:

<TABLE>
<S> <C> <C>
Public offering price............................................... $
Net tangible book value before the offering........................ ($.79)
Increase attributable to new investors.............................
------
Pro forma net tangible book value after the offering................
---
Dilution to new investors ( %)..................................... $
===
</TABLE>

The following table compares, as of December 31, 1997, the number of shares
of Common Stock purchased from CPS by its existing shareholders prior to this
offering and to be purchased by new investors in this offering, the total
consideration paid or to be paid to CPS and the average price per share paid
or to be paid to the Company by the Company's existing shareholders and by new
investors purchasing shares in this offering, assuming no exercise of the
Underwriters' over-allotment option:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
----------------- ------------------------ PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ------------- -------------------
<S> <C> <C> <C> <C> <C>
Existing shareholders....... 4,832,502 72% $ 1,002,376 % $.21
New investors............... 1,900,000 28 $
--------- --- ------------- ------
Total..................... 6,732,502 100% $ 100%
========= === ============= ======
</TABLE>

The foregoing table assumes exercise of outstanding options or warrants. In
October 1997, CPS granted options to purchase 335,000 shares of Common Stock
under the Stock Option Plan. In addition, CPS will issue to the
Representatives, effective upon consummation of this offering, the
Representatives' Warrant. See "Management--Employee Equity Plans," "Principal
Shareholders" and "Underwriting."

13
<PAGE>

CAPITALIZATION

The following table sets forth the historical capitalization of the Company
as of December 31, 1997 on an actual and as adjusted basis. The information
set forth in the table below should be read in conjunction with the Company's
Financial Statements and Notes thereto appearing elsewhere in this Prospectus.
See "Use of Proceeds."

<TABLE>
<CAPTION>
DECEMBER 31, 1997
-------------------
(AMOUNTS IN
THOUSANDS)
AS
ACTUAL ADJUSTED(2)
------ -----------
<S> <C> <C>
Cash and cash equivalents.................................. $ 327 $
====== ======
SHORT-TERM DEBT:
Current portion of long-term debt.......................... 731 -0-
------ ------
LONG-TERM DEBT:
Senior subordinated note................................... 2,014 2,014
Shareholder loans.......................................... 123 -0-
Other debt(3).............................................. 242 -0-
------ ------
Total long-term debt...................................... $2,379 $2,014
------ ------
SHAREHOLDERS' EQUITY:
Common stock and paid-in capital
$.01 par value, 50,000 shares authorized;
3,905 shares issued and outstanding; 6,733 shares issued
and outstanding,
as adjusted(1)............................................. 1,000
Accumulated deficit........................................ (723) (861)
------ ------
Total shareholders' equity................................. $ 277 $
------ ------
Total capitalization....................................... $3,387 $
====== ======
</TABLE>
- --------
(1) Does not give effect to (i) 335,000 shares of Common Stock reserved for
issuance upon exercise of outstanding options under the Company's 1997
Equity Participation Plan with a per share exercise price equal to the
initial offering price, (ii) 265,000 shares of Common Stock reserved for
issuance upon exercise of options reserved for future grant under the
Company's 1997 Equity Participation Plan and (iii) 100,000 shares of
Common Stock reserved under the Company's Employee Stock Purchase Plan.
See "Management--Employee Equity Plans," "Description of Capital Stock--
Warrants" and "Underwriting."
(2) Reflects the issuance and sale by the Company of 1,900,000 shares of the
Common Stock offered hereby and the application of a portion of the net
proceeds therefrom to repay certain indebtedness, after deducting the
underwriting discount and estimated offering expenses. Assumes the over-
allotment option granted to the Underwriters by the selling shareholders
is exercised in full.

(3) Represents recorded amount of put warrants as of December 31, 1997.
Warrant holders have agreed to exercise all warrants upon the effective
date of the Company's initial public offering.

14
<PAGE>

SELECTED FINANCIAL DATA

The selected financial data set forth below for the years ended December 31,
1997 and 1996 and as of December 30, 1997 are derived from the Company's
audited Consolidated Financial Statements, which appear elsewhere in this
Prospectus. The selected financial data as of December 31, 1996 are derived
from the Company's audited financial statements which are not included in this
Prospectus. The data set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's Consolidated Financial Statements, including the
Notes thereto, included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------
1997 1996
------- ------
(AMOUNTS IN THOUSANDS
EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
License fees........................................ $ 2,178 $1,635
Recurring maintenance and service fees.............. 3,910 3,851
Product sales....................................... 3,421 2,052
Other service fees.................................. 969 825
------- ------
Total revenue...................................... 10,478 8,363
------- ------
Cost of revenue:
Product sales....................................... 2,529 1,465
Software............................................ 576 391
Distribution........................................ 67 11
------- ------
Total cost of revenue.............................. 3,172 1,867
------- ------
Gross profit......................................... 7,306 6,496
Operating expenses:
Support and customer service........................ 3,278 2,743
Selling............................................. 966 772
Research and development............................ 1,508 866
General and administrative.......................... 1,048 1,030
Amortization of goodwill and non-compete agreements. 358 347
------- ------
7,158 5,758
------- ------
Earnings from operations............................. 148 738
Interest and financing costs......................... 420 819
------- ------
Loss before income taxes............................. (272) (81)
Income tax expense (benefit)......................... (25) 165
------- ------
Net loss............................................. $ (247) $ (246)
======= ======
Net loss per common share(1)
Basic............................................... $ (0.06) $(0.06)
Diluted............................................. $ (0.07) $(0.06)
Weighted average shares used in computing net loss
per common share(1):
Basic............................................... 3,905 3,905
Diluted............................................. 4,833 3,905
<CAPTION>
DECEMBER 31,
---------------
1997 1996
------- ------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash................................................. $ 327 $ 592
Working capital (deficit)............................ (489) 303
Total assets......................................... 6,499 6,134
Long-term debt, net of current portion............... 2,137 2,741
Shareholders' equity................................. 277 524
</TABLE>
- --------

(1) Does not give effect to (i) 335,000 shares of Common Stock reserved for
issuance upon exercise of outstanding options under the Company's 1997
Equity Participation Plan with a per share exercise price equal to the
initial offering price, (ii) 265,000 shares of Common Stock reserved for
issuance upon exercise of options reserved for future grant under the
Company's 1997 Equity Participation Plan, (iii) 100,000 shares of Common
Stock reserved under the Company's Employee Stock Purchase Plan and
(iv) 190,000 shares (218,500 shares if the Underwriters' over-allotment
option is exercised in full) of Common Stock issuable upon exercise of the
Representatives' Warrant at an exercise price of $ per share. See
"Management--Employee Equity Plans," "Description of Capital Stock--
Warrants" and "Underwriting."

15
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

The Company offers fully integrated, Y2K compliant, software solutions
designed to automate and integrate the operations of public sector
organizations. CPS serves the public sector market through three core product
groups: property tax appraisal and assessment, property tax billing and
collection and city and municipal systems. The Company provides its software
applications to customers in public sector markets under license agreements
and service contracts generally ranging from one to five years with automatic
renewals thereafter. The Company also markets to the private sector its
remittance processing systems ("RPS") solutions and related network and
communications products. The Company derives its revenue from four principal
sources: software license fees; recurring monthly maintenance and service
fees; hardware and product sales; and recurring monthly hardware maintenance
fees. Revenue from software licenses is generated from the initial contracts
that grant customers the right to use the Company's software products. Revenue
from recurring monthly service fees is generated from the continued use of the
Company's software products. Revenue from hardware and product sales includes
sales of computers, data collection equipment, peripherals, RPS solutions and
related network and communications products purchased from third parties and
sold by the Company to its customers. Maintenance and other revenue includes
revenue associated with hardware maintenance and support services.

License fees charged to end users are fixed, with the amount of the fee
based upon the number of accounts processed, hardware configuration, number of
users and applications licensed. License fees are recognized when the related
license 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. Revenue from maintenance and
service agreements are deferred and recognized ratably over the contractual
periods the services are provided. Service contracts are required to be in
effect during the entire license term. Hardware revenue is recognized upon
shipment.

The Company capitalizes software development costs associated with the
development of products. At December 31, 1997, capitalized software
development costs totaled approximately $938,000. These costs relate primarily
to the development of new products and major enhancements to existing products
to accommodate new markets or platforms using existing technologies and
programming methods. These capitalized costs are amortized on a straight line
basis over a 72-120 month period, commencing when each product is available to
the market. The useful lives of the capitalized software development costs are
based on management's expectations of the minimum life cycle of each product.

At December 31, 1997 goodwill and other intangible assets totaled
approximately $1,905,000 and $160,000, respectively. The goodwill arose
primarily in connection with the 1994 Acquisition (as defined below) of the
Company. The useful life of the goodwill was based on management's estimate of
the minimum period of time that the goodwill acquired by the Company would be
of benefit to its operations. The useful lives of the other intangible assets,
consisting of debt issue costs were based on the terms of the related
agreements. The Company also had $366,000 of deferred offering costs at
December 31, 1997, which will be charged against the gross proceeds of this
offering.

Management periodically evaluates the realizability of its capitalized
software development costs, goodwill and other intangible assets in light of
current technology, as it relates to the Company's products, and the current
environment of its industry and markets. Management believes that no material
impairment of software development costs, goodwill and other intangible assets
existed as of December 31, 1997.

Management has addressed the Y2K issue as it affects the Company's internal
computer programs and believes that its significant internal computer programs
and systems are currently Y2K compliant.

16
<PAGE>

RESULTS OF OPERATIONS

Certain of the Company's operating data for fiscal years 1997 and 1996 are
set forth below as percentages of total revenue:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------
1997 1996
------ ------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
License fees................................................ 20.8% 19.6%
Recurring maintenance and service fees...................... 37.3 46.0
Product sales............................................... 32.6 24.5
Other service fees.......................................... 9.3 9.9
------ ------
Total revenue............................................. 100.0 100.0
------ ------
Cost of revenue:
Product sales............................................... 24.1 17.5
Software.................................................... 5.5 4.7
Distribution................................................ 0.7 0.1
------ ------
Total cost of revenue..................................... 30.3 22.3
------ ------
Gross profit................................................. 69.7 77.7
Operating expenses:
Support and customer service................................ 31.3 32.8
Selling..................................................... 9.2 9.2
Research and development.................................... 14.4 10.4
General and administrative.................................. 10.0 12.3
Amortization of goodwill and non-compete agreements......... 3.4 4.2
------ ------
Operating expenses........................................ 68.3 68.9
------ ------
Earnings from operations...................................... 1.4 8.8
Interest and financing costs.................................. 4.0 9.7
------ ------
Loss before income taxes...................................... (2.6) (0.9)
Income tax expense (benefit).................................. (0.2) 2.0
------ ------
Net loss...................................................... (2.4)% (2.9)%
====== ======
</TABLE>

17
<PAGE>

COMPARISON OF THE YEARS ENDED DECEMBER 31, 1997 AND 1996

REVENUE

The Company's total revenue was $10.5 million for the year ended December
31, 1997, compared to $8.4 million for the year ended December 31, 1996, an
increase of $2.1 million, or 25.0%. This increase was primarily due to an
increase in computer-assisted mass appraisal ("CAMA") installation, RPS
hardware and software sales and $400,000 of revenue related to CDP integrated
voice response systems.

License fees. The Company's revenue from license fees was $2.2 million for
the year ended December 31, 1997, compared to $1.6 million for the year ended
December 31, 1996, an increase of $600,000, or 37.5%. This increase was
primarily due to an increase in new customer CAMA installations and, to a
lesser extent, installations of RPS software and CDP integrated voice response
systems. The Company sold 224 licenses at fees ranging from less than $10,000
to $200,000 per license during year ended December 31, 1997. The Company sold
219 licenses at fees ranging from less than $10,000 to $500,000 during year
ended December 31, 1996. Revenue from each license fee varies depending upon
the number of accounts processed, hardware configuration, number of users and
applications licensed.

Recurring Maintenance and Service Fees. The Company's revenue from recurring
fees was $3.9 million for the year ended December 31, 1997 compared to $3.9
million for the year ended December 31, 1996. Although there was an increase
in license fees during the period, the recurring revenue attributable to the
maintenance and service contracts remained constant because revenue associated
with such sales is not realized until the effective date of the maintenance
and service contracts (which could become effective up to three to 12 months
following execution of the licensing agreement). During this same period,
recurring software and service fees increased while the recurring revenue
associated with hardware maintenance declined due to 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.

Product Sales. Revenue from product sales was $3.4 million year for the year
ended December 31, 1997 compared to $2.1 million for the year ended December
31, 1996, an increase of $1.3 million, or 61.9%. This increase was primarily
due to an increase in RPS sales and, to a lesser extent, installations of
CAMA, sales of hardware for property tax billing and collection systems and
CDP integrated voice response systems.

Other Service Fees. Revenue from other service fees was $1.0 million for the
year ended December 31, 1997 compared to $800,000 for the year ended December
31, 1996, an increase of $200,000, or 25.0%. This increase was primarily due
to increased RPS software and hardware sales, CAMA installations and, starting
in 1997, cabling installations to improve client site infrastructure.

COST OF REVENUE

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

Product Sales. The cost of product sales was $2.5 million, or approximately
73.5% of product sales, for the year ended December 31, 1997 compared to $1.5
million, or approximately 71.4% of product sales for the year ended December
31, 1996, an increase of $1.0 million, or 66.7%. This increase was primarily
due to costs associated with an increase in RPS hardware sales and, to a
lesser extent, hardware sales associated with CAMA installations. The increase
in cost as a percentage of product sales was due to RPS hardware comprising a
larger portion of total hardware sales. RPS hardware generally has a higher
cost of sales than other hardware products.

Software. Cost of software includes purchased software as well as the
amortization of capitalized software development costs. The cost of software
was $600,000, or approximately 27.3% of license fees, for

18
<PAGE>

the year ended December 31, 1997 compared to $400,000, or approximately 25.0%
of license fees, for the year ended December 31, 1996, an increase of
$200,000, or 50.0%. This increase was largely due to the cost of purchased
software associated with the Cleveland County, Oklahoma installation.

Distribution. The costs associated with distribution were $70,000 for the
year ended December 31, 1997 compared to $10,000 for the year ended December
31, 1996, an increase of $60,000, or 600%. This increase was due to increased
sales of RPS and cabling installation work performed as a result of new CAMA
installations.

The total cost of revenue was $3.2 million for the year ended December 31,
1997 compared to $1.9 million for the year ended December 31, 1996, an
increase of $1.3 million, or 68.4%. This yielded a gross profit margin of
69.7% for the year ended December 31, 1997 compared to a gross profit margin
of 77.7% for the year ended December 31, 1996. This decrease in gross profit
margin resulted from an increase in product sales from 24.5% of total revenue
in 1996 to 32.6% of total revenue in 1997. Product sales have a higher cost of
revenue associated with them than the Company's other sources of revenue.

OPERATING EXPENSES

Support and Customer Service. Expenses related to support and customer
service were $3.3 million for the year ended December 31, 1997 compared to
$2.7 million for the year ended December 31, 1996, an increase of $600,000, or
22.2%. This increase resulted from an increase in personnel costs related to
enhancing customer service and supporting future growth expected for Y2K
sales.

Selling. The Company's selling expenses were $1.0 million for the year ended
December 31, 1997 compared to $800,000 for the year ended December 31, 1996,
an increase of $200,000, or 25.0%. This increase was due to an increase in the
number of sales personnel and expenses related to covering new markets such as
California, Nevada and Ohio. In addition, sales commission expenses rose as a
result of increased sales of RPS and CAMA.

Research and Development. Research and development expenses were $1.5
million, or 14.4% of revenue, for the year ended December 31, 1997 compared to
$900,000, or 10.4% of revenue, for the year ended December 31, 1996, an
increase of $600,000, or 66.7%. These expenses are comprised primarily of
salaries and a portion of the Company's overhead as well as amounts paid to
outside consultants to supplement product development efforts. The increase
resulted from the initiation of development for new database technology.

General and Administrative. General and administrative expenses were $1.0
million for the year ended December 31, 1997 compared to $1.0 million for the
year ended December 31, 1996.

Amortization of Goodwill and Non-Compete Agreements. The Company incurred a
non-cash expense for amortization of goodwill and non-compete agreements
related to the 1994 Acquisition (as defined below) of $350,000 for the year
ended December 31, 1997 compared to $350,000 for the year ended December 31,
1996.

EARNINGS FROM OPERATIONS

Earnings from operations were $100,000, or 1.4% of revenue, for the year
ended December 31, 1997 compared to $700,000, or 8.8% of revenue, for the year
ended December 31, 1996. This decline in earnings from operations of $600,000
was primarily due to the increase in research and development expenses to
14.4% of revenue for the year ended December 31, 1997 compared to 10.4% of
revenue for the year ended December 31, 1996, and the reduction in the gross
profit margin from 77.7% in 1996 to 69.7% in 1997. In each period, earnings
from operations include non-cash expenses related to amortization of goodwill
and non-compete agreements of $350,000 incurred in connection with the 1994
Acquisition (as defined below).

19
<PAGE>

NON-OPERATING EXPENSES

Interest and Financing Costs. The Company's interest expense on its long-
term debt was $400,000 for the year ended December 31, 1997 compared to
$800,000 for the year ended December 31, 1996, a decrease of $400,000, or
50.0%. This decrease was primarily attributable to a decrease in the put
warrant adjustment from an expense of $300,000 for the year ended December 31,
1996 to a benefit of $100,000 for the year ended December 31, 1997. The put
warrant adjustment is primarily based on the operating earnings of the Company
for the previous twelve month period, which decreased from 1996 to 1997.

Provision for Income Taxes. The Company had an income tax benefit of $30,000
for the year ended December 31, 1997, compared to an income tax expense of
$200,000 for the year ended December 31, 1996, a decrease of $230,000. The
decrease was primarily attributable 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.

QUARTERLY RESULTS OF OPERATIONS

The following tables set forth a summary of the Company's unaudited
quarterly operating results for each of the eight quarters in the period ended
December 31, 1997. This information has been derived from unaudited interim
financial statements that, in the opinion of management, have been prepared on
a basis consistent with the Consolidated Financial Statements contained
elsewhere in this Prospectus and include all adjustments, consisting only of
normal recurring adjustments, necessary for a fair statement of such
information when read in conjunction with the Company's Consolidated Financial
Statements and Notes thereto. The operating results for any quarter are not
necessarily indicative of results for any future period. See "Risk Factors--
Potential Fluctuations of Operating Results; Future Operating Results
Uncertainty."

20
<PAGE>

<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE. 30, SEPT. 30, DEC. 31,
1996 1996 1996 1996 1997 1997 1997 1997
-------- -------- --------- -------- -------- --------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
License fees........... $ 123 $ 729 $ 584 $ 199 $ 190 $1,175 $ 430 $ 383
Recurring maintenance
and service fees...... 969 959 944 979 955 956 976 1,023
Product sales.......... 360 618 593 481 501 1,147 651 1,122
Other service fees..... 68 168 241 348 146 335 257 231
------ ------ ------ ------ ------ ------ ------ ------
Total revenue........ 1,520 2,474 2,362 2,007 1,792 3,613 2,314 2,759
------ ------ ------ ------ ------ ------ ------ ------
Cost of revenue:
Product sales.......... 238 465 445 317 363 873 380 913
Software............... 54 85 111 141 93 189 132 162
Distribution........... 1 4 3 3 3 37 16 11
------ ------ ------ ------ ------ ------ ------ ------
Total cost of
revenue............. 293 554 559 461 459 1,099 528 1,086
------ ------ ------ ------ ------ ------ ------ ------
Gross profit............ 1,227 1,920 1,803 1,546 1,333 2,514 1,786 1,673
Operating expenses:
Support and customer
service............... 587 714 678 764 732 727 899 920
Selling................ 165 214 205 188 145 264 293 264
Research and
development........... 137 200 217 312 353 376 407 372
General and
administrative........ 251 252 254 273 301 229 263 255
Amortization of
goodwill and non-
compete agreements.... 90 89 90 78 90 91 84 93
------ ------ ------ ------ ------ ------ ------ ------
Total operating
expenses............ 1,230 1,469 1,444 1,615 1,621 1,687 1,946 1,904
------ ------ ------ ------ ------ ------ ------ ------
Earnings (loss) from
operations............. (3) 451 359 (69) (288) 827 (160) (231)
Interest and financing
costs.................. 208 207 203 201 116 116 43 145
------ ------ ------ ------ ------ ------ ------ ------
Earnings (loss) before
income taxes........... (211) 244 156 (270) (404) 711 (203) (376)
Income tax expense
(benefit).............. (31) 142 108 (54) (125) 299 (87) (112)
------ ------ ------ ------ ------ ------ ------ ------
Net earnings (loss)..... $ (180) $ 102 $ 48 $ (216) $ (279) $ 412 $ (116) $ (264)
====== ====== ====== ====== ====== ====== ====== ======
<CAPTION>
QUARTER ENDED
------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1996 1996 1996 1996 1997 1997 1997 1997
-------- -------- --------- -------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
License fees........... 8.1% 29.4% 24.7% 9.9% 10.6% 32.5% 18.6% 13.9%
Recurring maintenance
and service fees...... 63.8 38.8 40.0 48.8 53.3 26.5 42.2 37.1
Product sales.......... 23.7 25.0 25.1 24.0 28.0 31.7 28.1 40.7
Other service fees..... 4.4 6.8 10.2 17.3 8.1 9.3 11.1 8.3
------ ------ ------ ------ ------ ------ ------ ------
Total revenue........ 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
------ ------ ------ ------ ------ ------ ------ ------
Cost of revenue:
Product sales.......... 15.6 18.8 18.9 15.8 20.2 24.2 16.4 33.1
Software............... 3.6 3.4 4.7 7.0 5.2 5.2 5.7 5.9
Distribution........... 0.1 0.2 0.1 0.2 0.2 1.0 0.7 0.4
------ ------ ------ ------ ------ ------ ------ ------
Total cost of
revenue............. 19.3 22.4 23.7 23.0 25.6 30.4 22.8 39.4
------ ------ ------ ------ ------ ------ ------ ------
Gross profit............ 80.7 77.6 76.3 77.0 74.4 69.6 77.2 60.6
Operating expenses:
Support and customer
service............... 38.6 28.9 28.7 38.1 40.9 20.1 38.8 33.3
Selling................ 10.9 8.6 8.7 9.3 8.1 7.3 12.7 9.6
Research and
development........... 9.0 8.1 9.2 15.5 19.7 10.4 17.6 13.5
General and
administrative........ 16.5 10.2 10.7 13.6 16.8 6.4 11.4 9.2
Amortization of
goodwill and non-
compete agreements.... 5.9 3.6 3.8 3.9 5.0 2.5 3.6 3.4
------ ------ ------ ------ ------ ------ ------ ------
Total operating
expenses............ 80.9 59.4 61.1 80.4 90.5 46.7 84.1 69.0
------ ------ ------ ------ ------ ------ ------ ------
Earnings (loss) from
operations............. (0.2) 18.2 15.2 (3.4) (16.1) 22.9 (6.9) (8.4)
Interest and financing
costs.................. 13.7 8.4 8.6 10.0 6.5 3.2 1.9 5.3
------ ------ ------ ------ ------ ------ ------ ------
Earnings (loss) before
income taxes........... (13.9) 9.8 6.6 (13.4) (22.6) 19.7 (8.8) (13.7)
Income tax expense
(benefit).............. (2.1) 5.7 4.6 (2.7) (7.0) 8.3 (3.8) (4.1)
------ ------ ------ ------ ------ ------ ------ ------
Net earnings (loss)..... (11.8)% 4.1% 2.0% (10.7)% (15.6)% 11.4% (5.0)% (9.6)%
====== ====== ====== ====== ====== ====== ====== ======
</TABLE>

21
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

A private investor group acquired the Company on December 30, 1994 for
approximately $4.6 million (including a non-compete payment of $250,000) in a
leveraged transaction (the "1994 Acquisition"). The 1994 Acquisition was
financed with funding provided by certain of the Company's officers and
directors in the form of equity capital as well as with a $1.5 million senior
term loan due December 1998 provided by FINOVA and a $2.1 million senior
subordinated note due in two equal installments in December 1999 and December
2000, with 12% interest paid quarterly, provided by Hanifen Imhoff Mezzanine
Fund, L.P. ("Hanifen"). Each of FINOVA and Hanifen hold a security interest in
substantially all of the Company's assets and the Company's currently
outstanding Common Stock. Moreover, each loan agreement contains certain
restrictive covenants relating to debt coverage and liquidity ratios, payment
of cash dividends and other matters. The Company intends to retire the
outstanding balance of the FINOVA senior term loan with proceeds from this
offering, as well as certain shareholder indebtedness in the amount of
$126,000, including accrued interest. Management believes the Hanifen note can
be retired with cash generated from operations. However, management intends to
seek alternative financing with more favorable terms to replace the Hanifen
note. There can be no assurance that the Company will be able to obtain such
alternative financing on acceptable terms. In addition, in connection with the
1994 Acquisition, FINOVA agreed to provide a $1.0 million revolving credit
facility (the "Revolver") for working capital and general corporate purposes.
Subsequent to the closing of the 1994 Acquisition, the Company has funded its
business solely with the cash generated from operations and therefore to date
has not utilized the Revolver. See "Use of Proceeds" and "Risk Factors--
Control by Principal Shareholders, Officers and Directors."

The Company's cash balances were $330,000 and $590,000 as of December 31,
1997 and 1996, respectively. In 1997 and 1996, the Company generated cash from
operating activities of $570,000 and $550,000, respectively. Cash used in
investing activities, which includes capital expenditures and capitalized
software development costs, totaled $540,000 and $250,000 in fiscal 1997 and
1996, respectively. The increase of $290,000 was primarily due to the increase
in capitalized software development costs and an increase in investments of
tooling and related software. Net cash used in financing activities was
$300,000 and $100,000 in fiscal 1997 and 1996, respectively. Included in
financing activities for the year ended December 31, 1996 is a reimbursement
of $170,000 from the seller's escrow entered into in connection with the 1994
Acquisition.

The Company believes that the proceeds of this offering when combined with
its cash balances and cash generated from operations, will satisfy the
Company's working capital, business development and capital expenditures for
at least the next 12 months. In the longer term, the Company may require
additional sources of liquidity to fund future growth. Such sources of
liquidity may include additional equity offerings, or debt financings. In the
normal course of business, the Company evaluates acquisitions of businesses,
products and technologies that complement the Company's business. The Company
has no present commitments or agreements with respect of any such transaction.
There can be no assurance, however, that the Company will have sufficient
working capital to satisfy all of the anticipated needs for the next 12
months. Increased costs or expenses, acquisition prospects and opportunities
for growth or expansion may increase the demand for working capital thereby
making an additional infusion of capital necessary. See "Risk Factors--
Acquisition Risk."

ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board (FASB) has issued the following
Statements of Financial Accounting Standards (SFAS):

SFAS 130, Reporting Comprehensive Income, which is effective for fiscal
years beginning after December 15, 1997. SFAS 130 requires companies to
include details about comprehensive income that arise during a reporting
period. Comprehensive income includes revenue, expenses, gains and losses that
bypass the income statement and are reported directly in a separate component
of equity.

22
<PAGE>

SFAS 131, Disclosures About Segments of an Enterprise and Related
Information, which is effective for financial statements for periods beginning
after December 15, 1997. SFAS 131 requires companies to report information
about an entity's different types of business activities and the different
economic environments in which it operates, referred to as operating segments.

Additionally, the AICPA Accounting Standards Executive Committee has issued
Statement of Position (SOP) 97-2, Software Revenue Recognition, which is
effective for fiscal years beginning after December 15, 1997. SOP 97-2
modifies the criteria for determining recognition of revenue and allocation of
the contract fee for contracts containing multiple elements, such as software
products, rights to upgrades and other services.

Management does not expect the adoption of these Statements of Financial
Accounting Standards and SOP 97-2, referred to above, to have a material
impact on the Company's results of operations or financial condition.

<PAGE>

BUSINESS

INTRODUCTION

CPS develops, markets, implements and supports fully integrated software
applications designed specifically for public sector organizations, including
states, counties, townships, city governments and other municipal agencies.
The Company's products address the following functional areas: (i) property
tax appraisal and assessment, (ii) property tax billing and collection, (iii)
city and municipal systems and (iv) remittance processing systems. Currently,
the Company's public sector software applications are installed in six states
(Colorado, Florida, North Carolina, New Mexico, Oklahoma and Texas),
representing more than 250 customers. The majority of its customers are county
governments with taxable parcel counts over 10,000 or cities with populations
between 5,000 and 35,000. The Company's focus on the public sector allows it
to design solutions that address the needs of these organizations. The Company
has identified three significant growth opportunities in the public sector
marketplace as described below.

Expand Core Public Sector Business. The Company intends to geographically
expand its core product business to address the following functional areas:
property tax appraisal and assessment; property tax billing and collection;
and city and municipal systems. Recently, this core business has been growing
rapidly due, in the Company's judgment, to the ability of the Company's
software to improve delivery of service, reduce costs, enhance revenue
collection, operate successfully within budget constraints, comply with
rapidly changing local, state and federal regulations and improve management
economics. This opportunity represents a key segment of the Company's business
strategy due to the growing recurring revenue streams generated by license
agreements entered into by customers of the Company's core business.

Provide Y2K Solutions. The Company plans to leverage its 17 years of public
sector experience to capitalize on the opportunity to provide Y2K-compliant
software applications to public sector organizations. The Y2K problem results
from the traditional use of two-digit date fields to perform computations and
decision-making functions. For example, a program using a two-digit date field
may misinterpret "00" as the year 1900 rather than the year 2000. The Company
believes this problem has been magnified in the public sector due to the
substantially greater allocation of resources to the higher-paying private
sector. In addressing the Y2K problem, public sector entities are faced with
the prospect of competing with the private sector for recruiting, hiring and
retaining top data processing talent, despite possessing limited ability to
match competitive salaries for attracting new hires or retaining existing
staff. As a result, the Company believes many public sector organizations are
seeking cost-effective, non-labor intensive solutions such as those offered by
CPS.

Leverage Client/Server-Based Products. The Company intends to leverage the
interoperability of the Company's core products to manage information flow
between departments as organizations shift from mainframe computers to
client/server systems. When local governments began to use computerized
operations in the 1970s and 1980s, management systems were originally based on
mainframe computers and later based on minicomputers. These legacy systems
typically were developed on a customized basis using proprietary and often in-
house operating systems and database software. The Company believes many
public sector organizations currently are faced with a pressing need to
integrate mission critical functions and databases by replacing standalone
applications and customized, out-dated software with integrated software
applications similar to those offered by CPS.

INDUSTRY OVERVIEW

PUBLIC SECTOR MARKETPLACE

The public sector marketplace is composed of state, county and city
governments, other municipal agencies and publicly owned utilities. The
Company estimates the local government market comprises over 3,000 counties
and over 19,000 municipalities in the United States, not including school
districts, townships

24
<PAGE>

and special government districts. According to one industry source, state and
local government agencies spent approximately $34.5 billion on information
technology and related products in 1996. This total included approximately
$5.0 billion for software, $6.7 billion for external services, $7.4 billion
for hardware and $15.4 billion on internal services (e.g., in-house management
information systems departments).

Of the $5.0 billion in 1996 software expenditures, approximately $3.1
billion was spent on law enforcement, child welfare, education and emergency
services. Management estimates the remaining $1.9 billion was spent on
software in the four areas CPS markets applications: property tax appraisals
and assessments, property tax billing and collection, city and municipal
systems and remittance processing systems. As local jurisdictions experience
increasing pressure to provide more services without raising taxes, management
believes state legislatures will raise needed revenue by amending tax laws.
However, these same legislatures cannot, in the Company's view, appropriate
sufficient resources to modify existing information systems. Thus, the public
sector is faced with the dilemma of responding to frequent legislative change
during a period of budget cuts.

YEAR 2000 OPPORTUNITY

The Y2K problem relates to the highly publicized inability of many existing
computer legacy systems to accurately process information involving the year
2000 and beyond. For example, unless Y2K compliance is completed in certain
systems, public sector organizations cannot properly (i) appraise, bill and
collect property taxes, a principal revenue source, (ii) record fines and
deeds resulting from property sales and (iii) maintain and retain accurate law
enforcement records. Date-dependent programs are commonly found in legacy
software applications used in many critical business operations, including
those used by public sector organizations. Management has observed that the
public awareness and recognition of the Y2K crisis is rapidly increasing as
the millennium approaches.

While the business community is taking steps to address the Y2K problem, the
Company believes many public sector organizations lack the resources to
achieve a timely solution due to budgetary and other constraints. One industry
source estimates that the overall cost of solving the Y2K problem worldwide
will be in the range of $300 billion to $600 billion. As a result of the
significant resources required to resolve an enterprise-wide Y2K problem, many
public sector organizations may adopt temporary or partial solutions. The
failure by public sector organizations to install permanent Y2K solutions is
expected by management to provide opportunities for CPS to provide Y2K
solutions for years after the year 2000.

DELIVERY OF CLIENT/SERVER TECHNOLOGY

As computing technology evolves and information processing requirements
expand, medium to large public sector organizations are seeking to preserve
the investment in their existing systems by integrating or replacing mainframe
computers with modern distributed computer processing architectures, such as
client/server systems. Distributed computing refers to computer transactions
that may take place among different types of computers at one or more
locations, thereby permitting enterprise-wide information exchanges to occur
that otherwise might not be possible. In a client/server environment, a mid-
range computer serves as the network's hub or server. The server is connected
to possibly hundreds of desktop personal computers or workstations known as
"clients" throughout an organization. The Company believes the client/server
approach has several benefits over mainframe-based systems, including user
friendliness, flexibility in creating new applications in response to changes
in an organization's informational requirements such as tax code changes,
accessibility of enterprise-wide data from a variety of databases, and the
ability to present data in different formats. Moreover, client/server
architectures are becoming more cost effective as a result of technological
advances in personal computers, networking, disk storage, operating systems
and tiered software applications. As the public sector marketplace
increasingly recognizes the benefits of client/server technology, the Company
believes that there will be an increased demand for software and services that
assist such organizations in making this transition.

25
<PAGE>

THE CPS SOLUTION

PUBLIC SECTOR MARKETPLACE

Extensive Public Sector Experience. The Company's products are the result of
more than 17 years of focusing on the public sector. CPS software is designed
to help organizations streamline and automate administrative intensive
processes such as property tax billing and collection, property tax appraisal
and assessment and improve timeliness and quality of services. Each product
was developed specifically for the public sector, addressing specific needs at
an attractive price.

Integrated Solution and Depth of Functionality. CPS currently markets 41
applications, which provide feature-rich systems for property tax appraisal
and assessment, property tax billing and collection, as well as city and
municipal systems. The Company's software applications are designed to offer
customers the following: (i) simplification of data entry, (ii) compliance
with periodically changing legislation, (iii) extensive security features,
(iv) flexible report configuration and (v) open system technology. The
Company's products operate as stand-alone applications or as integrated suites
which provide users with a consistent graphical user interface ("GUI") and the
ability to easily access data and share information between different
departments. The Company's applications are based upon proven technologies and
are designed to function in mission critical environments.

Cost Effective Implementation Technology. The Company employs a highly
responsive implementation and planning process, offering rapid product
deployment and easy migration among its product lines. The Company minimizes
the productivity interruption that typically results from the introduction of
new technology, thereby enabling organizations to realize the associated
benefits more quickly.

YEAR 2000 OPPORTUNITY

Y2K Solutions and Applications. The CPS solution methodology incorporates
the following process: (i) complete assessment of the customer's information
systems using a proprietary technique to identify critical software components
and related Y2K compliance, (ii) demonstrate the benefits of the Company's Y2K
software applications, (iii) implement consulting and programming services to
convert the non-Y2K data, (iv) install the Company's Y2K software application
and (v) commence user training.

Proprietary Software Conversion Tool. The most important element of the Y2K
solution methodology is the conversion of the non-Y2K compliant data into Y2K
compliance. CPS has developed a proprietary tool that converts data into a
form that can be run by CPS applications. Management believes this tool offers
a significant competitive advantage in marketing its software applications
because the time to conversion and compliance is much shorter than a tedious
legacy conversion of data and source code.

Elimination Rather Than Correction of Legacy Code. The Company believes that
the principal issues facing all Y2K solution providers are finding the hidden
date codes embedded within legacy systems and locating any original lost
source codes. The CPS solution overcomes these obstacles through the following
process: (i) applying field expansion to the year field, (ii) running the
newly-converted Y2K-compliant database on the Company's software, thereby
eliminating the possibility of lost source codes and (iii) replacing the
legacy source code with the Company's Y2K compliant application, thus
eliminating the costly and time-consuming process of searching the legacy
system for hidden date codes. CPS believes the Y2K problem will cause many
public sector organizations to explore further the possibility of migrating
all or portions of their legacy systems to Y2K compliant client/server
systems.

DELIVERY OF CLIENT/SERVER TECHNOLOGY

Adaptability/Flexibility/Scalability. The Company's application software
products are designed to be readily adaptable to meet a customer's initial
needs and to offer sufficient flexibility to respond to a customer's

26
<PAGE>

specific system refinements and ongoing changes once the system is fully in
service. The scalability of the Company's software applications and the
customer's ability to migrate within the Company's product family allow state
and local governments to increase operating levels and expand application
functionality. In addition, the Company offers several application programming
interfaces intended to enable customers to develop customized reporting and
satisfy unique requirements.

Multi-Platform Tiered Software Architecture. The Company's tiered software
architecture separates the application logic from the GUI and database. This
feature enables the Company to utilize multiple platforms and effectively
integrate new technologies with existing software. The tiered architecture
also allows customers to protect their investments in information systems
while positioning them to adopt new object-based solutions, high performance
servers and database management systems with no loss of functionality.

Centralized System Administration. System administration is simplified in
the Company's software applications, thereby simplifying system management,
reducing the need for in-house system administrators and programmers and
mitigating the need for third-party services. The Company's software
applications incorporate extensive security features designed to protect data
from unauthorized retrieval or modification. Simplified menus and data access
can be tailored to meet each organization's requirements.

GROWTH STRATEGY

The Company's growth strategy with respect to serving the public sector
marketplace providing Y2K solutions and capitalizing on the shift to
client/server-based systems includes the following elements:

Augment Recurring Revenue Base. The Company's customers typically enter into
long-term service agreements which generate recurring revenue from continuing
monthly maintenance and service fees, typically at a rate equal to
approximately 32% of the software license fee. Recurring monthly maintenance
and service fees represented approximately 37% of the Company's revenues in
fiscal 1997. Customers benefit from continually updated software and service
in response to technological and legislative changes. In addition, long-term
agreements serve as competitive barriers to entry in the Company's markets.
The Company believes that its service, support and singular knowledge of its
customers' hardware and software requirements ensure continued service and
support revenues. See "Product Description."

Leverage the Y2K Opportunity. The Company views the Y2K market as an
opportunity to become one of the leaders in providing public sector solutions
on a national basis. The Company's history in servicing the public sector
coupled with the need for timely Y2K solutions creates a significant growth
opportunity for the Company. The Company believes the Y2K opportunity will
allow it to establish an installed base of large public sector accounts
nationwide.

Expand Geographic Initiatives. The Company intends to increase its
penetration of the public sector market by expanding the distribution of its
products into new and existing geographic markets. Currently, the Company has
installations in six states and is actively pursuing new business
opportunities in additional states, including Kentucky, Montana, Ohio and
California. To accomplish this expansion, the Company plans to actively
increase the size of its direct sales and marketing force and concurrently,
hire additional technical, support and systems personnel. In addition, the
Company intends to continue to build collaborative relationships with
customers in order to develop new applications and assist customers in keeping
pace with technology and in maintaining compliance with changing governmental
regulations. The Company intends to leverage its installed customer base in
order to enhance its ability to capture additional statewide accounts, as
exemplified by the Company's market penetration in the state of Florida. Since
entering the Florida market in 1988, the Company has completed 25 county
installations out of a total of 67 counties in the state.

Pursue Strategic Acquisitions. The Company views acquisitions as a means of
acquiring technology and application expertise, broadening its customer base
and expanding geographically. The Company believes that the public sector
marketplace is highly fragmented with many small, closely-held companies. The
Company believes its strong management team, the ability to leverage its core
technologies and expertise, proven

27
<PAGE>

marketing programs and strategies, as well as access to capital, should
provide the Company with a competitive advantage and position it to capitalize
on acquisition and integration opportunities which may become available over
the next several years. Its only corporate acquisition to date has been the
acquisition of its subsidiary CDP Systems, Inc. in July 1997. See "Risk
Factors--Acquisition Risk" and "Certain Transactions."

Leverage Software Development Relationship. In 1995, the Company entered
into an agreement with a subsidiary of Mastek, Ltd. ("Mastek"), an offshore
provider of economical programming services, to provide coding services. All
work is communicated to Mastek's Bombay, India office. Due to the difference
in time zones, the Company can send Mastek a new specification or design and
generally obtain the development code by the next business day. The Company
believes this relationship provides several competitive advantages. First, the
Company can respond rapidly to state and local regulatory changes through
prompt software modifications and updates. Second, the costs of recruitment,
hiring and traditional employee overhead expenses are minimized (if not
completely eliminated). Third, by utilizing a varying number of offshore
programming and development individuals, the Company minimizes its need to
employ increasingly sought-after and highly qualified technical personnel,
particularly as such programming relates to Y2K activities.

Capitalize on Public Sector Expertise. The Company intends to capitalize on
its public sector knowledge and experience to enhance sales in existing
markets and new markets. For the past 17 years, the Company has focused
exclusively on the public sector marketplace, resulting in the development of
core expertise. The Company believes its customer base offers considerable
leverage to new business since references from existing customers often result
in future sales opportunities.

Maximize Integrated Solutions to Become Sole Source Provider. The Company
believes a substantial opportunity exists to sell additional products to
current customers who have only one installed CPS product. For example, a
customer using the Company's property tax appraisal and assessment system
offers a direct-sales opportunity for the Company's property tax billing and
collection system since both systems share a common database and processes.

Leverage Relationships With Y2K Tool and Service Providers. CPS plans to
leverage relationships with leading Y2K tool and service providers. In certain
circumstances, CPS solutions may be unavailable to some public sector
organizations who have already committed to in-house remedial measures. These
public sector organizations can be referred to a Y2K tool and service provider
partner of CPS for a fee. CPS will then use corresponding referrals from these
Y2K tool and service providers of public sector organizations who desire a
replacement application.

PRODUCT DESCRIPTION

CPS offers fully integrated, Y2K compliant software solutions designed to
automate and integrate the operations of county governments with taxable
parcel counts over 10,000 or cities with populations between 5,000 and 35,000.
The Company has designed its products based upon the philosophy that complete
application integration is essential for the effective sharing of information
across an organization.

CPS seeks to be an innovative leader in each market served and set the
standard through high perceived value. This perception results in premium
pricing for its application software and related services which serves to
strengthen the Company's market position. Upon contract signing, customers pay
a license fee and a recurring maintenance and service fee equal to a rate of
approximately 32% (depending upon a variety of factors) of the software
license fee, which compares favorably with the Company's estimate of the
industry average of 12-20%. The Company can often command such a premium in
most markets it serves because the Company's products are designed to offer:
(i) the ability to maintain legislative compliance, (ii) a strong service and
support organization with a single point of contact, (iii) fully-integrated,
proven and feature-rich software applications, and (iv) a complete system
solution. Pricing for most applications is generally transaction based

28
<PAGE>

on a parcel count which allows the larger, more affluent governmental units to
bear a proportionately higher cost in a way that is readily justifiable. The
Company also provides RPS hardware and software to regulated utilities and
commercial markets to meet the needs of public and private sector
organizations with high speed processing of check payments. Currently, the
Company has RPS solutions installed in 12 states with applications in such
areas as utility payments, subscription payments and county property tax
collections. The Company also offers Windows NT-based integrated voice
response and document imaging systems.

The Company's technological strategy is to continue to offer applications
that run across the most popular operating systems. Currently, supported
systems include UNIX, AIX and Microsoft NT. The Company's products are
supported on databases including Oracle, Informix, Microsoft SQL Server and C-
ISAM.

The following table sets forth a summary description of certain of the
Company's products.

<TABLE>
<CAPTION>
CAMA
COMPUTER ASSISTED MASS TAX MANAGER CITY MANAGER
APPRAISAL TAX BILLING AND COLLECTIONS MUNICIPAL SOLUTIONS
--------------------------------- -------------------------------------- ----------------------------------
<S> <C> <C> <C>
PRODUCT POSITIONING: Exceeding 100,000 taxable parcels Exceeding 100,000 taxable parcels Population up to 35,000
SOLUTIONS: Software and Y2K tools/services Software and Y2K tools/services Software and Y2K tools/services
PRODUCTS/FEATURES: CAMA System Tax Manager General Ledger
--------------------------------- -------------------------------------- ----------------------------------
-- Appeals tracking -- Integrated current/delinquent taxes -- Flexible chart of accounts
-- Real time valuation -- Unlimited paid and audit history -- Integrated budgeting
-- Valuations by all methods -- Comprehensive distribution of taxes -- Financial reporting
-- Sketching/Field automation
-- Integrated real and personal
systems
Occupational License Utility Billing
----------------------------------
-- Multiple services tracked
Tourism Tax -- Hand held meter reading
-- Extensive billing parameters
Game and Fish Licensing -- Cycle billing
Vessel Registration Accounts Payable
----------------------------------
-- Unlimited vendor history
Non-Ad Valorem Assessment System -- Integrated with purchase orders
-- Allows for one time vendors
<CAPTION>
RPS
REMITTANCE PROCESSING
-----------------------
<S> <C>
PRODUCT POSITIONING: 50,000 peak items
per day or less
SOLUTIONS: Various services
PRODUCTS/FEATURES:
Integrators for various
software systems
designed for the NCR
7780
</TABLE>

PROPERTY TAX APPRAISAL AND ASSESSMENT SYSTEMS

The Company's CAMA system, designed and written using computer-aided
software engineering tools, is a fully integrated suite of programs with
applications for mass property tax appraisal, assessment administration
(appeals processing, statistical analysis of property values and sketching of
property and buildings), integrated imaging and GIS/911 interfacing and is
designed to meet the needs of county property appraisers and/or tax assessors.
The CAMA system adheres to IAAO standards and provides a powerful set of tools
to establish an equitable, defensible set of property values for a variety of
property types including residential, agricultural, multi-family, commercial,
industrial, business, personal and household goods.

The CPS CAMA system incorporates regression and feedback methodologies to
produce direct market values and market adjusting techniques which are
available for costing out location and depreciation. The system also provides
the user with the ability to: (i) specify which valuation appraisal method
(cost, market or income) will be used as the default valuation for each type
of property, (ii) maintain a comprehensive history file on each parcel,
including transactions affecting it, which can be displayed or printed upon
request and (iii) maintain sales data and descriptive information on each
parcel at the time of sale, thereby generating a "snapshot" vital in market
valuation and appraisal analyses.

Representative current licensees and users of the CPS CAMA system product
include Martin County (Florida), Union County (North Carolina) and Canadian
County (Oklahoma). The license fee for a typical client currently ranges from
approximately $225,000 to $1,800,000, depending on hardware configurations,
number of users and applications licensed.

29
<PAGE>

PROPERTY TAX BILLING AND COLLECTION SYSTEMS

Designed to meet the needs of county tax collectors and/or treasurers, the
Company's property tax billing and collection product (the "Tax Manager")
provides public sector organizations with a comprehensive integrated property
tax billing and collection reporting system designed to improve and streamline
revenue tracking, processing and payment collection. The Tax Manager provides
multiple terminal cash drawer, payment processing and validation capability
and eliminates redundant data entry. The product is designed to handle a full
range of services including posting, recording, universal cashiering,
reconciliation, cash control, auditing, distribution of funds, report
generation and interfacing to various high speed remittance processors.

The Tax Manager encompasses the following property tax billing and
collection applications: (i) current ad valorem tax system, (ii) installment
processing, (iii) mortgage processing, (iv) non ad valorem assessments, (v)
distribution systems, (vi) splits and corrections, (vii) advertising, (viii)
current tax roll billing, (ix) personal property system, (x) tax sale (real
estate, non ad valorem assessments), (xi) delinquent tax and assessment
system, (xii) tax deed processing, (xiii) boat licensing system and (xiv)
hunting and fishing licensing systems.

Representative current licensees and users of the Tax Manager product
include the Florida counties of Broward (Fort Lauderdale), Okaloosa (Fort
Walton Beach/Destin) and Volusia (Daytona Beach). The license fee for a
typical client currently ranges from approximately $225,000 to $1,800,000,
depending on hardware configurations, number of users and applications
licensed.

CITY AND MUNICIPAL SYSTEMS

The Company's city and municipal systems products provide key operating and
financial management functions for public city and municipal governments. The
Company's City Manager ("City Manager") and Financial Manager ("Financial
Manager") are both state-of-the-art libraries of software applications which
can be completely integrated with each other. CPS provides its users with
customization capabilities and updated applications which are the result of
changes mandated by state and local legislatures.

The City Manager and Financial Manager have been designed to serve the needs
of governmental financial officers and human resource managers in public
sector organizations by providing the following benefits: (i) serve as an
integrated financial reporting system designed to monitor organizational
goals, (ii) comply with all Governmental Accounting, Auditing, and Financial
Reporting and state standards, (iii) streamline reporting requirements, and
(iv) eliminate redundant data entry and minimizes record management. Both the
City Manager and the Financial Manager are integrated with the following
applications: (i) general ledger, (ii) payroll, (iii) purchase order, (iv)
inventory management, (v) accounts payable, (vi) account receivable, (vii)
fixed asset management and (viii) investment management.

Representative current licensees and users of the City Manager and Financial
Manager products include the City of Port Lavaca (Texas), City of Cedar Hill
(Texas) and City of Altus (Oklahoma). The license fee for a typical sale
currently ranges from approximately $25,000 to $150,000, depending on hardware
configurations, number of users and applications licensed.

REMITTANCE PROCESSING SYSTEMS

The Company also provides remittance processing hardware and software to
regulated utilities and commercial markets to meet the needs of public and
private sector organizations for high speed processing of check payments with
applications in such areas as utility payments, subscription payments and
county property tax collections. Currently, the Company has RPS installations
in 12 states (Arizona, California, Florida, Kansas, New York, Georgia,
Massachusetts, Minnesota, Utah, Oregon, Idaho and Texas) and has completed
21 installations since commencing RPS activities in June 1995. Representative
installations in the public sector market include San Bernardino County, Texas
Department of Public Safety, Georgia Department of Revenue and Tax and
Hillsborough County, Florida. In the private sector, representative
installations include

30
<PAGE>

Guidepost, Feature Films, Palm Coast Data, Snapping Shoals Utility and Eugene
Electric and Water Board. A typical RPS sale currently ranges from
approximately $50,000 to $650,000, depending on hardware configuration and
software conversion.

CPS PROPRIETARY Y2K CONVERSION PROCESS

CPS utilizes a unique, step-by-step process by which the client's legacy
data is removed, re-engineered with compliant date fields and then loaded into
an industry standard relational database of the client's choosing. Prior to
entering into a contract, CPS analyzes the data formats, sources and types in
anticipation of using the Company's Y2K tools. Immediately after the contract
process is complete, both on-site and in the Company's conversion centers, CPS
begins the process of extracting the raw data, analyzing it field by field,
mapping to the CPS database layout by application and testing the system
through use of the Company's Y2K compliant application software.

The Company believes that the primary advantage of the CPS approach is that
the time to conversion and compliance is much shorter than a tedious legacy
conversion of data and source code. In addition, the Company's Y2K compliant
application will be offering the client a multi-tiered client/server approach
allowing for extensive data mining using standard structured query language
("SQL") tools.

LOGO
[CHART OF CPS PROPRIETARY Y2K CONVERSION PROCESS APPEARS HERE]

As shown above, the Y2K conversion process involves numerous steps to
interrogate the legacy data, inventory all date fields and create a data
dictionary map for use in the Company's Y2K compliant software.

31
<PAGE>

Each date field is expanded, tested for proper validation, formatted to the
proper Y2K compliant format of the target database and then loaded for
testing. All date fields are converted in this process. By making the legacy
source code obsolete and eventually discarding it, the unique CPS solution
ensures that no non-Y2K compliant processes inherent in the legacy code
survive the conversion process. In addition, this solution eliminates the
problems of hidden date codes and lost source code.

CPS TIERED SOFTWARE ARCHITECTURE

The Company's tiered software architecture separates the application logic
from the GUI and the database, thereby enabling the Company's products to
operate on any Windows NT, UNIX or any UNIX derivative platform including IBM
(AIX), NCR (UNIX), Hewlett-Packard (HP-UX) and Sun Microsystems (Solaris). The
Company offers customers CPS GUI, internet browser and character-based
interface. Furthermore, the applications can be implemented on multiple
platforms with no loss of functionality. The Company's applications operate on
systems running databases such as Oracle, Informix, Microsoft SQL Server and
C-ISAM. The Company's tiered software architecture does not require the
application code to be reconfigured to enable the applications to operate on
different platforms, databases or operating systems. The tiered architecture
permits customers to protect their investment in the Company's system while
enabling them to adapt to emerging operating systems, servers and databases.

CPS TIERED APPLICATION ARCHITECTURE
LOGO
[Chart appears here]

<PAGE>

SALES AND MARKETING

The Company sells its products in the United States through a direct sales
force. As of February 28, 1998, the Company had 19 employees in its sales and
marketing organization. The Company employs a variety of business development
and marketing techniques to communicate directly with current and prospective
customers. These techniques include exhibiting at trade shows, holding
seminars for clients and prospective clients on technology and industry issues
and marketing through targeted mail campaigns.

The Company believes in establishing a strong local presence in order to
effectively address the needs of local governments and establish long-term
relationships. For that reason, CPS has established regional offices in
Dallas, Texas; Tampa, Florida; and Tulsa, Oklahoma. The Company also operates
customer service and sales offices in San Antonio, Houston, Abilene and
Wichita Falls, Texas. Additionally, CPS maintains sales and software
development personnel in Los Angeles and San Francisco, California; Boston,
Massachusetts; Atlanta, Georgia; and Tallahassee, Florida.

The Company's sales and marketing strategy focuses on building and
maintaining strong relationships with businesses that the Company believes
play a role in the successful marketing of its software products. These
providers include software and hardware vendors and technology consulting
firms, some of which are active in the selection and implementation of
information systems for organizations that comprise the Company's principal
customer base.

In connection with the sales and marketing of software application products,
the Company has established direct and indirect value-added re-seller
arrangements pursuant to standard re-seller agreements with IBM, NCR and
Compaq Computer for the sale of hardware and related products. In turn, the
sales force of these manufacturers work closely with the Company's sales and
marketing personnel in an effort to promote sales of the Company's products
and services in conjunction with hardware sales by such manufacturer.

A sales cycle is the period between the confirmation of interest and the
consummation of the sale. Historically, the sales cycle for the Company ranges
from nine to 18 months on average. Since public sector entities are subject to
and bound by budgets formally approved by the appropriate governing board, the
length of the sales cycle depends on (i) when the entity becomes a prospect,
(ii) the size of the appropriation and (iii) the availability of budgeted
funds for the purchase of a new system. In the future, management has
experienced and expects to continue to experience a trend towards a shorter
sales cycle. Entities who are experiencing a dilemma due to a Y2K problem are
accelerating their purchasing requirements. Moreover, CPS employs creative
software financing techniques that shorten the sales cycle.

RESEARCH AND DEVELOPMENT

The Company's research and development activities are focused on the
enhancement of its existing products and the introduction of new products. The
Company outsources certain product development and enhancement activities to
independent contractors. CPS continually updates its products for amendments
to the various tax laws and regulations. Research and development expenses
were $1.5 million for the year ended December 31, 1997, compared to $870,000
for the year ended December 31, 1996. See "Management's Discussion and
Analysis of Financial Condition and Results of Operation."

The Company believes it has a strong competitive advantage in the areas of
cost containment and time to market with key technology for its clients
resulting from its offshore out-sourcing programming services. Costs of
recruitment, hiring and traditional employee overhead expenses are minimized
or eliminated. By utilizing a team of offshore developers, the size of which
can be modified upon request, the Company can maintain a level of development
resources to match existing market needs. The Company is presently obtaining
these programming services through a non-exclusive agreement with Mastek,
cancellable upon 30 days' written notice. However, management believes
commercially competitive replacement services are available through other
offshore programming service providers.

<PAGE>

The Company plans to continue to enhance its applications to suit the
evolving needs of the public sector market. In particular, the Company intends
to develop additional functionality on existing application modules and to
create new modules. Additionally, the Company seeks to improve and expand its
object development environment, with two fundamental objectives: (i) continued
user empowerment with an emphasis on ease-of-use and (ii) increased
flexibility to modify base products in order to suit specific customer
requirements. The Company plans to continue to add new products and services,
both through internal development and potential acquisitions, to leverage the
Company's core technologies and expertise.

COMPETITION

The market in which the Company competes is highly fragmented, with a large
number of competitors that vary in size, primary computer platforms and
overall product scope. Within its traditional public-sector markets, the
Company competes from time to time with (i) custom software and services
providers (such as Andersen Consulting, KPMG Peat Marwick and Oracle
Corporation), (ii) companies which focus on selected segments of the public
sector market (including Systems & Computer Technology Corporation, Manatron,
Inc., H.T.E., Inc., American Management Systems, Incorporated and BRC
Holdings, Inc.), and (iii) a significant number of smaller private companies.
The Company also competes with in-house management information services staff.
In addition, within the market for its Y2K solution products, the Company
anticipates that it will compete with companies who focus upon overall
enterprise solutions to the Y2K problem. Many of the Company's competitors are
more established, benefit from greater name recognition and have substantially
greater resources than the Company. Moreover, the Company could face
additional competition as other established and emerging companies enter the
public sector software application market and/or the Y2K market and new
products and technologies are introduced. Increased competition could result
in price reductions, fewer customer orders, reduced gross margins and loss of
market share, any of which could materially adversely affect the Company's
business, financial condition and operating results. In addition, current and
potential competitors may make strategic acquisitions or establish cooperative
relationships among themselves or with third-parties, thereby increasing the
ability of their products to address the needs of the Company's prospective
customers. Accordingly, it is possible that new competitors or alliances among
current and new competitors may emerge and rapidly gain significant market
share.

CPS believes it can differentiate its own products and services from these
current and future competitors, focusing on the Company's functionality,
product flexibility, ease of implementation and adaptability to customer needs
without custom programming, enterprise product breadth, individual product
features, service reputation and price. The Company believes that many of its
competitors lack these essential qualities because they do not focus
exclusively on the public sector market or offer fully-integrated software
applications. However, there can be no assurance that the Company will be able
to compete successfully against current and future competitors, and the
failure to do so could have a material adverse effect upon the Company's
business, financial condition and operating results. See "Risk Factors--
Competition."

The following table sets forth a representative list of the Company's
competitors.

<TABLE>
<CAPTION>
CAMA
COMPUTER ASSISTED MASS TAX MANAGER CITY MANAGER RPS
APPRAISAL TAX BILLING AND COLLECTIONS MUNICIPAL SOLUTIONS REMITTANCE PROCESSING
- ---------------------- --------------------------- ---------------------------- ---------------------
<S> <C> <C> <C>
Cole Layer Trumble ASIX, Inc. H.T.E., Inc. Wassau Financial
Systems, Inc.*
American Management BRC Holdings, Inc. Interactive Computer Designs J & B Software, Inc.
Systems, Incorporated d/b/a INCODE
Sigma Systems New World Systems
Technology, Inc. Corporation
Kb Systems, Inc. Pentamation
BRC Holdings, Inc.
</TABLE>
- --------
* Currently serves as a supplier to the Company

34
<PAGE>

INTELLECTUAL PROPERTY, PROPRIETARY RIGHTS AND LICENSES

The Company regards certain features of its internal operations, software
and documentation as confidential and proprietary, and relies on a combination
of contract and trade secret laws and other measures to protect its
proprietary intellectual property. Despite these precautions, it may be
possible for unauthorized parties to copy the Company's software or reverse
engineer or otherwise obtain and use information the Company regards as
proprietary. The Company has no patents and, under existing copyright laws,
has only limited protection. In addition, certain provisions of the license
agreements entered into by the Company, including provisions against
unauthorized use, transfer and disclosure, may be unenforceable under the laws
of certain jurisdictions. There can be no assurance that the steps taken by
the Company to protect its proprietary rights will be adequate to deter
misappropriation of its technology or independent development by others of
technologies that are substantially equivalent or superior to the Company's
technology. Any such misappropriation or development could have a material
adverse effect on the Company's business, financial condition and operating
results. As the number of competitors providing similar products increases,
overlapping methodologies used in such products will become more likely.
Although the Company's methodology has never been the subject of an
infringement claim, there can be no assurance that third parties will not
assert infringement claims against the Company in the future, that assertion
of such claims will not result in litigation or that the Company would prevail
in such litigation or be able to obtain a license for the use of any infringed
intellectual property from a third party on commercially reasonable terms.
Litigation, regardless of its outcome, could result in substantial cost to the
Company and divert resources and management from the Company's operations. Any
infringement claim or litigation against the Company could, have a material
adverse effect on the Company's business, financial condition and operating
results. See "Risk Factors--Proprietary Rights and Risks of Infringement."

CUSTOMERS

The following table sets forth a representative list of the Company's
customers.

<TABLE>
<CAPTION>
CAMA TAX MANAGER CITY MANAGER RPS
CLIENT LOCATION COMPUTER ASSISTED MASS APPRAISAL TAX BILLING AND COLLECTIONS MUNICIPAL SOLUTIONS REMITTANCE PROCESSING
- --------------- -------------------------------- --------------------------- ------------------- -----------------------------
<S> <C> <C> <C> <C>
California Sacramento County Sacramento County San Bernardino County
San Diego County
Colorado Douglas County City of Alamosa
Adams County
Florida Martin County Appraiser Broward County Sarasota County Tax Collector
Charlotte County Hillsborough County Tax
Sarasota County Collector
New Mexico City of Artesia
North Carolina Union County
Oklahoma Canadian County Assessor Rogers County Treasurer City of Altus
City of El Reno
Texas Cooke County Appraisal District City of Port Lavaca City of Arlington
City of Cedar Hill Texas Department of Public
Safety
</TABLE>

EMPLOYEES

As of February 28, 1998, the Company had 95 full-time and 5 part-time
employees. This total includes 19 people in sales and marketing, 22 in
research and development, 42 in customer support and field services and 17 in
general administration. None of the Company's employees is represented by a
labor union or is subject to a collective bargaining agreement. The Company
believes its relations with its employees are good.

35
<PAGE>

DESCRIPTION OF PROPERTIES

The Company maintains its headquarters in Dallas, Texas where it leases from
a non-affiliated party an aggregate of approximately 14,250 square feet under
a lease expiring in April 2000. The lease requires annual rental payments of
$182,811 ($12.83 per sq ft per year) in 1998, $194,682 ($13.66 per sq ft per
year) in 1999 and $66,477 ($14.00 per sq ft per year) in 2000 through the
lease termination date. General and administrative, marketing, product
development and customer support and service operations are located in this
space. The Company also leases from a non-affiliated party an aggregate of
approximately 7,800 square feet of office space in various other locations
throughout the United States for sales and service offices. These leases
typically have terms of one year or less with an average per square foot
rental of $9.44, and on standard commercial terms. CPS believes its facilities
are in good condition and adequate for present needs.

LEGAL PROCEEDINGS

From time to time, the Company is involved in litigation relating to claims
arising out of its operations in the normal course of business. 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.

36
<PAGE>

MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES

The following table sets forth certain information concerning the directors,
executive officers and key employees of the Company.

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Paul E. Kana............ 64 Chairman and Chief Executive Officer
James K. Hoofard, Jr. .. 38 Director, President and Chief Operating Officer
Kevin L. Figge.......... 40 Chief Financial Officer
Michael P. Brown........ 47 Vice President
John C. Thomas.......... 51 Vice President
Bobby C. Dow............ 38 Vice President
Lisa D. Hargiss......... 36 Vice President
Randy A. Sellers........ 35 Vice President
G. Dean Booth, Jr. ..... 58 Director and Secretary
Sidney H. Cordier....... 53 Director
Brian R. Wilson......... 46 Director
</TABLE>

PAUL E. KANA has served as Chairman of the Board of Directors and Chief
Executive Officer of the Company since December 1994. From 1988 to 1994, Mr.
Kana served as President, Chief Executive Officer and a member of the Board of
Directors of Delaware-based MR Data Management, Inc. ("MR"), a wholly-owned
subsidiary of MR Data Management Group PLC ("MR Data Management"), which
engages in data transcription and document image-processing. In 1988, MR
acquired Computer Microfilm Corporation ("CMC"), a publicly-held company
founded by Mr. Kana in 1968. CMC engages in digital image processing,
conversion of computer output to microfilm and CD-ROM, computer processing,
high volume laser printing services and micro-publishing. Mr. Kana is a
graduate of Columbia University of New York with a Bachelor of Science in
Engineering.

JAMES K. HOOFARD, JR. has served as a Director, President and Chief
Operating Officer of CPS since December 1994. From 1991 to 1994, Mr. Hoofard
served as Vice President of Marketing and Sales, and was responsible for the
Property Tax Billing and Collection group. He joined the Company as a
Programmer/Analyst in May 1982 and moved into the marketing and sales area in
September 1987, focusing on developing the Florida market. From 1982 to 1987,
he served as a Revenue Analyst, Software Product Manager, and as a Product
Manager for the Florida Tax Manager product. Mr. Hoofard is a graduate of the
University of Texas at Arlington with a Bachelor of Business Administration in
Systems Analysis.

KEVIN L. FIGGE has served as Chief Financial Officer since October 1997. Mr.
Figge's responsibilities since December 1994 have been encompassed within the
Administrative Services group which is comprised of the Accounting and the
Finance Department, as well as the Personnel and Corporate Services
Department. He joined the Company in July 1992 as Controller and was made an
officer of the Company in December 1994. Prior to joining CPS, Mr. Figge
served as Controller of Aarberg Printing Inks, Inc. and was an Accounting
Manager with the Army and Air Force Exchange Service. Mr. Figge graduated with
a Bachelor of Science degree in Business Administration from the University of
Maryland and also obtained a Bachelor of Science degree in Accounting from the
same university. Mr. Figge is a certified public accountant.

MICHAEL P. BROWN has served as Vice President--Conversions since October
1996. From June 1995 to October 1996, Mr. Brown was responsible for the
Property Tax Appraisal and Assessment group. He served as Vice President of
Special Projects from 1993 to 1995 with responsibility for the development of
Property Tax Billing and Collection. Prior thereto, Mr. Brown was the Vice
President of the City and Municipal group primarily in Florida. Mr. Brown
joined CPS in November 1980. He is a graduate of Louisiana Tech University
with a Bachelor of Science degree in Computer Science.

37
<PAGE>

JOHN C. THOMAS has served as Vice President--Sales since June 1997. Mr.
Thomas was previously employed by Kb Systems, Inc., a Florida-based developer
of property tax appraisal and assessment software ("Kb Systems"), where he
served in various corporate management and marketing positions, focusing on
the areas of administration, CAMA and Property Tax Billing and Collection
software. Prior to joining Kb Systems in 1989, Mr. Thomas authored the Thomas
Sales Prospecting and Territory Management Directory, which was published by
the American Management Association. Prior thereto, he served as Vice
President of Sales of Citicorp Information Services, a division of Citibank,
N.A. and as Regional Sales Manager of Interactive Data Corporation, a wholly-
owned subsidiary of Chase Manhattan Corporation. Mr. Thomas earned a Bachelor
of Science degree in Industrial Management from Wayne State University.

LISA D. HARGISS has served as Vice President--Long Term Client Care since
September 1995. She joined the Company in August 1987 as a Client Support
Representative, becoming an integral part of the design team for the Florida
Property Tax Billing and Collection product and the CAMA product. Ms. Hargiss
obtained a Bachelor of Science degree in Computer Science from Texas A&M
University at Commerce.

RANDY A. SELLERS has served as Vice President--Implementation since November
1996. Prior to joining CPS in March 1994, Mr. Sellers served two years as MIS
director and four years in technical support with DacEasy, Inc., a provider of
accounting software. Mr. Sellers received a Bachelor of Science degree in
Management Science and Computer Systems from Oklahoma State University.

BOBBY C. DOW has served as Vice President--Product Development since October
1996. Mr. Dow was responsible for the Municipal group for one year prior to
joining the Product Development group. Mr. Dow, who joined the Company in 1983
as a programmer/analyst, has been part of the original development team that
designed and produced the City group product and has also devoted considerable
developmental efforts to the Tax Collection product. Mr. Dow is a graduate of
Southeastern Oklahoma State University with a Bachelor of Science degree in
Computer Science.

G. DEAN BOOTH, JR. has served as a Director and the Secretary of CPS since
December 1994. Mr. Booth is a partner at the law firm of Schreeder, Wheeler &
Flint, LLP of Atlanta, Georgia. Prior to joining Schreeder, Wheeler & Flint in
March 1996, he was the founder and managing partner of Booth, Wade and
Campbell from 1990. He currently serves as Honorary Chairman and Member of the
Executive Council for the International Bar Association, Trustee and Secretary
for the Institute for Political Economy, and Chairman of the Bar Council,
United States District Court, Northern District of Georgia.

SIDNEY H. CORDIER has served as a Director of the Company since December
1994. From January 1994 to present, Mr. Cordier has served as Chairman of the
Board of Directors of Cedardata PLC, a publicly-held U.K. company listed on
the London Stock Exchange, specializing in commercial and financial accounting
systems software ("Cedardata"). From 1984 to 1993, Mr. Cordier was Chief
Executive Officer of MR Data Management.

BRIAN R. WILSON has served as a Director of CPS since December 1994. From
1993 to the present, Mr. Wilson has been a management consultant, advising
companies on restructurings and serving as a manager of a private investment
trust, and in May 1996, was appointed a director of Cedardata. From 1987 to
1993 Mr. Wilson served as Finance Director and a member of the Board of
Directors of MR Data Management where his responsibilities included mergers
and acquisitions, cash management, pensions, insurance, certain legal matters
and investor relations. Prior to joining MR Data Management in 1987,
Mr. Wilson was the Chief Financial Officer for European Properties with the
Pension Fund Property Unit Trust in the United Kingdom.

The Company's Board of Directors is divided into three classes, with two
classes composed of two directors and one class with one director. The classes
serve staggered three-year terms. G. Dean Booth, Jr.'s term as Director shall
expire as of the 1998 annual meeting, Brian P. Wilson's and Sidney H.
Cordier's terms shall expire as of the 1999 annual meeting, and James K.
Hoofard, Jr.'s and Paul E. Kana's terms shall expire

38
<PAGE>

at the 2000 annual meeting. The Company's executive officers are appointed by
and serve at the discretion of the Board of Directors. No family relationships
exists between any directors or executive officers of CPS.

COMMITTEES OF THE BOARD OF DIRECTORS

The Board maintains an Audit Committee and Compensation Committee. The Audit
Committee is responsible for reviewing the results and scope of audits and
other services provided by the Company's independent auditors. The Audit
Committee is comprised of Messrs. Booth, Kana and Wilson. The Compensation
Committee is comprised of Messrs. Booth, Wilson and Kana. The Compensation
Committee makes recommendations concerning the salaries and incentive
compensation of employees and consultants to the Company, and will oversee and
administer the Company's stock option plans.

EXECUTIVE COMPENSATION

The following table sets forth the compensation paid by the Company to its
Chief Executive Officer and the four next most highly compensated executive
officers of the Company (collectively, the "Named Executive Officers") for
services rendered during the fiscal years ended December 31, 1997 and December
31, 1996.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
--------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
-------------------------------- ------------------ -------
RESTRICTED
NAME AND OTHER ANNUAL STOCK OPTION/ LTIP OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARDS SARS PAYOUTS COMPENSATION
- ------------------ ---- -------- ----- ------------ ---------- ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Paul E. Kana............ 1997 $110,000 -- -- -- -- -- --
Chairman and Chief 1996 110,000 -- -- -- -- -- --
Executive Officer
James K. Hoofard, Jr.... 1997 $125,000 -- -- -- -- -- --
Director, President and 1996 125,000 -- -- -- -- -- --
Chief
Operating Officer
</TABLE>

EMPLOYMENT AND CHANGE OF CONTROL AGREEMENTS

Messrs. Kana and Hoofard entered into employment agreements with the Company
on December 30, 1997. These agreements are for a two-year term and
automatically renew for another two-year period absent termination by the
Company or the employee. The employment agreements provide for an annual
salary of not less than $150,000 per year for Mr. Hoofard and $110,000 per
year for Mr. Kana, with annual performance bonuses to be determined by the
Compensation Committee in connection with achievement of performance criteria
to be determined. In addition, each of Messrs. Kana and Hoofard shall receive
severance payments equal to base compensation at the most recent annual amount
(including performance bonus) for two years if employment is terminated by the
Company without cause or if such employee resigns with "good cause" (i.e., in
the event of any material alteration, reduction or dimmunition in duties or
responsibilities, or following a merger or change in control of the Company).

COVENANTS NOT TO COMPETE

Messrs. Kana and Hoofard have agreed to devote substantially full time to
the business of the Company and not engage in any competitive businesses. In
particular, they will not manage, consult or participate in

39
<PAGE>

any software business (other than an ownership 5% or less), unless the
independent directors of the Company determine such investment is in the best
interests of the Company.

COMPENSATION OF DIRECTORS

All directors are reimbursed for their usual and customary expenses incurred
in attending all Board and committee meetings. CPS currently pays directors
who are not also employees (Messrs. Cordier, Wilson and Booth) $650 per day of
service as it relates to attending such meetings. Directors who are also
employees of the Company receive no remuneration for serving as directors.

BONUS PLAN

The Company has adopted bonus programs for employees, including executive
officers, whereby bonus payments are made based on achievement of individual
performance and consolidated corporate operating results. Business unit
performance also will be a factor in determining compensation awards with
respect to key employees who are not executive officers. The specified
qualitative and quantitative criteria employed by the Board of Directors of
the Company in determining bonus awards will vary for each individual and from
year to year.

401(K) SAVINGS PLAN

The Company sponsors a deferred savings plan (the "401(k) Plan") qualified
under Sections 401(a) and 401(k) of the Internal Revenue Code of 1986, as
amended (the "Code"). All employees over the age of 21 who have completed one
year of service with the Company are eligible to participate in the 401(k)
Plan. Eligible employees may contribute to the 401(k) Plan up to 15% of their
salary subject to an annual maximum established under the Code. Presently, the
Company does not match employee contributions to the 401(k) Plan.

EMPLOYEE EQUITY PLANS

1997 Equity Participation Plan. 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 is designed to attract and retain executive officers, other key
employees, independent directors and consultants of the Company and to provide
incentives to such persons to maximize the Company's performance. 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.

The 1997 Equity Participation Plan is administered by the Compensation
Committee, which is authorized to select from among the eligible participants
the individuals to whom options, restricted stock purchase rights and
performance awards are to be granted and to determine the number of shares to
be subject thereto and the terms and conditions thereof. The members of the
Compensation Committee who are not affiliated with the Company will select
from among the eligible participants the individuals to whom nonqualified
stock options are to be granted, except as set forth below, and will determine
the number of shares to be subject thereto and the terms and conditions
thereof. The Compensation Committee is also authorized to adopt, amend and
rescind rules relating to the administration of the 1997 Equity Participation
Plan.

Nonqualified stock options will provide for the right to purchase Common
Stock at a specified price which may be less than fair market value on the
date of grant (but not less than par value), and usually will

40
<PAGE>

become exercisable in installments after the grant date. Nonqualified stock
options may be granted for any reasonable term.

Incentive stock options will be designed to comply with the provisions of
the Code and will be subject to restrictions contained in the Code, including
exercise prices equal to at least 100% of fair market value of Common Stock on
the grant date and a ten year restriction on their term, but may be
subsequently modified to disqualify them from treatment as an incentive stock
option.

Restricted stock may be sold to participants at various prices (but not
below par value) and made subject to such restrictions as may be determined by
the Compensation Committee. Restricted stock, typically, may be repurchased by
the Company at the original purchase price if the conditions or restrictions
are not met. In general, restricted stock may not be sold, or otherwise
transferred or hypothecated, until restrictions are removed or expire.
Purchasers of restricted stock, unlike recipients of options, will have voting
rights and will receive dividends prior to the time when the restrictions
lapse.

Performance awards may be granted by the Compensation Committee on an
individual or group basis. Generally, these awards will be based upon specific
agreements and may be paid in cash or in Common Stock or in a combination of
cash and Common Stock. Performance awards may include "phantom" stock awards
that provide for payments based upon increases in the price of the Common
Stock over a predetermined period. Performance awards may also include bonuses
which may be granted by the Compensation Committee on an individual or group
basis and which may be payable in cash or in Common Stock or in a combination
of cash and Common Stock.

There are 600,000 shares of Common Stock reserved for issuance pursuant to
the 1997 Equity Participation Plan, of which options to purchase 335,000
shares have been granted to certain directors, officers and employees to be
effective upon the closing of this offering, with an exercise price equal to
the initial public offering price.

Employee Stock Purchase Plan. The Company has 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. Each employee is limited to purchasing
Common Stock having an aggregate market value of $25,000 in any calendar year.

CERTAIN TRANSACTIONS

G. Dean Booth, Jr., a director of the Company, is a partner in the law firm
of Schreeder, Wheeler & Flint, LLP of Atlanta, Georgia ("SWF") and was
formerly a partner at Booth, Owens & Jospin, LLP ("BOJ"). SWF has acted as
counsel to the Company and has been retained by the Company to assist in the
preparation of this offering. During fiscal 1997, legal fees incurred by the
Company to SWF totaled $289,000. During fiscal 1996, SWF was paid
approximately $28,000 in legal fees and expenses, and BOJ was paid
approximately $7,000 in legal fees and expenses. The Company did not make any
payments to SWF in fiscal 1995, but paid approximately $27,500 in legal fees
and expenses to BOJ. It is anticipated SWF's fees from services in the
preparation of this offering will total approximately $120,000.

In May 1997, the Company's shareholders formed Thor Concepts, Inc., a
Georgia corporation ("Thor"), for the sole purpose of acquiring CDP Systems,
Inc., a Florida corporation ("CDP"), for nominal consideration. In addition,
the Company's shareholders advanced approximately $123,000 to CDP to cover CDP
expenses (the "CDP Loans"). Effective July 1997, the Company purchased the
shares of CDP from Thor in exchange for nominal consideration and assumption
of the CDP Loans. As of December 31, 1997, there was approximately $126,000 in
principal and accrued interest outstanding under the CDP Loans. See "Use of
Proceeds."

41
<PAGE>

PRINCIPAL SHAREHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of February 28, 1998, and as adjusted to
reflect the sale of the shares of the Common Stock offered hereby, by (i) each
of the directors of CPS, (ii) each of the Named Executive Officers, (iii) each
person or entity known to CPS to own beneficially more than 5% of the
Company's Common Stock and (iv) all directors and executive officers as a
group. To the Company's knowledge, none of these entities has a relationship
with any Underwriters of this offering or their respective affiliates. Except
as otherwise indicated below, each person or entity named in the table has
sole voting and investment power (or shares such power with his or her spouse)
with respect to his or her Common Stock shown as beneficially owned by each.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY BENEFICIAL OWNERSHIP
OWNED AFTER THE
NAME AND ADDRESS OF PRIOR TO THE OFFERING(1) OFFERING(1)
DIRECTOR, OFFICER AND -------------------------------------------------
OTHER PRINCIPAL SHAREHOLDER NUMBER PERCENTAGE NUMBER PERCENTAGE
- --------------------------- -------------- ----------------------- ----------
<S> <C> <C> <C> <C>
Paul E. Kana................. 1,139,402 23.6% 1,139,402 16.9%
3400 Carlisle, Suite 500
Dallas, Texas 75204
Sidney H. Cordier(2)......... 1,139,402 23.6% 1,139,402 16.9%
Weybourne
10 Wray Park Road
Reigate Surrey
RH2 2 ODD
United Kingdom
Brian R. Wilson(2)........... 1,139,402 23.6% 1,139,402 16.9%
Drymen House
Horn Lane
East Hendren, Near Wantage,
Oxon OX128LD United Kingdom
G. Dean Booth, Jr.(2)........ 243,265 5.0% 243,265 3.6%
Schreeder, Wheeler & Flint
LLP
1600 The Candler Building
127 Peachtree Street, N.E.
Atlanta, Georgia 30303
James K. Hoofard, Jr......... 182,449 3.8% 182,449 2.7%
3400 Carlisle, Suite 500
Dallas, Texas 75204
Hanifen Imhoff Mezzanine
Fund, L.P.(2)(3)............ 724,719 15.0% 724,719 10.8%
1125 17th Street, Suite 1600
Denver, Colorado 80202
All directors and executive
officers as a group(2)
(5 persons)................. 3,843,920 79.5% 3,843,920 57.1%
</TABLE>
- --------
(1) The number of shares beneficially owned by each shareholder is determined
under rules and regulations promulgated by the Securities and Exchange
Commission, and the information is not necessarily indicative of
beneficial ownership for any other purpose. Under such rules, beneficial
ownership includes any shares as to which the individual has sole or
shared voting power or investment power, as well as any shares which the
individual has the right to acquire within 60 days of the date of this
Prospectus through the exercise of any stock option, warrant or other
right. The inclusion herein of such shares, however, does not constitute
an admission that the named shareholder is a direct or indirect beneficial
owner of such shares.
(2) Does not assume the sale of any shares of Common Stock. See "Selling
Shareholders."
(3) The Hanifen Imhoff Mezzanine Fund, L.P. is a Small Business Investment
Company licensed under the Small Business Investment Act of 1958, as
amended. Its focus is $1.0 million to $3.0 million subordinated debt
investments in later stage manufacturing, distribution and service
companies. No director, officer or other principal shareholder of the
Company is affiliated with the Hanifen Imhoff Mezzanine Fund, L.P.

42
<PAGE>

SELLING SHAREHOLDERS

In the event that the Underwriter's over-allotment option is exercised in
full, the following shareholders (the "Selling Shareholders") will sell the
number of shares indicated below:

<TABLE>
<CAPTION>
BENEFICIAL BENEFICIAL PERCENTAGE
OWNERSHIP PRIOR NUMBER OF OWNERSHIP AFTER OWNERSHIP AFTER
TO OVER-ALLOTMENT SHARES OVER-ALLOTMENT OVER-ALLOTMENT
NAME EXERCISE BEING OFFERED EXERCISE EXERCISE
- ---- ----------------- ------------- --------------- ---------------
<S> <C> <C> <C> <C>
Sidney H. Cordier....... 1,139,402 85,660 1,053,742 15.7%
Brian R. Wilson......... 1,139,402 85,660 1,053,742 15.7%
G. Dean Booth Jr........ 243,265 18,288 224,977 3.3%
Hanifen Imhoff Mezzanine
Fund, L.P.............. 724,719 63,472 661,247 9.8%
John K. Percival........ 103,476 21,280 82,196 1.2%
Robert J. Newcorn....... 30,457 10,640 19,817 *
</TABLE>
- --------
* Less than 1%.

In the event that the Underwriter elects to exercise less than its full over-
allotment option, the number of shares being offered by the Selling
Shareholders will be reduced proportionately.

DESCRIPTION OF CAPITAL STOCK

GENERAL

The Company's authorized capital stock consists of (i) 50 million shares of
Common Stock, par value $.01 per share, (ii) 10 million shares of preferred
stock, par value $.01 per share. As of the date of this Prospectus an
aggregate of 4,832,502 shares of Common Stock were outstanding and held by
nine Shareholders (assuming the exercise by four holders of warrants to
purchase 927,766 shares of Common Stock). No shares of preferred stock have
been issued or are outstanding.

COMMON STOCK

The holders of Common Stock are entitled to one vote per share for each
share held of record on all matters submitted to a vote of shareholders.
Subject to preferential rights with respect to any series of preferred stock
which may issued, holders of Common Stock are entitled to receive ratably such
dividends as may be declared by the Board of Directors on the Common Stock out
of funds legally available therefor (subject to the terms and conditions
contained in the Company's existing credit agreements with its lenders), and
in the event of a liquidation, dissolution or winding-up of the affairs of the
Company, are entitled to share equally and ratably in all remaining assets and
funds of the Company. The holders of Common Stock have no preemptive rights,
cumulative voting rights, or rights to convert shares of Common Stock into any
other securities and are not subject to future calls or assessments by the
Company. All outstanding shares of Common Stock are fully paid and non-
assessable.

PREFERRED STOCK

The Board of Directors is authorized, subject to limitations prescribed by
law, without shareholder approval, to issue such shares of preferred stock in
one or more series. Each series of preferred stock shall have such rights,
preferences, privileges and restrictions, including voting rights, dividend
rights, conversion rights, redemption privileges and liquidation preferences,
as shall be determined by the Board of Directors. No shares are issued and
outstanding as of the date hereof, and the Company has no present plans to
issue any of the preferred stock in the foreseeable future. The issuance of
the preferred stock, while providing desirable flexibility for corporate
acquisitions and other corporate purposes, could make it more difficult for

43
<PAGE>

third-parties to acquire, or discourage third-parties from acquiring, a
majority of the outstanding voting stock of the Company. See "Risk Factors--
Effect of Certain Charter and Bylaw Provisions; Antitakeover Effects."

WARRANTS

As of December 31, 1997, CPS had four outstanding warrants to purchase an
aggregate of 927,766 shares of the Common Stock at an exercise price of $.0026
per share. These warrants become exercisable upon the earlier of December 30,
1999 or the completion of an initial public offering and expire on December
29, 2004. The warrant holders have agreed to exercise all warrants upon the
effective date of this offering.

REGISTRATION RIGHTS OF CERTAIN HOLDERS

Upon the completion of this offering, the holders of 927,766 shares of
Common Stock (the "Registrable Securities") or their transferees are entitled
to certain rights with respect to the registration of such shares under the
Securities Act. These rights are provided under the terms of an agreement
between the Company and the holders of the Registrable Securities. If the
Company registers any of its Common Stock either for its own account or for
the account of other security holders, the holders of Registrable Securities
are entitled to include their shares of Common Stock in the registration,
subject to the ability of the underwriters to limit the number of shares
included in the registration to not more than 10% of the offering. All
registration expenses must be borne by the Company; provided, however, that
all underwriting discounts and selling commissions applicable to the sale of
shares in connection with any registration shall be borne by the holders of
the securities registered pro rata on the basis of the number of shares of
such securities being registered.

REPRESENTATIVES' WARRANT

For a description of the warrant to be sold to the Representatives in
connection with this offering, see "Underwriting."

CERTAIN STATUTORY AND CHARTER PROVISIONS REGARDING LIMITATIONS OF LIABILITIES
OF DIRECTORS

As permitted by the Texas Business Corporation Act, the Company's Restated
Articles of Incorporation (the "Restated Articles") include a provision that
eliminates the personal liability of its directors with respect to any acts or
omissions in the performance of his duties to the full extent permitted by
law. The Texas Business Corporation Act provides that Directors will not be
liable in the discharge of any duty if they relied in good faith and with
ordinary care on information, opinions, reports, or statements, including
financial statements and other financial data, that were prepared or presented
by (i) one or more officers or employees of the Corporation, (ii) a committee
of the Board of Directors of which the Director is not a member, or (iii)
anyone the Director reasonably believed to have professional or expert
knowledge.

The Company's Restated Articles further provide that, if the Texas Business
Corporation Act is amended to authorize the elimination or limitation of
director liability which is greater than therein provided, then the liability
of a director of the Company will be eliminated or limited to the fullest
extent permitted by such law, as so amended.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.

<PAGE>

CERTAIN CHARTER AND BYLAW PROVISIONS REGARDING CHANGE OF CONTROL

Certain provisions of the Company's Restated Articles may deter or frustrate
a takeover attempt of the Company that a shareholder might consider in his
best interest. The Company's Restated Articles or Bylaws, among other things,
provide that (i) the annual meeting of shareholders shall be held on such date
and at such time fixed from time to time by the Board of Directors, provided
that there shall be an annual meeting held every calendar year, (ii) any
special meeting of the shareholders may be called only by the Chairman of the
Board, President or upon the affirmative vote of at least a majority of the
members of the Board of Directors, or upon the written demand of the holders
of not less than 50% of the votes entitled to be cast at a special meeting,
(iii) an advance notice procedure must be followed for nomination of directors
and for other shareholder proposals to be considered at annual shareholders'
meetings, and (iv) the Company's Board of Directors be divided into three
classes, each of which serves for different three-year periods, and for which
shareholders have no cumulative voting rights. In addition, the Company will
be authorized to issue additional shares of Common Stock and up to ten million
shares of preferred stock in one or more series, having terms fixed by the
Board of Directors without shareholder approval, including voting, dividend or
liquidation rights that could be greater than or senior to the rights of
holders of Common Stock. Shareholders will have no preemptive rights with
respect to any additional common stock or preferred stock. Issuance of
additional shares of Common Stock or new shares of preferred stock could also
be used as an antitakeover device. Except as set forth herein, the Company has
no current intentions or plans to issue additional Common Stock or issue
Preferred Stock.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Company's securities is American
Securities Transfer and Trust, Inc.

45
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering there will be 6,732,502 shares of Common
Stock outstanding. Immediately following the completion of this offering, a
total of 1,900,000 shares of Common Stock (2,185,000 shares if the
Underwriters' over-allotment is exercised in full) will be freely tradeable
without restriction. An additional 4,832,502 (4,547,502 if the Underwriters'
over-allotment option is exercised in full) shares of Common Stock may be sold
subject to the limitations of Rule 144 under the Securities Act, following
expiration of a lock-up agreements executed by the Company's directors,
executive officers, certain key employees and certain other shareholders,
which expire one year after the date of this Prospectus. Cruttenden Roth has
no present intention to release the locked-up shares prior to expiration of
the one-year period.

In general, under Rule 144 a person (or persons whose shares are aggregated)
who has beneficially owned restricted shares for at least one year, including
any persons who may be deemed to be an affiliate of the Company, is entitled
to sell, within any three-month period, a number of shares that does not
exceed the greater of 1% of the total number of then-outstanding shares of
Common Stock or the average weekly trading volume in the Common Stock as
reported by the American Stock Exchange during the four calendar weeks
preceding such sale. Sales pursuant to Rule 144 also are subject to certain
other requirements relating to the manner of sale, notice and availability of
current public information about the Company.

Affiliates may publicly sell shares not constituting restricted securities
under Rule 144 in accordance with the foregoing volume limitations and other
restrictions but without regard to the one-year holding period. Under Rule
144(k), a person who is not deemed to have been an affiliate of the Company at
any time during the 90 days immediately preceding a sale by such person, and
who has beneficially owned restricted shares for at least two years, is
entitled to sell such shares under Rule 144 without regard to any of the
limitations described above.

46
<PAGE>

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
underwriters named below (the "Underwriters"), for whom Cruttenden Roth
Incorporated and Josephthal & Co. Inc. are acting as Representative, have
severally agreed to purchase from the Company and the Company has agreed to
sell to the Underwriters, the respective number of shares of Common Stock set
forth opposite each Underwriter's name below:

<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SHARES
------------ ---------
<S> <C>
Cruttenden Roth Incorporated....................................
Josephthal & Co. Inc. ..........................................
---------
Total......................................................... 1,900,000
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters thereunder are subject to certain conditions precedent, including
the absence of any material adverse change in the Company's business and the
receipt of certain certificates, opinions and letters from the Company's
counsel and independent public accountants. The nature of the Underwriters'
obligation is such that they are committed to purchase and pay for all the
shares of Common Stock if any are purchased.

The Company has been advised by the Representatives that the Underwriters
propose to offer the shares of Common Stock directly to the public on the
terms set forth on the cover page of this Prospectus. The Underwriters may
allow selected dealers, a concession of not more than $ per share, and
the Underwriters may allow, and such selected dealers may reallow, a
concession of not more than $ per share to other dealers. After the initial
public offering of the shares, the public offering price and other selling
terms may be changed by the Representatives. No change in such terms shall
change the amount of proceeds to be received by the Company as set forth on
the cover page of this Prospectus.

The selling shareholders have granted an option to the Underwriters,
exercisable for a period of 45 days after the date of this Prospectus, to
purchase up to an additional 285,000 shares of Common Stock at the same price
per share as the initial shares to be purchased by the Underwriters to cover
over-allotments, if any. To the extent that the Underwriters exercise this
option, each of the Underwriters will be committed, subject to certain
conditions, to purchase such additional shares of Common Stock in
approximately the same proportion as set forth in the above table.

The Representatives have advised the Company that they do not expect any
sales of the shares of Common Stock offered hereby to be made to discretionary
accounts controlled by the Underwriters.

The Company has agreed to issue to the Representatives at the closing of
this offering five-year warrants (the "Representatives' Warrants") to purchase
up to 10% of the number of shares of Common Stock sold in this offering
(excluding any shares sold in the event the over-allotment option is
exercised) at an exercise price per share equal to 165% of the initial per
share public offering price. The Representatives' Warrants are exercisable for
a period of four years beginning one year from the date of this Prospectus and
contain standard net-issuance provisions. The holders of the Representatives'
Warrants will have no voting, dividend or other

47
<PAGE>

shareholder rights until the Representatives' Warrants are exercised. The
terms of the Representatives' Warrants were established as the result of
negotiations between the Company and the Representatives. If the
Representatives' Warrants are exercised, the Representatives may realize
additional compensation. By their terms, the Representatives' Warrants will be
restricted from sale, transfer, assignment or hypothecation, except to persons
that are officers of the Representatives. The number of shares covered by the
Representatives' Warrants and the exercise price thereof are subject to
adjustment in certain events to prevent dilution. In addition, the Company has
granted certain rights to the holders of the Representatives' Warrants to
register the Representatives' Warrants and the Common Stock underlying the
Representatives' Warrants under the Securities Act, all of which are being
registered as part of this offering.

The Company has agreed to pay the Representatives a non-accountable expense
allowance equal to 3.0% of the aggregate Price to Public (including with
respect to shares of Common Stock underlying the over-allotment option, if and
to the extent it is exercised) set forth on the front cover of this
Prospectus. The Representatives' expenses in excess of the non-accountable
expense allowance, including their legal expenses, will be borne by the
Representatives.

The Company, its officers, directors and warrant holders have entered into
lock-up agreements with the Representatives which provide that they will not
offer, sell or otherwise dispose of any of the Company's Common Stock for a
period of 365 days after the commencement of the offering without the prior
written consent of Cruttenden Roth. Cruttenden Roth has no present intention
to release the locked-up shares prior to expiration of the one-year period.
See "Shares Eligible for Future Sale."

Prior to this offering, there has been no established trading market for the
Common Stock. Consequently, the initial public offering price for the Common
Stock offered hereby has been determined by negotiation between the Company
and the Representatives. Among the factors considered in such negotiations
were the preliminary demand for the Common Stock, the prevailing market and
economic conditions, the Company's results of operations, estimates of the
business potential and prospects of the Company, the present state of the
Company's business operations, an assessment of the Company's management, the
consideration of these factors in relation to the market valuation of
comparable companies in related businesses, the current condition of the
markets in which the Company operates, and other factors deemed relevant.
There can be no assurance that an active trading market will develop for the
Common Stock or that the Common Stock will trade in the public market
subsequent to this offering at or above the initial public offering price.

The Underwriting Agreement provides that the Company and the selling
shareholders will indemnify the Underwriters and their controlling persons
against certain liabilities under the Securities Act or will contribute to
payments the Underwriters and their controlling persons may be required to
make in respect thereof.

LEGAL MATTERS

The law firm of Schreeder, Wheeler & Flint, LLP, Atlanta, Georgia, has acted
as counsel to the Company in connection with this offering and will render an
opinion as to the legality of the shares of Common Stock being offered hereby.
See "Certain Transactions." Summit Law Group, P.L.L.C., Seattle, Washington,
has acted as counsel to the Underwriters in connection with certain legal
matters relating to this offering.

48
<PAGE>

EXPERTS

The Company's financial statements as of December 31, 1997, and for each of
the two years in the period ended December 31, 1997 included in this
Prospectus have been so included in reliance on the report of Grant Thornton
LLP, independent accountants, given on the authority of said firm as experts
in auditing and accounting.

AVAILABLE INFORMATION

The Company has not previously been subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and, accordingly, has not filed reports and other information with the
Securities and Exchange Commission (the "Commission"). The Company has filed
with the Commission a registration statement (the "Registration Statement")
with respect to the shares of Common Stock offered hereby. This Prospectus,
which constitutes part of the Registration Statement, does not contain all of
the information contained in the Registration Statement and the exhibits
thereto. For further information with respect to the Company and the shares of
Common Stock offered hereby, reference is made to the Registration Statement,
including the exhibits thereto, which may be examined without charge at, and
copies of all or part of which may be obtained at prescribed rates from, the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, and at its regional offices located at 7 World
Trade Center, 13th Floor, New York, New York 10048, and Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Electronic filings made through the Electronic Data Gathering and Retrieval
system are publicly available through the Commission's website at
"http://www.sec.gov". Statements contained in this Prospectus as to the
contents of any contract or any other document are not necessarily complete
and, in each instance, reference is made to the copy of such contract or
document filed as an exhibit to the Registration Statement, each statement
being qualified in all respects by such reference.

49
<PAGE>

CPS SYSTEMS, INC.

Index to Consolidated Financial Statements

<TABLE>
<S> <C>
Report of Independent Certified Public Accountants.......................... F-2
Consolidated Balance Sheet.................................................. F-3
Consolidated Statements of Operations....................................... F-4
Consolidated Statements of Shareholders' Equity............................. F-5
Consolidated Statements of Cash Flows....................................... F-6
Notes to Consolidated Financial Statements.................................. F-7
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors

CPS Systems, Inc.

We have audited the accompanying consolidated balance sheet of CPS Systems,
Inc. and Subsidiary as of December 31, 1997, and the related consolidated
statements of operations, shareholders' equity, and cash flows for each of the
two years in the period ended December 31, 1997. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of CPS Systems,
Inc. and Subsidiary as of December 31, 1997, and the consolidated results of
its operations and its cash flows for each of the two years in the period
ended December 31, 1997, in conformity with generally accepted accounting
principles.

LOGO
Atlanta, Georgia

February 19, 1998

F-2
<PAGE>

CPS SYSTEMS, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEET

DECEMBER 31, 1997

<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS
Cash............................................................. $ 327,375
Accounts receivable, less allowance for doubtful accounts of
$62,000......................................................... 1,719,246
Deferred income taxes............................................ 160,000
Inventories...................................................... 160,582
Refundable income taxes.......................................... 74,673
Prepaid expenses and other current assets........................ 134,321
Deferred offering costs.......................................... 366,515
----------
Total current assets........................................... 2,942,712
PROPERTY AND EQUIPMENT............................................. 536,163
SOFTWARE DEVELOPMENT COSTS......................................... 937,847
OTHER ASSETS
Costs in excess of net assets acquired........................... 1,904,592
Debt issue costs................................................. 160,132
Other assets..................................................... 17,948
----------
2,082,672
----------
$6,499,394
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long term debt................................ $ 730,736
Accounts payable................................................. 683,107
Accrued salaries, wages and payroll taxes........................ 12,000
Accrued offering costs........................................... 243,467
Other accrued expenses........................................... 230,125
Unearned revenue, current portion................................ 1,532,611
----------
Total current liabilities...................................... 3,432,046
OTHER LIABILITIES
Long-term debt................................................... 2,014,000
Deferred income taxes............................................ 317,000
Notes payable--shareholders...................................... 122,996
Unearned revenue................................................. 47,325
Other liabilities................................................ 47,025
----------
2,548,346
----------
Total liabilities.............................................. 5,980,392
PUT WARRANTS....................................................... 241,746
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;
3,904,736 shares issued......................................... 39,047
Additional paid-in capital....................................... 960,953
Accumulated deficit.............................................. (722,744)
----------
Total shareholders' equity..................................... 277,256
----------
$6,499,394
==========
</TABLE>

The accompanying notes are an integral part of these statements.

F-3
<PAGE>

CPS SYSTEMS, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

YEARS ENDED DECEMBER 31,

<TABLE>
<CAPTION>
1997 1996
----------- ----------
<S> <C> <C>
Revenue
License fees........................................ $ 2,178,237 $1,634,835
Recurring maintenance and service fees.............. 3,909,869 3,851,308
Product sales....................................... 3,420,413 2,052,148
Other service fees.................................. 969,043 824,486
----------- ----------
10,477,562 8,362,777
----------- ----------
Cost of revenue
Product sales....................................... 2,528,823 1,464,664
Software............................................ 575,815 390,830
Distribution........................................ 67,186 11,115
----------- ----------
3,171,824 1,866,609
----------- ----------
Gross profit...................................... 7,305,738 6,496,168
Operating expenses
Support and customer service........................ 3,277,581 2,743,217
Selling............................................. 965,996 771,470
Research and development............................ 1,508,026 866,366
General and administrative.......................... 1,048,181 1,030,277
Amortization of goodwill and non-compete agreements. 358,266 346,586
----------- ----------
7,158,050 5,757,916
----------- ----------
Earnings from operations.......................... 147,688 738,252
Interest and financing costs.......................... 419,219 819,125
----------- ----------
Loss before income taxes.......................... (271,531) (80,873)
Income tax expense (benefit).......................... (25,000) 165,200
----------- ----------
NET LOSS.......................................... $ (246,531) $ (246,073)
=========== ==========
Basic net loss per common share....................... $ (.06) $ (.06)
=========== ==========
Diluted net loss per common share..................... $ (.07) $ (.06)
=========== ==========
</TABLE>

The accompanying notes are an integral part of these statements.

F-4
<PAGE>

CPS SYSTEMS, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

YEARS ENDED DECEMBER 31, 1997 AND 1996

<TABLE>
<CAPTION>
COMMON STOCK
----------------- ADDITIONAL
NUMBER PAR PAID IN ACCUMULATED
OF SHARES VALUE CAPITAL DEFICIT TOTAL
--------- ------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Balance, December 31,
1995................... 3,904,736 $39,047 $960,953 $(230,140) $ 769,860
Net loss for the year... -- -- (246,073) (246,073)
--------- ------- -------- --------- ---------
Balance, December 31,
1996................... 3,904,736 39,047 960,953 (476,213) 523,787
Net loss for the year... -- -- -- (246,531) (246,531)
--------- ------- -------- --------- ---------
Balance, December 31,
1997................... 3,904,736 $39,047 $960,953 $(722,744) $ 277,256
========= ======= ======== ========= =========
</TABLE>

The accompanying notes are an integral part of these statements.

F-5
<PAGE>

CPS SYSTEMS, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31,

<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss............................................... $(246,531) $(246,073)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Deferred income tax (benefit) expense................ 19,000 (16,000)
Depreciation and amortization........................ 753,085 702,318
Adjustment to put warrants........................... (83,055) 271,632
Loss on disposal of property and equipment........... -- 820
Change in assets and liabilities, net of business
acquired:
Accounts receivable................................ (180,560) (612,648)
Refundable income taxes............................ (74,673) 118,134
Inventories........................................ (44,406) (58,552)
Prepaid expenses and other current assets.......... (30,136) 9,480
Other assets....................................... 3,000 963
Accounts payable................................... 152,940 70,476
Accrued expenses................................... 36,810 116,488
Unearned revenue................................... 448,977 (8,210)
Income taxes payable............................... (176,904) 176,904
Other liabilities.................................. (7,685) 27,354
--------- ---------
Net cash provided by operating activities........ 569,862 553,086
--------- ---------
Cash flows from investing activities:
Purchase of property and equipment..................... (260,823) (209,450)
Software development costs............................. (280,548) (41,016)
Cash acquired in CDP acquisition....................... 3,547 --
Proceeds from sale of property and equipment........... -- 1,299
--------- ---------
Net cash used by investing activities............ (537,824) (249,167)
--------- ---------
Cash flows from financing activities:
Principal payments on long-term debt................... (296,309) (262,644)
Proceeds from notes payable--shareholders.............. 122,996 --
Offering costs paid.................................... (123,048) --
Other receivable....................................... -- 165,000
--------- ---------
Net cash used by financing activities............ (296,361) (97,644)
--------- ---------
Net increase (decrease) in cash.......................... (264,323) 206,275
Cash at beginning of period.............................. 591,698 385,423
--------- ---------
Cash at end of period.................................... $ 327,375 $ 591,698
========= =========
Supplementary Cash Flow Disclosure:
Interest and financing costs paid...................... $ 393,000 $ 432,048
Income taxes (refunded) paid, net...................... $ 208,000 $(113,839)
</TABLE>

The accompanying notes are an integral part of these statements.

F-6
<PAGE>

CPS SYSTEMS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1997

NOTE A--DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1. BUSINESS

CPS Systems, Inc. and its wholly-owned Subsidiary, CDP Systems, Inc. (the
Company), engage primarily in developing, marketing, licensing and supporting
proprietary software and selling hardware and related products to
appraisal/assessment districts, tax collection agencies, municipalities and
law enforcement agencies located primarily in Texas, Oklahoma and Florida.

2. PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of CPS Systems,
Inc. and its wholly-owned subsidiary, CDP Systems, Inc. All significant
intercompany transactions and balances have been eliminated.

3. REVENUE RECOGNITION

The Company licenses its software products. 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.

Other fees are recognized as the services are provided and consist primarily
of training, conversion, customization and installation.

4. INVENTORIES

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

5. PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation is provided using
the straight-line method over the estimated useful lives of the assets.
Accelerated methods are utilized for income tax purposes.

6. SOFTWARE DEVELOPMENT COSTS

In accordance with SFAS No. 86, all software development costs are charged
to expense as incurred until technological feasibility has been established
for the product. Software development costs incurred after technological
feasibility has been established are capitalized and amortized, commencing
with product release, on a straight line basis over a period of six to ten
years. Amortization of software development costs was approximately $142,000
and $116,000 during the years ended December 31, 1997 and 1996, respectively,
and is included in software cost of revenue in the accompanying consolidated
statements of operations. Software development costs are stated net of
accumulated amortization of approximately $362,000 at December 31, 1997.

F-7
<PAGE>

CPS SYSTEMS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

7. COSTS IN EXCESS OF NET ASSETS ACQUIRED

The excess acquisition cost over the fair value of net assets acquired
(goodwill) of CPS Systems, Inc. is amortized on a straight line basis over a
ten year period. Goodwill arising from the acquisition of CDP Systems is
amortized on a straight-line basis over a three year period. Accumulated
amortization of goodwill was approximately $805,000 at December 31, 1997.
Amortization of costs in excess of net assets acquired charged to operations
was approximately $275,000 and $265,000 in 1997 and 1996, respectively.

The remaining balance of goodwill at December 31, 1997 consists of
$1,854,717 and $49,875 attributable to CPS and CDP, respectively.

8. DEBT ISSUE COSTS

Costs incurred in connection with obtaining financing have been capitalized
and are amortized on a straight-line basis over the term of the loan
agreements, which range from four to six years. Debt issue costs are stated
net of accumulated amortization of approximately $245,000 at December 31,
1997. Amortization of debt issue costs charged to operations was approximately
$82,000 annually in 1997 and 1996 and is included in interest and financing
costs in the accompanying consolidated statements of operations.

9. NON-COMPETE AGREEMENTS

Cost of non-compete agreements were capitalized and amortized on a straight
line basis over the three year term of the agreements. Non-compete agreements
were fully amortized at December 31, 1997. Amortization of non-compete
agreements charged to operations was approximately $83,000 annually in 1997
and 1996.

10. INCOME TAXES

The Company accounts for income taxes using the asset and liability method.
Under this method, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates applied to taxable income. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date. A valuation allowance is provided for
deferred tax assets when it is more likely than not that the asset will not be
realized.

11. USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS

In preparing financial statements in conformity with General Accepted
Accounting Principles ("GAAP"), management is required to make certain
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the
date of the financial statements and revenues and expenses during the
reporting period. Actual results could differ from those estimates.

12. LONG-LIVED ASSETS

Management periodically evaluates the realizability of its property and
equipment, software development costs and intangible assets in light of
current technology, as it may relate to the Company's products, and the
current environment of its industry and markets. Management believes that no
impairment of property and equipment, software development costs and
intangible assets exists at December 31, 1997.

F-8
<PAGE>

CPS SYSTEMS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

13. DEFERRED OFFERING COSTS

Deferred offering costs represent costs incurred directly in connection with
the Company's initial public offering and will be charged against the gross
proceeds of the offering. If the offering is not completed, the deferred
offering costs will be charged to operations in the period in which the
offering is abandoned.

14. FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments include cash, cash equivalents and long-
term debt. The carrying value of cash and cash equivalents approximates fair
value due to the relatively short period to maturity of the instruments. The
carrying value of the Company's long-term obligations approximates fair value
based upon borrowing rates currently available to the Company for borrowings
with comparable maturities.

15. EARNINGS PER SHARE

The Company adopted Statement of Financial Accounting Standards No. 128
(SFAS 128), Earnings Per Share, in the fourth quarter of 1997. Basic net
earnings per common share is based upon the weighted average number of common
shares outstanding. Diluted net earnings per common share is based upon the
weighted average number of common shares outstanding plus dilative potential
common shares, including warrants outstanding during the period. All
comparative earnings per share data for prior periods presented have been
restated.

NOTE B--ACQUISITION OF CDP SYSTEMS, INC.

On July 1, 1997, the Company acquired all the outstanding common stock of
CDP Systems, Inc. from Thor Concepts, Inc. (Thor) for $10 cash and the
assumption of approximately $138,000 of liabilities. Thor, which is owned by
the identical shareholders as CPS, acquired the common stock of CDP in June
1997 from the former CDP shareholders under substantially identical terms and
amounts. CDP develops automated voice response software.

The acquisition of CDP has been accounted for as a purchase. Accordingly,
the purchase price was allocated to assets and liabilities based on their
estimated fair value, at the date of acquisition. Results of operations of CDP
have been included in the consolidated financial statements from the date of
acquisition. The excess purchase price over the fair value of the net assets
acquired of approximately $60,000 is being amortized on a straight-line basis
over three years. The results of operations of CDP prior to July 1, 1997 were
not material.

NOTE C--PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at December 31, 1997:

<TABLE>
<CAPTION>
ESTIMATED
SERVICE LIVES
-------------
<S> <C> <C>
Computer equipment and purchased software............. $747,233 5 years
Furniture and fixtures................................ 186,008 5-7 years
Vehicles.............................................. 43,000 3 years
Leasehold improvements................................ 17,194 4 years
--------
993,435
Accumulated depreciation.............................. 457,272
--------
$536,163
========
</TABLE>

F-9
<PAGE>

CPS SYSTEMS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Depreciation of property and equipment charged to operations was $171,052
and $151,839 for the years ended December 31, 1997 and 1996, respectively.

NOTE D--LONG-TERM DEBT AND REVOLVING LINE OF CREDIT

LONG-TERM DEBT

Long-term debt consisted of the following at December 31, 1997:

<TABLE>
<S> <C>
Senior term loan. Requires monthly payments of $32,614 including
interest at prime plus 2.5% (effective rate of 10.25% at
December 31, 1997). All outstanding principal and interest due
December 1998................................................... $ 730,736
Subordinated note. Interest payable quarterly, principal payable
in two installments in December 1999 and December 2000.......... 2,014,000
----------
2,744,736
Less current portion............................................. 730,736
----------
$2,014,000
==========
</TABLE>

In accordance with the subordination and intercreditor agreement, the
Company can make no payments on the subordinated note until all indebtedness
under the senior term loan and revolving line of credit has been repaid, with
the exception of interest payments required under the subordinated note. Each
loan is collateralized by substantially all assets of the Company.

Each loan agreement contains covenants which, among other things, restrict
the payment of dividends and the level of capital expenditures, and require
the Company to maintain certain minimum financial ratios. The Company was in
compliance with these covenants at December 31, 1997.

The senior term loan requires the payment of a monthly maintenance fee of
$4,167 through December 1998. The lender may also require additional principal
payments not to exceed fifty percent of the Company's annual excess cash
flows, as defined.

In connection with the issuance of the subordinated note, CPS issued a put
warrant to purchase 724,719 shares of the Company's common stock for
approximately $.0026 per share to the note holder. Interest on this note is
payable at a stated rate of 12%. Giving effect to the issuance of the
warrants, and the put feature adjustment attributable to the warrants (see
Note G), the imputed interest rate on this note was 10.0% and 23.8% for the
years ended December 31, 1997 and 1996, respectively.

Maturities of long-term debt are as follows:

<TABLE>
<S> <C>
Year ending December 31,
1998............................................................ $ 730,736
1999............................................................ 975,725
2000............................................................ 1,038,275
----------
$2,744,736
==========
</TABLE>

REVOLVING LINE OF CREDIT

The Company executed a revolving line of credit agreement with the senior
lender which provides for maximum borrowings of $1,000,000. Borrowings are
restricted to 70% of eligible accounts receivable. Interest is payable monthly
at the prime rate plus 2%. The agreement is collateralized by substantially
all assets of the Company. The provisions of the agreement contain covenants
identical to those of the senior term loan. No amounts were outstanding under
this revolving line of credit at December 31, 1997.

F-10
<PAGE>

CPS SYSTEMS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTES PAYABLE--SHAREHOLDERS

The Company has notes payable to shareholders in the amount of $122,996
which are payable in full in September 2000. Interest is payable at maturity
at 8% per annum. Interest expense of approximately $2,500 was recorded on
these notes in 1997. No amounts were due under notes payable to shareholders
at December 31, 1996.

NOTE E--INCOME TAXES

The income tax provision consisted of the following:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------
1997 1996
-------- --------
<S> <C> <C>
Current expense (benefit)................................ $(44,000) $181,200
Deferred expense (benefit)............................... 19,000 (16,000)
-------- --------
$(25,000) $165,200
======== ========
</TABLE>

At December 31, 1997 the Company's temporary differences result in a
deferred income tax liability, summarized as follows:

<TABLE>
<S> <C>
Deferred tax liabilities:
Capitalized software costs....................................... $356,000
Depreciation..................................................... 36,000
--------
Gross deferred tax liability................................... 392,000
--------
Deferred tax assets:
Unearned revenue................................................. 121,000
Amortization of intangible assets................................ 75,000
Accruals and allowances.......................................... 39,000
--------
235,000
--------
Net deferred tax liability..................................... $157,000
========
</TABLE>

The net deferred tax liability is classified in the accompanying balance
sheet as follows:

<TABLE>
<S> <C>
Current deferred tax asset....................................... $(160,000)
Long-term deferred tax liability................................. 317,000
---------
Net deferred tax liability....................................... $ 157,000
=========
</TABLE>

The provision for income taxes differs from the amount of income tax
determined by applying the applicable federal rates due to the following:

<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Tax benefit at applicable federal rate of 34%........... $(92,300) $(27,500)
State tax expense (benefit), net........................ (2,000) 14,500
Non deductible amortization of goodwill................. 104,500 90,100
Non deductible (non taxable) warrant accretion.......... (31,500) 92,400
Other non deductible items.............................. 13,300 15,200
Tax credits............................................. (17,000) (19,500)
-------- --------
$(25,000) $165,200
======== ========
</TABLE>

F-11
<PAGE>

CPS SYSTEMS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE F--COMMITMENTS AND CONTINGENCIES

LEASE COMMITMENTS

The Company has entered into noncancelable operating lease agreements for
office space which expire at various dates through March 2001. Approximate
minimum future payments under noncancelable leases with initial or remaining
terms in excess of one year at September 30, are due as follows:

<TABLE>
<S> <C>
Year ending December 31,
1998.............................................................. $230,000
1999.............................................................. 210,000
2000.............................................................. 80,000
2001.............................................................. 2,000
--------
$522,000
========
</TABLE>

Rental expense for the years ended December 31, 1997 and 1996 was
approximately $300,000 and $260,000, respectively.

CONTINGENCIES

A former employee filed a civil action in the United States District Court
for the Middle District of Florida asserting claims under federal and state
Equal Opportunity Employment Laws. In January 1998, a jury found, and judgment
was entered, in favor in the Company and against the former employee. The
Court may award attorneys' fees of the former employee to be paid by the
Company. Management believes such action, if taken, would be without merit and
would appeal such action if necessary. The ultimate outcome of this
uncertainty cannot be determined at this time. Accordingly, no provision for
any liabilities that may result based on the ultimate outcome of this
uncertainty has been made.

NOTE G--WARRANTS

The Company issued warrants for the purchase of 724,719 shares of common
stock in connection with the subordinated note. Additionally, warrants for the
purchase of 203,047 shares of common stock were issued in connection with
costs of obtaining financing. All warrants issued entitle the holders to
purchase common stock at an exercise price of approximately $.0026 per share
and expire in December 2004. The terms of the warrant also entitle the holders
to require the Company to purchase the warrant for cash on or after December
31, 1999, or upon an initial public offering of the Company's common stock if
earlier, for a price as defined in the warrant agreements.

Upon issuance, the Company recorded the put warrants at their value as
estimated by management of $110,000. The Company is adjusting the put warrants
to the highest redemption price of the put warrants (the put feature
adjustment) in accordance with the warrant agreement, which is a formula based
on operating earnings, as defined, for the preceding twelve months,
outstanding indebtedness and cash balances. The put feature adjustments are
accrued over the period from the date of issuance to the earliest put date of
the warrants. The put feature adjustments resulted in a benefit of $83,055 in
1997 and a charge to earnings of $271,632 in 1996. Such put feature
adjustments are classified as interest and financing costs in the accompanying
statements of operations.

All warrant holders executed agreements to exercise all warrants into common
stock upon the closing of the initial public offering of the Company's common
stock.

F-12
<PAGE>

CPS SYSTEMS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE H--EARNINGS PER SHARE

Basic net earnings per common share and diluted net earnings per common
share were computed as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
-----------------------------------
EARNINGS SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------
<S> <C> <C> <C>
Net loss................................. $(246,531)
=========
Basic net loss per common share........ (246,931) 3,904,736 $(0.06)
======
Effect of dilutive securities
Put warrants........................... (83,055) 927,766
--------- ---------
Diluted net loss per common share...... $(329,986) 4,832,502 $(0.07)
========= ========= ======
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-----------------------------------
EARNINGS SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------
<S> <C> <C> <C>
Net loss................................. $(246,073)
=========
Basic net loss per common share........ $(246,073) 3,904,736 $(0.06)
======
Effect of dilutive securities............ -- --
--------- ---------
Diluted net loss per common share...... $(246,073) 3,904,736 $(0.06)
========= ========= ======
</TABLE>

NOTE I--RETIREMENT PLAN

The Company has a retirement savings plan covering substantially all of its
employees. The Company matches employee contributions at a rate determined
annually by the Board of Directors. No Company contributions were made for the
years ended December 31, 1997 and 1996.

NOTE J--NEW ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board (FASB) has issued the following
Statements of Financial Accounting Standards (SFAS):

SFAS 131, Disclosures about Segments of an Enterprise and Related
Information, which is effective for financial statements for periods beginning
after December 15, 1997. SFAS 131 requires companies to report information
about an entity's different types of business activities and the different
economic environments in which it operates, referred to as operating segments.

F-13
<PAGE>

CPS SYSTEMS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Management does not expect the adoption of the Statements of Financial
Accounting Standards and SOP 97-2, referred to above, to have a material
impact on the Company's results of operations or financial condition.

NOTE K--SHAREHOLDERS' EQUITY

A stock split of 390 to 1 was approved and became effective in October 1997.
Additionally, the articles of incorporation were amended to authorize
50,000,000 common shares and 10,000,000 preferred shares. The board can issue
such shares of preferred stock in one or more series which will have rights,
preferences, privileges and restrictions as determined by the board of
directors. All per share amounts and references to common and preferred stock
have been retroactively restated.

The Company adopted the 1997 Equity Participation Plan and Employee Stock
Purchase Plan (the Plans) in October 1997. The Plans provide for the issuance
of stock options and other performance awards as may be approved by the board
of directors. 335,000 stock options were issued under this plan, pending the
successful closing of the Company's initial public offering, with an exercise
price equal to the offering per share price of the Company's common stock
offered in its initial public offering.

NOTE L--RELATED PARTIES

Legal fees incurred to a law firm in which a director and shareholder of the
Company is a partner were approximately $289,000 and $35,000 in 1997 and 1996,
respectively.

F-14
<PAGE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UN-
DER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CON-
TAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER
TO BUY ANY SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.

-----------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 6
Use of Proceeds........................................................... 12
Dividend Policy........................................................... 12
Dilution.................................................................. 13
Capitalization............................................................ 14
Selected Financial Data................................................... 15
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 16
Business ................................................................. 24
Management................................................................ 37
Certain Transactions...................................................... 41
Principal Shareholders.................................................... 42
Selling Shareholders...................................................... 43
Description of Capital Stock.............................................. 43
Shares Eligible for Future Sale........................................... 46
Underwriting.............................................................. 47
Legal Matters............................................................. 48
Experts................................................................... 49
Available Information..................................................... 49
Index to Consolidated Financial Statements................................ F-1
</TABLE>

-----------

UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

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

1,900,000 SHARES

LOGO
[LOGO OS CPS SYSTEMS, INC. APPEARS HERE]

COMMON STOCK

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

PROSPECTUS

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

Cruttenden Roth
Incorporated

Josephthal & Co. Inc.

, 1998

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

<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Registrant's Restated Articles of Incorporation ("Restated Articles")
contains a provision that requires the Registrant to indemnify its directors,
officers, agents and employees to the extent permitted under Texas law. The
Registrant's Restated Articles provide that the Registrant shall indemnify its
directors, officers, employees and other agents to the fullest extent
permitted by law. The Registrant believes that indemnification under its
Restated Articles covers at least negligence and gross negligence on the part
of the indemnified parties. The Registrant's Restated Articles also require it
to maintain insurance, to the extent reasonably available and at its expense,
to protect any person entitled to indemnity thereunder against any liability
for which indemnification would be provided thereunder, whether or not the
Registrant has the power to indemnify such person against such liability under
Texas law.

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses, other than the
underwriting discounts and commissions, payable by the Registrant in
connection with the sale of the Common Stock being registered:

<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee................... $ 4,392
National Association of Securities Dealers, Inc. Filing Fee........... 1,949
Amex Filing Fee....................................................... 30,000
Non-accountable expense allowance * .................................. 313,500
Blue Sky Fees and Expenses * ......................................... 65,000
Legal Fees and Expenses *............................................. 270,000
Accounting Fees and Expenses *........................................ 110,000
Printing and Engraving Expenses *..................................... 110,000
Transfer Agent Fee *.................................................. 3,000
Miscellaneous Expenses *.............................................. 2,159
--------
Total................................................................. $910,000
========
</TABLE>
- --------
* Estimated for the purpose of this filing.

In the event the Underwriters' over-allotment option is exercised in full,
an additional $47,025 in non-accountable expenses will be payable by the
Registrant.

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES

None.

ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(A) EXHIBITS

<TABLE>
<CAPTION>
NO. DESCRIPTION
--- -----------
<C> <S>
1.1 Form of Underwriting Agreement
1.2 Form of Warrant Agreement of Cruttenden Roth Incorporated
3.1 Restated Articles of Incorporation and all amendments thereto
3.2 Bylaws
4.1 Form of Common Stock Certificate
See Exhibits 3.1 and 3.2 for provisions in the Certificate of
Incorporation and Amended and Restated Bylaws of the Company defining
4.2 the rights of the holders of Common Stock
</TABLE>

II-1
<PAGE>

<TABLE>
<CAPTION>
NO. DESCRIPTION
--- -----------
<C> <S>
5.1 Opinion of Schreeder, Wheeler & Flint, LLP regarding legality
10.1 Warrant to Purchase Shares of Common Stock issued on December 29, 1994
by the Company to Hanifen Imhoff Mezzanine Fund, L.P. granting the
right to purchase from the Company 724,719 shares of the Company's
Common Stock
10.2 Warrant to Purchase Shares of Common Stock issued on December 29, 1994
by the Company to John K. Percival granting the right to purchase from
the Company 103,476 shares of the Company's Common Stock
10.3 Warrant to Purchase Shares of Common Stock issued on December 29, 1994
by the Company to Samuel E. Hudgins granting the right to purchase from
the Company 69,114 shares of the Company's Common Stock
10.4 Warrant to Purchase Shares of Common Stock issued on December 29, 1994
by the Company to Robert J. Newcorn granting the right to purchase from
the Company 30,457 shares of the Company's Common Stock
10.5 401(k) Retirement Plan
10.6 1997 Equity Participation Plan
10.7 CPS Systems, Inc. Employee Stock Purchase Plan
10.8 Standard Office Building Lease Agreement between Aetna Life Insurance
Company and CPS Business Systems, Inc., dated February 13, 1990, as
amended by Amendment No. 1 between Dallas Metro Real Estate Fund I,
Aetna Life Insurance Company and CPS Systems, Inc. dated January 31,
1995
10.9 Term Loan Agreement dated as of December 29, 1994 between CPS
Acquisition Corp. and Greyhound Financial Corporation**
10.10 Term Loan Promissory Note dated December 29, 1994 in the amount of
$1,500,000
10.11 Guaranty and Subordination Agreement (Term Loan) dated December 29,
1994 between CPS Systems, Inc. and Greyhound Financial Corporation**
10.12 Form of Stock Pledge and Security Agreement (with Irrevocable Proxy)
dated December 29, 1994 between each of the Company's Shareholders and
Greyhound Financial Corporation**
10.13 Assignment of contract dated December 29, 1994 between CPS Acquisition
Corp. and Greyhound Financial Corporation**
10.14 Stock Pledge and Security Agreement (with Irrevocable Proxy) dated
December 29, 1994 between CPS Acquisition Corp. and Greyhound Financial
Corporation**
10.15 Assumption Agreement dated December 29, 1994 between CPS Systems, Inc.
and Greyhound Financial Corporation**
10.16 Revolver Loan and Security Agreement dated December 29, 1994 between
CPS Systems, Inc. and Greyhound Financial Corporation**
10.17 Revolver Loan Promissory Note dated December 29, 1994 in the amount of
$1,000,000
10.18 Assignment of Contracts, Intangibles, Licenses and Permits dated
December 29, 1994 between CPS Systems, Inc. and Greyhound Financial
Corporation**
10.19 Guaranty and Subordination Agreement (Revolver Loan) dated December 29,
1994 by CPS Acquisition Corp. in favor of Greyhound Financial
Corporation**
10.20 Subordination and Intercreditor Agreement dated December 29, 1994 among
Greyhound Financial Corporation, Hanifen Imhoff Mezzanine Fund, L.P.,
CPS Acquisition Corp. and CPS Systems, Inc.**
10.21 CPS Acquisition Corp. and CPS Systems, Inc. Note Agreement dated as of
December 29, 1994 for $2,100,000 12% Senior Subordinated Secured Note
Due December 31, 2000
10.22 Security Agreement (general) dated December 29, 1994 between CPS
Systems, Inc. and Hanifen Imhoff Mezzanine Fund, L.P.
10.23 Security Agreement (Stock) dated December 29, 1994 from Paul E. Kana to
and for the benefit of Hanifen Imhoff Mezzanine Fund, L.P.
10.24 Agreement for Ongoing Maintenance & Enhancement of Software Products
entered between CPS Systems, Inc. and Majesco Software, Inc. dated
January 1997
</TABLE>

II-2
<PAGE>

<TABLE>
<CAPTION>
NO. DESCRIPTION
--- -----------
<C> <S>
10.25 Value Added Reseller Agreement by and between CPS Systems, Inc. and
NCR Corporation dated June 13, 1996
10.26 Industry Remarketer Affiliate Document of Understanding by and
between IBM Corporation and CPS Systems, Inc. dated September 12,
1996
10.27 Form of Lock-Up Agreement
10.28 Employment Agreement for James K. Hoofard
10.29 Employment Agreement for Paul E. Kana
21.1 List of Subsidiaries
23.1*** Consent of Independent Auditors
23.2 Consent of Schreeder, Wheeler and Flint, LLP (see Exhibit 5.1)
24.1 Power of Attorney (see page II-IV)
27.1 Financial Data Schedules
</TABLE>
- --------
* Filed herewith.
** Greyhound Financial Corporation changed its name to FINOVA Capital
Corporation.
*** Amends previously filed Exhibit.

(B) FINANCIAL STATEMENT SCHEDULES

Report of Independent Auditors on Financial Statement Schedules

ITEM 28. UNDERTAKINGS

The small business issuer will provide to the underwriters at the closing
specified in the underwriting agreement certificates in such denominations and
registered in such names as required by the underwriters to permit prompt
delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the small
business issuer pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable.

In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses incurred or
paid by a director, officer or controlling person of the small business issuer
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the small business issuer will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.

For determining any liability under the Securities Act, the information
omitted from the form of prospectus filed as part of this Registration
Statement in reliance upon Rule 430A and contained in a form of prospectus
filed by the small business issuer under Rule 424(b)(1), or 497(h) under the
Securities Act will be treated as part of this Registration Statement as of
the time the Commission declares it effective.

For determining any liability under the Securities Act, each post-effective
amendment that contains a form of prospectus will be treated as a new
Registration Statement for the securities offered in the Registration
Statement, and the offering of the securities at that time will be treated as
the initial bona fide offering of those securities.

II-3
<PAGE>

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form SB-2 and has authorized this
Amendment No. 4 to the Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Dallas, State of
Texas, on March 19, 1998.

CPS SYSTEMS, INC.

By /s/ Paul E. Kana,
_____________________________________
Paul E. Kana,
Chairman and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 4 to the Registration Statement has been signed by the following
persons in the capacities indicated below on March 19, 1998.

<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----

<S> <C> <C>
/s/ Paul E. Kana Chairman of the Board and
____________________________________ Chief Executive Officer
Paul E. Kana (Principal Executive
Officer)

/*/ Kevin L. Figge Chief Financial Officer
____________________________________ (Principal Financial Officer)
Kevin L. Figge

/s/ James K. Hoofard, Jr. Director, President and
____________________________________ Chief Operating Officer
James K. Hoofard, Jr.

/*/ G. Dean Booth Director and Secretary
____________________________________
G. Dean Booth

/*/ Sidney H. Cordier Director
____________________________________
Sidney H. Cordier

/*/ Brian R. Wilson Director
____________________________________
Brian R. Wilson
</TABLE>

II-4

<PAGE>

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
ON SCHEDULE

Board of Directors
CPS Systems, Inc.

In connection with our audits of the consolidated financial statements of
CPS Systems, Inc. and Subsidiary and referred to in our report dated February
19, 1998, which is included in the Prospectus constituting Part I of this
Registration Statement, we have also audited Schedule II of CPS Systems, Inc.
and Subsidiary for the years ended December 31, 1997 and 1996. In our opinion,
this schedule presents fairly, in all material respects, the information
required to be set forth therein.

LOGO

Atlanta, Georgia

February 19, 1998
<PAGE>

CPS SYSTEMS, INC. AND SUBSIDIARY

SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- ---------- ---------- ------------ ----------
ADDITIONS
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND DEDUCTIONS END OF
DESCRIPTION OF PERIOD EXPENSES DESCRIBE (1) PERIOD
----------- ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
Year ended December 31, 1997
Allowance for doubtful accounts
receivable..................... $27,000 $37,000 $ 2,000 $62,000
Year ended December 31, 1996
Allowance for doubtful accounts
receivable..................... $40,000 $ -- $13,000 $27,000
</TABLE>
- --------
(1) Bad debt write off.
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
NO. DESCRIPTION
--- -----------
<C> <S>
1.1 Form of Underwriting Agreement
1.2 Form of Warrant Agreement of Cruttenden Roth Inc.
3.1 Restated Articles of Incorporation and all amendments thereto
3.2 Bylaws
4.1 Form of Common Stock Certificate
4.2 See Exhibits 3.1 and 3.2 for provisions in the Certificate of
Incorporation and Amended and Restated Bylaws of the Company defining
the rights of the holders of Common Stock
5.1 Opinion of Schreeder, Wheeler & Flint, LLP regarding legality
10.1 Warrant to Purchase Shares of Common Stock issued on December 29, 1994
by the Company to Hanifen Imhoff Mezzanine Fund, L.P. granting the right
to purchase from the Company 724,719 shares of the Company's Common
Stock
10.2 Warrant to Purchase Shares of Common Stock issued on December 29, 1994
by the Company to John K. Percival granting the right to purchase from
the Company 103,476 shares of the Company's Common Stock
10.3 Warrant to Purchase Shares of Common Stock issued on December 29, 1994
by the Company to Samuel E. Hudgins granting the right to purchase from
the Company 69,114 shares of the Company's Common Stock
10.4 Warrant to Purchase Shares of Common Stock issued on December 29, 1994
by the Company to Robert J. Newcorn granting the right to purchase from
the Company 30,457 shares of the Company's Common Stock
10.5 401(k) Retirement Plan
10.6 1997 Equity Participation Plan
10.7 CPS Systems, Inc. Employee Stock Purchase Plan
10.8 Standard Office Building Lease Agreement between Aetna Life Insurance
Company and CPS Business Systems, Inc., dated February 13, 1990, as
amended by Amendment No. 1 between Dallas Metro Real Estate Fund I,
Aetna Life Insurance Company and CPS Systems, Inc. dated January 31,
1995
10.9 Term Loan Agreement dated as of December 29, 1994 between CPS
Acquisition Corp. and Greyhound Financial Corporation**
10.10 Term Loan Promissory Note dated December 29, 1994 in the amount of
$1,500,000
10.11 Guaranty and Subordination Agreement (Term Loan) dated December 29, 1994
between CPS Systems, Inc. and Greyhound Financial Corporation**
10.12 Form of Stock Pledge and Security Agreement (with Irrevocable Proxy)
dated December 29, 1994 between each of the Company's Shareholders and
Greyhound Financial Corporation**
10.13 Assignment of contract dated December 29, 1994 between CPS Acquisition
Corp. and Greyhound Financial Corporation**
10.14 Stock Pledge and Security Agreement (with Irrevocable Proxy) dated
December 29, 1994 between CPS Acquisition Corp. and Greyhound Financial
Corporation**
10.15 Assumption Agreement dated December 29, 1994 between CPS Systems, Inc.
and Greyhound Financial Corporation**
10.16 Revolver Loan and Security Agreement dated December 29, 1994 between CPS
Systems, Inc. and Greyhound Financial Corporation**
10.17 Revolver Loan Promissory Note dated December 29, 1994 in the amount of
$1,000,000
10.18 Assignment of Contracts, Intangibles, Licenses and Permits dated
December 29, 1994 between CPS Systems, Inc. and Greyhound Financial
Corporation**
10.19 Guaranty and Subordination Agreement (Revolver Loan) dated December 29,
1994 by CPS Acquisition Corp. in favor of Greyhound Financial
Corporation**
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
NO. DESCRIPTION
--- -----------
<C> <S>
10.20 Subordination and Intercreditor Agreement dated December 29, 1994
among Greyhound Financial Corporation, Hanifen Imhoff Mezzanine Fund,
L.P., CPS Acquisition Corp. and CPS Systems, Inc.**
10.21 CPS Acquisition Corp. and CPS Systems, Inc. Note Agreement dated as of
December 29, 1994 for $2,100,000 12% Senior Subordinated Secured Note
Due December 31, 2000
10.22 Security Agreement (general) dated December 29, 1994 between CPS
Systems, Inc. and Hanifen Imhoff Mezzanine Fund, L.P.
10.23 Security Agreement (Stock) dated December 29, 1994 from Paul E. Kana
to and for the benefit of Hanifen Imhoff Mezzanine Fund, L.P.
10.24 Agreement for Ongoing Maintenance & Enhancement of Software Products
entered between CPS Systems, Inc. and Majesco Software, Inc. dated
January 1997
10.25 Value Added Reseller Agreement by and between CPS Systems, Inc. and
NCR Corporation dated June 13, 1996
10.26 Industry Remarketer Affiliate Document of Understanding by and between
IBM Corporation and CPS Systems, Inc. dated September 12, 1996
10.27 Form of Lock-Up Agreement
10.28 Employment Agreement for James K. Hoofard
10.29 Employment Agreement for Paul E. Kana
21.1 List of Subsidiaries
23.1*** Consent of Independent Auditors
23.2 Consent of Schreeder, Wheeler and Flint, LLP (see Exhibit 5.1)
24.1 Power of Attorney (see pages II-IV)
27.1 Financial Data Schedules
</TABLE>
- --------
* Filed herewith.
** Greyhound Financial Corporation changed its name to FINOVA Capital
Corporation.
*** Amends previously filed Exhibit.

<PAGE>

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We have issued our reports dated February 19, 1998 accompanying the consolidated
financial statements and schedule of CPS Systems, Inc. and subsidiary contained
in the Form SB-2, Registration Statement under the Securities Act of 1933 (the
"Registration Statement") and in the Prospectus which forms a part of that
Registration Statement. We consent to the use of the aforementioned reports in
the Registration Statement and Prospectus, and to the use of our name as it
appears under the caption "Experts".

/s/ Grant Thornton LLP
- ----------------------
Grant Thornton LLP

Atlanta, Georgia

March 19, 1998