-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NRRp6xYmkiGR56gYHfz0IdkHKN6Nr2H80OFO94O3br+YbHqFacHVf8qp5D8/m+r4 bijqDwNC0giirSQKpD2BdQ== 0001029869-98-000499.txt : 19980416 0001029869-98-000499.hdr.sgml : 19980416 ACCESSION NUMBER: 0001029869-98-000499 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19980415 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PEGASYSTEMS INC CENTRAL INDEX KEY: 0001013857 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROCESSING & DATA PREPARATION [7374] IRS NUMBER: 042787865 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 001-11859 FILM NUMBER: 98594757 BUSINESS ADDRESS: STREET 1: 101 MAIN ST CITY: CAMBRIDGE STATE: MA ZIP: 02142-1590 BUSINESS PHONE: 6173749600 MAIL ADDRESS: STREET 1: 101 MAIN ST CITY: CAMBRIDGE STATE: MA ZIP: 02142-1590 10-Q/A 1 PEGASYSTEMS INC. FORM 10-Q/A SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q/A (Mark One) [X] Quarterly Report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the quarterly period ended September 30, 1997 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 28,541,000 shares of the Registrant's common stock, $.01 par value per share, outstanding on September 30, 1997. PEGASYSTEMS INC. AND SUBSIDIARY Index to Form 10-Q
Part I - Financial Information Page ---- Item 1. Financial Statements Consolidated Balance Sheets at December 31, 1996 3 and September 30, 1997 Consolidated Statements of Income for the three 4 and nine months ended: September 30, 1996 and September 30, 1997 Consolidated Statements of Cash Flows for the nine 5 months ended: September 30, 1996 and September 30, 1997 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial 8 Condition and Results of Operations Part II - Other Information Item 1. Legal Proceedings 12 Item 2. Changes in Securities 12 Item 3. Defaults upon Senior Securities 12 Item 4. Submission of Matters to a Vote of Security Holders 12 Item 5. Other Information 12 Item 6. Exhibits and Reports on Form 8-K 12 SIGNATURES 13
Form 10-Q/A Page 3 of 13 PEGASYSTEMS INC. Consolidated Balance Sheets (in thousands, except share-related amounts)
December 31, September 30, 1996 1997 ------------------ ------------------- Assets (As Restated) Current assets: Cash and cash equivalents $24,201 $ 54,555 Trade and installment accounts receivable, net of allowance for doubtful accounts of $939 at December 31, 1996 and $2,245 at September 30, 1997 14,582 18,416 Prepaid expenses and other current assets 1,235 1,788 ------------------ ------------------- Total current assets 40,018 74,759 Long-term license installments, net 23,802 26,783 Equipment and improvements, net 3,035 4,679 Purchased software and other, net -- 12,286 ------------------ ------------------- Total assets $66,855 $118,507 ================== =================== Liabilities and Stockholders' Equity Current liabilities: Accounts payable and accrued expenses $ 2,697 $ 3,911 Deferred revenue 53 845 Deferred income taxes 2,904 814 ------------------ ------------------- Total current liabilities 5,654 5,570 ------------------ ------------------- Deferred income taxes 8,816 8,787 ------------------ ------------------- 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; 26,392,200 shares and 28,541,000 shares issued and outstanding at December 31, 1996 and September 30, 1997, respectively 264 285 Additional paid-in capital 30,206 82,784 Deferred compensation (73) (59) Stock warrant -- 2,897 Retained earnings 22,022 18,565 Cumulative foreign currency translation adjustment (34) (322) ------------------ ------------------- Total stockholders' equity 52,385 104,150 ------------------ ------------------- Total liabilities and stockholders' equity $66,855 $118,507 ================== ===================
The accompanying notes are an integral part of these consolidated financial statements. Form 10-Q/A Page 4 of 13 PEGASYSTEMS INC. Consolidated Statements of Income (in thousands, except per share amounts)
Three Months Ended Nine Months Ended September 30, September 30, 1996 1997 1996 1997 -------------- --------------- ------------- -------------- Revenue: (As Restated) (As Restated) Software license $6,502 $ 5,090 $12,896 $12,601 Services 3,064 3,578 8,060 9,297 -------------- --------------- ------------- -------------- Total revenue 9,566 8,668 20,956 21,898 -------------- --------------- ------------- -------------- Cost of revenue: Cost of software license 118 86 354 106 Cost of services 2,017 2,829 5,006 7,365 -------------- --------------- ------------- -------------- Total cost of revenue 2,135 2,915 5,360 7,471 -------------- --------------- ------------- -------------- Gross Profit 7,431 5,753 15,596 14,427 Operating expenses: Research and development 2,361 4,261 5,883 10,100 Selling and marketing 1,614 4,782 3,870 11,878 General and administrative 541 721 1,329 1,967 -------------- --------------- ------------- -------------- Total operating expenses 4,516 9,764 11,082 23,945 -------------- --------------- ------------- -------------- Income (loss) from operations 2,915 (4,011) 4,514 (9,518) License interest income 381 476 1,127 1,271 Other interest income 273 922 296 2,670 Interest expense (16) -- (85) -- -------------- --------------- ------------- -------------- Income (loss) before provision for income taxes 3,553 (2,613) 5,852 (5,577) Provision (benefit) for income taxes 1,386 (993) 2,285 (2,119) -------------- --------------- ------------- -------------- Net income (loss) $2,167 $(1,620) $ 3,567 $(3,458) ============== =============== ============= ============== Earnings per share: Basic $ 0.08 $ (0.06) $ 0.15 $ (0.12) ============== =============== ============= ============== Diluted $ 0.08 $ (0.06) $ 0.14 $ (0.12) ============== =============== ============= ============== Weighted average number of common shares outstanding: Basic 25,805 28,520 24,268 28,264 ============== =============== ============= ============== Diluted 27,818 28,520 26,207 28,264 ============== =============== ============= ==============
The accompanying notes are an integral part of these consolidated financial statements. Form 10-Q/A Page 5 of 13 PEGASYSTEMS INC. Consolidated Statements of Cash Flows (in thousands)
Nine Months Ended September 30, 1996 1997 -------------------- ------------------- Cash flows from operating activities: (As Restated) Net income (loss) $ 3,567 $ (3,458) Adjustments to reconcile net income (loss) to net cash used in operating activities: Provision for deferred income taxes 2,037 (2,119) Depreciation and amortization 1,152 2,258 Provision for doubtful accounts -- 1,315 Changes in operating assets and liabilities: Trade and installment accounts receivable (8,438) (8,096) Prepaid expenses and other current assets (116) (553) Accounts payable and accrued expenses (198) 1,214 Deferred revenue 149 792 -------------------- ------------------- Net cash used in operating activities (1,847) (8,647) Cash flows from investing activities: Purchase of equipment and improvements (1,067) (3,277) Purchased software -- (10,000) -------------------- ------------------- Net cash used in investing activities (1,067) (13,277) Cash flows from financing activities: Repayments of long-term debt (1,598) -- Issuance of common stock, net 29,396 51,943 Exercise of stock options 60 623 -------------------- ------------------- Net cash provided by financing activities 27,858 52,566 -------------------- ------------------- Effect of exchange rate on cash and cash equivalents (36) (288) -------------------- ------------------- Net increase in cash and cash equivalents 24,908 30,354 -------------------- ------------------- Cash and cash equivalents, at beginning of period 511 24,201 -------------------- ------------------- Cash and cash equivalents, at end of period $25,419 $ 54,555 ==================== ===================
The accompanying notes are an integral part of these consolidated financial statements. Form 10-Q/A Page 6 of 13 PEGASYSTEMS INC. Notes to Consolidated Interim Financial Statements September 30, 1997 (Unaudited) Note A - Basis of Presentation The accompanying unaudited consolidated financial statements of Pegasystems Inc. (the "Company") presented herein, as restated, 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 nine-month periods ended September 30, 1997 are not necessarily indicative of the results that may be expected for the year ended December 31, 1997. 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, 1996, included in the Company's Annual Report to Stockholders filed with the Securities and Exchange Commission. Note B - Subsequent Events The Company restated its consolidated financial statements for the unaudited quarters ended March 31, 1997, June 30, 1997, and September 30, 1997. The restatements reflect changes in the timing of revenue recognition and expense on certain contracts and increased reserves for revenue and doubtful accounts. In the opinion of management, all material adjustments necessary to correct the financial statements have been recorded. A summary of the impact of such restatements on the financial statements for the unaudited three months and nine months ended September 30, 1997 is as follows:
Unaudited Unaudited Three Months Ended Nine Months Ended September 30, 1997 September 30, 1997 Previously As Previously As Reported Restated Reported Restated -------------- --------------------------------------- ----------------- Software license revenue $3,273 $5,090 $13,734 $12,601 Services revenue 3,737 3,578 9,742 9,297 Total revenue 7,010 8,668 23,476 21,898 Income (loss) from operations (5,009) (4,011) (6,102) (9,518) Net (loss) income (2,239) (1,620) (1,340) (3,458) Earnings per share: Basic $(0.08) ($0.06) $0.05 ($0.12) Earnings per share: Diluted $(0.08) ($0.06) $0.05 ($0.12) Total assets $121,023 $118,507 $121,023 $118,507
Form 10-Q/A Page 7 of 13 Note C - Net Income Per Share The Company has adopted Statement of Financial Accounting 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. In accordance with the Securities and Exchange Commission's Staff Accounting Bulletin (SAB) No. 98, the Company has determined that there were no nominal issuances of common stock or potential common stock in the period prior to the Company's initial public offering (IPO). The Company has applied the provisions of SFAS No. 128 and SAB No. 98 retroactively to all periods presented. The net loss amounts for the three and nine months ended September 30, 1997 reflect the restatement adjustments discussed in Note B. Calculations of basic and diluted net income per share and potential common share are as follows:
Three Months Ended Nine Months Ended September 30, September 30, 1996 1997 1996 1997 -------------- ------------ -------------- ------------- (in thousands, except per share data) Basic Net income $2,167 $(1,620) $3,567 $(3,458) ============== ============ ============== ============= Weighted average common shares outstanding 25,805 28,520 24,268 28,264 ============== ============ ============== ============= Basic earnings per share $0.08 $(0.06) $0.15 $(0.12) ============== ============ ============== ============= Diluted Net income $2,167 $(1,620) $3,567 $(3,458) ============== ============ ============== ============= Weighted average common shares outstanding 25,805 28,520 24,268 28,264 Effect of: Assumed exercise of stock options 2,013 -- 1,939 -- -------------- ------------ -------------- ------------- Weighted average common shares outstanding, assuming dilution 27,818 28,520 26,207 28,264 ============== ============ ============== ============= Diluted earnings per share $0.08 $(0.06) $0.14 $(0.12) ============== ============ ============== =============
Note D - Software License and Support and Warrant Agreements On June 27, 1997, the Company entered into Software License and Support and Warrant Agreements with First Data Resources, Inc. (FDR). The provisions of the Software License and Support Agreement give FDR the right to use the Company's software in connection with new products and also the exclusive right to market, distribute and sublicense the Company's software and new products to FDR customers and prospects. In addition to the granting of a license to use its software, the Company will also provide services to FDR in connection with the new products. For the right to the license and the services, FDR is expected to pay the Company a base fee of $49.25 million. FDR will pay $5.0 million in 1997 and remaining fees are expected to be paid on a monthly basis over the term of the agreement. The initial term of this agreement commences on June 27, 1997 and runs through December 31, 2002. In accordance with the Software License and Support Agreement, the Company was granted a license for access to and use of the designs, specifications and code of FDR's ESP Product. As consideration for this right, the Company paid FDR $10.0 million. This amount was recorded as purchased software on the accompanying consolidated balance sheet. In connection with the Software License and Support Agreement on June 27, 1997, the Company committed to provide a warrant to FDR. Pursuant to the Warrant Agreement, the Company gave FDR the right to purchase 284,876 shares of the Company's Common Stock at a purchase price of $28.25 per share which represented the fair market value of the common stock on the date of the agreement. The warrant will become exercisable on June 27, 1998 and will expire on June 27, 2002. The warrant was valued at $2.9 million and the corresponding deferred asset was capitalized and included in "purchased software and other" on the accompanying consolidated balance sheet. The Company will recognize the base fee revenue and also amortize the value of the purchased software and the warrant on a pro rata basis over the initial 5-1/2 year term of the agreement. Form 10-Q/A Page 8 of 13 PEGASYSTEMS INC. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Three and Nine Months Ended September 30, 1997 Compared to Three and Nine Months Ended September 30, 1996 The Company restated its consolidated financial statements for the unaudited three-month and nine-month periods ended September 30, 1997. The restatements reflect changes in the timing of revenue recognition and expense on certain contracts and increased reserves for revenue and doubtful accounts. In the opinion of management, all material adjustments necessary to correct the financial statements have been recorded. Revenue Total revenue for the three months ended September 30, 1997 (the "1997 Three Month Period") decreased 9.4% to $8.7 million from $9.6 million for the three months ended September 30, 1996 (the "1996 Three Month Period"). This decrease was primarily due to a decrease in software license revenue. Total revenue for the nine months ended September 30, 1997 (the "1997 Nine Month Period") increased 4.5% to $21.9 million from $21.0 million for the nine months ended September 30, 1996 (the "1996 Nine Month Period"). This increase was primarily due to an increase in software license revenue. Software license revenue for the 1997 Three Month Period decreased 21.7% to $5.1 million from $6.5 million for the 1996 Three Month Period. This decrease in software license revenue for the 1997 Three Month Period was primarily attributable to fewer renewals of licenses by existing customers. Software license revenue for the 1997 Nine Month Period decreased 2.3% to $12.6 million from $12.9 million for the 1996 Nine Month Period. This decrease in software license revenue for the 1997 Nine Month Period was primarily attributable to fewer software license acceptances by new customers. Services revenue for the 1997 Three Month Period increased 16.8% to $3.6 million from $3.1 million for the 1996 Three Month Period. Services revenue for the 1997 Nine Month Period increased 15.3% to $9.3 million from $8.1 million for the 1996 Nine Month Period. The increase in services revenue was primarily attributable to increased implementation services for new customers, additional consulting services provided to existing customers, and to a lesser extent, increased maintenance revenue from a larger installed product base. Cost of Revenue Cost of software license for the 1997 Three Month Period decreased 27.1% to $0.09 million from $0.12 million for the 1996 Three Month Period, and decreased slightly as a percentage of total revenue to 1.0% for the 1997 Three Month Period from 1.2% for the 1996 Three Month Period. As a percentage of software license revenue, cost of software license decreased to 1.7% for the 1997 Three Month Period from 1.8% for the 1996 Three Month Period. Cost of software license for the 1997 Nine Month Period decreased 70.1% to $0.11 million from $0.35 million for the 1996 Nine Month Period, and decreased as a percentage of total revenue to 0.5% for the 1997 Nine Month Period from 1.7% for the 1996 Nine Month Period. As a percentage of software license revenue, cost of software license decreased to 0.8% for the 1997 Nine Month Period from 2.7% for the 1996 Nine Month Period. Form 10-Q/A Page 9 of 13 Cost of services for the 1997 Three Month Period increased 40.3% to $2.8 million from $2.0 million for the 1996 Three Month Period, and increased as a percentage of total revenue to 32.6% for the 1997 Three Month Period from 21.1% for the 1996 Three Month Period. As a percentage of service revenue, cost of services increased to 79.1% for the 1997 Three Month Period from 65.8% for the 1996 Three Month Period. Cost of services for the 1997 Nine Month Period increased 47.1% to $7.4 million from $5.0 million for the 1996 Nine Month Period, and increased as a percentage of total revenue to 33.6% for the 1997 Nine Month Period from 23.9% for the 1996 Nine Month Period. As a percentage of service revenue, cost of services increased to 79.2% for the 1997 Nine Month Period from 62.1% for the 1996 Nine Month Period. These increases were primarily due to the buildup of new staff, primarily in the Company's regional offices, and use of the Company's service personnel to build templates which can be reused in other customer applications. Operating Expenses Research and development expenses for the 1997 Three Month Period increased 80.5% to $4.3 million from $2.4 million for the 1996 Three Month Period. As a percentage of total revenue, research and development expenses increased to 49.2% for the 1997 Three Month Period from 24.7% for the 1996 Three Month Period. Research and development expenses for the 1997 Nine Month Period increased 71.7% to $10.1 million from $5.9 million for the 1996 Nine Month Period. As a percentage of total revenue, research and development expenses increased to 46.1% for the 1997 Nine Month Period from 28.1% for the 1996 Nine Month Period. Selling and marketing expenses for the 1997 Three Month Period increased 196.3% to $4.8 million from $1.6 million for the 1996 Three Month Period. As a percentage of total revenue, selling and marketing expenses increased to 55.2% for the 1997 Three Month Period from 16.9% for the 1996 Three Month Period. Selling and marketing expenses for the 1997 Nine Month Period increased 206.9% to $11.9 million from $3.9 million for the 1996 Nine Month Period. As a percentage of total revenue, selling and marketing expenses increased to 54.2% for the 1997 Nine Month Period from 18.5% for the 1996 Nine Month Period. These increases were primarily attributable to the hiring of additional direct sales and marketing personnel, commission payments on new sales, increased investment in marketing support activities and materials, additional trade show activities, preparations for the Company's User Meetings, and the opening of additional regional offices. Although selling and marketing expenses increased as a percentage of total revenue for both the Three Month and Nine Month Periods, these increases were mainly due to slower growth in the Company's total revenue. General and administrative expenses for the 1997 Three Month Period increased 33.3% to $0.7 million from $0.5 million for the 1996 Three Month Period. As a percentage of total revenue, general and administrative expenses increased to 8.3% for the 1997 Three Month Period from 5.7% for the 1996 Three Month Period. General and administrative expenses for the 1997 Nine Month Period increased 48.0% to $2.0 million from $1.3 million for the 1996 Nine Month Period. As a percentage of total revenue, general and administrative expenses increased to 9.0% for the 1997 Nine Month Period from 6.3% for the 1996 Nine Month Period. These increases were due to increased investment in the infrastructure needed to support the Company's growth. Although general and administrative expenses increased as a percentage of total revenue for both the Three Month and Nine Month Periods, these increases were mainly due to slower 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 which was not recognized upon product acceptance or license renewal increased 24.9% to $0.5 million for the 1997 Three Month Period from $0.4 million for the 1996 Three Month Period. License interest income increased 12.8% to $1.3 million for the 1997 Nine Month Period from $1.1 million for the 1996 Nine Month Period due to the increase in the Company's installed customer base. Provision (Benefit) for Income Taxes Form 10-Q/A Page 10 of 13 The provision for federal, state and foreign taxes was $1.4 million for the 1996 Three Month Period. For the 1997 Three Month Period, there was a tax benefit of $1.0 million. The provision for federal, state and foreign taxes was $2.3 million for the 1996 Nine Month Period. For the 1997 Nine Month Period, there was a tax benefit of $2.1 million. The effective tax rate decreased from 39.0% for 1996 Three and Nine Month Periods, respectively, to 38.0% for the 1997 Three and Nine Month Periods, respectively. These decreases were due to the re-instatement by the Internal Revenue Service of the research and development tax credit in May 1996. Liquidity and Capital Resources Since its inception, the Company had funded its operations primarily through cash flow 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 such 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 such offering were approximately $51.9 million. At September 30, 1997, the Company had cash and cash equivalents of approximately $54.6 million and working capital of approximately $69.2 million. The Company's approach of charging license fees payable in installments over the term of its licenses has historically deferred the receipt of cash and, prior to its initial public offering, had limited the availability of working capital. Net cash used in operating activities for the 1997 Nine Month period was $8.6 million, primarily due to an increase in accounts receivable, prepaid expenses and other current assets, partially offset by an increase in accounts payable and accrued expenses, and also in deferred revenue. Net cash used in investing activities was $13.3 million during the 1997 Nine Month Period of which $10 million was attributable to the Company's purchase of FDR's ESP software and the balance was attributable to the purchase of property and equipment consisting mainly of computer hardware and software and furniture and fixtures to support the Company's growing employee base. Net cash provided by financing activities was $52.6 million during the 1997 Nine Month Period mainly due to the completion of the Company's second public offering. The Company's capital commitments consist primarily of operating leases for office space and equipment. At September 30, 1997, the Company's commitments under non-cancellable operating leases for office space with terms in excess of one year totaled $0.4 million, $1.5 million and $0.6 million for 1997, 1998 and 1999, respectively. The Company's total payments under such leases was $1.1 million for the 1997 Nine Month Period. The Company's $5.0 million revolving credit line, which was set to expire on June 30, 1997, was renewed with the same bank and currently has a maturity date of June 30, 1999. At September 30, 1997, the Company had no borrowings under its revolving credit line. 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 $1.3 million in the 1997 Nine Month Period as a result of indications that certain receivables relating primarily to consulting and installation services rendered by the Company may not be collected in full. The Company believes that the net proceeds from its two recent 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 year. 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. Form 10-Q/A Page 11 of 13 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/A 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. Words such as "expects," "anticipates," "intends," "plans," "believes," "estimates," and "should" and similar words and expressions are intended to identify the forward-looking statements contained in this Form 10-Q/A. These statements are based on estimates, projections, beliefs, and assumptions of the Company and its management and are not guarantees of future performance. 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/A Page 12 of 13 PEGASYSTEMS INC. 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 27.1 Financial Data Schedule. (b) Reports on Form 8-K: None Form 10-Q/A Page 13 of 13 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: April 15, 1998 /s/ Ira Vishner ------------------------------------ Ira Vishner Vice President, Corporate Services, Treasurer, Chief Financial Officer and Director (principal financial officer and chief accounting officer) EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 U.S. Dollars 9-mos DEC-31-1997 JAN-01-1997 SEP-30-1997 1 54,555 0 20,661 2,245 0 74,759 8,765 (4,086) 118,507 5,570 0 0 0 285 103,865 118,507 21,898 21,898 7,471 7,471 23,945 0 0 (5,577) (2,119) (3,458) 0 0 0 (3,458) (0.12) (0.12)
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