Interim report of Proha plc for the period january 1 - september 30, 2001

INTERIM REPORT OF PROHA PLC FOR THE PERIOD JANUARY 1 - SEPTEMBER 30, 2001 - Net sales for January 1 - September 30, 2001 were EUR 60.4 million, growth compared to the corresponding period in 2000 228%. - Operating loss was EUR 7.8 million, against operating profit of EUR 2.8 million for the corresponding period in 2000. - Earnings before financial expenses, taxes, and depreciation (EBITDA) was EUR -4.6 million, compared to the profit of EUR 3.4 million for the same period in 2000. - Result for the period is affected by the Opus360 Corporation transaction. The the transaction had a negative effect of EUR 2.9 million on EBITDA during the period under review The loss of Opus360 was taken into account in the purchase price. - In addition, the result was affected by the expenses from the Opus360 transaction, some non-recurring expenses, and more extensive use of outsourcing services. Further, the world economic situation and disruptions in the US business due to the events on September 11 have affected the result. - Depending on the international economic development, the organic growth of net sales for the financial year 2001 is expected to be 5% which is within the previous forecast (5-20%). - This financial year is expected to have zero result (EBITDA) excluding the effect of Opus360 transaction, and a loss of EUR 5 million including the effect of Opus360 transaction. - The first phase of Opus360 Corporation transaction was completed on July 31, 2001. The second phase is expected to conclude after the Opus360 Corporation special stockholder meeting on November 20, 2001. - PortfolioDirector, a new Artemis product, was introduced globally in September. The new product expands Artemis' product offering to strategic decision-making. PortfolioDirector sales are expected to be reflected in the net sales for 2002. - The Company's Board of Directors decided to study the possibility to demerge Proha into global Artemis software business and Nordic software and service business. The study is expected to be done by the end of 2001. NET SALES AND RESULT The result and balance sheet were calculated assuming that the Opus360 transaction is completed and Proha owns 80% of Artemis International Solutions Corporation (AISC) and AISC owns 19.9% of both Intellisoft and Accountor. The assumption is deemed justified since the Opus360 Corporation special stockholder meeting will be held on November 20, 2001, and Proha Plc has both an adequate number of voting rights and an obligation to vote in favor of the transaction. Proha Group's net sales for January 1 - September 30, 2001, increased to EUR 60.4 million, compared to EUR 18.4 million for the same period in 2000. Earnings before financial expenses, taxes, and depreciation (EBITDA) was EUR -4.6 million (EUR 3.4 million). Operating loss was EUR 7.8 million, compared to operating profit of EUR 2.8 million for the corresponding period in 2000. Result before appropriations and taxes was EUR -8.5 million (-14.1% of net sales), compared to EUR 2.8 million in 2000. Earnings per share for the nine month period amounted to EUR -0.16 (EUR 0.09). NET SALES AND EBITDA BY BUSINESS AREA, EUR 1000 Business Area Net sales EBITDA % Artemis companies (Project Management) 58 379 -1 658 -2.8 Accountor companies (Financial Management) 3 641 -138 -3.8 Intellisoft companies (Internet Technologies) 1 476 -172 -11.6 Other areas 1 462 -1 167 -79.8 Eliminations -4 560 -1 491 Total 60 397 -4 626 -7.7 FINANCING AND INVESTMENTS The balance sheet total at the end of the period was EUR 60.1 million, compared to EUR 51.5 million for the same period in 2000. Cash items and short term investments totaled EUR 6.5 million, against EUR 5.2 million for the corresponding period in 2000. The Quick Ratio was 0.89. The product development expenses for international strategic products totaled EUR 9.6 million, of which EUR 9.2 million were entered as expenses. Interest bearing liabilities were equivalent to 10.7% of the Group's total capital at the end of the period. PRODUCT DEVELOPMENT During the period, 16% of the Group net sales was invested in the product development of international strategic products. In addition, Proha developed tactical products regionally. The development of these products was partly carried out as customer projects. The development expenses of tactical products were entered as expenses. PortfolioDirector (TM), an entirely new Artemis product, was launched globally in September. Until the end of the year 2001, the product is expected to be offered internationally to a limited number of customers. The pilot projects have been launched. The development of other Artemis products and product upgrades introduced this fall has proceeded as planned. New versions of Views products are expected to be launched during the last quarter of 2001 and the first quarter of 2002. The product development of the WorkForce Procurement product was terminated due to a difficult market situation. In the Financial Management business area, net sales of Proha subsidiary Accountor Oy continued to grow. In the nine month period, net sales increased by 125%, compared to the corresponding period in 2000. The development of service concepts into products has proceeded as planned. The Internet Accounting Partner and IAP Flow products are targeted at large companies, which can attain significant cost savings in the handling of electronic purchase invoices. In the Internet technologies business area, Proha subsidiary Intellisoft Oy has continued with the development work - integrating its own software with third-party systems - according to plan. The marketing and sales of service entities has started as expected. In addition, Intellisoft has a significant role as the realizer of information systems for the Accountor services. The profitability of the business is expected to improve towards the end of the year. ACQUISITIONS AND CHANGES IN ASSOCIATED COMPANIES OPUS360 CORPORATION In April, Proha Plc and Opus360 Corporation, a US-based software company, signed an agreement pursuant to which Proha is to receive 80% of the entire share capital of Opus360 Corporation in exchange for the Artemis businesses and 19.9% of Proha's Intellisoft Oy and Accountor Oy subsidiaries. The share exchange agreement was amended on July 12, 2001, in order to complete the transaction in a two-step process. At the first closing, consummated on July 31, 2001, a total of 73,938,702 Opus360 common shares were issued to Proha in return for its Artemis shares. As a result, Proha currently owns 59.75% of the Opus360 share capital. Proha's extraordinary general meeting approved the transaction on July 30, 2001, in accordance with the terms and conditions of the contract. At the second closing, Proha will receive approximately 125.5 million Opus360 common shares in return for concluding the transfer of its Artemis shares and for the 19.9% shares of the two Proha subsidiaries. After the second closing, Proha will own approximately 80% of the Opus360 share capital. The second closing is expected to occur after the special meeting of Opus360 stockholders on November 20, 2001. The closing of the second phase of the share exchange agreement requires that the Opus360 stockholders approve an amendment to the Opus360 restated certificate of incorporation. In accordance with US legal requirements, Opus360 filed a definitive proxy statement with the Securities and Exchange Commission (SEC) on November 6, 2001. The proxy statement includes a notice of a special stockholder meeting on November 20, 2001, and a proposal to approve the increase of the maximum share capital from 150,000,000 shares to 500,000,000 shares. In addition, the stockholders are being asked to approve another amendment to the certificate of incorporation of Opus360 which will change the name of the corporation to Artemis International Solutions Corporation. All stockholders of record on November 5, 2001 are entitled to participate in the special stockholder meeting. The proxy statement also contains information about the voting agreements related to the transaction, pursuant to which Ari Horowitz, Executive Vice President and holder of 2.7% of outstanding Opus360 shares, and Proha Plc, the principal stockholder, are required to vote in favor of the proposals in the proxy statement. As a result of the transaction, Opus360 Corporation becomes the parent company of Proha's Artemis Group. The combined business operations continue to operate under the name Artemis International Solutions Corporation. Proha CEO Pekka Pere was elected non-executive Chairman of the Board of Directors of Artemis International Solutions Corporation and Steven Yager was elected CEO of Artemis International Solutions Corporation. Mr. Pere and Mr. Yager continue as members of the Proha Board of Directors. The transaction strengthens Proha's financial position and decreases Artemis debt level. PERSONNEL The number of personnel continued to increase. At the end of the period the number of employees in Proha Group is 717. The corresponding number for the same period in 2000 was 461. The staff expenses were EUR 37.2 million (EUR 7.7 million), 61,2% of net sales (41.7%). Of these, 557 (322) people worked in the area of Project Management, 98 (83) in Financial Management, and 42 (56) in Internet Technologies. The number of employees in Finland was 250, while 467 worked abroad. SHARE CAPITAL On September 30, 2001, the number of company shares was 51,054,350 and the share capital was EUR 13,274,131.10. The cancellation of 1,960,180 Proha shares owned by Artemis Acquisition Corporation on August 15, 2001, was taken into account in the number of shares. AUTHORIZATION TO ISSUE SHARES The Board of Directors was authorized by the extraordinary general meeting on December 13, 2000 to decide on increasing the share capital through one or more new subscriptions having a total combined value of a maximum of 7,000,000 new shares, each share having a book parity of EUR 0.26. On the basis of this authorization, the company's share capital can be increased by a maximum of EUR 1,820,000. The number of unused shares is 6,685,595, corresponding to EUR 1,738,254.70. The authorization is valid until December 12, 2001. TRADING ON THE HELSINKI STOCK EXCHANGE The number of registered shareholders of Proha Plc totaled 3,477 at the end of the period. During the period, the share price was EUR 0.27 at its lowest and EUR 0.71 at its highest. Market capitalization was approximately EUR 13.8 million as of the end of the period. EVENTS FOLLOWING THE NINE MONTH PERIOD Study on the possible demerger In its meeting on October 18, 2001, the Proha Board of Directors decided to study the possibility to demerge the company into global Artemis software business and Nordic software and service businessThe study is expected to be done by the end of 2001. In case the company decides in favor of the demerger in accordance with the Companies Act, the owners of Proha Plc would continue as the owners of the new companies and they would receive shares of the resulting new companies in the same proportion as they owned Proha Plc shares before the demerger. Other events following the nine month period The combination of Artemis Group and Opus360 Corporation business operations has been completed. Dovre International AS, an associated company of the Proha Group, signed an agreement on the implementation of an oilfield with the Norwegian state-owned oil company Statoil. The agreement is valid for 2 years, and the expected workload is over 10 man-years. As required pursuant to the share exchange agreement between Proha and Opus360 Corporation, Opus360 filed a definitive proxy statement with the United States Securities and Exchange Commission on November 6, 2001. The definite proxy statement includes a notice of a special stockholder meeting on November 20, 2001. The special stockholder meeting will decide on amending the Opus360 restated certificate of incorporation to increase the corporation's maximum share capital from 150,000,000 shares to 500,000,000 shares. In addition, the stockholders are being asked to approve another amendment to the certificate of incorporation of Opus360 which will change the name of the corporation to Artemis International Solutions Corporation. All stockholders of record on November 5, 2001, are entitled to participate in the special meeting. DECISIONS OF THE GENERAL MEETING Extraordinary general meeting of Proha Plc held on July 30, 2001 - approved the Opus360 Corporation transaction in accordance with the proposal of Board of Directors - approved the Board of Directors' proposal for the cancellation of 1,960,180 Proha Plc shares owned by Proha subsidiary, Artemis Acquisition Corporation, and for the decrease in the share capital with the amount corresponding to the combined book parity of the cancelled shares, EUR 509,646.80. The reduction of the share capital will be done by transferring EUR 509,646.80 to the share premium account which is company's restricted capital. The reduction of the share capital will have no impact on the distribution of share ownership or voting rights, since the shares to be cancelled are owned by the company's subsidiary Artemis Acquisition Corporation. - decided to change the section 6 of the Articles of Association as follows: "6§ Board of Directors The Board of Directors of the company is composed of no less than three (3) and no more than eight (8) members. Their term ends at the end of the first Annual General Meeting following the election. In the first meeting after the election of the Board of Directors, the Board appoints one member to be the Chairman of the Board and another member to be the Vice-Chairman of the Board, whose term lasts until the end of the Annual General Meeting following the election." - approved the Board of Directors' proposal to increase the number of members in the Board to eight ordinary members instead of the previous six. - approved the Board's proposal for the composition of the Board of Directors in accordance with the share exchange agreement signed with Opus360 Corporation as follows: Mr. Pekka Mäkelä resigned from the Board of Directors. The members of Opus360 Corporation Board of Directors, Mr. Ari Horowitz and Mr. James A. Cannavino, as well as Artemis Chief Financial Officer Peter Schwartz were elected as the new members of Proha Board of Directors. Mr. Olof Ödman will continue as the Chairman and Mr. Steven Yager, Mr. Alec Gores, Mr. Pekka Pere, and Mr. Klaus Cawén continue to serve as members in the Board of Directors. ACCOUNTING PRINCIPLES FOR THE GROUP INTERIM REPORT In the interim report, the consolidation follows the accounting principles of the financial statements stipulated on December 31, 2000. Result and balance sheet were calculated assuming that the Opus transaction is closed and Proha owns 80% of Artemis International Solutions Corporations (AISC) and AISC 19.9% of both Intellisoft and Accountor. Opus360 Corporation has been combined as of August 1, 2001. Amortization of negative goodwill The negative goodwill of EUR 6.15 million originating from the Opus360 Corporation transaction will be amortized during 11 months starting from August 1, 2001. For the nine month period, the amortization of negative goodwill was EUR 1.12 million. Depreciation of goodwill Goodwill for Artemis companies will be depreciated in 10 years and for other companies in 3 years. For the nine month period, the depreciation of goodwill was EUR 2.3 million. Minority interest of Opus360 Corporation For the minority shareholders of Opus, a minority interest of 20% is presented separately from the capital and reserves at the time of the purchase and the result for the period, a total of EUR 0.9 million. The separate presentation of minority interest is justified since the Opus360 Corporation special stockholder meeting which is required for the closing of the Opus transaction will be held on November 20, 2001, and Proha Plc has both an adequate number of voting rights and an obligation to vote in favor of the transaction. If the minority interest had been presented in accordance with the legal holding of 40.31% at the end of September, the minority interest would have been EUR 1.8 million. Fixed assets assessment The depreciation plan of machinery and equipment was altered from the previous year. According to plan, the depreciation period is 3-10 years. Straight-line depreciation is used as a depreciation method. Research and development expenses Research and development expenses were EUR 9.6 million of which EUR 0.4 million was activated in the balance sheet and EUR 9.2 million was entered as expenses. Company shares The Group has no Proha Plc shares. The shares previously owned by the Group were cancelled on August 15, 2001. These shares were equivalent to 3.7% of all Proha Plc shares. PROSPECTS FOR THE NEAR FUTURE Difficult market situation and the recent events in the United States decelerated especially the license sales during the second half of 2001. We expect the net sales growth for the financial year 2001 to be approximately 5% and the result (EBITDA) to be zero excluding the effect of Opus360 transaction. These estimates are in line with the lower end of our previous estimates. The loss (EBITDA) resulting from Opus360 transaction for August-September 2001 is approximately EUR 2.9 million and the estimate of the management of Proha for the last quarter is approximately EUR 2 million loss (EBITDA). No significant growth in net sales is expected for 2002, and the operations are focused on improving the profitability. New software updates and entirely new products are expected, however, to result in an opportunity for stronger growth if market conditions are favorable. Due to a slowdown in software markets, the company expects that even a modest growth will enhance the market share. Accountor and the entire financial management service and software operation are expected to grow significantly during the end of the year and continue to grow next year. In 2002, the company expects the profitability to improve even further. IAP Flow, a globally unique service product for electronic handling of purchase invoices, has attracted wide interest on the market and its production use has been started. Intellisoft has reached its profitability target, and the operation as well as the profitability are expected to grow further during 2002. The weakening of the general economic situation has given ASP services competitive edge over traditional information technology investments. Espoo The Board of Directors of Proha Plc For more information please contact: PROHA PLC President and CEO Pekka Pere, tel. +358 (0)20 4362 000 pekka.pere@proha.com www.proha.com DISTRIBUTION: Helsinki Stock Exchange Major Media PRESS CONFERENCE Proha Plc will hold a press conference for the media and for the financial analysts at 12.00 am on November 15, 2001, at World Trade Center, cabinet 2, address: Aleksanterinkatu 17, Helsinki. 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