SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1998
or
[ ] Transition Report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the transition period from ________ to ________
Commission File Number: 1-11859
PEGASYSTEMS INC.
(Exact name of Registrant as specified in its charter)
Massachusetts 04-2787865
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
101 Main Street
Cambridge, MA 02142-1590
(Address of principal executive offices) (zip code)
(617) 374-9600
(Registrant's telephone number including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
There were 28,607,200 shares of the Registrant's common stock, $.01 par value
per share, outstanding on June 30, 1998.
PEGASYSTEMS INC. AND SUBSIDIARY
Index to Form 10-Q
Part I - Financial Information
Page
Item 1. Financial Statements ----
Consolidated Balance Sheets at December 31, 1997 3
and June 30, 1998
Consolidated Statements of Income for the three 4
and six months ended: June 30, 1997 and June 30, 1998
Consolidated Statements of Cash Flows for the six 5
months ended: June 30, 1997 and June 30, 1998
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial 9
Condition and Results of Operations
Part II - Other Information
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
Form 10-Q Page 3 of 14
PEGASYSTEMS INC.
Consolidated Balance Sheets
(in thousands, except share-related amounts)
December 31, June 30,
1997 1998
------------ --------
Assets
Current assets:
Cash and cash equivalents $ 52,005 $ 43,898
Trade and installment accounts receivable, net of
allowance for doubtful accounts of $2,200 at
December 31, 1997 and $2,500 at June 30, 1998 20,319 31,126
Prepaid expenses and other current assets 1,514 2,121
--------- --------
Total current assets 73,838 77,145
Long-term license installments, net 36,403 48,133
Equipment and improvements, net 5,578 6,883
Purchased software, net 11,701 10,524
--------- --------
Total assets $127,520 $142,685
========= ========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $ 5,398 $ 8,159
Deferred revenue 1,754 4,198
Deferred income taxes 3,978 7,762
--------- -------
Total current liabilities 11,130 20,119
--------- -------
Deferred income taxes 3,669 3,669
--------- -------
Stockholders' Equity:
Preferred stock, $.01 par value, 1,000,000 shares
authorized; no shares issued and outstanding -- --
Common stock, $.01 par value, 45,000,000 shares authorized;
28,545,100 shares and 28,607,200 shares issued and
outstanding in 1997 and 1998, respectively 285 286
Additional paid-in capital 86,841 87,133
Deferred compensation (55) (45)
Stock warrant 2,897 2,897
Retained earnings 23,107 29,003
Cumulative foreign currency translation adjustment (354) (377)
--------- --------
Total stockholders' equity 112,721 118,897
--------- --------
Total liabilities and stockholders' equity $127,520 $142,685
========= ========
The accompanying notes are an integral part of these
consolidated financial statements.
Form 10-Q Page 4 of 14
PEGASYSTEMS INC.
Consolidated Statements of Income
(in thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1998 1997 1998
-------------- ------- ------------- -------
Revenue:
Software license $ 1,696 $14,534 $ 7,511 $25,922
Services 3,052 9,005 5,719 15,584
------- ------- ------- -------
Total revenue 4,748 23,539 13,230 41,506
------- ------- ------- -------
Cost of revenue:
Cost of software license 10 735 20 881
Cost of services 2,386 5,317 4,536 9,376
------- ------- ------- -------
Total cost of revenue 2,396 6,052 4,556 10,257
------- ------- ------- -------
Gross Profit 2,352 17,487 8,674 31,249
Operating expenses:
Research and development 3,253 5,310 5,839 10,521
Selling and marketing 4,403 5,825 7,096 11,112
General and administrative 641 1,237 1,246 2,486
------- ------- ------- -------
Total operating expenses 8,297 12,372 14,181 24,119
------- ------- ------- -------
Income (loss) from operations (5,945) 5,115 (5,507) 7,130
License interest income 421 604 795 1,153
Other interest income 998 598 1,748 1,227
------- ------- ------- -------
Income (loss) before provision (benefit) for
income taxes (4,526) 6,317 (2,964) 9,510
Provision (benefit) for income taxes (1,720) 2,401 (1,126) 3,614
------- ------- ------- -------
Net income (loss) $(2,806) $ 3,916 $(1,838) $ 5,896
======= ======= ======= =======
Earnings (loss) per share:
Basic $ (0.10) $ 0.14 $ (0.07) $ 0.21
======= ======= ======= =======
Diluted $ (0.10) $ 0.13 $ (0.07) $ 0.19
======= ======= ======= =======
Weighted average number of common and potential
common shares outstanding:
Basic 28,452 28,573 28,134 28,560
======= ======= ======= =======
Diluted 28,452 30,781 28,134 30,463
======= ======= ======= =======
The accompanying notes are an integral part of these
consolidated financial statements.
Form 10-Q Page 5 of 14
PEGASYSTEMS INC.
Consolidated Statements of Cash Flows
(in thousands)
Six Months Ended
June 30,
1997 1998
-------------- -------
Cash Flows from Operating Activities:
Net income (loss) $(1,838) $ 5,896
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Provision for deferred income taxes (1,126) 3,784
Depreciation and amortization 804 2,647
Provision for doubtful accounts 815 300
Changes in operating assets and liabilities:
Trade and installment accounts receivable (3,668) (22,837)
Prepaid expenses and other current assets (385) (607)
Accounts payable and accrued expenses 963 2,761
Deferred revenue 2,024 2,444
------- -------
Net cash used in operating activities (2,411) (5,612)
------- -------
Cash Flows from Investing Activities:
Purchase of equipment and improvements (1,565) (2,764)
------- -------
Net cash used in investing activities (1,565) (2,764)
------- -------
Cash Flows from Financing Activities:
Issuance of common stock, net 51,943 --
Exercise of stock options 424 292
------- -------
Net cash provided by financing activities 52,367 292
Effect of exchange rate on cash and cash equivalents (81) (23)
------- -------
Net increase (decrease) in cash and cash equivalents 48,310 (8,107)
Cash and cash equivalents, at beginning of period 24,201 52,005
------- -------
Cash and cash equivalents, at end of period $72,511 $43,898
======= =======
The accompanying notes are an integral part of these
consolidated financial statements.
Form 10-Q Page 6 of 14
PEGASYSTEMS INC.
Notes to Consolidated Interim Financial Statements
June 30, 1998
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of Pegasystems Inc.
(the "Company") presented herein have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three-and six-month periods ended June 30, 1998 are
not necessarily indicative of the results that may be expected for the year
ended December 31, 1998. The Company suggests that these interim condensed
consolidated financial statements be read in conjunction with the consolidated
financial statements and notes thereto for the year ended December 31, 1997,
included in the Company's 1997 Annual Report to Stockholders filed with the
Securities and Exchange Commission.
Note B - Earnings Per Share
The Company follows the provisions of Statement of Financial Standards (SFAS)
No. 128, "Earnings Per Share." SFAS No. 128 establishes standards for computing
and presenting earnings per share and applies to entities with publicly held
common stock or potential common stock. The Company has applied the provisions
of SFAS No. 128 and SAB No. 98 retroactively to all periods presented.
Calculations of basic and diluted net income (loss) per share and potential
common shares are as follows:
Three Months Ended Six Months Ended
June 30, June 30,
(in thousands, except per share data) 1997 1998 1997 1998
-------- ------- ------- -------
Basic
Net income (loss) $ (2,806) $ 3,916 $(1,838) $ 5,896
======== ======= ======= =======
Weighted average common shares outstanding 28,452 28,573 28,134 28,560
======== ======= ======= =======
Basic earnings (loss) per share $ (0.10) $ 0.14 $ (0.07) $0.21
======== ======= ======= =======
Diluted
Net income (loss) $ (2,806) $ 3,916 $(1,838) $ 5,896
======== ======= ======= =======
Weighted average common shares outstanding 28,452 28,573 28,134 28,560
Effect of:
Assumed exercise of stock options -- 2,208 -- 1,903
-------- ------- ------- -------
Weighted average common shares outstanding,
assuming dilution 28,452 30,781 28,134 30,463
======== ======= ======= =======
Diluted earnings (loss) per share $ (0.10) $ 0.13 $ (0.07) $ 0.19
======== ======= ======= =======
For the three-month periods ended June 30, 1997 and 1998, 77,368 and 295,970
options, respectively, were excluded from the weighted average common shares
outstanding, assuming dilution, as their effect would be anti-dilutive. For the
six-month periods ended June 30, 1997 and 1998, 77,564 and 577,025 options,
respectively, were excluded from the weighted average common shares outstanding,
assuming dilution, as their effect would be anti-dilutive.
Form 10-Q Page 7 of 14
PEGASYSTEMS INC.
Notes to Consolidated Interim Financial Statements - Continued
June 30, 1998
Note C - New Accounting Standards
The Company adopted SFAS No. 130, "Reporting Comprehensive Income," effective
January 1, 1998. SFAS 130 establishes standards for reporting and display of
comprehensive income and its components in financial statements. The components
of the Company's comprehensive income are as follows:
Three Months Ended Six Months Ended
June 30, June 30,
(in thousands) (in thousands)
1997 1998 1997 1998
------- ------ ------- ------
Net income (loss) $(2,806) $3,916 $(1,838) $5,896
Foreign currency translation adjustments, net
of income taxes 23 33 50 14
======= ====== ======= ======
Comprehensive income (loss) $(2,783) $3,949 $(1,788) $5,910
======= ====== ======= ======
In February 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 132, "Employers' Disclosures about Pensions and other post-Retirement
Benefits." SFAS No. 132 is effective for fiscal years beginning after December
15, 1997. The Company does not expect the adoption of this Statement to have a
significant impact on its financial position or results of operations.
In March 1998, the American Institute of Certified Public Accountants ("AICPA")
issued Statement of Position 98-1 ("SOP 98-1"), "Accounting for Costs of
Computer Software Developed or Obtained for Internal Use." SOP 98-1 requires
computer software costs associated with internal use software to be expensed as
incurred until certain capitalization criteria are met. The Company will adopt
SOP 98-1 prospectively beginning January 1, 1999. The Company does not expect
the adoption of this Statement to have a significant impact on its financial
position or results of operations.
In April 1998, the AICPA issued Statement of Position 98-5 ("SOP 98-5"),
Reporting on the Costs of Start-Up Activities." SOP 98-5 requires all costs
associated with pre-opening, pre-operating and organization activities to be
expensed as incurred. The Company will adopt SOP 98-5 beginning January 1, 1999.
The Company does not expect the adoption of this Statement to have a significant
impact on its financial position or results of operations.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards for derivative instruments and for hedging instruments. It
requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. This statement applies to all entities and is effective for all
fiscal quarters beginning after June 15, 1999. Initial application of this
Statement should be as of an entity's fiscal quarter. As of June 30, 1998 and
during the quarter then ended, the Company did not hold any derivative
instruments or have any hedging activities. The Company does not expect the
adoption of this Statement to have a significant impact on its financial
position or results of operations.
Form 10-Q Page 8 of 14
PEGASYSTEMS INC.
Notes to Consolidated Interim Financial Statements - Continued
June 30, 1998
Note D - Restatement
The Company restated its consolidated financial statements for the quarters
ended March 31, 1997, June 30, 1997 and September 30, 1997. In the opinion of
management, all material adjustments necessary to correct the financial
statements have been recorded. The restatements reflect revenue adjustments, as
a result of a change in the timing of revenue recognition on certain contracts.
These adjustments resulted in revenue reversals or in an increase of deferred
revenue. Also included in the restated consolidated financial statements are
operating expenses, including a provision for bad debts not previously recorded
by the Company and the recording of certain other expenses and reserves.
A summary of the impact of such restatements on the financial statements for the
three months ended and six-months ended June 30, 1997 is as follows:
Three Months Ended Six Months Ended
June 30, 1997 June 30, 1997
Previously As Previously As
Reported Restated Reported Restated
-------- -------- -------- --------
Software license revenue $ 3,983 $ 1,696 $ 10,462 $ 7,511
Services revenue 3,250 3,052 6,004 5,719
Total revenue 7,233 4,748 16,466 13,230
(Loss) from operations (2,814) (5,945) (1,093) (5,507)
Net income (loss) (865) (2,806) 899 (1,838)
Earnings (loss) per share: Basic $ (0.03) $ (0.10) $ 0.03 $ (0.07)
Earnings (loss) per share: Diluted $ (0.03) $ (0.10) $ 0.03 $ (0.07)
Total assets $123,311 $132,106 $123,311 $132,106
Form 10-Q Page 9 of 14
PEGASYSTEMS INC.
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Results of Operations
Three and Six Months Ended June 30, 1998 Compared to Three and Six Months Ended
June 30, 1997
Revenue
Total revenue for the three months ended June 30, 1998 (the "1998 Three Month
Period") increased 395.8% to $23.5 million from $4.7 million for the three
months ended June 30, 1997 (the "1997 Three Month Period"). Total revenue for
the six months ended June 30, 1998 (the "1998 Six Month Period") increased
213.7% to $41.5 million from $13.2 million for the six months ended June 30,
1997 (the "1997 Six Month Period"). These increases were due to increases in
both software license and services revenue.
Software license revenue for the 1998 Three Month Period increased 757.0% to
$14.5 million from $1.7 million for the 1997 Three Month Period. Software
license revenue for the 1998 Six Month Period increased 245.1% to $25.9 million
from $7.5 million for the 1997 Six Month Period. These increases in software
license revenue were primarily attributable to software license acceptances by
new customers, software license agreement renewals, and extended software usage
by existing customers.
Services revenue for the 1998 Three Month Period increased 195.0% to $9.0
million from $3.1 million for the 1997 Three Month Period. Services revenue for
the 1998 Six Month Period increased 172.5% to $15.6 million from $5.7 million
for the 1997 Six Month Period. These increases in services revenue were
primarily attributable to additional consulting services provided to existing
customers, increased implementation services for new customers, and to a lesser
extent, increased maintenance revenue from a larger installed product base.
Cost of Revenue
Cost of software license for the 1998 Three Month Period increased 7,250.0% to
$0.7 million from $0.01 million for the 1997 Three Month Period. As a percentage
of software license revenue, cost of software license increased from 0.6% for
the 1997 Three Month Period to 5.1% for the 1998 Three Month Period. Cost of
software license for the 1998 Six Month Period increased 4,305.0% to $0.9
million from $0.02 million for the 1997 Six Month Period. As a percentage of
software license revenue, cost of software license increased from 0.3% for the
1997 Six Month Period to 3.4% for the 1998 Six Month Period. These increases
were primarily due to licensing third party software and amortization costs
associated with a stock purchase warrant issued by the Company in June 1997.
Cost of services for the 1998 Three Month Period increased 122.8% to $5.3
million from $2.4 million for the 1997 Three Month Period. Cost of services for
the 1998 Six Month Period increased 106.7% to $9.4 million from $4.5 million for
the 1997 Six Month Period. These increases were due to costs associated with
increased staffing in the Company's Client Services group. Cost of services as a
percentage of services revenue decreased from 78.2% for the 1997 Three Month
Period to 59.0% for the 1998 Three Month Period. Cost of services as a
percentage of services revenue decreased from 79.3% for the 1997 Six Month
Period to 60.2% for the 1998 Six Month Period. These improved gross margins, for
both the 1998 Three and Six Month Periods, were due to more effective use of a
larger Consulting Services staff.
Form 10-Q Page 10 of 14
Operating Expenses
Research and development expenses for the 1998 Three Month Period increased
63.2% to $5.3 million from $3.3 million for the 1997 Three Month Period.
Research and development expenses for the 1998 Six Month Period increased 80.2%
to $10.5 million from $5.8 million for the 1997 Six Month Period. These
increases were primarily due to costs associated with increased staffing in the
Company's research and development group and amortization costs associated with
the acquisition of FDR's ESP Software. As a percentage of total revenue,
research and development expenses decreased from 68.5% for the 1997 Three Month
Period to 22.6% for the 1998 Three Month Period. As a percentage of total
revenue, research and development expenses decreased from 44.1% for the 1997 Six
Month Period to 25.4% for the 1998 Six Month Period. These decreases were due to
increased growth in the Company's total revenue.
Selling and marketing expenses for the 1998 Three Month Period increased 32.3%
to $5.8 million from $4.4 million for the 1997 Three Month Period. Selling and
marketing expenses for the 1998 Six Month Period increased 56.6% to $11.1
million from $7.1 million for the 1997 Six Month Period. These increases were
primarily due to costs associated with increased staffing in the Company's
selling and marketing group. As a percentage of total revenue, selling and
marketing expenses decreased from 92.7% for the 1997 Three Month Period to 24.8%
for the 1998 Three Month Period. As a percentage of total revenue, selling and
marketing expenses decreased from 53.6% for the 1997 Six Month Period to 26.8%
for the 1998 Six Month Period. These decreases were due to increased growth in
the Company's total revenue.
General and administrative expenses for the 1998 Three Month Period increased
93.0% to $1.2 million from $0.6 million for the 1997 Three Month Period. General
and administrative expenses for the 1998 Six Month Period increased 99.5% to
$2.5 million from $1.2 million for the 1997 Six Month Period. These increases
were due to increased investment in the infrastructure needed to support the
Company's growth, and increased professional fees incurred as a result of the
change in the Company's independent public accountants. General and
administrative expenses decreased as a percentage of total revenue from 13.5%
for the 1997 Three Month Period to 5.3% for the 1998 Three Month Period and from
9.4% for the 1997 Six Month Period to 6.0% for the 1998 Six Month Period. These
decreases were due to increased growth in the Company's total revenue.
License Interest Income
License interest income, which is the portion of all license fees due under
software license agreements that was not recognized upon product acceptance or
license renewal, increased 43.5% from $421,000 for the 1997 Three Month Period
to $604,000 for the 1998 Three Month Period. License interest income increased
45.0% from $795,000 for the 1997 Six Month Period to $1.2 million for the 1998
Six Month Period. These increases were due to an increase in the Company's
installed customer base.
Provision for Income Taxes
The tax benefit for federal, state and foreign taxes was $1.7 million for the
1997 Three Month Period. The tax provision for the 1998 Three Month Period was
$2.4 million. The tax benefit for federal, state and foreign taxes was $1.1
million for the 1997 Six Month Period. The tax provision for the 1998 Six Month
Period was $3.6 million. The effective tax rate has remained constant at 38.0%
for the 1997 and 1998 Three and Six Month Periods.
Form 10-Q Page 11 of 14
Liquidity and Capital Resources
Since its inception, the Company has funded its operations primarily through
cash flows from operations and bank borrowings. In July 1996, the Company issued
and sold 2.7 million shares of Common Stock in connection with its initial
public offering. Net proceeds to the Company from this offering were
approximately $29.4 million. In January 1997, the Company issued and sold 1.8
million shares of Common Stock in connection with a second public offering. Net
proceeds to the Company from this second offering were approximately $51.9
million. At June 30, 1998, the Company had cash and cash equivalents of
approximately $43.9 million and working capital of approximately $57.0 million.
Net cash used in operating activities for the 1998 Six Month period was $5.6
million, primarily due to an increase in accounts receivable partially offset by
increases in deferred income taxes, accounts payable and accrued expenses,
depreciation and amortization, and deferred revenue.
Net cash used in investing activities was $2.8 million during the 1998 Six Month
Period due to the purchase of property and equipment consisting mainly of
computer hardware and software and furniture and fixtures to support the
expansion of certain facilities and the Company's growing employee base.
Net cash provided by financing activities was $292,000 during the 1998 Six
Month Period due to the exercise of stock options.
The Company's capital commitments consist primarily of operating leases for
office space and equipment. At June 30, 1998, the Company's commitments under
non-cancellable operating leases for office space with terms in excess of one
year totaled $2.9 million, $3.8 million and $3.6 million for 1998, 1999 and
2000, respectively. The Company's total payments under such leases was $1.6
million for the 1998 Six Month Period.
The Company's $5.0 million revolving credit line has a maturity date of June 30,
1999. At June 30, 1998, the Company had no borrowings under such facility. The
Company's credit agreement prohibits the payment of dividends, has profitability
requirements and requires maintenance of specified levels of tangible net worth
and certain financial ratios.
The Company recorded bad debt expense of $300,000 in the 1998 Six Month Period
as a result of indications that certain receivables relating primarily to
consulting and installation services rendered by the Company would not be
collected in full.
The Company believes that the net proceeds from its two public offerings
together with cash generated by operations and availability under its bank
credit facility will be sufficient to fund the Company's operations for at least
the next twelve months. However, there can be no assurance that additional
capital beyond the amounts currently forecasted by the Company will not be
required or that any such required additional capital will be available on
reasonable terms, if at all, at such time as required by the Company.
The "Year 2000 Issue" refers to the problems associated with computer programs
having been written using two digits rather than four to define the applicable
year. The Company has performed an assessment of the software it uses internally
and the software it licenses to customers and such assessment has not revealed
any outstanding problems in this regard. There can be no assurance that such
problems will not develop or be revealed in the future which could materially
and adversely affect the Company's business, operating results, and financial
condition.
Form 10-Q Page 12 of 14
Inflation
Inflation has not had a significant impact on the Company's operating results to
date, nor does the Company expect it to have a significant impact in the future
due to the fact that the Company's license and maintenance fees are typically
subject to annual increases based on recognized inflation indexes.
Forward-Looking Statements
Certain statements contained in this Form 10-Q are "forward-looking statements"
as defined in the Private Securities Litigation Reform Act of 1995. These
statements involve various risks and uncertainties which could cause the
Company's actual results to differ from those expressed in such forward-looking
statements. These risks and uncertainties include the seasonal variation of the
Company's operations and fluctuations in the Company's quarterly results, rapid
technological change involving the Company's products, delays in product
development and implementation, the technological compatibility of the Company's
products with its customers' systems, the Company's dependence on customers in
the financial services market, intense competition in the markets for the
Company's products, risk of non-renewal by current customers, management of the
Company's growth, and other risks and uncertainties. Further information
regarding those factors which could cause the Company's actual results to differ
materially from any forward-looking statements contained herein is included in
the Company's filings with the Securities and Exchange Commission.
Form 10-Q Page 13 of 14
PEGASYSTEMS INC.
Part II - Other Information:
Item 1. Legal Proceedings
Disclosure concerning certain litigation pending against the Company is
contained in the Company's Form 10-K filed April 15, 1998. There have been no
material developments with respect to such litigation since such date.
In April 1998, a complaint purporting to be a class action was filed with the
United States District Court for the District of Massachusetts alleging that the
Company and several of its officers violated section 10(b) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), Rule 10b-5 promulgated by
the Commission thereunder, and section 20(a) of the Securities Exchange Act. The
complaint names the Company itself, Alan Trefler, Ira Vishner, Kenneth W. Olson
and Michael R. Pyle, four officers of the Company, as defendants. The Complaint
alleges that the defendants issued false and misleading financial statements and
press releases concerning the Company's publicly reported earnings. The
Complaint seeks certification of a class of persons who purchased the Company's
Common Stock between April 28, 1997 and April 2, 1998, and does not specify the
amount of damages sought. The defendants have served upon counsel for the
plaintiffs a motion to dismiss the Complaint, and expects the defendants to file
a response to the motion. The defendants have not filed an answer or any other
responsive pleadings in this litigation. The Company intends to defend this
matter vigorously.
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
10.1 Amended and Restated 1994 Long-Term Incentive Plan
27.1 Financial Data Schedule
(b) Reports on Form 8-K:
None
Form 10-Q Page 14 of 14
PEGASYSTEMS INC.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Pegasystems Inc.
Date: August 14, 1998 /s/ Ira Vishner
---------------
Ira Vishner
Vice President, Corporate Services,
Treasurer, Chief Financial Officer
and Director
(principal financial officer and
chief accounting officer)