ANNUAL REPORT 2014
Sopheon’s mission is to help our
customers achieve exceptional
long-term growth and
profitability through
sustainable innovation.
Summary Results and Trends
Chairman's Statement
Strategic Report
Financial Report
Directors and Advisors
Report on Directors’ Remuneration
Directors’ Report
Statement of Directors’ Responsibilities
5
6
7
11
14
15
18
21
Auditors’ Report
Consolidated Income Statements
and Consolidated Statements of
Comprehensive Income
Consolidated and Company Balance Sheets
Consolidated and Company
Cash Flow Statements
Consolidated and Company Statements
of Changes in Equity
Notes to the Financial Statements
22
24
25
26
27
28
Sopheon’s mission is to help our customers
achieve exceptional long-term growth and
profitability through sustainable innovation.
We do this by providing software, services and best practices that help complex, global enterprises to
increase the return on their R&D and broader innovation investments. We provide transparency and insight
to improve decision making through an integrated innovation platform which drives performance across
four distinct business capabilities required to achieve sustainable
innovation.
Conventional
Approach
Sopheon’s
Approach
Good execution of a bad strategy drives bad results. The Sopheon
solution was designed from the start to ensure that business
strategy stays front of mind throughout the project life cycle,
ensuring market success.
Project Orientation
Strategy Orientation
Focus on Rolling
Up Projects
Focus on Achieving
Corporate Strategy
Short-Term
Long-Term
How do we optimize our
portfolio for achieving our
performance goals?
Strategy
Execution
Should this new idea/concept
get funds/resources to move
to the next stage?
olio O p ti
rtf
o
P
P
r
o
c
M
e
s
a
s
n
ti o n
Innova
ti
Which strategies (segment brands,
product lines, platforms)
should we prioritize to achieve
our growth objectives?
a
m iz
o
n
P
l
a
n
n
i
n
g
Enterprise
Innovation
Performance
&
a
g
e
m
e
Project
nt
e a/Concept
e v elopment
I d
D
Should this new idea/concept
become a development
initiative/project?
VESUVIUS: black 85%VESUVIUS: whiteA selection of products and brands powered by Accolade.
First to introduce smart
technologies and PPT
on a single click
First to embed
graphical “product
life cycle” stages
PPT
XLS
DOC
MPP
First to implement
enterprise-wide,
fully-integrated
Innovation Planning
and Roadmapping
First to embed
30 years of
best-practice
know-how
First to introduce
integrated roadmapping,
planning, execution,
ideation and portfolio
in one solution
First to
automate
Stage-Gate®
First and only to provide a
genetic (learning) algorithm to
assist with portfolio alignment
(smart optimization)
250
200
150
100
50
0
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Since inception Sopheon has built
a roster of almost 230 licensees,
including some of the world’s best
known companies and brands.
We added ten new customers in
2014 – across a broad range of
industries including defense, oil,
and high-technology as well as
in our traditionally core consumer
goods and chemical sectors.
6
CHAIRMAN'S STATEMENT
7
C H A I R M A N ' S S TAT E M E N T
We entered 2014 on the back of the strongest quarter in our history, and having taken the
business from under $13m revenues in 2009 to almost $21m in 2013. This advance was
coupled with steady improvements in profitability. We also entered 2014 in the second
year of a strategic transition from delivering process automation, to delivering enterprise
class, integrated innovation management solutions. We made substantial progress in 2014
completing this shift in our business model but not without some disruption to momentum,
leading to revenues of $18.3m in 2014. The transition has taken longer than we had
planned. With much of the organizational change and restructuring now behind us, I wish
to re-emphasize my belief in our growth strategy. We continue to lead the market for innovation management
solutions, with a breadth of vision, experience and capability that is unmatched by competitors that have
emerged in recent years. We believe that the restructuring we have undergone to better address the enterprise
market is the right path for the Sopheon business, at a time when we also believe that this market is maturing.
The closing quarter has always been busy and this was true for 2014. As previously announced, a number of
our larger opportunities were deferred into 2015. One of our learnings last year was that enterprise solutions,
while larger in value, require an even longer sales cycle than our historical business. Delays often reflect the
impact of a more intense decision-making process due to its strategic importance; this was not fully anticipated,
but underlines the importance and value of our integrated innovation management solution. In spite of this,
revenue visibility coming into 2015 was $10.2m, only modestly down on $10.8m from the year before. This
reflects the strengthening recurring revenue base coupled with good levels of services backlog from deals that
did close at the end of 2014.
We added ten new customers in the year – across a broad range of industries including defense, oil, and high-
technology as well as in our traditionally core consumer goods and chemical sectors. The investment and
transformation in our sales organization has been completed, with new leadership in the US and Europe as well
as several new team members, and dedicated resources bringing focus between new customer acquisition and
existing customer account management. Partners and resellers continued to bring us into new opportunities
and were instrumental in acquiring new customer wins. Our services organization was also restructured to
support our growth strategy, and furthermore, we have brought services, support and development under
common leadership.
Ongoing investment in software development delivered a continued rapid pace of releases, with Accolade 9.1
and 9.2 released in April and September respectively, and most recently Accolade 9.3 in February 2015. We
continue to bring forward new and unique functionality. Areas of enhanced capability include roadmapping,
resource planning and project execution, and deeper security and integration facilities – meeting the needs
of new vertical segments as well as enterprise class requirements. As announced in January, we are also
introducing Accolade Express, which enables customers to leverage Sopheon software to rapidly improve
innovation performance, by adopting out-of-the-box best practices content developed from over a decade of
experience with industry leaders.
Early in the year, we were delighted to conclude $3.5m in new debt facilities with Silicon Valley Bank. In
December, we successfully completed the share consolidation and capital reduction process initiated the year
before, with a cumulative reduction of very small shareholdings by approximately 10,000 across the UK and
the Netherlands. Sopheon’s board stood behind fractional entitlements that were sold on the market and
purchased the equivalent of 471,500 current ordinary shares, underscoring our belief in the business.
We remain confident in our strategic path. We look forward to improved commercial progress this year, to
match and leverage the major strides made with organizational, product and corporate matters.
Barry Mence
Executive Chairman
18 March 2015
Sopheon and Accolade are registered trademarks of Sopheon plc.
Accolade Roadmapping, Innovation Planner, Idea Lab, Process Manager, Portfolio Center and Vision Strategist are
trademarks of Sopheon plc.
Microsoft is a registered trademark of the Microsoft Corporation in the United States and/or in other countries.
Stage-Gate is a registered trademark of the Product Development Institute, Inc.
6
STRATEGIC REPORT
7
S T R AT E G I C R E P O R T
In this report, our CEO Andy Michuda provides more details on Sopheon’s mission and
differentiation, our principal growth strategies, and an update on our people, processes and
platform. A summary of the principal risk areas facing the business is set out in the Directors’
Report. Further analysis of Sopheon’s financial results during the year, including a review of
the business, the financial position at the end of the year, key indicators and an overview of
key corporate developments are set out in the Financial Report that follows and forms part of
this Strategic Report.
What We Do
Sopheon’s mission is to help our customers achieve exceptional long-term growth and profitability through
sustainable innovation. We do this by providing software and services that help complex, global enterprises to
increase the market success rate of their innovation efforts, to improve R&D throughput and time to market, and
to increase the value per product or service in their innovation portfolio. We provide transparency and insight
to improve decision making through an enterprise innovation platform which drives performance across the four
distinct business capabilities required to achieve sustainable innovation.
• Strategic alignment of long-term Innovation Plans with market requirements, industry regulations, and
supply chain capabilities; to create stronger strategic initiatives and priorities.
• Generation and development of higher value Ideas and Concepts to fill key gaps relevant to achieving
strategic initiatives.
• Improved Process and Project Management that tracks and enables key decision making, focused on
evaluating projects associated with innovation initiatives, and accelerating productivity and velocity of
development efforts through better execution and collaboration.
• Data management, analytics and integrity tools improve project management and Portfolio Optimization to
ensure the best return on innovation investments.
How do we get more
from our portfolio?
Accolade Portfolio Center
Resource Planning
Is our portfolio achieving
our performance goals?
Should this initiative move
forward for launch?
Accolade Process Manager
Collaborative Workflow
Should this initiative move
into development?
olio O p ti
rtf
o
P
P
r
o
c
M
e
s
a
s
n
&
a
g
e
m
What plans do we create to
achieve business objectives?
Accolade Innovation Planner
Accolade Roadmapping
Which strategies
will we pursue?
a
m iz
ti o n
Innova
ti
o
n
P
l
a
n
n
i
n
g
Enterprise
Innovation
Performance
e
Project
nt
e a/Concept
e v elopment
I d
D
Which ideas/concepts support
our strategic objectives?
Accolade Idea Lab
Accolade Idea Submission
Which ideas/concepts
are viable initiatives?
Research indicates that on average, only 50 percent of new products achieve their desired business
objectives. We have helped customers implement effective innovation management processes to dramatically
increase this success rate, with some as high as 85 percent.
A common innovation and new product development challenge companies face is coordinating resources to bring
products to market. We help improve throughput efficiency, enabling 15-30 percent more products to be
brought to market for the same investment.
Companies can increase the value of their portfolios by 75-100 percent or more, by connecting innovation
planning to business objectives, developing better initiatives in the innovation funnel, more effectively managing
processes, and optimizing portfolios with our Accolade solution.
9
8
STRATEGIC REPORT
What Makes Sopheon Different
The Sopheon solution was designed from the start to ensure that business strategy stays front of mind,
focusing on the business value that really matters to corporations. During 2014 a specific focus was on
developing tighter integration of long-range planning functionality with near-term execution capabilities –
an increasingly vital requirement in an ever more competitive and unpredictable world.
Conventional
Approach
Sopheon’s
Approach
Project Orientation
Strategy Orientation
Focus on Rolling
Up Projects
Focus on Achieving
Corporate Strategy
Our integrated support for the entire lifecycle enables critical decision making at every
step to help companies achieve significant innovation performance improvements
across the enterprise. Sopheon’s solutions have been implemented by over 200
customers with over 60,000 users in over 50 countries.
Customer Value Trends
“Studies have found
that two-thirds to
three-quarters of large
organizations struggle
to implement their
strategies.”
We see a convergence of several business, economic and market trends that
play directly into Sopheon’s market position, solutions and investments. We have
identified three major trends from interactions with our customers, in the
market, and from research sources. We believe that Sopheon is uniquely
positioned to leverage these trends with our proven solutions, services,
expertise and best practices.
Why Strategy Execution Unravels—
and What to Do About It
Harvard Business Review, March 2015
• Business Transformation – Companies are exploring innovative options to transform their business
models for increased competitiveness, disruptive operating models, and greater connectedness with
customers, and other strategic initiatives. Sopheon provides these companies with solutions to undertake
these high-risk/high-reward initiatives with structured planning, governance and performance measurement
that greatly improve success probabilities.
• Increased Operating Plan Cadence – Most companies are realizing that the traditional annual operating
plan (AOP) done in spreadsheets and presentations is not effective and does not systematically drive
relevant action, results and alignment in innovation initiatives. Companies face increasingly disruptive and
unplanned events in their markets which requires an ability to quickly assess the market situation, make
fact-based informed decisions, and then implement appropriate actions. Sopheon’s solutions integrate
strategic initiatives with the day to day operating activities in a way that enables fast, dynamic adjustments
based on continuous changes in market condition.
• Sustainable Innovation – Moving with speed remains a struggle for large global companies due to rising
complexity inherent in their business models. Sopheon’s integrated innovation management platform
allows our customers to cut through the complexity, improving the rate of innovation. This means that a
CEO-level objective can be driven, propagated, managed and tracked through all areas and levels of the
enterprise. The flexibility with which Sopheon’s solutions can be applied uniquely supports this enterprise
process need.
8
STRATEGIC REPORT
9
Growth Strategies
Sopheon’s growth strategy centers on transitioning our business from
“automating New Product Development” to “delivering Enterprise
Innovation Management solutions.” This sharper strategic focus is
informed by experiences from some of our early client successes,
supplemented by recent validation from industry shifts and trends.
It has required us to redirect our selling channels, service delivery
model and roadmap priority towards a higher value proposition,
interconnected with offering customers a more strategic solution.
Our refined focus requires Sopheon to:
• Increase industry-specific alignment of solutions and
“Many CEOs feel they can’t
move fast enough on the
innovation front. But the most
successful CEOs are doing
three things to ‘industrialise’
innovation, i.e. to make it
repeatable, dependable and
scalable: they’re focusing on
breakthrough innovation in all
its forms; putting disciplined
innovation techniques in
place; and collaborating
much more actively.”
marketing: We have always believed that different vertical
markets, while sharing core functionality needs, have differing
pain-points and best-practice traditions. In 2014 we continued
our objective to dominate in our chosen core verticals of
chemical, consumer products and high-tech. The focus on
enterprise innovation management is enabled by our ability
to leverage the deep industry knowledge we have developed over the years, to bring more value to our
clients across their enterprise. Our progress and success as deploying this strategy in the consumer
products market has been recognized by the fact that we have again – five years running – been voted
among the top 10 providers of Innovation Solutions by consumer goods executives. Our ambition is to
replicate this success in the years to come with ongoing initiatives in the other core sectors, chemicals and
high-tech.
17th Annual Global CEO Survey
PwC, 2014
• Introduce new offerings to leverage growth from our customer base: Sopheon’s roster of customer
names is a hugely impressive list of the world’s leading companies. Our strategy calls for us to continue
to expand the range of our innovation solutions, extending our footprint within our customers across
their enterprise, to deliver considerably higher value for their investment in Accolade. Examples of this
product strategy in recent years include our 2012 release of Accolade Innovation Planner™ and the
migration of Accolade Vision Strategist™ (now known as Accolade Roadmapping™) to our core Accolade
platform, offering a single-database repository for strategic planning, operational execution and portfolio
decision making. We believe this is unique. In 2014 we have invested in dedicated account management
resources, and in social marketing programs focused on our customer base, to support our client growth
strategy.
• Transition distribution channels for Enterprise Solution selling: We recognize that selling enterprise
class, integrated solutions requires different skills to selling automation tools. This strategy has led to
several changes in our distribution model. In the US we completed the migration to a hunter/farmer sales
and marketing model with dual goals and targets for new customer acquisition,
along with extension and retention of our existing customer base. This
“Projects are divided into
different stages, each leading to
a specific gate where decisions
about the next stage are taken.
Accolade is a software tool for
managing this kind of processes.
It will help Treofan bring more
focused innovation to the market
in less time. It will also help the
company focus its innovation
resources in the most efficient
and effective way.”
process took longer than anticipated but we are pleased to have all roles
transferred and filled coming into 2015. These changes have been led
by Sheila Plunkett, who was appointed in the first half of 2014 to lead
the North American sales team. In November we also appointed
Pieter Leijten to lead our European sales team. Sheila and Pieter
have extensive experience with software companies such as IBM,
SAP and Infor, as well as start-up environments, and they bring us
deep experience in selling enterprise solutions. We also continued
to develop our ties with consulting firms, an area we believe will be
key to the acceleration of our growth.
Peter Vanacker
Chief Executive Officer, Treofan
1 1
1 0
STRATEGIC REPORT
People, Process & Platform
People & Process
Sopheon is differentiated in the market by its industry-leading reputation for deep domain expertise in the
product development business process referred to as “Stage-Gate®”. Over recent years the market has pulled
Sopheon more holistically into the broader innovation management space. That know-how is instituted in our
methodologies, our best practices and our substantial experience developed through many years of helping
top businesses achieve innovation success. We are very proud of the commitment that our people have
shown to the company. We place great emphasis on the development of our people to institutionalize this
deep experience and knowledge of enterprise integrated innovation in our customer facing teams. This priority
continues to have high visibility inside our company.
We have continued our transformation of the global Customer Success (consulting and implementation
services) organization, embedding standardized methodologies and reporting mechanisms to support integrated
innovation management. Our services teams are customer-facing in their activities, relationships and service
delivery and, increasingly, are vertically aligned to our target industries. Similarly, the Customer Support
organization is a single global team with people located across time zones to support local customer requests.
Our Success and Support organizations now report to Don Sarno, who led the transformation of our product
development approach to Agile and who has now taken on a Chief Operating Officer role.
Platform
Over the years Sopheon has made significant investments in product development as a commitment to
maintaining our leadership of a market we helped to create through our own innovation. These investments
have been consistently held above 20 percent of revenue. Our Product Development organization operates
using an Agile methodology. Our goal is to deliver three major releases a year. Leveraging our industry-
standard .NET foundation, the Agile methodology drives greater customer interaction and feedback directly into
the development process. It allows maximum flexibility to respond to market needs, while at the same time
supporting strategic needs.
We continued a rapid pace in 2014 with Accolade 9.1 and 9.2 released in April and September respectively,
and have most recently released Accolade 9.3 in February 2015. Amongst a host of other improvements,
these new versions stepped up our functionality in roadmapping, resource planning and project execution. In
addition, Accolade 9.1 introduced a range of security enhancements while Accolade 9.2 had greater focus
on additional integration capabilities with the latest versions of Microsoft® Office. Our releases continue to be
aligned to market needs and reflect
extensive input from our customer
panels. Alongside Accolade 9.3
we have also released the first
iteration of our new Accolade
Express offering, which will enable
enterprises to rapidly automate
innovation processes based on
implementing out-of-the-box best
practices rooted in Sopheon’s
extensive experiences with
industry-leading customers.
Sopheon’s Accolade solution provides integrated support for the entire
innovation and new product development lifecycle, including innovation planning,
roadmapping, idea and concept development, process and project management,
portfolio management, and resource planning.
Beyond the market and customer inputs, at the strategic level we continue to track four key product roadmap
drivers – social, mobile, cloud and information. These drivers mesh with global trends that are facing the
majority of software companies today, and we are focused on ensuring that new releases keep pace with
market expectations in these areas.
Approved by the board on 18 March 2015 and signed on its behalf by:
Andy Michuda
CEO
Accolade® Solution• Innovation & NPD Process• Project & Portfolio Management (PPM)• Collaborative Workflow• Stage-Gate® & Other Process Automation• Time TrackingInnovationPlannerRoadmappingIdea LabProcess ManagerPortfolio Center• Define Targets & Strategies• Multi-Layer Planning• Planning Board• Taxonomy Visualization• Real-Time Collaboration• Market, Product & Technology Planning• Roadmapping Automation• Dependencies• Milestones• Conflict Resolution• Gantt & Composite Views• Idea & Concept Development • Campaigns• Communities• Collaboration• Ideation Accelerator• Reputation• Portfolio Optimizer• Portfolio Classes• Portfolio Accelerator• Scenarios• Resource Planning• Ranking & Prioritization
1 0
FINANCIAL REPORT
1 1
F I N A N C I A L R E P O R T
In this report, our CFO Arif Karimjee provides further analysis of Sopheon’s financial results
during 2014, our financial position at the end of the year, and an overview of key corporate
developments. In view of the fact that two-thirds of Sopheon’s revenues and staff are
based in the USA, the board took the decision to present the group’s financial statements
in US Dollars as of the 2014 interim report. This is the first annual report reflecting this
change. It is intended to reduce the effect of currency movements on reported revenues,
and to better reflect the underlying source of the majority of the group’s business.
Comparatives for the prior period have been restated accordingly.
Trading Performance
Sopheon’s consolidated turnover in 2014 was $18.3m, compared to $20.8m in 2013. The overall shape of
the business continues to be approximately one-third Europe and two-thirds North America, with a material
contribution from other territories including Asia, the Pacific Rim and the Middle East.
Total license transactions including extension orders were 42 in 2014, compared to 47 in 2013. A trend in the
previous two years of rising average revenue per transaction was interrupted, which in conjunction with the
lower transaction count resulted in a lower overall sales performance. Accordingly, while maintenance and
hosting revenues remained broadly consistent with the prior year, license and services revenues both fell back.
Taking the long view, the annualized average growth of our business since the launch of Accolade remains
above 20 percent.
Business Mix
Over the years we have frequently referred to the sensitivity of our license results to individual sales events.
Historically, the second and fourth quarters tend to be strong and the final quarter of 2013 was a particularly
marked example, being the strongest revenue quarter in our history. In 2014, while the second and fourth
quarters were certainly stronger than the first and third, they did not match the prior year performance. In
particular, and as we announced towards the end of 2014, a number of large transactions that we had
originally expected to close in the fourth quarter were delayed into 2015. Such delays are often reflective of
an opportunity growing in size and scale; potentially a good long-term outcome but of course the impact on the
year under review can be unwelcome. This deferral of larger orders also contributed to the average deal size
being lower than in the prior year, as referenced above.
Although overall sales were lower, the contribution from new customers improved to 45 percent from 35 percent
in 2013, reflecting a number of exciting new customer wins. We entered last year determined to improve
new sales performance, and backed this up with a recruitment strategy in North America that was focused on
ensuring better segregation between hunter and farmer sales representatives. In addition to the appointment of
a new sales leader in April, by the end of 2014 we had ten sales representatives in the US, of which five joined
the team during the year. In November we also brought on a new sales leader in Europe, where we ended the
year with three experienced representatives and have just added a fourth.
Attrition in the recurring revenue base was more than outweighed by the value of new contracts which means
that the overall base of recurring business stood at approximately $7.9m coming into 2015, compared to $7.5m
coming into 2014 and $7.1m coming into 2013. We recognize that this rising trend of recurring revenue is
key to our progress and stability, and have introduced programs alongside our focus on account management
to ensure that it is nurtured. The majority of recurring income is represented by maintenance services, but
also includes hosting and cloud services. Overall, in 2014 our business delivered a 21:42:37 ratio of licenses,
maintenance, and services respectively compared to 29:35:36 in the previous year.
Overall our reported gross margins were 66 percent, down from 70 percent in 2013, reflecting the lower level of
high-margin license revenue, coupled with the relatively fixed costs in our services business.
1 2
FINANCIAL REPORT
1 3
Research and Development Expenditure
Overall investment in product development decreased by approximately $0.1m in 2014, following a steady
annual rise since 2010; this compares to the headline R&D reported in the income statement showing a
reduction from $4.8m to $4.3m. The majority of the difference is due to the effects of capitalization and
amortization of development costs. The amount of 2014 research and development expenditure that met the
criteria of IAS38 for capitalization was $2.4m (2012: $1.8m) offset by amortization charges of $2.1m (2013:
$1.8m). These capitalized costs are largely attributable to the group’s investment in the Accolade 9.1, 9.2 and
9.3 releases. In 2013, a further $0.1m of amortization and impairment charges relating to acquired intangible
assets were charged to distribution costs; these were fully written down coming into 2014 and accordingly the
charge did not recur.
Sopheon remains committed to product leadership, with excellence in research and software development as a
critical core competency of the group. Since 2001 Sopheon’s reported research and development costs each
year have been at least 20 percent of revenues reported in that year. For 2014, this metric was 23 percent
(2013: 23 percent).
Operating Costs
Coming into 2012 Sopheon had 95 staff members, which we grew to 116 by the end of 2013. Following
expansion of resources in line with revenue growth through 2012 and 2013, we stabilized headcount in light
of developments last year and ended 2014 with 113 staff. Although staffing numbers were broadly constant
year on year, all cost areas were moderated by the reduced bonus attributable to the lower 2014 performance.
The corporate bonus scheme covers the majority of the group’s executives and employees, with the principal
exception of the sales teams for whom incentives are tied to individual or territory results. Bonus costs in a
given year are allocated to the relevant categories of the income statement.
Detailed comments regarding professional services and research and development costs are noted above.
After allowing for $0.1m lower amortization and impairment charge noted above, as well as lower commission
costs, sales and marketing costs were broadly stable at $6.2m in 2014 compared to $6.3m in 2013.
Headline administration costs have risen by $0.2m, mainly due to a swing from a net exchange gain position
on the group’s cash balances to a net exchange loss. As a matter of policy, the group does not hedge currency
balances. Underlying administration costs and resourcing have remained broadly constant since 2007.
Results
In common with other technology businesses, the board believes EBITDA provides a useful indicator of the
underlying performance of our business by removing the effect on earnings of tax, capital spend and financing.
EBITDA is further defined and reconciled to profit before tax in Note 4.
The combined effect of the revenue and cost performance discussed above has resulted in Sopheon’s EBITDA
(Earnings before Interest, Tax, Depreciation and Amortization) performance for 2014 falling to $1.2m, from $3m
in 2013.
Including the effect of interest, depreciation and amortization, the group reported a loss before tax for the year
of $1.5m (2013: profit of $0.5m). No tax has been provided. The loss per ordinary share was 20.9 cents
(2013: profit per share of 7.3 cents).
1 2
FINANCIAL REPORT
1 3
Balance Sheet and Corporate
Consolidated net assets at the end of the year stood at $4.2m (2013: $5.8m). Gross cash resources at 31
December 2014 amounted to $4.7m (2013: $4.0m). Approximately $2.4m was held in US Dollars, $2.0m in
Euros and $0.3m in Sterling.
Intangible assets stood at $5.9m (2013: $5.6m) at the end of the year. This includes (i) $4.9m being the net
book value of capitalized research and development (2013: $4.6m) and (ii) an additional $1.0m (2013: $1.0m)
being goodwill arising on the acquisitions of Alignent Software Inc., and Sopheon GmbH.
Facilities
Since 2007 the company had term-loan and line of credit facilities provided by BlueCrest Capital Finance
(“BlueCrest”). BlueCrest decided to move away from debt funding and accordingly, further renewals were not
available. Accordingly, in February 2014 the group established new replacement facilities with the London
branch of Silicon Valley Bank. These facilities comprise a term loan of $0.5m repayable in 36 equal monthly
instalments, and, reflecting the group’s expanded receivables capacity, a $3m revolving line of credit. Both
facilities bear interest at rates of 2.75 percent over Wall Street Prime, resulting in a current effective rate of
6 percent. The facilities are subject to covenants based on operating results, and in addition the drawdown
mechanics and interest rates are subject to certain working capital ratios. These facilities have substantially
lower financing costs than the ones they replace, reflecting the growing maturity of the Sopheon business.
To underpin the group’s growth strategies, in two tranches in 2009 and 2011, the company issued a total of
£2m of convertible unsecured loan stock (the “Loan Stock”) to a group of investors including key members of
the board and senior management team. In June 2014, the Loan Stock investors agreed to extend the maturity
date by two years to 31 January 2017. The conversion price is 76.5 pence per share.
As a final component of its financing structure, Sopheon has an equity line of credit facility with GEM Global
Yield Fund Limited ("GEM") which was last renewed for a two-year term expiring on 23 December 2015. The
facility, which has been renewed on a number of previous occasions, has been used to raise working capital
once, in March 2004. This leaves approximately 90 percent of the original €10m facility available under the
extended agreement. Drawings under the GEM equity line of credit are subject to conditions relating inter alia
to trading volumes in Sopheon shares.
Approved by the board on 18 March 2015 and signed on its behalf by:
Arif Karimjee
CFO
1 4
DIRECTORS AND ADVISORS
1 5
D I R E C T O R S A N D A D V I S O R S
Directors
Barry K. Mence
Andrew L. Michuda
Arif Karimjee ACA
Stuart A. Silcock FCA
Bernard P. F. Al
Daniel Metzger
Executive Chairman
Chief Executive Officer
Chief Financial Officer
Non-executive Director
Non-executive Director
Non-executive Director
Secretary
Arif Karimjee
Registered Office
Registered Name and Number
Dorna House One
Guildford Road
West End, Surrey GU24 9PW
Sopheon plc.
Registered in England and Wales
No. 3217859
Lloyds TSB Bank plc.
77 High Street
Southend-on-Sea
Essex SS1 1HT
Briggs and Morgan
2200 IDS Center, 80 South Eighth Street
Minneapolis, MN 55402
United States
Auditors
Principal Bankers and Financiers
Solicitors and Attorneys
AIM Nominated Adviser and Broker
Alternext Paying Agent
Registrars
BDO LLP
55 Baker Street
London W1U 7EU
Silicon Valley Bank
3003 Tasman Drive
Santa Clara, CA 95054
United States
Rabobank Amsterdam
Van Baerlestraat 102-106
1071 BC Amsterdam
The Netherlands
Squire Patton Boggs
7 Devonshire Square
Cutlers Gardens
London EC2M 4YH
Loyens & Loeff
Fred Roeskestraat 100
1076 ED Amsterdam
The Netherlands
finnCap Limited
60 New Broad Street
London EC2M 1JJ
Kempen & Co.
Beethovenstraat 300
1077 WZ Amsterdam
The Netherlands
Capita Registrars
Northern House
Woodsome Park
Fenay Bridge
Huddersfield HD8 0LA
1 4
REPORT ON DIRECTORS’ REMUNERATION
1 5
R E P O R T O N D I R E C T O R S ’ R E M U N E R AT I O N
The remuneration committee of Sopheon plc is responsible for oversight of the contract terms, remuneration and other
benefits for executive directors, including performance-related bonus schemes. The committee comprises two non-
executive directors, B.P.F. Al, as chairman, and S.A. Silcock, together with B.K. Mence, other than in respect of his
own remuneration. The committee makes recommendations to the board, within agreed parameters, on an overall
remuneration package for executive directors and other senior executives in order to attract, retain and motivate high
quality individuals capable of achieving the group’s objectives. The package for each director consists of a basic salary,
benefits and pension contributions, together with performance-related bonuses and share options on a case-by-case
basis. Consideration is given to pay and employment policies elsewhere in the group, especially when considering
annual salary increases. From time to time, the remuneration committee may take advice from appropriate remuneration
consultants or to consult benchmarking data.
Contracts
The service contract between the company and Mr. Michuda is terminable on up to three months’ notice, with an
additional twelve months’ salary in lieu of notice due by the company in the event of termination without cause. Service
contracts between the company and the other executive directors are terminable on six to nine months’ notice.
Fees for Non-executive Directors
The fees for non-executive directors are determined by the board. The non-executive directors are not involved in any
discussions or decisions about their own remuneration.
Directors’ Remuneration
Set out below is a summary of the fees and emoluments received by all directors during the year, translated where
applicable into US Dollars at the average rate for the period. Mr. Mence’s remuneration is largely fee-based and
therefore subject to fluctuations from period to period. Benefits primarily comprise healthcare insurance and similar
expenses. Details of directors’ interests in shares and options are set out in the Directors’ Report.
Executive Directors
B.K. Mence
A.L. Michuda
A. Karimjee
Non-executive Directors
S.A. Silcock
B.P.F. Al
D. Metzger
Pay and Fees
2014
$
Bonus
2014
$
Benefits
2014
$
Total
2014
$
Total
2013
$
235,064
283,750
196,459
-
-
-
5,652
12,596
3,713
240,716
296,346
200,172
247,335
312,503
202,062
32,942
32,942
32,942
_______
814,099
_______
_______
-
-
-
_______
-
_______
_______
-
-
-
_______
21,961
_______
_______
32,942
32,942
32,942
_______
836,060
_______
_______
31,398
31,398
31,398
_______
856,094
_______
_______
The remuneration committee establishes the objectives that must be met for each financial year if a cash bonus is to be
paid. With the principal exception of members of Sopheon’s sales teams, for whom incentives are tied to individual or
territory results, the committee concluded that the cash incentive should be tied to the financial performance of the group
as a whole, and in 2013 and 2014 these objectives were set with regard to EBITDA performance. These measures were
applied to all members of the executive board and management committee of the group, as well as the majority of the
group’s employees.
In addition to the amounts disclosed above, pension contributions are made to individual directors’ personal pension
schemes. During 2014 contributions of $8,030, $3,943 and $9,033 (2013: $7,653, $4,754 and $9,405) were paid
respectively to the pension schemes of B.K. Mence, A.L. Michuda and A. Karimjee.
1 6
REPORT ON DIRECTORS’ REMUNERATION
1 7
Performance Graph
The following graph shows the company’s share price performance on AIM since January 2011, in UK pence, compared
with the performance of the FTSE AIM All Share index, which has been selected for this comparison as it is a broad-
based index which the directors believe most closely reflects the performance of companies with similar characteristics
as the group’s. Historical share prices have been adjusted to reflect the net 20:1 share consolidation performed by the
group during 2013.
250
200
150
100
50
0
1
1
n
a
J
1
1
r
p
A
1
1
l
u
J
1
1
t
c
O
2
1
n
a
J
2
1
r
p
A
2
1
l
u
J
2
1
t
c
O
3
1
n
a
J
3
1
r
p
A
3
1
l
u
J
3
1
t
c
O
4
1
n
a
J
4
1
r
p
A
4
1
l
u
J
4
1
t
c
O
5
1
n
a
J
Sopheon
Aim All-Share (rebased to Sopheon)
Directors’ Interests
The interests of the directors, who held office at the end of the year, in the share capital of the company (all beneficially
held except those marked with an asterisk (*), which are held as trustee), were as follows:
Share Options
Ordinary Shares
8%
Convertible
Loan Stock
At 31 December
2014
2013
2014
2013
2014
2013
B.K. Mence
A.L. Michuda
A. Karimjee
S.A. Silcock
S.A. Silcock*
B.P.F. Al
D. Metzger
24,250
199,880
57,500
-
-
1,125
-
24,250
199,880
57,500
-
-
1,125
-
1,033,000
30,000
17,500
145,000
4,000
61,500
5,000
722,500
8,000
4,500
47,500
4,000
32,500
5,000
£640,000 £640,000
£45,000 £45,000
£27,000 £27,000
£200,000 £200,000
-
-
£60,000 £60,000
-
-
Of the 1,033,000 ordinary shares mentioned above B.K. Mence beneficially owns and is the registered holder of 917,000
ordinary shares. His wife, Mrs. M.T. Mence, beneficially owns 500 ordinary shares. A further 115,500 ordinary shares are
held by Inkberrow Limited, a company which is owned by B.K. Mence.
1 6
REPORT ON DIRECTORS’ REMUNERATION
1 7
The following table provides information for each of the directors who held office during the year and held options to
subscribe for Sopheon ordinary shares. All options were granted without monetary consideration.
Date of
Grant
Exercise
Price
At 31
December
2013
Granted
During
Year
Expired
During
Year
At 31
December
2014
B.K. Mence
B.K. Mence
A.L. Michuda
A.L. Michuda
A.L. Michuda
A. Karimjee
A. Karimjee
A. Karimjee
B.P.F. Al
29 September 2012
5 December 2013
27 August 2010
29 September 2012
5 December 2013
27 August 2010
29 September 2012
5 December 2013
29 September 2012
105p
85p
6,125
18,125
12,500
150p
105p
85p
138,380
49,000
150p 7,500
23,125
105p
26,875
85p
1,250
105p
-
-
-
-
-
-
-
-
-
6,125
-
18,125
-
- 12,500
138,380
-
49,000
-
7,500
-
23,125
-
26,875
-
1,250
-
None of the directors exercised any share options during the year. Vesting of all of the above share options which were
outstanding at 31 December 2014 is in three equal tranches on the first, second and third anniversaries of the date of
grant and all such options expire on the tenth anniversary of the date of grant. The mid-market price of Sopheon ordinary
shares at 31 December 2014 was 39.5p. During the financial year the mid-market price of Sopheon ordinary shares
(adjusted, where applicable, for the share consolidation and subsequent share subdivision referred to in Note 23) ranged
from 39.5p to 96.5p. Save as disclosed above, no director (or member of his family) or connected persons has any
interest, beneficial or non-beneficial, in the share capital of the company.
Approved by the board on 18 March 2015 and signed on its behalf by:
Arif Karimjee
Director
1 8
DIRECTORS’ REPORT
1 9
D I R E C T O R S ’ R E P O R T
The group’s principal activities during the year continued to focus on the provision of software and services that improve
the return on investment of product development, within the rapidly emerging product lifecycle management (PLM) market.
A review of the development of the business during the year is given in the Chairman's Statement on page 6 and the
subsequent Strategic and Financial Reports. These also include reference to the group’s future prospects. In view of the
fact that two-thirds of the group’s revenues and staff are based in the USA, the directors have decided to present the group’s
financial statements in US Dollars. The group’s result for the year ended 31 December 2014 is a loss after tax of $1,519,000
(2013: profit $534,000). As for the prior year, the directors do not intend to declare a dividend.
Corporate Governance
The Sopheon board is committed to high standards of corporate governance and aims to follow appropriate governance
practice, although as a company incorporated in the UK and listed on AIM and Alternext the company is not subject to
the requirements of the UK Corporate Governance Code or the Netherlands Tabaksblat Committee. The board currently
comprises three executive directors and three independent non-executive directors. Their biographies appear at the back of
this annual report, and demonstrate a range of experience and caliber to bring the right level of independent judgment to the
board.
The board is responsible for the group’s system of internal control and for reviewing its effectiveness. Such a system can
only provide reasonable, but not absolute, assurance against material misstatement or loss. The board believes that the
group has internal control systems in place appropriate to the size and nature of its business. The board is satisfied that the
scale of the group’s activities do not warrant the establishment of an internal audit function. The board is also responsible for
identifying the major business risks faced by the group and for determining the appropriate course of action to manage those
risks. Formal meetings are held quarterly to review strategy, management and performance of the group, with additional
meetings between those dates convened as necessary. During 2014, all directors attended all quarterly meetings either in
person or by conference call. The audit committee, which comprises all of the non-executive directors and is chaired by
Stuart Silcock, considers and determines actions in respect of any control or financial reporting issues they have identified or
that are raised by the auditors. The board has a formal schedule of matters specifically reserved to it for decision. Details of
the constitution of the remuneration committee are provided in the Report on Directors’ Remuneration on page 15.
Share Consolidation and Subsequent Subdivision of Shares
In May 2013 a reorganization of the company’s share capital was carried out, including a share consolidation and
subsequent share subdivision intended to reduce the disproportionately large number of shareholders with relatively small
shareholdings for a company of Sopheon’s size. However, the capital reorganization was not correctly processed by certain
brokers in the Netherlands. Enquiries and representations established that this could not be rectified other than by repeating
the process. Accordingly, on 10 October 2014 shareholders approved a further share consolidation, on the basis of one
new ordinary share of £100 nominal value for every 500 ordinary shares of 20p each. On 18 December 2014 shareholders
approved a further share subdivision, whereby each ordinary share of £100 nominal value was subdivided into 500 ordinary
shares of 20 pence each.
Share Option Schemes
Details of options granted are shown in Note 27 to the financial statements.
Post Balance Sheet Events
There are no post balance sheet events that warrant disclosure in the financial statements.
1 8
DIRECTORS’ REPORT
1 9
Principal Risk Areas
As with any business at its stage of development, Sopheon faces a number of risks and uncertainties. The board
monitors these risks on a regular basis. The key areas of risk identified by the board are summarized below.
Sopheon’s markets are emerging and this means that Sopheon's growth may be erratic. The broad market for
Sopheon’s software products continues to emerge and evolve, and the timing and size of individual sales can have a
substantial impact on performance in a given period. Sopheon has formalized processes for soliciting input to product
strategy from analysts and customers, while also capitalizing on the group’s leadership in key market areas. Sopheon
also seeks to improve revenue predictability by introducing specific initiatives to balance efforts between new customer
acquisition, and meeting the needs of existing customers.
Sopheon’s prospects of achieving sustained and growing profitability are dependent on correctly aligning investments
with sales. Sopheon’s ability to continue to finance its investments at the optimal pace is dependent on the group
maintaining profitability and sales growth alongside its investment strategy, or having appropriate financial resources
in place to invest with confidence. Sopheon has sought to focus its resources on the sub-segments that it believes
offer the best opportunities for growth. Sopheon management carefully monitors short- and medium-term financing
requirements and has regularly raised additional funding resources to meet requirements.
Some of Sopheon’s competitors and potential competitors have greater resources than Sopheon. Sopheon remains a
relatively small organization by global standards. Its resources are small compared to those of many larger companies
that are capable of developing competitive solutions and it can be difficult to overcome the marketing engine of a
large global firm. Sopheon seeks to compete effectively with such companies by keeping its market communications
focused, clear and consistent with its product and market strategy, and working to deliver first class quality of execution
so that referenceability of the customer base is maximized. Sopheon’s use of an agile development methodology with
deep customer involvement is a key plank in this approach.
Sopheon is dependent upon skilled personnel, the loss of whom could have a material impact. While service
agreements have been entered into with key executives, retention of key members of staff cannot be guaranteed and
departure of such employees could be damaging in the short term. In addition the competition for qualified employees
continues to be difficult and retaining key employees has remained challenging. As a relatively small business,
Sopheon is more exposed to this risk than some of its larger competitors. Sopheon management checks staff
remuneration against recognized benchmarks and other industry sources, and seeks to maintain pay at competitive
levels appropriate to its business.
Sopheon will require relationships with partners who are able to market and implement its products. Historically,
Sopheon has devoted substantial resources to the direct marketing of its products, and its strategy to enter into
strategic alliances and other collaborative relationships to widen the customer base and create a broad sales and
implementation channel for its products is not yet mature. The successful implementation of this strategy is crucial to
Sopheon’s prospects and its ability to scale effectively. However, Sopheon cannot be sure that it will select the right
partners, or that the partners it does select will devote adequate resources to promoting, selling and becoming familiar
with Sopheon's products. Over the years Sopheon has built up a network of both resellers and consulting partners,
however this has yet to mature and the revenues delivered through these relationships remain a relatively modest part
of the total.
Sopheon could be subject to claims for damages for errors in its products and services. Sopheon may be exposed to
claims for damages from customers in the event that there are errors in its software products or should support and
maintenance service level agreements fail to meet agreed criteria. Sopheon has sought to protect itself from such risks
through excellent development methodologies, its contract terms and insurance policies. Sopheon has never had any
such claims.
Auditors
All of the current directors have taken all the steps that they ought to have taken to make themselves aware of any
information needed by the company’s auditors for the purposes of their audit and to ensure that the auditors are aware
of that information. The directors are not aware of any relevant audit information of which the auditors are unaware. A
resolution to reappoint BDO LLP as auditors will be put to the members at the Annual General Meeting.
2 0
DIRECTORS' REPORT
Financial Instruments
Details of the group’s financial instruments and its policies with regard to financial risk management are given in
Note 22 to the financial statements.
Substantial Shareholdings
The directors are aware of the following persons who as at 18 March 2015 were interested directly or indirectly in
3 percent or more of the company’s issued ordinary shares:
Name
B.K. Mence (director)
Rivomore Limited and Myrtledare Corp.
No. of
% Issued
Ordinary Shares Ordinary Shares
1,033,000
1,408,500
14.2
19.4
B.K. Mence also holds £640,000 nominal of 8% convertible loan stock. Rivomore Limited and Myrtledare Corp. also
hold £640,000 nominal of 8% convertible loan stock. The convertible loan stock is convertible at the rate of 76.5p per
ordinary share.
B.K. Mence’s interest represents direct beneficial holdings as well as those of his family.
Approved by the board on 18 March 2015 and signed on its behalf by:
A. Karimjee
Director
2 1
2 0
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
2 1
S TAT E M E N T O F D I R E C T O R S ’ R E S P O N S I B I L I T I E S I N
R E S P E C T O F T H E F I N A N C I A L S TAT E M E N T S
The directors are responsible for preparing the annual report and financial statements in accordance with applicable law
and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors
have elected to prepare the group and company financial statements in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European Union. Under company law the directors must not approve
the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group
and company and of the profit or loss of the group for that period. The directors are also required to prepare financial
statements in accordance with the rules of the London Stock Exchange for companies trading securities on the
Alternative Investment Market and the rules of the NYSE Alternext Amsterdam Stock Exchange.
In preparing these financial statements, the directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgments and accounting estimates that are reasonable and prudent;
• state whether they have been prepared in accordance with IFRSs as adopted by the European Union, subject to
any material departures disclosed and explained in the financial statements; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company
will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
company’s transactions and disclose with reasonable accuracy at any time the financial position of the company
and enable them to ensure that the financial statements comply with the requirements of the Companies Act 2006.
They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
Website Publication
The directors are responsible for ensuring the annual report is made available on a website. Annual reports are
published on the company's website in accordance with legislation in the United Kingdom governing the preparation
and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and
integrity of the company's website is the responsibility of the directors. The directors' responsibility also extends to the
ongoing integrity of the annual reports contained therein.
2 2
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF SOPHEON PLC
2 3
I N D E P E N D E N T A U D I T O R S ’ R E P O R T T O T H E M E M B E R S O F
S O P H E O N P L C
We have audited the financial statements of Sopheon plc for the year ended 31 December 2014 which comprise the
consolidated income statement, the consolidated statement of comprehensive income, the consolidated and company
balance sheets, the consolidated and company cash flow statements, the consolidated and company statements of
changes in equity, and the related notes. The financial reporting framework that has been applied in their preparation
is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as
regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act
2006.
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those
matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted
by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a
body, for our audit work, for this report, or for the opinions we have formed.
Respective Responsibilities of Directors and Auditors
As explained more fully in the statement of directors’ responsibilities, the directors are responsible for the preparation
of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit
the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland).
Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors.
Scope of the Audit of the Financial Statements
A description of the scope of an audit of financial statements is provided on the APB’s website at
www.frc.org.uk/apb/scope/private.cfm
Opinion on Financial Statements
In our opinion:
• the financial statements give a true and fair view of the state of the group’s and the parent company’s affairs as at
31 December 2014 and of the group’s loss for the year then ended;
• the group financial statements have been properly prepared in accordance with IFRSs as adopted by the
European Union;
• the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by
the European Union; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on Other Matters Prescribed by the Companies Act 2006
In our opinion the information given in the Strategic Report and the Directors’ Report for the financial year for which the
financial statements are prepared is consistent with the financial statements.
2 2
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF SOPHEON PLC
2 3
Matters on Which We are Required to Report by Exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to
you if, in our opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have
not been received from branches not visited by us; or
• the parent company financial statements are not in agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Julian Frost (senior statutory auditor)
For and on behalf of BDO LLP, statutory auditor
55 Baker Street
London W1U 7EU
United Kingdom
18 March 2015
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
2 4
FINANCIAL STATEMENTS
2 5
C O N S O L I D AT E D I N C O M E S TAT E M E N T
F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 1 4
Revenue
Cost of sales
Gross profit
Sales and marketing expense
Research and development expense
Administrative expense
Operating (loss)/profit
Finance income
Finance expense
(Loss)/profit before tax
Income tax expense
(Loss)/profit for the year
(Loss)/earnings per share
Basic and fully diluted (US cents)
Notes
2014
$’000
2013
$’000
3
18,296
(6,209)
_______
20,841
(6,296)
_______
12,087
14,545
(6,173)
(4,298)
(2,718)
_______
(6,331)
(4,776)
(2,486)
_______
(1,102)
952
8
9
12
(429)
_______
27
(445)
_______
(1,519)
534
10
-
_______
-
_______
5
(1,519)
_______
534
_______
12
(20.87c)
_______
_______
7.34c
_______
_______
C O N S O L I D AT E D S TAT E M E N T O F C O M P R E H E N S I V E I N C O M E
F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 1 4
(Loss)/profit for the year
Other comprehensive expense
Exchange differences on translation of foreign operations
Total comprehensive (expense)/income for the year
2014
$’000
2013
$’000
(1,519)
534
(197)
_______
(99)
_______
(1,716)
_______
_______
435
_______
_______
2 4
FINANCIAL STATEMENTS
2 5
C O N S O L I D AT E D A N D C O M PA N Y B A L A N C E S H E E T S AT
3 1 D E C E M B E R 2 0 1 4
Notes
2014
$’000
Company
2012
$’000
2014
$’000
2013
$’000
2012
$’000
Assets
Non-current Assets
Property, plant and equipment 13
14
Intangible assets
15
Investments in subsidiaries
16
Other receivable
Total non-current assets
Current Assets
Trade and other receivables
Cash and cash equivalents
17
18
Total current assets
Total assets
Liabilities
Current Liabilities
Trade and other payables
Borrowings
Deferred revenue
Total current liabilities
Non-current Liabilities
19
20
Borrowings
20
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Capital reserves
Translation reserve
Retained losses
Total equity
Group
2013
$’000
326
5,598
-
19
______
5,943
______
9,066
4,027
______
13,093
______
19,036
3,503
1,513
4,949
______
9,965
______
3,270
______
3,270
______
13,235
______
5,801
______
265
5,889
-
19
______
6,173
______
6,755
4,735
______
11,490
______
17,663
2,842
2,124
5,166
______
10,132
______
3,288
______
3,288
______
13,420
______
4,243
______
318
5,694
-
19
______
6,031
______
6,403
6,273
______
12,676
______
18,707
3,861
1,830
4,304
______
9,995
______
3,436
______
3,436
______
13,431
______
5,276
______
-
-
9,551
-
______
9,551
______
52
789
______
841
______
10,392
492
-
-
______
492
______
3,120
______
3,120
______
3,612
______
6,780
______
-
-
10,113
-
______
10,113
______
2
479
______
481
______
10,594
628
-
-
______
628
______
3,270
______
3,270
______
3,898
______
6,696
______
23
24
2,354
5,654
(46)
(3,719)
______
4,243
______
______
2,354
5,498
151
(2,202)
______
5,801
______
______
11,769
89,926
250
(96,669)
______
5,276
______
______
2,354
5,654
-
(1,228)
______
6,780
______
______
2,354
5,498
-
(1,156)
______
6,696
______
______
-
-
9,893
-
______
9,893
______
-
2,352
______
2,352
______
12,245
587
-
-
______
587
______
3,167
______
3,167
______
3,754
______
8,491
______
11,769
89,926
-
(93,204)
______
8,491
______
______
Approved by the board and authorized for issue on 18 March 2015.
Barry K. Mence
Director
Arif Karimjee
Director
2 6
FINANCIAL STATEMENTS
2 7
C O N S O L I D AT E D A N D C O M PA N Y C A S H F L O W S TAT E M E N T S
F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 1 4
Group
Company
Notes
2014
$’000
2013
$’000
2014
$’000
2013
$’000
Operating Activities
(Loss)/profit for the year
(1,519)
534
488
(2,105)
Adjustments for:
Finance income
Finance costs
Depreciation of property, plant and equipment
Amortization and impairment of intangible assets
Share-based payment expense
Intra-group credits and charges
Provisions against intra-group loans
Operating cash flows before movements in working capital
Decrease/(increase) in receivables
(Decrease)/increase in payables
Net cash generated from/(used in) operating activities
Investing Activities
Finance income
Purchases of property, plant and equipment
Development costs capitalized
Acquisition of subsidiary undertaking
Net cash acquired with subsidiary undertaking
Advance of loans to group companies
Repayment of loans by group companies
Net cash (used in)/generated from investing activities
Financing Activities
Drawdown/(repayment) of loan notes
Increase in line of credit
Expenses of capital reorganization
Interest paid
Net cash from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of foreign exchange rate changes
Cash and cash equivalents at the end of the year
18
(12)
429
227
2,076
158
-
-
––––––––
1,359
2,003
(314)
––––––––
3,048
––––––––
(27)
445
226
1,923
121
-
-
––––––––
3,222
(2,568)
99
––––––––
753
––––––––
-
330
-
-
158
(448)
(1,043)
––––––––
(515)
(50)
(137)
––––––––
(702)
––––––––
-
261
-
-
121
(482)
1,383
––––––––
(822)
(2)
41
––––––––
(783)
––––––––
12
(176)
(2,367)
-
-
-
-
––––––––
27
(227)
(1,788)
(58)
69
-
-
––––––––
-
-
-
-
-
(1,486)
2,974
––––––––
-
-
-
-
-
(2,826)
1,926
––––––––
(2,531)
––––––––
(1,977)
––––––––
1,488
––––––––
(900)
––––––––
92
729
-
(395)
––––––––
426
––––––––
943
(1,080)
450
(31)
(413)
––––––––
(1,074)
––––––––
(2,298)
-
-
-
(295)
––––––––
(295)
––––––––
491
-
-
(31)
(229)
––––––––
(260)
––––––––
(1,943)
4,027
(235)
––––––––
4,735
––––––––
––––––––
6,273
52
––––––––
4,027
––––––––
––––––––
479
(181)
––––––––
789
––––––––
––––––––
2,352
70
––––––––
479
––––––––
––––––––
2 6
FINANCIAL STATEMENTS
2 7
C O N S O L I D AT E D A N D C O M PA N Y S TAT E M E N T S O F C H A N G E S
I N E Q U I T Y F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 1 4
Group
At 1 January 2013
Profit for the year
Exchange differences on translation
of foreign operations
Total comprehensive income for the year
Recognition of share-based payments
Lapsing or expiry of share options
Capital reorganization and reduction of capital
At 1 January 2014
Loss for the year
Exchange differences on translation
of foreign operations
Total comprehensive income for the year
Recognition of share-based payments
Lapsing or expiry of share options
At 31 December 2014
Share
Capital
$’000
Capital Translation
Reserve
$’000
Reserves
$’000
Retained
Losses
$’000
11,769
-
89,926
-
250
-
(96,669)
534
-
––––––––
-
––––––––
-
-
(9,415)
––––––––
2,354
-
-
––––––––
-
––––––––
-
-
––––––––
2,354
––––––––
––––––––
-
––––––––
-
––––––––
121
(729)
(83,820)
––––––––
5,498
-
-
––––––––
-
––––––––
158
(2)
––––––––
5,654
––––––––
––––––––
(99)
––––––––
(99)
––––––––
-
-
-
––––––––
151
-
(197)
––––––––
(197)
––––––––
-
-
––––––––
(46)
––––––––
––––––––
-
––––––––
534
––––––––
-
729
93,204
––––––––
(2,202)
(1,519)
-
––––––––
(1,519)
––––––––
-
2
––––––––
(3,719)
––––––––
––––––––
Total
$’000
5,276
534
(99)
––––––––
435
––––––––
121
-
(31)
––––––––
5,801
(1,519)
(197)
––––––––
(1,716)
––––––––
158
-
––––––––
4,243
––––––––
––––––––
The translation reserve represents accumulated differences on the translation of assets and liabilities of foreign
operations. Retained losses represent accumulated trading losses, including amortization and impairment charges
in respect of goodwill and intangible assets arising from past acquisitions, and the credit arising from the reduction of
capital which became effective in November 2013. Full details of the capital reserves and the capital reorganization and
reduction of capital are set out in the Director’s Report and in Notes 23 and 24.
Company
At 1 January 2013
Loss and total comprehensive income for the year
Recognition of share-based payments
Lapsing or expiry of share options
Capital reorganization and reduction of capital
At 1 January 2014
Profit and total comprehensive loss for the year
Recognition of share-based payments
Lapsing or expiry of share options
At 31 December 2014
Share
Capital
Capital Reserves
$’000
$’000
Retained
Losses
$’000
11,769
-
-
-
(9,415)
––––––––
2,354
-
-
-
––––––––
2,354
––––––––
––––––––
89,926
-
121
(729)
(83,820)
––––––––
5,498
-
158
(2)
––––––––
5,654
––––––––
––––––––
(93,204)
(1,885)
-
729
93,204
––––––––
(1,156)
(74)
-
2
––––––––
(1,228)
––––––––
––––––––
Total
$’000
8,491
(1,885)
121
-
(31)
––––––––
6,696
(74)
158
-
––––––––
6,780
––––––––
––––––––
2 8
NOTES TO THE FINANCIAL STATEMENTS
2 9
1 . G E N E R A L I N F O R M AT I O N
Sopheon plc ("the company") is a public limited company incorporated in England and Wales. The address of its registered
office and principal place of business is set out on page 14. The principal activities of the company and its subsidiaries are
described in Note 3. The financial statements have been prepared in US Dollars and rounded to the nearest thousand.
2 . S I G N I F I C A N T A C C O U N T I N G P O L I C I E S
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 2006 which apply to companies preparing their financial statements under IFRS. The principal
accounting policies are set out below. The policies have been applied consistently to all the years presented.
A number of new standards, amendments and interpretations to existing standards have been adopted by the group, but
have not been listed, since they have no material impact on the financial statements. The impact of IFRS 15 Revenues
from Contracts with Customers, which will apply from reporting periods beginning on or after 1 January 2017, is still being
assessed. None of the other new standards, amendments and interpretations in issue but not yet effective are expected to
have a material effect on the financial statements.
Change in Accounting Policies
The group’s financial statements have been presented in US Dollars. In prior periods, the financial statements were
presented in British Pounds Sterling. This change is intended to reduce the effect of currency movements on reported
revenues, and to better reflect the underlying nature of the business. Approximately two-thirds of the group’s revenue and
operating costs are denominated in US Dollars. The 2013 and 2012 balance sheets for the group and company have been
retranslated into US Dollars at 1.6528 and 1.6168 US Dollars to British Pounds Sterling, and the results for 2013 have been
retranslated into US Dollars at 1.5699 US Dollars to British Pounds Sterling. Retranslation differences arising have been
recognised in the translation reserve.
Going Concern
The financial statements have been prepared on a going concern basis. In reaching their assessment, the directors have
considered a period extending at least 12 months from the date of approval of these financial statements. This assessment
has included consideration of the forecast performance of the business for the foreseeable future, the cash and financing
facilities available to the group, and the repayment terms in respect of the group’s borrowings, including the potential of
having to repay convertible loan stock in January 2017.
During 2014, the group achieved revenues of $18.3m and a loss before tax of $1.5m. This represents a reduced
performance compared to the previous year, which culminated 5 years of growth. The directors believe this was a
temporary pause in the development of the business. Coming into 2015, the group’s sales pipeline remains active, and
accordingly, the directors remain positive about the prospects for the business.
On 25 February 2014 the group established facilities with Silicon Valley Bank (“SVB”) to replace expiring facilities from
BlueCrest Capital Finance. The new facilities comprised a term loan of $0.5m repayable in 36 equal monthly instalments,
and a $3m revolving line of credit, which will come up for renewal in February 2016. The facilities are subject to covenants
based on operating results and working capital ratios.
In addition, the group has a £2,000,000 convertible loan outstanding to key investors including members of the board and
management. The current terms of the loan call for repayment or conversion by 31 January 2017.
Notwithstanding the group’s funding position, the time-to-close and the order value of individual sales continues to vary
considerably as exemplified by 2014’s results. When combined with the relatively low-volume and high-value nature of the
group’s business, these are factors which constrain the ability to accurately predict revenue performance. If sales fall short
of expectations, there is a risk that the group may be obliged to seek additional funding.
The directors have concluded that the circumstances set forth above represent uncertainties. However they believe that
taken as a whole, the factors described above 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 company or group were unable to
continue as a going concern.
2 8
NOTES TO THE FINANCIAL STATEMENTS
2 9
Basis of Consideration
The consolidated financial statements incorporate the financial statements of the parent company Sopheon plc and the
financial statements of the subsidiaries as shown in Note 15 of the consolidated financial statements. The financial
statements of all the group companies are prepared using uniform accounting policies. All intra-group transactions,
balances, income and expenses are eliminated on consolidation.
Business Combinations
The acquisition of subsidiaries is accounted for within the consolidated financial statements using the purchase method.
No material business combinations have been entered into since that date. The cost of the acquisition is measured at the
aggregate of the fair values at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments
issued by the group in exchange for control of the entity being acquired, together with any costs directly attributable to the
business combination. The results of the acquired entities are included in the consolidated income statement from the date
on which effective control is obtained. The identifiable assets, liabilities and contingent liabilities of the entity being acquired
that meet the conditions for recognition are recognized at their fair values of the date of acquisition.
Identifiable intangible assets are capitalized at fair value as at the date of acquisition. The useful lives of these intangible
assets are assessed and amortization is charged on a straight-line basis, with the expense taken to the income statement
within sales and marketing expense (in respect of customer relationships) and research and development expense (in
respect of IPR and technology). Intangible assets are tested for impairment when a trigger event occurs. Useful lives are
also examined on an annual basis and adjustments, where applicable, are made on a prospective basis.
Goodwill
Goodwill arising on the acquisition of a subsidiary represents the excess of the cost of acquisition over the group’s interest
in the net fair value of the identifiable assets, liabilities and contingent liabilities of the subsidiary at the date of acquisition.
Goodwill is initially recognized at cost and is subsequently measured at cost less any accumulated impairment losses.
For the purposes of impairment testing, goodwill is allocated to those cash-generating units of the group expected to benefit
from the synergies of the business combination. Cash-generating units to which goodwill has been allocated are tested
for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable
amount of the cash-generating unit is less than the carrying value of the unit, the impairment loss is allocated firstly to
reduce the carrying cost of any goodwill allocated to the unit and then to any other assets of the unit pro rata to the carrying
value of each asset of the unit. An impairment loss recognized for goodwill is not reversed in a subsequent period.
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 licenses are recognized once no significant obligations remain owing to the customer in connection with
such license sale. Such significant obligations could include giving a customer a right to return the software product without
any preconditions, or if the group is unable to deliver a material element of the software product by the balance sheet date.
Revenues relating to maintenance, hosting and post-contract support agreements are deferred and recognized over the
period of the agreements.
Revenues from implementation and consultancy services are recognized as the services are performed, or in the case of
fixed price or milestone-based projects, 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 recognized 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 the income statement.
3 0
NOTES TO THE FINANCIAL STATEMENTS
3 1
Rentals payable under operating leases are charged to the income statement on a straight-line basis over the term of the
relevant lease.
Interest on Borrowings
All interest on borrowings is recognized in the income statement in the period in which it is incurred.
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.
Foreign Currencies
The individual financial statements of each group entity are presented in the currency of the primary economic
environment in which the entity operates (its functional currency). In preparing the financial statements of the individual
entities, transactions in currencies other than the entity’s functional currency (foreign currencies) are recorded at rates
approximating to the transaction rates. At each balance sheet date, monetary items denominated in foreign currencies
are retranslated at the rates prevailing on the balance sheet date. Exchange differences arising on the settlement of
monetary items, and on the retranslation of monetary items, are included in the income statement for the period.
For the purpose of presenting consolidated financial statements, the assets and liabilities of the group’s foreign
operations are expressed in US Dollars 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 where there is no intention that these should be settled) are
classified as equity and transferred to the group’s translation reserve.
On disposal of a foreign operation the cumulative exchange differences recognized in the foreign exchange reserve
relating to that operation up to the date of disposal are transferred to the income statement as part of the profit or loss on
disposal.
Deferred Tax
Deferred tax is recognized 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 recognized for all taxable temporary differences, but
deferred tax assets are recognized only to the extent that it is probable that taxable profits will be available against which
deductible temporary differences can be utilized.
Deferred tax is calculated at tax rates that have been enacted or substantively enacted at the balance sheet date, and
that are expected to apply in the period when the liability is settled or the asset realized. 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.
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 recognized in the income statement.
The following rates are used for the depreciation of property, plant and equipment:
Computer equipment
Furniture and fittings
20-33 percent on a straight-line basis
20-25 percent on a straight-line basis
3 0
NOTES TO THE FINANCIAL STATEMENTS
3 1
Investments
Investments in subsidiaries within the company balance sheet are stated at cost less impairment. Impairment tests are
undertaken whenever events or changes in circumstances indicate that their carrying amount may not be recoverable.
Where the carrying value of an investment exceeds its recoverable amount, the investment is written down accordingly.
Internally Generated Intangible Assets (Research and Development Expenditure)
Development expenditure on internally developed software products is capitalized 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.
Development costs not satisfying the above criteria and expenditure on the research phase of internal projects are
recognized in the income statement as incurred. Capitalization of a particular activity commences after proof of concept,
requirements and functional concept stages are complete.
Capitalized development costs are amortized over the period over which the group expects to benefit from selling the product
developed. This has been estimated to be four years from the date of code-finalization of the applicable software release.
The amortization expense in respect of internally generated intangible assets is included in research and development costs.
Impairment of Tangible and Intangible Assets (Excluding Goodwill)
At each balance sheet date, the group reviews the carrying amounts of its tangible and intangible assets to determine
whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not
possible to estimate the recoverable amount of an individual asset, the group estimates the recoverable amount of the cash-
generating unit to which the asset belongs.
Recoverable amount is the higher of the fair value less costs to sell and value in use. In assessing the value in use, the
estimated future cash flows are discounted to their net present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset.
If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying
amount of the asset or cash-generating unit is reduced to its recoverable amount. An impairment loss is recognized
immediately in the administrative expenses line item in the income statement.
Where an impairment loss subsequently reverses, the carrying value of the asset or cash-generating unit is increased to
the revised recoverable amount, but so that the increased carrying amount does not exceed the carrying amount which
would have been determined had no impairment loss been recognized in prior years. A reversal of an impairment loss is
recognized immediately in profit or loss.
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.
As set out in Note 24, the group has also issued warrants to certain financing institutions which are also treated as equity-
settled share-based payments.
3 2
NOTES TO THE FINANCIAL STATEMENTS
3 3
Significant Accounting Estimates and Judgments
Management is required to make judgments, estimates and assumptions about the carrying amounts of assets and
liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based
on historical experience and other factors that are considered to be relevant. Estimates and judgments adopted for
property plant and equipment, externally acquired intangible assets and internally generated intangible assets are
dealt with in the accounting policy notes set forth above that relate to these areas. Actual results may differ from these
estimates, and accordingly they are reviewed on an ongoing basis. Revisions to accounting estimates are recognized
in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and
future periods if the revision affects both current and future periods.
Financial Instruments
1. Financial Assets
The group’s financial assets fall into the category of loans and receivables. The group does not have any financial
assets in the categories of fair value through profit and loss or available for sale. The group has not classified any of
its financial assets as held to maturity.
Unless otherwise indicated, the carrying values of the group’s financial assets are a reasonable approximation of their
fair values.
Loans and Receivables
These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market. They arise principally through the provision of goods and services (e.g. trade receivables) but also include
cash and cash equivalents and other types of contractual monetary asset. They are initially recognized at fair value
plus transaction costs that are directly attributable to the acquisition or issue and subsequently carried at amortized
cost using the effective interest rate method, less provision for impairment. The effect of discounting on these financial
instruments is not considered material.
Impairment provisions are recognized when there is objective evidence (such as significant financial difficulties, default
or significant delay in payment on the part of the counter-party) that the group will be unable to collect all the amounts
due under the terms of the receivable, the amount of such provision being the difference between the net carrying
amount and the present value of the future expected cash flows associated with the receivable. For trade receivables,
such provisions are recorded in a separate allowance account with the loss being recognized within administrative
expenses in the income statement. On confirmation that the trade receivable will not be collectable, the gross carrying
value of the asset is written off against the associated provision.
2. Financial Liabilities
The group classifies its financial liabilities in the category of financial liabilities at amortized cost.
Financial liabilities measured at amortized cost include:
• Trade payables and other short-dated monetary liabilities, which are initially recognized at fair value and
subsequently carried at amortized cost using the effective interest rate method.
• Bank and other borrowings (including the host debt element of the convertible loan noted above), which are initially
recognized at fair value net of any transaction costs directly attributable to the acquisition of the instrument. Such
interest-bearing liabilities are subsequently measured at amortized cost using the effective interest rate method,
which ensures that the interest expense over the period to repayment is at a constant rate on the balance of
the liability carried in the balance sheet. Interest expense in this context includes initial transaction costs and
premiums payable on redemption, as well as any interest payable while the liability is outstanding.
Unless otherwise indicated, the carrying values of the group’s financial liabilities measured at amortized cost represent
a reasonable approximation of their fair values.
3 2
NOTES TO THE FINANCIAL STATEMENTS
3 3
3. Convertible Loan Stock
The host debt element of convertible loan stock is treated as a financial liability measured at amortized cost as further
described above. The equity component of convertible loan stock arising on issue is reclassified from debt to capital
reserves.
4. Share Capital
Financial instruments issued by the group are treated as equity only to the extent that they do not meet the definition
of a financial liability. The group’s ordinary shares are classified as equity. For the purpose of the disclosures given in
Note 23 the group considers its capital to comprise its ordinary share capital, special reserve and equity reserve less its
accumulated retained loss.
3 . S E G M E N TA L A N A LY S I S
All of the group’s revenue in respect of the years ended 31 December 2014 and 2013 was derived from the design,
development and marketing of software products with associated implementation and consultancy services, as more
particularly described in the Strategic and Financial Reports. For management purposes, the group is organized
geographically across two principal operating segments, which can be expressed geographically. The first segment is
North America, and the second Europe. Information relating to these two segments is given below.
The information in the following table relating to external revenues includes analysis both by location of customer and
by location of operations. The information relating to other items provides analysis by location of operations only.
Inter-segment revenues are priced on an arm’s length basis.
Year ended 31 December 2014
Income Statement
External revenues – by location of operations
Operating profit/(loss) before interest and tax
Finance income
Finance expense
Profit/(loss) before tax
Depreciation and amortization
EBITDA
Balance Sheet
Fixed asset additions
Capitalization of internally generated development costs
Total assets
Total liabilities
Year ended 31 December 2013
Income Statement
External revenues – by location of operations
Operating profit/(loss) before interest and tax
Finance income
Finance expense
Profit/(loss) before tax
Depreciation, amortization and impairment charges
EBITDA
Balance Sheet
Fixed asset additions
Capitalization of internally generated development costs
Total assets
Total liabilities
North
America
$’000
Europe
$’000
Total
$’000
12,544
424
-
(95)
329
(2,239)
2,664
––––––––
132
2,367
13,766
(8,088)
––––––––
––––––––
North
America
$’000
5,752
(1,526)
12
(334)
(1,848)
(64)
(1,463)
––––––––
44
-
3,897
(5,332)
––––––––
––––––––
18,296
(1,102)
12
(429)
(1,519)
(2,303)
1,201
––––––––
176
2,367
17,663
(13,420)
––––––––
––––––––
Europe
$’000
Total
$’000
13,984
1,137
-
(182)
953
(2,091)
3,155
––––––––
6,857
(184)
27
(263)
(419)
(58)
(126)
––––––––
20,841
953
27
(445)
534
(2,149)
3,029
––––––––
131
1,788
13,289
(7,148)
––––––––
––––––––
96
-
5,747
(6,087)
––––––––
––––––––
227
1,788
19,036
(13,235)
––––––––
––––––––
3 4
NOTES TO THE FINANCIAL STATEMENTS
3 5
One customer accounted for approximately 10 percent of the group’s revenues in 2014. A different customer
accounted for approximately 8 percent or more of the group’s revenue in 2013. In 2014 the customer was within the
North America segment based on location of operations (2013: Europe segment).
External revenues in 2014 exclude inter-segmental revenues which amounted to $1,696,000 (2013: $2,148,000) for
North America and $370,000 (2013: $349,000) for Europe.
Revenues attributable to customers in North America in 2014 amounted to $11,433,000 (2013: $12,507,000). Revenue
attributable to customers in the rest of the world amounted to $6,863,000 (2013: $8,335,000) of which $5,775,000
(2013: $6,754,000) was attributable to customers in Europe.
4 . E B I T D A A N D R E V E N U E V I S I B I L I T Y
EBITDA
The directors consider that EBITDA, which is defined as earnings before interest, tax, depreciation and amortization, is
an important measure, since it is widely used by the investment community. It is calculated as follows:
(Loss)/profit for the year after tax
Interest payable
Interest receivable
Amortization of intangible assets
Depreciation of property, plant and equipment
Income tax expense
EBITDA
Revenue Visibility
2014
$’000
2013
$’000
(1,519)
534
429
(12)
2,076
227
-
––––––––
1,201
––––––––
––––––––
445
(27)
1,851
226
-
––––––––
3,029
––––––––
––––––––
Another performance indicator used by the group and referred to in narrative descriptions of the group’s performance
is revenue visibility. At any point in time it comprises revenue expected from (i) closed license orders, including those
which are contracted but conditional on acceptance decisions scheduled later in the year; (ii) contracted services
business delivered or expected to be delivered in the year; and (iii) recurring maintenance, hosting and rental
streams. The visibility calculation does not include revenues from new sales opportunities expected to close during the
remainder of the year.
5 . P R O F I T F O R T H E Y E A R
The profit for the year has been arrived at after charging/(crediting):
Continuing Operations
Net foreign exchange losses/(gains)
Research and development costs (excluding amortization)
Amortization of intangible assets
Impairment of intangible assets
Depreciation of property, plant and equipment
Operating lease rentals – land and buildings
Operating lease rentals – other
2014
$’000
2013
$’000
42
2,367
2,076
-
227
587
120
––––––––
––––––––
(106)
2,972
1,851
72
226
497
118
––––––––
––––––––
Net foreign exchange gains or losses arise on the translation of cash and trade balances held in currencies other than
the functional currency of the entity concerned and are accordingly included in administration expense.
3 4
NOTES TO THE FINANCIAL STATEMENTS
3 5
6 . A U D I T O R S ’ R E M U N E R AT I O N
During the year the group obtained the following services from its auditors and associated firms. Fees for the audit
of the parent, pursuant to legislation, are not segregated from those for the group and are included in the amounts
disclosed.
Audit of the financial statements of the group
Audit of the financial statements of the UK subsidiary
Review of interim financial information
Audit of US pension plan
Tax services
7 . S TA F F C O S T S
Wages and salaries
Social security costs
Pension contributions
Employee benefits expense
2014
$’000
2013
$’000
84
7
16
-
15
––––––––
––––––––
76
7
16
8
22
––––––––
––––––––
2014
$’000
2013
$’000
11,390
1,019
234
951
–––––––
13,594
––––––––
––––––––
11,700
1,064
243
808
–––––––
13,815
––––––––
––––––––
Included within the above are staff costs capitalized as development expenditure amounting to $2,367,000
(2013: $1,788,000). Included within wages and salaries are bonus and sales commission costs amounting to $455,000
(2013: $945,000).
The average monthly number of employees during the year was made up as follows:
Development and operations
Sales and management
2014
Number
2013
Number
79
35
–––––––
114
––––––––
––––––––
78
36
–––––––
114
––––––––
––––––––
The above staff costs and the numbers of employees during the year include the executive directors.
The remuneration of all directors was as follows:
Fees and emoluments
Pension contributions
2014
$’000
2013
$’000
836
21
––––––––
857
––––––––
––––––––
856
22
––––––––
878
––––––––
––––––––
No director exercised share options during the year (2013: None). Pension contributions are to personal defined
contribution schemes and have been made for three directors (2013: three) who served during the year.
Full details of directors’ remuneration are disclosed in the Report on Directors’ Remuneration on page 15.
3 6
NOTES TO THE FINANCIAL STATEMENTS
3 7
8 . F I N A N C E I N C O M E
Income on financial assets measured at amortized cost
Interest income on bank deposits
9 . F I N A N C E E X P E N S E
Interest expense on financial liabilities measured at amortized cost Interest on borrowings
1 0 . I N C O M E TA X E X P E N S E
Income tax expense for the year – current tax
The charge for the year can be reconciled to the accounting (loss)/profit as follows:
(Loss)/profit before tax
2014
$’000
2013
$’000
12
––––––––
––––––––
27
––––––––
––––––––
2014
$’000
(429)
––––––––
––––––––
2013
$’000
(445)
––––––––
––––––––
2014
$’000
2013
$’000
-
––––––––
––––––––
-
––––––––
––––––––
2014
$’000
2013
$’000
(1,519)
––––––––
––––––––
534
––––––––
––––––––
Tax credit/(charge) at the UK corporation tax rate of 21.5% (2013: 23.25%)
Adjustment for differing rates of corporate taxation in overseas jurisdictions
Tax effect of expenses that are not deductible in determining taxable losses
Temporary differences arising from the capitalization and transfer of development investments
Losses for the year not relievable against current tax
Utilization of prior year losses
Income tax expense for the year
There is no tax arising on other comprehensive income.
327
143
(91)
280
(659)
-
––––––––
-
––––––––
––––––––
(124)
(96)
(115)
249
-
86
––––––––
-
––––––––
––––––––
The group has an unrecognized deferred tax asset arising from its unrelieved trading losses, which has not been
recognized owing to uncertainty as to the level and timing of taxable profits in the future. The unrecognized deferred
tax asset is made up as follows:
Shortfall of tax depreciation compared to book depreciation
Effect of timing differences arising from capitalization
of internally generated development costs
Unrelieved trading losses
Unrecognized deferred tax asset
2014
$’000
2013
$’000
194
225
(1,704)
21,307
––––––––
19,797
––––––––
––––––––
(1,602)
21,569
––––––––
20,192
––––––––
––––––––
At 31 December 2014, tax losses estimated at $73m were available to carry forward by the Sopheon group, arising
from historic losses incurred. These losses represent a potential deferred tax asset of $21.3m, based on the tax rates
currently applicable in the relevant tax jurisdictions.
Of these tax losses, an aggregate amount of $11.7m (representing $4.1m of the potential deferred tax asset) represents
pre-acquisition tax losses of Sopheon Corporation (Minnesota) and Alignent Software, Inc. The future utilization of
these losses may be restricted under Section 382 of the US Internal Revenue Code, whereby the ability to utilize net
operating losses arising prior to a change of ownership is limited to a percentage of the entity value of the corporation
at the date of change of ownership.
3 6
NOTES TO THE FINANCIAL STATEMENTS
3 7
11 . P R O F I T D E A LT W I T H I N T H E F I N A N C I A L S TAT E M E N T S O F T H E
PA R E N T C O M PA N Y
The profit dealt with in the financial statements of the parent company for the year ended 31 December 2014 was
$488,000 (2013: loss of $2,105,000). Advantage has been taken of Section 408 of the Companies Act 2006 not to
present an income statement for the parent company.
1 2 . ( L O S S ) / E A R N I N G S P E R S H A R E
Profit after tax
Weighted average number of ordinary shares for the purpose of basic earnings per share
2014
$’000
2013
$’000
(1,519)
––––––––
––––––––
534
––––––––
––––––––
’000s
7,279
––––––––
––––––––
’000s
7,279
––––––––
––––––––
The profit attributable to ordinary shareholders and the weighted average number of ordinary shares for the purpose of
calculating the diluted earnings per ordinary share are the same as those used for calculating the basic earnings per
ordinary share in both 2014 and 2013. This is (i) because the exercise of conversion rights attaching to the convertible
loan stock (details of which are set out in Note 20), would have the effect of reducing the loss per share or increasing
earnings per ordinary share (by virtue of the saving of loan stock interest, which would otherwise be payable) and are
therefore not dilutive; and (ii) because the warrants to subscribe for 25,138 ordinary shares and the 636,190 share
options to subscribe for ordinary shares (details of which are set out in Notes 23 and 27), have a strike price above the
average market price for the year.
1 3 . P R O P E R T Y, P L A N T A N D E Q U I P M E N T
Group
Cost
At 1 January 2013
Additions
Exchange differences
At 1 January 2014
Additions
Exchange differences
At 31 December 2014
Accumulated Depreciation
At 1 January 2013
Depreciation charge for the year
Exchange differences
At 1 January 2014
Depreciation charge for the year
Exchange differences
At 31 December 2014
Carrying Amount
At 31 December 2014
At 31 December 2013
Company
The company has no property, plant and equipment.
Computer
Equipment
$’000
Furniture
& Fittings
$’000
1,455
166
7
––––––––
1,628
168
(20)
––––––––
1,776
––––––––
1,190
191
3
––––––––
1,384
195
(15)
––––––––
1,564
––––––––
302
61
5
––––––––
368
8
(10)
––––––––
366
––––––––
249
35
2
––––––––
286
32
(5)
––––––––
313
––––––––
Total
$’000
1,757
227
12
––––––––
1,996
176
(30)
––––––––
2,142
––––––––
1,439
226
5
––––––––
1,670
227
(20)
––––––––
1,877
––––––––
212
––––––––
––––––––
244
––––––––
––––––––
53
––––––––
––––––––
82
––––––––
––––––––
265
––––––––
––––––––
326
––––––––
––––––––
3 8
NOTES TO THE FINANCIAL STATEMENTS
3 9
1 4 . I N TA N G I B L E A S S E T S
Development
Costs
(Internally Technology
Generated)
$’000
Customer
and IPR Relationships
$’000
$’000
Goodwill
$’000
Total
$’000
Cost
At 1 January 2013
Additions (internally generated)
Acquisition in 2013
At 1 January 2014
Additions (internally generated)
Amounts written off
At 31 December 2014
Amortization
At 1 January 2013
Charge for the year
At 1 January 2014
Charge for the year
Amounts written off
At 31 December 2014
Accumulated Impairment Losses
At 1 January 2013
Impairment losses in year
At 1 January 2014
Amounts written off
At 31 December 2014
Carrying Amount
At 31 December 2014
At 31 December 2013
1,394
13,500
-
1,788
-
-
–––––––– ––––––––
1,394
-
(1,394)
15,288
2,367
-
–––––––– ––––––––
-
–––––––– ––––––––
17,655
8,908
1,804
975
-
–––––––– ––––––––
975
-
(975)
10,712
2,076
-
–––––––– ––––––––
-
–––––––– ––––––––
12,788
419
-
-
-
–––––––– ––––––––
419
-
(419)
-
–––––––– ––––––––
-
–––––––– ––––––––
-
4,867
-
–––––––– ––––––––
–––––––– ––––––––
-
–––––––– ––––––––
–––––––– ––––––––
4,576
2,614
-
-
––––––––
2,614
-
(2,614)
––––––––
-
––––––––
1,371
47
––––––––
1,418
-
(1,418)
––––––––
-
––––––––
1,124
72
––––––––
1,196
(1,196)
––––––––
-
––––––––
983
-
39
––––––––
1,022
-
-
––––––––
1,022
––––––––
-
-
––––––––
-
-
-
––––––––
-
––––––––
-
-
––––––––
-
-
––––––––
-
––––––––
18,491
1,788
39
––––––––
20,318
2,367
(4,008)
––––––––
18,677
––––––––
11,254
1,851
––––––––
13,105
2,076
(2,393)
––––––––
12,788
––––––––
1,543
72
––––––––
1,615
(1,615)
––––––––
-
––––––––
-
––––––––
––––––––
-
––––––––
––––––––
1,022
––––––––
––––––––
1,022
––––––––
––––––––
5,889
––––––––
––––––––
5,598
––––––––
––––––––
The amortization period for the internally generated development costs relating to the group’s software products is four
years. The amortization periods for (a) technology & IPR and (b) customer relationships, arising from the acquisition of
Alignent Software, Inc. in June 2007, were four years and eight years respectively, and have now been written off in full.
Goodwill is not amortized. The residual goodwill arising on the acquisition of Alignent is attributable to the enhanced
market position of each of the group’s operating segments, due to the completeness of the solution that Sopheon can
offer the market. The recoverable amount of the goodwill can be underpinned on a value in use basis by the expected
performance of the group’s operating segments, each of which is treated as a separate cash generating unit. Goodwill
primarily relates to the North American operating segment.
The valuation used for this purpose is based on cash-flow projections for the next five years, and thereafter for an
indefinite period at a growth assumption of 3 percent. The discount rate used was 14.6 percent. Sensitivity analysis
performed on these projections demonstrates significant valuation headroom above the carrying value of goodwill. The
same discount and growth rates were used for the valuation conducted in respect of 2013.
Company
The company has no intangible assets.
3 8
NOTES TO THE FINANCIAL STATEMENTS
3 9
1 5 . I N V E S T M E N T I N S U B S I D I A R I E S
At 31 December 2012 and at 31 December 2013
At cost less amounts provided
At 31 December 2013
Exchange difference
At 31 December 2014
Company
$’000
10,113
(562)
––––––––
9,551
––––––––
––––––––
Details of the company’s subsidiaries at 31 December 2014 are set out below. Companies marked with an asterisk (*)
are held via Sopheon UK Ltd and those with an obelus (†) are held via Orbital Software Holdings plc. The common
stock of Alignent Software, Inc. and Sopheon Corporation, Minnesota, USA are held by Sopheon Corporation, Delaware,
USA. The share capital of Sopheon Corporation, Delaware, USA and Sopheon GmbH are held by Sopheon NV.
Name of Company
Place of Incorporation
Sopheon Corporation
Minnesota, USA
Sopheon Corporation
Delaware, USA
Alignent Software, Inc.
California, USA
Sopheon NV
The Netherlands
Sopheon UK Ltd
United Kingdom
Sopheon GmbH
Germany
Orbital Software Holdings plc
United Kingdom
Orbital Software Inc.†
Delaware, USA
Sopheon Edinburgh Ltd†
United Kingdom
Orbital Software Europe Ltd†
United Kingdom
Network Managers (UK) Ltd*
United Kingdom
AppliedNet Ltd*
United Kingdom
Future Tense Ltd*
United Kingdom
Polydoc Ltd
United Kingdom
Nature of Ownership
Interest
Proportion of
Voting Rights Held
Nature of Business
Common Stock
100%
Software sales and services
Common Stock
100%
Software development and sales
Common Stock
100%
Software sales and services
Ordinary Shares
100%
Software sales and services
Ordinary Shares
100%
Software sales and services
Ordinary Shares
100%
Software sales and services
Ordinary Shares
100%
Holding company
Common Stock
100%
Dormant
Ordinary Shares
100%
Dormant
Ordinary Shares
100%
Dormant
Ordinary Shares
100%
Dormant
Ordinary Shares
100%
Dormant
Ordinary Shares
100%
Dormant
Ordinary Shares
100%
Dormant
Applied Network Technology Ltd*
United Kingdom
Ordinary Shares
100%
Employee Share Ownership
Trust
4 0
NOTES TO THE FINANCIAL STATEMENTS
4 1
1 6 . O T H E R R E C E I VA B L E
Other receivable
Group
Company
2014
$’000
2013
$’000
2014
$’000
2013
$’000
19
––––––––
––––––––
19
––––––––
––––––––
-
––––––––
––––––––
-
––––––––
––––––––
The other receivable represents a deposit paid in respect of a property leased by the group.
1 7 . T R A D E A N D O T H E R R E C E I VA B L E S
Trade receivables
Other receivables
Total receivables
Prepayments
Accrued income
Group
Company
2014
$’000
2013
$’000
2014
$’000
2013
$’000
6,072
9
––––––––
6,081
545
129
––––––––
6,755
––––––––
––––––––
7,962
21
––––––––
7,983
572
511
––––––––
9,066
––––––––
––––––––
-
-
––––––––
-
52
-
––––––––
52
––––––––
––––––––
-
2
––––––––
2
-
-
––––––––
2
––––––––
––––––––
Trade and other receivables are stated net of allowances totaling $Nil (2013: $Nil) for estimated irrecoverable amounts.
The directors consider that the carrying amount of trade and other receivables approximates to their fair value.
A full provision has been made against amounts totaling $62,870,000 (2013: $67,565,000) owed to the company by
subsidiary undertakings, which are due after more than one year and are subordinated to the claims of all other creditors.
1 8 . C A S H A N D S H O R T- T E R M B A N K D E P O S I T S
Cash at bank
Short-term bank deposits
Group
Company
2014
$’000
2013
$’000
2014
$’000
2013
$’000
3,944
791
––––––––
4,735
––––––––
––––––––
2,592
1,435
––––––––
4,027
––––––––
––––––––
789
-
––––––––
789
––––––––
––––––––
479
-
––––––––
479
––––––––
––––––––
Cash and short-term bank deposits comprise cash held by the group, bank current accounts and short-term bank deposit
accounts with maturities of three months or less and bearing interest at variable rates. The carrying amount of these
assets represents a reasonable approximation to their fair value.
Included in cash at bank of the group is an amount of $38,000 (2013: $40,000) held by the group’s employee share
ownership trust.
4 0
NOTES TO THE FINANCIAL STATEMENTS
4 1
1 9 . T R A D E A N D O T H E R PAYA B L E S
Trade payables
Other payables
Tax and social security costs
Accruals
Group
Company
2014
$’000
2013
$’000
2014
$’000
2013
$’000
833
246
336
1,427
––––––––
2,842
––––––––
––––––––
909
255
342
1,997
––––––––
3,503
––––––––
––––––––
74
160
-
258
––––––––
492
––––––––
––––––––
83
169
-
376
––––––––
628
––––––––
––––––––
Trade payables principally comprise amounts outstanding for trade purchases and ongoing costs.
The directors consider that the carrying amounts of trade and other payables represent a reasonable approximation to
their fair values.
2 0 . B O R R O W I N G S
Current Loans and Borrowings
Line of credit
Loan notes (current portion)
Total current loans and borrowings
Non-current Loans and Borrowings
Loan notes (non-current portion)
8% convertible loan stock 2017
Total non-current loans and borrowings
Total loans and borrowings
a) Line of Credit and Loan Notes
Group
Company
2014
$’000
2013
$’000
2014
$’000
2013
$’000
1,979
145
––––––––
2,124
1,250
263
––––––––
1,513
-
-
––––––––
-
-
-
––––––––
-
168
3,120
––––––––
3,288
––––––––
5,412
––––––––
––––––––
-
3,270
––––––––
3,270
––––––––
4,783
––––––––
––––––––
-
3,120
––––––––
3,120
––––––––
3,120
––––––––
––––––––
-
3,270
––––––––
3,270
––––––––
3,270
––––––––
––––––––
In February 2014 the group established new credit facilities with Silicon Valley bank. The facilities comprise a $3m
revolving line of credit and a term loan of $0.5m repayable in 36 equal installments. Both facilities bear interest at rates
of 2.75 percent above the Bank’s Prime Rate, resulting in a current effective rate of 6 percent. The facilities are subject
to covenants based on operating results, and in addition the drawdown mechanics and interest rates are subject to
certain working capital ratios.
The directors consider that the carrying amounts for loan notes, and the line of credit, represent a reasonable
approximation of the financial instruments’ fair values.
4 2
NOTES TO THE FINANCIAL STATEMENTS
4 3
b) 8 Percent Convertible Loan Stock 2017
The convertible loan stock is denominated in Sterling and bears interest at a fixed rate of 8 percent per annum. The
loan stock was issued at par in a nominal amount of £850,000 on 1 October 2009. On 23 August 2012 the company
made a further issue of loan stock in a nominal amount of £1,150,000. Following this issue, whereby the aggregate
liability at maturity of the loan stock increased from £850,000 to £2,000,000, the conversion price was 5p per ordinary
share.
As a result of the capital reorganization approved by shareholders on 12 June 2013, and the reduction of capital
which was confirmed by the Court on 20 November 2013, the conversion terms were amended in accordance with the
provisions of the loan stock, such that the loan stock was convertible into ordinary shares of 20p each of the company
at a rate of 100p per ordinary share.
On 2 June 2014 the company announced that it had reached agreement with the holders of the loan stock to extend
the maturity date of the loan stock to 31 January 2017 coupled with an amendment of the conversion price to 76.5p per
share, representing the closing market price of Sopheon shares immediately prior to such agreement.
Holders may convert the loan stock into Sopheon ordinary shares at any time up to the extended maturity date of
31 January 2017, and any loan stock not converted is to be repaid at par on that date.
2 1 . O P E R AT I N G L E A S E A R R A N G E M E N T S
At the balance sheet date the group had outstanding commitments under operating leases in respect of which the total
future minimum lease payments were due as follows:
Due within one year
Due after one year and within five years
Land &
Buildings
2014
$’000
583
1,116
––––––––
1,699
––––––––
––––––––
Other
2014
$’000
113
159
––––––––
272
––––––––
––––––––
Land &
Buildings
2013
$’000
537
394
––––––––
931
––––––––
––––––––
Other
2013
$’000
99
149
––––––––
248
––––––––
––––––––
The group leases its office accommodation in the US, UK and the Netherlands and has operating leases for office
equipment and vehicles.
Company
The company has no operating leases.
4 2
NOTES TO THE FINANCIAL STATEMENTS
4 3
2 2 . F I N A N C I A L I N S T R U M E N T S
Categories of Financial Assets and Liabilities
The following table sets out the categories of financial instruments held by the group. All of the group’s financial assets
are in the category of loans and receivables, and all of its financial liabilities are in the category of financial liabilities
measured at amortized cost.
1. Financial Assets
Current Financial Assets
Trade receivables
Other receivables
Accrued income
Cash and cash equivalents
Non-current Financial Assets
Other receivable
Group
Company
Notes
2014
$’000
2013
$’000
2014
$’000
2013
$’000
17
17
17
18
6,072
9
129
4,735
––––––––
10,945
––––––––
––––––––
7,962
21
511
4,027
––––––––
12,521
––––––––
––––––––
-
52
-
789
––––––––
841
––––––––
––––––––
-
2
-
479
––––––––
481
––––––––
––––––––
16
19
––––––––
––––––––
19
––––––––
––––––––
-
––––––––
––––––––
-
––––––––
––––––––
The group does not have any financial assets in any other categories.
2. Financial Liabilities
Current Financial Liabilities
Trade payables
Other payables
Accruals
Loans and borrowings
Non-current Financial Liabilities
Loans and borrowings
8% convertible loan stock 2015
Group
Company
Notes
2014
$’000
2013
$’000
2014
$’000
2013
$’000
19
19
19
20
20
20
833
246
1,427
2,124
––––––––
4,630
––––––––
168
3,120
––––––––
3,288
––––––––
7,918
––––––––
––––––––
909
255
1,997
1,513
––––––––
4,674
––––––––
-
3,270
––––––––
3,270
––––––––
7,944
––––––––
––––––––
74
160
258
-
––––––––
492
––––––––
-
3,120
––––––––
3,120
––––––––
3,612
––––––––
––––––––
83
169
376
-
––––––––
628
––––––––
-
3,270
––––––––
3,270
––––––––
3,898
––––––––
––––––––
As set out in Note 20 the carrying value of the convertible loan stock at the balance sheet date reflects a deduction for
the reclassification of the fair value of conversion rights into equity.
4 4
NOTES TO THE FINANCIAL STATEMENTS
4 5
Financial Instrument Risk Exposure and Management
The group is exposed to risks that arise from its use of financial instruments. This note describes the group’s
objectives, policies and processes for managing those risks and the methods used to measure them.
There have been no changes in the group’s exposure to financial instrument risks, its objectives, policies and
processes for managing those risks or the methods used to measure them from previous periods, unless otherwise
disclosed in this note.
Principal Financial Instruments
The principal financial instruments used by the group, from which financial instrument risk arises, are as follows:
• Trade and other receivables
• Cash and cash equivalents
• Trade and other payables
• Loan notes
• Bank line of credit
• Convertible loan stock
General Objectives, Policies and Processes
The board has overall responsibility for the determination of the group’s risk management objectives and policies and,
while retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that
ensure the effective implementation of the objectives and policies to the group’s finance function. The board receives
quarterly reports from the group finance director through which it reviews the effectiveness of the processes put in
place and the appropriateness of the objectives and policies it sets. The group’s risk management procedures are also
reviewed periodically by the audit committee.
The overall objective of the board is to set policies that seek to reduce risk as far as possible without unduly affecting
the group’s competitiveness and flexibility. Further details regarding these policies are set out below:
a) Credit Risk
Credit risk arises principally from the group’s trade receivables, other receivables and accrued income. It is the risk that
the counterparty fails to discharge its obligations in respect of the instrument.
The group’s software is principally marketed at major international corporations of good credit standing, and the group’s
historical bad debt experience is very low. Due to the potentially large size of certain individual sales, in a particular
year one customer can account for a substantial proportion of revenues recorded. However, such concentrations rarely
persist for multiple years and therefore the directors do not believe that the group is systematically exposed to credit
risk concentration in respect of particular customers. In 2014, the largest single customer accounted for 10 percent of
group revenues (2013:8 percent, different customer).
Credit risk also arises from cash and cash equivalents and deposits with banks and financial institutions. At the year
end the group was holding a proportion of its deposits and bank balances with each of Lloyds Banking Group plc,
Rabobank Amsterdam, and Silicon Valley Bank.
The group's customers are major international corporations of high credit standing and therefore the group does not
typically obtain credit ratings for individual customers. Nevertheless, current economic conditions have resulted in
such major corporations slowing down payments and this is reflected in the ageing profile of the group’s receivables.
However, impairment of trade receivables is very rare, and in the three years ending 31 December 2014 provisions or
write offs against customer receivables amounted in total to less than 0.5 percent of revenues. Such impairments do
not arise from credit defaults, but principally from disagreements with a very small number of former customers over
their responsibility for renewal fees for maintenance or hosting contracts. Sopheon's policy is to pursue collection of
such fees where invoiced, and to make provision against the applicable receivable if collection is uncertain.
4 4
NOTES TO THE FINANCIAL STATEMENTS
4 5
The following is an analysis of the group’s trade receivables identifying the totals of trade receivables which are current
and those which are past due but not impaired:
Total
$’000
Current
$’000
Past Due
+30 Days
$’000
Past Due
+60 Days
$’000
At 31 December 2014
At 31 December 2013
6,072
642
––––––––– ––––––––– –––––––––
––––––––– ––––––––– –––––––––
5,030
7,962
488
––––––––– ––––––––– –––––––––
––––––––– ––––––––– –––––––––
6,063
400
–––––––––
–––––––––
1,411
–––––––––
–––––––––
The following is an analysis of the group’s provisions against trade receivables, analyzed between the geographical
segments in which the group’s operations are located:
2014
$’000
Provision
$’000
Gross
Value
$’000
Carrying
Value
$’000
Gross
Value
2013
$’000
Provision
Trade receivables
North America
Europe
4,792
1,280
–––––––––
6,072
–––––––––
–––––––––
-
-
–––––––––
-
–––––––––
–––––––––
5,682
2,280
4,792
1,280
-
-
––––––––– ––––––––– –––––––––
-
––––––––– ––––––––– –––––––––
––––––––– ––––––––– –––––––––
7,962
6,072
$’000
Carrying
Value
5,682
2,280
–––––––––
7,962
–––––––––
–––––––––
The group records impairment losses on its trade receivables separately from the gross amounts receivable. No
impairment losses were recorded during 2014 or 2013. The main factors used in assessing the impairment of the
group’s trade receivables are the age of the balances and the circumstances of the individual customer.
The company provides in full for amounts due from subsidiaries. The company is exposed to credit risk in respect of
its cash and cash equivalents, which are held in the form of current and deposit accounts with leading UK, US and
European banking institutions.
b) Liquidity Risk
Liquidity risk arises from the group’s management of working capital, and more particularly its ability to be consistently
cash generative after finance charges and principal repayments on its debt instruments. It is the risk that the group will
encounter difficulties in meeting its financial obligations as they fall due.
The group’s policy is to maintain significant cash balances, short-term bank deposits and facilities with a view to having
sufficient cash to meet its liabilities when they become due. The board annually approves budgets including cash flow
projections for each of the operating companies within the group and receives regular information as to cash balances
held and progress against budget. Attention is particularly drawn to the detailed discussion of the factors which enable
the group to continue as a going concern for the foreseeable future in the section headed “Going Concern” in Note 2 to
the financial statements.
The following table sets out an analysis of the contractual maturity of the group’s and the company’s financial liabilities
that must be settled gross, based on exchange rates prevailing at the relevant balance sheet date.
4 6
NOTES TO THE FINANCIAL STATEMENTS
4 7
Group
At 31 December 2014
Trade and other payables
Line of credit
Loan notes
Future interest – loan notes
Convertible loan stock
Future interest – convertible loan stock
Total financial liabilities
At 31 December 2013
Trade and other payables
Line of credit
Loan notes
Future interest – loan notes
Convertible loan stock
Future interest – convertible loan stock
Total financial liabilities
Company
At 31 December 2014
Trade and other payables
Convertible loan stock
Future interest – convertible loan stock
Total financial liabilities
At 31 December 2013
Trade and other payables
Convertible loan stock
Future interest – convertible loan stock
Total financial liabilities
On Demand
or Within
Six Months
$’000
2,842
1,979
83
10
-
125
–––––––––
5,039
–––––––––
–––––––––
On Demand
or Within
Six Months
$’000
3,503
1,250
263
7
-
132
–––––––––
5,155
–––––––––
–––––––––
On Demand
or Within
Six Months
$’000
492
-
125
–––––––––
617
–––––––––
–––––––––
On Demand
or Within
Six Months
$’000
628
-
132
–––––––––
760
–––––––––
–––––––––
Within
One Year
$’000
Within
Two Years
$’000
Within
Five Years
$’000
-
-
83
7
-
125
-
-
167
7
3,120
250
-
-
28
-
-
21
––––––––– ––––––––– –––––––––
49
––––––––– ––––––––– –––––––––
––––––––– ––––––––– –––––––––
3,544
215
Within
One Year
$’000
Within
Two Years
$’000
Within
Five Years
$’000
-
-
-
-
-
132
-
-
-
-
3,306
23
-
-
-
-
-
-
––––––––– ––––––––– –––––––––
-
––––––––– ––––––––– –––––––––
––––––––– ––––––––– –––––––––
3,329
132
Within
One Year
$’000
Within
Two Years
$’000
Within
Five Years
$’000
-
-
125
-
3,120
250
-
-
21
––––––––– ––––––––– –––––––––
21
––––––––– ––––––––– –––––––––
––––––––– ––––––––– –––––––––
3,370
125
Within
One Year
$’000
Within
Two Years
$’000
Within
Five Years
$’000
-
-
132
-
3,306
23
-
-
-
––––––––– ––––––––– –––––––––
-
––––––––– ––––––––– –––––––––
––––––––– ––––––––– –––––––––
3,329
132
Total
$’000
2,842
1,979
361
24
3,120
521
–––––––––
8,847
–––––––––
–––––––––
Total
$’000
3,503
1,250
263
7
3,306
287
–––––––––
8,616
–––––––––
–––––––––
Total
$’000
492
3,120
521
–––––––––
4,133
–––––––––
–––––––––
Total
$’000
628
3,306
287
–––––––––
4,221
–––––––––
–––––––––
4 6
NOTES TO THE FINANCIAL STATEMENTS
4 7
c) Market Risk
Market risk arises from the group’s use of interest-bearing and foreign currency financial instruments. It is the risk that
the future cash flows of a financial instrument will fluctuate because of changes in interest rates (interest rate risk) or
foreign exchange rates (currency risk). The group does not have any financial instruments that are publicly traded
securities and is not exposed to other price risk associated with changes in the market prices of such securities.
d) Interest Rate Risk
The group’s fixed rate interest bearing liabilities consisted of the convertible loan stock with a nominal value of
£2,000,000, which bears a fixed interest rate of 8 percent. This liability does not give rise to interest rate risk. The
group also had a revolving line of credit and a term loan, on which $2,340,000 in aggregate was outstanding at
31 December 2014, and which bore interest at a margin of 2.75 percent above the Bank’s Prime Rate, currently
representing an effective rate of 6 percent. Should this rate have increased 1 percent the annualized effect would have
been to increase finance costs by $23,000.
The group invests its surplus cash in bank deposits denominated in US Dollars, Euros or Sterling, which bear interest
based on short-term money market rates, and in doing so exposes itself to fluctuations in money market interest rates.
The group’s surplus cash held in the form of bank deposits at 31 December 2014 was $791,000. During 2014 interest
rates on money market deposits averaged at or below 0.5 percent in respect of US Dollar, Euro and Sterling deposits.
The annualized effect of a movement of 0.5 percent in the average interest rate received on the group’s bank deposits
at the balance sheet date would result in an increase or decrease in the group’s and the company’s interest income of
$4,000.
The company had no interest bearing bank deposits at the balance sheet date.
e) Currency Risk
The following is an analysis of the group’s financial assets and liabilities, analyzed by the currency in which they are
denominated:
At 31 December 2014
Financial Assets
Receivables and accrued income
Cash and cash equivalents
Total financial assets
Financial Liabilities
Trade and other payables
Borrowings
Total financial liabilities
At 31 December 2013
Financial Assets
Receivables and accrued income
Cash and cash equivalents
Total financial assets
Financial Liabilities
Trade and other payables
Borrowings
Total financial liabilities
US Dollars
$’000
Sterling
$’000
Euro
$’000
Total
$’000
189
288
4,867
2,424
1,173
2,023
––––––––– ––––––––– –––––––––
3,196
––––––––– ––––––––– –––––––––
––––––––– ––––––––– –––––––––
7,291
477
1,384
2,340
403
3,120
719
-
––––––––– ––––––––– –––––––––
719
––––––––– ––––––––– –––––––––
––––––––– ––––––––– –––––––––
3,523
3,724
6,229
4,735
–––––––––
10,964
–––––––––
–––––––––
2,506
5,460
–––––––––
7,966
–––––––––
–––––––––
US Dollars
$’000
Sterling
$’000
Euro
$’000
Total
$’000
370
149
5,986
1,279
2,157
2,599
––––––––– ––––––––– –––––––––
4,756
––––––––– ––––––––– –––––––––
––––––––– ––––––––– –––––––––
7,265
519
1,655
1,513
569
3,306
937
-
––––––––– ––––––––– –––––––––
937
––––––––– ––––––––– –––––––––
––––––––– ––––––––– –––––––––
3,875
3,168
8,513
4,027
–––––––––
12,540
–––––––––
–––––––––
3,161
4,819
–––––––––
7,980
–––––––––
–––––––––
4 8
NOTES TO THE FINANCIAL STATEMENTS
4 9
The amount shown in respect of Sterling borrowings at 31 December 2014 represents the nominal value of the
instrument. As set out in Note 20 the carrying value of the instrument at the balance sheet date reflects a deduction for
the reclassification of the fair value of conversion rights into equity.
The group’s policy is, where possible, to allow group entities to settle liabilities denominated in the functional currency
with cash generated from their own operations in that currency. The group also maintains cash and bank deposits
in the currencies which are the functional currencies of its operating entities, which are the US Dollar, the Euro and
Sterling.
The group is exposed to currency risk in respect of foreign currency denominated bank deposits and bank loans.
Taking into account the fact that a large proportion of the group’s income and expenditure arise in US Dollars and, to a
lesser extent, in Euros, the group’s policy is not to seek to hedge such currency risk.
Foreign currency risk also arises where individual group entities enter into transactions denominated in currencies other
than their functional currency, with fluctuations in exchange rates giving rise to gains or losses in the income statement.
Where the foreign currency risk to the group is significant, consideration is given to hedging the risk through the forward
currency market and, while this would be an economic hedge of the cash-flow risk, the group does not employ hedge
accounting.
The following table shows the effects, all other things being equal, of changes to exchange rates on the group’s profit
after tax and on the exchange differences on retranslation of the assets and liabilities of foreign operations which is
recognized directly in equity. It illustrates the effects if the exchange rates for Sterling and the Euro against the US
Dollar had been higher or lower than those which actually applied during the year and at the year end.
2014
2013
2014
2013
Increase/
(Decrease)
in Profit
After Tax
$’000
Increase/
(Decrease)
in Profit
After Tax
$’000
Effect on
Exchange Differences
on Translation of
Assets and Liabilities
of Foreign Operations
$’000
$’000
Strengthening of Sterling in US Dollar terms by 10c
Weakening of Sterling in US Dollar terms by 10c
Strengthening of Euro in US Dollar terms by 10c
Weakening of Euro in US Dollar terms by 10c
(58)
55
31
(35)
(26)
30
89
(86)
(115)
122
77
(63)
–––––––––
–––––––––
––––––––– –––––––––
––––––––– –––––––––
(488)
488
121
(120)
–––––––––
–––––––––
The company holds certain assets, mainly bank deposits, and liabilities denominated in the functional currencies of its
principal operating subsidiaries, which are the US Dollar, the Euro and Sterling. The following table shows the effects,
all other things being equal, of changes to exchange rates at the year end on the profit after tax of the company. It is
based on the company’s assets and liabilities at the relevant balance sheet date.
2013
2014
Increase/(Decrease)
in Profit After Tax
$’000
$’000
Strengthening of Sterling in US Dollar terms by 10c
Weakening of Sterling in US Dollar terms by 10c
Strengthening of Euro in US Dollar terms by 10c
Weakening of Euro in US Dollar terms by 10c
(187) (220)
190 220
48
(48) (8)
––––––––– –––––––––
––––––––– –––––––––
8
f) Capital
The group considers its capital to comprise its share capital and its special reserve and equity reserve less the
accumulated retained losses. The group is not subject to any externally imposed capital requirements. In managing its
capital, the group’s primary objective is to support the development of the group’s activities through to the point where
they are cash generative on a sustained basis.
The group’s share capital is all equity capital and is summarized in Note 23.
4 8
NOTES TO THE FINANCIAL STATEMENTS
4 9
2 3 . S H A R E C A P I TA L
Issued and Fully Paid
Ordinary shares of 20 pence each
2014
Number
2014
$’000
2013
Number
2013
$’000
7,279,000
7,279,000
––––––––– ––––––––– –––––––––
––––––––– ––––––––– –––––––––
2,354
2,354
–––––––––
–––––––––
On 12 June 2013 shareholders approved a capital reorganization and reduction of capital, details of which are set out in the
Directors’ Report.
Throughout the year the company has had in issue one class of ordinary shares, which have at no time carried any right to
fixed income. As referred to in the Directors’ Report, on 10 October 2014 shareholders approved a share consolidation, on
the basis of one new ordinary share of £100 nominal value for every 500 ordinary shares of 20p each. On 18 December
2014 shareholders approved a share subdivision, whereby each ordinary share of £100 nominal value was subdivided into
500 ordinary shares of 20 pence each, thereby reversing the share consolidation.
At 31 December 2014 the company had outstanding 25,138 warrants to subscribe for ordinary shares of 20p each at a
price of 400p per share, which were issued in June 2007 to BlueCrest Capital Finance LLC in connection with the financing
of the acquisition of Alignent Software, Inc. The warrants have a 10 year life.
2 4 . C A P I TA L R E S E R V E S
Group
At 1 January 2013
Recognition of share-based payments
Lapsing or expiry of share options
Reduction of capital
Expenses of capital reorganization
At 1 January 2014
Recognition of share-based payments
Lapsing or expiry of share options
At 31 December 2014
Company
At 1 January 2013
Recognition of share-based payments
Lapsing or expiry of share options
Reduction of capital
Expenses of capital reorganization
At 1 January 2014
Recognition of share-based payments
Lapsing or expiry of share options
At 31 December 2014
Capital
Share Redemption
Reserve
$’000
Premium
$’000
Equity
Reserve
$’000
Special
Reserve
$’000
84,230
-
-
(84,230)
-
––––––––
-
-
-
––––––––
-
––––––––
––––––––
4,663
-
-
(4,663)
-
––––––––
-
-
-
––––––––
-
––––––––
––––––––
1,033
121
(729)
-
-
––––––––
425
158
(2)
––––––––
581
––––––––
––––––––
-
-
-
5,104
(31)
––––––––
5,073
-
-
––––––––
5,073
––––––––
––––––––
Capital
Share Redemption
Reserve
$’000
Premium
$’000
84,230
-
-
(84,230)
-
––––––––
-
-
-
––––––––
-
––––––––
––––––––
4,663
-
-
(4,663)
-
––––––––
-
-
-
––––––––
-
––––––––
––––––––
Equity
Reserve
$’000
Special
Reserve
$’000
1,033
121
(729)
-
-
––––––––
425
158
(2)
––––––––
581
––––––––
––––––––
-
-
-
5,104
(31)
––––––––
5,073
-
-
––––––––
5,073
––––––––
––––––––
Total
$’000
89,926
121
(729)
(83,789)
(31)
––––––––
5,498
158
(2)
––––––––
5,654
––––––––
––––––––
Total
$’000
89,926
121
(729)
(83,789)
(31)
––––––––
5,498
158
(2)
––––––––
5,654
––––––––
––––––––
5 0
NOTES TO THE FINANCIAL STATEMENTS
5 1
Share premium represents the premium arising on the issue of shares and its use is governed by the provisions of the
Companies Act 2006.
The capital redemption reserve is a non-distributable reserve arising from the cancellation in 2001 of deferred shares.
The equity reserve comprises the fair value of share-based payments to employees pursuant to the group’s share
option schemes, the fair value of warrants to subscribe for Sopheon shares issued to BlueCrest Capital Finance LLC,
and the equity component of the group’s 8 percent convertible loan stock 2017.
In addition, investment by the group’s employee share ownership trust (the “Esot”) in the company’s shares is deducted
from equity in the consolidated balance sheet as if they were treasury shares, by way of deduction from the equity
reserve. At 31 December 2014 and at 31 December 2013, the Esot held 7,000 ordinary shares of 20p each in the
company, which represents 0.1 percent of the company’s ordinary share capital. The equity reserve includes a
deduction of $17,000 (2013: $17,000) which represents the cost of the shares held by the Esot at 31 December 2014.
The purpose of the Esot is to facilitate the company’s policy of offering participation in the ownership of its shares
to employees for reward and incentive purposes. At 31 December 2014 and at 31 December 2013, no shares held
by the Esot were under option or had been gifted to any employees. Arrangements for the distribution of benefits to
employees will be made at the Esot’s discretion in such manner as the Esot considers appropriate. Administration
costs of the Esot are accounted for in the profit and loss account of the company as they are incurred.
On 20 November 2013 the Court confirmed the cancellation of the whole of the company’s share premium and capital
redemption reserves, as part of the capital reorganization approved by shareholders of the company on 12 June 2013.
The special reserve represents the net reserve arising from the cancellation the company’s 7,279,000 deferred
shares of 80p each referred to in Note 23, amounting to $9,415,000, the cancellation of share premium amounting to
$84,230,000 and of the capital redemption reserve amounting to $4,663,000, and after offsetting $93,204,000 against
accumulated losses. The special reserve is a non-distributable reserve which may be used, amongst other purposes as
approved by the court, for the same purposes as if it were a share premium reserve.
2 5 . R E T I R E M E N T B E N E F I T P L A N S
The group operates defined contribution retirement benefit plans which employees are entitled to join. The total
expense recognized in the income statement of $234,000 (2013: $243,000) represents contributions paid to such plans
at rates specified in the rules of the plans.
2 6 . R E L AT E D PA R T Y T R A N S A C T I O N S
Details of transactions between the group and related parties are disclosed below.
Compensation of Key Management Personnel
Details of directors’ remuneration are given in Note 7. The total remuneration of executive directors and members of
the group’s operating and executive management committees during the year was as follows:
Emoluments and benefits
Pension contributions
Share-based payments
2014
$’000
2013
$’000
1,898
47
119
–––––––
2,064
–––––––
–––––––
2,097
55
93
–––––––
2,245
–––––––
–––––––
5 0
NOTES TO THE FINANCIAL STATEMENTS
5 1
Transactions with Related Parties who are Subsidiaries of the Company
The following is a summary of the transactions of the company with its subsidiaries during the year:
Net amounts borrowed/(repaid) by subsidiaries by way of interest-free loans
Net management charges to subsidiaries
2014
$’000
2013
$’000
(1,025)
448
–––––––
1,356
482
–––––––
The amounts owed by subsidiary companies to the parent company at 31 December 2014 totaled $62,870,000
(2013: $67,565,000). A full provision has been made against these amounts, which are unsecured and are subordinated
to the claims of all other creditors.
During 2014 and 2013 the company granted share options to employees of subsidiary companies. Details of grants of
share options are disclosed in Note 27.
Other Related Party Transactions
There were no other related party transactions during the year under review or the previous year.
2 7 . S H A R E - B A S E D PAY M E N T S
Equity-settled Share Option Schemes
The group has a number of share option schemes for all employees. Options are exercisable at a price equal to the
market price on the date of grant. The normal vesting periods are as set out below.
Vesting
Sopheon plc (USA) stock option plan
Sopheon UK approved share option scheme
Sopheon UK unapproved share option scheme
Sopheon NV share option scheme
In three equal tranches between the first and third anniversary of grant
On third anniversary of grant
Immediate or as per USA plan
Immediate or as per USA plan
Following the capital reorganization which became effective on 12 June 2013, the terms of all share options outstanding
on that date were amended in accordance with the terms of the respective schemes.
NOTES TO THE FINANCIAL STATEMENTS
Details of the share options outstanding during the 2013 and 2014 are as follows:
Outstanding at 1 January 2013
Options granted in 2013 prior to capital reorganization
Options lapsed in 2013 prior to capital reorganization
Share options outstanding immediately prior to capital
reorganization becoming effective
Share options outstanding immediately following the capital
reorganization becoming effective
Share options granted in 2013 subsequent to capital reorganization
Options lapsed or cancelled in 2013 subsequent to capital reorganization
Outstanding at 31 December 2013
Options granted in 2014
Options lapsed in 2014
Outstanding at 31 December 2014
Exercisable at 31 December 2014
Exercisable at 31 December 2013
Number of
Share
Options
Weighted
Average
Exercise
Price
£
12,179,680
1,117,500
(1,128,300)
0.10
0.05
0.11
–––––––––
–––––––––
12,168,880
–––––––––
0.11
–––––––––
608,440
233,704
(231,204)
–––––––––
610,940
38,500
(13,500)
–––––––––
635,940
–––––––––
–––––––––
335,492
–––––––––
–––––––––
157,095
–––––––––
–––––––––
2.11
0.85
3.65
–––––––––
1.04
0.55
0.96
–––––––––
1.01
–––––––––
–––––––––
1.12
–––––––––
–––––––––
1.27
–––––––––
–––––––––
No share options were exercised during the year (2013: Nil). The options outstanding at the end of the year have a
weighted average contractual life of 8.1 years (2013: 9.0 years).
During the year share options were granted on 19 September 2014, when the exercise price of options granted was
55p and the estimated fair value was 32.6p.
During 2013 share options were granted on 18 April 2013 (prior to the capital reorganization referred to in Note 23),
when the exercise price of options granted was 5.25p and the estimated fair value was 3.11p and on 5 December 2013
(after the capital reorganization) when the exercise price of options granted was 85p and the estimated fair value was
50.33p.
The fair values for options granted are calculated using the binomial option-pricing model. The principal assumptions
used were:
Date of Grant
Share price at time of grant
Exercise price
Expected volatility
Risk-free rate
Expected dividend yield
September
2014
December
2013
April
2013
55p
55p
40%
5%
Nil
85p
85p
40%
5%
Nil
5.25p
5.25p
40%
5%
Nil
The expected contractual life of the options used was ten years. Expected volatility was determined by reference to the
historic volatility of the company’s share price in the period before the date of grant.
52 53
D I R E C T O R S
Barry Mence, Chairman. Barry Mence has served as executive chairman and as a director and substantial
shareholder of Sopheon since its inception in 1993 when he was one of the founding members. From
1976 to 1990, Barry was the major shareholder and group managing director of the Rendeck Group of
Companies, a software and services group based in the Netherlands.
Andrew Michuda, Chief Executive Officer. Andrew (Andy) Michuda was appointed chief executive officer
of Sopheon in 2000. From 1997 to 2000, he served as chief executive officer and an executive director of
Teltech Resource Network Corporation, which was acquired by Sopheon. Prior to joining Sopheon, Andy
held senior leadership positions at Control Data.
Arif Karimjee, ACA, Chief Financial Officer. Arif Karimjee joined Sopheon as chief financial officer in 2000.
Arif served as an auditor and consultant with Ernst & Young in the United Kingdom and Belgium from 1988
until joining Sopheon.
Stuart Silcock, FCA, Non-Executive Director. Stuart Silcock has served as a director of Sopheon since
its inception in 1993 when he was one of the founding members of the company. Since 1982 Stuart has
been a principal Partner in Lawford & Co chartered accountants. Stuart was a non-executive director of
Brown and Jackson plc for four years from 2001 and has held a number of other directorships in the United
Kingdom.
Bernard Al, Non-Executive Director. Bernard Al was appointed as director of Sopheon in 2001. He is a
former chief executive officer of Wolters Kluwer in the Netherlands and has a background in linguistics.
Bernard is also the non-executive chairman of CB-Logistics in the Netherlands and he has held a number
of other non-executive positions in international companies during the last ten years.
Daniel Metzger, Non-Executive Director. Dan Metzger was until 1998 Lawson Software’s EVP Marketing,
where he helped the company grow its revenues from $13m to $400m. Since then he has held similar
roles at Parametric Technologies, and also at auxilium and nQuire, subsequently sold to Parametric and
Siebel respectively. As a strategy consultant, Dan has helped numerous technology companies reach and
exceed their growth objectives. Dan is currently CEO of Oppsource Inc.
52 53