<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

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

For the quarterly period ended June 30, 2003        Commission file no. 0-11527

                                MPSI SYSTEMS INC.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

          Delaware                                               73-1064024
-------------------------------                              -------------------
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)

               4343 South 118th East Avenue, Tulsa Oklahoma 74146
              -----------------------------------------------------
              (Address of principal executive offices and zip code)

Registrant's telephone number, including area code       (918) 877-6774
                                                   ----------------------------

Number of shares of common stock outstanding at June 30, 2003 -   2,911,781
                                                                ---------------

                                       1
<PAGE>

                                      INDEX

<Table>
<Caption>
                                                                                                       Page No
                                                                                                       --------
<S>   <C>                                                                                              <C>
PART I. FINANCIAL INFORMATION:

      Item 1 - Financial Statements:
           Condensed Consolidated Balance Sheet - June 30, 2003 ..................................            3

           Condensed Consolidated Statements of Operations - Six Months Ended
                 June 30, 2003 and 2002 ..........................................................            5

           Consolidated Statement of Stockholders' Equity - Six Months Ended June 30, 2003 .......            6

           Condensed Consolidated Statements of Cash Flows -
                Six Months Ended June 30, 2003 and 2002 ..........................................            7

           Notes To Condensed Consolidated Financial Statements ..................................            8

      Item 2 - Management's Discussion and Analysis of Financial Condition and
           Quarterly Results of Operations .......................................................           11

      Item 3 - Controls and Procedures ...........................................................           18

PART II. OTHER INFORMATION (Including Index to Exhibits) .........................................           18

SIGNATURES .......................................................................................           19
</Table>

                                       2
<PAGE>

                          PART I. FINANCIAL INFORMATION

ITEM 1-FINANCIAL STATEMENTS

                       MPSI SYSTEMS INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEET

<Table>
<Caption>
                                                                                     JUNE 30,
ASSETS                                                                                 2003
                                                                                   ------------
                                                                                    (UNAUDITED)
<S>                                                                                <C>
Current assets:
      Cash and cash equivalents                                                    $    634,000
      Receivables                                                                     1,508,000
      Other current assets                                                              140,000
                                                                                   ------------

                Total current assets                                                  2,282,000

Capitalized product development costs, net                                              878,000

Property and equipment, net of accumulated depreciation
           and amortization                                                             509,000

Other assets                                                                            498,000
                                                                                   ------------

                Total assets (Note 3)                                              $  4,167,000
                                                                                   ============
</Table>

See accompanying notes to condensed consolidated financial statements.

                                       3
<PAGE>

                       MPSI SYSTEMS INC. AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED BALANCE SHEET (CONT'D)

<Table>
<Caption>
                                                                                 JUNE 30,
LIABILITIES AND STOCKHOLDERS' EQUITY                                               2003
                                                                              --------------
                                                                                (UNAUDITED)
<S>                                                                           <C>
Current liabilities:
      Accounts payable                                                        $      461,000
      Accrued liabilities                                                            863,000
      Deferred revenue                                                             2,495,000
                                                                              --------------
                Total current liabilities                                          3,819,000

Noncurrent deferred revenue                                                          613,000
Other noncurrent liabilities                                                              --
                                                                              --------------
                Total liabilities                                                  4,432,000
                                                                              --------------

Commitments and contingencies

Stockholders' Equity (Deficiency):
      Preferred Stock, $.10 par value, 1,000,000 shares
           authorized, none issued or outstanding                                         --

      Common Stock, $.05 par value, 20,000,000 shares
           authorized, 2,912,000 shares issued and
           outstanding at June 30, 2003                                              146,000

      Junior Common Stock, $.05 par value, 500,000 shares
           authorized, none issued or outstanding                                         --

      Additional paid-in capital                                                  13,145,000

      Deficit                                                                    (13,926,000)

      Other accumulated comprehensive income                                         370,000
                                                                              --------------

                Total stockholders' equity (deficiency)                             (265,000)
                                                                              --------------

                Total liabilities and stockholders' equity (deficiency)       $    4,167,000
                                                                              ==============
</Table>

See accompanying notes to condensed consolidated financial statements.

                                       4
<PAGE>

                       MPSI SYSTEMS INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<Table>
<Caption>

                                                           THREE MONTHS ENDED JUNE 30,          SIX MONTHS ENDED JUNE 30,
                                                             2003              2002              2003              2002
                                                         ------------      ------------      ------------      ------------
<S>                                                      <C>               <C>               <C>               <C>
Revenues                                                 $  2,927,000      $  3,060,000      $  5,166,000      $  7,083,000

Cost of Sales                                               1,389,000         1,296,000         2,425,000         2,956,000
                                                         ------------      ------------      ------------      ------------
       Gross profit                                         1,538,000         1,764,000         2,741,000         4,127,000
                                                         ------------      ------------      ------------      ------------

Operating expenses:
    General and administrative                                475,000         1,076,000         1,015,000         2,103,000
    Marketing and client services                             668,000           943,000         1,458,000         1,872,000
    Research and development                                  305,000           357,000           688,000           721,000
                                                         ------------      ------------      ------------      ------------
       Total operating expenses                             1,448,000         2,376,000         3,161,000         4,696,000
                                                         ------------      ------------      ------------      ------------

       Operating income (loss)                                 90,000          (612,000)         (420,000)         (569,000)
Other expense, net                                            (21,000)           (3,000)          (33,000)         (111,000)
                                                         ------------      ------------      ------------      ------------
       Income (loss) before income taxes                       69,000          (615,000)         (453,000)         (680,000)
Provision for income taxes                                     14,000            44,000            16,000           105,000
                                                         ------------      ------------      ------------      ------------
       Net income (loss)                                 $     55,000      $   (659,000)     $   (469,000)     $   (785,000)
                                                         ============      ============      ============      ============
Per Share:
    Basic and diluted income (loss) per common share     $        .02      $       (.23)     $       (.16)     $       (.27)
</Table>

See accompanying notes to condensed consolidated financial statements.

                                       5
<PAGE>

                       MPSI SYSTEMS INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                         SIX MONTHS ENDED JUNE 30, 2003
                                   (UNAUDITED)

<Table>
<Caption>
                                                                                                        OTHER
                                            COMMON STOCK              ADDITIONAL                      ACCUMULATED       TOTAL
                                  --------------------------------     PAID-IN                       COMPREHENSIVE    STOCKHOLDERS'
                                      SHARES            AMOUNT         CAPITAL         DEFICIT          INCOME           EQUITY
                                  --------------    --------------  --------------  --------------  --------------   --------------
<S>                               <C>               <C>             <C>             <C>             <C>              <C>
Balance,
    December 31, 2002                  2,912,000    $      146,000  $   13,145,000  $  (13,457,000) $      226,000   $       60,000
    Net loss                                  --                --              --        (469,000)             --         (469,000)
    Other accumulated
        comprehensive
        income:
        Foreign currency
           translation adjustment             --                --              --              --         144,000          144,000
                                                                                                                     --------------
Total comprehensive loss                                                                                             $     (325,000)
                                  --------------    --------------  --------------  --------------  --------------   --------------
Balance,
    June 30, 2003                      2,912,000    $      146,000  $   13,145,000  $  (13,926,000) $      370,000   $     (265,000)
                                  ==============    ==============  ==============  ==============  ==============   ==============
</Table>

See accompanying notes to condensed consolidated financial statements.

                                       6
<PAGE>

                       MPSI SYSTEMS INC. AND SUBSIDIARIES
            CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (NOTE 2)
                                   (UNAUDITED)

<Table>
<Caption>
                                                                                SIX MONTHS ENDED JUNE 30,
                                                                             ------------------------------
                                                                                 2003              2002
                                                                             ------------      ------------
<S>                                                                          <C>               <C>
Net loss                                                                     $   (469,000)     $   (785,000)

Adjustments to reconcile net loss to cash provided (used) by operations:
      Depreciation and amortization                                               458,000           535,000
      Decrease (increase) in assets                                               518,000         1,326,000
      Increase (decrease) in liabilities                                         (620,000)         (619,000)
                                                                             ------------      ------------

           Net cash provided (used) by operating activities                      (113,000)          457,000
                                                                             ------------      ------------

Cash flows from investing activities:
      Purchase equipment                                                          (28,000)          (81,000)
      Capitalized product development costs                                       (89,000)         (266,000)
                                                                             ------------      ------------

           Net cash used by investing activities                                 (117,000)         (347,000)
                                                                             ------------      ------------

Cash flows from financing activities:
      Debt repayments                                                                  --          (350,000)
                                                                             ------------      ------------

           Net cash used by financing activities                                       --          (350,000)
                                                                             ------------      ------------

Increase (decrease) in cash and cash equivalents                                 (230,000)         (240,000)

Cash and cash equivalents at beginning of period                                  864,000           675,000
                                                                             ------------      ------------

Cash and cash equivalents at end of period                                   $    634,000      $    435,000
                                                                             ============      ============
</Table>

See accompanying notes to condensed consolidated financial statements.

                                       7
<PAGE>

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.    GENERAL NOTES:

      Certain notes to the December 31, 2002 audited consolidated financial
      statements filed with Form 10-K are applicable to the unaudited
      consolidated financial statements for the six months ended June 30, 2003.
      Accordingly, reference should be made to the audited consolidated
      financial statements at December 31, 2002.

      Revenue Recognition. Effective January 1, 2003, the Company adopted a
      revised method of estimating its percentage of completion for its major
      consulting and technology projects. In fiscal 2002 and prior periods, the
      Company aggregated all phases of a production project together
      (contractually and internally) and made its percentage of completion
      calculation based upon the ratio of actual costs incurred at any
      measurement date to total estimated costs for the project. Effective for
      fiscal 2003 the Company has begun to unbundle its project pricing
      (contractually and internally) so that individual phases of the production
      process are separately priced (and costed). Accordingly, the percentage of
      completion will be adjusted as each phase is complete and the aggregation
      of completed phases will represent the overall percentage of completion
      for the project / contract. Management has elected to make this change
      because it is a more conservative and accurate method of determining
      percentage of project completion and because this method results in
      financial information about internal profit centers which will be critical
      to performance evaluation of the production groups and to resource
      allocation decisions.

      In the opinion of Management, the unaudited consolidated financial
      statements as of June 30, 2003 contain all adjustments (including normal
      recurring adjustments) necessary to fairly present the financial position
      and the results of operations of the Company. The timing of market study
      orders and software license agreements can significantly impact quarterly
      results of operations and, accordingly, the results of operations for the
      six months ended June 30, 2003 are not necessarily indicative of the
      results to be expected for the full year.

      New Accounting Standard. In May 2003, the Financial Accounting Standards
      Board issued Statement of Financial Accounting Standards ("SFAS") No. 150,
      Accounting for Certain Financial Instruments with Characteristics of Both
      Liabilities and Equity. SFAS No. 150 establishes standards for how an
      issuer classifies and measures certain financial instruments with
      characteristics of both liabilities and equity. It requires that an issuer
      classify a financial instrument that is within its scope as a liability
      (or an asset in some circumstances). Many of those instruments were
      previously classified as equity. SFAS No. 150 is effective for financial
      instruments entered into or modified after May 31, 2003, and otherwise is
      effective at the beginning of the first interim period beginning after
      June 15, 2003. Management does not expect the adoption of SFAS No. 150 to
      have a significant impact on the Company as the Company has not issued any
      financial instruments falling within the scope of SFAS No. 150.

2.    SUPPLEMENTAL CASH FLOW INFORMATION:

      The Company paid interest of $11,000 and $145,000 during the six months
      ended June 30, 2003 and 2002, respectively. Net income taxes of $20,000
      and $105,000 were paid during the six months ended June 30, 2003 and 2002,
      respectively.

3.    BUSINESS SEGMENTS:

      Prior to fiscal 2003, the Company identified its operating segments based
      upon line of business, which resulted in three reportable segments:
      Convenience Retailing, Pricing, and Business Development. During the first
      quarter of fiscal 2003 the Company undertook a reorganization in
      connection with a reduction in force aimed at reducing monthly operating
      costs. That reorganization resulted in an amalgamation of resources from
      the three previous segments, a change in the divisional operating
      responsibilities and a different management focus based upon geographic
      operating differences and

                                       8
<PAGE>

      resource requirements. Product offerings, consisting of decision support
      modeling technology for multi-outlet convenience retailers, are
      essentially equivalent across all segments.

      Set forth below is certain condensed financial information presented with
      respect to the operational segments that shall carry forward in 2003,
      together with a reconciliation to loss before income taxes. These reported
      operational segments represent aggregations of certain information
      relative to operations in homogenous countries within the defined
      geographic segments. All revenue is from external customers as there are
      no inter-segment sales. Comparative information for the prior year has
      been restated to conform to the new segment definitions.

         In Thousands
<Table>
<Caption>
                                                                       SEGMENTS
                                             ------------------------------------------------------------------
                                                             EUROPE / AFRICA /     PACIFIC
      QUARTER ENDED JUNE 30, 2003              AMERICAS        MIDDLE EAST           RIM              TOTALS
----------------------------------------     ------------    -----------------   ------------      ------------
<S>                                          <C>               <C>               <C>               <C>
Revenues ...............................     $      1,650      $        115      $      1,162      $      2,927

Contribution Margin ....................     $        735      $        (97)     $        359      $        997

Reconciling items not allocated to
operating segments:
   Corporate administration, sales
      and technology expense ...........                                                                   (907)
   Other income (expense) ..............                                                                    (21)
                                                                                                   ------------
   Income before income taxes ..........                                                           $         69
                                                                                                   ============

Total assets ...........................                                                           $      4,167
</Table>

<Table>
<Caption>
                                                                        SEGMENTS
                                             ------------------------------------------------------------------
                                                             EUROPE / AFRICA /     PACIFIC
      QUARTER ENDED JUNE 30, 2002              AMERICAS        MIDDLE EAST           RIM              TOTALS
----------------------------------------     ------------    -----------------   ------------      ------------
<S>                                          <C>               <C>               <C>               <C>
Revenues ...............................     $      2,137      $        387      $        536      $      3,060

Contribution Margin ....................     $        969      $        147      $        (34)     $      1,082

Reconciling items not allocated to
operating segments:
   Corporate administration, sales
      and technology expense ...........                                                                 (1,694)
   Other income (expense) ..............                                                                     (3)
                                                                                                   ------------
   Loss before income taxes ............                                                           $       (615)
                                                                                                   ============

Total assets ...........................                                                           $      5,406
</Table>

                                       9
<PAGE>

Information on segments and a reconciliation to income before taxes for the six
months ended June 30, 2003 and 2002 are as follows:

<Table>
<Caption>
                                                                       SEGMENTS
                                             -----------------------------------------------------------------
                                                              EUROPE / AFRICA /    PACIFIC
     SIX MONTHS ENDED JUNE 30, 2003            AMERICAS         MIDDLE EAST          RIM             TOTALS
----------------------------------------     ------------     -----------------  ------------     ------------
<S>                                          <C>               <C>               <C>              <C>
Revenues ...............................     $      2,926      $        377      $      1,863     $      5,166

Contribution Margin ....................     $        999      $        (37)     $        696     $      1,658

Reconciling items not allocated to
operating segments:
   Corporate administration, sales
      and technology expense ...........                                                                (2,078)
   Other income (expense) ..............                                                                   (33)
                                                                                                  ------------
   Loss before income taxes ............                                                          $       (453)
                                                                                                  ============

Total assets ...........................                                                          $      4,167
</Table>

<Table>
<Caption>
                                                                         SEGMENTS
                                             ----------------------------------------------------------------
                                                             EUROPE / AFRICA /    PACIFIC
    SIX MONTHS ENDED JUNE 30, 2002             AMERICAS         MIDDLE EAST         RIM             TOTALS
----------------------------------------     ------------    -----------------  ------------     ------------
<S>                                          <C>               <C>              <C>              <C>
Revenues ...............................     $      4,612      $        942     $      1,529     $      7,083

Contribution Margin ....................     $      1,875      $        327     $        329     $      2,531

Reconciling items not allocated to
operating segments:
   Corporate administration, sales
      and technology expense ...........                                                               (3,100)
   Other income (expense) ..............                                                                 (111)
                                                                                                 ------------
   Loss before income taxes ............                                                         $       (680)
                                                                                                 ============

Total assets ...........................                                                         $      5,406
</Table>

5.    COMPREHENSIVE INCOME

      Comprehensive income is net income, plus certain other items that are
      recorded directly to stockholders' equity, bypassing net income. The only
      such items currently applicable to the Company are foreign currency
      translation adjustments.

      Comprehensive income (loss) was $55,000 and $(647,000) for the quarters
      ended June 30, 2003 and 2002, respectively. For the six months ended June
      30, 2003 and 2002, comprehensive income (loss) was $(325,000) and
      $(797,000), respectively.

                                       10
<PAGE>

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

RESULTS OF OPERATIONS

     CONSOLIDATED OPERATIONS. MPSI reported a net income of $55,000 or $.02 per
share on revenues of $2.9 million for the three months ended June 30, 2003
compared with a net loss of $659,000 or $.23 per share on revenues of $3.1
million for the comparable quarter ended June 30, 2002 The June 2003 positive
results represent a significant improvement over the preceding quarter ended
March 31, 2003 (a loss of $524,000 or $.18 per share on revenue of $2.2
million), despite continuing negative effects of (1) generally poor retail
petroleum margins affecting many multi-national oil company clients and (2) poor
economic performance in the US economy, both of which have plagued the Company
for the last eighteen months. These economic factors are clearly indicated when
comparing revenue for the six months ended June 30, 2003 ($5.2 million) versus
the six months ended June 30, 2002 ($7.1 million). Management has been
challenged during the intervening period to continually re-align MPSI's cost
base with the revenue trend. A series of staff reductions, foreign office
closures and other conversions of fixed costs to variable resources have been
required, the most recent event having taken place in late March 2003. The cost
reductions implemented at that time, coupled with an upturn in quarterly
revenue, played a significant role in the improved quarterly and six-month
results through June 30, 2003.

     Consolidated revenues of $2.9 million for the June 2003 quarter rebounded
31% or $ 688,000 from the $2.2 million experienced in MPSI's first fiscal
quarter ended March 31, 2003, but were still slightly lower than the June 2002
quarterly revenues of $3.1 million. Despite the June 2003 quarterly revenue
improvement, depressed economic factors noted above resulted in six-month
revenues for 2003 being only 73% of revenues experienced in the first six months
of 2002. Consolidated cost of sales remained relatively constant at just over
46% of revenue in all three comparative periods noted. However, cost of sales
for the June 2003 quarter reflects what in management's opinion is a positive
attribute - fixed staffing costs declined and, where necessary, were supplanted
with variable third-party resources. This decline in fixed costs is part of the
general cost reductions undertaken in March 2003 as discussed in more detail in
connection with operating expense fluctuations below. Lower fixed expenditures
in cost of sales during the June 2003 quarter are masked by an increase in
variable third-party field survey costs (up $215,000 or 75% compared with the
first quarter ended March 31, 2003). Such increased survey costs are consistent
with improved production project turnover.

     Comparison of consolidated operating expenses for either the quarter or six
months ended June 30, 2003 with similar prior periods of 2002 must take into
account certain restructuring expenses in 2002 which did not recur in 2003.
These measures included closure of certain foreign offices and reduced staffing
in the 2002 comparative periods, which resulted in accrued expenses of $326,000
and $717,000 in the June 2002 quarter and the six months then ended,
respectively. Such expenses have been factored out of the following discussion
of operating expense fluctuations. Consolidated operating expenses were
$1,448,000 for the quarter ended June 30, 2003 as compared with an adjusted
$2,050,000 during the same quarter last fiscal year and $1,713,000 incurred in
the March 2003 first quarter. The net reduction of $265,000 (16%) versus the
first quarter of 2003 reflects the benefit of force reduction and office closure
actions taken in late March 2003. Those cost saving measures are expected to
save the Company approximately $1.5 million annually (approximately $300,000 per
quarter over the remaining months of 2003). These measures were taken mainly in
areas of the Company with excess capacity and, accordingly, resulted in no loss
of technology or customer support capabilities. A similar comparison of
consolidated operating expenses with the June 2002 quarter reflects a decrease
of $602,000 (29%), most of which is again related to cost reduction measures
initiated after June 2002 that were necessary to continue re-alignment of the
Company's cost base with revenue trends.

    Consolidated general and administrative expenses for the quarter ended June
30, 2003 were down $65,000 or 12% as compared to the first fiscal quarter of
2003, and were down $275,000 or 37% compared with the second fiscal quarter of
last year. That same category of expenses declined $371,000 or 27% relative to
the comparative six months ended June 30, 2002. The primary contributor to the
decrease versus quarterly and six-month comparative periods was reduced staffing
costs. Relative to the March 2003 quarter, the June 2003 quarter decline also
reflects lower costs associated with public financial compliance reporting.

                                       11
<PAGE>

     Consolidated marketing and client service expenses for the quarter ended
June 30, 2003 were down $122,000 (15%) as compared to the first fiscal quarter
of 2003, and were down $275,000 (29%) compared with the second fiscal quarter of
last year. A decrease of $414,000 (22%) was experienced when comparing the six
months ended June 30, 2003 with the same period ended June 30, 2002. All
indicated fluctuations were principally the result of staffing reductions
previously noted. In addition to staffing reductions, consolidated marketing
expenses have been reduced as a result of (1) increased use of value-added
resellers to service smaller customers and (2) a shift in client service
resources from client support (marketing expense) to revenue based projects
resulting in a shift of dollars to cost of sales. Further, relative to the March
2003 quarter, the Company has placed strict controls on travel costs.

    Consolidated research and development expenses (excluding amounts
capitalized for product development as discussed under Financial Condition and
Liquidity below) for the quarter ended June 30, 2003, were down $78,000 as
compared with the first fiscal quarter of 2003, were down $52,000 as compared
with the June 2002 quarter, and were down $33,000 for the comparative six-month
periods ended June 30, 2003 and 2002. This decline reflects both a staffing
reduction and fluctuation in the number of software development resources
dedicated to new capitalized software technology as discussed hereinafter.

    Other income and expenses reflect interest and foreign exchange
transactions. Interest expense was $8,000 for the June 2003 quarter compared
with $21,000 in the June 2002 quarter ($11,000 and $145,000 for the six-month
periods ended June 30, 2003 and 2002, respectively). Declines reflect bank debt
that was outstanding in 2002 until the final $550,000 was liquidated in November
of that year. The nominal interest costs in the June 2003 quarter and the six
months then ended are principally related to supplier financing arrangements

    The Company's operations and contract methods can result in periodic foreign
exchange gains and losses. 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 US Dollar relative to
the respective foreign currencies. The Company experienced exchange losses of
$18,000 during the June 2003 quarter ($12,000 for the six months then ended)
compared with exchange gains in the June 2002 quarter of $10,000 ($19,000 for
the six months then ended). Although MPSI anticipates continuing exposure to
exchange fluctuations from these sources, no material adverse effect is expected
as the Company denominates a limited number of contracts in foreign currencies.
The Company does not utilize derivative financial instruments to hedge its
foreign currency risks.

    Income taxes were $14,000 for the quarter ended June 30, 2003 as compared to
$44,000 during the comparable quarter last year ($16,000 and $105,000 for the
respective six-month periods). The changes in income tax are primarily due to
foreign taxes withheld at the source by customers and are therefore subject to
significant fluctuation from quarter to quarter depending upon the timing of
customer payments from abroad.

     SEGMENT OPERATIONS. With the latest cost control measures and related
restructuring in March 2003, the focus of management is more directly associated
with geographic regional operations. Accordingly, the financial information
about operating segments is presented relative to three general spheres of
operations: the Americas Region, the Europe/Africa/Middle East Region, and the
Pacific Rim Region. Set forth below are commentaries concerning the principal
operations of the three operating segments:

o    AMERICAS REGION. This operating region encompasses activities in North
     America and Latin America. Although MPSI enjoyed an upsurge in revenue and
     gross margin from customers in Central America earlier in fiscal 2003, most
     of the revenue and profit potential for this region centers on activities
     in the US. Poor economic performance by the US economy and lower retail
     margins by many of MPSI's traditional petroleum company customers has
     resulted in very conservative retail investment over the last twelve
     months. As a result, MPSI's revenue and contribution margin in this segment
     both dropped approximately 23% during the June 2003 quarter compared with
     the June 2002 quarter, despite reductions in fixed operating expenses. The
     revenue fall-off has correspondingly decreased the Company's opportunity to
     leverage fixed production costs across the customer base resulting in lower
     contribution margin in this segment. Thus, the quarter decline continues
     earlier trends and is reflected in revenue and contribution margin
     decreases of $1,686,000 (36%) and $876,000 (47%), respectively, when the
     six-month period ended June 30, 2003 is compared to the six months ended
     June 30,

                                       12
<PAGE>

     2002. Large petroleum retailers, historically MPSI's mainstay customers,
     are exploring alternative ways to "retail," including expanded dealer
     organizations and third-party operators. While it is not true across the
     board, these tactics suggest that retail decision-making may ultimately
     shift more in favor of smaller, more nimble petroleum / convenience
     retailers, which is a customer segment that MPSI has traditionally served
     only passively. As noted above, organizational recognition of this dynamic
     has been given by management as some sales, marketing and technology
     resources have been shifted to focus on this new and potentially
     significant customer segment.

o    EUROPE/AFRICA/MIDDLE EAST REGION. This operating region encompasses MPSI
     activities in Europe, Western Asia, Africa and the Middle East. At present,
     most activity is concentrated in Eastern Europe and South Africa. As is the
     case in the US, MPSI's traditional multi-national petroleum retail
     customers in Europe have been increasingly conservative with their
     investment dollar. Some customers have chosen to reduce their retail
     networks via sell-off. Smaller regional or country specific petroleum
     retailers are taking up the slack and these "new customers" are now
     searching for technological assistance necessary to manage larger networks.
     Here again, MPSI has restructured its sales force to more directly target
     the national retailer while maintaining its existing multi-national
     customer network. However, as such restructuring and targeting efforts are
     recent, they have not yet been reflected in operating results for this
     segment, which experienced a revenue decline of $272,000 (70%) and a
     $244,000 decline in contribution margin for the quarter ended June 30, 2003
     compared with the comparable quarter last year. Six-month results are only
     marginally better for this operating segment year-to-date when compared
     with the first six months last year (revenue declined $565,000 or 60% and
     contribution margin declined $364,000). This segment is expected to rebound
     during the last half of 2003, but is likely not going to contribute to
     consolidated results on par with the other two operating segments this
     year.

o    PACIFIC RIM REGION. This operating region encompasses MPSI activities in
     Japan, Eastern Asia (including India), Southeast Asia and Australia/New
     Zealand. This operating segment has experienced the least fluctuation from
     world economic events. Additionally, although MPSI has traditionally
     undertaken services in favor of multi-national petroleum retailers in this
     region, more of MPSI's activities have traditionally centered on the large
     national and regional petroleum retailers. Hence, MPSI has enjoyed an
     increase in revenue ($626,000 or 116%) and contribution margins ($393,000)
     for the quarter ended June 30, 2003 compared with the quarter ended June
     30, 2002. The six-month results for this segment reflect revenue
     improvement of $334,000 (22%) and a contribution margin increase of
     $367,000 (112%) as compared with the first six months last year. This is
     principally due to customer interest in the region for national databases
     in several countries. Based largely on the coupling of web-enabled modeling
     technology with national databases, the Company has been able to improve
     results in Japan and elsewhere in this region. These projects are highly
     leverageable and provide the customer with a considerably broader
     perspective on their national markets.

FINANCIAL CONDITION AND LIQUIDITY

    The Company's primary measure of liquidity, working capital, was a deficit
of $(1,537,000) at June 30, 2003 as compared with $(683,000) at June 30, 2002,
although MPSI did generate positive cash flow from operations during the June
2003 quarter ($38,000 versus a negative $151,000 for the first fiscal quarter
ended March 31, 2003). Cash reserves at June 30, 2003 of $634,000 are up 46%
compared with June 30, 2002, although they are 27% lower than at the beginning
of the 2003 fiscal year. The cash balance is slightly higher than at March 31,
2003, and all accounts payable are down 19% since that date. These facts
indicate that the Company is satisfactorily meeting its ongoing operating
liquidity needs overall, despite an occasional cash pinch.

    The decrease in working capital is attributable to the revenue fall-off in
the intervening twelve months as previously discussed, compounded by the
necessity for the Company to divert approximately $675,000 to debt service and
liquidation during the last half of 2002. The working capital deficit has
declined $198,000 from $1,735,000 at March 31, 2003, principally due to the
timing of project payments from certain Asian customers. Trade receivables have
declined $100,000 since the quarter ended March 31, 2003, indicating a
continuation of sluggish order levels consistent with economic uncertainties. As
discussed under Results of Operations, the significant decline in revenue for
the quarter and six months ended June 30, 2003 compared with the similar period
ended June 30, 2002 has resulted in a decline in receivables of approximately
$651,000 (30%). Operating accounts

                                       13
<PAGE>

payable and accrued liabilities have declined ($700,000 or 35%) compared with
June 30, 2002 and such account balances are consistent with the amounts
outstanding at March 31, 2003. Deferred revenue represents customer prepayments
required under product delivery or service contracts for which services have not
yet been provided. MPSI's increased production efficiency allowed the Company to
reduce that obligation by approximately $443,000 during the June 2003 quarter,
thus bringing the balance of this obligation down to $2,495,000. The Company
will be required to fund production costs of approximately 50% of that amount in
the future (based on recent project costing trends). The remainder will help
defray general operating expenses that will be incurred during the period of
contract performance. In the absence of a bank line of credit that could provide
some measure of working capital back-up, MPSI continues to deal with peaks and
valleys in cash flow by adjusting payments to suppliers and other creditors as
required. Assuming the Company meets with a reasonable degree of success in
addressing the changing and uncertain markets, management anticipates that cash
flow from operations will be sufficient to meet operating requirements in fiscal
2003.

    Liquidity remains a principal focus of management looking forward in 2003.
The revenue trends of the last several years and the rise of competitors in
certain regional service areas have challenged management to continually
re-evaluate business strategies, resource allocations, and cost structure.
Management has responded by re-engineering products to be more flexible in
meeting the needs of a more diverse customer base. Management has also acted to
conserve liquidity by closing certain foreign offices, reducing employee costs
and controlling research and development expenditures. In late March 2003,
management implemented a further reduction in force in order to better match
capacity with revenue levels (see previous discussion of $1.8 million cost
saving package). These measures were taken to give the Company time to ramp up
revenue from both traditional and new customer targets. In order to position the
Company to increase its revenues, management reorganized a portion of its sales
force to target new customer segments within the retail petroleum sector, which
customer segments had only been served passively by the Company heretofore.
Although the average unit sale from the new target customers will likely be
smaller, the number of potential customers far exceeds the multi-national market
sector the Company has relied on. This partial shift in customer focus should
not require any substantial product re-tooling. Management's plan is intended to
produce revenues at least at a level comparable to 2002, while cutting costs
significantly with the objective of returning MPSI to profitability. Achievement
of these plan objectives depends on the accomplishment of matters both within
and outside MPSI's control, including the strength of the US economy and the
timing of customer decisions. There is risk that adverse economic conditions
could persist to the point where management's plan cannot overturn the recent
trends.

    In view of liquidity constraints, capital expenditures have been limited for
equipment ($11,000 during the June 2003 quarter compared with $50,000 during the
June 2002 quarter) and capitalized product development expenditures ($16,000 for
the quarter ended June 30 2003 versus $109,000 in the quarter ended June 30,
2002). The lower expenditures in the June 2003 quarter and for the six months of
2003, compared with similar 2002 periods, reflect the completion of new
development primarily related to web-enabling certain MPSI modeling
capabilities. The Company believes its present REX, Pricing, and Internet retail
planning technology far surpass competitive technology.

    MPSI's backlog of market studies at June 30, 2003 in the amount of
approximately $5.5 million, ($6.1 million at June 30, 2002), contained a
substantial number of recurring studies under multi-year client commitments.
Such studies represent a significant amount (approximately 25%) of the estimated
revenues for fiscal year 2003. Of the June 30, 2003 backlog amount, the Company
expects to turn over approximately $2.9 million during the last half of 2003.
Because customer commitments for market studies may entail multi-year terms, the
number of such agreements in force may have significant implications on the
conclusions to be drawn concerning fluctuations in backlog between accounting
periods. For example, if a customer commits to a five-year series of market
studies in year one, backlog of that year would substantially increase.
Thereafter, as the Company delivers successive market studies, backlog would
decline in years 2 - 4. MPSI's present backlog is indicative of long-standing
customer relationships that are very important to achievement of the Company's
2003 business plan.

OFF-BALANCE SHEET ARRANGEMENTS

         None.

                                       14
<PAGE>

        APPLICATION OF CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES

USE OF ESTIMATES

    The Company's consolidated financial statements are prepared in accordance
with accounting principles generally accepted in the United States (herein after
referred to as "GAAP") and the application of GAAP requires management to make
estimates that affect the Company's reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and
liabilities. In many instances, the Company could have reasonably used different
accounting estimates, and in other instances changes in the accounting estimates
are reasonably likely to occur from period to period. Accordingly, actual
results could differ significantly from the estimates made by management. To the
extent that there are material differences between these estimates and actual
results, the Company's future financial statement presentation of its financial
condition or results of operations will be affected.

    On an ongoing basis, the Company evaluates its estimates, including those
related to revenue recognition, provision for doubtful accounts, recovery of
capitalized product development costs, useful lives of property and equipment,
income taxes, contingencies and litigation, among others. The Company bases its
estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources.

    In addition to these estimates and assumptions that are utilized in the
preparation of historical financial statements, the inability to properly
estimate the timing and amount of future revenues could significantly impact the
Company's future operations. While the Company's software allows it to monitor
potential revenues and aids in its ability to manage the size of its operations,
management must make assumptions and estimates as to the timing and amount of
future revenue. Specifically, the Company's sales personnel monitor the status
of all proposals, including the estimated closing date and potential dollar
amount of such transactions. The Company aggregates these estimates periodically
to generate a sales pipeline and then evaluates the pipeline to identify trends
in the Company's business. This pipeline analysis and related estimates of
revenue may differ significantly from actual revenues in a particular reporting
period as the estimates and assumptions were made using the best available data
at the time, which is subject to change. Specifically, the slowdown in the
global economy and information technology spending has caused and may continue
to cause customer purchasing decisions to be delayed, reduced in amount or
canceled, all of which have reduced and could continue to reduce the rate of
conversion of the pipeline into contracts. A variation in the pipeline or in the
conversion rate of the pipeline into contracts could cause the Company to plan
or budget inaccurately and thereby could adversely affect the Company's
business, financial condition or results of operations. In addition, because of
unpredictable timing of high-dollar contracts, management may not be able to
adjust the Company's cost structure to respond to a variation in the conversion
of the pipeline in a timely manner, and thereby the delays may adversely and
materially affect the Company's business, financial condition or results of
operations.

CRITICAL ACCOUNTING POLICIES

    In addition to making critical accounting estimates, the Company must ensure
that its financial statements are properly stated in accordance with GAAP. In
many cases, the accounting treatment of a particular transaction is specifically
dictated by GAAP and does not require management's judgment in its application,
while in other cases, management's judgment is required in selecting among
available alternative accounting standards that allow different accounting
treatment for similar transactions (e.g., revenue recognition, stock-based
compensation, depreciation methodology, etc.). The Company believes that the
following accounting policies are critical to understanding the Company's
historical and future performance, as these policies relate to the more
significant areas involving management's judgments and estimates: revenue
recognition, stock-based compensation, the provision for doubtful accounts,
capitalized product development costs, income taxes, and foreign currency
transactions.

                                       15
<PAGE>

    The Company's management has reviewed its critical accounting policies, its
critical accounting estimates, and the related disclosures with its Audit
Committee. These policies, and the Company's procedures related to these
policies, are described in detail below.

o    Revenue Recognition: Effective January 1, 2003, the Company adopted a
     revised method of estimating its percentage of completion for its major
     consulting and technology projects. In fiscal 2002 and prior periods, the
     Company aggregated all phases of a production project together
     (contractually and internally) and made its percentage of completion
     calculation based upon the ratio of actual costs incurred at any
     measurement date to total estimated costs for the project. Effective for
     fiscal 2003 the Company has begun to unbundle its project pricing
     (contractually and internally) so that individual phases of the production
     process are separately priced (and costed). Accordingly, percentage of
     completion will be adjusted as each phase is complete and the aggregation
     of completed phases will represent the overall percentage of completion for
     the project / contract. Management has elected to make this change because
     it is more conservative and accurate method of determining percentage of
     project completion and because this method results in financial information
     about internal profit centers which will be critical to performance
     evaluation of the production groups and to resource allocation decisions.

     The Company recognizes software revenue under the provisions of the
     Accounting Standards Executive Committee's Statement of Position 97-2 ("SOP
     97-2") entitled "Software Revenue Recognition" (as amended by SOP 98-9).
     Under the terms of SOPs 97-2 and 98-9, companies are required to defer all
     revenue from multiple-element software arrangements if sufficient vendor
     specific objective evidence does not exist for the allocation of revenue to
     the various elements of the arrangement. As a result, the Company
     recognizes revenue on multi-year software license agreements ratably over
     the life of the arrangement.

     Revenue is recognized when the Company has no remaining obligations under
     the software license and maintenance contracts other than providing
     post-contract 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
     are recognized ratably over the term of the contracts as the post-contract
     customer support services are provided and the related costs incurred are
     recognized. Optional training and consulting represents service transaction
     on which revenue and expense are recognized when the earnings process is
     substantially complete.

     Beginning in fiscal 2001, MPSI changed its software licensing and
     maintenance contracting methods. Following the change, most software
     products are perpetually licensed in a fashion that mandates up-front
     payment of the license fees. Maintenance is an optional annual commitment
     by clients who wish to obtain future upgrades without additional cost. This
     change in licensing did not materially impact fiscal 2001.

o    Stock-Based Compensation: At December 31, 2002, the Company has one
     stock-based employee compensation plan. The Company accounts for the plan
     under the recognition and measurement principles of Accounting Principles
     Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and
     related Interpretations. No stock-based employee compensation cost is
     reflected in net income (loss), as all options granted under the plan had
     an exercise price equal to or greater than the market value of the
     underlying common stock on the date of grant.

o    Receivables: Trade receivables are carried at original invoice amount less
     an estimate made for doubtful receivables (immaterial in the condensed
     statements reflected herein) based on a review of all outstanding amounts
     on a monthly basis. Management determines the allowance for doubtful
     accounts by regularly evaluating individual customer receivables and
     considering a customer's financial condition, credit history, and current
     economic conditions. Trade receivables are written off when deemed
     uncollectable. Recoveries of trade receivables previously written off are
     recorded when received.

o    Capitalized Product Development Costs: 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.

                                       16
<PAGE>

     The costs of internally developed software held for resale 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 product 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.

o    Income Taxes: The Company applies the liability method of accounting for
     income taxes. 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.

o    Foreign Currency Translation: Assets and liabilities of the Company's
     foreign operations 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 other comprehensive income. 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.

----------

Portions of this document may constitute forward-looking statements as defined
by federal law. Although the Company believes any such statements are based on
reasonable assumptions, there is no assurance that actual outcomes will not be
materially different. Additional information about issues that could lead to
material changes in performance is contained in the Company's annual report on
Form 10-K, which is filed with the Securities and Exchange Commission

                                       17
<PAGE>

ITEM 3 - CONTROLS AND PROCEDURES

MPSI Systems Inc.'s Chief Executive Officer and Chief Financial Officer have
evaluated the effectiveness of the Company's disclosure controls and procedures
(as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) as of a date within 90
days prior to the filing date of this quarterly report. Based on such
evaluation, such officers have concluded that the Company's disclosure controls
and procedures are effective in alerting them on a timely basis to material
information relating to MPSI Systems Inc. (including its consolidated
subsidiaries) required to be included in the Company's periodic filings under
the Exchange Act. There have not been any significant changes to the Company's
internal controls or in other factors that could significantly affect such
controls subsequent to the date of this evaluation.

                           PART II - OTHER INFORMATION

Item 1 -- Legal Proceedings - None.

Item 2 -- Changes in Securities - None.

Item 3 -- Defaults Upon Senior Securities - None.

Item 4 -- Submission of Matters to a Vote of Security Holders - None.

Item 5 -- Other Information - None.

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

          (a) Exhibits:

              31.1  Chief Executive Officer's Certification Pursuant to Section
                    302 of the Sarbanes-Oxley Act of 2002.

              31.2  Chief Financial Officer's Certification Pursuant to Section
                    302 of the Sarbanes-Oxley Act of 2002.

              32.1  Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
                    Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

          (b) Reports on Form 8-K - None

                                       18
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed in its behalf by the
undersigned hereunto duly authorized.

                                         MPSI SYSTEMS INC.

Date August 13, 2003                     By /s/ Ronald G. Harper
     ---------------                        ------------------------------
                                            Ronald G. Harper, President
                                            (Chief Executive Officer) and
                                            Director

Date August 13, 2003                     By /s/ James C. Auten
     ---------------                        ------------------------------
                                            James C. Auten, Vice President
                                            (Chief Financial Officer)

                                       19
<PAGE>

                                  EXHIBIT INDEX

<Table>
<Caption>
Exhibit
Number       Description
-------      -----------
<S>          <C>
   31.1      Chief Executive Officer's Certification Pursuant to Section 302 of
             the Sarbanes-Oxley Act of 2002.

   31.2      Chief Financial Officer's Certification Pursuant to Section 302 of
             the Sarbanes-Oxley Act of 2002.

   32.1      Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
             Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
</Table>

                                       20