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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------

                                   FORM 10-Q
                            ------------------------

     [X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
           EXCHANGE ACT OF 1934

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001

                                       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 0-25494

                               REMEDY CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<Table>
<S>                                            <C>
                  DELAWARE                                      77-0265675
(STATE OR OTHER JURISDICTION OF INCORPORATION     (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
               OR ORGANIZATION)

   1585 CHARLESTON ROAD, MOUNTAIN VIEW, CA                         94043
  (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                      (ZIP CODE)
</Table>

                                 (650) 903-5200
              (REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE)

                                 WWW.REMEDY.COM
                        (REGISTRANT'S INTERNET ADDRESS)

     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 [ ]

     There were 30,942,956 shares of the Company's Common Stock, par value
$.00005, outstanding on July 27, 2001.

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                               TABLE OF CONTENTS

<Table>
<Caption>
                                                                         PAGE
                                                                         ----
<S>        <C>                                                           <C>
                        PART I. FINANCIAL INFORMATION
Item 1.    Financial Statements
           Condensed Consolidated Balance Sheets as of June 30, 2001
           and December 31, 2000.......................................    3
           Condensed Consolidated Statements of Operations for the
           Three and Six Months Ended June 30, 2001 and June 30,
           2000........................................................    4
           Condensed Consolidated Statements of Cash Flows for the Six
           Months Ended June 30, 2001 and June 30, 2000................    5
           Notes to Condensed Consolidated Financial Statements........    6
Item 2.    Management's Discussion and Analysis of Financial Condition
           and Results
           of Operations...............................................   10
Item 3.    Quantitative and Qualitative Disclosures About Market
           Risk........................................................   22

                         PART II. OTHER INFORMATION
Item 4.    Submission of Matters to a Vote of Security Holders.........   23
Item 6.    Exhibits and Reports on Form 8-K............................   23
Signature..............................................................   24
</Table>

                                        2
<PAGE>   3

                         PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                               REMEDY CORPORATION

                     CONDENSED CONSOLIDATED BALANCE SHEETS
                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)

                                     ASSETS

<Table>
<Caption>
                                                               JUNE 30,      DECEMBER 31,
                                                                 2001            2000
                                                              -----------    ------------
                                                              (UNAUDITED)        (1)
<S>                                                           <C>            <C>
Current assets:
  Cash and cash equivalents.................................   $ 51,352        $ 43,119
  Short-term investments....................................    167,180         164,780
  Accounts receivable, net..................................     51,972          79,326
  Prepaid expenses and other current assets.................      7,246           5,861
  Deferred tax assets.......................................      7,157           7,157
                                                               --------        --------
          Total current assets..............................    284,907         300,243
Property and equipment, net.................................     21,295          19,418
Goodwill and other intangible assets, net...................     23,441          25,439
Other non-current assets....................................        910             524
Deferred tax assets -- non-current portion..................      3,437           3,437
                                                               --------        --------
                                                               $333,990        $349,061
                                                               ========        ========
                          LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable..........................................   $  1,662        $  4,036
  Accrued compensation and related liabilities..............      7,249          10,293
  Income taxes payable......................................         --           3,616
  Other accrued liabilities.................................     17,074          20,942
  Deferred revenue..........................................     58,000          56,915
                                                               --------        --------
          Total current liabilities.........................     83,985          95,802
Stockholders' equity:
  Common stock and additional paid-in capital...............    196,927         184,230
  Treasury Stock (4,132,300 shares and 3,872,300 shares,
     respectively)..........................................    (74,924)        (68,441)
  Accumulated other comprehensive loss......................     (1,098)           (396)
  Retained earnings.........................................    129,100         137,866
                                                               --------        --------
          Total stockholders' equity........................    250,005         253,259
                                                               --------        --------
                                                               $333,990        $349,061
                                                               ========        ========
</Table>

---------------
(1) The balance sheet at December 31, 2000 has been derived from the audited
    financial statements at that date, but does not include all the information
    and footnotes required by generally accepted accounting principles for
    complete financial statements.

                            See accompanying notes.
                                        3
<PAGE>   4

                               REMEDY CORPORATION

                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                  (UNAUDITED)

<Table>
<Caption>
                                                    THREE MONTHS ENDED      SIX MONTHS ENDED
                                                         JUNE 30,               JUNE 30,
                                                    ------------------    --------------------
                                                     2001       2000        2001        2000
                                                    -------    -------    --------    --------
<S>                                                 <C>        <C>        <C>         <C>
Revenue:
  Product.........................................  $25,782    $39,750    $ 54,863    $ 75,170
  Maintenance and service.........................   38,555     29,376      74,229      55,888
                                                    -------    -------    --------    --------
          Total revenue...........................   64,337     69,126     129,092     131,058
Costs and expenses:
  Cost of product revenue.........................    1,625      2,387       3,540       4,789
  Cost of maintenance and service revenue.........   14,448     12,568      29,327      23,605
  Research and development........................   13,517     12,836      29,057      24,122
  Sales and marketing.............................   29,740     25,218      63,493      50,990
  General and administrative......................    4,702      4,335       8,798       7,574
  Amortization of goodwill and other
     intangibles..................................    2,647      2,203       5,220       4,032
  Peregrine acquisition expenses..................    2,525         --       2,525          --
  Restructuring charges...........................      975         --       4,368          --
                                                    -------    -------    --------    --------
          Total costs and expenses................   70,179     59,547     146,328     115,112
Income (loss) from operations.....................   (5,842)     9,579     (17,236)     15,946
Interest income and other, net....................    2,311      2,408       5,062       4,082
                                                    -------    -------    --------    --------
Income (loss) before income taxes.................   (3,531)    11,987     (12,174)     20,028
Provision (benefit) for income taxes..............     (989)     3,596      (3,409)      6,169
                                                    -------    -------    --------    --------
Net income (loss).................................  $(2,542)   $ 8,391    $ (8,765)   $ 13,859
                                                    =======    =======    ========    ========
Net income (loss) per share:
  Basic...........................................  $ (0.08)   $  0.27    $  (0.29)   $   0.45
                                                    =======    =======    ========    ========
  Diluted.........................................  $ (0.08)   $  0.24    $  (0.29)   $   0.41
                                                    =======    =======    ========    ========
Shares used in computing per share amounts:
  Basic...........................................   30,690     31,235      30,517      30,827
                                                    =======    =======    ========    ========
  Diluted.........................................   30,690     34,316      30,517      34,200
                                                    =======    =======    ========    ========
</Table>

                            See accompanying notes.
                                        4
<PAGE>   5

                               REMEDY CORPORATION

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                  (UNAUDITED)

<Table>
<Caption>
                                                                 SIX MONTHS ENDED
                                                                     JUNE 30,
                                                              ----------------------
                                                                2001         2000
                                                              ---------    ---------
<S>                                                           <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)...........................................  $  (8,766)   $  13,859
Adjustments to reconcile net income (loss) to net cash
  provided by operating activities:
     Depreciation...........................................      5,162        4,200
     Amortization of goodwill and other intangibles.........      5,209        4,032
     Non-cash element of restructuring charges..............      2,794           --
Changes in assets and liabilities:
  Accounts receivable.......................................     27,354        7,712
  Prepaid expenses and other current assets.................     (1,385)       8,006
  Deferred tax asset........................................         --       (3,924)
  Accounts payable..........................................     (2,374)       2,239
  Accrued compensation and related liabilities..............     (3,044)      (1,238)
  Income taxes payable......................................     (3,616)      (1,341)
  Other accrued liabilities.................................     (6,662)         859
  Other non-current assets..................................       (386)         (38)
  Deferred revenue..........................................      1,085        4,820
                                                              ---------    ---------
          Net cash provided by operating activities.........     15,371       39,186
                                                              ---------    ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments.........................   (169,285)    (312,468)
Maturities of short-term investments........................    166,885      292,301
Cash paid for businesses acquired, net of cash assumed......     (3,403)     (15,315)
Capital expenditures........................................     (6,847)      (5,908)
                                                              ---------    ---------
          Net cash used in investing activities.............    (12,650)     (41,390)
                                                              ---------    ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments under capital lease obligations..........         --          (54)
Proceeds from issuance of common stock......................     12,697       21,413
Purchase of treasury stock..................................     (6,483)          --
                                                              ---------    ---------
          Net cash provided by financing activities.........      6,214       21,359
                                                              ---------    ---------
Net increase in cash and cash equivalents...................      8,935       19,155
Effect of exchange rate changes on cash.....................       (702)        (413)
Cash and cash equivalents at beginning of period............     43,119       47,302
                                                              ---------    ---------
Cash and cash equivalents at end of period..................  $  51,352    $  66,044
                                                              =========    =========
</Table>

                            See accompanying notes.
                                        5
<PAGE>   6

                               REMEDY CORPORATION

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

 1. BASIS OF PRESENTATION

     The condensed consolidated balance sheet as of June 30, 2001, the condensed
consolidated statements of operations for the three months and six months ended
June 30, 2001 and 2000, and the condensed consolidated statements of cash flows
for the six months ended June 30, 2001 and 2000, have been prepared by Remedy
Corporation ("Remedy" or the "Company"), without audit. In the opinion of
management, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position, results of operations and
cash flows at June 30, 2001 and for all periods presented have been made. The
condensed consolidated balance sheet at December 31, 2000 has been derived from
the audited financial statements at that date but does not include all
disclosures required by generally accepted accounting principles.

     Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the Securities and Exchange
Commission's rules and regulations. These condensed financial statements should
be read in conjunction with the audited financial statements and notes thereto
included in the Company's 2000 Annual Report on Form 10-K filed with the
Securities and Exchange Commission in March 2001.

     The results of operations for the three months and six months ended June
30, 2001 are not necessarily indicative of results that may be expected for any
other interim period or for the full fiscal year.

 2. REVENUE RECOGNITION

     The Company recognizes revenue in accordance with Statement of Position
97-2 "Software Revenue Recognition", as amended. The Company derives revenue
from the sale of software licenses, post-contract support ("support") and other
services. Support includes telephone technical support, bug fixes and rights to
upgrades on a when-and-if available basis for a stated term of generally one
year. Services range from installation, training and basic consulting to
software modification to meet specific customer needs. In software arrangements
that include rights to multiple software products, support and/or other
services, the Company allocates the total arrangement fee among each deliverable
based on the relative fair value of each of the deliverables determined based on
objective evidence specific to the Company.

     Revenue from license fees is recognized when persuasive evidence of an
agreement exists, delivery of the product has occurred, the fee is fixed or
determinable and collection is probable. Revenue from license fees in multiple
element contracts is recognized using the residual method when there is vendor
specific objective evidence of the fair value of all undelivered elements in an
arrangement but vendor specific objective evidence of fair value does not exist
for one or more of the delivered elements in an arrangement. Under the residual
method, the total fair value of the undelivered elements, as indicated by vendor
specific objective evidence, is deferred and the difference between the total
arrangement fee and the amount deferred for the undelivered elements is
recognized as revenue related to the delivered elements regardless of any
separate prices stated within the contract for each element. If the fee due from
the customer is not fixed or determinable due to extended payment terms, revenue
is recognized as payments become due from the customer. If collection is not
considered probable, revenue is recognized when the fee is collected.

     Revenue allocable to support is recognized on a straight-line basis over
the periods in which the support is to be provided.

     Arrangements that include consulting services are evaluated to determine
whether those services are essential to the functionality of other elements of
the arrangement. When the services are considered essential, revenue under the
arrangement is recognized in accordance with SOP 81-1, "Accounting for
Performance of Construction-Type and Certain Production-Type Contract". When the
services are not considered essential, the revenue allocable to the software
services is recognized as the services are performed.
                                        6
<PAGE>   7
                               REMEDY CORPORATION

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                  (UNAUDITED)

 3. RECENT DEVELOPMENT

     On June 10, 2001, the Company entered into a definitive agreement with
Peregrine Systems, Inc. ("Peregrine") under which Peregrine will acquire all of
the outstanding shares of Remedy. Remedy stockholders will receive $9.00 in cash
and 0.9065 shares of Peregrine common stock for each Remedy share of common
stock. All outstanding options will be assumed by Peregrine and will become
options to purchase Peregrine common stock. The definitive agreement has been
approved by the Board of Directors of both companies and is subject to approval
by Remedy's stockholders, regulatory approvals and customary closing conditions,
and is expected to close in the third calendar quarter.

 4. EARNINGS (LOSS) PER SHARE

     Basic earnings (loss) per share is computed using the weighted-average
number of common shares outstanding. Diluted earnings (loss) per share includes
the weighted-average number of common share equivalents outstanding during the
period. Dilutive common share equivalents consist of employee stock options and
are calculated using the treasury stock method.

     The following table sets forth the computation of basic and diluted
earnings (loss) per share:

<Table>
<Caption>
                                              THREE MONTHS ENDED     SIX MONTHS ENDED
                                                   JUNE 30,              JUNE 30,
                                              ------------------    ------------------
                                               2001       2000       2001       2000
                                              -------    -------    -------    -------
                                                (IN THOUSANDS,        (IN THOUSANDS,
                                               EXCEPT PER SHARE      EXCEPT PER SHARE
                                                   AMOUNTS)              AMOUNTS)
                                                 (UNAUDITED)           (UNAUDITED)
<S>                                           <C>        <C>        <C>        <C>
Numerator:
  Net income (loss).........................  $(2,542)   $ 8,391    $(8,766)   $13,859
                                              =======    =======    =======    =======
Denominator:
  Denominator for basic earnings (loss) per
     share-weighted-average shares..........   30,690     31,235     30,517     30,827
  Effect of dilutive securities:
  Employee stock options....................       --      3,081         --      3,373
                                              -------    -------    -------    -------
  Denominator for diluted earnings (loss)
     per share-weighted-average shares and
     dilutive securities....................   30,690     34,316     30,517     34,200
                                              =======    =======    =======    =======
  Basic earnings (loss) per share...........  $ (0.08)   $  0.27    $ (0.29)   $  0.45
                                              =======    =======    =======    =======
  Diluted earnings (loss) per share.........  $ (0.08)   $  0.24    $ (0.29)   $  0.41
                                              =======    =======    =======    =======
</Table>

 5. COMPREHENSIVE INCOME (LOSS)

     Comprehensive income (loss) is comprised of net income (loss) and other
comprehensive income (loss), which includes certain changes in equity of the
Company that are excluded from net income (loss). Specifically, FAS 130 requires
foreign currency translation adjustments and hedging gains (losses) to be

                                        7
<PAGE>   8
                               REMEDY CORPORATION

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                  (UNAUDITED)

included in accumulated other comprehensive income (loss). Comprehensive income
(loss) for the three months and six months ended June 30, 2001 and 2000 is as
follows:

<Table>
<Caption>
                                                  THREE MONTHS ENDED   SIX MONTHS ENDED
                                                       JUNE 31,            JUNE 31,
                                                  ------------------   -----------------
                                                    2001      2000      2001      2000
                                                  --------   -------   -------   -------
                                                    (IN THOUSANDS)      (IN THOUSANDS)
                                                     (UNAUDITED)          (UNAUDITED)
<S>                                               <C>        <C>       <C>       <C>
Net income (loss)...............................  $(2,542)   $8,391    $(8,766)  $13,859
Unrealized hedging loss.........................      (28)     (100)       (22)      (93)
Change in cumulative translation adjustment.....     (235)     (159)      (680)     (320)
                                                  -------    ------    -------   -------
Comprehensive net income (loss).................  $(2,805)   $8,132    $(9,468)  $13,446
                                                  =======    ======    =======   =======
</Table>

 6. RECENT PRONOUNCEMENTS

     In June 1998, the Financial Accounting Standards Board issued Statement No.
133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activity",
which was subsequently amended by Statement No. 137 ("SFAS 137"), "Accounting
for Derivative Instruments and Hedging Activities: Deferral of Effective Date of
SFAS 133" and Statement No. 138 ("SFAS 138"), "Accounting for Certain Derivative
Instruments and Certain Hedging Activities: an amendment of FASB Statement No.
133". SFAS 137 requires adoption of SFAS 133 in years beginning after June 15,
2000. SFAS 138 establishes accounting and reporting standards for derivative
instruments and addresses a limited number of issues causing implementation
difficulties for numerous entities. The Statement requires Remedy to recognize
all derivatives on the balance sheet at fair value. Derivatives that are not
hedges must be recorded at fair value through earnings. If the derivative
qualifies as a hedge, depending on the nature of the exposure being hedged,
changes in the fair value of derivatives are either offset against the change in
fair value of hedged assets, liabilities, or firm commitments through earnings
or are recognized in other comprehensive income until the hedged cash flow is
recognized in earnings. The ineffective portion of a derivative's change in fair
value is recognized in earnings. The Statement permits early adoption as of the
beginning of any fiscal quarter. Remedy adopted SFAS 133 in the quarter ended
September 30, 1999 and subsequently implemented a program to hedge a portion of
its forecasted foreign currency denominated revenue and expenses with foreign
exchange forward contracts. SFAS 133 did not have a material effect on Remedy's
financial statements.

 7. RESTRUCTURING OF OPERATIONS

     In April 2001, Remedy announced restructuring activities to reduce future
operating costs. The restructuring includes a reduction in workforce by
approximately 100 employees or 7%, cancellation of certain contracts and
commitments and other cost-saving actions. The Company incurred a restructuring
cost of $1.4 million, including $1.0 million for severance related costs and
$0.4 million for cancellation of contracts and commitments to reduce future
expenses. During the three months ended June 30, 2001, the Company paid
approximately $0.9 million for severance related costs, $0.3 million for
cancellation of contracts and commitments and wrote-off approximately $0.1
million of prepaid assets. At June 30, 2001, the Company had recorded a
liability of $0.1 million for severance costs expected to be paid out by the end
of 2001.

     In the first quarter of 2001, the Company recorded a restructuring charge
of $3.4 million related to the discontinuation of the eProcurement product. The
restructuring charge includes approximately $2.9 million for future customer
settlement and support costs, $0.3 million for the write-off of prepaid assets,
and $0.2 million for other exit-related costs. During the six months ended June
30, 2001, the Company paid approximately $1.6 million in customer settlement and
support costs, $0.2 million for other exit-related costs and wrote-off
approximately $0.3 million of prepaid assets. On June 30, 2001, the Company
evaluated its

                                        8
<PAGE>   9
                               REMEDY CORPORATION

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                  (UNAUDITED)

restructuring liability based on the then current facts and determined that $0.5
million was not needed due to a lower level of settlement payments and support
costs than originally estimated. Accordingly, the liability was reversed by $0.5
million against the restructuring charges recorded in the first quarter of 2001.
As of June 30, 2001, the remaining restructuring liability relating to the
discontinuation of eProcurement product consists of $0.8 million primarily for
future customer settlement and support costs. The Company expects the $0.8
million liability will be paid out by the end of the fiscal year 2001.

 8. PEREGRINE ACQUISITION EXPENSES

     During the second quarter of 2001, Remedy incurred approximately $2.5
million of outside professional fees associated with the anticipated Peregrine
merger.

 9. SHARE REPURCHASE

     Since 1998, the Company has repurchased a total of 4,132,300 shares of
common stock on the open market from time to time, depending on market
conditions. On July 26, 2000, the Board of Directors authorized management of
the Company to repurchase up to 3 million shares or approximately 10 percent of
the Company's outstanding shares of common stock over the subsequent twelve
months. The repurchases have been funded by the Company's cash and short-term
investments. During the first quarter of 2001, the Company repurchased a total
of 260,000 shares of the Company's stock, at an average price of $24.94,
totaling approximately $6.5 million. No shares were repurchased during the
second quarter of 2001. At July 26, 2001, no shares remain authorized for
repurchase.

10. SEGMENT INFORMATION

     Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 131 ("SFAS 131"), "Disclosures about Segments of an
Enterprise and Related Information". SFAS 131 superseded Statement No. 14 ("SFAS
14"), "Financial Reporting for Segments of a Business Enterprise." SFAS 131
established standards for the way that public business enterprises report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports. SFAS 131 also establishes standards for related
disclosures about products and services, geographic areas and major customers.

     Operating segments are defined as components of an enterprise for which
separate financial information is available that is evaluated regularly by the
Chief Operating Decision Maker (the "CODM") in deciding how to allocate
resources and assess performance. Remedy considers itself to be in a single
industry segment, specifically the provision of license, support, consulting and
training for its software products. Remedy markets its products in the United
States and in foreign countries through both direct and indirect sales channels
and through its subsidiaries. Remedy's assets are primarily located in its
offices in the United States. Remedy's CODM reviews financial information
presented on a consolidated basis, accompanied by disaggregated revenues by
geographic region for purposes of making operating decisions and assessing
financial performance.

                                        9
<PAGE>   10

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

     This Report on Form 10-Q contains forward-looking statements that involve
risks and uncertainties. The Company's actual results may differ materially from
the results discussed in the forward-looking statements. The Company's quarterly
operating results have in the past and may in the future vary significantly
depending on factors including, but not limited to, those discussed in the
"Factors That May Affect Future Operating Results" section on page 14 of this
report, in the Company's 2000 Form 10-K filed with the Securities and Exchange
Commission ("SEC") in March 2001, and in Peregrine's Registration Statement on
Form S-4 filed with the SEC in July 2001 and other schedules containing or
incorporating by reference such documents and other information. Furthermore,
the Company has often recognized a substantial portion of its revenue in the
last month of a quarter, with this revenue frequently concentrated in the last
week of a quarter. As a result, product revenue in any quarter is substantially
dependent on orders booked and shipped in that quarter, and revenue for any
future quarter is not predictable with any degree of certainty. Product revenue
is also difficult to forecast because the market for client/server and web-based
application software products is rapidly evolving, and the Company's sales
cycle, from initial trial to multiple copy purchases and the provision of
support services, varies substantially from customer to customer. In addition,
the Company expects that sales derived through indirect channels, which are
harder to predict and have lower margins than direct sales, may increase as a
percentage of total revenue. The Company's expense levels are based, in part, on
its expectations as to future revenues. If revenue levels are below
expectations, operating results are likely to be adversely affected. Net income
may be disproportionately affected by a reduction in revenue because a
proportionately smaller amount of the Company's expenses varies with its
revenue. As a result, the Company believes that period-to-period comparisons of
its results of operations are not necessarily meaningful and should not be
relied upon as indications of future performance. Due to all the foregoing
factors, it is likely that in some future quarter the Company's operating
results will be below the expectations of public market analysts and investors.
In such event, the price of the Company's Common Stock would likely decline.

     Remedy develops, markets and supports highly adaptable enterprise software
solutions. Its solutions are focused on automating frequently changing,
employee-intensive, everyday business processes. Remedy has two solutions
families: information technology service management solutions and customer
relationship management solutions. Information technology service management
solutions such as Remedy Help Desk(TM), Remedy Service Level Agreements(TM),
Remedy Asset Management(TM) and Remedy Change Management(TM) manage and
streamline the business processes for serving and supporting internal corporate
customers and for managing the full life-cycle of assets. Customer relationship
management solutions such as Remedy Customer Support(TM), Remedy Quality
Management(TM), Remedy Leads Management(TM) and Remedy Sales Continuum(TM)
manage external customer relationships including the management of customer
support. Important product attributes of both solutions families include
flexible integration capabilities in a packaged solution, speed of
implementation, ease of use, rapid return on investment, and on-going
adaptability.

     Remedy's software is designed to integrate, generally without programming,
with a wide variety of computer and telecommunication technologies and products,
including desktop applications, ERP applications, telephony devices, hand-held
devices, network management systems and legacy systems. Remedy provides a highly
scalable, ready-to-deploy eBusiness foundation and solutions that are easy to
change. The majority of customer installations take place in less than 90 days.
Customers use the solutions as is, out-of-the-box, or point-and-click to easily
tailor them to specific company requirements. The concept is similar to
spreadsheet software, which can be used as a simple tabular calculating platform
or can be modified to include sophisticated formulas and style changes to create
unique solutions. More importantly, Remedy's solutions are adaptable to meet
most future requirements and growth without costly programming.

     The Company was incorporated on November 20, 1990 in Delaware. The Company
maintains its executive offices and principal facilities at 1585 Charleston
Road, Mountain View, California 94043. Its telephone number is (650) 903-5200.

     On June 10, 2001, the Company entered into a definitive agreement with
Peregrine Systems, Inc. ("Peregrine") under which Peregrine will acquire all of
Remedy's outstanding shares. Remedy stockholders will receive $9.00 in cash and
0.9065 shares of Peregrine common stock for each Remedy share of common

                                        10
<PAGE>   11

stock. All outstanding options will be assumed by Peregrine and will become
options to purchase Peregrine common stock. The definitive agreement has been
approved by the Board of Directors of both companies and is subject to approval
by Remedy's stockholders, regulatory approvals and customary closing conditions.

RESULTS OF OPERATIONS

     The following table sets forth, as a percentage of total revenue, statement
of operations data for the periods indicated.

<Table>
<Caption>
                                                           THREE MONTHS     SIX MONTHS
                                                              ENDED           ENDED
                                                             JUNE 30,        JUNE 30,
                                                           ------------    ------------
                                                           2001    2000    2001    2000
                                                           ----    ----    ----    ----
<S>                                                        <C>     <C>     <C>     <C>
Revenue:
  Product................................................   40%     58%     42%     57%
  Maintenance and service................................   60%     42%     58%     43%
                                                           ---     ---     ---     ---
          Total revenue..................................  100%    100%    100%    100%
                                                           ---     ---     ---     ---
Costs and expenses:
  Cost of product revenue................................    3%      3%      3%      4%
  Cost of maintenance and service revenue................   22%     18%     23%     18%
  Research and development...............................   21%     19%     23%     18%
  Sales and marketing....................................   46%     36%     49%     39%
  General and administrative.............................    7%      6%      7%      6%
  Amortization of goodwill and other intangibles.........    4%      4%      4%      3%
  Peregrine acquisition expenses.........................    4%      0%      2%      0%
  Restructuring charges..................................    2%      0%      2%      0%
                                                           ---     ---     ---     ---
          Total costs and expenses.......................  109%     86%    113%     88%
                                                           ---     ---     ---     ---
Income (loss) from operations............................   -9%     14%    -13%     12%
Interest income, net.....................................    4%      3%      4%      3%
                                                           ---     ---     ---     ---
Income (loss) before income taxes........................   -5%     17%     -9%     15%
Provision (benefit) for income taxes.....................   -2%      5%     -3%      5%
                                                           ---     ---     ---     ---
Net income (loss)........................................   -3%     12%     -6%     10%
                                                           ===     ===     ===     ===
</Table>

  REVENUE

     Total revenue was $64.3 million and $69.1 million for the quarters ended
June 30, 2001 and June 30, 2000 respectively, representing a decrease of 7% in
the current period. Total revenue decreased to $129.1 million for the six months
ended June 30, 2001 from $131.1 million for the comparable 2000 period,
representing a decrease of 2%.

     Remedy distributes the majority of its products through its direct sales
organization, which is complemented by indirect sales channels, including value
added resellers ("VARs"), system integrators ("SIs") and independent software
vendors ("ISVs"). Billings derived through indirect channels accounted for
approximately 41% of its total billings for the quarter ended June 30, 2001 and
47% for the comparable period in 2000, and approximately 43% for the six months
ended June 30, 2001 and 47% in the comparable period in 2000.

     International sales accounted for approximately 37% of total revenue for
the quarter ended June 30, 2001 and 36% for the comparable period in 2000, and
approximately 37% for the six months ended June 30, 2001 and 36% in the
comparable period in 2000.

     PRODUCT REVENUE. Revenue from product licenses decreased 35% to $25.8
million for the quarter ended June 30, 2001 from $39.8 million in the comparable
quarter in 2000. Product license fees decreased 27% to $54.9 million for the six
months ended June 30, 2001 from $75.2 million in the comparable period in 2000.
Product revenue represented 40% of total billings for the quarter ended June 30,
2001 and 58% for the

                                        11
<PAGE>   12

comparable period in 2000, and approximately 42% for the six months ended June
30, 2001 and 57% in the comparable period in 2000. The decrease of product
revenue as a percentage of total revenue, as well as in absolute dollars, is the
result of customers' postponement of product purchases and a slow down in the
U.S. and European economies. This economic uncertainty was reflected
particularly in the decrease in large enterprise deals and the decrease in
contribution of new license revenue as compared to the same period in 2000. The
Peregrine acquisition was announced close to the end of the second quarter 2001
which may have created uncertainty with customers regarding the direction of the
combined company's product offerings and may have resulted in hesitation and
postponement of purchases.

     MAINTENANCE AND SERVICE REVENUE. Revenue from maintenance and services
increased by 31% to $38.6 million for the quarter ended June 30, 2001 from $29.4
million in the comparable quarter in 2000. Revenue from services increased by
33% to $74.2 million for the six months ended June 30, 2001 from $55.9 million
in the comparable 2000 period. Revenue from maintenance and services represented
60% of its total billings for the quarter ended June 30, 2001 and 42% for the
comparable period in 2000, and approximately 58% for the six months ended June
30, 2001 and 43% in the comparable period in 2000. The growth of maintenance and
service revenue as percentage of total revenue and in absolute dollars is
primarily due to the renewal of existing maintenance contracts resulting from
product sales in earlier periods.

  COSTS AND EXPENSES

     COST OF PRODUCT REVENUE. Cost of product revenue consists primarily of
costs related to product media and duplication, manuals, packaging materials,
personnel, shipping expenses and royalties paid to third-party vendors. Cost of
product revenue decreased to $1.6 million for the quarter ended June 30, 2001
from $2.4 million for the comparable quarter in 2000, both representing 6% of
the related product revenue, respectively. Cost of product revenue decreased to
$3.5 million for the six months ended June 30, 2001 from $4.8 million in the
comparable 2000 period, both representing 6% of the related product revenue in
such periods, respectively. The decrease in cost of product revenue in absolute
dollars is primarily attributable to a decrease in royalties paid to third party
vendors as well as the lower volumes of product shipped in the quarter. Cost of
product revenue does not include amortization of capitalized software
development costs, as all development costs incurred in the research and
development of new software products and enhancements to existing software
products have been expensed as incurred.

     COST OF MAINTENANCE AND SERVICE REVENUE. Costs of maintenance and service
revenue consist primarily of personnel related costs incurred in providing
telephone support, consulting services and training to customers. Cost of
maintenance and service revenue increased to $14.5 million for the quarter ended
June 30, 2001 from $12.6 million in the comparable quarter in 2000, representing
37% and 43% of the related maintenance and service revenue, respectively. As a
percent of the related maintenance and service revenue, cost decreased due to
the better utilization of Remedy's consultants. Cost of maintenance and service
revenue increased to $29.3 million for the six months ended June 30, 2001 from
$23.6 million in the comparable 2000 period, representing 40% and 42% of the
related maintenance and service revenue, respectively. Cost of maintenance and
service revenue in absolute dollars increased, primarily due to costs from
increased personnel, as Remedy invested substantially in its customer support
and consulting organizations.

     RESEARCH AND DEVELOPMENT. Research and development costs relate to the
personnel and equipment costs associated with maintaining and enhancing existing
product lines as well as developing new product lines to meet the expanding
range of customer requirements. Research and development expenses were $13.5
million and $12.8 million for the quarters ended June 30, 2001 and June 30,
2000, respectively, representing 21% and 19% of total revenue, respectively.
Research and development expenses increased to $29.1 million for the six months
ended June 30, 2001 from $24.1 million in the comparable period in 2000, or 23%
and 18% of total revenue, respectively. The increase in research and development
expenses as a percentage of total revenue and in absolute dollar amounts is
primarily attributable to increased staffing, outside contractors and associated
support for software engineers necessary to expand and enhance Remedy's product
line.

     SALES AND MARKETING. Sales and marketing expenses consist primarily of
salaries, commissions and bonuses for sales and marketing personnel, as well as
promotional expenses. Sales and marketing expenses

                                        12
<PAGE>   13

were $29.7 million and $25.2 million, for the quarters ended June 30, 2001 and
June 30, 2000, or 46% and 36% of total revenue, respectively. Sales and
marketing expenses increased to $63.5 million for the six months ended June 30,
2001 from $51.0 million in the comparable 2000 period, or 49% and 39% of total
revenue, respectively. The increase in sales and marketing expenses as a
percentage of total revenue and in absolute dollar amounts is primarily due to
an increase in number of sales and marketing employees to promote and sell new
and existing products.

     GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of the salaries and related expenses for executive and finance
personnel, professional fees and other corporate expenses. General and
administrative expenses were $4.7 million and $4.3 million, for the quarters
ended June 30, 2001 and June 30, 2000, respectively, or 7% and 6% of total
revenue, respectively. General and administrative expenses increased to $8.8
million for the six months ended June 30, 2001 from $7.6 million for the
comparable 2000 period, representing 7% and 6% of total revenue, respectively.
The increase as a percentage of total revenue and in absolute dollar amounts is
primarily due to increased staffing and associated expenses necessary to manage
and support growth.

     AMORTIZATION OF GOODWILL AND OTHER INTANGIBLES. Amortization of goodwill
and other intangibles relates to the purchase of BayStone Software, Inc. in
October 1998, Pipestream Technologies, Inc. in July 1999, Fortress Technologies,
Inc. in September 1999, Axtive Software, Inc. in February 2000, Ostream
Software, Inc. in February 2000, ESQ Systems Integrators, Inc. in June 2000, and
Deodis SA in January 2001. Goodwill and other intangibles, which consist of
$40.0 million of goodwill and $2.1 million of acquired workforce valuation are
being amortized on a straight-line basis over a period of four years from the
date of acquisition. Amortization expense totaled $2.6 million and $2.2 million
for the quarters ended June 30, 2001 and June 30, 2000, respectively.
Amortization expense totaled $5.2 million and $4.0 million for the six months
ended June 30, 2001 and June 30, 2000, respectively. Amortization expense
related to these acquisitions is expected to be approximately $10.5 million for
the year ending December 31, 2001.

     PEREGRINE ACQUISITION EXPENSES. During the second quarter of 2001, we
incurred and expensed approximately $2.5 million in costs for outside
professional fees associated with the merger with Peregrine.

     RESTRUCTURING CHARGES. In April 2001, Remedy announced restructuring
activities to reduce future operating costs. In the second quarter of 2001, the
Company incurred a restructuring cost of $1.4 million related to the
restructuring activities, including severance and related costs for the
reduction in workforce by approximately 100 employees or 7%, cancellation of
certain contracts and commitments and other cost-saving actions.

     In January 2001, Remedy approved a plan to discontinue its eProcurement
solution product. As part of this restructuring, it terminated two employees and
reassigned all others. For customers who have already purchased the eProcurement
solution, Remedy will continue to provide certain support services for up to one
year. Remedy recorded a restructuring charge of $3.4 million in the first
quarter of 2001, to provide for employee separation costs, write-off of prepaid
expenses, and future customer support costs. On June 30, 2001, the Company
evaluated its restructuring liability based on the current facts and determined
that $0.5 million was not needed due to a lower level of settlement payments and
support costs than originally estimated. Accordingly, the remaining liability
was reduced by $0.5 million against the restructuring charges recorded in the
first quarter of 2001. As of June 30, 2001, the restructuring liability relating
to the discontinuation of the eProcurement product consists of $0.8 million
primarily for future customer settlement and support costs. The Company expects
the $0.8 million liability will be paid out by the end of the fiscal year 2001.

     INTEREST INCOME AND OTHER, NET. Interest income and other, net consists
primarily of interest income earned on the Company's cash and short term
investments and was $2.3 million and $2.4 million for the quarters ended June
30, 2001 and June 30, 2000, respectively. Interest income and other, net
increased to $5.1 million for the six months ended June 30, 2001 from $4.1
million for the comparable 2000 period. The increase in interest and other
income was primarily due to an increase in foreign exchange gain realized in
2001 as a result of favorable foreign exchange rate fluctuations, as well as an
increase in interest rates and short-term investment balances maintained in the
six months ended June 30, 2001 compared to the same period in 2000.
                                        13
<PAGE>   14

     PROVISION FOR INCOME TAXES. The effective tax rate for the quarters ended
June 30, 2001 and June 30, 2000 was 28% and 30%, respectively. The effective tax
rate for the six months ended June 30, 2001 and June 30, 2000 was 28% and 31%,
respectively. The effective tax rate for 2001 is lower than the effective tax
rate for 2000 due to increased research and development credits, increased
amounts of tax exempt interest and lower state taxes.

LIQUIDITY AND CAPITAL RESOURCES

     At June 30, 2001, Remedy had $51.4 million in cash and cash equivalents,
$167.2 million in short-term investments and $200.9 million of working capital.

     Net cash provided by operating activities was $15.4 million and $39.2
million during the six months ended June 30, 2001 and June 30, 2000,
respectively. The decrease in net cash provided by operations was primarily
attributable to the net loss generated from the current period.

     Net cash used in investing activities was $12.7 million and $41.4 million
during the six months ended June 30, 2001 and June 30, 2000, respectively. The
decrease in net cash used in investing activities is primarily due to decrease
in net short-term investment purchases, less cash spent on businesses acquired
offset by a slight increase in purchases of property and equipment.

     Purchases exceeded maturities of short-term investments by $2.4 million and
$20.2 million for the six months ended June 30, 2001 and June 30, 2000,
respectively.

     Cash paid to acquire businesses amounted to $3.4 million and $15.3 million
for the six months ended June 30, 2001 and June 30, 2000, respectively. The $3.4
million is related to the acquisition of Deodis SA in January 2001, and the
$15.3 million is comprised of the acquisition of Axtive Software, Inc., Ostream
Software, Inc and ESQ Systems Integrators, Inc. in 2000.

     Cash used to purchase property and equipment, primarily for computer
workstations, capitalized internal use software, leasehold improvements and file
servers for Remedy's growing employee base was $6.8 million and $5.9 million
during the six months ended June 30, 2001 and June 30, 2000, respectively.
Remedy's principal commitments consist primarily of operating leases on its
facilities.

     Net cash provided by financing activities during the six months ended June
30, 2001 decreased to $6.2 million from $21.4 million during the six months
ended June 30, 2000. This comparative decrease of approximately $15.2 million is
primarily due to the repurchase of approximately 0.3 million shares of common
stock at a cost of $6.5 million and by the decrease of proceeds of $8.7 million
from the issuance of common stock under stock purchase and stock option plans
during the six months ended June, 2001.

     Remedy believes that its current cash and cash equivalents, short-term
investments and expected future cash flow from operations will be sufficient to
meet its working capital and capital expenditure requirements for at least the
next 12 months. Although operating activities may provide cash in certain
periods, to the extent it experiences growth in the future, Remedy anticipates
that its operating and investing activities may use cash. In addition, it may
utilize cash resources to fund acquisitions or investments in complementary
businesses, technologies or product lines. Consequently, significant future
growth may require Remedy to obtain additional equity or debt financing which
may not be available to the Company on acceptable terms, or at all, in the event
that the merger does not proceed as expected.

FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS

THE SHARES OF PEREGRINE COMMON STOCK THAT REMEDY STOCKHOLDERS WILL RECEIVE AS
PART OF THE MERGER CONSIDERATION MAY NOT MAINTAIN THEIR VALUE.

     At the closing of the merger, each share of Remedy common stock will be
exchanged for $9.00 in cash and 0.9065 shares of Peregrine common stock. There
will be no adjustment in the number of shares of Peregrine common stock issued
to Remedy stockholders because of changes in the market price of either
Peregrine common stock or Remedy common stock. Accordingly, the specific dollar
value of Peregrine

                                        14
<PAGE>   15

common stock that Remedy stockholders will receive upon the merger's completion
will depend entirely upon the market value of Peregrine common stock at the time
the merger is completed. This value may substantially decrease. In addition,
Remedy may not terminate the merger agreement, "walk away" from the merger or
re-solicit the vote of its stockholders solely because of changes in the market
price of Peregrine common stock or Remedy common stock. The share prices of
Peregrine common stock and Remedy common stock are by nature subject to the
general price fluctuations in the market for publicly-traded equity securities,
and the prices of both companies' common stock have experienced significant
volatility in the past. We urge you to obtain recent market quotations for
Peregrine common stock and Remedy common stock. Neither Peregrine nor Remedy can
predict or give any assurances as to the respective market prices of its common
stock at any time before or after the completion of the merger.

THE PUBLIC ANNOUNCEMENT OF THE MERGER COULD HAVE AN ADVERSE EFFECT ON THE
COMPANY'S REVENUES IN NEAR-TERM QUARTERS IF CUSTOMERS DELAY, DEFER, OR CANCEL
PURCHASES PENDING RESOLUTION OF THE MERGER.

     The public announcement of the merger could have an adverse effect on the
near-term revenues and profitability of Remedy. In particular, prospective
customers could be reluctant to purchase the Company's products if they are
uncertain about the direction of the combined Company's product offerings and
its willingness to support and service existing products. Since announcement of
the merger, Remedy has experienced questions from prospective customers about
the status of the merger and anticipated product integration plans, which have
not yet been determined. The merger was announced on June 11, 2001, in the last
month of Remedy's second quarter of fiscal 2001. Remedy tends to realize a
substantial portion of its revenues during the last few weeks of a quarter.
Accordingly, the announcement of the merger may have and could create
uncertainty among businesses and organizations contemplating software or service
purchases and subscriptions. If one large customer, or a significant group of
small customers, were to delay their purchase decisions pending resolution of
the merger, the quarterly revenues of Remedy could be substantially below the
expectations of market analysts, which would have an adverse effect on the
results of operations and could cause a dramatic reduction in the Company's
stock price. Remedy anticipates announcement of the merger could have an adverse
effect on other near term quarters pending completion of the merger and
Peregrine's product integration initiatives.

THE MERGER COULD IMPAIR REMEDY'S EXISTING RELATIONSHIPS WITH SUPPLIERS,
CUSTOMERS, STRATEGIC PARTNERS, AND EMPLOYEES, WHICH COULD HAVE AN ADVERSE EFFECT
ON REMEDY'S INDIVIDUAL AND COMBINED BUSINESSES AND FINANCIAL RESULTS.

     The public announcement of the merger could substantially impair important
business relationships of Remedy. Impairment of these business relationships
could reduce revenues or increase expenses, either of which would harm the
financial results of the affected Company. Specific examples of situations in
which Remedy could experience problems include the following:

     - suppliers, distributors, or customers of either Remedy could decide to
       cancel or terminate existing arrangements, or fail to renew those
       arrangements, as a result of the merger;

     - customers of Remedy could terminate or delay orders with Remedy because
       they question Remedy's continued commitment to provide products and
       enhancements, or to support products;

     - key employees of Remedy may decide to terminate their employment; and

     - other current or prospective employees of Remedy may experience
       uncertainty about their future roles with the combined company, which
       could adversely affect Remedy's ability to attract and retain key
       management, sales, marketing, and technical personnel.

                                        15
<PAGE>   16

FAILURE TO COMPLETE THE MERGER COULD HAVE A NEGATIVE IMPACT ON REMEDY'S STOCK
PRICE AS WELL AS A NEGATIVE IMPACT ON ITS BUSINESS AND FINANCIAL RESULTS.

     If the merger is not completed for any reason, Remedy may be subject to a
number of material risks, including the followings:

     - the price of Remedy common stock may decline to the extent that the
       relevant current market price reflects a market assumption that the
       merger will be completed;

     - Remedy's stock price may decline because of uncertainty concerning
       Remedy's stand-alone prospects;

     - some costs related to the merger, such as legal, accounting, financial
       advisory, and financial printing fees must be paid even if the merger is
       not completed;

     - Remedy could be required to pay Peregrine a termination fee in the amount
       of $40 million under certain circumstances;

     - the benefits that Remedy expect to realize from the merger, such as the
       potentially enhanced financial position of the combined company, would
       not be realized; and

     - the diversion of management attention from the day-to-day businesses of
       Remedy and the unavoidable disruption to their employees and their
       relationships with customers and suppliers during the period before
       consummation of the merger may make it difficult for Remedy to regain
       their respective financial market positions if the merger does not occur.

REMEDY'S QUARTERLY OPERATING RESULTS ARE VOLATILE AND DIFFICULT TO PREDICT. IF
FUTURE RESULTS ARE BELOW THE EXPECTATIONS OF PUBLIC MARKET ANALYSTS OR
INVESTORS, THE PRICE OF REMEDY'S COMMON STOCK MAY DECLINE.

     Remedy's quarterly operating results have in the past, and may in the
future, vary significantly depending on factors such as:

     - increased competition;

     - the timing of new product announcements and changes in pricing policies
       by Remedy and its competitors;

     - market acceptance of new and enhanced versions of Remedy's products;

     - the size and timing of significant orders;

     - the mix of direct and indirect sales;

     - changes in operating expenses;

     - changes in company strategy;

     - personnel changes;

     - foreign currency exchange rate fluctuations; and

     - general economic factors.

     Remedy operates with no significant order backlog because its software
products typically are shipped or electronically downloaded over the Web shortly
after orders are received. Furthermore, Remedy has often recognized a
substantial portion of its revenue in the last month of a quarter, with this
revenue frequently concentrated in the last weeks of a quarter. As a result,
product revenue in any quarter is substantially dependent on orders booked and
shipped in that quarter and revenue for any future quarter is not predictable
with any significant degree of certainty. Product revenue is also difficult to
forecast because the market for software products is rapidly evolving, and
Remedy's sales cycle, from initial trial to multiple copy purchases and the
provision of support services, varies substantially from customer to customer.
Remedy's expense levels are based, in part, on its expectations as to future
revenue. If revenue levels are below expectations, operating

                                        16
<PAGE>   17

results are likely to be adversely affected. Net income may be
disproportionately affected by a reduction in revenue because a proportionately
smaller amount of Remedy's expenses varies with its revenue.

     In addition, the technology sector in which Remedy operates has experienced
a dramatic general slowdown over the past nine months as evidenced by the
decline of stock prices on the Nasdaq National Market. This macroeconomic
environment may harm Remedy's business by impacting its customers, their
spending and the rate at which they accept Remedy's products. Remedy's
operations and stock price may experience substantial fluctuations from quarter
to quarter as a consequence of this environment and other factors affecting the
timing of capital spending decisions by Remedy's customers. There can be no
assurance that these factors will not seriously harm Remedy's business,
operating results or financial position.

     As a result, Remedy believes that period-to-period comparisons of its
results of operations are not necessarily meaningful and should not be relied
upon as indications of future performance. It is likely that in some future
quarter Remedy's operating results will be below the expectations of public
market analysts and investors. If this happens, the price of Remedy's common
stock would likely decline dramatically.

INCREASED COMPETITION IN THE MARKET FOR REMEDY'S PRODUCTS AND SERVICES COULD
SERIOUSLY HARM REMEDY'S BUSINESS, OPERATING RESULTS AND FINANCIAL CONDITION.

     The market for Remedy's products is intensely competitive, diverse and
subject to rapid change. New products are frequently introduced and existing
products are continually enhanced. Competitors vary in size and in the scope and
breadth of the products and services offered. Remedy has experienced substantial
competition from companies of all types and sizes, and these competitors
include:

     - providers of enterprise software, such as Computer Associates, FrontRange
       Solutions, Hewlett-Packard, IBM, infraWise, Interact Commerce, Intraware,
       Kana Communications, Main Control, Microsoft, Network Associates, Nortel
       Networks, Onyx Software, Oracle, PeopleSoft, Peregrine, Pivotal, Siebel
       Systems, STAFF & LINE and Viadyne Corporation; and

     - internally developed systems.

     In addition, because there are relatively low barriers to entry in the
software market, Remedy expects additional competition from other established
and emerging companies as the software market continues to develop and expand.
Increased competition could result in price reductions, reduced gross margins
and loss of market share, any of which could seriously harm Remedy's business,
operating results and financial condition. Some of Remedy's current, and many of
its potential, competitors have significantly greater financial, technical,
marketing and other resources than Remedy. As a result, they may be able to
respond more quickly to new or emerging technologies and changes in customer
requirements, or to devote greater resources to the development, promotion and
sale of their products than Remedy is able to do. In addition, current and
potential competitors have established or may establish cooperative
relationships among themselves or with third parties to increase the ability of
their products to address the needs of Remedy's prospective customers.
Accordingly, it is possible that new competitors or alliances among competitors
may emerge and rapidly acquire significant market share.

REMEDY DERIVES SUBSTANTIALLY ALL OF ITS REVENUE FROM PRODUCTS AND SERVICES
RELATED TO THE ACTION REQUEST SYSTEM.

     Remedy currently derives substantially all of its revenue from licenses of
its Action Request System, the applications Remedy provides that are built upon
the Action Request System foundation, and related services. Broad market
acceptance of these products and services is critical to Remedy's future
success. As a result, a decline in demand for or failure to achieve broad market
acceptance of the Action Request System foundation and applications as a result
of competition, technological change or otherwise, would seriously harm the
business, operating results and financial condition of Remedy. Remedy's future
financial performance will depend in part upon the successful development,
introduction and customer acceptance of new and enhanced versions of the Action
Request System foundation and other applications, specifically customer
relationship management and information technology service management
applications. There can be no assurance that

                                        17
<PAGE>   18

Remedy will continue to be successful in marketing the Action Request System or
any new or enhanced products or applications. Remedy continues to invest
significant resources into the research and development, sales and marketing of
new software applications. However, Remedy believes that its success in
expanding its product line will depend largely on new products achieving market
acceptance and technological competitiveness.

IF REMEDY FAILS TO RESPOND TO THE EVOLVING NEEDS OF ITS CUSTOMERS IN A TIMELY
MANNER, OR IF ITS PRODUCTS DO NOT ACHIEVE MARKET ACCEPTANCE, ITS BUSINESS WOULD
BE SERIOUSLY HARMED.

     The client/server and web-based application software industry is
characterized by rapid technological change, frequent new product introductions
and evolving industry standards. The introduction of products embodying new
technologies and the emergence of new industry standards can render existing
products obsolete and unmarketable. The life cycles of Remedy's products are
difficult to estimate. Remedy's future success will depend upon its ability to
enhance its current products and to develop and introduce new products on a
timely basis that keep pace with technological developments and emerging
industry standards and address the increasingly sophisticated needs of its
customers. Since 1999, Remedy has invested significant resources into the
research and development and sales and marketing of software applications.
Remedy intends to continue to invest heavily in these efforts in the future.
There can be no assurance that Remedy will be successful in developing and
marketing product enhancements or new products that respond to technological
change, evolving industry standards and customer requirements, or that Remedy
will not experience difficulties that could delay or prevent the successful
development, introduction and marketing of these products, or that its new
products and product enhancements will adequately meet the requirements of the
marketplace and achieve market acceptance. If Remedy is unable, for
technological or other reasons, to develop and introduce new products or
enhancements of existing products in a timely manner in response to changing
market conditions or customer requirements, Remedy's business, operating results
and financial condition will be seriously harmed. If the new products currently
being developed by Remedy do not achieve market acceptance or are not released
when expected, its business, operating results and financial condition will be
seriously harmed.

REMEDY'S SUCCESS DEPENDS ON RETAINING ITS CURRENT KEY PERSONNEL AND ATTRACTING
AND RETAINING ADDITIONAL KEY PERSONNEL.

     Remedy's future performance depends in significant part upon the continued
service of its key technical, sales and senior management personnel, none of
whom are bound by an employment agreement. The loss of the services of one or
more of its current executive officers could seriously harm its business,
operating results and financial condition. Remedy employees may question their
role with the combined company following completion of the merger. If this
occurs, Remedy may experience an increase in attrition over historical rates.
Remedy's future success also depends upon its continuing ability to attract and
retain highly qualified technical, sales and managerial personnel. Competition
for such personnel is intense, particularly in the competitive employment market
of the Silicon Valley in California where the majority of Remedy's workforce is
located, and there can be no assurance that it can retain its key technical,
sales and managerial employees or that it can attract, assimilate or retain
other highly qualified technical, sales and managerial personnel in the future.
In particular, if Remedy is to achieve significant revenue growth in the future,
it must continue to hire additional sales personnel. Competition for such
personnel is intense, and there can be no assurance that Remedy can retain its
existing sales personnel or that it can attract, assimilate or retain additional
highly qualified sales persons in the future. In the past, Remedy has
experienced difficulty in recruiting a sufficient number of qualified sales
persons. Any failure of Remedy to attract and retain such qualified employees
could seriously harm its business, operating results and financial condition.

REMEDY CAN HAVE A LONG SALES CYCLE, WHICH MAKES THE PREDICTION OF OPERATING
RESULTS DIFFICULT.

     Historically, Remedy made a significant number of its sales to a department
or a division of an organization. If the implementation was successful at the
departmental or divisional level, Remedy then attempted to make additional sales
into the organization either by selling other applications to the department

                                        18
<PAGE>   19

or division of the organization that made the initial purchase, or
alternatively, by selling to other departments or divisions of the organization.
Over the past several years, Remedy has also attempted to sell its products at
the organizational level, in which case a company would often buy multiple
Remedy products or multiple applications of the Remedy Action Request System and
deploy the products or applications throughout the organization. These
organizational transactions typically are larger in size than Remedy's
department or divisional sales and take longer to complete. For the quarter
ended June 30, 2001, Remedy's sales at the organizational level were
significantly below its expectations.

     Organizational customers often deploy Remedy's products in business
critical operations, which involve significant capital and management
commitments, by such customers. These customers generally commit significant
resources to an evaluation of available enterprise software and require Remedy
to expend substantial time, effort and money. Sales of Remedy's products to
these customers require an extensive sales effort throughout a customer's
organization, because decisions to purchase the products generally involve the
evaluation of the software by a significant number of customer personnel in
various functional and geographic areas, each often having specific and
conflicting requirements. A variety of factors, including factors over which
Remedy has little or no control, may cause these potential customers to favor a
particular supplier or to delay or forego a purchase. As a result of these or
other factors, the sales cycle for Remedy's products is relatively long when
selling at the organizational level, typically ranging between three and nine
months.

     As a result of the length of the sales cycle and the significant selling
expenses resulting from selling at the organizational level, Remedy's ability to
forecast the timing and amount of specific sales is limited, and the delay or
failure to complete one or more large transactions to which Remedy has devoted
significant resources could seriously harm Remedy's business, operating results
or financial condition and could cause significant variations in its operating
results from quarter to quarter. In addition, many organizational customers have
significantly decreased their spending because of the dramatic slowdown in the
technology sector. Reduced spending has and may continue to impact Remedy's
customers' decisions to purchase Remedy's products, which has and could continue
to seriously harm Remedy's business, financial condition and results of
operations.

REMEDY INTENDS TO RELY ON THIRD PARTIES TO IMPLEMENT ITS PRODUCTS IN SOME
CUSTOMERS.

     Remedy relies on third-party implementation providers, including
integration consulting firms and other consultants, to assist with the
implementation of its products in organizational customers and in the training
of personnel within such customers, in order to meet the demand for
implementation of its product from these customers. Remedy's operating margins
may be lower as a result of the higher expenses associated with engaging such
third party service providers. In addition, if Remedy is unable to establish and
maintain effective, long-term relationships with its implementation providers,
or if these providers do not meet the needs or expectations of its
organizational customers, its business would be seriously harmed.

REMEDY RELIES ON INDIRECT MARKETING CHANNELS FOR A SIGNIFICANT PERCENTAGE OF ITS
TOTAL SALES.

     An integral part of Remedy's strategy is to continue to develop the
marketing channels of value-added resellers, system integrators and independent
software vendors. Value added resellers, system integrators and independent
software vendors accounted for approximately 44% of Remedy's total revenue in
the six-month period ended June 30, 2001 and approximately 47% of its total
revenue in 2000. If these marketing channels increase as a percentage of sales,
Remedy's operating margins may be seriously harmed due to the lower unit prices
that Remedy receives when selling through indirect channels.

     There can be no assurance that Remedy will be able to attract value added
resellers, system integrators and independent software vendors that will be able
to market Remedy's products effectively and will be qualified to provide timely
and cost-effective customer support and service. In addition, Remedy's
agreements with its value added resellers, system integrators and independent
software vendors are not exclusive and in many cases may be terminated by either
party without cause, and many of Remedy's value added resellers, system
integrators and independent software vendors carry competing product lines.
Therefore, there can be no assurance that any value added resellers systems
integrators and independent software vendors will

                                        19
<PAGE>   20

continue to represent Remedy's products, and the inability to recruit, or the
loss of important value added resellers, system integrators and independent
software vendors could seriously harm Remedy's results of operations.

IF REMEDY CONTINUES TO EXPAND ITS INTERNATIONAL OPERATIONS ITS OPERATING MARGINS
MAY DECREASE.

     International sales represented approximately 37% of Remedy's revenue in
the six months ended June 30, 2001 and approximately 38% of Remedy's revenue for
the year ended December 31, 2000. Remedy currently has nineteen international
wholly owned subsidiaries, which primarily function as sales offices, and are
located in the United Kingdom, Ireland, Canada, Germany, France, Spain, Italy,
The Netherlands, Sweden, Singapore, Australia, Japan, Hong Kong, Brazil, Mexico,
Argentina and Switzerland. One of Remedy's strategies is to continue to expand
its existing international operations and enter additional international
markets, which will require significant management attention and financial
resources. Traditionally, international operations are characterized by higher
operating expenses and lower operating margins. As a result, if Remedy's
international revenues increase as a percentage of total revenue, its operating
margins may be seriously harmed. Costs associated with international expansion
include the establishment of additional foreign offices, the hiring of
additional personnel, the localization and marketing of its products for
particular foreign markets and the development of relationships with additional
international service providers. If Remedy's international revenue is not
adequate to offset the expense of expanding foreign operations, its business,
operating results or financial condition could be seriously harmed.

REMEDY'S INTERNATIONAL OPERATIONS EXPOSE IT TO NUMEROUS RISKS.

     Remedy's international operations are subject to risks inherent in
international business activities and generally include:

     - unexpected changes in regulatory requirements, tariffs and other trade
       barriers;

     - difficulties cultivating product acceptance in foreign countries;

     - longer accounts receivable payment cycles;

     - difficulties in managing international operations;

     - potentially adverse tax consequences including restrictions on the
       repatriation of earnings;

     - the burdens of complying with a wide variety of foreign laws;

     - currency exchange rates fluctuations; and

     - general economic conditions and political instability in foreign
       countries.

     There can be no assurance that such factors will not seriously harm
Remedy's future international sales and, consequently, its results of
operations. In addition, because a substantial majority of its international
sales are indirect, any material increase in its international sales as a
percentage of total revenue may adversely affect Remedy's average selling prices
and gross margins due to the lower unit prices that it receives when selling
through indirect channels.

REMEDY'S ABILITY TO COMPETE EFFECTIVELY MAY BE ADVERSELY AFFECTED IF IT IS
UNABLE TO PROTECT ITS PROPRIETARY TECHNOLOGY.

     Remedy's success is heavily dependent upon proprietary technology. Remedy
relies primarily on a combination of patent, copyright and trademark laws, trade
secrets, confidentiality procedures and contractual provisions to protect its
proprietary rights. It seeks to protect its software, documentation and other
written materials under trade secret and copyright laws, which afford only
limited protection. Remedy presently has two patent applications pending. Remedy
does not know whether any of its pending or future patent applications will
result in the issuance of patents. To the extent patents have been issued or
will be issued, Remedy does not know whether these patents will be subject to
further proceedings limiting their scope, will provide significant proprietary
protection or competitive advantage, or will be circumvented or invalidated.
                                        20
<PAGE>   21

Despite its efforts to protect its proprietary rights, unauthorized parties may
attempt to copy aspects of Remedy's products or to obtain and use information
that Remedy regards as proprietary. Policing unauthorized use of Remedy's
products is difficult, and while it is unable to determine the extent to which
piracy of its software products exists, software piracy can be expected to be a
persistent problem. In selling its products, Remedy relies primarily on "shrink
wrap" (out-of-the-box or off-the-shelf sales) and "click wrap" (electronic sales
transmitted via the internet) licenses that are not signed by licensees and,
therefore, it is possible that such licenses may be unenforceable under the laws
of some jurisdictions. In addition, the laws of some foreign countries do not
protect its proprietary rights to as great an extent as do the laws of the
United States. There can be no assurance that Remedy's means of protecting its
proprietary rights will be adequate or that its competitors will not
independently develop similar technology.

     Remedy may have to resort to litigation to protect its intellectual
property rights, to protect any issued patents, its trade secrets or know-how or
to determine their scope validity or enforceability. Enforcing or defending its
proprietary technology is expensive, could cause the diversion of its resources,
and may not prove successful. Remedy's protective measures may prove inadequate
to protect its proprietary rights, and any failure to enforce or protect its
rights could adversely affect Remedy's ability to compete effectively.

NEW VERSIONS AND RELEASES OF REMEDY'S PRODUCTS MAY CONTAIN ERRORS.

     Software products as complex as those offered by Remedy may contain
undetected errors or failures when first introduced or when new versions are
released. Remedy has in the past discovered software errors in certain of its
new products and enhancements after their introduction and has experienced
delays or lost revenue during the period required to correct these errors.
Although Remedy has not experienced material adverse effects resulting from any
such errors to date, there can be no assurance that, despite testing by Remedy
and by current and potential customers, errors will not be found in new products
or releases after commencement of commercial shipments, resulting in loss of or
delay in market acceptance, which could seriously harm Remedy's business,
operating results and financial condition.

REMEDY MAY BE SUBJECT TO INFRINGEMENT AND PRODUCT LIABILITY CLAIMS THAT, WITH OR
WITHOUT MERIT, COULD BE COSTLY TO DEFEND OR SETTLE.

     Remedy is not aware that any of its products infringe the proprietary
rights of third parties. However, there can be no assurance that third parties
will not claim infringement by Remedy with respect to current or future
products. Remedy expects that software product developers will increasingly be
subject to infringement claims as the number of products and competitors in its
industry segment grows and the functionality of products in different industry
segments overlaps. Any such claims, with or without merit, could be time-
consuming, result in costly litigation, cause product shipment delays or require
Remedy to enter into royalty or licensing agreements. Such royalty or licensing
agreements, if required, may not be available on terms acceptable to Remedy or
at all, which could seriously harm its business, operating results and financial
condition.

     In addition, because Remedy's customers use its products and services to
manage their business processes and customer relationships, any errors, defects
or other performance problems in Remedy's products and services could result in
financial or other damages to Remedy's customers. Although Remedy has not
experienced any product liability claims to date, the sale and support of
products by Remedy may entail the risk of such claims. Remedy's license
agreements with its customers typically contain provisions designed to limit its
exposure to potential product liability claims. In selling its products, Remedy
relies primarily on "shrink wrap" (out-of-the-box or off-the-shelf sales) and
"click wrap" (electronic sales transmitted via the internet) licenses that are
not signed by licensees and, therefore, it is possible that such licenses may be
unenforceable under the laws of some jurisdictions. For these and other reasons,
it is possible that the limitation of liability provisions contained in its
license agreements may not be effective. A product liability claim brought
against Remedy, even if not successful, would likely be time consuming and
costly and could seriously harm Remedy's business.

                                        21
<PAGE>   22

     A successful product liability claim brought against Remedy could seriously
harm Remedy's business, operating results and financial condition.

THE CONVERSION OF EUROPEAN CURRENCIES INTO THE EUROPEAN UNION'S COMMON CURRENCY
COULD HARM REMEDY'S BUSINESS.

     Remedy is aware of the issues associated with the changes in Europe aimed
at forming a European Economic and Monetary Union. On January 1, 1999, certain
member countries of the European Union established fixed conversion rates
between their existing currencies and the European Union's common currency, the
Euro. On that day, the Euro became a functional legal currency within these
countries and over the next three years, business in the European Economic and
Monetary Union member states will be conducted in both the existing national
currency and the Euro. As a result, companies operating in or conducting
business in European Economic and Monetary Union member states need to ensure
that their financial and other software systems are capable of processing
transactions and properly handling these currencies, including the Euro. No
later than July 1, 2002, the participating countries will withdraw all bills and
coins denominated in the legacy currencies, so that the legacy currencies will
no longer be legal tender for any transactions, making the conversion to the
Euro complete. Remedy recognizes that by January 1, 2002, all its customers in
the participating countries in Europe will need to have converted all the values
in their databases to the Euro, having previously reflected all values in the
appropriate local currencies. At this time, it is not possible to summarize the
potential costs associated with addressing any Euro conversion issues and there
can be no assurance that these issues and their related costs will not seriously
harm Remedy's business, operating results and financial position.

     For additional risks related to the combined entity following the closing
of the merger between Peregrine and Remedy, please see the Registration
Statement on Form S-4 filed with the Securities and Exchange Commission on July
3, 2001 (Registration Statement No. 333-64458).

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     INTEREST RATE RISK. Remedy's exposure to market risk for changes in
interest rates primarily relates to its investment portfolio. As stated in its
policy, Remedy is averse to principal loss and seeks to preserve its invested
funds by limiting issuer risk, default risk, liquidity risk and interest rate
risk. Remedy limits issuer risk by placing its investments with high credit
quality issuers and, by policy, limiting the amount of credit exposure to any
one issuer. Remedy mitigates default and liquidity risks by investing in only
high credit quality securities and by positioning its portfolio to respond
appropriately to a significant reduction in a credit rating of any investment
issuer or guarantor. The portfolio includes only marketable securities with
active secondary or resale markets to ensure portfolio liquidity. Remedy
mitigates interest rate risk by only allowing suitable investments to be made in
taxable and non-taxable U.S. as well as foreign instruments. All of Remedy's
investments in aggregate have a weighted average remaining maturity of less than
one year at any given point in time. For a tabular presentation of interest rate
risk sensitive instruments, including the carrying value, market value and
related weighted average interest rates for Remedy's investment portfolio as of
December 31, 2000 and December 31, 1999, see Remedy's 2000 Form 10-K filed with
the Securities and Exchange Commission in March 2001.

     FOREIGN CURRENCY RISK. Remedy transacts business in various foreign
currencies, primarily in Europe. As some revenues are denominated in currencies
other than U.S. dollars, Remedy will be subject to the risks associated with
foreign exchange rate fluctuations. In addition, an increase in the value of the
U.S. dollar relative to foreign currencies could make its products more
expensive and, therefore, potentially less competitive in those markets. As part
of its overall strategy to manage the level of exposure to the risk of foreign
currency exchange rate fluctuations, Remedy hedges a portion of its foreign
currency exposures anticipated over the ensuing twelve month period. In the
fourth quarter of 1999, Remedy began invoicing in currencies other than U.S.
dollars, and as a result, it has entered into hedging activities in order to
minimize the exposure of the United States Dollar ("USD") value of foreign
currency denominated sales. Remedy does not enter into any derivative
transactions for speculative purposes, and its derivative financial instruments
should not subject it to material risk due to exchange rate movements because
gains and losses on these
                                        22
<PAGE>   23

contracts should offset losses and gains on the transactions being hedged. In
the future, more of its revenues may be denominated in currencies other than
U.S. dollars and, as a result, Remedy's exposure in the future may fluctuate
depending upon the nature and success of the hedging activities. Accordingly,
due to the substantial volatility of foreign exchange rates, Remedy's business,
operating results or financial condition could be seriously harmed.

                           PART II. OTHER INFORMATION

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     On May 24, 2001, the Annual Meeting of Stockholders of Remedy Corporation
was held in Mountain View, California. Of the 30,308,306 shares outstanding as
of March 30, 2000, the record date, holders of 28,803,780 shares were present or
represented by proxy at the meeting.

     An election of directors was held, with the following individuals being
elected to the Board of Directors of the Company:

<Table>
<S>                              <C>
Lawrence L. Garlick............  (26,764,943 votes for, 2,038,837 votes withheld)
David A. Mahler................  (27,699,138 votes for, 1,104,642 votes withheld)
Harvey C. Jones, Jr. ..........  (27,706,441 votes for, 1,097,339 votes withheld)
John F. Shoch..................  (28,497,193 votes for, 306,587 votes withheld)
Sheri Anderson.................  (27,705,336 votes for, 1,098,444 votes withheld)
John Olsen.....................  (27,702,071 votes for, 1,101,709 votes withheld)
</Table>

     Other matters voted upon at the meeting and the number of affirmative and
negative votes cast with respect to each such matter were as follows:

     1. To approve amendment to the Employee Stock Purchase Plan, including an
        increase to the number of shares available, as described in the proxy
        statement. (22,877,060 votes in favor, 4,347,712 votes opposed,
        1,579,008 votes abstaining).

     2. To ratify the appointment of Ernst & Young LLP as independent auditors
        of the Company for the fiscal year ending December 31, 2001. (28,588,198
        votes in favor, 170,065 votes opposed, 45,517 votes abstaining).

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

     (a) Exhibits

<Table>
        <S>  <C>
        2.1  Agreement and Plan of Merger and Reorganization, dated as of
             June 10, 2001, by and among Peregrine Systems, Inc., Rose
             Acquisition Corporation and Remedy Corporation.*
</Table>

     (b) Reports on Form 8-K

        A current report on Form 8-K was filed with the Securities and Exchange
        Commission by Remedy on June 13, 2001 with respect to the Agreement and
        Plan of Merger and Reorganization, dated as of June 10, 2001, by and
        among Peregrine Systems, Inc., Rose Acquisition Corporation and Remedy
        Corporation.
---------------
* Incorporated by reference from the Exhibits to Remedy Corporation's Form 8-K,
  dated June 13, 2001.

                                        23
<PAGE>   24

                                   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.

                                          REMEDY CORPORATION

                                          /s/         RON J. FIOR
                                          --------------------------------------
                                                       Ron J. Fior
                                          Vice President, Finance & Operations,
                                                 Chief Financial Officer
                                               (Duly Authorized Officer and
                                            Principal Financial and Accounting
                                                         Officer)

Dated: July 31, 2001

                                        24
<PAGE>   25

                                 EXHIBIT INDEX

<Table>
<Caption>
EXHIBIT
NUMBER                            EXHIBIT TITLE
-------                           -------------
<C>        <S>
  2.1      Agreement and Plan of Merger and Reorganization, dated as of
           June 10, 2001, by and among Peregrine Systems, Inc., Rose
           Acquisition Corporation and Remedy Corporation.*
</Table>

---------------
* Incorporated by reference from the Exhibits to Remedy Corporation's Form 8-K,
  dated June 13, 2001.

                                        25