Unaudited Pro Forma Financial Information

EX-99.2 5 dex992.htm UNAUDITED PRO FORMA FINANCIAL INFORMATION Unaudited Pro Forma Financial Information

EXHIBIT 99.2

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

The unaudited pro forma condensed consolidated balance sheet as of December 31, 2003 is presented to give effect to the acquisition of IXOS as if it occurred on December 31, 2003. As the acquisitions of Centrinity, Corechange, Eloquent and Gauss had been completed as of that date, the consolidated balance sheet of Open Text at December 31, 2003 already reflects those transactions. The unaudited pro forma condensed consolidated statement of operations of Open Text is presented as if the acquisitions of Centrinity, Corechange, Eloquent, Gauss and IXOS had taken place on July 1, 2003. As the acquisitions of Centrinity, Corechange and Eloquent had been completed as of July 1, 2003, the statement of operations of Open Text for the six-month period ended December 31, 2003 already reflects their results from operations.

The following unaudited pro forma condensed consolidated financial statements are based on the historical financial statements of Open Text, Centrinity, Corechange, Eloquent, Gauss and IXOS after giving effect to the acquisitions of Centrinity, Corechange, Eloquent, Gauss and IXOS using the purchase method of accounting and the assumptions and adjustments described in the accompanying notes to the unaudited pro forma condensed consolidated financial statements. The acquisition of Centrinity was completed on November 1, 2002, the acquisition of Corechange was completed on February 25, 2003, the acquisition of Eloquent was completed on March 20, 2003 and the acquisition of Gauss was completed on October 16, 2003. The Company intends to acquire 100% of the common shares of IXOS and Gauss and the unaudited pro forma condensed consolidated financial statements are prepared on that basis. As of May 3, 2004, Open Text had acquired approximately 88% and 87% of the common shares of IXOS and Gauss, respectively.

Under the purchase method of accounting, the total estimated purchase price, calculated as described in Note 2 to these unaudited pro forma condensed consolidated financial statements, is allocated to the net tangible and intangible assets of IXOS acquired. Independent valuation specialists are currently conducting an independent valuation in order to assist management of Open Text in determining the fair values of a significant portion of the assets of IXOS. The preliminary work performed by the independent valuation specialists has been considered in management’s estimates of the fair values reflected in these unaudited pro forma condensed consolidated financial statements. A final determination of these fair values will include management’s consideration of the final valuation prepared by the independent valuation specialists. This final valuation will be based on the actual net tangible and identifiable intangible assets of IXOS that existed effective February 29, 2004, which will differ from those at December 31, 2003 used in the pro forma condensed consolidated financial statements.

As these unaudited pro forma condensed consolidated financial statements have been prepared based on preliminary estimates of fair values relating to the IXOS acquisition, the actual amounts recorded as of the completion of the acquisition may differ from the information presented in these unaudited pro forma condensed consolidated financial statements due to the receipt of the final valuation, the impact of ongoing integration activities (as described below) and the finalization of IXOS’ net assets as of the acquisition date (effective February 29, 2004), and these differences may be material.

As of the acquisition date, management of Open Text began to assess and formulate plans to exit certain activities of IXOS and to terminate or relocate certain employees of the company. The assessment is expected to be completed shortly and additional expenses may be incurred. Estimated costs of approximately $35 million will be incurred for severance or relocation costs related to IXOS employees, costs of vacating certain facilities of IXOS, and other direct costs associated with this transaction. A pro forma adjustment of approximately $35 million was recognized for these anticipated costs in Open Text’s accounting for the consummation of the IXOS acquisition. This estimate is preliminary and subject to change based on Open Text’s further assessments.

The pro forma condensed consolidated statements of operations do not include any non-recurring charges or credits, such as those described in the preceding paragraph, directly attributable to the acquisition. The unaudited pro forma condensed consolidated financial statements should be read in conjunction with the historical consolidated financial statements and accompanying notes contained in Open Text’s Annual Report on Form 10-K for its fiscal year ended June 30, 2003 and Quarterly Reports on Form 10-Q for its quarters ended September 30, 2003 and December 31, 2003 and with the financial statements contained herein for IXOS. The unaudited pro forma condensed consolidated financial statements are presented for illustrative purposes only and are not intended to represent or be indicative of the consolidated results of operations or financial condition of Open Text that would have been reported had the acquisitions been completed as of the dates presented, and should not be taken as representative of the future consolidated results of operations or financial condition of Open Text.

Open Text Corporation

Unaudited Pro Forma Condensed Balance Sheet

As of December 31, 2003

(In thousands of US Dollars)


	Open Text			IXOS (1)			Pro Forma Adjustments			Pro Forma
							(Note 3)
ASSETS
Current Assets
Cash and cash equivalents	$	65,421		$	31,862		$	(45,333	)A	$	51,950
Accounts receivable, net of allowance		39,942			57,232			—			97,174
Income taxes recoverable		5,127			—			—			5,127
Prepaid expenses and other current		4,368			12,331			—			16,699
Deferred taxes		5,866			—			—			5,866

		120,724			101,425			(45,333	)		176,816

Restricted cash		46,837			—			—			46,837
Capital assets		11,850			11,639			2,086	B		25,575
Goodwill		50,262			12,454			127,848	C		190,564
Deferred taxes		13,388			—			490	G		13,878
Other assets (includes intangibles)		35,411			2,059			118,300	D		155,770
Intangible assets		—			9,577			(9,577	)E		—

Total Assets	$	278,472		$	137,154		$	193,814		$	609,440

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	42,032		$	21,748		$	35,288	F	$	99,068
Deferred revenue		38,628			20,344			(2,278	)W		56,694
Deferred taxes		—			522			—			522
Income taxes payable		—			1,002			—			1,002

		80,660			43,616			33,010			157,286

Long Term Liabilities
Deferred revenue		1,149			—			—			1,149
Deferred tax credit		2,557			—			—			2,557
Pension liability		—			1,399			—			1,399
Deferred taxes		—			—			37,186	G		37,186
Accrued liabilities		4,944			—			—			4,944

		8,650			1,399			37,186			47,235


Shareholders Equity
Share capital		217,810			28,051			162,886	H		408,747
Additional paid in capital, less treasury shares		—			67,889			(67,889	)I		—
Paid in capital – stock warrants		—			—			24,820	J		24,820
Translation adjustment		2,132			1,101			(1,101	) I		2,132
Deficit		(30,780	)		(4,902	)		4,902	I		(30,780	)

		189,162			92,139			123,618			404,919

	$	278,472		$	137,154		$	193,814		$	609,440

See accompanying notes to the pro forma condensed consolidated financial statements

(1)	Euro converted to USD at rate of 1.2630, the exchange rate in effect at December 31, 2003

Open Text Corporation

Unaudited Pro Forma Condensed Consolidated Statements of Operations

For the Twelve-Month Period Ended June 30, 2003

(In thousands of US Dollars, except per share data)


	Open Text Year ended June 30, 2003		Centrinity July 1, 2002 to Oct. 31, 2002 (1)			Corechange July 1, 2002 to Feb. 24, 2003			Eloquent July 1, 2002 to Mar. 19, 2003			Gauss 12 months ended June 30, 2003 (2)			IXOS 12 months ended June 30, 2003 (2)			IXOS Pro Forma Adjustments			Other Pro Forma Adjustments			Total Pro Forma Adjustments			Pro Forma
																		(Note 3)			(Note 3)
Revenues:
License & networking	$	75,991	$	2,000		$	1,997		$	847		$	8,639		$	53,153			—		$	(64	)K	$	(64	)	$	142,563
Customer support		63,091		1,853			1,757			254			11,779			43,339			—			—			—			122,073
Service		38,643		418			1,058			671			4,645			37,647			—			—			—			83,082

Total revenues		177,725		4,271			4,812			1,772			25,063			134,139			—			(64	)		(64	)		347,718

Cost of revenues:
License & networking		6,550		415			882			261			3,614			2,174			(49	)P		(128	)K		(177	)		13,719
Customer support		10,406		386			87			195			3,352			28,641			139	P		—			139			43,206
Service		28,241		85			1,059			436			785			10,904			(669	)P		—			(669	)		40,841

Total cost of revenues		45,197		886			2,028			892			7,751			41,719			(579	)		(128	)		(707	)		97,766

Gross profit		132,528		3,385			2,784			880			17,312			92,420			579			64			643			249,952

Operating expenses:
Research and development		29,324		825			1,950			1,587			6,233			19,986			(1,805	)P		—			(1,805	)		58,100
Sales and marketing		54,532		2,361			7,739			2,546			12,531			58,469			(2,359	)P		—			(2,359	)		135,819
General and administrative		13,509		3,406			1,884			2,590			2,661			13,878			(317	)P		—			(317	)		37,611
Stock based compensation		—		178			47			184			—			—			—			(409	)L		(409	)		—
Restructuring charge		—		—			457			1,205			—			—			—			—			—			1,662
Other operating income		—		—			—			—			—			(6,383	)		—			—			—			(6,383	)
Other operating expenses		—		—			—			—			—			6,331			(560	)P		—			(560	)		5,771
Depreciation		5,009		702			539			313			1,946			—			5,016	Q		—			5,016			13,525
Amortization of acquired intangible assets		3,236		152			—			1,160			2,649			—			15,980	R		(653	)M		15,327			22,524
Impairment of goodwill		—		—			—			—			2,632			—			—			(2,632	)N		(2,632	)		—

Total operating expenses		105,610		7,624			12,616			9,585			28,652			92,281			15,955			(3,694	)		12,261			268,629

Income (loss) from operations		26,918		(4,239	)		(9,832	)		(8,705	)		(11,340	)		139			(15,376	)		3,758			(11,618	)		(18,677	)

Other income (loss)		2,733		314			(6,803	)		(1,821	)		(693	)		(4,700	)		—			2,611	O		2,611			(8,359	)
Interest income		1,283		64			7			102			110			806			—			—			—			2,372

Income (loss) before income taxes		30,934		(3,861	)		(16,628	)		(10,424	)		(11,923	)		(3,755	)		(15,376	)		6,369			(9,007	)		(24,664	)
Provision for income taxes		3,177		—			—			—			333			419			—			—			—			3,929

Net income (loss) for the period	$	27,757	$	(3,861	)	$	(16,628	)	$	(10,424	)	$	(12,256	)	$	(4,174	)	$	(15,376	)	$	6,369		$	(9,007	)	$	(28,593	)

Basic net income (loss) per share	$	0.71																									$	(0.59	)
Diluted net income (loss) per share	$	0.67																									$	(0.59	)
Weighted average number of Common Shares outstanding - basic *		39,050																							* &			48,338
Weighted average number of Common Shares outstanding - diluted *		41,394																							* &			48,338
* - adjusted for stock split October 8, 2003
& - adjusted for shares issued to acquire IXOS

See accompanying notes to the pro forma condensed consolidated financial statements

(1)	Canadian Dollar converted to USD at rate of 0.6404, the average rate of the period.

(2)	Euro converted to USD at rate of 1.0552, the average rate of the period.

Open Text Corporation

Unaudited Pro Forma Condensed Consolidated Statements of Operations

For the Six-Month Period Ended December 31, 2003

(In thousands of US Dollars, except per share data)


	Open Text		Gauss July 1, 2003 to Oct. 15, 2003 (1)			IXOS July 1, 2003 to December 31, 2003 (2)			IXOS Pro Forma Adjustments			Other Pro Forma Adjustments			Pro Forma
									(Note 3)			(Note 3)
Revenues:
License & networking	$	44,760	$	1,098		$	31,758		$	—		$	—		$	77,616
Customer support		41,348		3,105			27,642			—			—			72,095
Service		19,751		1,058			21,232			—			—			42,041

Total revenues		105,859		5,261			80,632			—			—			191,752

Cost of revenues:
License & networking		3,841		1,071			1,515			(18	) S		—			6,409
Customer support		7,235		781			6,334			(190	) S		—			14,160
Service		16,329		183			16,359			(220	) S		—			32,651

Total cost of revenues		27,405		2,035			24,208			(428	)		—			53,220

Gross profit		78,454		3,226			56,424			428			—			138,532

Operating expenses:
Research and development		17,955		1,437			12,519			(1,941	)S		—			29,970
Sales and marketing		32,307		3,128			33,519			(811	)S		—			68,143
General and administrative		8,241		3,062			8,250			(343	)S		—			19,210
Total stub period expense		—		1,347									—			1,347
Depreciation		2,666		592			—			2,763	S		105	T		6,126
Amortization of acquired intangible assets		2,822		576			—			1,078	S		6,902	U		11,378
Other operating income		—		—			(3,416	)		—			—			(3,416	)
Other operating expenses		—		—			3,409			(318	)S		—			3,091

Total operating expenses		63,991		10,142			54,281			428			7,007			135,849

Income (loss) from operations		14,463		(6,916	)		2,143			—			(7,007	)		2,683

Other income (loss)		488		555			(200	)		—			(43	)V		800
Interest income		437		23			148			—			—			608

Income (loss) before income taxes		15,388		(6,338	)		2,091			—			(7,050	)		4,091
Provision for income taxes		4,341		(348	)		104			—			—			4,097

Net income (loss) for the period	$	11,047	$	(5,990	)	$	1,987		$	—		$	(7,050	)	$	(6	)

Basic net income (loss) per share	$	0.28													$	0.00
Diluted net income (loss) per share	$	0.26													$	0.00
Weighted average number of Common Shares outstanding - basic		39,947												*		49,235
Weighted average number of Common Shares outstanding - diluted		42,872												*		49,235
* adjusted for shares issued to acquire IXOS

See accompanying notes to the pro forma condensed consolidated financial statements

(1)	Euro converted to USD at rate of 1.1299, the average rate of the period.

(2)	Euro converted to USD at rate of 1.1691, the average rate of the period.

Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements

(in thousands of US Dollars)

Note 1: Basis of Presentation

The unaudited pro forma condensed consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission for the purposes of inclusion in Open Text’s Form 8-K/A prepared in connection with the acquisition of IXOS. These unaudited pro forma condensed consolidated financial statements give effect to the acquisitions of Centrinity, Corechange, Eloquent, Gauss and IXOS.

Certain information and certain footnote disclosure normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (GAAP) have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures provided herein are adequate to make the information presented not misleading.

The information concerning Open Text has been obtained from the audited consolidated financial statements of Open Text for the year ended June 30, 2003 and the unaudited consolidated financial statements for the six months ended December 31, 2003. The information concerning IXOS has been obtained from the audited consolidated financial statements of IXOS for the year ended June 30, 2003 and the unaudited consolidated financial statements for the six months ended December 31, 2003. The information concerning Gauss has been obtained from the audited consolidated financial statements of Gauss for the year ended December 31, 2002 and the nine months ended September 30, 2003 and the unaudited consolidated financial statements for the six months ended June 30, 2003 and 2002, the three months ended September 30, 2003 and for the period from October 1, 2003 to October 15, 2003, being the day immediately prior to the completion of the acquisition of Gauss by Open Text. The information concerning Eloquent has been obtained from the audited consolidated financial statements of Eloquent for the year ended December 31, 2002 and the unaudited consolidated financial statements for the six months ended December 31, 2002 and for the period from January 1, 2003 to March 19, 2003, being the day immediately prior to the completion of the acquisition of Eloquent by Open Text. The information concerning Corechange has been obtained from the audited consolidated financial statements of Corechange for the year ended December 31, 2002 and the unaudited consolidated financial statements for the six months ended December 31, 2002 and for the period from January 1, 2003 to February 24, 2003, being the day immediately prior to the completion of the acquisition of Corechange by Open Text. The information concerning Centrinity has been obtained from the audited consolidated financial statements for the year ended September 30, 2002 and unaudited consolidated financial statements for the three months ended September 30, 2002 and the unaudited consolidated financial statements for the four-month period ended October 31, 2002, being the day immediately prior to the acquisition date of Centrinity.

Open Text terminated a number of employees relating to these acquisitions subsequent to their completion. As such, Open Text expects the acquired entities to have lower operating expenses than that reported in the unaudited pro forma condensed consolidated statement of operations. Similarly, as a result of Open Text’s intention to execute certain restructuring plans to help re-align these businesses with the current economic environment, the Company anticipates that the acquired business’ historical levels of revenues may not be sustainable, and that they may experience a decline following the closing of these acquisitions. However, in accordance with Regulation S-X (Article 11), adjustments were not included in the unaudited pro forma condensed consolidated statement of operations to reflect these post-acquisition events, as any such adjustments would reflect judgmental estimates of historical management practices.

The unaudited pro forma condensed consolidated financial statements are provided for informational purposes only and do not purport to be indicative of the Company’s financial position or results of operations which would actually have been obtained had such transactions been completed as of the date or for the periods presented, or of the financial position or results of operations that may be obtained in the future.

Note 2: Purchase Price Allocation

On February 19, 2004, Open Text closed the Tender Offer, pursuant to which, 2016091 Ontario Inc., a wholly owned subsidiary of Open Text, acquired a total of 19,157,428 IXOS shares or approximately 88% of the ordinary share capital and voting rights of IXOS, including shares acquired in the open market. Of these IXOS shares, 17,792,529 shares (approximately 93% of the tendered shares) were tendered for the Alternative Consideration of Open Text shares and warrants, with the balance, including shares purchased on the open market, tendered for approximately $15 million in cash. The Alternative Consideration for each IXOS share consists of 0.5220 of an Open Text common share and 0.1484 of a warrant. Each whole warrant is exercisable to purchase one Open Text common share for up to one year after the closing date of the Tender Offer at a strike price of US$20.75 per share.

Approximately 9.3 million Open Text shares were issued in conjunction with the tender offer for IXOS. The shares were valued at the weighted average share price two days before and after the acquisition was announced. Accordingly, the fair value of the issued shares was approximately $191 million.

Approximately 2.6 million warrants were issued in conjunction with the Alternate Consideration. The fair value of each warrant was estimated using the Black-Scholes option-pricing model with the following weighted average assumptions:


Volatility		60%
Risk-free interest rate		3.5%
Dividend yield		—
Expected life		1 year

Based on this methodology, the warrants were valued at $9.40 each for a total value assigned of approximately $25 million.

The cash consideration to be paid to acquire the remaining outstanding shares, is expected to be approximately $30 million, based on a €9.00 per share price. Open Text intends to acquire 100% of the shares of IXOS and, accordingly, these pro forma financial statements are prepared on this basis.

The Company has retained the services of an independent valuator to assist in the purchase price allocation relating to the acquisition of IXOS. Given that the IXOS acquisition was not completed until February 19, 2004, the work of the independent valuator is still in the preliminary stages. The Company will adjust the preliminary purchase price allocation once the work of the independent valuator is finalized and those adjustments may be material.

For the purpose of these proforma financial statements, the purchase price of IXOS has been allocated to the assets acquired and liabilities assumed based on their estimated fair values at December 31, 2003. For certain assets and liabilities, the book values at the balance sheet date have been determined to reflect fair values. The following table summarizes the components of the total purchase price of IXOS and the pro forma allocation:


Current assets (excluding cash acquired)	$	69,563
Non-current assets		16,274
Intangible assets		118,300
Goodwill		140,302

Total assets acquired		344,439
Liabilities		(115,211	)

Purchase price	$	229,228

Note 3: Pro Forma Adjustments

The following adjustments have been reflected in the unaudited pro forma condensed consolidated financial statements:

Represents the cash consideration paid for IXOS by Open Text at closing and the estimated additional cash consideration required to acquire the remaining outstanding shares of IXOS.

Represents the fair value adjustment to capital asset associated with IXOS acquisition.

To record the new goodwill related to the acquisition of IXOS and to eliminate the historical goodwill of IXOS (also see Note 2).


Elimination of IXOS historical goodwill	$	(12,454	)
Goodwill from IXOS acquisition		140,302

	$	127,848

To record the new intangible assets related to the acquisition of IXOS (see Note 2)


Customer intangibles from IXOS acquisition	$	37,400
Core technology intangibles from IXOS acquisition		25,900
Application technology intangibles from IXOS acquisition		42,700
Trade name assets from IXOS acquisition		12,300

	$	118,300

To eliminate IXOS’ historical intangibles.

To record the Company’s estimate of severance and relocation costs related to certain IXOS employees, costs of vacating certain facilities and other direct costs associated with the transaction.

To record deferred tax assets and deferred tax liabilities related to IXOS acquisition.

To eliminate the share capital of IXOS at the date of acquisition and to record the shares issued by Open Text to acquire IXOS as follows:


Share capital of IXOS at the date of acquisition	$	(28,051	)
Shares issued to acquire IXOS		190,937

	$	162,886

To eliminate the additional paid in capital, translation adjustment and accumulated deficit of IXOS at the date of acquisition.

To record the stock warrants issued associated with the acquisition of IXOS.

To eliminate the revenues and expenses for hosting activities, as Open Text exited Centrinity’s hosting operations upon completion of that acquisition.

To remove the stock-based compensation recorded in Centrinity, Eloquent, and Corechange as follows:


Centrinity	$	178
Corechange		47
Eloquent		184

	$	409

As Open Text acquired the entire capital structure of Centrinity, Eloquent and Corechange as part of these acquisitions, Open Text incurs no such expenses post-acquisition.

To adjust amortization relating to the identifiable intangible assets recorded at the time of the acquisition of Centrinity, Corechange, Eloquent, and Gauss and to reflect the elimination of Centrinity’s goodwill amortization and Eloquent’s, and Gauss’ intangible asset amortization as follows:


Amortization of acquired intangible assets relating to Centrinity acquisition	$	408
Amortization of acquired intangible assets relating to Eloquent Acquisition		332
Amortization of acquired intangible assets relating to Corechange Acquisition		628
Amortization of acquired intangible assets relating to Gauss acquisition		1,940
Elimination of Eloquent’s historical intangible asset amortization		(1,160	)
Elimination of Centrinity’s historical goodwill amortization		(152	)
Elimination of Gauss’ historical intangible asset amortization		(2,649	)

	$	(653	)

Based on the independent valuators reports, the Company has selected amortization periods of 5–7 years for various components of the acquired technology, as well as an amortization period of 3 years for customer contracts and 7 years for customer relationships.

Relating to Gauss acquisition, the Company has retained the services of an independent valuator to assist in the allocation of intangibles. The work of independent valuator is still in the preliminary stages, and the Company anticipates that the final allocation of the purchase price to Gauss assets will be made during the quarter ending June 30, 2004.

To eliminate Gauss’ goodwill impairment charge based upon the annual impairment test performed by Gauss.

To remove the accretion and dividends on Corechange’s preferred stock and interest expense on Corechange’s warrants recorded by Corechange, the interest on Gauss’ convertible debt which was converted to common shares at the acquisition date and the minority interest recorded in Gauss’ statement of operations.


Elimination of Corechange’s dividends and interest	$	2,563
Elimination of Gauss’ interest on convertible debt		197
Elimination of Gauss’ minority interest		(149	)

	$	2,611

To adjust IXOS presentation to conform to Open Text’s presentation.


Cost of revenue – license	$	(49	)
Cost of revenue – service		(669	)
Cost of revenue – customer support		139

Total		(579	)

Sales and marketing expenses		(2,359	)
Research and development		(1,805	)
G&A		(317	)
Other operating expenses		(560	)
Depreciation		4,807
Amortization of acquired intangibles		813

Total		579

Net adjustment		—

To record the depreciation of capital asset adjustment associated with IXOS acquisition.


Depreciation of capital asset adjustment	$	209
Reallocation of depreciation of existing capital assets (see note P)		4,807

	$	5,016

To adjust amortization relating to the identifiable intangible assets recorded at the time of the acquisition of IXOS and to reflect the elimination of IXOS’ goodwill amortization as follows:


Elimination of IXOS historical intangible asset amortization	$	(813	)
Amortization of acquired intangible assets relating to IXOS acquisition		15,980

		15,167
Re-allocation of IXOS amortization to conform with Open Text’s reporting structure (see note P for adjustment)		813

	$	15,980

As discussed in note 2 above, the Company has retained the services of an independent valuator to assist in the allocation of the intangible assets associated with the IXOS acquisition. The work of the independent valuator is still in the preliminary stages, and the Company anticipates that the final allocation of the purchase price to IXOS assets acquired will be made during the quarter ending June 30, 2004.

To adjust IXOS presentation to conform to Open Text’s presentation:


Cost of revenue – license	(18	)
Cost of revenue – service	(220	)
Cost of revenue – customer support	(190	)

Total cost of sales	(428	)

Sales and marketing expenses	(811	)
Research and development	(1,941	)
G&A	(343	)
Other operating expenses	(318	)
Depreciation	2,763
Amortization of acquired intangibles	1,078

Total operating expenses	428

Net adjustment	—

To record the depreciation related to the capital asset adjustment associated with the IXOS acquisition.

To adjust amortization relating to the identifiable intangible assets recorded at the time of the acquisition of Gauss and IXOS and to reflect the elimination of Gauss’ and IXOS’ intangible asset amortization as follows:


Elimination of Gauss’ historical intangible asset amortization	$	(576	)
Amortization of acquired intangible assets relating to Gauss acquisition		566
Elimination of IXOS’ historical intangible asset amortization		(1,078	)
Amortization of acquired intangible assets relating to IXOS acquisition		7,990

	$	6,902

To remove the interest on Gauss’ convertible debt, which was converted to common shares at the merger date and the minority interest recorded in Gauss’ statement of operations.


Elimination of Gauss’ interest on convertible debt	$	100
Elimination of Gauss’ minority interest		(143	)

	$	(43	)

To eliminate a portion of deferred revenue using a valuation based on estimated costs and appropriate profit margin to perform the services related to IXOS’ deferred maintenance contracts.

Note 4: Forward-Looking Statements

This document contains forward-looking statements that are based on a number of assumptions and estimates and that involve risks and uncertainties. All statements other than statements of historical fact are forward-looking statements. If any of these risks or uncertainties materializes or any of these assumptions proves incorrect, the actual results or performance of Open Text and its consolidated subsidiaries could differ materially from those expressed or implied by such forward-looking statements.

The risks, uncertainties and assumptions referred to above include the challenges of integration associated with the acquisitions or other planned acquisitions; the inability to achieve anticipated synergies; the costs associated with the acquisitions; the inability to maintain revenues on a combined company basis; employee management issues; the timely development, production and acceptance of products and services; the challenge of managing asset levels and expenses; and the other risks that are described from time to time in Open Text’s Securities and Exchange Commission reports, including but not limited to Open Text’s Annual Report on Form 10-K for the fiscal year ended June 30, 2003.

Open Text assumes no obligation and does not intend to update these forward-looking statements.