UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Amendment No. 1
to
FORM 10-Q
(Mark One)
[ x ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Period Ended June 30, 1996.
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 (I.R.S. Employer
incorporation or organization) Identification No.)
101 Main Street
Cambridge, Massachusetts 02142-1590
- ------------------------------------------- ----------------------------------
(Address of principal executive office) (Zip Code)
(617) 374-9600
- -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not applicable
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
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 periods that
the registrant was required to file such reports), and (2) has been
subject to such reporting requirements for the past 90 days.
Yes [ ] No [ x ]
As of August 30, 1996, there were 26,324,600 shares of the registrant's
Common Stock, par value $.01 per share, outstanding.
<PAGE>
Index to Form 10-Q
Pegasystems Inc. and Subsidiary
Page
Part I. Financial Information Number(s)
---------
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -- June 30, 3
1996 and December 31, 1995
Condensed Consolidated Statements of Income -- Three 4
months ended June 30, 1996 and June 30, 1995 and six
months ended June 30, 1996 and June 30, 1995
Condensed Consolidated Statements of Cash Flow -- Six
months ended June 30, 1996 and June 30, 1995 5
Notes to Condensed Consolidated Financial Statements 6
-- June 30, 1996
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-11
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 13
Item 6. Exhibits and Reports on Form 8-K 13
Signature(s) 14
-2-
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
Pegasystems Inc.
Condensed Consolidated Balance Sheets
(in thousands except share-related data)
December 31, June 30,
1995 1996
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $511 $557
Trade and installment accounts receivable,
net of allowance for doubtful accounts
of $434 at December 31, 1995 and at
June 30, 1996 8,896 10,580
Prepaid expenses and other assets 425 423
-------- ---------
Total current assets 9,832 11,560
Long-term license installments, net 13,399 13,963
Equipment and improvements, net 2,172 2,192
Software development costs, net 473 236
-------- ---------
Total assets $25,876 $27,951
======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $1,747 $1,723
Deferred revenue 114 523
Current portion of long-term debt 782 678
Deferred income taxes 2,796 2,799
-------- ---------
Total current liabilities 5,439 5,723
Deferred income taxes 4,947 5,630
Long-term debt 816 529
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;
23,494,200 shares issued and outstanding 235 235
Additional paid-in capital 106 107
Deferred compensation (91) (81)
Retained earnings 14,522 15,922
Cumulative foreign currency translation
adjustment (98) (114)
---------- ---------
14,674 16,069
---------- ---------
$25,876 $27,951
========== =========
-3-
<PAGE>
<TABLE>
<CAPTION>
Pegasystems Inc.
Condensed Consolidated Statements of Income
(unaudited)
(in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
1995 1996 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue
Software license $2,581 $3,874 $4,790 $6,394
Services 2,113 2,575 3,909 4,996
---------- ---------- --------- ----------
Total Revenue 4,694 6,449 8,699 11,390
Cost of Revenue
Cost of software license 190 118 381 236
Cost of services 1,404 1,584 2,653 2,989
---------- ---------- --------- ----------
Total cost of revenue 1,594 1,702 3,034 3,225
---------- ---------- --------- ----------
Gross profit 3,100 4,747 5,665 8,165
Operating expenses
Research and development 1,640 1,918 3,078 3,522
Sales and marketing 867 1,282 1,664 2,256
General and administrative 380 399 707 788
---------- ---------- --------- ----------
Total operating expenses 2,887 3,599 5,449 6,566
---------- ---------- --------- ----------
Income from operations 213 1,148 216 1,599
License interest income 368 378 738 746
Other interest income 4 11 10 23
Interest expense (17) (30) (35) (69)
---------- ---------- --------- ----------
Income before provision for
income taxes 568 1,507 929 2,299
Provision for income taxes 216 588 353 899
---------- ---------- --------- ----------
Net income $352 $919 $576 $1,400
========== ========== ========= ==========
Net income per common and
common equivalent share $0.01 $0.04 $0.02 $0.06
========== ========== ========= ==========
Weighted average number of
common and common
equivalent shares outstanding 25,600 25,359 25,600 25,432
</TABLE>
-4-
<PAGE>
Pegasystems Inc.
Condensed Consolidated Statements of Cash Flow
(unaudited)
(in thousands)
Six Months Ended June 30,
1995 1996
---- ----
Operating activities
Net income 576 1,400
Adjustments to reconcile net income to
net cash provided (used) by
operating activities:
Provision for deferred income taxes 358 686
Depreciation and amortization 700 746
Provision for doubtful accounts ----- ----
Change in operating assets and
liabilities:
Decrease (increase) in trade and
installment accounts receivable 574 (2,248)
Decrease (increase) in prepaid
expenses and other assets (278) 2
Decrease (increase) in inventory ---- ----
Increase (decrease) in accounts
payable and accrued expenses (867) (24)
Increase (decrease) in deferred
revenue 184 409
--- ---
Net cash provided by operating 1,247 971
activities
Investing activities
Purchase of equipment and improvements (716) (529)
Software development costs ---- ----
---- ----
Net cash used in investing activities (716) (529)
Financing activities
Repayment of note payable to shareholder (25) ----
Proceeds from issuance of long-term debt 1,180 ----
Repayments of long-term debt (190) (391)
Exercise of stock options ---- 1
Amortization of deferred compensation ---- 10
---- --
Net cash provided (used) by financing
activities 965 (380)
Effect of exchange rate on cash (18) (16)
---- ----
Net increase in cash 1,478 46
Cash and equivalents at beginning of year 456 511
--- ---
Cash and equivalents at end of period 1,934 557
===== ===
-5-
<PAGE>
PEGASYSTEMS INC.
NOTES TO CONDENSED CONSOLIDATED
INTERIM FINANCIAL STATEMENTS
(unaudited)
June 30, 1996
Note A -- Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
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, 1996 are not necessarily indicative of the results that
may be expected for the year ending December 31, 1996. The registrant suggests
that these interim condensed consolidated financial statements be read in
conjunction with the audited consolidated financial statements and footnotes
thereto included in the registrant's Registration Statement on Form S-1, as
amended (the "Registration Statement") originally filed on May 15, 1996 and
declared effective on July 18, 1996. A copy of the Registration Statement may be
obtained from the Securities and Exchange Commission from its Public Reference
Section, 450 Fifth Street, N.W., Washington, D.C. 20549, upon payment of
prescribed fees.
Note B -- Subsequent Events
In the initial public offering effected by the Registration Statement
which closed on June 24, 1996, the registrant sold 2.7 million shares of its
Common Stock, par value $.01 per share. The registrant's Restated Articles of
Organization (the "Restated Articles") filed with the Massachusetts Secretary of
State shortly before the effectiveness of the Registration Statement, among
other things, increased the number of shares of Common Stock the registrant is
authorized to issue from 9 million to 45 million and created a class of
Preferred Stock, par value $.01 per share, of which no shares have been issued
to date. Upon the effectiveness of the Restated Articles, the registrant
effected a 3 for 1 split of its outstanding Common Stock in the form of a stock
dividend. The registrant realized approximately $30.132 million from the
offering (before deducting the expenses of the offering). The aforementioned
offering occurred after the period covered by this Report.
-6-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
The registrant was founded in April 1983 to develop, market, and support
customer management software solutions for financial services organizations.
Product development began immediately and by the end of the year the registrant
had secured its first customer. The registrant has been profitable in each
fiscal quarter since the first quarter of 1985.
The registrant's revenue is derived from two sources: software license
fees and services revenue. License fees, which have historically represented the
majority of the registrant's total revenue, are generally payable on a monthly
basis under license agreements which typically have a five-year term and are
subject to renewal at the customer's option for an additional fixed period. Such
license agreements are generally non-cancelable, although some may be terminated
by the licensee for a fee prior to the expiration of the initial term but after
a minimum specified period. The registrant's licenses generally provide for
annual license fee increases (the "inflation adjustments") based on recognized
inflation indexes (sometimes subject to maximums). The registrant believes that
both it and its customers derive substantial benefits from the recurring fee
model because the recurring fee model encourages the registrant to be responsive
to customer needs and provides the registrant with additional revenue
opportunities through license renewals.
License revenue is recognized upon product acceptance. In the case of
license renewals, revenue is recognized upon execution of the renewal agreement
or if, as is generally the case, renewal is automatic unless the customer gives
notice of termination, at the expiration of the period during which the customer
has the right to terminate. The inflation adjustments are recognized ratably
over the months to which they apply. In accordance with Statement of Position
No. 91-1 issued by the American Institute of Certified Public Accountants, the
amount of software license revenue recognized upon product acceptance or license
renewal is equal to the present value of the payments due during the minimum
initial or renewal term, as the case may be, plus the present value of any early
termination fee. In 1993, 1994, and 1995, the discount rate for purposes of the
present value calculation was 7%. In the future, the registrant intends to
establish the discount rate quarterly based on the registrant's then current
marginal borrowing rate, reduced, with respect to licenses which provide for
inflation adjustments, by 1.5%, reflecting the registrant's estimate of the
benefit of future inflation adjustments during the minimum license term. The
imputed interest portion of the license fees, which is reported as license
interest income in the registrant's consolidated statements of income, is
recognized over the minimum initial or the renewal term, as the case may be. To
date, a substantial majority of the registrant's software licenses have been
renewed upon expiration. License renewals accounted for 32%, 26%, and 28% of
total revenue in 1993, 1994, and 1995, respectively. The fact that a significant
portion of the registrant's revenue is derived from the renewal of license
agreements with fixed expiration dates assists the registrant in anticipating
future revenue.
The registrant's services revenue is comprised of fees for
implementation, consulting, maintenance, and training services. All software
license customers are required to enter into a maintenance contract requiring
the customer to pay a monthly maintenance fee over the term of the related
license agreement equal to approximately 18% of the license fee. Maintenance
fees are recognized ratably over the term of the maintenance agreement. The
registrant's software license agreements typically require the registrant to
provide a specified level of implementation services for a fixed fee, typically
with additional implementation services available at an hourly rate.
Implementation fees are payable upon the achievement of specified milestones.
The registrant generally recognizes implementation as well as consulting and
training fees as the services are provided.
In accordance with generally accepted accounting principles, the
registrant has capitalized certain software development costs which it has
typically amortized over two years. No such costs, however, were capitalized in
1995 or in the six months ended June 30, 1996. At June 30, 1996, the registrant
carried $236,000 of capitalized software development costs. These costs will be
fully amortized by the end of 1996. As a result, the registrant expects that its
cost of software license revenue will be lower in 1997 than in 1996.
-7-
<PAGE>
The registrant's export revenue has fluctuated considerably in the past
due to the fact that such revenue has been largely attributable to a small
number of product acceptances during a given period. The registrant's export
revenue increased from $1.0 million in 1993 to $3.9 million in 1994 due
primarily to product acceptance by a single customer in Ireland in 1994, the
year in which the registrant organized its subsidiary in the United Kingdom.
Export revenue declined to $2.3 million in 1995 due to the lack of large product
acceptances during the year.
Substantially all of the registrant's contracts are denominated in U.S.
dollars, although several are denominated in British pounds sterling. The
registrant expects that in the future more of its contracts will be denominated
in foreign currencies. The registrant has not experienced any significant
foreign exchange gains or losses, and the registrant does not expect that
foreign currency fluctuations will have a significant effect on either its
revenue or costs in the near term.
Three and Six Months Ended June 30, 1996 As Compared to Three and Six Months
Ended June 30, 1995
Revenue
The registrant's total revenue for the three months ended June 30, 1996
(the "1996 Three Month Period") increased 37.4% to $6.4 million from $4.7
million for the three months ended June 30, 1995 (the "1995 Three Month
Period"). The registrant's total revenue for the six months ended June 30, 1996
(the "1996 Six Month Period") increased 30.9% to $11.4 million from $8.7 million
for the six months ended June 30, 1995 (the "1995 Six Month Period"). The
increases were primarily due to an increase in software license revenue and, to
a lesser extent, an increase in services revenue.
Software license revenue for the 1996 Three Month Period increased
50.1% to $3.9 million from $2.6 million for the 1995 Three Month Period.
Software license revenue for the 1996 Six Month Period increased 33.5% to $6.4
million from $4.8 million for the 1995 Six Month Period. The increases in
software license revenue were primarily attributable to software license
acceptances by new customers, by software license agreement renewals, and by
extended software usage by existing customers. Renewals in the 1996 Three Month
Period accounted for 22% of total revenues, or 37% of software license revenue.
Renewals in the 1996 Six Month Period accounted for 23% of total revenues, or
42% of software license revenue. Additional sales to existing customers in the
1996 Three Month Period and 1996 Six Month Period accounted for 26% and 20% of
license revenue, respectively. Revenue from customers headquartered outside of
the United States made up 29% and 27% of software license revenue in the 1996
Three Month Period and the 1996 Six Month Period, respectively.
Services revenue for the 1996 Three Month Period increased 21.8% to
$2.6 million from $2.1 million for the 1995 Three Month Period. Services revenue
for the 1996 Six Month Period increased 27.8% to $5.0 million from $3.9 million
for the 1995 Six Month Period. The increases in services revenue were primarily
attributable to increased demand for consulting and implementation services,
and, to a lesser extent, increased maintenance revenue from a larger installed
product base.
8
<PAGE>
Cost of Revenue
Cost of software license consists of amortization expense related to
capitalized software development costs, royalty payments to third party software
vendors and costs of product media, duplication, and packaging. Cost of software
license for the 1996 Three Month Period decreased 38.0% to $118,000 from
$190,000 for the 1995 Three Month Period, and decreased as a percentage of total
revenue from 4.1% for the 1995 Three Month Period to 1.8% for the 1996 Three
Month Period. As a percentage of software license revenue, cost of software
license decreased from 7.4% for the 1995 Three Month Period to 3.1% for the 1996
Three Month Period. Cost of software license for the 1996 Six Month Period
decreased 38.1% to $236,000 from $381,000 for the 1995 Six Month Period, and
decreased as a percentage of total revenue from 4.4% for the 1995 Six Month
Period to 2.1% for the 1996 Six Month Period. As a percentage of software
license revenue, cost of software license decreased from 8.0% for the 1995 Six
Month Period to 3.7% for the 1996 Six Month Period. Such decreases were due to
decreased amortization expense related to capitalized software development
costs.
Cost of services consists primarily of the costs of providing
implementation, consulting, maintenance, and training services. Cost of services
for the 1996 Three Month Period increased 12.8% to $1.6 million from $1.4
million for the 1995 Three Month Period and increased 12.7% to $3.0 million from
$2.7 million over the 1995 Six Month Period to the 1996 Six Month Period mainly
due to increased staffing in the registrant's Reengineering and Client Services
group in the United Kingdom and in the registrant's domestic regional offices.
Cost of services as a percentage of total revenue declined from 29.9% for the
1995 Three Month Period to 24.6% for the 1996 Three Month Period, and declined
as a percentage of services revenue from 66.4% for the 1995 Three Month Period
to 61.5% for the 1996 Three Month Period. Cost of services as a percentage of
total revenue declined from 30.5% for the 1995 Six Month Period to 26.2% for the
1996 Six Month Period, and declined as a percentage of services revenue from
67.9% for the 1995 Six Month Period to 59.8% for the 1996 Six Month Period.
These decreases resulted from the growth in the registrant's total revenue and
increased utilization of service personnel.
Operating Expenses
Research and development expenses consist primarily of the cost of
personnel and equipment needed to conduct the registrant's research and
development efforts. Research and development expenses for the 1996 Three Month
Period increased 17.0% to $1.9 million from $1.6 million for the 1995 Three
Month Period. Research and development expenses for the 1996 Six Month Period
increased 14.4% to $3.5 million from $3.1 million for the 1995 Six Month Period.
The modest increase in research and development expenses reflected the
substantial completion in December 1995 of the registrant's efforts to develop
versions of its products based on the C++ programming language. As a percentage
of total revenue, research and development expenses declined from 34.9% for the
1995 Three Month Period to 29.7% for the 1996 Three Month Period, and from 35.4%
for the 1995 Six Month Period to 30.9% for the 1996 Six Month Period due to the
growth in the registrant's total revenue.
9
<PAGE>
Sales and marketing expenses for the 1996 Three Month Period increased
47.9% to $1.3 million from $867,000 for the 1995 Three Month Period. As a
percentage of total revenue, sales and marketing expenses increased from 18.5%
for the 1995 Three Month Period to 19.9% for the 1996 Three Month Period. Sales
and marketing expenses for the 1996 Six Month Period increased 35.6% to $2.3
million from $1.7 million for the 1995 Six Month Period. As a percentage of
total revenue, sales and marketing expenses increased from 19.1% for the 1995
Six Month Period to 19.8% for the 1996 Six Month Period. Such increases were
attributable to the hiring of additional direct sales personnel along with an
expanded marketing staff and expenses, and increased sales commission payments
attributable to higher sales. The registrant's license agreements, by providing
for the payment of license fees in installments over the term of the agreement,
have historically limited the registrant's working capital and consequently its
ability to invest in sales and marketing. With the proceeds of its recent
offering, the registrant intends to increase substantially its sales and
marketing spending.
General and administrative expenses consist primarily of the salaries
of the registrant's executive, administrative, and financial personnel, and
associated expenses. General and administrative expenses for the 1996 Three
Month Period increased 5.0% to $399,000 from $380,000 for the 1995 Three Month
Period due to staff growth. Such expenses declined as a percentage of total
revenue from 8.1% for the 1995 Three Month Period to 6.2% for the 1996 Three
Month Period due to the growth in the registrant's total revenue. General and
administrative expenses for the 1996 Six Month Period increased 11.5% to
$788,000 from $707,000 for the 1995 Six Month Period due to staff growth, and
such expenses declined as a percentage of total revenue from 8.1% for the 1995
Six Month Period to 6.9% for the 1996 Six Month Period due to the growth in the
registrant's total revenue.
License Interest Income
License interest income represents the portion of all license fees due
under software license agreements which was not recognized upon product
acceptance or license renewal. License interest income for the 1996 Three Month
Period increased slightly to $379,000 from $368,000 in the 1995 Three Month
Period. License interest income for the 1996 Six Month Period also increased
slightly to $746,000 from $738,000 in the 1995 Six Month Period.
Provision for Income Taxes
The provisions for federal, state and foreign taxes were $216,000 and
$588,000 for the 1995 Three Month Period and the 1996 Three Month Period,
respectively. The effective tax rates were 38% for the 1995 Three Month Period
and 39% for the 1996 Three Month Period. The provisions for federal, state and
foreign taxes were $353,000 and $899,000 for the 1995 Six Month Period and the
1996 Six Month Period, respectively. The effective tax rates were 38% for the
1995 Six Month Period and 39% for the 1996 Six Month Period. The increase in the
effective tax rate was primarily due to the reduced availability of research and
development tax credit carryforwards.
Liquidity and Capital Resources
The registrant historically has satisfied its cash requirements through
cash generated from operations and borrowings. The registrant's approach of
charging license fees payable in installments over the term of its licenses has
historically deferred the receipt of cash and limited the availability of
working capital.
Net cash provided by operating activities for the 1996 Six Month Period
was $971,000 as compared to $1.2 million for the 1995 Six Month Period. During
each of these periods, these sources of cash were used to support the
registrant's working capital requirements.
The registrant used $529,000 and $716,000 of net cash during the 1996
Six Month Period and the 1995 Six Month Period, respectively, to purchase
property and equipment, primarily computer hardware and software, to support the
registrant's growing employee base.
The registrant's capital commitments consist primarily of operating
leases for office space and equipment. During the 1996 Six Month Period, there
were no material changes in the registrant's commitments under noncancellable
operating leases for office space and equipment with terms in excess of one
year.
The registrant has a $5.0 million revolving credit line, which expires
June 30, 1997, and four term loans from the same bank in the aggregate principal
amount of $1.2 million at June 30, 1996, which are due December 1996 ($103,000),
November 1997 ($179,000), June 1998 ($787,000), and December 1998 ($138,000).
The term loans are secured by certain fixed assets of the registrant; the
revolving credit line is unsecured. At June 30, 1996, the registrant had no
borrowings under its revolving credit line. The registrant used a portion of the
proceeds from its initial public offering which closed on July 24, 1996 to repay
the four term loans in full. The registrant'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.
10
<PAGE>
The registrant believes that the net proceeds from its recent initial
public offering together with cash generated by operations and credit
availability under its bank credit facility will be sufficient to fund the
registrant's operations for at least one year following the completion of the
aforementioned offering. However, there can be no assurance that additional
capital beyond the amounts currently forecasted by the registrant 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 registrant.
Forward Looking Statements
To the extent that this report contains "forward looking statements,"
the registrant cautions that actual financial, market, and operating results may
vary materially and adversely from those predicted, and that the forward looking
statements are subject to a wide range of risks and uncertainties. Further
information regarding the various factors which could materially and adversely
affect the registrant's results is described in its Prospectus dated July 18,
1996 which was filed with the Securities and Exchange Commission on July 19,
1996.
-11-
<PAGE>
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 Securities Holders
On June 26, 1996, the stockholders of the registrant approved at a duly
convened annual meeting the following votes:
That an Amendment and Restatement of the Corporation's Articles
of Organization (the "Restatement"), providing, among other
things, (i) that the number of authorized shares of the
Corporation's common stock be increased to 45,000,000, (ii) that
1,000,000 shares of undesignated Preferred Stock, $.01 par value,
be authorized, and (iii) that indemnification rights of officers,
directors, employees and other agents of the Corporation under
certain circumstances be expanded, be approved.
That an Amendment and Restatement of the Corporation's By-Laws be
approved.
That the size of the Corporation's Board of Directors be fixed
at six and that Alan Trefler, Ira Vishner, Edward A. Maybury,
Edward B. Roberts, Leonard A. Schlesinger and Thomas E.
Swithenbank be elected for terms of between one and three years.
That the Corporation's 1994 Long-Term Incentive Plan be ratified
and that an amendment thereto increasing the number of shares
issuable thereunder from 800,000 to 5,000,000 (giving effect to
the Restatement) be approved.
That the Corporation's 1996 Non-Employee Director Stock Option
Plan and 1996 Employee Stock Purchase Plan be approved.
That the selection by the Board of Directors of the firm of Ernst
& Young L.L.P. as the Corporation's independent auditors for
1996, be ratified.
That the actions of the Corporation's Board of Directors since
the date of the last Annual Meeting of Stockholders, be ratified.
Each of the votes was adopted by the unanimous vote of all 7,791,500 shares
represented at the meeting.
-12-
<PAGE>
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
-13-
<PAGE>
Signature
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 30, 1996 By:_____________________________________
Ira Vishner
Chief Financial Officer and Vice President
of Corporate Services
-14-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet of Pegasystems Inc. as of June 30, 1996 and the
related consolidated statement of income for the six month period ended June 30,
1996 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0001013857
<NAME> Pegasystems Inc.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 557
<SECURITIES> 0
<RECEIVABLES> 11,014
<ALLOWANCES> 434
<INVENTORY> 0
<CURRENT-ASSETS> 11,560
<PP&E> 4,012
<DEPRECIATION> 1,820
<TOTAL-ASSETS> 27,951
<CURRENT-LIABILITIES> 5,723
<BONDS> 0
0
0
<COMMON> 235
<OTHER-SE> 15,834
<TOTAL-LIABILITY-AND-EQUITY> 27,951
<SALES> 11,390
<TOTAL-REVENUES> 11,390
<CGS> 3,225
<TOTAL-COSTS> 6,566
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 69
<INCOME-PRETAX> 2,299
<INCOME-TAX> 899
<INCOME-CONTINUING> 1,400
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,400
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
