UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the three months ended March 31, 2002 Commission file no. 0-11527
MPSI SYSTEMS INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 73-1064024
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4343 South 118th East Avenue, Tulsa Oklahoma 74146
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(Address of principal executive offices and zip code)
Registrant's telephone number, including area code (918) 877-6774
-----------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Number of shares of common stock outstanding at March 31, 2002 - 2,911,781
---------------
1
INDEX
<Table>
<Caption>
Page No.
--------
Part I. FINANCIAL INFORMATION:
Financial Statements:
Consolidated Balance Sheets - March 31, 2002 and December 31, 2001 ................... 3
Consolidated Statements of Operations - Three Months Ended March 31, 2002 and 2001.... 5
Consolidated Statement of Stockholders' Equity - Three Months Ended March 31, 2002 ... 6
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 2002 and 2001....................................... 7
Notes To Consolidated Financial Statements ........................................... 8
Management's Discussion and Analysis of Financial Condition and
Quarterly Results of Operations ...................................................... 11
Part II. OTHER INFORMATION (Including Index to Exhibits) ....................................... 14
SIGNATURES ................................................................................. 15
</Table>
2
MPSI SYSTEMS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<Table>
<Caption>
MARCH 31, DECEMBER 31,
ASSETS 2002 2001
------------ ------------
(UNAUDITED) (UNAUDITED)
Current assets:
Cash and cash equivalents $ 720,000 $ 675,000
Short-term investments, at cost -- 3,000
Receivables:
Trade, net 2,034,000 3,011,000
Current portion of long-term receivables, net of
unamortized discount 311,000 381,000
Work in process inventory 84,000 36,000
Prepayments 116,000 71,000
------------ ------------
Total current assets 3,265,000 4,177,000
Long-term receivables, net of current portion
and unamortized discount 471,000 530,000
Property and equipment, net of accumulated depreciation
and amortization 885,000 939,000
Capitalized product development costs, net 1,340,000 1,366,000
Other assets 151,000 153,000
------------ ------------
Total assets (Note 3) $ 6,112,000 $ 7,165,000
============ ============
</Table>
See accompanying notes to consolidated financial statements.
3
MPSI SYSTEMS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONT'D)
<Table>
<Caption>
MARCH 31, DECEMBER 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 2002 2001
------------ ------------
(UNAUDITED) (UNAUDITED)
Current liabilities:
Note payable to bank (Note 3) $ 550,000 $ 900,000
Accounts payable 617,000 630,000
Accrued liabilities 1,040,000 993,000
Deferred revenue 1,316,000 1,819,000
------------ ------------
Total current liabilities 3,523,000 4,342,000
Noncurrent deferred revenue 518,000 583,000
Noncurrent deferred income taxes 111,000 115,000
Other noncurrent liabilities 15,000 30,000
------------ ------------
Total liabilities 4,167,000 5,070,000
------------ ------------
Commitments and contingencies -- --
Stockholders' Equity:
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
March 31, 2002 and December 31, 2001 146,000 146,000
Junior Common Stock, $.05 par value, 500,000 shares
authorized, none issued or outstanding -- --
Additional paid-in capital 13,145,000 13,145,000
Deficit (11,694,000) (11,568,000)
Other accumulated comprehensive income 348,000 372,000
------------ ------------
Total stockholders' equity 1,945,000 2,095,000
------------ ------------
Total liabilities and stockholders' equity $ 6,112,000 $ 7,165,000
============ ============
</Table>
See accompanying notes to consolidated financial statements.
4
MPSI SYSTEMS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<Table>
<Caption>
THREE MONTHS ENDED MARCH 31,
2002 2001
------------- -------------
Revenues:
Information services and software maintenance $ 3,999,000 $ 3,839,000
Software licensing 24,000 32,000
------------- -------------
Total revenues 4,023,000 3,871,000
------------- -------------
Cost of Sales:
Information services and software maintenance 1,576,000 1,497,000
Software licensing 84,000 166,000
------------- -------------
Total cost of sales 1,660,000 1,663,000
------------- -------------
Gross profit 2,363,000 2,208,000
Operating expenses:
General and administrative 1,027,000 744,000
Marketing and client services 929,000 1,327,000
Research and development 364,000 335,000
------------- -------------
Total operating expenses 2,320,000 2,406,000
------------- -------------
Operating income (loss) 43,000 (198,000)
Other income (expense):
Interest income 6,000 25,000
Interest expense (124,000) (175,000)
Gain (loss) on foreign exchange 9,000 (16,000)
Other, net 1,000 11,000
------------- -------------
Loss before income taxes (65,000) (353,000)
Provision for income taxes 61,000 23,000
------------- -------------
Net loss $ (126,000) $ (376,000)
============= =============
Per Share:
Basic and diluted loss
per common share $ (.04) $ (.13)
Shares Outstanding:
Basic 2,912,000 2,912,000
Diluted 2,912,000 2,912,000
</Table>
See accompanying notes to consolidated financial statements.
5
MPSI SYSTEMS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 2002
(UNAUDITED)
<Table>
<Caption>
OTHER
COMMON STOCK ADDITIONAL ACCUMULATED TOTAL
---------------------------- PAID-IN COMPREHENSIVE STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT INCOME EQUITY
------------ ------------ ------------ ------------ ------------ ------------
Balance,
December 31, 2001 2,912,000 $ 146,000 $ 13,145,000 $(11,568,000) $ 372,000 $ 2,095,000
Net loss -- -- -- (126,000) -- (126,000)
Other accumulated
comprehensive
income:
Foreign currency
translation adjustment -- -- -- -- (24,000) (24,000)
------------
Total comprehensive loss $ (150,000)
------------ ------------ ------------ ------------ ------------ ------------
Balance,
March 31, 2002 2,912,000 $ 146,000 $ 13,145,000 $(11,694,000) $ 348,000 $ 1,945,000
============ ============ ============ ============ ============ ============
</Table>
See accompanying notes to consolidated financial statements.
6
MPSI SYSTEMS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW (NOTE 2)
(UNAUDITED)
<Table>
<Caption>
THREE MONTHS ENDED MARCH 31,
2002 2001
------------ ------------
Loss from operations $ (126,000) $ (376,000)
Adjustments to reconcile loss from operations to cash provided by operations:
Depreciation and amortization of property and equipment 85,000 84,000
Amortization of product development costs 183,000 264,000
Changes in assets and liabilities:
Decrease (increase) in assets:
Receivables 1,102,000 (180,000)
Inventories (48,000) 77,000
Other (40,000) (47,000)
Increase (decrease) in liabilities:
Trade payables and accruals (2,000) (288,000)
Taxes payable (3,000) (17,000)
Deferred revenue (568,000) 56,000
------------ ------------
Net cash provided by operating activities 583,000 (427,000)
------------ ------------
Cash flows from investing activities:
Purchase equipment (31,000) (46,000)
Software developed for internal use -- (35,000)
Capitalized product development costs (157,000) (155,000)
------------ ------------
Net cash used by investing activities (188,000) (236,000)
------------ ------------
Cash flows from financing activities:
Debt repayments (350,000) (100,000)
------------ ------------
Net cash used by financing activities (350,000) (100,000)
------------ ------------
Increase (decrease) in cash and cash equivalents 45,000 (763,000)
Cash and cash equivalents at beginning of period 675,000 1,152,000
------------ ------------
Cash and cash equivalents at end of period $ 720,000 $ 389,000
============ ============
</Table>
See accompanying notes to consolidated financial statements.
7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL NOTES:
Certain notes to the September 30, 2001 audited consolidated financial
statements filed with Form 10-K are applicable to the unaudited
consolidated financial statements for the three months ended March 31,
2002. Accordingly, reference should be made to the audited consolidated
financial statements at September 30, 2001.
Effective October 22, 2001, the Board of Directors of the Company
authorized a change in fiscal year end principally in an effort to align
the Company's operating cycle with that of the majority of its main
customers. As a result, MPSI filed a Form 10-QT for the period October 1,
2001 to December 31, 2001. This report on Form 10-Q for the three months
ended March 31, 2002 represents the first fiscal quarter of the new fiscal
year ending December 31, 2002. Accordingly, the information for the three
months ended March 31, 2001 (designated at time of original SEC reporting
as the second fiscal quarter) is included herein for comparative purposes.
Management believes that no adjustments of comparative information were
required simply because of the change in fiscal year end.
In the opinion of Management, the unaudited consolidated financial
statements as of March 31, 2002 contain all adjustments (including normal
recurring accruals) 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
three months ended March 31, 2002 are not necessarily indicative of the
results to be expected for the full year.
2. SUPPLEMENTAL CASH FLOW INFORMATION:
The Company paid interest of $124,000 and $175,000 during the three months
ended March 31, 2002 and 2001, respectively. Income taxes of $63,000 and
$84,000 were paid during the three months ended March 31, 2002 and 2001,
respectively.
3. NOTE PAYABLE TO BANK:
At March 31, 2002, the Company owed $550,000 to Bank of America under a
revolving line of credit arrangement secured by accounts and contracts
receivable, inventory, general intangibles and certain cash accounts. The
note bears interest at Bank of America floating prime rate plus 7%
(approximately 11.75%). The weighted average interest rates were 12.84%
for the three months ended March 31, 2002 and 12.69% for the three months
ended March 31, 2001.
Bank of America and MPSI executed a loan extension effective January 6,
2002 concurrent with a $250,000 pay down by the Company and set the new
maturity date at October 1, 2002. A further debt payment of $100,000 was
required on or before April 1, 2002 and was made by MPSI prior to that
date bringing the outstanding balance down to $550,000. In connection with
the extension, the Bank revised the $3.5 million minimum net worth
covenant with which the Company had not been in compliance prior to the
extension. Henceforth, the Company will be required to maintain a minimum
net worth of $1,700,000. Balances outstanding under the extension bear
interest at Bank of America floating prime plus 7% (approximately 13%
presently). Additionally, the extension agreement eliminated subjective
acceleration clauses from the original agreements which remain in effect
except to the extent amended by the extension documents.
If the Company is unable to maintain the revised minimum net worth
covenant or if the Company fails to maintain an adequate collateral level
as determined through a defined borrowing base computation, the bank could
call the note before its maturity date. If this were to occur, the Company
may not have sufficient cash to repay the note requiring management to
take actions such as delaying payments to suppliers or reducing operating
expenditures. Such actions, if necessary, could have an adverse effect on
the Company's operations or financial condition.
8
4. BUSINESS SEGMENTS:
The Company identifies segments based upon line of business, which results
in three reportable segments: Convenience Retailing, Pricing, and Business
Development. The Business Development segment includes the former
DataMetrix and Postal activities. The Convenience Retailing segment
derives its revenues from providing decision support software, information
databases and consulting services to businesses which have an investment
in retail outlet networks, primarily in the petroleum industry. In many
cases, pricing products are sold within the same customer base applicable
to Convenience Retailing. However, Pricing services are directed more
towards operational issues rather than retail site location or operation.
The Business Development segment derives its revenues primarily from the
sales of DataMetrix branded products, including visual mapping information
for cities in the United States. The Company's measure of segment profit
is operating income. Amortization is specifically assigned to each
reported segment as capitalized development costs are written off to
segmented cost of sales over their useful economic lives. Depreciation is
allocated to each reported segment through pre-determined corporate
percentages. Identifiable assets in the Convenience Retailing, Pricing and
Business Development segments, which are recorded in the Convenience
Retailing segment, are shared resources which are not specifically
allocated. All assets acquired are managed as shared resources and are not
identifiable to specific reporting segments.
Comparative business segment information has been reclassified herein to
conform with the March 31, 2002 disclosure format. Information on segments
and a reconciliation to income before taxes are as follows:
<Table>
<Caption>
----------------------------------------------------------------
SEGMENTS
----------------------------------------------------------------
CONVENIENCE BUSINESS
RETAILING PRICING DEVELOPMENT TOTAL
------------- ------------- ------------- -------------
QUARTER ENDED MARCH 31, 2002
Revenues:
Info services & SW maint .............. $ 3,227,000 $ 666,000 $ 106,000 $ 3,999,000
Software licensing .................... 24,000 -- -- 24,000
------------- ------------- ------------- -------------
Total revenues ................... $ 3,251,000 $ 666,000 $ 106,000 $ 4,023,000
============= ============= ============= =============
Operating income (loss) ............... $ 202,000 $ (4,000) $ (155,000) $ 43,000
============= ============= =============
Other income (expense) ................ (108,000)
-------------
Loss before income tax ................ $ (65,000)
Amortization of capitalized
product development .............. $ 35,000 $ 29,000 $ 20,000 $ 84,000
Amortization of U.S.
geographic database .............. -- -- 99,000 99,000
Depreciation .......................... 68,000 13,000 4,000 85,000
Identifiable assets ................... 6,112,000 -- -- 6,112,000
Additions to long-lived assets ........ 31,000 -- -- 31,000
QUARTER ENDED MARCH 31, 2001
Revenues:
Info services & SW maint .............. $ 3,180,000 $ 515,000 $ 144,000 $ 3,839,000
Software licensing .................... 29,000 -- 3,000 32,000
------------- ------------- ------------- -------------
Total revenues ................... $ 3,209,000 $ 515,000 $ 147,000 $ 3,871,000
============= ============= ============= =============
Operating income (loss) ............... $ 2,000 $ (76,000) $ (124,000) $ (198,000)
============= ============= =============
Other income (expense) ................ (155,000)
-------------
Loss before income tax ................ $ (353,000)
Amortization of capitalized
product development .............. $ 136,000 $ -- $ 29,000 $ 165,000
Amortization of U.S.
geographic database .............. -- -- 99,000 99,000
Depreciation .......................... 67,000 13,000 4,000 84,000
Identifiable assets ................... 8,970,000 -- -- 8,970,000
Additions to long-lived assets ........ 81,000 -- -- 81,000
</Table>
9
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 loss was $(150,000) and $(377,000) for the quarters ended
March 31, 2002 and 2001, respectively.
10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND QUARTERLY RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
CONSOLIDATED OPERATIONS. MPSI reported a net quarterly loss of $126,000 or
$.04 per share on revenues of $4.0 million for the three months ended March 31,
2002 compared with a net loss of $376,000 or $.13 per share on revenues of $3.9
million for the comparable quarter ended March 31, 2001. The quarterly results
for March 31, 2002 reflect an accrual of estimated shutdown expenses associated
with the closure of the Brazil office of approximately $326,000 (a net increase
of approximately $266,000 over the normal quarterly expense for that office).
Had this charge not been accrued, the Company would have reported significantly
improved results compared with the March 2001 quarter based on comparable
revenues. This operating improvement is attributable to cost savings resulting
from downsizing which occurred during fiscal 2001. The net effect of ongoing
downsizing resulted in reduced operating expenses of $86,000 for the quarter
ended March 31, 2002 as compared with the same fiscal quarter last year. As the
full effects of downsizing are realized, the Company anticipates significant
reductions in operating expenses, which should portend positive earnings in
future quarters.
CONVENIENCE RETAILING SEGMENT. This business unit accounted for revenues of
$3,251,000, and $3,209,000 for the fiscal quarters ended March 31, 2002 and
2001, respectively, with corresponding operating profits of $202,000 and $2,000.
Although revenues for the quarter ended March 31, 2002 were consistent with the
same period last fiscal year, there was an increase in operating income of
$200,000. This increase in operating income is partially related to decreased
amortization expense of $101,000 resulting from certain capitalized product
development projects reaching the end of their amortization periods. Although
these projects are now fully amortized, they will continue to generate revenue
while the Company moves forward to develop new products slated for release
during fiscal 2002. The other major contributing factor to improved operating
income relates to reduction of the cost base through corporate downsizing, which
took place during fiscal 2001.
PRICING SEGMENT. Revenues of $666,000 for the quarter ended March 31, 2002,
as compared to $515,000 during the same quarter last fiscal year are up $151,000
primarily due to the timing of orders. This segment experienced an operating
loss of $4,000 (including all corporate overhead allocations) for the quarter
ended March 31, 2002 compared to an operating loss of $76,000 during the
comparable quarter last year. The decrease in the operating loss is a direct
result of increased revenues. Excluding corporate overhead charges, this segment
generated contribution margins of $172,000 and $90,000 in the quarters ended
March 31, 2002 and 2001, respectively. Because this segment deals with a
relatively small number of high dollar projects, timing of client pilot tests
and orders can substantially affect period results.
BUSINESS DEVELOPMENT SEGMENT. This unit (which continues to market mapping
products under the DataMetrix brand and is in the process of developing products
which will be marketed through the internet) generated revenues of $106,000
during the fiscal quarter ended March 31, 2002 as compared with $147,000 during
the comparable period last fiscal year. Business Development incurred an
operating loss of $155,000 for the quarter ended March 31, 2002 as compared with
an operating loss of $124,000 during the same fiscal quarter last year. The
reduction in operating income is directly related to the reduction in revenues.
Costs within this group are primarily fixed in nature and therefore do not
significantly fluctuate with revenue volume.
One of the major costs associated with this segment is the amortization and
maintenance of the U.S. geographic database used to generate the unit's product
offerings. Amortization of this database of $99,000 per quarter will continue
throughout fiscal 2002. Until this unit achieves critical mass and the
substantial original product development costs are fully amortized, operating
results are likely to be negative during fiscal 2002.
CONSOLIDATED OPERATING EXPENSES. Consolidated operating expenses were
$2,320,000 for the quarter ended March 31, 2002 as compared with $2,406,000
during the same quarter last fiscal year. This net reduction of $86,000, which
is a result of continuing cost cutting measures implemented by the Company, was
negatively affected by shutdown expenses associated with the Brazil office, in
excess of normal operations of approximately $266,000.
Consolidated general and administrative expenses for the quarter ended March
31, 2002 were up $283,000 (38%) as compared to the same fiscal quarter of last
year. Excluding the net effect of the Brazil office closure reflected in general
and administrative expense of approximately $300,000, the expenses for the two
quarters presented are comparable.
11
Consolidated marketing and client service expenses for the quarter ended
March 31, 2002 were down $398,000 (30%) as compared to the same fiscal quarter
of last year. Consolidated marketing expenses have been reduced as a result of
(1) increased reliance on value-added resellers to service smaller customers,
(2) reduction of marketing personnel and related office requirements in Bristol
and Brazil and, (3) 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.
Consolidated research and development expenses (excluding amounts
capitalized for product development as discussed under Financial Condition and
Liquidity below) for the quarter ended March 31, 2002, were up $29,000 as
comparable with the same fiscal period last year. This increase is a result of
the mix of activities between capital development and pure research /
maintenance (which costs are expensed). Total costs, including amounts
capitalized for product development and maintenance of existing products
decreased approximately $70,000. This decrease is a result of third-party
development of the web-based LocationXpert project incurred during the fiscal
quarter ended March 31, 2001. The Company continues to focus on cost reductions
through new technologies which seek to produce modular products that are easier
to develop, less costly to customize and maintain, and can more readily be
transported to other vertical market applications.
OTHER INCOME AND EXPENSES. Interest expense of $124,000 for the quarter
ended March 31, 2002 was down from $175,000 for the comparable quarter ended
March 31, 2001. The Company's bank debt of $550,000 at March 31, 2002
($1,840,000 at March 31, 2001), which is the primary source of interest expense,
was reduced from $900,000 at December 31, 2001. Additionally, the Company's
positive cash flow from operations allowed for more timely payments of recurring
obligations which resulted in reduced carrying costs.
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 currencies. The Company experienced an exchange gain of approximately
$9,000 for the quarter ended March 31, 2002 as compared to an exchange loss of
$16,000 during the comparable quarter last fiscal year. Although MPSI
anticipates continuing exposure to exchange fluctuations, 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. Income taxes were $61,000 for the quarter ended March 31, 2002
as compared to $23,000 during the same period last fiscal year. The changes in
income tax are primarily due to foreign taxes withheld at the source by
customers. The amount of foreign income taxes withheld can fluctuate
significantly between fiscal periods based not only on the geographic areas in
which the Company operates, but on the particular products and services
delivered within an individual country.
FINANCIAL CONDITION AND LIQUIDITY
Working capital, the Company's primary measure of liquidity, was $(258,000)
at March 31, 2002 as compared with $(165,000) at December 31, 2001. The decrease
in working capital is primarily a result of accrued shutdown expenses related to
the closure of the Brazil office, as previously discussed. Generally, the
decrease in liquidity which resulted from the Brazil office closure was
partially offset by (a) reduced operating expenses related to the downsizing and
reorganization, and (b) reductions in production costs associated with the REX
software and the related databases. Cash receipts generated from operations were
utilized to reduce the bank debt by $350,000 during the current quarter. Net
trade receivables decreased $977,000 as a result of cash collections exceeding
orders received and invoices prepared during the quarter ended March 31, 2002.
Although accounts payable and accrued liabilities increased by $34,000
during the quarter ended March 31, 2002, this increase includes the
non-recurring accrual for the Brazil office closure. Current deferred revenue
decreased by $503,000 as compared to December 31, 2001. This reduction is a
result of revenues on active projects exceeding new billings.
In June 2000, the Company's principal bank, Bank of America, announced its
internal plans to substantially reduce its lending exposures in certain
industries and to certain customer categories. MPSI fell within the criteria
and, accordingly, was pressured to liquidate or move its line of credit. MPSI
has diligently worked this issue on two fronts: (1) investigation of alternative
financing sources, and (2) regular pay down of the debt from operating cash
flows. Although no acceptable financing alternative has been identified, the
outstanding balance has been steadily reduced from $1,940,000 at December 31,
2000 to $900,000 at December 31, 2001. The pay downs have continually pressured
MPSI's operating liquidity and prevented accumulation of additional cash
reserves even though the Company generated positive cash flow from operations of
more than
12
$1.9 million in fiscal 2001. Largely on the basis of the Company's diligent
efforts at liquidation, Bank of America has granted several extensions of the
credit maturity. The latest extension by Bank of America, effective January 6,
2002, was granted concurrently with a $200,000 paydown by the Company and set
the maturity date at October 1, 2002 on the remaining $700,000 outstanding
balance. This action significantly lengthened the Bank's commitment to MPSI when
compared with previous extension periods and provided for an adjustment of the
equity covenant down to $1.7 million. Subsequent to that extension, MPSI has
made further debt payments of $150,000 bringing the outstanding balance down to
$550,000 at March 31, 2002.
In the absence of an alternative banking solution that provides some measure
of working capital capability, MPSI continues to deal with peaks and valleys in
cash flow by adjusting payments to suppliers and other creditors as required.
Management anticipates that cash flow from operations will be sufficient to meet
operating requirements and liquidate remaining bank debt in fiscal 2002.
Capitalized product development expenditures for the quarter ended March 31,
2002 were $157,000 compared with $269,000 in the same period last year. The
reduction in fiscal year 2002 capitalized costs principally reflects the slowing
down of new development as the Company believes its present REX and Pricing
technology far surpasses competitive technology.
MPSI's backlog of market studies at March 31, 2002 in the amount of
approximately $7.7 million, ($9.1 million at December 31, 2001), contained a
substantial number of recurring studies under multi-year client commitments.
Such studies represent a significant amount of the estimated revenues for fiscal
year 2002. 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.
- -------------------
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.
13
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:
11.1 Earnings per share computation
(b) Reports on Form 8-K - None
14
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 May 14, 2002 By /s/ Ronald G. Harper
---------------------- ----------------------------------
Ronald G. Harper, President
(Chief Executive Officer) and
Director
Date May 14, 2002 By /s/ James C. Auten
---------------------- ----------------------------------
James C. Auten, Vice President
(Chief Financial Officer)
15
EXHIBIT INDEX
<Table>
<Caption>
Exhibit
Number Description
- ------- -----------
11.1 Earnings Per Share Computation
</Table>
16