Final Results

Embargoed Release: 07:00hrs Thursday 29th March 2007

                                  SOPHEON PLC                                  

                   ("Sopheon", the "Group" or the "Company")                   

         PRELIMINARY AUDITED RESULTS FOR THE YEAR TO 31 DECEMBER 2006          

Sopheon plc, the international provider of software and services that improve
the financial return from innovation and product development investments,
announces its results for the year ended 31 December 2006 together with an
outlook for the current year. Sopheon shares are traded on AIM in London and on
the Euronext Amsterdam.

Highlights:

  * Revenue for the year was £6.0m (2005: £4.7m) and the EBITDA result for the
    year was a profit of £33,000 (2005: £746,000 loss).
   
  * Sixteen new customers were added in the year, with 20 extension orders from
    existing customers. By year end there were 87 companies throughout the
    world that had licensed our software, and the total number of individual
    users from within those organizations surpassed 27,000.
   
  * We released the Accolade® Accelerators, a group of new modules which expand
    Accolade's out-of-the-box capabilities in key process automation areas such
    as Stage-Gate®implementation, roadmapping and planning, and product
    portfolio management (PPM).
   
  * Sopheon clients participating in a benchmark study by Aberdeen Group on PPM
    best practices ranked best-of-class in a variety of key areas including
    widespread process adoption, speed of portfolio management decisions,
    meeting cost goals and hitting deadlines.
   
  * Revenue growth in Europe was particularly strong. Strategically we began to
    move beyond the specialty chemicals, materials and food & beverage markets
    that have historically been our targets and secured our first customers in
    the discrete manufacturing industries.
   
Barry Mence, Chairman, commented: "Past reports to our shareholders have
chronicled our progress toward profitability. With today's announcement, we
acknowledge that we achieved breakeven EBITDAfor the first time. This
milestone, coupled with significant strides during 2006 in virtually every area
of our business, has set the stage for Sopheon's next important phase of
growth. We know that we must balance the need to drive the Companyforward
strategically witha continued focus on financial performance. We're looking
forward to another very promising and exciting year."

For further information contact:

Barry Mence, Chairman   Sopheon plc                  Tel : + 44 (0) 1483 685 735  
                                                                      
Arif Karimjee, CFO                                                             
                                                                               
Andrew Tan              Hansard                      Tel : + 44 (0) 207 245 1100                      
                                                                               
                                                     + 44 (0) 7957 203 685     
                                                                               
Floor van Maaren        Citigate First Financial     Tel : + 31 (0) 205 754 010

About Sopheon

Sopheon (LSE:SPE) is an international provider of software and services that
help organizations improve the business impact of product innovation. The
Sopheon Accolade® system automates gate or phase-based product development
processes and provides strategic decision support that allows companies to
increase revenue and profits from new products. Sopheon is listed on the AIM
Market of the London Stock Exchange and on the Euronext in the Netherlands. For
more information, please visit www.sopheon.com.

Accolade® is a registered trademark of Sopheon plc.

Stage-Gate® is a registered trademark of the Product Development Institute.

Introduction

We achieved much in 2006. In headline terms, we grew revenues to £6.0m from £
4.7m in 2005. This was underpinned by 36 license orders and extensions, taking
the total number of licensed customers to 87. Full-year revenues were 30%
higher than the prior year, and we achieved breakeven EBITDA (earnings before
interest, tax, depreciation and amortization) for the first time in our
history. Coming into 2007 we continue to enjoy high levels of activity in our
sales pipeline, reinforcing our belief that we are the leading independent
vendor in the market for Product Portfolio Management (PPM) solutions. This
market is projected to triple in size between 2006 and 2010. Implementing a
system like Accolade represents a serious commitment for any organization and
this continues to weigh on our sales cycles. However, as our business matures
in scale we believe that this area, which has always brought unpredictability
to our revenues, will show improvement.

At the start 2006, we made a strategic decision to move beyond the chemicals,
materials, and food & beverage markets that have historically been our focus.
In particular, we began to pursue opportunities in non-food & beverage segments
of the consumer packaged goods sector. This effort encompassed marketing
programs and targeted business development activity. It led to our securing a
number of new clients, exemplified by Timex, the leading watchmaker in North
America, and Electrolux, the world's leading international appliance company.
Leveraging our partnerships will be critical to achieving our longer term goals
in this area, and we were delighted to announce our first major automobile
customer, secured in collaboration with Hewlett-Packard. Geographical reach was
also extended with sales for the first time in Scandinavia, France, Israel,
Portugal and New Zealand. Some of these were secured through our growing
reseller channel.

Results

Sopheon's consolidated turnover grew to £6.0m (2005: £4.7m). This overall
result included a strong new sales performance by our European business, which
grew revenues by 68% in the year. This was offset by a relatively flat
performance in the US, accentuated by the weakening of the US dollar in global
currency markets. This growth pattern is the opposite of what took place in
2005, when we experienced stronger growth in North America. Over the years we
have invested heavily in maintaining a truly international footprint for our
business and this is proving to be both a key differentiator in our business
development and implementation efforts, and a source of balance for our revenue
performance. Since the introduction of Accolade six years ago, our average
annualized growth in US dollar terms continued to hold at approximately 50%.

Overall, Sopheon's revenues for 2006 were 30%, higher than the preceding year.
Unlike in 2005, however, revenues were evenly spread across the first and
second half. Although we look forward to strong growth, we believe that our
performance in any particular period will remain relatively unpredictable for
some time to come. This is a function of sales cycle time and of transaction
value.

Business mix

During 2006 we closed 16 new license customers and 20 extension orders from
existing customers. In past statements we have noted the growing influence of
larger sales, which have the potential to increase revenue volatility, but also
underpin growth. Such transactions also have the effect of pulling through
substantial consulting and other service opportunities due both to the more
extensive nature of the implementations in question, and also to a growing
trend of existing customers returning to Sopheon to support expansion efforts
through additional configuration and consultancy work following the initial
roll-out. During 2006, we enjoyed £0.6m of such repeat services business.

In addition to license and services revenues, our third major revenue stream is
recurring maintenance income which coming into 2007 has grown to £1.7m,
compared to £1.4m a year before.

In 2006 our business delivered a 37:25:38 ratio of license, maintenance,
service respectively compared to 40:25:35 in the prior year. We expect our
consulting revenues to continue to grow strongly and to provide another source
of stability and maturity to our business. However, we believe that this will
be offset as a proportion of our total revenues by the effect of license
business coming through our expanding reseller network, for which associated
services work is unlikely to be performed by Sopheon. We expect maintenance to
hold at approximately a quarter of our overall revenues.

As we first signaled in 2005, the higher proportion of services in our revenue
mix has required us to make extensive use of subcontractor partners. This
requirement has increased as the scope of deployments and the geographic spread
of our customers have continued to expand. A recent example was our Accolade
installation at Electrolux, where we contracted with Arthur D Little to perform
the bulk of the implementation work. In spite of this we achieved an overall
gross margin, measured after deducting the costs of such partners as well as
our own client services resources, of 72% (2005: 73%).

Research & Development expenditure

During 2006, our R&D effort focused on three different areas. During the year
we developed and launched the Accolade Accelerators, a group of new
applications which expand Accolade's out-of-the-box capabilities in key process
automation areas such as Stage-Gate® implementations, roadmapping and planning,
and product portfolio management. The Accelerators feature built in
best-practice content and reports that allow a company to leverage Accolade in
these areas with much reduced configuration effort.

In addition, we completed the majority of the effort required to transfer our
legacy healthcare protocol management system onto the Accolade platform, and
our hospital clients have now started the upgrade process. Finally, we
continued to invest substantial resources in developing the next release of
Accolade which is due in late 2007. This release will bring a host of new
features to our flagship offering, enabling Sopheon to maintain its leadership
position and expand to new markets.

As a result of the above, £0.5m (2005: £0.4m) of our 2006 R&D expenditure met
the criteria of IAS38 for capitalization.

Operating costs

As noted in the Remuneration Report a bonus was earned by the majority of the
Group's employees in respect of the 2006 performance. This has resulted in an
increase in payroll costs relative to 2005 in all areas, with the principal
exception of members of Sopheon's sales teams for whom incentives are tied to
individual or territory results.

More specifically, if the effect of the capitalization and amortization of R&D
costs is added back, we increased total R&D expenditure by £0.2m. In
particular, this reflects the formation of an internal organization that we
call RAD, short for Research & Application Development. The Group is chartered
to work with clients to investigate and create new software applications built
on the Accolade platform that would extend the utility and value of the core
offering; the Accelerators described above were developed by the RAD team.

Distribution costs are slightly lower than the previous year in spite of the
higher revenues. Some of this apparent reduction is attributable to the
reclassification of certain employees into the RAD team; however, other than
the bonus noted above both administrative and distribution costs remained
tightly contained. Although we do not currently plan to increase direct sales
representation in 2007, we do plan to raise investment in channel development
and marketing in order to continue to drive growth.

We achieved a breakeven consolidated EBITDA position (2005: £0.75m loss). This
total reflects a deduction of share based payments of £0.1m (2005: £0.2m). It
excludes depreciation and amortization charges of £0.3m (2005: £0.5m) for the
year. Including these items, the resultant retained loss for the year was £0.3m
(2005: £1.2m) reducing the loss per ordinary share to 0.2p (2005: 0.9p).

Financing and balance sheet

Net assets at the end of the year stood at £1.6m (2005: £2m) and include £0.8m
(2005: £0.8m) being the net book value of capitalized research and development
arising from the application of IAS38. Cash resources at 31 December 2006
amounted to £1.0m (2005 - £2.0m). A surge of sales at the end of the year
resulted in trade receivables of £2.5m compared to £1.7m at the end of 2005.

At the end of 2005 Sopheon renewed its €10 million equity line of credit
facility with GEM Global Yield Fund Limited until December 2007, securing
continued access to a source of equity-based funding over which the Company
retains a substantial degree of control. The facility was not used during 2006
and over 90% of the original equity line remains untapped.

Market

Sopheon's Accolade addresses one of the most universal challenges facing
manufacturing companies today. It is the challenge of operating research and
development - traditionally a black box area of business - as a repeatable
process, so that results can be predicted and continuously improved. Accolade
automates the innovation process, enabling companies to strengthen the
alignment between their innovation strategies and product development activity,
gain a clear view of the commercial potential of projects in their portfolios,
and readily access other details of product innovation initiatives in progress.

Accolade belongs to a major class of software applications that concentrate on
supporting Product Life-cycle Management (PLM). These solutions help companies
create and execute their product strategies. ARC Advisory group states that the
PLM market totalled nearly $7 billion in 2005, and will nearly double to more
than $13 billion by the end of 2010. Sopheon is focused on Product Portfolio
Management (PPM) which analysts indicate is among the fastest growing
submarkets within PLM, and they expect its exceptional rate of expansion to
continue. While most areas of product life cycle management concentrate on the
engineering or technical challenges involved in developing and managing a
product, PPM addresses the business challenges. Analysts view PPM as a
strategically critical applications area. Their research has determined that
adoption of PPM methodologies by cross-functional teams engaged in product
development is critical to achieving business impact and success.

Most companies have tried to build their innovation processes around commonly
used methodologies such as Stage-Gate®, PACE® and waterfall. But studies have
shown that, when companies attempt to deploy these methodologies without
automating them, they fail 48% of the time. Independent research has confirmed
that Accolade users have a significant edge over other companies endeavouring
to implement product portfolio management processes. In late 2006, Aberdeen
Group, the IT research and advisory firm, completed a benchmarking report on
PPM best-practices for which they surveyed more than 150 manufacturers. Sopheon
clients participating in the study ranked best-of-class in a variety of key
areas including widespread process adoption, speed of portfolio management
decisions, meeting cost goals and hitting deadlines.

In 2006 we saw considerable movement in the PLM market among both established
suppliers and new entrants. Many of the more established PLM vendors were
involved in mergers and acquisitions. We expect that this will continue in
2007, as evidenced by the recent high-profile acquisition of UGS by Siemens.
These changes are introducing some confusion in the marketplace, but they are
also increasing demand. These factors will continue to challenge Sopheon to
sustain its position of market leadership. Our response to this challenge is
the five part strategy set out below.

Growth Strategy

Expand Within Client Base. During 2006, we received 20 license orders from
existing customers intent on extending the use of our software across their
organizations. This is up from 13 extension orders in 2005, further validating
that we have a sticky application with strong growth potential inside our
client base. The number of Accolade end-users grew by 30% in 2006 to more than
27,000. This rapid escalation is traceable partly to the fact that, while early
implementations of Accolade were on the department level, the solution is
increasingly being deployed on an enterprise-wide scale. A number of our
customers are using the system throughout their global operations. Accolade
users can now be found in 58 countries worldwide.

Expand Within Target Markets.Our primary focus has been on manufacturers of
chemicals, paper and, within the consumer packaged goods sector, food &
beverage producers. Sopheon signed sixteen new customers in 2006, seventy-five
percent of which were in our target verticals. We exited the year with 87
clients. In each of the markets we have targeted, our current level of
penetration is minimal, leaving substantial room for growth. We will continue
to focus on this opportunity in 2007.

Expand Product.In 2006, Sopheon convened its first Product Advisory Council
(PAC) sessions in both North America and Europe. The PAC group is comprised of
executive-level decision-makers from client companies in a mix of industries.
Their input related to such areas as our product road maps and go-to-market
strategies has been an extremely valuable input to the next major version of
Accolade, scheduled for commercialization in late 2007.

In late 2006, Sopheon introduced a set of add-on applications for its Accolade
solution. Referred to collectively as Accolade Accelerators, the new offerings
are designed to enable companies to more quickly achieve the next level of
maturity in the governance of their innovation processes and realize the
associated higher levels of business performance.

In October of 2006, we announced that we would augment the current use of
Microsoft tools within Accolade by integrating the software system with
Microsoft Office Project Server 2007. Adoption of the Microsoft product will
broaden and deepen aspects of Accolade's capacity to provide governance support
for the product innovation process.

Expand to New Markets. Throughout its history, Sopheon has made ongoing,
nominal investments in select new markets as a way of evaluating opportunities
to leverage existing technologies and drive additional business growth. In
2006, Sopheon announced its expansion into non-food & beverage areas of the CPG
(Consumer Packaged Goods) market. Today we have a growing client base in this
vertical, illustrated by such industry leaders as Electrolux, Freudenberg
Household Products, Nautilus, Reckitt Benckiser, and Timex. These customers
include several CPG companies that operate in light discrete manufacturing. Our
initial experiences in discrete will dictate the level of investment and effort
we undertake towards growing in the large discrete manufacturing market - which
includes the auto, defence and aerospace industries. Leveraging our
partnerships will be critical to achieving our longer term goals in this area,
and we were delighted to announce our first major automobile customer, secured
in collaboration with Hewlett-Packard.

Sopheon continues to support its historic position as a supplier to the
healthcare protocol market. Our Qualiflow® technology is used by healthcare
institutions to provide doctors, nurses and other medical practitioners with
procedural guidelines at the point of care. Conversion of the Qualiflow
solution to operate on the Accolade platform is expected to be completed in
2007. Expansion of our protocol management market activity is on hold until
this platform transition has been proven successful. Sopheon will then
readdress its strategies for growing this aspect of our business.

Expand Partnerships.Sopheon remains committed to growing its business through
partnerships. We also know that it takes time and investment to develop a
strong network of partners that can add value to the Company.

The Microsoft Office Project 2007 integration initiative is the latest advance
in a continuing strategic alliance between Sopheon and Microsoft. Since its
inception, Sopheon's Accolade software has incorporated Microsoft products such
as Microsoft Office Project Server and other components of the Microsoft Office
system, focusing the capabilities of these horizontal platforms on helping
manufacturers increase the business impact of new product innovation. Based on
the strength and success of Sopheon's business application, the alliance
between Sopheon and Microsoft has steadily grown. Sopheon has earned
Microsoft's designation as a Gold Certified and "managed" partner.

In 2006, we concentrated on working with existing reseller partners to deepen
their knowledge and understanding of our value proposition, the dynamics of our
markets and the capabilities of our product offerings. Partner relationships
resulted in Sopheon's signing its first clients in Israel, New Zealand,
Portugal and Sweden, providing a critical foundation of local references to
support expansion in these nascent sales territories. We were also active with
our consulting partners, working together on a number of Accolade
implementations in the U.S. and Europe. We expect 2007 to be a year of further
collaboration and business development efforts with our partners. Plans call
for a continued focus on our existing network, as well as the addition of a
small number of new members.

People

Our ability to deliver value to our customers is a testament to Sopheon people
in all parts of our company, many of whom have been working tirelessly for
several years to build the business we have today. We thank them for their
contribution to our growing success.

Sopheon's executive management team has also been in place for several years
and comprises a team of five, which includes the three executive directors
being Barry Mence the chairman, Andy Michuda the CEO and Arif Karimjee the CFO,
in addition to Paul Heller our CTO and Huub Rutten our head of research. The
Sopheon plc board includes the three executive directors, in addition to our
three non-executive directors Stuart Silcock, Dan Metzger and Bernard Al who
bring a wealth of knowledge and experience to our business.

Outlook

With the achievement of a breakeven EBITDA result, our business crossed a
financial milestone during 2006. As we approach the next milestone of 100
licensees for our software, the scale and maturity for which we have been
striving since the launch of Accolade six years ago is, we believe, finally
coming through. This is contributing both to rising revenue stability, and to
rising market recognition. As set out in more detail above, we will build on
our achievements by attending to five key areas:

  * Secure more business from our existing customer base
   
  * Extend our hold in established chemicals, materials, food and beverage
    markets
   
  * Expand the Accolade product in depth, functionality, integration and
    scalability
   
  * Enter new vertical markets
   
  * Develop and expand our partner network
   
In addition, we will carefully consider potential acquisitions that offer both
strategic and operational benefits. As always, we recognize the need both to
drive Sopheon forward strategically, and to stay focused on financial
performance. This challenge will continue to shape our thinking in the exciting
times ahead.

                                  SOPHEON PLC                                  

        CONSOLIDATED INCOME STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2006        

                                                      2006           2005
                                                                               
                                                     £'000          £'000
                                                                               
Turnover - continuing activities                     6,045          4,664      
                                                                               
Cost of sales                                       (1,690)        (1,264)    
                                                                               
Gross profit                                         4,355          3,400      
                                                                               
Distribution expenses                                2,401          2,473      
                                                                               
Research and development expenses                    1,028            974        
                                                                               
Administrative expenses                              1,232          1,175      
                                                                               
Operating loss                                        (306)        (1,222)    
                                                                               
Investment revenue                                      39             53         
                                                                               
Finance costs                                          (36)           (67)       
                                                                               
Loss on ordinary activities before taxation           (303)        (1,236)    
                                                                               
Retained loss for the year                            (303)        (1,236)    
                                                                               
Loss per share - basic and diluted                   (0.2p)         (0.9p)
                                                                               
EBITDA                                                  33           (746)      
                                                                               

            CONSOLIDATEDSTATEMENT OF RECOGNISED INCOME AND EXPENSE             

                      FOR THE YEAR ENDED 31 DECEMBER 2006                      

                                                     2006           2005
                                                                               
                                                    £'000          £'000
                                                                               
Exchange difference on translation of foreign         133             86         
operations                                                                     
                                                                               
Net income/(expense) recognised directly in equity    133             86         
                                                                               
Loss for the financial year                          (303)        (1,236)    
                                                                               
Total recognised income and expense for the year     (436)        (1,150)    
(all attributable to members of the parent company)                            
                                                                               

                                  SOPHEON PLC                                  

                CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2006                 

                                                      2006           2005
                                                                               
                                                     £'000          £'000
                                                                               
Non-current assets                                                             
                                                                               
Property, plant and equipment                          110            101        
                                                                               
Intangible assets                                      848            764        
                                                                               
Non-current receivables                                 10             10         
                                                                               
                                                       968            875        
                                                                               
Current assets                                                                 
                                                                               
Trade and other receivables                          2,484          1,741      
                                                                               
Cash and cash equivalents                            1,034          1,970      
                                                                               
                                                     3,518          3,711      
                                                                               
Total assets                                         4,486          4,586      
                                                                               
Current liabilities                                                            
                                                                               
Short term borrowings                                  414            370        
                                                                               
Trade and other payables                             2,444          2,253      
                                                                               
Obligations under finance leases                         8             12         
                                                                               
                                                     2,866          2,635      
                                                                               
Net assets                                           1,620          1,951      
                                                                               
Equity and reserves                                                            
                                                                               
Share capital                                        6,679          6,665      
                                                                               
Other reserves                                      72,827         72,931     
                                                                               
Profit and loss account and translation reserve    (77,886)       (77,645)   
                                                                               
Total equity (all attributable to equity holders of  1,620          1,951      
the                                                                            
                                                                               
parent company)                                                                

            CASH FLOW STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2006             

                                                      2006           2005
                                                                               
                                                     £'000          £'000
                                                                               
Loss for the year                                     (303)        (1,236)    
                                                                               
Adjustments for non-cash and similar items             397            623        
                                                                               
Movements in working capital                          (596)           465        
                                                                               
Tax and interest costs                                 (36)            14         
                                                                               
Net cash outflow from operating activities            (538)          (134)      
                                                                               
Investing activities                                  (510)          (416)      
                                                                               
Financing activities                                   131          1,298      
                                                                               
(Decrease)/Increase in cash and cash equivalents      (917)           748        

NOTES

1. Basis of preparation

The financial statements have been prepared in accordance with International
Financial Reporting Standards and Interpretations issued by the International
Accounting Standards Board as adopted by the European Union and those parts of
the Companies Act 1985 which apply to companies preparing their financial
statements under IFRS. Accounting policies have been applied consistently to
all the years presented, and on the going concern basis.

2. Going concern.

In 2006 the Group's revenues from continuing operations were £6.0 million and
it achieved a breakeven financial result on an EBITDA (earnings before
interest, tax, depreciation and amortization) basis. This represented growth of
30% over the prior year. At the year end the Group reported consolidated net
assets of £1.6 million and gross cash resources of £1 million. The Group has
access to a $1 million (£583,000) bank line of credit with Silicon Valley Bank,
which is secured against the trade debtors of Sopheon Corporation Minnesota. At
31 December 2006, $800,000 (£409,000) was drawn against this facility. The
facilities with Silicon Valley Bank have been in place since 1999, and are
renewable annually.

The directors remain positive about the direction, focus and momentum of the
business and believe that this, together with the Group's existing resources
provide it with adequate funding to support its activities through to the point
at which they anticipate that trading will become cash generative on a
sustained basis. This is in turn dependent on the Group delivering substantial
sales growth.

Should this not be the case, Sopheon continues to have access to its equity
line of credit facility from GEM Global Yield Fund Limited ("GEM") for an
aggregate of €10 million. At the end of 2005, the facility was renewed for a
further two year term expiring in December 2007. GEM's obligation to subscribe
for shares is subject to certain conditions linked to the prevailing trading
volumes and prices of Sopheon shares on the Euronext stock exchange. To date
Sopheon has made just one call on the equity line of credit facility, raising
under €1 million in March 2004, leaving over €9 million (£6 million) available.

While uncertainties remain as to the achievement of the expected sales growth
and the continued availability of facilities, the directors believe that
together, these factors enable the Group to continue as a going concern for the
foreseeable future. The financial statements do not include the adjustments
that would be required if the Group were unable to continue as a going concern.

3. Annual Report

The abridged financial information set out herein has been extracted from
financial statements approved by the directors on 29 March 2007, and which will
be delivered to the Registrar of Companies following the Company's annual
general meeting. The auditors have issued an unqualified audit report, but
consistent with prior years, have drawn attention to the uncertainty over going
concern. This financial information does not constitute statutory accounts as
defined in section 240 of the Companies Act 1985 and has been prepared on the
basis of the accounting policies set out in the financial statements for the
year ended 31 December 2005. The Annual Report and Financial Statements will be
posted to shareholders shortly and thereafter will be available from the
Company's registered office at 40 Occam Road, Surrey Research Park, Guildford,
Surrey GU2 7YG.

NOTES

4. Principal Accounting Policies

Basis of consolidation

The consolidated financial statements incorporate the financial statements of
the Company and entities controlled by the Company ("subsidiaries"). Control is
achieved where the Company has the power to govern the financial and operating
policies of an entity and to obtain benefits from its activities. All
intra-group transactions, balances, income and expenses are eliminated on
consolidation.

Revenue recognition

Revenue is measured at the fair value of the consideration received or
receivable and represents amounts receivable for goods and services provided in
the normal course of business, net of discounts and sales related taxes. Sales
of software products are recognised on delivery, and when no significant vendor
obligations remain. Revenues relating to maintenance and post contract support
agreements are deferred and recognised over the period of the agreements.
Revenues from implementation and consultancy services are recognised as the
services are performed, or in the case of milestone based or long term
contracts, recognised on a percentage basis as the work is completed and any
relevant milestones are met, using latest estimates to determine the expected
duration and cost of the project.

Leases

Assets held under finance leases are recognised as assets of the Group at their
fair value at the inception of the lease or, if lower, at the net present value
of the minimum lease payments. The corresponding liability to the lessor is
included in the balance sheet as a finance lease obligation. Lease payments are
apportioned between finance charges and reduction of the lease obligation so as
to achieve a constant rate of interest on the remaining balance of the
liability. Finance charges are charged to profit or loss. Rentals payable under
operating leases are charged to profit or loss on a straight-line basis over
the term of the relevant lease.

Retirement benefit costs

Payments to defined contribution retirement benefit plans are charged as an
expense as they fall due. The Group does not operate any defined benefit
retirement benefit plans.

Treatment of foreign currencies for consolidation

For the purpose of the consolidated financial statements, the results and
financial position of each entity are expressed in sterling, which is the
functional currency of the parent company, and the presentation currency for
the consolidated financial statements. The assets and liabilities of the
Group's foreign operations (including comparatives) are expressed in sterling
using exchange rates prevailing on the balance sheet date. Income and expense
items (including comparatives) are translated at the average exchange rates for
the period. Exchange differences arising (including exchange differences on
intra-group loans) are classified as equity and transferred to the Group's
translation reserve. Such translation differences are recognised in profit or
loss in the period in which the foreign operation is disposed of.

Deferred taxation

Deferred tax is recognised on differences between the carrying amounts of
assets and liabilities in the financial statements and the corresponding tax
bases used in the computation of taxable profit, and is accounted for using the
balance sheet liability method. Deferred tax liabilities are generally
recognised for all taxable temporary differences, but deferred tax assets are
recognised only to the extent that it is probable that taxable profits will be
available against which deductible temporary differences can be utilised.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset realised. Deferred tax is
charged or credited to profit or loss, except when it relates to items charged
or credited directly to equity, in which case the deferred tax is also dealt
with in equity.

NOTES

4. Principal Accounting Policies (continued)

Property, plant and equipment

Computer equipment and fixtures and fittings are stated at cost less
accumulated depreciation and any accumulated impairment losses. Depreciation is
charged so as to write off the costs of assets over their estimated useful
lives, using the straight-line method. Assets held under finance leases are
depreciated over their expected useful lives on the same basis as owned assets,
or, when shorter, over the term of the relevant lease. The gain or loss arising
on the disposal or retirement of an item of property, plant and equipment is
determined as the difference between the sale proceeds and the carrying amount
of the asset and is recognised in profit or loss.

Intangible assets - research and developmentexpenditure

Development expenditure on internally developed software products is
capitalised if it can be demonstrated that:

  * it is technically feasible to develop the product
   
  * adequate resources are available to complete the development
   
  * there is an intention to complete and sell the product
   
  * the Group is able to sell the product
   
  * sales of the product will generate future economic benefits; and
   
  * expenditure on the product can be measured reliably
   
Capitalised development costs are amortized over the period over which the
Group expects to benefit from selling the product developed. Development costs
not satisfying the above criteria and expenditure on the research phase of
internal projects are recognised in profit or loss as incurred.

Share based payments

The Group issues equity-settled share-based payments to certain employees.
Equity-settled share-based payments are measured at fair value (excluding the
effect of non-market-based vesting conditions) at the date of grant. The fair
value determined at the date of grant is expensed on a straight-line basis over
the vesting period, based on the Group's estimate of the shares that will
eventually vest and adjusted for the effect of non-market-based vesting
conditions. Fair value is measured by the binomial option-pricing model. The
expected life used in the model had been adjusted, based on management's best
estimate, for the effects of non-transferability, exercise restrictions and
behavioral considerations.

NOTES

5. Turnover

All of the Group's revenue in respect of the years ended 31 December 2006 and
2005 derived from continuing operations and from the Group's single business
segment, the design, development and marketing of software products with
associated implementation and consultancy services.

6. Share based payments

In accordance with IFRS2 Share basedPayments, an option pricing model has been
used to work out the fair value of share options granted since November 2002,
with this value being charged to the profit and loss account over the expected
vesting period and leading to a charge of £62,000 (2005: £143,000).

7. Earnings per share

The calculation of basic loss per ordinary share is based on a loss of £303,000
(2005: £1,236,000), and on 133,441,000 (2005: 131,059,000) ordinary shares,
being the weighted average number of ordinary shares in issue during the year.
The effect of all potential ordinary shares is antidilutive.

8. EBITDA

EBITDA is defined as earnings before interest, tax, depreciation and
amortization and can be arrived at by adding back depreciation and amortization
charges amounting to £339,000 (2005: £476,000) to the operating loss of £
306,000 (2005: £1,222,000).

9. Intangible Assets

In accordance with IAS 38Intangible Assets, certain development expenditure
must be capitalised and amortised based on detailed technical criteria, rather
than automatically charging such costs in the profit and loss account as they
arise. This has led to the capitalization of £495,000 (2005: £427,000), and
amortization of £305,000 (2005: £392,000) during the year.

10. Obligations under finance leases

Obligations under finance leases include £5,000 (2005: £9,000) relating to
amounts due in more than one year.

11. Cautionary Statement

Sopheon has made forward-looking statements in this press release, including
statements about the market for and benefits of its products and services;
financial results; product development plans; the potential benefits of
business relationships with third parties and business strategies. These
statements about future events are subject to risks and uncertainties that
could cause Sopheon's actual results to differ materially from those that might
be inferred from the forward-looking statements. Sopheon can make no assurance
that any forward-looking statements will prove correct.