MPSI SYSTEMS INC, 424B1, 1997-01-21

MPSI SYSTEMS INC
424B1, 1997-01-21
COMPUTER PROGRAMMING, DATA PROCESSING, ETC.

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<PAGE> 1
Filed Pursuant to Rule 424(b)(1)
Registration No. 33-76286
AMENDED PROSPECTUS

1,580,432 SHARES

MPSI SYSTEMS INC.

COMMON STOCK
(PAR VALUE $0.05)

All of the shares of $0.05 par value Common Stock ("Common Stock") offered
hereby are being sold for the account of certain security holders ("Selling
Stockholders") of MPSI Systems Inc. ("MPSI" or the "Company"), including certain
security holders owning five percent or more of the Company's Common Stock
("Significant Stockholders"). The Company will not receive any proceeds from
this offering. The Company's President owns or controls approximately 42% of the
outstanding Common Stock.

SEE "RISK FACTORS" FOR A DISCUSSION OF RISK FACTORS THAT SHOULD BE
CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY.

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

<TABLE>
<CAPTION>
===============================================================================================
UNDERWRITING
PRICES TO DISCOUNTS AND PROCEEDS TO THE
PUBLIC COMMISSIONS(2) COMPANY(3)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share................................ Prevailing Market
Value(1) Not Applicable Not Applicable
===============================================================================================
</TABLE>

(1) The shares will be sold at prevailing prices from time to time by the
Selling Stockholders. See "Plan of Distribution." The Common Stock of the
Company is traded on the NASDAQ SmallCap Market(TM) under the symbol "MPSI".
On December 5, 1996, the per share bid and offer quotations for the Common
Stock were $2.50 and $3.50, respectively. See "Market Information for MPSI
Common Stock."

(2) There is no underwriter with respect to this offering and each Selling
Stockholder will be determining the timing of sales of shares made pursuant
hereto. Broker-Dealers acting as agents for Selling Stockholders in
effecting sales hereunder will realize usual and customary brokerage
commissions.

(3) The Company will realize no proceeds from this offering. The expenses of
this offering, estimated to be approximately $250,000, inclusive of the
registration fee for the shares, are being paid by the Company.

It is anticipated that the Selling Stockholders may from time to time sell
all or a part of the shares of Common Stock covered by this Amended Prospectus
("Prospectus") in ordinary brokerage or principal transactions at prices
prevailing at the time of sale. Upon any sale of the shares of Common Stock
offered hereby, Selling Stockholders, brokers executing sales orders on their
behalf and dealers to whom such persons or entities may sell such shares may,
under certain circumstances, be deemed to be "underwriters" within the meaning
of the Securities Act of 1933, as amended (the "1933 Act").

BROKER-DEALERS EFFECTING SALES OF SHARES OF COMMON STOCK PURSUANT TO THIS
PROSPECTUS SHOULD CAREFULLY REVIEW THE RESTRICTIONS ON THE USE HEREOF AND THE
MANNER OF SELLING AS DESCRIBED IN "PLAN OF DISTRIBUTION."

The date of this Amended Prospectus is January 13, 1997.
<PAGE> 2

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and in accordance therewith files periodic
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such periodic reports, proxy statements and other
information may be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the regional offices of the Commission located at 7 World Trade Center,
13th Floor, New York, New York 10048, and Citicorp Center, 500 W. Madison
Street, Suite 1400, Chicago, Illinois 60621. Copies of such material may be
obtained at prescribed rates from the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549.

The Commission maintains a web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission, including the Company, and the address of
such web site is http:www.sec.gov.

The Company's Common Stock is traded on The NASDAQ SmallCap Market(TM).
Reports and other information pertaining to the Company may be inspected at the
NASD Public Reference Room located at 1735 K Street, N.W., Washington, D.C.
20006.

The Company has filed with the Commission a Registration Statement on Form
S-1 under the Act with respect to the shares of Common Stock offered hereby.
This Prospectus does not contain all the information set forth in the
Registration Statement and the exhibits and schedules thereto. For further
information pertaining to the Company and Common Stock, reference is made to
such Registration Statement and the exhibits and schedules thereto, which may be
inspected without charge at the office of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, and copies of which may be obtained from the
Public Reference Section of the Commission at prescribed rates.

2
<PAGE> 3

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the detailed
information and the Consolidated Financial Statements, including notes,
appearing elsewhere in this Prospectus.

THE COMPANY

The Company develops and markets proprietary computer applications software
and related geographically specific information data bases used by petroleum
companies and other multi-outlet retailers for strategic planning in specified
geographic market areas. Together, this software and the related data bases
construct a mathematical model of a retail market, allowing the Company's
clients to anticipate changes in both the supply and demand variables of that
market in order to forecast profitability of retail outlets. Clients use the
Company's retail planning software and related services to forecast the sales
volumes and, ultimately, the profitability of retail site locations, to make
decisions relating to site selection, divestiture and remodeling, and to
evaluate competitive strategies, such as pricing, use of credit cards and
product line expansion. To date the primary users of the Company's services have
been major petroleum companies with extensive worldwide retail networks. Most of
the Company's revenues are derived from clients who have entered into multi-year
software license agreements and who subsequently purchase related market data
bases. The Company also provides consulting services and informational services,
such as consumer and other research, data base management of geographic and
tabular data files and retail outlet surveys. See "Business."

The Company was previously named "The MPSI Group Inc." On October 24, 1983,
its name was changed to "MPSI Systems Inc." The Company's principal executive
offices are located at 8282 South Memorial Drive, Tulsa, Oklahoma 74133 and its
telephone number is (918) 250-9611. As used in this Prospectus, the terms
"Company" and "MPSI" mean MPSI Systems Inc. and each of its subsidiaries and
predecessors unless the context indicates otherwise.

THE OFFERING

This Prospectus relates to 1,580,432 shares of Common Stock that may be
offered and sold from time to time by the Selling Stockholders who acquired such
shares in a private placement and recapitalization of the Company which closed
on September 29, 1993. The Company will not receive any of the proceeds from the
sale of shares by the Selling Stockholders. See "Plan of Distribution." In
addition to other information in this Prospectus, prospective investors should
carefully consider matters discussed under "Risk Factors" before making an
investment.

SELECTED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues.................................... $21,745 $23,437 $19,872 $19,524 $25,313
Income (loss) from continuing operations.... (623) 2,029 1,956 (939) (5,567)
Net income (loss)........................... (623) 2,029 1,474 1,560 (5,581)
Income (loss) per share from continuing
operations............................... (.23) .72 .71 (.94) (6.53)
Net income (loss) per share................. (.23) .72 .53 1.56 (6.54)
BALANCE SHEET DATA:
Total assets................................ $10,319 $12,924 $ 9,734 $10,040 $14,861
Long-term debt.............................. -- -- -- -- 2,620
Noncurrent deferred revenue................. 1,342 1,961 1,068 1,453 2,602
Other noncurrent liabilities................ 177 220 349 252 2,429
</TABLE>

Operating data prior to fiscal year 1994 has been restated giving effect to
discontinued operations of the Retail Systems, Inc. ("RSI") subsidiary. See Note
2 to Consolidated Financial Statements. All share and per share data for all
periods presented reflect the reverse stock split which occurred on November 18,
1993.

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<PAGE> 4

RISK FACTORS

In addition to the other information in this Prospectus, prospective
purchasers should carefully consider the following risk factors relating to the
Company and its Common Stock before making an investment.

HISTORY OF LOSSES

The Company experienced losses from continuing operations in three of its
five most recent fiscal years of $.6 million, $.9 million, and $5.6 million for
the fiscal years ending September 30, 1996, 1993 and 1992. There can be no
assurance that the Company will not suffer losses again in the future.

ABSENCE OF A PUBLIC MARKET

Although the shares will be registered and freely tradeable in the public
market, there may not be a ready market for the shares. The Company's Common
Stock was listed on the NASDAQ Small Cap Market(SM) effective September 26, 1995
but the trading volume is low.

COMMON STOCK RESTRICTIONS LIMITING TAKEOVER POTENTIAL

The President of the Company, Ronald G. Harper, owns or controls
approximately 42% of the Company's outstanding stock. An additional 45% is owned
by five participants in a 1993 recapitalization transaction. Concentration of
ownership in so few a number of stockholders could also result in such owners'
interests not being aligned with the interests of the smaller stockholders in
areas of corporate operations and governance. Among other matters, these
stockholders will control the outcome of all elections of directors.

OTHER ANTI-TAKEOVER MATTERS

The Company's Certificate of Incorporation and Bylaws contain provisions
which may discourage certain types of transactions involving an actual or
threatened change of control of the Company that a stockholder might consider to
be in the stockholder's best interest, including provisions that: (i) permit the
Company's Board of Directors, without stockholder approval, to issue Preferred
Stock and Junior Common Stock and, at the time of issuance, to fix the
designations, rights, preferences and limitations of such stock, which could
include dilution of voting power of the Common Stock offered hereby, and (ii)
provide for removal of directors only with cause and upon vote of a majority of
the voting stock of the Company. In addition, as a corporation organized under
the laws of the State of Delaware, the Company is subject to Delaware laws
restricting certain business combinations absent "super majority" approvals by
noninterested stockholders, among other restrictions. The existence or threat of
implementation of one or more of these anti-takeover mechanisms could have an
adverse impact on the market price of the Common Stock. See "Description of
Capital Stock -- Certain Effects of Authorized but Unissued Stock,"
"-- Certificate of Incorporation and Bylaws" and "-- Delaware Takeover Statute."

SHARES ELIGIBLE FOR RESALE

There are approximately 2,794,000 total shares of Common Stock outstanding
as of the date of this Prospectus. Of these shares, 1,580,432 are covered by
this Prospectus, meaning 57% is available for sale in the public market under
this Prospectus. All 2,794,000 shares are eligible for immediate sale in the
public market, except that affiliates of the Company may generally sell their
shares not covered by this Prospectus in the public market only in compliance
with the restrictions contained in Rule 144 adopted by the Commission pursuant
to the 1933 Act. Accordingly, no assurance can be given that the eligibility of
such number of shares for sale will not have an adverse impact on the market
price of the Common Stock. Sales of substantial amounts of Common Stock of the
Company in the public market pursuant to and subsequent to this offering could
adversely affect the prevailing market price of the Common Stock and could
impair the Company's future ability to raise capital through the sale of its
equity securities.

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<PAGE> 5

MARKET OVERHANG

Because the sales pursuant to this Prospectus will not be effected through
an underwriter, there will be a substantial number of shares available for sale
on the market at one time without any control over the timing or volume of sales
by the Company or any third party. The Company cannot foresee the impact of such
potential sales on the market, but it is possible that if attempts are being
made to sell a significant percentage of such available shares within a short
period of time, the effect on the market may be negative. It is also doubtful
whether or not the market for the Common Stock could absorb such a large number
of shares in a short period of time, regardless of the price at which the same
might be offered. Even if a substantial number of sales are not effected within
a short period of time, the mere existence of this "market overhang" could have
a negative effect on the market for the Common Stock and the Company's future
ability to conduct any equity financing. The potential effect of the market
overhang is of greater significance since September 29, 1996 when resale
restrictions previously applicable to the Significant Stockholders expired.

REVENUE CONCENTRATION

The Company is dependent on the petroleum industry for substantially all of
its revenues. Listed individual petroleum industry customers have accounted for
10% or more of MPSI consolidated revenues in at least one of the three years
1996, 1995, or 1994 as follows (in millions of dollars):

<TABLE>
<CAPTION>
1996 1995 1994
---------------- ---------------- ----------------
AMOUNT % AMOUNT % AMOUNT %
------ --- ------ --- ------ ---
<S> <C> <C> <C> <C> <C> <C>
Exxon/Esso/Imperial.................. $6.3 29 $4.4 19 $3.8 19
Texaco/Caltex........................ $2.7 12 $1.3 6 $3.0 15
Shell................................ $1.5 7 $2.8 12 $2.1 11
Amoco................................ $2.1 10 $2.5 11 $1.4 7
</TABLE>

The Company would be adversely affected if several petroleum industry
clients curtailed their usage of MPSI products.

FOREIGN OPERATIONS

Substantial portions of the Company's sales are to foreign affiliates of
multi-national oil companies and such sales are denominated primarily in either
Singapore Dollars or British Pounds. Additionally, the Company has entered into
multi-year market study commitments with some of those foreign clients. The
studies are generally produced in the United States. These business activities
expose the Company to risks associated with changes in the value of the foreign
currencies in which the sales prices are denominated. The Company recorded
transaction gains of $146,000, $638,000, and $8,000 in fiscal years 1996, 1995,
and 1994, respectively. In Brazil, which has traditionally experienced
hyper-inflationary conditions, the Company's practice is to reduce the related
currency risk, when possible, by structuring such transactions so that a
substantial portion of the sale price is payable in U.S. dollars and a
relatively smaller portion is payable in the client's local currency.

The Company continually monitors applicable changes in regulatory
requirements, tax laws and intellectual property laws in the various countries
where it does business. As many of such laws are patterned after United States
or United Kingdom laws, compliance generally does not place an abnormal burden
on the Company, although certain costs are attached to compliance. The
intellectual property laws of certain countries do not provide the same
protection as do laws of the United States. The Company relies on its
confidentiality agreements with clients as additional product protection in such
instances. The Company is unaware of any breach in product security since its
inception.

There is a risk that adverse changes in regulatory, tax, trade or
intellectual property laws might affect the Company's foreign operations.
However, the countries in which the Company operates have exhibited relatively
stable economic, legal and taxation environments. In many instances, treaties
have been negotiated by the United States governing taxation and intellectual
property further reducing exposure to adverse changes. The Company has not
experienced any significant negative impact on its business as a result of the

5
<PAGE> 6

risks noted above. Considering the countries in which the Company conducts
foreign operations and the level of investment in those countries, management
does not expect any material adverse consequences to its business as a result of
these risks.

WORKING CAPITAL AND LIQUIDITY

At September 30, 1996 and 1995, the Company's balance sheets reflected
working capital (current assets less current liabilities) of $1,390,000 and
$1,948,000, respectively. The Company's clients have traditionally provided
working capital through advance payments for market studies and software
licenses resulting in recognition of deferred revenues. Although reflected in
part as current liabilities, these deferred revenues do not require a
commensurate cash outlay due to inherent profit components. Management expects
the Company to meet its obligations as they mature from operating cash flows.

Approximately 45% of the Company's consolidated assets at September 30,
1996 are represented by unbilled receivables derived from two principal sources:

- Included in trade receivables are unbilled receivables which represent
market study revenues recognized under the percentage-of-completion
method in excess of amounts billed. These unbilled amounts will
generally be billable within 12 months upon completion of the respective
studies. No significant collection difficulties are anticipated.

- Long-term receivables, including the current portion thereof, are related
to noncancelable software license agreements which generally encompass a
five-year term. When collection is probable, licensing revenue is
recognized at the later of contract execution or software delivery (the
portion of such contracts related to service and maintenance is deferred
and recognized ratably or as earned over the contract term). Since the
agreements allow annual payments by the client, the unbilled balance of
some contracts is as much as four years' future billings. The Company's
typical clients for these license agreements are large corporations in
the petroleum industry which have significant financial resources. The
Company has historically experienced virtually no bad debt expense
related to software licenses and, accordingly, considers collection of
the contract amounts to be probable (although the "collectibility" is
regularly evaluated on a contract-by-contract basis).

MARKET FACTORS

Economic conditions throughout the world have varying degrees of impact on
the Company's products. For example, oil prices, unsettled economic conditions
and retail consolidation efforts in the petroleum industry worldwide continued
to affect the Company's volume of new business in fiscal year 1996. The Company
is unable to predict the extent to which the continuance of current conditions
in the petroleum industry will affect its business. However, the Company's
software and services are intended for use by its clients to promote the
efficiency of their operations, including the divestiture of uneconomical
outlets as well as the selective acquisition of additional retail sites, and
therefore should have appeal even in adverse economic times.

The Company's operating cycle and cash flow are driven principally by the
timing of client orders for market studies. Many North American petroleum
clients budget on a calendar year basis. Consequently, MPSI generally receives a
concentration of orders in December through February from such clients. Many
European and Pacific Rim clients operate on March 31 fiscal periods resulting in
significant orders during the period May through June. The timing of market
study production and the resulting revenues are subject to a degree of
fluctuation. Quarterly revenues can also be impacted by the timing of software
license agreements. Accordingly, management believes that quarterly results may
not be indicative of results for full fiscal years.

Although the Company believes that it is a leader in comprehensive
applications software and data base systems for multi-outlet retailers, there
has recently been a worldwide trend toward product development of this type. The
Company realizes this competition lies in two areas: first, in the market
research staffs of petroleum companies and in potential customers who develop
and manage their own software and data; and

6
<PAGE> 7

second, in consulting and research companies which compete for portions of the
Company's business. See "Business -- Competition."

USE OF PROCEEDS

All of the proceeds from the sales of the shares offered hereby will be
received by the Selling Stockholders. See "Plan of Distribution." The Company
will not receive any proceeds from the sale of shares of Common Stock.

PLAN OF DISTRIBUTION

RESTRICTIONS ON USE OF PROSPECTUS

This Prospectus may only be used in accordance with and sales of Common
Stock effected hereunder only in compliance with the following:

1. A Selling Stockholder may only sell or place for sale any shares of
Common Stock with broker-dealers registered as such with the National
Association of Securities Dealers, Inc. ("NASD") who are in good standing
with such organization. In connection with any such sales, the Selling
Stockholder shall deliver to the broker all necessary information to allow
the broker to comply with the prospectus delivery and other requirements of
applicable law in connection with any such sale. The agreement with the
Selling Stockholder's selling agent must contain all usual and customary
provisions including, without limitation, the obligation to (i) comply with
all applicable rules of the NASD, (ii) provide no additional information
and make no representations other than those contained in the Prospectus,
(iii) comply with applicable rules and regulations, and (iv) otherwise
comply with the requirements for the use of the Prospectus and the sale of
Common Stock thereunder imposed hereby and by applicable law.

2. No information or offering materials other than the Prospectus, as
it may be amended or supplemented, may be used by a Selling Stockholder or
broker-dealer in effecting sales hereunder.

3. As the Registration Statement will be maintained effective by the
Company for an undetermined period of time, it will be necessary for the
Company to supplement and amend the Registration Statement and the
Prospectus from time to time. Upon notice from the Company that any such
supplement or amendment is necessary, a Selling Stockholder shall cease any
effort to sell any shares of Common Stock offered for sale pursuant to the
Registration Statement, and shall cause any selling agent to cease all
sales efforts, and will not so sell any such shares of Common Stock until
he has received the supplemental or amended prospectus and delivered a copy
of the same to any prospective purchaser or broker effecting any such sale,
as required by law.

4. The Selling Stockholder will bear all commissions, transfer taxes,
fees and disbursements of counsel, if any, and all other expenses directly
related to his or her sale of Common Stock hereunder.

5. No broker-dealer selling shares of Common Stock hereunder shall be
compensated at other than usual and customary broker rates.

6. From and after the time any shares of Common Stock are deposited
with a selling agent for sale hereunder and until the agreement with such
selling agent is terminated and all certificates representing unsold shares
of Common Stock are returned to the Selling Stockholder, the Selling
Stockholder may not sell, make any short sale of, loan or give a lien on,
grant any option for the purchase of or otherwise dispose of, such shares,
without the prior written consent to the selling agent.

7
<PAGE> 8

BENEFICIAL OWNERSHIP OF SELLING STOCKHOLDERS

This Prospectus relates to 1,580,432 shares of Common Stock that may be
offered and sold from time to time by the Selling Stockholders. On September 29,
1993, the Selling Stockholders received the shares which are being offered in
this Prospectus in a private placement under Section 4 (2) of the 1933 Act.

Set forth below is information as of December 5, 1996, regarding the
beneficial ownership of Common Stock by each Selling Stockholder: The
information set forth in this table is based on a review by the Company of its
stock record books at such date. The table assumes no other purchases of Common
Stock by any of the Selling Stockholders.

<TABLE>
<CAPTION>
SHARES COMMON SHARES
BENEFICIALLY OWNED NUMBER OF BENEFICIALLY OWNED
PRIOR TO OFFERING(1) COMMON AFTER OFFERING(2)
-------------------- SHARES ------------------
NAME NUMBER PERCENT OFFERED NUMBER PERCENT
------ --------- ------- --------- ------- -------
<S> <C> <C> <C> <C> <C>
Ronald G. Harper(3)(4)(5).................... 1,118,591 40.03% 400,000 718,591 25.72%
Bank of Oklahoma, N.A........................ 285,714 10.23% 285,714 -- --
The Robertson Stephens Orphan Fund........... 263,971 9.50% 182,890 81,081 2.90%
Joseph C. McNay(4)........................... 261,322 9.34% 222,222 39,100 1.40%
John C. Bumgarner, Jr.(4).................... 222,322 8.00% 222,222 100 --
Sanford Orkin................................ 222,222 8.00% 222,222 -- --
Roger A. Finn(3)............................. 23,238 -- 222 23,016 --
Suzanne C. Huff.............................. 5,000 -- 5,000 -- --
Dorothy Y. Terhune........................... 4,045 -- 444 3,601 --
The Donald and Yvonne Harper Living Trust.... 53,800 -- 10,000 43,800 1.57%
Prince P. Platner(5)......................... 19,505 -- 1,944 17,561 --
Shirley J. Johnson(5)........................ 3,395 -- 887 2,508 --
Thomas D. Gable.............................. 17,777 -- 17,777 -- --
Thomas F. Golden............................. 4,444 -- 4,444 -- --
Michael D. Cooke............................. 4,444 -- 4,444 -- --
--------- --------- -------
Offering Totals.............................. 2,509,790 89.82% 1,580,432 929,358 33.26%
========= ========= =======
</TABLE>

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

(1) Unless otherwise indicated, the person named in the table has sole voting
and sole investment power with respect to all Common Stock beneficially
owned, subject to community property laws. Ownership percentages are
presented only with respect to holdings which exceed one percent of the
aggregate shares outstanding.

(2) Assumes that all of the Common Stock offered hereby is actually sold.

(3) The individual identified is an executive officer of the Company.

(4) The individual identified is a director of the Company.

(5) The individual identified is an employee of the Company.

PREVIOUS SALES

The Registration Statement was declared effective by the Commission on July
28, 1994, and covered 1,789,270 shares of Common Stock to be offered for sale by
Selling Stockholders. Since the effective date and through December 5, 1996,
208,838 of such shares were sold. Accordingly, this Amended Prospectus offers
1,580,432 shares of Common Stock and the table above as to each Selling
Stockholder reflects only the shares now offered hereunder, as reduced for any
previous sales under the Registration Statement, and any Selling Stockholder who
has previously sold all shares originally registered for sale under the
Registration Statement is no longer reflected as a Selling Stockholder in the
table.

MANNER OF DISTRIBUTION

The Selling Stockholders may sell all or a portion of the Common Stock
offered by this Prospectus from time to time (i) to the public through the
NASDAQ SmallCap or in the over-the-counter market, (ii) in

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<PAGE> 9

negotiated transactions, at fixed prices which may be changed, at market prices
prevailing at the time of sale or at prices reasonably related thereto or at
negotiated prices, (iii) pursuant to Rule 144, if available at the time of sale,
or (iv) by a combination of the foregoing methods of sale. The Selling
Stockholders may effect such transactions by selling the Common Stock to or
through broker-dealers. Such broker-dealers may receive compensation in the form
of discounts, concessions or commissions from the Selling Stockholders and/or
the purchasers of the Common Stock for whom such broker-dealers may act as agent
or to whom they may sell as principal, or both. The Company is not aware as of
the date of this Prospectus of any agreements between any of the Selling
Stockholders and any broker-dealers with respect to the sale of the shares
offered by this Prospectus. The Selling Stockholders and any broker-dealer or
other agent executing sell orders on behalf of the Selling Stockholders may be
deemed to be "underwriters" within the meaning of the 1933 Act, in which event
commissions received by any such broker-dealer or agent and profit on any resale
of the Common Stock may be deemed to be underwriting commissions under the 1933
Act. Such commissions received by a broker-dealer or agent may be in excess of
customary compensation.

The Company will pay all of the costs, expenses and fees incident to the
offering and sale of the shares to the public other than commissions and
discounts of underwriters, broker-dealers or agents not paid by the purchasers
of the shares.

The Company has advised each of the Selling Stockholders of their
obligation to comply fully with applicable securities law restrictions regarding
the sale of Common Stock pursuant to this Prospectus, including the above
described requirements. In addition, the Company has advised each Selling
Stockholder of his or her obligation to comply fully with the anti-manipulation
provisions of Rules 10b-6 and 10b-7 of the Commission adopted under the
Securities Exchange Act of 1934, namely not to buy shares of Common Stock, not
to solicit purchases of shares of Common Stock by others and not to engage in
any stabilization transaction with respect to the price of the Common Stock to
facilitate the Selling Stockholder's distribution hereunder. Each Selling
Stockholder has also been advised to notify the other Selling Stockholders and
the Company when such Selling Stockholder's distribution is completed.

In effecting the sale of the shares of Common Stock offered by this
Prospectus, each of the Selling Stockholders must comply with Rule 10b-6 under
the Securities Exchange Act of 1934, which requires that a Selling Stockholder,
as well as any person who acts in concert with such Selling Stockholder and the
broker, if any, who sells the shares on behalf of such Selling Stockholder,
suspend all purchases of shares of Common Stock at least nine business days
prior to and during any offers and sales by such Selling Stockholder of the
shares of the Common Stock offered by this Prospectus. In the case of any
Selling Stockholder who is an affiliate of the Company, Rule 10b-6 also requires
the Company and all persons who are in a control relationship with the Company
to suspend all purchases of shares of the Company at least nine business days
prior to and during any offers and sales by the affiliate Selling Stockholder of
the shares of Common Stock offered by this Prospectus. The Company may require
each Selling Stockholder, and his or her broker if applicable, to provide a
letter that acknowledges compliance with Rule 10b-6 before authorizing the
transfer of such Selling Stockholder's shares.

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<PAGE> 10

DESCRIPTION OF CAPITAL STOCK

PREFERRED STOCK

The Company is authorized to issue up to 1,000,000 shares of Preferred
Stock, $.10 par value, none of which is presently outstanding. The Board of
Directors is authorized without any further vote or action by the stockholders
to determine and alter the rights, preferences, privileges and restrictions,
including the dividend rights, dividend rate, conversion rights, voting rights,
rights and terms of redemption, liquidation preferences and sinking fund terms
granted to or imposed upon any wholly unissued class or series of Preferred
Stock, the number of shares constituting any series and the designation thereof,
and to increase or decrease the number of shares of such series subsequent to
the issuance of shares of such series (but not below the number of shares of
such series then outstanding). The Company has no present plans to issue any of
the Preferred Stock.

COMMON STOCK

The Company is authorized to issue up to 20,000,000 shares of Common Stock.
Each holder of Common Stock is entitled to one vote for each share held of
record. Holders of Common Stock are entitled to receive such dividends as may be
declared from time to time by the Board of Directors out of funds legally
available therefor and to share pro rata in any other distribution to holders of
Common Stock. Upon liquidation or dissolution of the Company, subject to any
prior liquidation rights of any outstanding Preferred Stock, the holders of
Common Stock are entitled to receive ratably, subject to the rights of holders
of any Junior Common Stock then outstanding, to share in such assets on a basis
up to but not exceeding the rights of the holders of Common Stock, the assets
legally available for distribution to stockholders. The Common Stock has no
cumulative voting, preemptive or other subscription rights, and there are no
conversion rights or redemption or sinking fund provisions with respect to such
shares. All the outstanding shares of Common Stock are fully paid and
nonassessable. Effective September 26, 1995 MPSI's Common Stock began trading on
The NASDAQ SmallCap Market(TM) under the trading symbol "MPSI".

As of December 5, 1996, 2,793,164 shares of Common Stock were outstanding
and were held of record by 930 stockholders. The Company has reserved 879,000
shares of Common Stock for future issuance pursuant to stock option plans.

JUNIOR COMMON STOCK

The Company is authorized to issue up to 500,000 shares of a class of
common shares designated Junior Common Stock, $.05 par value ("Junior Common
Stock"), in one or more series, having such voting rights and preferences,
redemption prices, sinking funds, convertibility provisions, liquidation and
certain other rights and provisions as the Board of Directors, by action of a
majority of disinterested directors, may fix in providing for the issuance of
such stock without any vote or action by stockholders, except that holders of
the Junior Common Stock shall not be entitled to receive dividends except share
dividends paid in the same ratio as share dividends paid on the Common Stock,
and in no event shall the voting rights or other rights with respect to shares
of Junior Common Stock be greater than the voting or other rights with respect
to shares of Common Stock. Holders of Common Stock and Junior Common Stock, if
any, shall vote together as a class on all matters.

The Company has no shares of Junior Common Stock outstanding and no present
plans to issue any shares of Junior Common Stock. In the event shares of Junior
Common Stock are issued in the future, it is likely that they will be
subordinated to the Common Stock with respect to voting rights and liquidation
preferences, and may be convertible into Common Stock upon the occurrence of
certain events. If and when the Board of Directors should approve the issuance
of Junior Common Stock, voting rights and redemption prices, sinking funds,
convertibility provisions, liquidation and certain other rights and provisions
of such an issue could decrease the amount of earnings and assets available for
distribution to holders of Common Stock.

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<PAGE> 11

STOCKHOLDER ACTION

Pursuant to the Company's Certificate of Incorporation, with respect to any
act or action to be taken by the holders of the Common Stock the affirmative
vote of the holders of a majority of the issued and outstanding Common Stock
entitled to vote thereon and represented at a meeting of the stockholders at
which a quorum is present is sufficient to authorize, affirm, ratify or consent
to such act or action.

The Certificate of Incorporation provides that stockholders may take
certain action without the holding of a meeting by written consent or consents
signed by the holders of a majority of the outstanding shares of the capital
stock of the Company entitled to vote thereon. Prompt notice of the taking of
any action without a meeting by less than unanimous consent of the stockholders
will be given to those stockholders who do not consent in writing to the action.
The purposes of this provision are to facilitate action by stockholders and to
reduce the corporate expense associated with annual and special meetings of
stockholders. As discussed in "Risk Factors--Common Stock Restrictions Limiting
Takeover Potential," six Significant Stockholders currently own or control
approximately 87% of the outstanding Common Stock. Accordingly, the Significant
Stockholders will be in a position to approve by written consent certain actions
required or permitted to be taken by stockholders of the Company, including the
election of directors. Pursuant to the rules and regulations of the Commission,
if stockholder action is taken by written consent, the Company will be required
to send each stockholder entitled to vote on the matter acted on, but whose
consent was not solicited, an information statement containing information
substantially similar to that which would have been contained in a proxy
statement.

CERTAIN EFFECTS OF AUTHORIZED BUT UNISSUED STOCK

The Company's authorized but unissued capital stock consists of 1,000,000
shares of Preferred Stock, approximately 17,206,000 shares of Common Stock and
500,000 shares of Junior Common Stock. One of the effects of the existence of
authorized but unissued capital stock may be to enable the Board of Directors to
render more difficult or to discourage an attempt to obtain control of the
Company by means of a merger, tender offer, proxy contest or otherwise, and
thereby to protect the continuity of the Company's management. If in the due
exercise of its fiduciary obligations, for example, the Board of Directors was
to determine that a takeover proposal was not in the Company's best interests,
such shares could be issued by the Board of Directors without stockholder
approval in one or more private offerings or other transactions that might
prevent or render more difficult or costly the completion of the takeover
transaction by diluting the voting or other rights of the proposed acquiror or
insurgent stockholder or stockholder group, by creating a substantial voting
block in institutional or other hands that might undertake to support the
position of the incumbent Board of Directors, by effecting an acquisition that
might complicate or preclude the takeover, or otherwise. In this regard, the
Company's Certificate of Incorporation grants the Board of Directors broad power
to establish the rights and preferences of the authorized and unissued Preferred
Stock, one or more series of which could be issued entitling holders to vote
separately as a class on any proposed merger or consolidation, to convert
Preferred Stock into a larger number of shares of Common Stock or other
securities, to demand redemption at a specified price under prescribed
circumstances related to a change in control, or to exercise other rights
designed to impede takeover. The issuance of shares of Preferred Stock pursuant
to the Board's authority described above could decrease the amount of earnings
and assets available for distribution to holders of Common Stock, and adversely
affect the rights and powers, including voting rights, of such holders and may
have the effect of delaying, deferring or preventing a change in control of the
Company. Junior Common Stock may likewise be issued with dilutive effect on
ownership, but not voting rights. The Board of Directors does not currently
intend to seek stockholder approval prior to any issuance of authorized but
unissued stock, unless otherwise required by law.

CERTIFICATE OF INCORPORATION AND BYLAWS

Under Delaware law, the exclusive power to adopt, amend and repeal bylaws
is conferred solely upon the stockholders unless the corporation's certificate
of incorporation also confers such power upon its Board of Directors. Under the
Company's Certificate of Incorporation, the Board of Directors has been granted
this power. These provisions, in addition to the existence of authorized but
unissued capital stock, may have the

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<PAGE> 12

effect, either alone or in combination with each other, of making more difficult
or discouraging an acquisition of the Company deemed undesirable by the Board of
Directors.

DELAWARE TAKEOVER STATUTE

The Company is subject to Section 203 of the Delaware General Corporation
Law. In general, Section 203 prevents an "interested stockholder" from engaging
in a "business combination" with a Delaware corporation for three years
following the date such person became an interested stockholder, unless (i)
prior to the date such person became an interested stockholder, the board of
directors of the corporation approved either the business combination or the
transaction which resulted in the interested stockholder becoming an interested
stockholder; (ii) upon consummation of the transaction that resulted in the
interested stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding stock held (x) by
directors who are also officers of the corporation and (y) by employee stock
plans that do not provide employees with the rights to determine confidentially
whether shares held subject to the plan will be tendered in a tender or exchange
offer); or (iii) on or subsequent to the date of the transaction in which such
person became an interested stockholder, the business combination is approved by
the board of directors of the corporation and authorized at a meeting of
stockholders by the affirmative vote of the holders of two-thirds of the
outstanding voting stock of the corporation not owned by the interested
stockholder. Under Section 203, the restrictions described above do not apply to
certain business combinations proposed by an interested stockholder following
the announcement or notification of one of a number of extraordinary
transactions involving the corporation and a person who had not been an
interested stockholder during the previous three years or who became an
interested stockholder with the approval of a majority of the corporation's
directors, if such extraordinary transaction is approved or not opposed by a
majority of the directors who were directors prior to any person becoming an
interested stockholder during the previous three years or who were recommended
for election or elected to succeed such directors by a majority of such
directors.

Section 203 defines a "business combination" to include (i) any merger or
consolidation involving the corporation and an interested stockholder, (ii) any
sale, lease, exchange, mortgage, pledge, transfer or other disposition involving
an interested stockholder of 10% or more of assets of the corporation, (iii)
subject to certain exceptions, any transaction which results in the issuance or
transfer by the corporation of any stock of the corporation to an interested
stockholder, (iv) any transaction involving the corporation which has the effect
of increasing the proportionate share of the stock of any class or series of the
corporation beneficially owned by the interested stockholder or (v) the receipt
by an interested stockholder of any loans, advances, guarantees, pledges or
other financial benefits provided by or through the corporation. In addition,
Section 203 defines an "interested stockholder" as any entity or person
beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by such an entity or person.

STOCKHOLDER REPORTS

The Company will furnish to its stockholders annual reports containing
audited financial statements reported on by independent public accountants for
each fiscal year.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is ChaseMellon
Shareholder Services, Overpeck Centre, 85 Challenger Road, Ridgefield, New
Jersey 07660-2108.

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<PAGE> 13

BUSINESS

The operations of MPSI are confined to one business segment wherein it
provides decision support products and services in the form of (1) proprietary
computer software, (2) geographically specific information data bases (market
studies), and (3) consulting services. These products and services are designed
to meet retail business planning requirements of its clients.

From its inception in 1970 until it became a publicly-held company in 1983,
the Company's decision support services were directed primarily at planning
requirements for petroleum companies and other multi-outlet retailers who were
concerned with retail site selection and retail network optimization. MPSI
products provided computerized models of specified retail markets which enabled
its clients to predict sales volumes at proposed new retail sites, while at the
same time indicating the effects of each new outlet on sales volumes at both the
client's and competitors' existing outlets. During this period, the Company's
operations were characterized by limited geographic diversification, centralized
management, centralized market study production and significant dependence on
the petroleum industry.

With the 1983 capital infusion from its initial public offering, the
operating plan of the Company expanded. In order to diversify and maintain
growth, management initiated programs intended to expand the Company's
geographic presence and its client mix. Such programs sought to reduce MPSI's
exposure to economic factors in a particular country and to lessen the
percentage of its total revenues which were attributable to the petroleum
industry (while maintaining steady growth in that core business). Accordingly,
during the period from 1983 to 1987, MPSI expanded its European operations and
opened new offices in Singapore, Japan and Brazil. This expansion led to
decentralization of management and the market study production operations. In
1986, the Company acquired RSI, a company headquartered in Minneapolis,
Minnesota, which offered products to retail food clients that were similar to
those offered by MPSI to the petroleum industry. This acquisition combined with
expanded retail planning software for banks, restaurants and governmental
clients, enabled MPSI to diversify its revenue portfolio such that revenues from
the petroleum industry, as a percent of total revenues, dropped from 90% in 1985
to 75% in 1988. During this period, MPSI's products continued to be directed
toward site selection, although enhancements such as artificial intelligence
technology moved the Company's products toward operational decision support
capabilities.

In 1988 MPSI undertook significant changes aimed at accelerating the
Company's revenue growth, product expansion and diversification of its customer
base. MPSI reorganized its existing business unit and acquired Execucom Systems
Corporation ("ESC"). The ESC acquisition resulted in (1) a more diverse family
of products including financial planning and executive information systems, (2)
a greater number of client industries, and (3) an expanded international
presence. Although revenues from petroleum clients continued to be important to
the Company, they accounted for approximately 53% of consolidated revenues in
1990 because of the dilutive effect of ESC's non-petroleum revenues. The
concurrent restructuring of the MPSI business unit resulted in the realignment
of managerial responsibilities to correspond with the distinct client industries
it served. This realignment centralized management responsibilities such that
functional units were again controlled from the United States, regardless of
where the personnel might be located. Although not brought about directly as the
result of the changes noted above, in 1989 management also decided that the
computer workstation should replace the mainframe computer as the Company's
principal product delivery and product development hardware. This action was
taken in order to reduce internal operating costs associated with the mainframe,
facilitate product development and communications using workstation networks and
enhance product distribution.

The period from 1988 to 1991 was characterized by significant product
development. The development activities were driven by two principal needs. The
MPSI unit needed new products and services which went beyond site selection to
operational decision support. The ESC unit, being in a highly competitive
environment, needed to regularly upgrade existing products incorporating new
technology in order to retain its maintenance revenue stream. These requirements
coupled with additional marketing personnel and programs contributed to a
substantial increase in the Company's debt through early 1991.

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<PAGE> 14

In March 1991, effective for accounting purposes at February 28, 1991, the
Company sold substantially all of the net operating assets of ESC to Comshare,
Incorporated. This action was necessitated because of poor performance by the
ESC unit, the weakening U.S. economy, declines in MPSI revenues due to the
effects of the Persian Gulf conflict and limitations on the Company's cash
resources. The sale resulted in a substantial loss on disposition, but generated
approximately $4.5 million of cash which was used to reduce debt.

Concurrent with the ESC sale, management scaled back the MPSI business unit
to refocus on the core petroleum industry products and clients in order to begin
liquidating the remaining debt. Additionally, the Company wrote down certain
capitalized software development costs previously carried in the consolidated
balance sheet which related to products developed for industries that had not
met profit goals.

The corporate restructuring initiated in 1991 eventually encompassed
further restructuring throughout the three-year period ended September 30, 1993.
The initial 1991 restructuring involved a 30% reduction of the work force in
England, closure of the Singapore production center with termination of
virtually all employees in that facility, and reduction of management personnel
in the United States. Substantially all market study production and software
development activities were consolidated back into the United States. Portions
of these activities had been previously performed in the Company's Singapore and
England offices, in addition to the U.S. corporate headquarters. In spite of the
cost reductions and production streamlining achieved as the result of 1991
actions discussed above, consolidated revenues continued to decline during
fiscal year 1992 forcing the Company to further reduce its work force in the
United States and in England. Economic conditions continued to worsen for MPSI
during fiscal year 1993. The Company again reduced its work force and overhead
expenses throughout the fiscal year. Approximately 106 employees (30% of work
force) were terminated or resigned, and the Company negotiated a reduction in
the space occupied by its corporate headquarters. Further, the Company closed
certain foreign sales offices and moved to less expensive office space in
several satellite offices.

During the fourth quarter of fiscal year 1993, the Company completed a
significant recapitalization transaction and eliminated its corporate debt
(other than trade payables and accrued liabilities). Among other benefits, the
recapitalization allowed the Company to redirect funding from debt service to
product development. Beginning in 1994 and in response to client input, MPSI
committed substantial funding and development efforts toward release of a new
generation of MPSI decision support products. Early versions of these products
were completed for commercial release in fiscal year 1995 (see discussion of
CAPS(TM), OPS(R) and PVO(R) software under "Product Development").

During fiscal years 1994 and 1995, the Company experienced increased
stability in its regional petroleum industry markets as clients, except in
Europe, generally completed restructuring and focused on the retail aspects of
their businesses. Although European operations continued to be sluggish,
revenues in North America, South America and the Pacific Rim grew. Several U.S.
oil companies who had been recently inactive with MPSI placed significant market
study orders in 1994 and 1995 indicating interest in MPSI's new software
products which targeted operational and pricing decision support.

Although the petroleum industry utilization of MPSI's products had been
somewhat revitalized, the Company's retail food line of business, which was
serviced by RSI, never developed to the point of being a profitable endeavor and
had sustained losses regularly since its acquisition. As a result, on September
1, 1994, RSI sold all of its noncash assets to Dakota Worldwide Corporation
("Dakota"), an unaffiliated third party, and the Company discontinued its
services and products to that class of customer. See Note 2 to the Consolidated
Financial Statements.

Although MPSI successfully launched initial versions of new products in
1994 and 1995, such products principally were directed at the North American
market. New versions of CAPS(TM) for European and South American clients were
scheduled for release in the first quarter of fiscal year 1996 but were
ultimately delayed approximately eight months until June 1996. The delay in
release was partially attributable to MPSI's desire to accommodate client
requests for additional functionality and multi-product modeling capabilities.
However, a portion of the delay was attributable to MPSI's software development
methodology and organizational structure. The delayed release of the two new
CAPS(TM) versions significantly hampered MPSI's sales activities in the European
and South American regions and contributed to the lower 1996 revenues and
profitability

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<PAGE> 15

compared to 1995. In order to address the organizational implications indicated
above, MPSI undertook a significant reorganization in July 1996. The primary
objectives of the reorganization were to (1) promote interdepartmental
cooperation in software development, (2) improve accountability and teamwork,
and (3) insure timely delivery of future software versions. Although not
undertaken specifically in order to reduce staffing, the reorganization resulted
in approximately an 8% staff reduction for which MPSI took a $215,000 charge
against its 1996 fourth quarter earnings. Management believes that the new
organizational structure positions MPSI for better quality, more timely delivery
and better client service going forward.

PRODUCTS AND SERVICES

The Company markets its services in the United States, Europe, Africa,
Canada, South America, Central America, the Caribbean Basin and the Pacific Rim.
See Note 8 to the Consolidated Financial Statements for financial information
addressing foreign and domestic operations and export sales. Generally, the
Company's marketing activities center on personal presentations to existing and
prospective clients, client referrals, proposal submissions, selective mailings,
limited print advertising, seminars and trade show participation. Most of the
Company's clients are identified by the Company's direct sales force.

Economic conditions throughout the world have varying degrees of impact on
the Company's products. Volatile oil prices, unsettled economic conditions and
retail consolidation affected the Company's volume of new business in fiscal
1996. The Company is unable to predict the extent to which these conditions will
continue to affect its business during 1997. At present, however, the Company is
realigning its products and services to increase profitability, either by
evaluating alternative methods for gathering market information in order to
contain future expenses or by development of ancillary products and services
which will allow the Company to leverage market information through sales to
companies who cannot afford a commitment to MPSI's more expensive main line
products. The Company anticipates growth in Southeast Asia during fiscal 1997
and increased retail petroleum activity in the U.S. and South American markets.

After adjustment to remove the effects of RSI, which business was
discontinued in September 1994 as set forth above, approximately 97%, 96%, and
99% of revenues were derived from the petroleum industry during the fiscal years
ended September 30, 1996, 1995, and 1994, respectively. In each of the fiscal
years 1996, 1995 and 1994, MPSI derived revenues representing 10% or more of
consolidated revenues from certain clients, together with their affiliates, as
set forth below (in millions of dollars):

<TABLE>
<CAPTION>
1996 1995 1994
-------------- -------------- --------------
AMOUNT % AMOUNT % AMOUNT %
------ ---- ------ ---- ------ ----
<S> <C> <C> <C> <C> <C> <C>
Exxon/Esso/Imperial................................. $6.3 29 $4.4 19 $3.8 19
Texaco/Caltex....................................... $2.7 12 $1.3 6 $3.0 15
Shell............................................... $1.5 7 $2.8 12 $2.1 11
Amoco............................................... $2.1 10 $2.5 11 $1.4 7
</TABLE>

The Company would be adversely affected if several petroleum industry
clients curtailed their long-term usage of MPSI products.

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<PAGE> 16

The following table shows the percentage of total revenue from continuing
operations that the Company derived from various sources during each of the last
three fiscal years.

REVENUE DERIVED FROM KEY PRODUCTS AND SERVICES (%)

<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Data base construction (market studies)................................. 71 70 65
Software licenses....................................................... 2 5 12
Software maintenance agreements......................................... 6 5 7
Consulting, educational, and other services............................. 21 20 16
</TABLE>

Described below are the computer applications software, information data
bases and other services currently provided by the Company.

Retail Planning

Until 1995, the Company's primary retail planning applications software was
the Retail Planning System(R) ("RPS"). See "Product Development" for discussion
of three major enhancements of RPS scheduled for commercial release in fiscal
years 1996 and 1997. In fiscal year 1995, MPSI released the first version of its
new CAPS(TM) software for use by North American clients. This country-specific
software interacts with an information data base (market study) to construct a
mathematical model of a retail market. The enhanced systems support client needs
in three areas:

Short-term pricing issues are addressed by assisting the client with
daily pricing decisions at retail outlets that optimize profit while
maintaining target sales volumes. The system also aids with the
establishment of supply/demand-balanced trade zones to reduce rapid
geographic deterioration in pricing.

Medium-term operational issues are addressed by systematic forecasting
of retail sales volume changes resulting from operational changes (such as
hours of operation and merchandising practices), by counselling dealers as
to pricing, merchandising and operational practices and by providing
territory-wide planning for anticipated retail sales volumes, pricing and
operations.

Long-term capital investment issues are addressed in the areas of (1)
new retail site location where the system provides an objective measure for
comparing available sites based on competition and convenience to demand,
(2) identification of outlets to divest where the system isolates and
evaluates client locations that have poor performance, (3) identification
of outlets to be rebuilt by identifying sales potential to be realized by
remodeling or reformatting specified outlets and (4) assessing multiple
profit centers by forecasting the potential benefits of retailing
complementary products and services.

Software licensing agreements for the RPS and/or CAPS(TM) software
(including ancillary products) generally have multi-year (generally five year
agreements) noncancellable terms. These agreements offer the client an
installment payment option requiring a payment upon execution and annual
payments on the succeeding anniversary dates of the agreement. The software can
be used by the client for a particular industry (such as petroleum) and a
particular geographic market (such as Japan). Also, the agreement contains broad
restrictions on the use and disclosure of the software by the client. See
"Trademarks, Copyrights, and Licenses" below. Modifying the software typically
involves changes in the weighting of various supply and demand factors or the
addition of a new factor as the result of changes in the marketplace.

MPSI provides full maintenance (postcontract customer support) services for
the RPS and, where necessary, training of and consultation with client staff.
Software licenses, maintenance and optional consulting services are set out
separately in each multi-year license agreement. The agreement states that any
company-sponsored modification to the software during the postcontract customer
support period will be provided to the client at no additional cost. Prices for
the CAPS(TM) software in the United States are based upon formulas which address
geographical boundaries, population, number of automobiles and other factors.

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<PAGE> 17

Prices for the RPS and/or CAPS(TM) software applicable to foreign countries are
based on a percentage of the United States pricing.

Information Data Bases

The Company also constructs the market study data bases that are the
primary informational sources used by the retail planning software. The data
base construction process involves acquisition of geographic digitized mapping,
traffic counts, and demographic demand data from governmental agencies or
independent suppliers, on-site survey of retail outlet supply information by
MPSI personnel or contract surveyors, collation of all demographic demand and
supply information into specified data layout, data editing and quality control
checking, and preparation of the client-specific deliverables. Separate
contracts govern each data base order by a client and generally require advance
payments ranging from 35 percent to 70 percent of the total sales value. The
amount of the required prepayment is determined principally by the client's
delivery requirements. There is no retainage provision relative to these
production-type contracts. These data bases are arranged and presented in six
types of studies.

Constantly Current Market Studies ("CCMS"). These studies are used by
clients who possess a large number of retail sites and who wish to analyze
market conditions and evaluate site locations in metropolitan areas on a
regular basis. The supply and demand data used in this type of study is
collected by the Company. This type of study provides clients with a series
of consecutive data base updates over a specific time period, generally
five years. Clients agree to pay for the CCMS in periodic installments. It
is tailored to individual client needs, and pricing is determined in part
by the number of subscribers to a particular market during the commitment
period and offers clients discounts for their multi-year commitments.

Quality Partnership Studies ("QP"). These study programs, like the
CCMS studies, offer clients the opportunity to regularly update market
study information on an annual basis. However, in the QP program, all
clients participate in the updating process by providing regular
information about changes (new outlets, new brands, rebuilt outlets, etc.)
in the market. MPSI gathers information relative to these changes and
updates the data base which otherwise remains unchanged. The lower update
costs are passed on to the client participants in the form of lower annual
update prices. Although the updates are not as extensive as full CCMS
updates, clients are able to track the effects of major market changes
using QP's.

Scheduled Market Area Studies ("SMAS"). These studies are similar to
the CCMS except that the clients do not commit to a series of consecutive
data base updates over a specific time period. These studies are usually
scheduled by one client and offered to additional clients on a subscription
basis. While each study uses a single demand-side data base, the final data
base provided to each client is unique.

Market Area Studies ("MAS"). These studies are similar to the SMAS
except they are sold to a single client. Portions of the demographic data
can generally be used as a major part of other studies in the same market
for clients in the same or comparable retail industries.

Mini-Market Area Studies. These studies are similar to the MAS except
the area studied does not contain more than 75 outlets. Likewise, the
accompanying study deliverables are scaled down.

Single Site Studies. These studies are used to evaluate market
conditions or the effects of various operating decisions at a specific
location within a specified geographic area.

Other Products and Services

Licensed software clients may utilize the retail planning software and
information data bases on their own computer facilities, may dial in to MPSI's
computers and use the software interactively (subject to certain usage
restrictions), or may elect to have MPSI run tactics (that is, pose "what if"
questions) on MPSI's computers. In cases where software is installed on client
computers, the Company charges for installation of the software and training the
client's personnel. A client may then run unlimited tactics on its own
equipment.

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<PAGE> 18

If tactics are run on the Company's computers, the client pays a fee per tactic.
Clients who have entered into long-term user agreements are entitled to
discounts on data bases and on tactics.

MPSI introduced two new "data" products during fiscal year 1995 which were
designed to leverage market information already in MPSI's inventory or allow
clients to contract for customized data collection by MPSI. The Quest product
allows MPSI clients to obtain point-in-time retail outlet information either
relative to MPSI's standard market study boundaries in a given geographic market
or to establish specialized market boundaries or specialized data requirements
for an additional fee. MPSI's PriceTracker(TM) product allows clients to obtain
high quality, timely retail pricing information on a recurring basis in order to
track trends in the marketplace. Such products were introduced partially in
response to competitors who attempt to infiltrate MPSI's client base by
initially providing low-cost market data. The PriceTracker(TM) product is
currently utilized by clients only in the United States. Quest services have
been supplied in Europe, South Africa, and the United States, among other
countries. These products, while not intended to be a material portion of MPSI's
business, have been well received by clients needing lower cost data.

Other products and services provided by the Company include litigation
support; determination of petroleum price zones and key competitors; regular
tracking of petroleum prices using geographic information systems for user
analyses; retail consulting; consumer research; and customized retail outlet
surveys. Certain services are complementary to retail planning services. For
example, the data bases provided as part of the retail planning services may be
linked with other data supplied by the client. This data could then be processed
interactively through geographic information system software which manages and
displays information in a variety of graphic and map formats.

COMPETITION

Since its inception in 1970 the Company has provided comprehensive
applications software and data base systems, primarily to the retail petroleum
industry, and currently has more than 175 multinational clients in 73 countries.
There has recently been a worldwide trend toward competitive product development
of this type due to the availability of computer resources and acceptance of
retail modeling theory. The Company believes its competition lies in two areas:
first, in the market research staffs of petroleum companies or potential
customers who develop and manage their own software and data; and second, in
consulting and research companies which compete for portions of the Company's
business.

The Company has found that the market research staffs of some large
petroleum companies continue to concentrate on in-house data gathering and site
selection methods, while other companies with more limited resources must
consider low cost alternatives for obtaining market information. It has been
MPSI's experience that clients often encounter substantial cost barriers
relative to internally developed systems. Without the economies of scale, data
gathering expertise and modelling sophistication that MPSI has obtained during
its 25-year existence, clients often find that systems developed in house are
expensive to develop, expensive to maintain given changing market conditions,
require market information with an inherent degree of accuracy which is
difficult to obtain, and that the results of such systems do not justify the
associated costs and effort. Additionally, as clients or potential clients
struggle to manage operating costs and consider outsourcing certain activities
where economically feasible, the capabilities of companies like MPSI offer an
attractive alternative to internal systems. Because of the trend in large
companies to outsource certain functions and because of the growth in business
consulting generally, independent consulting and research companies have
challenged certain products the Company offers such as demographic data
collection, geographic data bases, retail outlet surveys, retail consulting,
pricing applications, and single site studies. Occasionally, such consultants
are engaged to develop a proprietary internal model for their clients. Often
competitive services of this type are offered by independent consultants as part
of a larger consulting project wherein pricing for the retail planning segment
can be very competitive with MPSI's pricing. Certain of such companies are
offering computerized tools and services which, the Company believes are not as
sophisticated as MPSI products, but may be attractive to customers willing to
sacrifice accuracy for a lower cost solution to their business needs.

The Company believes it competes with these various market alternatives by
providing high-quality, sophisticated software and reliable, accurate data bases
at a reasonable cost. MPSI further believes its

18
<PAGE> 19

historical expertise and success in the areas of volume projections and retail
network planning provide a substantial barrier to entry for competitors.
Further, MPSI's maintenance programs and its commitment to more than one client
in a given market results in regular updates of existing software in line with
changes in a given market. The Company attributes its ability to provide these
quality products and services to the expertise and experience of its personnel.

By focusing on PC-oriented products and services, the Company believes it
is better equipped to challenge "lower cost competitors". New data collection
techniques will allow more timely and regular updating of market data using
handheld data collection technology and PC-based data transmission and delivery
technology. These processes are expected to reduce MPSI's data collection costs
relative to market studies and thereby allow the Company to leverage data
already collected or to collect custom data for clients who may not require full
market study information. The Company believes it can thereby be competitive
with potential competitors who have targeted customers with limited retail
market resources.

In addition to addressing low-cost competitors, MPSI regularly evaluates
potential strategic alliances with certain independent consulting firms. The
target consulting firms will be those who service industries in which MPSI has
historical expertise (e.g., petroleum, government/postal, and banking). Such
alliances can provide MPSI the opportunity to sub-contract portions of larger
consulting projects thereby establishing MPSI's credibility with the client and
allowing interface with customer personnel who are potentially valuable sales
contacts for future business.

BACKLOG

The Company's September 30, 1996 and 1995 backlog consisted principally of
orders for market information data bases (1996 -- $16,338,000,
1995 -- $14,669,000) and multi-year commitments by customers for software
maintenance and support services (1996 -- $2,194,000, 1995 -- $3,014,000). The
Company expects that the market information data bases in backlog at September
30, 1996 will be recognized in fiscal year revenues as follows:
1997 -- $9,998,000; 1998 -- $3,264,000, 1999 -- $2,248,000 and 2000 -- $828,000.
Maintenance and support services in backlog are the result of client contractual
obligations to purchase support services generally over periods of three to five
years. Such revenues will be recognized, and backlog accordingly reduced, on a
ratable basis over the life of each underlying agreement. Of the aggregate
maintenance and support backlog at September 30, 1996, future fiscal year
revenues are expected to be recognized as follows: 1997 -- $875,000;
1998 -- $562,000; 1999 -- $391,000, 2000 -- $246,000, 2001 -- $100,000 and
2002 -- $20,000.

EMPLOYEES

As of September 30, 1996, the Company employed 225 people, including 80 in
sales and marketing, 39 in research and development, 77 in data base analysis,
consulting, and production and 29 in management, administration, and finance. Of
these, 184 are employed in the United States and 41 are employed in foreign
countries.

PRODUCT DEVELOPMENT

Since 1970, the foundation of the Company's business has been its developed
software which helps retailers select sites, improve operations and make product
pricing decisions. Over the last five years, the major development efforts of
the Company have been directed toward (1) enhancement of this core RPS product
in order to extend its petroleum utilization around the world, (2) portation of
the software from mainframe to workstation/PC platforms, and (3) incorporation
of third party software in order to enhance the user interface, speed and
efficiency of this software. Currently, the Company has several development
efforts underway that address the aforesaid areas.

MPSI's product development cycle consists of four primary stages. During
the product specification phase the Company identifies the initial requirements
of the software, determines the functional requirements and begins the initial
design. During this stage, the Company sets forth the data base requirements as
well as the hardware, operating systems, third-party imbedded software and
general functional requirements. From

19
<PAGE> 20

information a business plan, conceptual prototype and a project plan are
developed. The prototypes developed during this stage are not fully functional
prototypes, but are designed to present the "look and feel" of the end product.
Upon completion of this phase, the Company has generally completed a detailed
program design and, accordingly, established the technological feasibility of
the project. Following the product specification phase, the project enters the
build phase where actual software programming takes place. Once coding is
complete the project enters the quality assurance phase which encompasses
various internal systems testing and user acceptance testing. Once testing is
completed the project enters the implementation phase where hardware and
software installation procedures and user documentation are finalized.

Software development costs incurred prior to completion of the detailed
program design are expensed as research and development costs. Costs incurred
during the build, quality assurance and implementation phases are generally
capitalized. At the point where the software product is ready for general
release to the customers, capitalization of costs ceases.

Beginning in fiscal year 1993, MPSI undertook a major internally funded
rewrite of its retail planning software. The new systems are designed to meet
the three primary operational requirements of clients through PC-based products
including the Capital Performance System ("CAPS")(TM) for site selection and
capital planning, the Operational Performance System(TM) ("OPS")(R) for use in
the field by retail managers in order to optimize outlet and territory
performance and the Price Volume Optimizer ("PVO")(R) for retail fuel pricing
decisions. The initial versions of OPS(R) and PVO(R) software were available to
customers in fiscal year 1994 but are presently undergoing further enhancement.
The CAPS(TM) software for North America was released in January 1995.
Third-party geographic information system software is being incorporated into
the CAPS(TM) as part of rewrite enhancements. The new software should not only
provide client requested enhancements but is also expected to reduce costs
associated with (market study) data base production and efficiencies in future
product programming and model revisions. Regional CAPS(TM) software for Europe
and South America was released in June 1996. CAPS(TM) for Japan and Asia is
scheduled for release in fiscal year 1997.

Development of the initial PVO(R) product was the result of a contract that
was signed with a North American client during 1993 for the nonexclusive
development of a volume prediction model for a petroleum related product and
service facility. Several market data bases were also part of the contract. The
commercial version of PVO(R) was completed in August of 1995 and is presently
undergoing implementation testing by clients in Canada, England, Belgium, South
Korea, and the United States. It is anticipated this product, if successful,
will not only result in contracts for additional client data bases in 1997, but
also will lead to further business with other clients through the adaptation of
the model to other petroleum client ancillary product/service needs. Utilizing
information from Company produced CAPS(TM)/RPS data bases or from other MPSI
studies, PVO(R) is designed to give retailers an easy to use decision tool for
optimizing petroleum outlet profits through price or volume level
determinations.

The PC-based OPS(R) software utilizing CAPS(TM)/RPS data base information
is currently installed with clients in the United States, Europe and the Pacific
Rim. During fiscal year 1997, the Company intends to continue making the model
available to existing clients at a nominal cost for the purpose of increasing
Company-produced data bases, MPSI's principal revenue source. A stand-alone
OPS(R) product is scheduled for development and release late in fiscal year
1998.

MPSI has historically provided retail network planning software, data, and
consulting services to the postal industry on a limited basis, primarily in
Europe and the United States. MPSI continues to pursue opportunities with the
United States Postal Service and expects an increase in revenues from that
source in 1997. Should MPSI be awarded a U.S. postal contract for market
studies, additional development efforts would be expended during fiscal 1997 to
enhance certain features of an existing prototype model and to incorporate new
technology which has become available since the prototype was developed.

During the years ended September 30, 1996, 1995, and 1994, the Company
spent $2,610,000, $2,789,000, and $3,257,000, respectively, on research and
development or enhancement of new products and the maintenance of existing
products. The amounts spent on research and development were primarily Company
sponsored, meaning there is no direct recoupment of expenses from clients.

20
<PAGE> 21

TRADEMARKS, COPYRIGHTS, AND LICENSES

The Company holds a number of trademarks, some of which are registered at
the U.S. Patent and Trademark Office. To date, registrations have been sought
only in the United States and Mexico. During fiscal year 1997 and in connection
with global introduction of new products, the Company will evaluate trademark
registration in certain other foreign countries where the volume of present
and/or potential business warrants registration. Set forth below are the
Company's trademarks and related registration expiration dates.

<TABLE>
<CAPTION>
TYPE OF
PRODUCT MARK STATUS/EXPIRATION
----------------------------------------------------- ----------- ------------------
<S> <C> <C>
MPSI's Site Evaluation System........................ Registered 2001
MPSI and Design...................................... Registered 2002
MPSI's OPS........................................... Registered 2002
MPSI................................................. Registered 2004
Retail Planning System............................... Registered 2005
PVO.................................................. Registered 2006
Location Volume...................................... Registered 2006
Facility/Location Volume............................. Registered 2006
Price Volume Optimizer............................... Trademark Filed
MPSI's CAPS.......................................... Trademark Filed
MPSI's Market Monitor................................ Trademark Common Law Rights
PriceTracker......................................... Trademark Common Law Rights
The Intelligent Approach to Retail Marketing......... Trademark Common Law Rights
</TABLE>

The Company does not hold any patents or registered copyrights. The
Company's long-term software license agreements require customer acknowledgment
of the proprietary nature of the Company's software. The Company relies on these
agreements, together with trade secret laws and internal nondisclosure
safeguards, to protect its products. To date, the Company has had no indication
of any material breach in the security of its products. Should a material breach
in the security of the Company's software products occur, it might have the
impact of reducing the current barriers to entry for competitors and thus
materially adversely affect long-term results of Company operations. The
Company's modeling methodology, mathematical modeling algorithms and data
gathering processes have been developed over an extensive period of time and
would, in the absence of a material breach in the security, require potential
competitors a substantial period of time to duplicate. Even in the event that a
material breach did occur, such as a reverse engineering of an MPSI software
product, the Company believes that because of the rapid annual change in
technology and the regular software upgrades required thereby, such breach would
not result in a material adverse effect on the Company's short-term business
because new versions of its products would likely reduce the competitive value
of older versions breached by potential competitors.

PROPERTIES

The Company's principal facility and corporate headquarters in Tulsa,
Oklahoma (42,500 square feet) is the primary location for software development
and market study production. The Bristol, England facility encompasses 10,000
square feet, and the Rio de Janeiro, Brazil office encompasses 3,000 square
feet. Both foreign offices do single site and special project work in addition
to their primary marketing role. Regional sales offices in Singapore;
Johannesburg, South Africa (established in 1996); Melbourne, Australia; and
Tokyo, Japan remained the Company's principal client liaison facilities in those
areas at September 30, 1996. MPSI has established a new office in Seoul, South
Korea which will begin operations during the first quarter of fiscal year 1997.
Management believes that the various facilities are now properly sized to meet
anticipated business levels. Additional space may be required to accommodate
business expansion. All office facilities are leased.

21
<PAGE> 22

MARKET INFORMATION FOR MPSI COMMON STOCK

During fiscal 1994 and through September 25, 1995, the Company's Common
Stock was not listed with an established securities exchange and all purchases
and sales occurred in direct negotiations or over the counter. Set forth below
for those periods are the high and low bid prices, as adjusted giving effect to
a one-for-ten reverse stock split on November 18, 1993. The trading symbol is
"MPSI". Bid prices reflect interdealer prices without retail mark-up, mark-down
or commission and may not necessarily represent actual transactions. On
September 26, 1995, the Company's Common Stock was listed on The NASDAQ SmallCap
Market(SM) (hereafter NASDAQ). Information in the table below for the fourth
quarter of fiscal 1995 and for fiscal 1996 reflects the high and low sales
prices reported by NASDAQ.

<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
Fiscal 1994
First Quarter Ended December 31, 1993................................. 7 5
Second Quarter Ended March 31......................................... 7 4
Third Quarter Ended June 30........................................... 5 1/4 2
Fourth Quarter Ended September 30..................................... 4 3/4

Fiscal 1995
First Quarter Ended December 31, 1994................................. 2 5/8 1 1/2
Second Quarter Ended March 31......................................... 2 1/2 1
Third Quarter Ended June 30........................................... 7 1 1/2
Fourth Quarter Ended September 30..................................... 7 1/2 3

Fiscal 1996
First Quarter Ended December 31, 1995................................. 7 4 3/4
Second Quarter Ended March 31......................................... 5 1/4 3
Third Quarter Ended June 30........................................... 3 1/2 2 3/4
Fourth Quarter Ended September 30..................................... 4 1/4 5/8
</TABLE>

The 2,794,000 shares of Common Stock outstanding at September 30, 1996,
were held by 923 stockholders of record. At that date, an additional 279,283
shares were subject to options to purchase Common Stock as discussed more fully
in Note 8 to the Consolidated Financial Statements. The per share bid and offer
prices on December 5, 1996, were $2.50 and $3.50, respectively. Common Stock
that could be sold pursuant to Rule 144 under the 1933 Act totals 912,224 shares
as of December 5, 1996.

The Company intends to reinvest its earnings in its business and therefore
does not anticipate paying any cash dividends in the foreseeable future. The
Company has not paid cash dividends since its inception.

22
<PAGE> 23

SELECTED FINANCIAL DATA*
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30,
---------------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues...................................... $21,745 $23,437 $19,872 $19,524 $25,313
Income (loss) from continuing operations...... (623) 2,029 1,956 (939) (5,567)
Income (loss) from discontinued operations.... -- -- (482) 2,149 (14)
Extraordinary gain on debt extinguishment..... -- -- -- 350 --
Net income (loss)............................. (623) 2,029 1,474 1,560 (5,581)
Per share:
Income (loss) per common and common
equivalent share:
Continuing operations.................... $ (.23) $ .72 $ .71 $ (.94) $ (6.53)
Discontinued operations.................. -- -- (.18) 2.15 (.01)
Extraordinary item....................... -- -- -- .35 --
Net income (loss)........................ (.23) .72 .53 1.56 (6.54)
Weighted average shares of common stock and
common stock equivalents outstanding........ 2,756 2,802 2,766 998 853

BALANCE SHEET DATA:
Total assets.................................. $10,319 $12,924 $ 9,734 $10,040 $14,861
Long-term debt................................ -- -- -- -- 2,620
Noncurrent deferred revenue................... 1,342 1,961 1,068 1,453 2,602
Other noncurrent liabilities.................. 177 220 349 252 2,429
</TABLE>

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

* Operating data prior to fiscal year 1994 has been restated giving effect to
the September 1994 sale of RSI . See Note 2 to Consolidated Financial
Statements regarding discontinued operations.

SELECTED QUARTERLY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
UNAUDITED

<TABLE>
<CAPTION>
NET GROSS NET PER
QUARTER ENDED SALES PROFIT INCOME SHARE
- ------------- ------ ------ ------ -----
<S> <C> <C> <C> <C>
Fiscal Year 1995:
December 31, 1994.......................................... $4,911 $2,978 $ 172 $ .06
March 31, 1995............................................. 5,280 3,244 386 .14
June 30, 1995.............................................. 6,114 3,288 593 .21
September 30, 1995......................................... 7,132 3,494 878 .31

Fiscal Year 1996:
December 31, 1995.......................................... $5,311 $2,988 $ 180 $ .06
March 31, 1996............................................. 5,364 2,505 (148) (.05)
June 30, 1996.............................................. 4,976 2,161 (723) (.26)
September 30, 1996......................................... 6,094 3,077 68 .02
</TABLE>

23
<PAGE> 24

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

The following table sets forth (in thousands), for the periods indicated,
certain items in the consolidated statements of continuing operations and the
change of such items as compared with the indicated prior period. See Note 2 to
the Consolidated Financial Statements which sets forth the effect of the
September 1994 sale of RSI. All information below reflects RSI as discontinued
operations.

CHANGE
------------------
YEAR ENDED SEPTEMBER 30 1996 1995
------------------------------- ------- ------
VS.
1996 1995 1994 1995 1994
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Revenues.................................. $21,745 $23,437 $19,872 $(1,692) $3,565
Cost of sales............................. 11,014 10,432 7,614 582 2,818
------- ------- ------- ------- ------
Gross profit............................ 10,731 13,005 12,258 (2,274) 747
------- ------- ------- ------- ------
Operating expenses:
General and administrative.............. 3,005 2,571 2,388 434 183
Marketing and client services........... 6,928 6,993 5,578 (65) 1,415
Research and development................ 1,382 1,794 2,331 (412) (537)
------- ------- ------- ------- ------
Total operating expenses........ 11,315 11,358 10,297 (43) 1,061
------- ------- ------- ------- ------
Operating income (loss)................... (584) 1,647 1,961 (2,231) (314)
Other income (expense), net............... 332 836 289 (504) 547
------- ------- ------- ------- ------
Income (loss) from continuing operations
before income taxes..................... (252) 2,483 2,250 (2,735) 233
Income taxes.............................. (371) (454) (294) (83) 160
------- ------- ------- ------- ------
Income (loss) from continuing
operations.............................. $ (623) $ 2,029 $ 1,956 $(2,652) $ 73
======= ======= ======= ======= ======
</TABLE>

RESULTS OF OPERATIONS

MPSI reported a loss for the fiscal year ended September 30, 1996 of
$623,000 or $.23 per share on revenues of $21.7 million compared with income of
$2.0 million or $.72 per share on revenues of $23.4 million in 1995 and $2.0
million or $.71 per share on revenues of $19.9 million in 1994. The 1996 results
reflected a 7% decline in revenues and substantially reduced profitability
through the first three fiscal quarters compared with 1995. However, despite
severance costs of approximately $215,000 related to a corporate restructuring
completed in July 1996, the 1996 fourth quarter results were positive. In
contrast, fiscal year 1995 results reflected a revenue increase of $3.6 million
or 18% as compared to 1994 coupled with strong fourth quarter revenues and
earnings. (The Company reported net income of $878,000 or $.31 per share on
revenues of $7.1 million compared with net income of $45,000 or $.02 per share
on revenues of $4.8 million in the 1994 fourth quarter.)

Set forth below (in thousands of dollars) is an analysis of MPSI's revenue
fluctuations over the last three fiscal years.

<TABLE>
<CAPTION>
1996 VS. 1995 1995 VS. 1994
----------------- ----------------
AMOUNT % AMOUNT %
------- --- ------ ---
<S> <C> <C> <C> <C>
North America......................................... $ 336 4 $2,455 35
South America......................................... (11) (1) 394 31
Pacific Rim........................................... (1,193) (12) 1,342 15
Europe/Africa......................................... (824) (34) (626) (21)
------- ------
Totals...................................... $(1,692) (7) $3,565 18
======= ======
</TABLE>

North American revenues continued to grow in 1996 compared with the two
previous years, but the rate of growth has slowed to the level that the Company
would anticipate carrying forward in this highly

24
<PAGE> 25

competitive market segment. Oil companies are recording solid profits in North
America and there is good activity in the retail marketing portion of their
business. The revenue surge in 1995 was principally attributable to the release
during late 1994 of the new CAPS(TM) software. CAPS(TM) software versions for
the three remaining MPSI regions were targeted for release during fiscal year
1996. As discussed below, the South American and European versions of CAPS(TM)
were substantially delayed and were not released until June 1996. MPSI was able
to maintain revenues in South America at a level comparable with 1995 by
expanding into several new countries, as the oil industry is experiencing
reasonable growth in certain South American countries. European business
continued to decline in 1996 as the oil industry, particularly in western
Europe, is undergoing significant consolidation and is not, therefore,
committing substantial resources to growth of the retail markets. Eastern
European customers, whose retail marketing staffs are expanding and becoming
more sophisticated, appear to be more interested presently in turnkey solutions
rather than decision support tools. The delay in European CAPS(TM) release
delayed MPSI's ability to meet European customer needs for most of 1996, but
with a shift in product targeting, MPSI anticipates being able to begin growing
European revenues in 1997. The CAPS(TM) release for Japan/Southeast Asia was
delayed in part due to the impending deregulation of the Japanese oil industry.
The revenue decline in the Pacific Rim is principally attributable to Japanese
clients spending very cautiously for new retail marketing sites until they can
assess the effects of deregulation. MPSI has been able to partially counteract
this situation by entry into new geographic markets, most notably South Korea.

The Company does not believe that inflation has significantly impacted the
results of operations during the three years ended September 30, 1996. The 1994
implementation of lower pricing in North America, South America and Europe
resulted in increased client interest in those regions. While the Company
believes that lower pricing, brought about by competition in certain MPSI
regions, has stimulated revenues from such customers during the three years, the
Company attributes the 1996 and 1995 revenue growth, where it occurred,
primarily to the technological improvements of its new products.

The combination of the economic and industry factors discussed above with
the delayed release of CAPS(TM) software for Europe and South America
contributed substantially to the $698,000 (64%) decline in software licensing
revenues for 1996. Such revenues also declined $1.2 million or 52% in 1995
compared with 1994. While MPSI regularly records software license renewals and
recorded software renewals in both 1996 and 1995, the surge in 1994 software
revenues related to a single large renewal transaction in which a worldwide
licensee renewed its license for three years in the amount of $1.5 million. The
timing of new or renewed long-term software license agreements can have a
substantial impact upon reported revenues and gross profits from software
licensing for any interim or annual fiscal period. In general, over the past two
years, MPSI's software license renewal rate has been declining, except in the
U.S. where the new CAPS(TM) software has resulted in new business. Management
believes that as CAPS(TM) is released in MPSI's other operating regions, the
trend of software renewals will reflect acceptance of CAPS(TM) as a valuable
replacement for the aging RPS software.

While MPSI is projecting revenue and earnings growth in 1997 within its
core petroleum business back to levels comparable with fiscal year 1995, several
new products have been under development which management believes have the
potential to accelerate growth. Although they were not profit contributors in
fiscal year 1996 because of delays in deployment due to resource constraints and
start-up costs, they are expected to positively impact fiscal years 1997 and
beyond. MPSI completed development and released its enhanced commercial version
of PVO(R) software in August 1995. Clients in North America, South America,
Europe and Australia are presently evaluating the PVO(R) software. In addition
to new software offerings, MPSI introduced two "data" products during fiscal
year 1995 which were designed to leverage market information already in MPSI's
inventory and to combat the competitive challenge from data providers. The Quest
product allows clients to obtain point-in-time retail outlet information either
relative to MPSI's standard market study boundaries in a given geographic market
or to establish specialized market boundaries or specialized data requirements
for an additional fee. PriceTracker(TM) allows clients to obtain high quality,
timely retail pricing information on a recurring basis in order to track trends
in the marketplace. The start-up and survey coordination costs on these products
exceeded revenues in fiscal years 1995 and 1996, but these products are expected
to attain profitability in fiscal year 1997. The preceding sentence is a
forward-looking

25
<PAGE> 26

statement. Despite the fact MPSI is projecting revenue and earnings growth in
1997 within its core petroleum business, no assurance can be given that such
goals will be achieved for several reasons, including competition from other
vendors or the work of in-house research staffs; economic conditions in the
petroleum business; product development delays; and the Company's own ability to
generate and identify sales prospects. It is noted that MPSI had anticipated the
revenue and earnings growth, as well as the decline of new product start-up and
survey coordination costs discussed above, to have achieved the favorable
results expected for 1997 within fiscal 1996, where such objectives were not
realized.

In line with reduced revenues and the lower percentage of such revenues
that were attributable to software licensing, MPSI experienced a 17% decline in
gross profits in 1996, whereas MPSI experienced better gross profit margins on
its software and market studies in 1995 compared with 1994 (excluding the impact
of the $1.5 million license renewal discussed above). Software cost of sales
reflects amortization of capitalized software development costs generally over
product lives of 18 months from product release. Software cost of sales rose 83%
in 1996 compared with 1995 and 35% in 1995 over 1994. Substantial non-
capitalized research and specification work was undertaken in 1994 as
preparation for actual development of the CAPS(TM) software which began late in
fiscal year 1994 (see discussion of research and development expenses below).
Fiscal years 1996 and 1995 reflect the amortization of capitalized development
costs undertaken in prior years relative to the various CAPS(TM) versions. The
Company expects fiscal year 1997 amortization to increase as new CAPS(TM)
software will be amortized for the entire year (only three months in 1996).
Gross profit on market studies, the largest component of information services
revenues, was approximately $9.1 million in 1996, $9.9 million in 1995 and $7.5
million in 1994, and represented 58%, 60%, and 58% of market study revenues in
1996, 1995 and 1994, respectively. The lower market study gross profits in 1996
were attributable in part to certain of the multi-year study updates which carry
acceptable gross profit margins overall but may result in reduced margins in
certain fiscal year components. MPSI did implement production efficiencies
during fiscal year 1996 and 1995. Those implemented in 1995, combined with a
higher number of studies prepared for multiple client users, allowed MPSI to
leverage its costs to a greater degree in that year. Gross profit on special
projects and other services declined approximately 8% reflecting the start-up of
new data products discussed above.

Also in line with reduced revenues, MPSI curtailed growth in operating
expenses in spite of undertaking operations in several new geographic countries
(business presences were established in Italy, Canada, South Korea and South
Africa). The $434,000 (17%) increase in general and administrative expenses in
1996 is primarily attributable to severance costs associated with a corporate
reorganization completed in July 1996, to the legal costs associated with
organizing the new offices and with accounting costs associated with an income
tax examination initiated by the Internal Revenue Service as discussed below.
The corporate restructuring was undertaken primarily in response to some of the
problems encountered in timely development of the CAPS(TM) versions noted above
and partly in order to re-align the Company's resources to increase attention to
quality client support services. While not undertaken specifically in order to
reduce personnel, the restructuring did result in a reduction of the workforce
by approximately 7% (equally between Tulsa and Bristol, England) with an
associated severance cost of approximately $215,000. Marketing expenses were
slightly lower than in 1995 in spite of the Company's increased focus on client
service resources. Research and development expenses declined $412,000 (23%) as
the proportion of capitalizable activities increased in 1996 (European and South
American CAPS(TM) programming). The 1995 increases in operating expenses
compared with 1994 included higher general and administrative costs in the
amount of $183,000 (8%) related principally to accrual of incentive bonuses and
awards for employees where no similar amounts were accrued or paid for fiscal
year 1994. Marketing and client services expenses grew in 1995 by $1.4 million
(25%) reflecting primarily the start-up costs for the new products mentioned
above. Research and development expenses in the consolidated statements of
operations declined $537,000 (23%) in fiscal year 1995 compared with 1994 as the
Company's overall expenditures were less in respect of contract programming
resources and because a higher proportion of such expenses were capitalized in
connection with development of PVO(R) version 2.0 and the CAPS(TM) versions for
Europe and South America as these products achieved technological feasibility.

MPSI enters into multi-year contracts for market studies, some of which are
denominated in foreign currencies (principally the Singapore Dollar and the
British Pound Sterling). This exposes MPSI to exchange gains or losses depending
upon the periodic value of the U.S. Dollar relative to the respective foreign

26
<PAGE> 27

currencies. During fiscal years 1996 and 1995, MPSI benefited from foreign
currency exchange gains in the amount of $146,000 and $638,000, respectively.
These gains were generally the result of multi-year data base contracts
denominated in Singapore Dollars which were booked by clients in prior years and
partially collected in 1996 or 1995. By the time the collections were effected,
the contract values had increased relative to the U.S. Dollar reporting
currency. Although MPSI anticipates continuing benefit from the same source in
fiscal year 1997, the magnitude should be somewhat lower. In the longer term,
these multi-year commitments could result in exchange losses if the current
currency trends were to reverse.

Income taxes declined $83,000 in 1996 compared with increases of $160,000
and $172,000 in fiscal years 1995 and 1994, respectively. The 1994 income taxes
were primarily foreign income taxes either applicable to the Company's foreign
subsidiaries or withheld at the source from payments by foreign clients. Income
taxes in 1995, however, reflected a larger estimated component of U.S. Federal
and state income taxes (see Note 6 to the Consolidated Financial Statements). In
1996, the Company subsequently filed income tax returns applicable to fiscal
year 1995 which reflected refunds of both federal ($125,000) and state ($85,000)
income taxes. Such refunds are reflected as adjustments to the 1996 income tax
expense in accordance with generally accepted accounting principles governing
changes in estimates. The profits generated in fiscal years 1995 and 1994 from
U.S. operations resulted in utilization of virtually all net operating loss
carryforwards available for income tax purposes in the U.S. Certain foreign tax
credits may be carried forward to fiscal year 1997, as set forth in Note 6, but
can only be utilized to offset U.S. incomes taxes to the extent they result from
foreign source income. The Company expects to pay higher U.S. income taxes in
1997 and beyond although a significant portion of U.S. taxable income in 1997 is
anticipated to come from foreign sources.

In March 1996, the Internal Revenue Service initiated an examination of tax
years 1993 through 1995. The Company has not yet received a final report of the
results, and believes that the resolution of any issue raised will not have a
material effect on its financial position.

FINANCIAL CONDITION AND LIQUIDITY

Compared with 1995, the Company's working capital, its primary measure of
"liquidity", declined approximately $558,000 or 29% to $1.4 million at September
30, 1996. Working capital had improved to a positive balance of $1.9 million at
September 30, 1995 from a deficit of $5,000 at September 30, 1994. The 1996
decline was principally attributable to the decline in market study and software
revenues previously discussed. The revenue shortfall resulted in lower
receivables balances at year end and reduced the number of multiple-client
studies. Multiple-client studies, in addition to being more profitable,
generally contribute significant incremental cash flow. The 1995 improvement was
a combination of the Company's continued generation of operating cash flow ($1.6
million as reflected in the statement of cash flow) and the higher balance in
current receivables at September 30, 1995 ($6.4 million) compared with September
30, 1994 ($4.4 million). The increase in trade receivables was principally
attributable to increased market study activity.

The 1996 operating results have precluded the Company from obtaining a
renewal of its previous bank line of credit. The Company intends to seek a
replacement credit facility in 1997. The lack of a back-up funding facility
means that operations must be funded entirely internally, except perhaps for
some limited capital equipment leasing options. The Company has historically
placed significant reliance on customer deposits and prepayments as a source of
ongoing liquidity and operating capital and had not drawn on the previous line
of credit since 1993. Management anticipates internal funding will be sufficient
to satisfy operating needs during the fiscal year although for short periods of
time, the Company may be required to defer capital acquisition and tightly
manage cash resources. Should substantial direct competitors gain market share
and offer price concessions or favorable payment terms, the Company's liquidity
could be negatively impacted. The Company relies on its long-term client
relationships and the quality of its products and services to mitigate this
potential negative impact on liquidity.

As set forth in the statements of cash flow, the Company generated cash
flow from operations of $1.0 million in 1996 which represented a $.7 million or
41% decline compared with 1995. Cash flow from operations of $1.6 million in
1995 was 41% higher than the $1.2 million in 1994. During 1996, 1995 and 1994,

27
<PAGE> 28

MPSI committed substantial resources to acquisition of additional computer
equipment and to development of new software products, as previously discussed.
The Company expended $1.4 million in 1996 ($1.0 million in both 1995 and 1994)
for such purposes. The Company anticipates comparable expenditures in 1997 for
similar purposes but has no commitments for capital expenditures at September
30, 1996, other than those related to the forthcoming regional versions of
CAPS(TM) software which are expected to be funded entirely out of operating cash
flows.

The trends in software licensing discussed under "Results of Operations"
above impacted the relative levels of both the related receivables and deferred
revenues. The current and noncurrent balances in long-term receivables (totaling
$3.2 million and $4.3 million at September 30, 1996 and 1995, respectively) and
the deferred maintenance component of deferred revenue (totaling $2.2 million
and $3.0 million at September 30, 1996 and 1995, respectively) decreased in 1996
as the receivables and deferred revenue from new software contracts were less
than the collections and maintenance revenue recognized during 1996. MPSI's
license agreements generally are noncancelable, although a few contracts include
provisions for cancellation of portions of the client's commitment upon
occurrence of certain negative economic events in the clients' geographic areas
of operations. In accordance with its policy, the Company does not recognize
revenues on such contingent portions of agreements, so that in the event of
cancellation, only receivables and deferred revenue are generally adjusted. In
accordance with contractual cancellation options, certain clients canceled
portions of their software licenses in 1996 aggregating $435,000 compared with
$65,000 during 1995 and $226,000 during 1994. As the number of contracts with
cancellation clauses are few, the Company does not expect a significant impact
from cancellations in 1997.

The decrease in other noncurrent liabilities to $177,000 at September 30,
1996 from $220,000 at September 30, 1995 is the result of reclassifying certain
U.S. headquarters lease obligations to current accrued liabilities. The
Company's present lease on its headquarters facility expires in April 1998, and
the Company has been informed by a new landlord who recently acquired the
building that MPSI will be required to vacate at the end of the lease. The
Company is presently evaluating facility alternatives but does not expect to
move before lease expiration.

MPSI's backlog of market studies at September 30, 1996 in the amount of
approximately $16.3 million, contained a substantial number of recurring studies
under multi-year client commitments. Such studies represented approximately 26%
of the estimated revenues for fiscal year 1997. Revenues in 1995, particularly
during the last six months of the fiscal year, resulted in a drop of
approximately $4.1 million in backlog compared with 1994 and reduced the market
study backlog at September 30, 1995 to $14.7 million.

28
<PAGE> 29

DIRECTORS AND EXECUTIVE OFFICERS OF MPSI

INFORMATION WITH RESPECT TO DIRECTORS

The following table sets forth the directors, their ages, a brief
description of their recent business experience, including present occupations
and employment, certain directorships held by each and the year in which each
became a director of the Company. All were elected at the Company's Annual
Meeting of Stockholders held on February 1, 1996.

<TABLE>
<CAPTION>
NAME AND PRINCIPAL OCCUPATION AT PRESENT DIRECTOR
AND FOR THE PAST FIVE YEARS; OTHER DIRECTORSHIPS SINCE AGE
--------------------------------------------------------------------- ---------- ---
<S> <C> <C>
Ronald G. Harper(1)................................................. 1970 58
Mr. Harper, who founded the Company in 1970, has served as its
President, Chairman of the Board and Chief Executive Officer since
inception.

John C. Bumgarner, Jr.(1)(2)(3)..................................... 1982 54
In 1979, Mr. Bumgarner was appointed to his present position as
Senior Vice President -- Corporate Development and Planning of The
Williams Companies, Inc., a Tulsa-based conglomerate. He has been
employed by The Williams Companies, Inc. since 1977. He is also a
director of TRANSCO, James River Coal Company, and several
privately held companies.

Dr. David L. Huff(1)................................................ 1982 65
Since 1968, Dr. Huff has been a member of the faculty at the
University of Texas. He has been a Fulbright Lecturer and has
published numerous books and articles, including Market Area
Analysis, "A Graphical Index of Consumer Expectation," "Measures of
Market Area Overlap," and "Retail Location Theory." He is an expert
in computer modeling techniques.

Joseph C. McNay(1)(2)(3)............................................ 1982 62
Since November 1976, Mr. McNay has been the President, a Director
and the Chairman of the Board of Essex Investment Management
Company, Inc., a company engaged in investment and advisory
services. Mr. McNay is also a director of Softech, Inc. and Alpha 1
Biomedical, Inc., each of which are publicly-held companies.

John J. McQueen(2)(3)............................................... 1982 75
Mr. McQueen has been in the private practice of law in the Tulsa
area since 1959. He has also served as a certified public
accountant with KPMG Peat Marwick, as a tax specialist with Warren
Petroleum Corp., and as controller of Davis Investments, a company
engaged in oil and real estate activities.
</TABLE>

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

(1) The individual identified is a member of the Compensation Committee.

(2) The individual identified is a member of the Audit Committee.

(3) The individual identified is a member of the Nominating Committee.

29
<PAGE> 30
INFORMATION WITH RESPECT TO EXECUTIVE OFFICERS

The following table sets forth the executive officers currently serving the
Company, their ages, all positions and offices held with the Company and their
tenure in such office. All officers of the Company serve at the pleasure of its
Board of Directors, and there exists no arrangement or understanding among any
of the Company's executive officers with any other person pertaining to their
selection to serve in such position.

<TABLE>
<CAPTION>
SERVING IN
CURRENT
NAME AND ALL POSITIONS POSITION
AND OFFICE HELD WITH THE COMPANY SINCE AGE
--------------------------------------------------------------------- ---------- ---
<S> <C> <C>
Ronald G. Harper.................................................... 1970 58
Mr. Harper, who founded the Company in 1970, has served as its
President, Chairman of the Board and Chief Executive Officer since
inception.

Roger A. Finn....................................................... 1996 59
Mr. Finn was appointed as Vice President, Consulting on July 11,
1996. Mr. Finn joined MPSI in 1982 as Director of Network
Planning. Subsequent assignments included General
Manager -- Network Planning, Chief Marketing Officer, Vice
President of Operations, Vice President of Americas Petroleum,
Vice President -- Marketing and Product Development, and Chief
Operating Officer.

James C. Auten...................................................... 1996 48
Mr. Auten was appointed Vice President and Chief Financial Officer
on January 1, 1996. Mr. Auten joined MPSI in 1984 as Corporate
Controller and held such position until December 1992 when he was
appointed Principal Accounting Officer.

Jyo Umezawa......................................................... 1996 56
Mr. Umezawa was appointed Sr. Vice President, Retail Petroleum, on
July 11, 1996. Mr. Umezawa joined MPSI in 1983 and has served as
Manager -- Market Development, Director -- Market Studies, Chief
Information Officer, General Manager -- Technical Services, and
Vice President, Pacific Rim Region.

Mark R. Davis....................................................... 1996 44
Mr. Davis was appointed to his present position as Vice President,
Consulting on July 11, 1996. Mr. Davis joined MPSI in 1978 and has
served as Project Manager, Manager -- Network Planning, Director
of Marketing, Director -- Product Development, Director -- Network
Planning, General Manager -- Production, Vice
President -- Production, Vice President -- Government/Financial
Services, and Vice President Europe/Middle East/Africa Region.

Bryan D. Porto...................................................... 1996 47
Mr. Porto was appointed to his present position as Sr. Vice
President, Retail Petroleum on July 11, 1996. Mr. Porto joined
MPSI's Rio de Janeiro office in 1985 and has served as
Director -- Network Planning, General Manager -- Marketing, Vice
President of MPSI's Brazilian subsidiary, and most recently served
as Vice President, North/Central/South America Region.

Lance B. Taylor..................................................... 1996 38
Mr. Taylor was appointed to his present position as General
Manager -- Retail Services Consulting on October 1, 1996. Mr.
Taylor joined MPSI in 1981 and has served as a Network Planner,
Production Manager -- North America Region, Production
Director -- Americas Region and General Manager of Production.
</TABLE>

30
<PAGE> 31

STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information as of December 5, 1996, as to
shares of Common Stock beneficially owned by the directors, the executive
officers, the directors and officers of the Company as a group, and certain
persons known to the Company to own beneficially more than five percent of the
Common Stock. Except as otherwise indicated, each person has sole investment and
voting power with respect to the shares shown. Ownership information is based
upon information furnished by the respective individuals.

<TABLE>
<CAPTION>
BENEFICIAL
OWNERSHIP
OF COMMON STOCK
------------------------
NUMBER PERCENT
NAME OF COMMON STOCKHOLDER OF SHARES OF CLASS
--------------------------------------------------------------- --------- --------
<S> <C> <C>
Ronald G. Harper(2)............................................ 1,172,391(1) 42.00%
8282 South Memorial Drive
Tulsa, Oklahoma 74133

John C. Bumgarner, Jr.......................................... 222,322 8.00%
4900 Bank of Oklahoma Tower
One Williams Center
Tulsa, Oklahoma 74172

Joseph C. McNay................................................ 261,322 9.34%
125 High Street, 29th Floor
Boston, Massachusetts 02110

Bank of Oklahoma, N.A.......................................... 285,714 10.23%
P. O. Box 2300
Tulsa, Oklahoma 74192

The Robertson Stephens Orphan Fund............................. 263,971 9.50%
555 California Street, Suite 2600
San Francisco, California 94104

Sanford Orkin.................................................. 222,222 8.00%
3414 Peachtree Road, N.E., Suite 236
Atlanta, Georgia 30326

Dr. David L. Huff.............................................. 5,000(3) .18%
John J. McQueen................................................ -- --
Roger A. Finn (2).............................................. 23,238 .83%
Jyo Umezawa (2)................................................ 25,229 .90%
Mark R. Davis (2).............................................. 15,566 .56%
Bryan D. Porto (2)............................................. 15,443 .55%
All officers and directors as a group (11 persons)............. 1,761,900 63.08%
</TABLE>

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

(1) Includes 308,177 shares of Common Stock held directly by Mr. Harper's family
or in trust for the benefit of Mr. Harper's family and 396,030 shares held
in trust for the benefit of certain charities. Mr. Harper disclaims
beneficial ownership of 449,830 shares held in certain of such trusts.

(2) The indicated individuals are executive officers of the Company.

(3) Represents shares held by Dr. Huff's wife, as to which Dr. Huff disclaims
beneficial ownership.

31
<PAGE> 32

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Based solely upon a review of Forms 5 furnished to the Company with respect
to its most recent fiscal year, the Company has determined that reports required
pursuant to Section 16(a) of the Securities Exchange Act of 1934, as amended,
were not filed on a timely basis. The Company believes that Forms 4 for Ronald
G. Harper, Roger A. Finn, and Mark R. Davis were filed late. The late filings
encompassed one Form 4 for Mr. Harper covering two transactions, two Forms 4 for
Mr. Finn covering two transactions, and two Forms 4 for Mr. Davis covering three
transactions. The Forms 5 for such individuals were filed at year end and
reflected all information which was required to be filed as to such individuals.

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table summarizes the compensation paid over the last three
completed fiscal years to the Company's CEO and the other executive officers of
the Company who received compensation of $100,000 or more during the fiscal year
ended September 30, 1996.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM COMPENSATION
--------------------------------
AWARDS
OTHER --------------------- PAYOUTS ALL OTHER
ANNUAL COMPENSATION ANNUAL RESTRICTED ------- ANNUAL
NAME AND ----------------------------- COMPENSATION STOCK OPTIONS/ LTIP COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($)(1) AWARD(S) SARS(#) PAYOUTS ($)(2)
- ---------------------- ---- --------- -------- ------------ ---------- ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ronald G. Harper...... 1996 196,961 -- 8,242 -- -- -- 8,085
Chairman of the 1995 181,456 5,599 8,232 -- -- -- 8,128
Board, President 1994 155,402 6,994 34,285 -- -- -- 8,754
and Chief
Executive Officer
Roger A. Finn......... 1996 106,109 1,023 4,500 -- -- -- 3,980
Vice President and 1995 101,013 4,092 6,000 -- 6,000 -- 4,006
Chief Operating 1994 102,674 4,620 6,000 -- -- -- 3,817
Officer
Jyo Umezawa........... 1996 100,122 3,690 -- -- -- -- 3,237
Vice President 1995 100,022 4,701 -- -- 7,000 -- 3,155
Pacific Rim 1994 93,970 6,354 -- -- -- -- 3,476
Mark R. Davis......... 1996 100,122 3,690 -- -- -- -- 3,772
Vice President 1995 100,022 3,300 -- -- 5,400 -- 3,599
Europe/Africa 1994 92,236 3,084 -- -- 5,000 -- 1,575
Bryan D. Porto........ 1996 100,122 3,690 -- -- -- -- 672
Vice President 1995 100,022 4,000 -- -- 5,400 -- 624
Americas 1994 92,809 3,480 -- -- 8,000 -- 612
</TABLE>

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

(1) Represents automobile allowances paid to or on behalf of the named executive
officers.

(2) The components of "All Other Compensation" for the fiscal years ended
September 30, 1996, 1995, and 1994 include (a) Company matching
contributions to the Company's 401(k) defined contribution plan (Mr.
Harper -- $3,278, $3,865 and $4,497, Mr. Finn -- $3,183, $3,244 and $3,182,
Mr. Umezawa -- $2,565, $2,531 and $2,864, Mr. Davis -- $3,100, $2,975 and
$976, respectively), (b) supplemental life insurance premiums paid by the
Company (Mr. Harper -- $4,807, $4,263 and $4,257, Mr. Finn -- $797, $762 and
$635, Mr. Umezawa -- $672, $624 and $612, Mr. Davis -- $672, $624 and $599
and Mr. Porto -- $672, $624 and $612, respectively).

32
<PAGE> 33
OPTION/SAR GRANTS TABLE

The following table sets forth certain information with respect to stock
options (whether or not in tandem with stock appreciation rights) and
freestanding stock appreciation rights (SAR) granted to the named executive
officers during the last completed fiscal year.

OPTION/SAR GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
INDIVIDUAL GRANTS VALUE AT
----------------------- ASSUMED
% OF TOTAL ANNUAL RATES OF
OPTIONS/SARS STOCK PRICE
OPTIONS/ GRANTED TO EXERCISE APPRECIATION
SARS EMPLOYEES OR BASE FOR OPTION TERM
GRANTED IN PRICE EXPIRATION ---------------
NAME (#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
------ -------- ------------ -------- ---------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Roger A. Finn.......................... 15,000 10% $ 5.38 12-19-00 22,275 49,222
Mark R. Davis.......................... 10,000 7% $ 5.38 12-19-00 14,850 32,815
Bryan D. Porto......................... 13,500 9% $ 5.38 12-19-00 20,048 44,300
Jyo Umezawa............................ 15,000 10% $ 5.38 12-19-00 22,275 49,222
James C. Auten......................... 7,500 5% $ 5.38 12-19-00 11,138 24,611
Lance B. Taylor........................ 3,100 2% $ 5.38 12-19-00 4,604 10,173
</TABLE>

OPTIONS EXERCISED TABLE

The following table sets forth information concerning each exercise of
stock options by the named executive officers during the last completed fiscal
year.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY END OPTION VALUES

<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
- --------------------------------------------- ----------- ------------ ------------- -------------
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES FY END(#) FY END($)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
------ ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Mark R. Davis................................ 3,334 5,418 6,800/18,600 --
Lance B. Taylor.............................. 4,233 5,250 1,000/ 9,000 --
</TABLE>

EMPLOYMENT CONTRACTS AND SEVERANCE ARRANGEMENTS

The Company maintains a severance policy applicable to all full-time
regular employees with at least one year of fulltime service. Eligible employees
are those who are terminated as the result of (1) a reduction of the Company's
work force, (2) elimination of a job or position, (3) inability to
satisfactorily perform required responsibilities, or (4) relocation of
applicable Company facilities. The amount of severance paid is based upon the
employee's base salary and length of service, and includes payment for vested
but unused vacations and pro rated automobile allowances, if applicable. The
only named executive officer who would receive aggregate severance in excess of
$100,000 under the current policy is Mr. Ronald G. Harper. Mr. Harper's
aggregate severance would be approximately $116,000 at September 30, 1996.

BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

The Compensation Committee of the Board of Directors (the "Committee") was
composed of Ronald G. Harper, President and Chief Executive Officer of the
Company, and independent outside directors, John C. Bumgarner, Jr., Joseph C.
McNay and Dr. David L. Huff. This Committee is responsible for overseeing and
administering the Company's executive compensation program described below.

33
<PAGE> 34

Compensation Policy

The executive compensation program of the Company is reviewed and approved
annually by the Committee and is designed to serve the interest of the Company
and its stockholders by aligning executive compensation with stockholder
objectives and to encourage and reward management initiatives and good
performance. Specifically, the executive compensation program seeks to:

(i) implement compensation practices which allow the Company to
attract and retain highly qualified executives and maintain a competitive
position in the executive marketplace with employers of comparable size and
in similar lines of business;

(ii) enhance the compensation potential of executives who are in the
best position to contribute to the development and success of the Company
by providing the flexibility to compensate individual performance; and

(iii) directly align the interest of executives with the long-term
interest of stockholders through compensation opportunities in the form of
Common Stock ownership.

These objectives are met through a program comprised of base salary and
annual cash or stock incentive awards, which are tied to operating performance,
and long-term incentive opportunities primarily in the form of incentive stock
options.

Salary. The Committee considers annual salary adjustments for the Company's
executive officers, including those named in the Summary Compensation Table.
Salary adjustments are designed to reflect internal comparability,
organizational considerations and competitive data provided by outside surveys.
As a general rule, salary ranges are targeted toward the median of survey
results.

Incentive Awards. Executives are eligible for cash awards annually based
upon financial and nonfinancial results relative to pre-established performance
targets and objectives.

Stock Options. The Company's 1988 Stock Option Plan, approved by the
stockholders in 1989, permits the Committee to grant incentive or nonstatutory
stock options to executive officers. The plan provides for stock option awards
giving executives the right to purchase Common Stock over a five-year period at
the fair market value per share as of the date the option is granted. Options
generally become exercisable in three equal annual installments beginning one
year after grant. Neither Mr. Harper nor any other member of the Board of
Directors are eligible to participate in the stock option plan.

Chief Executive Officer Compensation

Mr. Harper's overall compensation package has increased by approximately
27% during the three years ended September 30, 1996 in recognition of the
Company's progress. Mr. Harper received annual incentive awards as set forth in
the Summary Compensation Table. In determining the amount of annual incentive
awards, the Committee took into consideration the Company's operating results in
an environment affected by adverse economic conditions, the increased quality of
core assets as a result of the Company's emphasis on its core client industry
(retail petroleum), and Mr. Harper's increased personal attention to
revitalization of certain significant client relationships and introduction of
new products.

The Board of Directors did not reject or modify any compensation
recommendation of the Compensation Committee.

The Compensation Committee
John C. Bumgarner, Jr.
Ronald G. Harper
Dr. David L. Huff
Joseph C. McNay

34
<PAGE> 35

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Mr. Ronald G. Harper, Chief Executive Officer of the Company, is the only
member of the Compensation Committee who is also an employee or officer of the
Company. In addition, Mr. Harper is a party to certain relationships and
transactions with the Company which are described below.

In 1993 and 1994, the Company entered into leases of computer equipment and
related software from Ronald G. Harper or certain members of his family. The
original cost of the equipment subject to lease was approximately $118,000. The
lease agreements provided for quarterly rental payments by the Company of
approximately $16,000. The transactions carry an inherent interest rate of 8.5%
per annum. The Company's lease obligation to the indicated parties expired
December 31, 1995.

The Company entered into a number of agreements on or about September 29,
1993 with certain of its directors, executive officers and Significant
Stockholders, including Ronald G. Harper, John C. Bumgarner, Jr., and Joseph C.
McNay, in connection with a recapitalization transaction (See "Beneficial
Ownership of Selling Stockholders"). Among other undertakings, the Company
agreed that upon the request of the Significant Stockholders owning a specified
percentage of shares of Common Stock, on one additional occasion (one such
registration request having been satisfied by this Prospectus), the Company will
register under the 1933 Act and applicable state securities laws, the sale of
the Common Stock owned by the Significant Stockholders. The Company's obligation
is subject to certain limitations regarding the timing of registrations and
other matters. The Company is also obligated to offer, on up to two occasions,
to the Significant Stockholders the opportunity to include shares of Common
Stock owned by them in certain registration statements filed by the Company. In
addition, the Company has agreed to indemnify the Significant Stockholders
against securities law liabilities arising in connection with such offerings,
other than liabilities arising as a result of information furnished to the
Company by the Significant Stockholders participating in the registration. The
Company is obligated to pay all expenses incident to such registration, except
underwriting discounts and commissions allocable to the sale of shares by the
Significant Stockholders. All of the obligations to Significant Stockholders
expire September 29, 1998.

DIRECTORS' COMPENSATION

Members of the Board of Directors who are employees of the Company receive
no additional compensation as a result of their service as directors. Directors
who are not employees of the Company are compensated at the rate of $1,500 for
each board meeting attended and are reimbursed for any out-of-pocket expenses
incurred in attending meetings.

35
<PAGE> 36

PERFORMANCE GRAPH

The following graph sets forth the yearly percentage change in the
cumulative total shareholder return on the Company's Common Stock during the
preceding five fiscal years ended September 30, 1996 compared with the
cumulative total returns of the NASDAQ Stock Market -- U.S. index and an
industry peer group. The comparison assumes $100 was invested on September 30,
1991 in the Company's Common Stock and in each of the foregoing indices and
assumes reinvestment of dividends.

COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN

AMONG MPSI SYSTEMS INC., THE NASDAQ STOCK MARKET-US
INDEX AND A PEER GROUP

[GRAPH]

<TABLE>
<CAPTION>
MEASUREMENT PERIOD NASDAQ STOCK
(FISCAL YEAR COVERED) MPSI PEER GROUP MARKET-US
<S> <C> <C> <C>
9/91 100 100 100
9/92 18 121 112
9/93 41 147 147
9/94 182 142 148
9/95 545 164 204
9/96 70 187 242
</TABLE>

For comparative purposes, the Company has identified a peer group including
companies who are competitors or who are known to provide services similar to
those provided by the Company. The peer group companies are CACI International
Incorporated, Information Resources Incorporated, MARC Incorporated, Equifax
Incorporated, Dun & Bradstreet, Acxiom Corporation, Market Facts Incorporated,
SEI Corporation, and Fair Issac & Company.

36
<PAGE> 37

CERTAIN TRANSACTIONS

The Company entered into a number of agreements on or about September 29,
1993 with certain of its directors, executive officers and Significant
Stockholders, including Ronald G. Harper, John C. Bumgarner, Jr., Joseph C.
McNey, Dr. David L. Huff, Bank of Oklahoma, N.A., the Robertson Stephens Orphan
Fund, and Sanford Orkin in connection with a recapitalization transaction (See
"Beneficial Ownership of Selling Stockholders"). Among other undertakings, the
Company agreed that upon the request of the Significant Stockholders owning a
specified percentage of shares of Common Stock, on one additional occasion (one
such registration request having been satisfied by this Prospectus), the Company
will register under the 1933 Act and applicable state securities laws, the sale
of the Common Stock owned by the Significant Stockholders. The Company's
obligation is subject to certain limitations regarding the timing of
registrations and other matters. The Company is also obligated to offer, on up
to two occasions, to the Significant Stockholders the opportunity to include
shares of Common Stock owned by them in certain registration statements filed by
the Company. In addition, the Company has agreed to indemnify the Significant
Stockholders against securities law liabilities arising in connection with such
offerings, other than liabilities arising as a result of information furnished
to the Company by the Significant Stockholders participating in the
registration. The Company is obligated to pay all expenses incident to such
registration, except underwriting discounts and commissions allocable to the
sale of shares by the Significant Stockholders. All of the obligations to
Significant Stockholders set forth above expire September 29, 1998.

The Company believes that the terms of the above described transactions
were competitive and no less beneficial to the Company than would have been made
available by unaffiliated parties. The Board of Directors of the Company has a
policy that the Company not enter into any related party transactions unless
approved by a majority of the Company's independent directors based upon
independent evidence of fair value.

INDEMNIFICATION

The Company has included in its Certificate of Incorporation and Bylaws
provisions to (i) eliminate the personal liability of its directors for monetary
damages resulting from breaches of their fiduciary duty (provided that such
provision does not eliminate liability for breaches of the duty of loyalty, acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, violations under Section 174 of the Delaware General
Corporation Law (the "Law"), or for any transaction from which the director
derived an improper personal benefit) and (ii) indemnify its directors and
officers to the fullest extent permitted by Section 145 of the Law, including
circumstances in which indemnification is otherwise discretionary. MPSI has also
entered into separate indemnification agreements with certain of its directors
and executive officers which, among other terms and provisions, (i) provide the
individuals a contractual right of indemnity, as opposed to reliance upon
statutes or the Company's governing instruments, (ii) express the Company's
intention to maintain liability insurance, and (iii) specify procedures for
indemnity claims. The Company believes that these provisions are necessary to
attract and retain qualified persons as directors and officers.

As discussed in "Certain Transactions," the Company entered into an
agreement with the Significant Stockholders according them certain rights to
require the Company make their shares of Common Stock freely tradeable by
registration with the Commission. As a part of such agreements, the Company and
the Significant Stockholders entered into reciprocal indemnity arrangements
providing for indemnity against securities law liabilities arising in connection
with this offering and other offerings pursuant to which such rights are
exercised, other than liabilities arising as a result of information furnished
by the party seeking indemnity.

Insofar as indemnification for liabilities arising under the 1933 Act may
be permitted to directors, officers and controlling persons of the Company
pursuant to the Law, or otherwise, the Company has been advised that in the
opinion of the Commission such indemnification is against public policy as
expressed in the 1933 Act, and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Company of expenses incurred or paid by a director, officer or controlling

37
<PAGE> 38

person of the Company 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 hereunder, the Company will,
unless in the opinion of its counsel the question has already been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public policy as
expressed in the 1933 Act and will be governed by the final adjudication of such
issue.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company by its counsel, Hall, Estill, Hardwick, Gable, Golden & Nelson, P.C.,
Tulsa, Oklahoma. Members of such firm participating as Selling Stockholders
hereunder include Thomas D. Gable, Thomas F. Golden and Michael D. Cooke.

EXPERTS

The consolidated financial statements and schedules of MPSI Systems Inc.,
at September 30, 1996 and 1995, and for each of the three years in the period
ended September 30, 1996, appearing in this Prospectus and Registration
Statement have been audited by Ernst & Young LLP, independent auditors, as set
forth in their reports thereon appearing elsewhere herein and in the
Registration Statement, and are included in reliance upon such reports given
upon the authority of such firm as experts in accounting and auditing.

38
<PAGE> 39

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Report of Independent Auditors...................................................... F-2
Consolidated Statements of Operations for the Years Ended September 30, 1996, 1995
and 1994.......................................................................... F-3
Consolidated Balance Sheets at September 30, 1996 and 1995.......................... F-4
Consolidated Statements of Cash Flow for the Years Ended September 30, 1996, 1995
and 1994.......................................................................... F-5
Consolidated Statements of Stockholders' Equity for the Years Ended September 30,
1996, 1995 and 1994............................................................... F-6
Notes to Consolidated Financial Statements.......................................... F-7
</TABLE>

F-1
<PAGE> 40

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
MPSI Systems Inc.

We have audited the accompanying consolidated balance sheets of MPSI
Systems Inc. and subsidiaries as of September 30, 1996 and 1995, and the related
consolidated statements of operations, stockholders' equity, and cash flow for
each of the three years in the period ended September 30, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
MPSI Systems Inc. and subsidiaries at September 30, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended September 30, 1996 in conformity with generally
accepted accounting principles.

ERNST & YOUNG LLP

Tulsa, Oklahoma
November 19, 1996

F-2
<PAGE> 41

MPSI SYSTEMS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Information services and software maintenance...... $21,354,000 $22,348,000 $17,593,000
Software licensing................................. 391,000 1,089,000 2,279,000
----------- ----------- -----------
Total revenues.................................. 21,745,000 23,437,000 19,872,000
----------- ----------- -----------
Cost of sales:
Information services and software maintenance...... 10,406,000 10,100,000 7,368,000
Software licensing (Note 5)........................ 608,000 332,000 246,000
----------- ----------- -----------
Total cost of sales............................. 11,014,000 10,432,000 7,614,000
----------- ----------- -----------
Gross profit.................................... 10,731,000 13,005,000 12,258,000
Operating expenses:
General and administrative......................... 3,005,000 2,571,000 2,388,000
Marketing and client services...................... 6,928,000 6,993,000 5,578,000
Research and development........................... 1,382,000 1,794,000 2,331,000
----------- ----------- -----------
Total operating expenses........................ 11,315,000 11,358,000 10,297,000
----------- ----------- -----------
Operating income (loss)......................... (584,000) 1,647,000 1,961,000
Other income (expense):
Interest income.................................... 204,000 195,000 205,000
Interest expense................................... (17,000) (12,000) (16,000)
Gain on foreign exchange........................... 146,000 638,000 8,000
Other, net......................................... (1,000) 15,000 92,000
----------- ----------- -----------
Income (loss) from continuing operations before
income taxes.................................... (252,000) 2,483,000 2,250,000
Income taxes......................................... (371,000) (454,000) (294,000)
----------- ----------- -----------
Income (loss) from continuing operations............. (623,000) 2,029,000 1,956,000
Discontinued operations (Note 2):
Operating loss of RSI before disposition........... -- -- (431,000)
Loss on RSI disposition............................ -- -- (51,000)
----------- ----------- -----------
Net income (loss).................................... $ (623,000) $ 2,029,000 $ 1,474,000
=========== =========== ===========
Per share (Note 1):
Income (loss) per common and common equivalent
share:
Continuing operations........................... $ (.23) $ .72 $ .71
Discontinued operations......................... $ -- $ -- $ (.18)
Net income (loss)............................... $ (.23) $ .72 $ .53
</TABLE>

See accompanying notes to consolidated financial statements.

F-3
<PAGE> 42

MPSI SYSTEMS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------------
1996 1995
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents........................................ $ 951,000 $ 1,270,000
Short-term investments, at cost.................................. 49,000 41,000
Receivables (Note 3):
Trade......................................................... 3,413,000 4,522,000
Current portion of long-term receivables, net of unamortized
discount..................................................... 1,177,000 1,893,000
Work in process inventory........................................ 361,000 304,000
Prepayments...................................................... 174,000 175,000
----------- -----------
Total current assets.......................................... 6,125,000 8,205,000
Long-term receivables, net of unamortized discount (Note 3)........ 1,779,000 2,421,000
Property and equipment, net (Note 4)............................... 1,325,000 1,191,000
Software products, net (Note 5).................................... 843,000 673,000
Other assets....................................................... 247,000 434,000
----------- -----------
Total assets.................................................. $10,319,000 $12,924,000
=========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................. $ 1,241,000 $ 905,000
Accrued liabilities (Notes 6 and 8).............................. 1,214,000 1,738,000
Deferred revenue................................................. 2,280,000 3,614,000
----------- -----------
Total current liabilities..................................... 4,735,000 6,257,000
Noncurrent deferred revenue........................................ 1,342,000 1,961,000
Other noncurrent liabilities....................................... 177,000 220,000
----------- -----------
Total liabilities........................................ 6,254,000 8,438,000
----------- -----------
Commitments and contingencies (Note 9)............................. -- --
Stockholders' equity (Note 8):
Preferred Stock, $.10 par value, 1,000,000 shares authorized,
none issued or outstanding.................................... -- --
Common Stock, $.05 par value, 20,000,000 shares authorized,
2,794,000 and 2,733,000 shares issued and outstanding at
September 30, 1996 and 1995, respectively..................... 140,000 137,000
Junior Common Stock, $.05 par value, 500,000 shares authorized,
none issued or outstanding.................................... -- --
Additional paid-in capital....................................... 12,934,000 12,751,000
Deficit.......................................................... (9,963,000) (9,340,000)
Foreign currency translation adjustment.......................... 954,000 938,000
----------- -----------
Total stockholders' equity............................... 4,065,000 4,486,000
----------- -----------
Total liabilities and stockholders' equity............... $10,319,000 $12,924,000
=========== ===========
</TABLE>

See accompanying notes to consolidated financial statements.

F-4
<PAGE> 43

MPSI SYSTEMS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOW (SEE ALSO NOTE 10)

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------------
1996 1995 1994
----------- ----------- ----------
<S> <C> <C> <C>
Income (loss) from continuing operations............... $ (623,000) $ 2,029,000 $1,956,000
Adjustments to reconcile income (loss) from continuing
operations to cash provided by continuing operations:
Depreciation and amortization of property and
equipment......................................... 450,000 405,000 406,000
Amortization of software products.................... 592,000 294,000 246,000
Deferred income taxes................................ -- -- 26,000
Loss (gain) on sale of assets........................ 5,000 7,000 (1,000)
Write off of capitalized software development
costs............................................. -- 30,000 --
Changes in assets and liabilities:
Decrease (increase) in assets:
Receivables....................................... 1,970,000 (2,436,000) (715,000)
Inventories....................................... (57,000) 228,000 (254,000)
Prepayments....................................... 189,000 138,000 191,000
Increase (decrease) in liabilities:
Trade payables and accruals....................... 388,000 (214,000) (699,000)
Taxes payable..................................... (438,000) 234,000 (24,000)
Deferred revenue.................................. (1,501,000) 924,000 440,000
----------- ----------- ----------
Net cash provided by continuing operations... 975,000 1,639,000 1,572,000
----------- ----------- ----------
Loss from discontinued operations...................... -- -- (482,000)
Adjustments to reconcile loss from discontinued
operations to cash used by discontinued operations:
Provision for loss on receivables in excess of
write-offs........................................ -- -- 2,000
Loss on sale of assets............................... -- -- 51,000
Provision for income taxes........................... -- -- (10,000)
Depreciation and amortization........................ -- -- 27,000
----------- ----------- ----------
Net cash used by discontinued operations..... -- -- (412,000)
----------- ----------- ----------
Net cash provided by operating activities.... 975,000 1,639,000 1,160,000
----------- ----------- ----------
Cash flows from investing activities:
Increase in short-term investment.................... -- -- (28,000)
Purchase equipment................................... (601,000) (634,000) (388,000)
Software development................................. (762,000) (396,000) (590,000)
Proceeds from disposition of assets.................. 16,000 16,000 7,000
Proceeds from sale of discontinued RSI unit.......... -- -- 70,000
Net investment activities of discontinued
operations........................................ -- -- (11,000)
----------- ----------- ----------
Net cash used by investing activities........ (1,347,000) (1,014,000) (940,000)
----------- ----------- ----------
Cash flows from financing activities:
Proceeds from exercised stock options................ 53,000 10,000 --
----------- ----------- ----------
Net cash provided by financing activities.... 53,000 10,000 --
----------- ----------- ----------
Increase (decrease) in cash and cash equivalents....... (319,000) 635,000 220,000
Cash and cash equivalents at beginning of period....... 1,270,000 635,000 415,000
----------- ----------- ----------
Cash and cash equivalents at end of period............. $ 951,000 $ 1,270,000 $ 635,000
=========== =========== ==========
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE> 44

MPSI SYSTEMS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FISCAL YEARS ENDED SEPTEMBER 30, 1994, 1995 AND 1996

<TABLE>
<CAPTION>
COMMON STOCK FOREIGN
-------------------- ADDITIONAL CURRENCY
CARRYING PAID-IN TRANSLATION STOCKHOLDERS'
SHARES VALUE CAPITAL DEFICIT ADJUSTMENT EQUITY
--------- -------- ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1993....... 2,705,000 $135,000 $12,636,000 $(12,843,000) $ 1,006,000 $ 934,000
Net income...................... -- -- -- 1,474,000 -- 1,474,000
Stock issued to 401(k) Plan..... 23,000 1,000 106,000 -- -- 107,000
Translation adjustment.......... -- -- -- -- (32,000) (32,000)
--------- -------- ----------- ------------ ----------- -----------
Balance, September 30, 1994....... 2,728,000 136,000 12,742,000 (11,369,000) 974,000 2,483,000
Net income...................... -- -- -- 2,029,000 -- 2,029,000
Stock options exercised......... 5,000 1,000 9,000 -- -- 10,000
Translation adjustment.......... -- -- -- -- (36,000) (36,000)
--------- -------- ----------- ------------ ----------- -----------
Balance, September 30, 1995....... 2,733,000 137,000 12,751,000 (9,340,000) 938,000 4,486,000
Net loss........................ -- -- -- (623,000) -- (623,000)
Stock options exercised......... 20,000 1,000 52,000 -- -- 53,000
Stock issued to 401(k) Plan..... 41,000 2,000 131,000 -- -- 133,000
Translation adjustment.......... -- -- -- -- 16,000 16,000
--------- -------- ----------- ------------ ----------- -----------
Balance, September 30, 1996....... 2,794,000 $140,000 $12,934,000 $ (9,963,000) $ 954,000 $ 4,065,000
========= ======== =========== ============ =========== ===========
</TABLE>

See accompanying notes to consolidated financial statements.

F-6
<PAGE> 45

MPSI SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Nature of Operations: MPSI Systems Inc. is a United States-based
multinational corporation whose principal line of business is providing decision
support software, information data bases and consulting services to businesses
which have an investment in retail outlet networks. The Company markets its
products and services in North America, the Pacific Rim, South America, Europe
and South Africa through a direct sales force located in various foreign
countries. As discussed more fully in Note 7, over 60% of consolidated revenues
are generated from foreign customers, and substantial portions of such revenues
are billed in foreign currencies. Most of the Company's business comes from the
petroleum industry, including several customers who individually account for a
significant portion of consolidated revenues. Services are also provided for
clients in the banking, convenience food, quick service restaurant and
government postal industries. All software development and substantially all of
the information data base preparation is performed at the Company's headquarters
facility in Tulsa, Oklahoma.

Principles of Consolidation: The accompanying consolidated financial
statements include the accounts of MPSI Systems Inc. and its wholly owned
subsidiaries. All significant intercompany transactions and accounts have been
eliminated in consolidation.

Revenue Recognition: Revenues and costs related to production of market
information data bases are recorded based upon the ratio of costs incurred to
total estimated completion costs (percentage-of-completion method). Revenues and
costs related to single site studies, mini-market studies and other projects
which are completed in a short time period are recognized at completion.
Anticipated losses on contracts are charged against earnings at the time such
losses are identified.

The Company's software products are generally licensed to customers through
noncancelable software license and maintenance contracts with terms of up to
five years. The corresponding long-term receivables and deferred maintenance
revenue from these installment contracts are stated at the discounted present
value of annual license and maintenance payments to be received over the
contract term based upon the prime rate of interest on the effective date of
each contract. The present value discount, related to installments due after one
year, is amortized to interest income using an accelerated method that equates
interest earnings with outstanding receivable balances. Software license
revenues, equal to the present value of the aggregate annual license
installments, are recognized at the latter of contract execution or software
delivery when collection is probable. When it cannot be determined that
collection is probable, or if a contract contains cancellation options, software
revenues are recognized as the annual installments are billed. At the time
revenue is recognized, the Company has no remaining obligations under the
software license and maintenance contracts other than providing postcontract
customer support services related to the maintenance portion of the contract and
performance obligations under any optional and separately priced training or
consulting arrangements. Maintenance revenues, equal to the present value of
annual installment payments, are recognized ratably over the term of the
contracts as the postcontract customer support services are provided and the
related costs are incurred and recognized. Optional training and consulting
represent service transactions as to which revenues and expense are recognized
when the earnings process is substantially complete.

Statement of Cash Flows: For purposes of the statement of cash flows, the
Company considers all highly liquid debt instruments purchased with an original
maturity of three months or less to be cash equivalents.

Property and Equipment: Property and equipment is stated at cost.
Depreciation is provided using the straightline method, over the estimated
useful lives of the respective assets, except for leasehold improvements which
are amortized over the lesser of the lease term or the economic life of the
underlying asset. Since such assets are employed in all facets of the Company's
operations, depreciation expense is reflected in cost of sales as well as in
each category of operating expenses. The Company charges the cost of repairs and
maintenance to expense as incurred and capitalizes the cost of replacements,
renewals and betterments. When property or

F-7
<PAGE> 46

MPSI SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

equipment is retired, the cost and accumulated depreciation are removed from the
accounts, and the resulting gain or loss on the disposition is reflected in
other income (expense).

Software Products: Cost of software held for resale, which was either
purchased with the intent to incorporate the acquired software in MPSI products
or developed internally, is presented net of accumulated amortization. The costs
of internally developed software include direct labor, materials and overhead,
and relate to significant enhancements to existing software or to development of
new software products. All costs incurred to establish the technological
feasibility of internally developed software are charged to research and
development expense as incurred. Royalties, which may become payable because of
ongoing proprietary interests related to third-party software imbedded in MPSI
products, are charged to cost of sales-software licensing as applicable software
sales are recognized.

The annual amortization of software products is computed on a
product-by-product basis and is the greater of the amount determined using (1)
the ratio that current gross revenues for a product bear to the total of current
and anticipated future gross revenues for that product or (2) the straight-line
method over the remaining economic life of the product. Historically, the
straight-line method has resulted in a greater amount of amortization in each
accounting period and has, therefore, been the basis for amortization in the
current period and in prior periods. Amortization starts when a product is
available for general release to customers and is reflected in cost of
sales-software licensing.

In the event that capitalized software development costs are subsequently
determined not to be fully recoverable from future operations, the carrying
value of such software is reduced to an amount equal to its net realizable value
less costs of marketing and distribution. The reduction in carrying value is
recorded in cost of sales-software licensing.

Inventory: Work-in-process is composed of direct labor, costs of gathering
demographic data, indirect costs and overhead. Indirect costs and overhead are
allocated to each contract based upon the direct labor incurred.

Income Taxes: The Company applies the liability method of accounting for
income taxes in accordance with Statement of Financial Accounting Standards No.
109 which was adopted October 1, 1993 as required. Under this method, deferred
income taxes are recognized for the tax consequences of "temporary differences"
by applying enacted statutory tax rates applicable to future years to
differences between the financial statement carrying amounts and the tax bases
of existing assets and liabilities. The effect on deferred taxes of a change in
tax rates is recognized in the results of operations during the period that
includes the enactment date.

Earnings Per Share: Earnings per share computations are based upon the
weighted average number of common shares outstanding during each period,
including dilutive common stock equivalents related to unexercised stock
options. Earnings per share computations do not give effect to common stock
equivalents for any period in which their inclusion would have the effect of
increasing the earnings per share amount or decreasing the loss per share amount
otherwise computed. The adjusted weighted average shares utilized in determining
income (loss) per share were 2,756,000 for fiscal year 1996, 2,802,000 for
fiscal year 1995, and 2,766,000 for fiscal year 1994.

Foreign Currency Translation: Assets and liabilities of the Company's
foreign operations, except Brazil, are translated from the foreign operating
currency to the U.S. Dollar equivalent for consolidated reporting purposes using
the applicable exchange rates at the balance sheet date. Revenues and expenses
are translated at average rates for the year. Exchange differences from these
translations are included in stockholders' equity. Where amounts denominated in
a foreign currency are or are expected to be converted into dollars by
remittance or repayment, the realized exchange differences are reflected in the
results of operations. Due to high rates of inflation in Brazil, transactions
and accounting records are maintained in U.S. Dollar equivalents.

F-8
<PAGE> 47

MPSI SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Restructuring Expenses: Expenses associated with corporate restructuring
are recognized at the time that the underlying obligations are incurred.
Severance costs are accrued in the accounting period during which management,
having authority to do so, approves severance plans, provided that (1) the
specific individuals or positions to be terminated have been identified and the
costs thereof were reasonably quantifiable and probable of occurrence within the
succeeding twelve months, and (2) prior to release of the financial statements
for the affected period, the affected employees or positions are either
terminated or the general terms of the termination plan have been communicated,
including the benefits to which terminated employees are entitled or will
voluntarily receive. The net present value of remaining lease obligations
related to excess space is accrued in full at the time the space is abandoned,
net of sublease recoveries which are probable. The costs of other corporate
restructuring decisions are accrued at the time the obligations related thereto
are incurred and quantifiable.

New Accounting Pronouncements: In March 1995 the Financial Accounting
Standards Board adopted Statement No. 121, "Accounting for Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of," effective for
fiscal years beginning after December 15, 1995. Adoption of this new Statement
is not expected to have a material effect on the Company's financial position or
results of operations.

In October 1995, the Financial Accounting Standards Board adopted Statement
No. 123, "Accounting for Stock Based Compensation," effective for fiscal years
beginning after December 15, 1995. FAS 123 provides MPSI the option to continue
present methods of accounting for stock-based compensation with additional
disclosure of the effects thereof had the accounting policies set forth in the
Statement been adopted. MPSI will incorporate the required disclosure in future
financial statements issued after the effective date.

Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expense during the reporting
period. Actual results could differ from those estimates.

2. DISCONTINUED OPERATIONS:

On September 1, 1994, the Company's wholly owned subsidiary, RSI, sold all
of its noncash assets to an unaffiliated third party, Dakota Worldwide
Corporation ("Dakota"). Dakota paid $70,000 cash, assumed trade accounts payable
of approximately $97,000, assumed certain lease obligations of approximately
$426,000 at the date of sale (although RSI remains contingently liable on such
leases in the event Dakota fails to perform) and agreed to pay RSI future
royalties equal to 10% of sales generated from RSI's client base through and
including August 31, 1997. Dakota acquired trade accounts receivable,
furnishings and equipment (with a net book value of $52,000) and work in process
inventory. Dakota assumed all performance obligations related to contracts in
force with RSI's customers at the sale date.

Concurrent with this transaction, RSI and MPSI executed an agreement not to
compete with Dakota in North America. RSI terminated all of its employees,
subject to temporary retention of certain administrative staff, and RSI was
responsible for all severance costs related thereto. The Company has completed a
winding down of the corporate affairs of RSI and dissolved it effective
September 25, 1995.

Operating results of the discontinued RSI business unit at September 30,
1994 were as follows:

<TABLE>
<S> <C>
Revenues................................................... $1,226,000
Loss before income taxes................................... (440,000)
Income tax benefit......................................... 9,000
Loss from operations....................................... (431,000)
</TABLE>

F-9
<PAGE> 48

MPSI SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The loss on disposal of RSI at September 30, 1994 included the following:

<TABLE>
<S> <C>
Gain on net assets sold.................................................. $ 32,000
Accrued close-down costs................................................. (38,000)
Income tax benefit....................................................... 1,000
Accrued employee severance............................................... (46,000)
----------
Loss on disposal of discontinued operations.................... $ (51,000)
==========
</TABLE>

3. RECEIVABLES:

Trade accounts receivable include unbilled amounts of $1,423,000 at
September 30, 1996 and $1,662,000 at September 30, 1995. These amounts represent
market study revenues recognized under the percentage-of-completion method in
excess of amounts billed and will generally be billable during the succeeding
twelve months upon completion of the respective studies.

Current and noncurrent receivables also include unbilled amounts of
$2,987,000 at September 30, 1996 and $4,254,000 at September 30, 1995 (before
present value discount and excluding $207,000 and $381,000 which had been billed
at September 30, 1996 and 1995, respectively) related to multi-year software
license and maintenance agreements. Since these agreements contain annual
installment billing provisions, the unbilled receivable balance for some
contracts is as much as four years' future annual billings. Of the September 30,
1996 unbilled amounts, $1,086,000 (compared with $1,656,000 at September 30,
1995) will be billed in the succeeding twelve months, and the remainder will be
billed thereafter at such future dates as are specified in the respective
contracts. The portion of such future billings related to maintenance and
support services not yet performed is offset by corresponding amounts in
deferred revenue. The current portions of long-term receivables are reduced by
unamortized present value discount of $116,000 and $144,000 at September 30,
1996 and 1995, respectively. Noncurrent long-term receivables are presented net
of unamortized present value discount in the amount of $122,000 and $177,000 at
September 30, 1996 and 1995, respectively. The present value discount is imputed
based upon the New York prime rate on the effective date of each agreement.
Interest income related to these agreements was $160,000, $171,000, and $196,000
in fiscal years 1996, 1995 and 1994, respectively.

A significant portion of the Company's business activity is with the major
multinational oil companies. At September 30, 1996, 96% ($6,341,000) of the
Company's receivables (before present value discounts) were from petroleum
clients ($8,556,000 or 93% at September 30, 1995). The receivable portfolio is
well diversified geographically which tends to mitigate the potential impact of
fluctuations in petroleum activities which may otherwise result if receivables
were confined to a particular geographic area. Software license agreements are
payable over several years (generally five-year agreements) and are expected to
be paid from operating cash flows of the customers. The Company does not require
collateral or other security to support these contractual receivables. The
carrying value of long-term receivables, net of unearned discount, approximates
market value.

F-10
<PAGE> 49

MPSI SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. PROPERTY AND EQUIPMENT:

Property and equipment consists of:

<TABLE>
<CAPTION>
SEPTEMBER 30,
USEFUL LIFE --------------------------
IN YEARS 1996 1995
----------- ----------- ----------
<S> <C> <C> <C>
Leasehold improvements........................... Various $ 702,000 $ 713,000
Computer equipment and software.................. 4-5 5,955,000 6,243,000
Office furnishings and equipment................. 3-10 1,637,000 1,655,000
----------- ----------
8,294,000 8,611,000
Accumulated depreciation......................... (6,969,000) (7,420,000)
----------- ----------
Net property and equipment............. $ 1,325,000 1,191,000
=========== ==========
</TABLE>

The provision for depreciation was $450,000, $405,000, and $406,000 for the
years ended September 30, 1996, 1995 and 1994, respectively. At September 30,
1996, fully depreciated assets with an aggregate original cost of approximately
$5,517,000 remain in use.

5. SOFTWARE PRODUCTS:

<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------------
1996 1995
----------- -----------
<S> <C> <C>
Capitalized software development costs..................... $ 3,931,000 $ 3,171,000
Accumulated amortization................................... (3,088,000) (2,498,000
----------- -----------
Net software products............................ $ 843,000 $ 673,000
=========== ===========
</TABLE>

The provision for amortization, reflected in Software Licensing cost of
sales, was $592,000, $294,000, and $246,000 for the years ended September 30,
1996, 1995 and 1994, respectively. Based upon current sales forecasts,
capitalized software costs are projected to be recoverable. However, these sales
forecasts are subject to certain vulnerabilities which could potentially affect
the recoverability of those costs.

6. INCOME TAXES:

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------------
1996 1995 1994
--------- ----------- ----------
<S> <C> <C> <C>
Income (loss) from continuing operations before
income taxes:
Domestic..................................... $ 27,000 $ 3,515,000 $2,977,000
Foreign...................................... (279,000) (1,032,000) (727,000)
--------- ----------- ----------
Total................................ $(252,000) $ 2,483,000 $2,250,000
========= =========== ==========
Income taxes (benefits):
Current:
Federal................................... $ 15,000 $ 80,000 $ 56,000
State..................................... (56,000) 203,000 3,000
Foreign................................... 412,000 171,000 209,000
--------- ----------- ----------
Current income taxes................. 371,000 454,000 268,000
Foreign deferred income taxes................ -- -- 26,000
--------- ----------- ----------
Provision for total income taxes..... $ 371,000 $ 454,000 $ 294,000
========= =========== ==========
</TABLE>

F-11
<PAGE> 50

MPSI SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

A reconciliation of the provision for income taxes at the applicable
Federal statutory income tax rate to the actual provision for income taxes
follows:

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------------
1996 1995 1994
-------- --------- -----------
<S> <C> <C> <C>
Expense (benefit) at statutory rate............... $(88,000) $ 869,000 $ 787,000
Alternative minimum tax........................... 15,000 80,000 56,000
Foreign income and taxes, net..................... 295,000 (201,000) 177,000
Loss carryforwards................................ 156,000 418,000 311,000
Federal loss carryforwards utilized............... -- (813,000) (1,069,000)
State income taxes................................ (36,000) 132,000 2,000
Other, net........................................ 29,000 (31,000) 30,000
-------- --------- -----------
Income taxes.................................... $371,000 $ 454,000 $ 294,000
======== ========= ===========
</TABLE>

Income taxes of $210,000 were refundable at September 30, 1996 ($352,000
payable at September 30, 1995). The Company does not accrue income taxes on
undistributed earnings of certain foreign subsidiaries which are permanently
invested. At September 30, 1996 and 1995, the amount of undistributed earnings
for which taxes have not been accrued was insignificant.

In March 1996, the Internal Revenue Service initiated an examination of tax
years 1993 through 1995. The Company has not yet received a final report of the
results, and believes that the resolution of any items raised will not have a
material effect on its financial position.

At September 30, 1996, the Company has various U.S. tax credits of $633,000
which expire between 1997 and 2001. At September 30, 1996, certain foreign
subsidiaries have net operating loss carryforwards of approximately $8,115,000
which may be utilized in future years.

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

<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------------
1996 1995
----------- ----------
<S> <C> <C>
Deferred tax liabilities:
Software revenue......................................... $ 699,000 $ 825,000
Depreciation............................................. 58,000 49,000
Other.................................................... 98,000 98,000
----------- ----------
Total deferred tax liabilities................... 855,000 972,000
----------- ----------
Deferred tax assets:
Accrued liabilities...................................... 287,000 245,000
U.S. and foreign loss carryforwards...................... 2,413,000 2,279,000
U.S. tax credit carryforwards............................ 633,000 689,000
----------- ----------
Total deferred tax assets........................ 3,333,000 3,213,000
Valuation allowance for deferred tax assets.............. (2,576,000) (2,339,000)
----------- ----------
Net deferred tax assets............................... 757,000 874,000
----------- ----------
Net deferred tax liabilities included in Other
Noncurrent Liabilities......................... $ 98,000 $ 98,000
=========== ==========
</TABLE>

F-12
<PAGE> 51

MPSI SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Utilization of the Company's tax credit and loss carryforwards is dependent
on realizing taxable income in the appropriate tax jurisdiction. Deferred tax
assets for these carryforwards have been reduced by the valuation allowance to
an amount that is more likely than not to be realized.

7. BUSINESS SEGMENT AND REVENUE FROM MAJOR CUSTOMERS:

The Company operates in one business segment from its principal production
facility in the United States supported by satellite production facilities in
England and Brazil. Foreign sales offices or representatives are currently
maintained in Australia, Brazil, Canada, Japan, Italy, South Africa, South
Korea, Shanghai, the United Kingdom and Singapore. The following table sets
forth the revenues and other information related to continuing services provided
by each of the Company's three production centers.

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Unaffiliated customers:
United States............................... $20,248,000 $21,839,000 $18,045,000
Europe...................................... 780,000 1,369,000 1,428,000
Brazil...................................... 717,000 229,000 399,000
Between geographic areas(1):
United States............................... 237,000 300,000 391,000
Europe...................................... 673,000 284,000 384,000
Asia/Pacific Rim............................ 2,228,000 2,222,000 2,033,000
Brazil...................................... 387,000 -- --
Eliminations.................................. (3,525,000) (2,806,000) (2,808,000)
----------- ----------- -----------
Total revenues...................... $21,745,000 $23,437,000 $19,872,000
=========== =========== ===========
Operating income (loss):
United States............................... $ 795,000 $ 2,868,000 $ 2,520,000
Europe...................................... (891,000) (649,000) (430,000)
Brazil...................................... (488,000) (572,000) (129,000)
----------- ----------- -----------
Total operating income (loss)....... $ (584,000) $ 1,647,000 $ 1,961,000
=========== =========== ===========
Identifiable assets:
United States............................... $ 9,276,000 $11,581,000 $ 8,620,000
Europe...................................... 436,000 891,000 860,000
Brazil...................................... 607,000 452,000 254,000
----------- ----------- -----------
Total assets........................ $10,319,000 $12,924,000 $ 9,734,000
=========== =========== ===========
Export sales from U.S.:
Canada...................................... $ 952,000 $ 749,000 $ 572,000
Central America............................. 358,000 154,000 418,000
South America............................... 1,055,000 1,554,000 790,000
Europe...................................... 521,000 903,000 1,475,000
Asia/Pacific Rim............................ 8,873,000 10,066,000 8,724,000
Africa...................................... 289,000 143,000 137,000
----------- ----------- -----------
Total export sales.................. $12,048,000 $13,569,000 $12,116,000
=========== =========== ===========
</TABLE>

F-13
<PAGE> 52

MPSI SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Consolidated revenues from foreign customers
by geographic area are as follows:
Canada and Central America.................. $ 1,310,000 $ 903,000 $ 991,000
Singapore, Australia and Japan.............. 8,873,000 10,066,000 8,724,000
Europe and United Kingdom................... 1,172,000 2,271,000 2,903,000
Africa...................................... 418,000 143,000 137,000
South America............................... 1,772,000 1,783,000 1,189,000
----------- ----------- -----------
Consolidated foreign revenues....... $13,545,000 $15,166,000 $13,944,000
=========== =========== ===========
Depreciation and amortization of property and
equipment:
United States............................... $ 402,000 $ 366,000 $ 373,000
Europe...................................... 36,000 24,000 18,000
Brazil...................................... 12,000 15,000 15,000
Capital expenditures:
United States............................... $ 563,000 $ 565,000 $ 374,000
Europe...................................... 20,000 64,000 14,000
Brazil...................................... 18,000 5,000 --
</TABLE>

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

(1) Sales between geographic areas are made at prices that generally approximate
the prices of similar charges to unaffiliated customers.

Approximately 97% of total revenues from continuing operations were derived
from the petroleum industry during the year ended September 30, 1996 (96% and
99% during 1995 and 1994, respectively). Individual customers accounted for MPSI
revenues which were in excess of 10% of consolidated revenues in 1996, 1995 or
1994 as follows:

<TABLE>
<CAPTION>
1996 1995 1994
------------- ------------- -------------
AMOUNT % AMOUNT % AMOUNT %
------ --- ------ --- ------ ---
<S> <C> <C> <C> <C> <C> <C>
Exxon/Esso/Imperial......................... $6.3 29 $4.4 19 $3.8 19
Texaco/Caltex............................... $2.7 12 $1.3 6 $3.0 15
Shell....................................... $1.5 7 $2.8 12 $2.1 11
Amoco....................................... $2.1 10 $2.5 11 $1.4 7
</TABLE>

Although the Company would be adversely affected if several petroleum
industry customers curtailed their longterm usage of MPSI products or in the
event of a significant long-term economic downturn in the petroleum industry
generally, the Company's petroleum clients are well diversified geographically
which reduces the long-term risk attendant with its industry dependence, and
MPSI has historically experienced high renewal rates for its software license
and maintenance agreements.

8. EMPLOYEE BENEFITS:

Under an employee stock ownership and investment plan, all qualifying U.S.
employees may contribute up to 16% of their annual earnings. Subject to certain
limitations, the Company will contribute in cash or Common Stock an amount equal
to but not less than 50% or more than 100% of a participant's salary deferral
contributions that are not in excess of 6% of the participant's earnings for the
year. Contributions may be invested in the Company's Common Stock or in five
other equity or fixed-income funds. The Company recorded expense related to its
matching contribution of $143,000, $132,000 and $114,000 in fiscal years 1996,
1995 and 1994, respectively. At September 30, 1996 and 1995, the Company had
accrued $114,000 and

F-14
<PAGE> 53

MPSI SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

$102,000 of liabilities for matching contributions to the 401(k) plan (which in
each case represented the estimated Company match attributable to nine months of
participant contributions since the Plan year ends December 31). During fiscal
year 1996, the Company liquidated its matching contribution liability for the
Plan year ended December 31, 1995 by contributing previously unissued Common
Stock at a value of $133,000. During fiscal year 1995, the Company paid a
$121,000 cash matching contribution applicable to the Plan year ended December
31, 1994. The matching contribution for Plan year 1996 will be paid during
fiscal year 1997.

The Company has reserved 750,000 shares of Common Stock for issuance of
stock options under a 1988 stock option plan covering all employees which
expires in 1998. An additional 129,000 shares are potentially issuable if
outstanding options under a 1984 stock option plan are exercised. The remaining
options under the 1984 plan expire from September 3, 1998 to November 28, 1999,
and no further options may be granted under that plan.

The following table summarizes the status of the plans at September 30,
1996:

<TABLE>
<CAPTION>
NO. OF OPTION PRICE
SHARES PER SHARE
------- ------------
<S> <C> <C>
Outstanding September 30, 1993.............................. 109,600 $2.25-$17.50
Granted................................................... 18,000 $3.00-$ 4.50
Cancelled................................................. (15,500) $ 2.25
-------
Outstanding September 30, 1994.............................. 112,100 $2.25-$17.50
Granted................................................... 68,900 $ 3.00
Cancelled................................................. (8,050) $2.25-$ 8.75
Exercised................................................. (4,333) $ 2.25
-------
Outstanding September 30, 1995.............................. 168,617 $2.25-$17.50
Granted................................................... 139,050 $3.50-$ 5.50
Cancelled................................................. (8,884) $2.25-$17.50
Exercised................................................. (19,500) $2.25-$ 4.50
-------
Outstanding September 30, 1996.............................. 279,283 $2.25-$ 8.75
=======
Exercisable September 30, 1996.............................. 98,288 $2.25-$ 8.75
=======
</TABLE>

The Company accrued $92,000 at September 30, 1996 ($140,000 accrued at
September 30, 1995); in connection with incentive award programs for certain
employees. The awards were accrued based upon the Company's achievement of
certain revenue and operating income objectives and the respective contributions
of certain employees to the achievement of those objectives. The various
incentive plans specify cash settlement of the accrued liability prior to
December 31, 1996.

At September 30, 1995, the Company had an accrual of approximately $110,000
in connection with discretionary employee performance awards in the form of
deferred compensation. Such amount was earned and accrued based on the
employee's performance during the year ended September 30, 1994. Under deferred
compensation agreements with certain key employees as approved by the
Compensation Committee, the Company will pay future cash awards to the specified
employees upon the achievement, for thirty consecutive business days, of a $6.00
per share market price for the Company's Common Stock. Such payments could be
made at any point after November 29, 1995, assuming stock price and other
vesting requirements have been met. Based upon the stock price at September 30,
1996, the amount previously accrued has been reversed.

At September 30, 1996 and 1995, the Company had accrued $607,000 and
$546,000, respectively, related to employee vacations earned but not yet taken.

F-15
<PAGE> 54

MPSI SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

9. COMMITMENTS AND CONTINGENCIES:

The Company leases other office space and equipment under various
agreements, substantially all of which have been accounted for as operating
leases. Rental expense, including the leases described above, of $1,040,000 was
recorded during the year ended September 30, 1996 ($1,095,000 and $1,265,000 in
1995 and 1994, respectively). Aggregate future rentals under these commitments
are as follows: 1997 -- $770,000; 1998 -- $386,000, 1999 -- $40,000 and
2000 -- $7,000.

During 1994, the Company leased computer equipment from its chairman and
members of his family under various agreements which required aggregate
quarterly payments of approximately $16,000 which expired in 1995. Approximately
$45,000 was paid under such agreements during each of the years ended September
30, 1995 and 1994.

In connection with the discontinued RSI business unit and sale of its
assets as described in Note 2, the Company remains contingently liable until
December 31, 1997, for certain lease obligations in the event that the purchaser
does not fully perform in accordance with the lease terms. The Company has
received no notices of non-performance on these obligations. At September 30,
1996, the aggregate remaining lease obligations assumed by the purchaser was
$155,000 related to the office space which RSI occupied prior to the sale. The
annual amounts under such lease obligations for which the Company might be
liable in the event that Dakota fails to perform are: 1997 -- $124,000 and
1998 -- $31,000.

10. SUPPLEMENTAL CASH FLOW INFORMATION:

The following information concerning noncash transactions is provided to
supplement the Consolidated Statements of Cash Flow.

In the normal course of business, certain clients exercised contract
cancellation options available in their software license agreements in response
to economic downturns in their operating regions. As the Company, in accordance
with its policy, had not recognized any revenues on such contingent portions of
those agreements, the cancellations resulted in noncash reductions of long-term
receivables and deferred revenues in the amount of approximately $435,000 during
fiscal year 1996 and $65,000 during fiscal year 1995.

The Company satisfied its 401(k) matching contribution for the Plan year
ended December 31, 1995 by subsequently issuing its Common Stock. This
transaction resulted in a noncash reduction of accrued liabilities and a
corresponding increase in Common Stock and additional paid-in capital of
approximately $133,000 in fiscal year 1996.

The Company paid interest of $17,000 during fiscal year 1996, $12,000
during fiscal year 1995, and $16,000 in fiscal year 1994. Income taxes of
$809,000, $220,000, and $295,000 were paid during fiscal years 1996, 1995 and
1994, respectively.

F-16
<PAGE> 55

================================================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING
MADE HEREBY. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE SELLING
STOCKHOLDERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF ANY OFFER TO BUY ANY SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT
WOULD BE UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION IN SUCH JURISDICTION.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 4
Use of Proceeds....................... 7
Plan of Distribution.................. 7
Description of Capital Stock.......... 10
Business.............................. 13
Market Information for MPSI Common
Stock............................... 22
Selected Financial Data............... 23
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 24
Directors and Executive Officers of
MPSI................................ 29
Stock Ownership of Certain Beneficial
Owners and Management............... 31
Executive Compensation................ 32
Certain Transactions.................. 37
Indemnification....................... 37
Legal Matters......................... 38
Experts............................... 38
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>

================================================================================

1,580,432 SHARES
COMMON STOCK

MPSI SYSTEMS INC.

-------------------------------------
AMENDED PROSPECTUS
-------------------------------------

JANUARY 13, 1997

================================================================================