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This interview is a small excerpt from a comprehensive interview published in The Wall Street Transcript as part of the Technology Sector, available at (001-212-952-7433) or http://www.twst.com/sectors/techno.html

TWST: Let's start with an overview of Sopheon, including your products, services and core markets.

Mr. Michuda: Sopheon is a software and services company. We are global, with operations in North America, Europe and the Far East. Our flagship offering is a software and services system that provides decision support to improve the product development process. Our clients are primarily research and development-intensive companies within such vertical markets as specialty chemicals, paper, food and beverage, and medical devices, where large amounts of money are being spent to develop products that will generate future revenues and profits.

TWST: Could you talk about some of the newer software packages that have been introduced by Sopheon?

Mr. Michuda: In mid-2001 we introduced a major software application called 'Accolade'. This is the product development system I spoke of earlier. Last September, we released the 4.0 version of Accolade, including such high-value features as an Idea Management module that helps corporations capture ideas from their employees, clients and suppliers, assess and prioritize those ideas, and advance the most commercially promising into the product development process. This latest version of Accolade also introduced something we call 'Smart Docs', a capability that automatically reuses information to reduce the administrative burden associated with completing forms, documents and templates within a product development process. The software contains best practices and other types of pre-loaded content, including a 'knowledge network' that provides on-demand access to information research professionals, technical and business experts, and critical print information that can be applied to product and process decisions. Accolade also comes with a knowledge base that can predict whether a given product concept will succeed or fail with 84% accuracy. In essence, our solution gives cross-functional product development teams access to all of the internal and external, human and print information and knowledge sources that are needed to complete their work.

TWST: Could you describe the competitive landscape and how your products give you an advantage, how they distinguish you from others in the market?

Mr. Michuda: I would characterize our market as emerging, and we don't yet have any direct competitors in the traditional sense. But even though there are no products comparable to ours being sold today, we do run into competition in the form of home-grown solutions. We'll walk into a large corporation and they'll say "we weren't aware that there was a solution like yours on the market, so we created our own". In these instances, organizations are generally using applications such as Lotus Notes or other document management systems to support their product development process requirements. We also need to be mindful of solutions that operate downstream in the product development process from Accolade. Most of these offerings are geared to supporting the actual design and development of products and are part of the PDM or ERP facets of the market. The primary role of these solutions is to capture product and cost data. We don't compete head to head today with these tools, but we are increasingly being called upon to integrate with them. The uniqueness of our software application is that it addresses the strategic business issues corporations face in their product development efforts and links the adopting organization's day-to-day activity to its strategic objectives. Accolade operates in the very early stages of a product's lifecycle, before design and development have been initiated. For instance, our software system helps executives and product development teams decide which products to fund and which ones to jettison. The point of pain that we address is the fact that 46% of the dollars the average company spends on product development is wasted on products that either never make to market or fail after commercialization. Sopheon's Accolade can cut that spending waste in half, and also accelerate time to market.

TWST: In today's down economy, most businesses aren't spending as much. What are your thoughts on the current state of the market, and what is Sopheon doing strategically to overcome these tough economic conditions and further its organic growth?

Mr. Michuda: One of the things that I feel very good about is the fact that we brought our Accolade product to market in mid-2001under what some would argue were the worst market conditions in history for software and capitalized products. We exited 2001 with three industry-leading, referencable clients. And we recently closed out 2002 with more than 30 clients. So we've achieved significant growth in spite of formidable economic challenges. Much of that success is due to the fact we are focused on addressing one of the top priorities of today's corporate executives. Research indicates that CEO's rank improving product development and increasing innovation as their top two strategic priorities for achieving business success. Our solution helps companies make dramatic advances in both innovation and product development performance. We're also fortunate in that our solution delivers strong, fast return on investment. Our clients recoup what they spent on Accolade within 12 months of implementation. And the benefits build from there. Accolade is also unusual among software solutions in that, once it's installed, it always sticks. In this application's brief history, there's not been a single unsuccessful deployment. Both of these factors¡ªstrong ROI and a consistent track record of implementation successþuhave played very strongly in reassuring prospects and clients that there's little risk in adopting the solution and that, more positively, it can deliver the kinds of returns that they most need in this down economy.