##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
 For the quarterly period ended June 30, 2008
 Or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
 For the transition period from       to
 Commission file number 001-32711
 SoftBrands, Inc.
  Delaware
    
    41-2021446(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)800 LaSalle Avenue, Suite 2100Minneapolis, Minnesota
    
    55402(Address of principal executive offices)
    
    (Zip Code)
 (612) 851-1500
 þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ
   Common Stock, par value $.01 per share
    
    41,883,952(Title of class)
    
    (Outstanding at July 31, 2008)




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##### 



SoftBrands, Inc.
 Quarterly Report on Form 10-Q
 Table of Contents
 PagePART I  FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    3Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    15Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    26Item 4. Controls and Procedures
    
    
    26PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    27Item 1A. Risk Factors
    
    
    27Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    27Item 3. Defaults Upon Senior Securities
    
    
    27Item 4. Submission of Matters to a Vote of Security Holders
    
    
    27Item 5. Other Information
    
    
    27Item 6. Exhibits
    
    
    27Signatures
    
    
    28Certification Pursuant to Section 302 - Randal B. ToftelandCertification Pursuant to Section 302 - Gregg A. WaldonCertification Pursuant to Section 906
  2




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##### Table of Contents



PART I.  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 PageConsolidated Balance Sheets as of June 30, 2008 (unaudited) and September 30, 2007
    
    
    4Consolidated Statements of Operations for the three and nine months ended
June 30, 2008 and 2007 (unaudited)
    
    
    5Consolidated Statements of Cash Flows for the nine months ended
June 30, 2008 and 2007 (unaudited)
    
    
    6Notes to Consolidated Financial Statements (unaudited)
    
    
    7
 3




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##### Table of Contents



SoftBrands, Inc.
 
 Consolidated Balance Sheets
 June 30,
    
    
    September 30,(In thousands, except share and per share data)
    
    2008
    
    
    2007(Unaudited)
    
    
    (See Note 1)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    12,022
    
    
    $
    8,682Accounts receivable, net
    
    
    24,537
    
    
    
    15,683Prepaid expenses and other current assets
    
    
    5,083
    
    
    
    4,474Total current assets
    
    
    41,642
    
    
    
    28,839Furniture, fixtures and equipment, net
    
    
    2,163
    
    
    
    2,602Goodwill
    
    
    36,340
    
    
    
    37,271Intangible assets, net
    
    
    5,133
    
    
    
    7,433Other long-term assets
    
    
    487
    
    
    
    439Total assets
    
    $
    85,765
    
    
    $
    76,584LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term obligations
    
    $
    3,439
    
    
    $
    3,510Revolving loan
    
    
    7,115
    
    
    
    1,585Accounts payable
    
    
    4,122
    
    
    
    4,554Accrued expenses
    
    
    8,919
    
    
    
    8,329Accrued restructuring costs
    
    
    273
    
    
    
    423Deferred revenue
    
    
    26,643
    
    
    
    21,015Other current liabilities
    
    
    2,704
    
    
    
    2,354Total current liabilities
    
    
    53,215
    
    
    
    41,770Long-term obligations
    
    
    13,510
    
    
    
    16,082Other long-term liabilities
    
    
    687
    
    
    
    832Total liabilities
    
    
    67,412
    
    
    
    58,684Commitments and contingenciesStockholders equity:Series A and undesignated preferred stock, $.01 par value; 10,647,973
shares authorized; no shares issued or outstanding
    
    
    
    
    
    
    Series B convertible preferred stock, $.01 par value; 4,331,540 shares
authorized, issued and outstanding; liquidation value of $4,591
    
    
    5,068
    
    
    
    5,068Series C-1 convertible preferred stock, $.01 par value; 18,000 shares
authorized, issued and outstanding; liquidation value of $18,000 plus
unpaid dividends of $728 and $368, respectively
    
    
    18,000
    
    
    
    18,000Series D convertible preferred stock, $.01 par value; 6,673 shares
authorized, 6,000 shares issued and outstanding; liquidation value of
$6,000 plus unpaid dividends of $242 and $123, respectively
    
    
    5,051
    
    
    
    5,051Common stock, $.01 par value; 110,000,000 shares authorized; 41,883,952
and 41,391,043 shares issued and outstanding, respectively
    
    
    419
    
    
    
    414Additional paid-in capital
    
    
    174,370
    
    
    
    174,009Accumulated other comprehensive loss
    
    
    (864
    )
    
    
    (811
    )Accumulated deficit
    
    
    (183,691
    )
    
    
    (183,831
    )Total stockholders equity
    
    
    18,353
    
    
    
    17,900Total liabilities and stockholders equity
    
    $
    85,765
    
    
    $
    76,584
  4




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##### Table of Contents



SoftBrands, Inc.
 
 Consolidated Statements of Operations
 Three Months Ended
    
    Nine Months EndedJune 30,
    
June 30,(In thousands, except per share data)
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007(Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)Revenues:Software licenses
    
    $
    4,278
    
    
    $
    4,274
    
    
    $
    11,287
    
    
    $
    12,607Maintenance and support
    
    
    14,360
    
    
    
    14,431
    
    
    
    41,437
    
    
    
    41,670Professional services
    
    
    7,177
    
    
    
    4,071
    
    
    
    16,794
    
    
    
    13,416Third-party software and hardware
    
    
    1,548
    
    
    
    845
    
    
    
    3,749
    
    
    
    2,348Total revenues
    
    
    27,363
    
    
    
    23,621
    
    
    
    73,267
    
    
    
    70,041Cost of revenues:Software licenses
    
    
    499
    
    
    
    904
    
    
    
    1,677
    
    
    
    2,133Maintenance and support
    
    
    3,907
    
    
    
    4,058
    
    
    
    12,063
    
    
    
    12,157Professional services
    
    
    4,199
    
    
    
    3,952
    
    
    
    12,214
    
    
    
    12,585Third-party software and hardware
    
    
    1,535
    
    
    
    772
    
    
    
    3,452
    
    
    
    1,913Total cost of revenues
    
    
    10,140
    
    
    
    9,686
    
    
    
    29,406
    
    
    
    28,788Gross profit
    
    
    17,223
    
    
    
    13,935
    
    
    
    43,861
    
    
    
    41,253Operating expenses:Selling and marketing
    
    
    4,578
    
    
    
    5,341
    
    
    
    14,498
    
    
    
    15,316Research and product development
    
    
    4,305
    
    
    
    3,399
    
    
    
    12,150
    
    
    
    10,574General and administrative
    
    
    4,556
    
    
    
    4,989
    
    
    
    15,437
    
    
    
    15,508Restructuring related charges
    
    
    
    
    
    
    1,630
    
    
    
    25
    
    
    
    1,630Total operating expenses
    
    
    13,439
    
    
    
    15,359
    
    
    
    42,110
    
    
    
    43,028Operating income (loss)
    
    
    3,784
    
    
    
    (1,424
    )
    
    
    1,751
    
    
    
    (1,775
    )Interest expense
    
    
    (303
    )
    
    
    (492
    )
    
    
    (1,291
    )
    
    
    (1,436
    )Other income (expense), net
    
    
    183
    
    
    
    (118
    )
    
    
    693
    
    
    
    (158
    )Income (loss) before provision for
(benefit from) income taxes
    
    
    3,664
    
    
    
    (2,034
    )
    
    
    1,153
    
    
    
    (3,369
    )Provision for (benefit from) income taxes
    
    
    3,236
    
    
    
    (387
    )
    
    
    1,013
    
    
    
    586Net income (loss)
    
    
    428
    
    
    
    (1,647
    )
    
    
    140
    
    
    
    (3,955
    )Preferred stock dividends
    
    
    (485
    )
    
    
    (485
    )
    
    
    (1,461
    )
    
    
    (1,467
    )Net loss available to common shareholders
    
    $
    (57
    )
    
    $
    (2,132
    )
    
    $
    (1,321
    )
    
    $
    (5,422
    )Basic and diluted loss per common share
    
    $
    (0.00
    )
    
    $
    (0.05
    )
    
    $
    (0.03
    )
    
    $
    (0.13
    )Weighted-average common shares outstanding:Basic and diluted
    
    
    41,880
    
    
    
    41,283
    
    
    
    41,708
    
    
    
    41,264
  5




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##### Table of Contents



SoftBrands, Inc.
 
 Consolidated Statements of Cash Flows
 Nine Months Ended June 30,(In thousands)
    
    2008
    
    
    2007(Unaudited)
    
    
    (Unaudited)Cash flows from operating activities:Net income (loss)
    
    $
    140
    
    
    $
    (3,955
    )Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:Deferred income taxes
    
    
    1,013
    
    
    
    197Amortization
    
    
    2,442
    
    
    
    2,675Depreciation
    
    
    1,065
    
    
    
    1,183Stock-based compensation
    
    
    1,706
    
    
    
    1,276Provision for doubtful accounts
    
    
    775
    
    
    
    43Other
    
    
    40
    
    
    
    Change in operating assets and liabilities:Accounts receivable
    
    
    (9,600
    )
    
    
    (8,556
    )Prepaid expenses and other current assets
    
    
    (609
    )
    
    
    (1,196
    )Accounts payable
    
    
    (432
    )
    
    
    589Accrued expenses and restructuring costs
    
    
    (40
    )
    
    
    2,489Deferred revenue
    
    
    5,628
    
    
    
    1,994Other current liabilities
    
    
    212
    
    
    
    1,900Other long-term assets and liabilities
    
    
    (299
    )
    
    
    441Net cash provided by (used in) operating activities
    
    
    2,041
    
    
    
    (920
    )Cash flows from investing activities:Purchases of furniture, fixtures and equipment
    
    
    (583
    )
    
    
    (879
    )Purchase of intangible assets
    
    
    (129
    )
    
    
    Change in restricted cash
    
    
    63
    
    
    
    (10
    )Net cash used in investing activities
    
    
    (649
    )
    
    
    (889
    )Cash flows from financing activities:Short-term borrowings, net of repayments
    
    
    5,530
    
    
    
    921Issuance of long-term obligations
    
    
    
    
    
    
    22Repayment of long-term obligations
    
    
    (2,643
    )
    
    
    (1,436
    )Net proceeds from issuance of common stock from stock options
    
    
    76
    
    
    
    349Preferred stock dividends paid
    
    
    (981
    )
    
    
    (871
    )Net cash provided by (used in) financing activities
    
    
    1,982
    
    
    
    (1,015
    )Effect of exchange rates on cash balances
    
    
    (34
    )
    
    
    507Change in cash and cash equivalents
    
    
    3,340
    
    
    
    (2,317
    )Cash and cash equivalents:Beginning of period
    
    
    8,682
    
    
    
    14,520End of period
    
    $
    12,022
    
    
    $
    12,203
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##### Table of Contents



SoftBrands, Inc.
 
 Notes to Consolidated Financial Statements
 Note 1. General
 Basis of Presentation
  Consolidation
  Use of Estimates
  Fiscal Periods
  Liquidity
   7




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##### Table of Contents



New Accounting Pronouncements
 Fair Value
Measurements
 The Fair
Value Option for Financial Assets and Financial Liabilities  Including an amendment of FASB
Statement No. 115
 Business Combinations
 Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51
 Disclosures
about Derivative Instruments and Hedging Activities  an amendment of FASB Statement No. 133 Accounting for Derivative Instruments and Hedging Activities
 8




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##### Table of Contents



Note 2. Acquisition
 MAI Systems Corporation
  Note 3. Goodwill and Intangible Assets
 Goodwill
  June 30,
    
    
    September 30,2008
    
    
    2007Manufacturing
    
    $
    21,423
    
    
    $
    22,354Hospitality
    
    
    14,917
    
    
    
    14,917$
    36,340
    
    
    $
    37,271
  9




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##### Table of Contents



Intangible Assets
  June 30, 2008
    
    September 30, 2007Gross
    
    
    
    
    
    Net
    
    Gross
    
    
    
    
    
    NetCarrying
    
    Accumulated
    
    Carrying
    
    Carrying
    
    Accumulated
    
    CarryingAmount
    
    Amortization
    
    Amount
    
    Amount
    
    Amortization
    
    AmountAcquired technology
    
    $
    21,257
    
    
    $
    (20,857
    )
    
    $
    400
    
    
    $
    21,257
    
    
    $
    (20,479
    )
    
    $
    778Capitalized software development
    
    
    3,707
    
    
    
    (2,733
    )
    
    
    974
    
    
    
    3,707
    
    
    
    (1,976
    )
    
    
    1,731Consulting and
non compete agreements
    
    
    2,952
    
    
    
    (1,997
    )
    
    
    955
    
    
    
    2,952
    
    
    
    (1,290
    )
    
    
    1,662Customer relationships
    
    
    2,700
    
    
    
    (966
    )
    
    
    1,734
    
    
    
    2,700
    
    
    
    (608
    )
    
    
    2,092Other
    
    
    2,088
    
    
    
    (1,018
    )
    
    
    1,070
    
    
    
    1,946
    
    
    
    (776
    )
    
    
    1,170$
    32,704
    
    
    $
    (27,571
    )
    
    $
    5,133
    
    
    $
    32,562
    
    
    $
    (25,129
    )
    
    $
    7,433
   Remainder of 2008
    
    $
    7982009
    
    
    2,5192010
    
    
    7362011
    
    
    5802012
    
    
    500Thereafter
    
    
    $
    5,133
 Note 4. Stock-Based Compensation
 Share-Based Payment
  Three Months Ended
    
    Nine Months EndedJune 30,
    
    June 30,2008
    
    2007
    
    2008
    
    2007Cost of revenues
    
    $
    38
    
    
    $
    71
    
    
    $
    199
    
    
    $
    199Operating expenses:Selling, general and administrative
    
    
    295
    
    
    
    287
    
    
    
    1,276
    
    
    
    865Research and product development
    
    
    68
    
    
    
    71
    
    
    
    231
    
    
    
    212
 10




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##### Table of Contents



Weighted
    
    Weighted-Average
    
    AggregateNumber
    
    Average
    
    Remaining
    
    Intrinsicof Options
    
    Exercise
    
    Contractual
    
    Value(in thousands)
    
    Price
    
    Life (Years)
    
    (in thousands)Outstanding, September 30, 2007
    
    
    8,311
    
    
    $
    2.20
    
    
    
    5.1
    
    
    $
    1,599Granted
    
    
    Exercised
    
    
    (51
    )
    
    
    1.50
    
    
    
    
    
    
    
    20Cancelled
    
    
    (12
    )
    
    
    1.73Outstanding, June 30, 2008
    
    
    8,248
    
    
    
    2.21
    
    
    
    4.4
    
    
    
    Exercisable, June 30, 2008
    
    
    8,057
    
    
    
    2.22
    
    
    
    4.3
    
    
    
    
  Restricted Stock Units
    
    Stock Appreciation RightsWeighted
    
    
    
    
    
    WeightedNon-Vested
    
    Average
    
    Number
    
    AverageShares
    
    Grant Date
    
    of SARs
    
    Grant Date(in thousands)
    
    Fair Value
    
    (in thousands)
    
    Fair ValueOutstanding, September 30, 2007
    
    
    1,231
    
    
    $
    1.78
    
    
    
    2,011
    
    
    $
    0.96Granted
    
    
    776
    
    
    
    1.85
    
    
    
    991
    
    
    
    0.75Vested
    
    
    (415
    )
    
    
    1.85
    
    
    
    Cancelled
    
    
    (88
    )
    
    
    1.80
    
    
    
    (265
    )
    
    
    1.01Outstanding, June 30, 2008
    
    
    1,504
    
    
    
    1.80
    
    
    
    2,737
    
    
    
    0.94
  Note 5. Accrued Expenses
  June 30,
    
    
    September 30,2008
    
    
    2007Accrued compensation and benefits
    
    $
    3,331
    
    
    $
    2,908Accrued lease obligation
    
    
    1,123
    
    
    
    722Accrued dividends on Series C-1 and Series D convertible preferred stock
    
    
    971
    
    
    
    491Accrued sales taxes
    
    
    902
    
    
    
    668Accrued professional services
    
    
    233
    
    
    
    396Other
    
    
    2,359
    
    
    
    3,144$
    8,919
    
    
    $
    8,329
 11




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##### Table of Contents



Note 6. Restructuring Charges
  EmployeeSeverance and
    
    
    LeaseTermination Costs
    
    
    Commitments
    
    
    TotalBalance, September 30, 2006
    
    $
    371
    
    
    $
    565
    
    
    $
    936Restructuring charges
    
    
    1,705
    
    
    
    
    
    
    
    1,705Cash payments and other
    
    
    (1,766
    )
    
    
    (452
    )
    
    
    (2,218
    )Balance, September 30, 2007
    
    
    310
    
    
    
    113
    
    
    
    423Restructuring charges
    
    
    12
    
    
    
    13
    
    
    
    25Cash payments and other
    
    
    (169
    )
    
    
    (6
    )
    
    
    (175
    )Balance, June 30, 2008
    
    $
    153
    
    
    $
    120
    
    
    $
    273
      Note 7. Income Taxes
  12




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##### Table of Contents



Accounting for
Uncertainty in Income Taxes
   Note 8. Commitments and Contingencies
  Note 9. Net Income (Loss) Per Share
 Earning per Share
 13




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##### Table of Contents



Participating Securities and the Two-Class Method under FASB
Statement No. 128 The Effect of Contingently Convertible Instruments on Diluted
Earnings per share
  Three and Nine Months EndedJune 30,2008
    
    2007Employee and non-employee stock options
    
    
    8,904
    
    
    
    8,806Warrants
    
    
    6,114
    
    
    
    6,114Restricted stock units
    
    
    1,504
    
    
    
    1,212Stock-settled stock appreciation rights
    
    
    2,737
    
    
    
    1,936Series B convertible preferred stock
    
    
    4,332
    
    
    
    4,332Series C-1 convertible preferred stock
    
    
    8,955
    
    
    
    8,955Series D convertible preferred stock
    
    
    3,593
    
    
    
    3,59336,139
    
    
    
    34,948
 Note 10. Comprehensive Income (Loss)
 Reporting Comprehensive Income
 Three Months Ended
    
    
    Nine Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net income (loss)
    
    $
    428
    
    
    $
    (1,647
    )
    
    $
    140
    
    
    $
    (3,955
    )Foreign currency translation adjustments
    
    
    (36
    )
    
    
    381
    
    
    
    (53
    )
    
    
    411Comprehensive income (loss)
    
    $
    392
    
    
    $
    (1,266
    )
    
    $
    87
    
    
    $
    (3,544
    )
  14




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##### Table of Contents



Note 11. Segment Reporting
 Disclosures about
Segments of an Enterprise and Related Information
  Three Months Ended June 30,2008
    
    2007Manufacturing
    
    Hospitality
    
    Total
    
    Manufacturing
    
    Hospitality
    
    TotalRevenues
    
    $
    12,463
    
    
    $
    14,900
    
    
    $
    27,363
    
    
    $
    12,973
    
    
    $
    10,648
    
    
    $
    23,621Operating income (loss)
    
    
    2,708
    
    
    
    1,076
    
    
    
    3,784
    
    
    
    462
    
    
    
    (1,886
    )
    
    
    (1,424
    )
 Nine Months Ended June 30,2008
    
    2007Manufacturing
    
    Hospitality
    
    Total
    
    Manufacturing
    
    Hospitality
    
    TotalRevenues
    
    $
    36,939
    
    
    $
    36,328
    
    
    $
    73,267
    
    
    $
    37,813
    
    
    $
    32,228
    
    
    $
    70,041Operating income (loss)
    
    
    6,706
    
    
    
    (4,955
    )
    
    
    1,751
    
    
    
    2,453
    
    
    
    (4,228
    )
    
    
    (1,775
    )
  Three Months Ended
    
    
    Nine Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007United States
    
    $
    17,670
    
    
    $
    12,318
    
    
    $
    45,006
    
    
    $
    40,207United Kingdom
    
    
    4,086
    
    
    
    4,827
    
    
    
    12,712
    
    
    
    14,302Other
    
    
    5,607
    
    
    
    6,476
    
    
    
    15,549
    
    
    
    15,532$
    27,363
    
    
    $
    23,621
    
    
    $
    73,267
    
    
    $
    70,041
  June 30,
    
    
    September 30,2008
    
    
    2007United States
    
    $
    1,039
    
    
    $
    1,318Other
    
    
    1,124
    
    
    
    1,284$
    2,163
    
    
    $
    2,602
 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion of our financial condition and results of operations should be read
together with the financial statements and related notes, which are included elsewhere in this
Quarterly Report on Form 10-Q . This discussion contains forward-looking statements based upon
current expectations that involve risks and uncertainties. Our actual results may differ
materially from those anticipated in these forward-looking statements as a result of various
factors, including those set forth in more detail in our 2007 Annual Report on Form 10-K . We
undertake no obligation to update any information in our forward-looking statements.
 15




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##### Table of Contents



Fiscal Year
  Critical Accounting Policies and Estimates
   
    
    revenue recognition;
    
    the valuation of deferred tax assets;
    
    the valuation of accounts receivable;
    
    the valuation of goodwill and intangible assets;
    
    restructuring charges; and
    
    stock-based compensation.
 Managements Discussion
and Analysis of Financial Condition and Results of Operations Note 2 to Consolidated Financial
Statements
 Introduction and Overview
    Accounting for Performance of Construction-Type and Certain Production-Type Contracts
 16




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##### Table of Contents



Results of Operations
 Revenues.
 Three Months Ended June 30,2008
    
    
    2007Manufacturing
    
    
    Hospitality
    
    
    Total
    
    
    Manufacturing
    
    
    Hospitality
    
    
    TotalSoftware licenses
    
    $
    1,346
    
    
    $
    2,932
    
    
    $
    4,278
    
    
    $
    1,786
    
    
    $
    2,488
    
    
    $
    4,274Maintenance and support
    
    
    7,873
    
    
    
    6,487
    
    
    
    14,360
    
    
    
    8,522
    
    
    
    5,909
    
    
    
    14,431Professional services
    
    
    3,015
    
    
    
    4,162
    
    
    
    7,177
    
    
    
    2,470
    
    
    
    1,601
    
    
    
    4,071Third-party software
and hardware
    
    
    229
    
    
    
    1,319
    
    
    
    1,548
    
    
    
    195
    
    
    
    650
    
    
    
    845Total
    
    $
    12,463
    
    
    $
    14,900
    
    
    $
    27,363
    
    
    $
    12,973
    
    
    $
    10,648
    
    
    $
    23,621
 % ChangeManufacturing
    
    Hospitality
    
    TotalSoftware licenses
    
    
    -24.6
    %
    
    
    17.8
    %
    
    
    0.1
    %Maintenance and support
    
    
    -7.6
    %
    
    
    9.8
    %
    
    
    -0.5
    %Professional services
    
    
    22.1
    %
    
    
    160.0
    %
    
    
    76.3
    %Third-party software
and hardware
    
    
    17.4
    %
    
    
    102.9
    %
    
    
    83.2
    %Total
    
    
    -3.9
    %
    
    
    39.9
    %
    
    
    15.8
    %
 Nine Months Ended June 30,2008
    
    
    2007Manufacturing
    
    
    Hospitality
    
    
    Total
    
    
    Manufacturing
    
    
    Hospitality
    
    
    TotalSoftware licenses
    
    $
    4,077
    
    
    $
    7,210
    
    
    $
    11,287
    
    
    $
    4,468
    
    
    $
    8,139
    
    
    $
    12,607Maintenance and support
    
    
    23,786
    
    
    
    17,651
    
    
    
    41,437
    
    
    
    24,479
    
    
    
    17,191
    
    
    
    41,670Professional services
    
    
    8,588
    
    
    
    8,206
    
    
    
    16,794
    
    
    
    8,276
    
    
    
    5,140
    
    
    
    13,416Third-party software
and hardware
    
    
    488
    
    
    
    3,261
    
    
    
    3,749
    
    
    
    590
    
    
    
    1,758
    
    
    
    2,348Total
    
    $
    36,939
    
    
    $
    36,328
    
    
    $
    73,267
    
    
    $
    37,813
    
    
    $
    32,228
    
    
    $
    70,041
 % ChangeManufacturing
    
    Hospitality
    
    TotalSoftware licenses
    
    
    -8.8
    %
    
    
    -11.4
    %
    
    
    -10.5
    %Maintenance and support
    
    
    -2.8
    %
    
    
    2.7
    %
    
    
    -0.6
    %Professional services
    
    
    3.8
    %
    
    
    59.6
    %
    
    
    25.2
    %Third-party software
and hardware
    
    
    -17.3
    %
    
    
    85.5
    %
    
    
    59.7
    %Total
    
    
    -2.3
    %
    
    
    12.7
    %
    
    
    4.6
    %
 17




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##### Table of Contents



Three Months Ended June 30,2008
    
    
    2007Manufacturing
    
    
    Hospitality
    
    
    Total
    
    
    Manufacturing
    
    
    Hospitality
    
    
    TotalAmericas
    
    $
    7,659
    
    
    $
    10,270
    
    
    $
    17,929
    
    
    $
    7,584
    
    
    $
    5,015
    
    
    $
    12,599Europe, Middle East
and Africa
    
    
    3,243
    
    
    
    2,103
    
    
    
    5,346
    
    
    
    3,545
    
    
    
    2,490
    
    
    
    6,035Asia Pacific
    
    
    1,561
    
    
    
    2,527
    
    
    
    4,088
    
    
    
    1,844
    
    
    
    3,143
    
    
    
    4,987Total
    
    $
    12,463
    
    
    $
    14,900
    
    
    $
    27,363
    
    
    $
    12,973
    
    
    $
    10,648
    
    
    $
    23,621
 % ChangeManufacturing
    
    Hospitality
    
    TotalAmericas
    
    
    1.0
    %
    
    
    104.8
    %
    
    
    42.3
    %Europe, Middle East
and Africa
    
    
    -8.5
    %
    
    
    -15.5
    %
    
    
    -11.4
    %Asia Pacific
    
    
    -15.3
    %
    
    
    -19.6
    %
    
    
    -18.0
    %Total
    
    
    -3.9
    %
    
    
    39.9
    %
    
    
    15.8
    %
 Nine Months Ended June 30,2008
    
    
    2007Manufacturing
    
    
    Hospitality
    
    
    Total
    
    
    Manufacturing
    
    
    Hospitality
    
    
    TotalAmericas
    
    $
    22,330
    
    
    $
    23,506
    
    
    $
    45,836
    
    
    $
    21,976
    
    
    $
    19,010
    
    
    $
    40,986Europe, Middle East
and Africa
    
    
    9,904
    
    
    
    6,437
    
    
    
    16,341
    
    
    
    10,660
    
    
    
    7,100
    
    
    
    17,760Asia Pacific
    
    
    4,705
    
    
    
    6,385
    
    
    
    11,090
    
    
    
    5,177
    
    
    
    6,118
    
    
    
    11,295Total
    
    $
    36,939
    
    
    $
    36,328
    
    
    $
    73,267
    
    
    $
    37,813
    
    
    $
    32,228
    
    
    $
    70,041
 % ChangeManufacturing
    
    Hospitality
    
    TotalAmericas
    
    
    1.6
    %
    
    
    23.7
    %
    
    
    11.8
    %Europe, Middle East
and Africa
    
    
    -7.1
    %
    
    
    -9.3
    %
    
    
    -8.0
    %Asia Pacific
    
    
    -9.1
    %
    
    
    4.4
    %
    
    
    -1.8
    %Total
    
    
    -2.3
    %
    
    
    12.7
    %
    
    
    4.6
    %
 Manufacturing Segment
  18




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##### Table of Contents



Software License Revenue.
 Maintenance and Support Revenue. Fourth Shift Edition
 Professional Services Revenue.
 Third-Party Software and Hardware Revenue.
 Revenue by Geography. Fourth Shift Edition
 Hospitality Segment
  19




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##### Table of Contents



Software License Revenue.
 Maintenance and Support Revenue.
 Professional Services.
 Third-Party Software and Hardware Revenue.
 Revenue by Geography.
 Gross Margin.
 Three Months Ended June 30,2008
    
    2007Manufacturing
    
    Hospitality
    
    Total
    
    Manufacturing
    
    Hospitality
    
    TotalSoftware licenses
    
    
    88.5
    %
    
    
    88.2
    %
    
    
    88.3
    %
    
    
    88.6
    %
    
    
    71.8
    %
    
    
    78.8
    %Maintenance and support
    
    
    80.7
    %
    
    
    63.2
    %
    
    
    72.8
    %
    
    
    78.6
    %
    
    
    60.6
    %
    
    
    71.9
    %Professional services
    
    
    23.9
    %
    
    
    54.2
    %
    
    
    41.5
    %
    
    
    5.7
    %
    
    
    -3.7
    %
    
    
    3.0
    %Third-party software
and hardware
    
    
    2.2
    %
    
    
    0.6
    %
    
    
    0.9
    %
    
    
    -7.8
    %
    
    
    13.5
    %
    
    
    8.5
    %Total
    
    
    66.4
    %
    
    
    60.1
    %
    
    
    62.9
    %
    
    
    64.8
    %
    
    
    50.7
    %
    
    
    59.0
    %
 Nine Months Ended June 30,2008
    
    2007Manufacturing
    
    Hospitality
    
    Total
    
    Manufacturing
    
    Hospitality
    
    TotalSoftware licenses
    
    
    88.4
    %
    
    
    83.3
    %
    
    
    85.1
    %
    
    
    86.0
    %
    
    
    81.5
    %
    
    
    83.1
    %Maintenance and support
    
    
    79.2
    %
    
    
    59.7
    %
    
    
    70.9
    %
    
    
    78.6
    %
    
    
    59.8
    %
    
    
    70.8
    %Professional services
    
    
    21.4
    %
    
    
    33.4
    %
    
    
    27.3
    %
    
    
    14.0
    %
    
    
    -6.4
    %
    
    
    6.2
    %Third-party software
and hardware
    
    
    -12.9
    %
    
    
    11.0
    %
    
    
    7.9
    %
    
    
    8.0
    %
    
    
    22.0
    %
    
    
    18.5
    %Total
    
    
    65.6
    %
    
    
    54.1
    %
    
    
    59.9
    %
    
    
    64.2
    %
    
    
    52.7
    %
    
    
    58.9
    %
 20




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##### Table of Contents



Manufacturing Segment
      Hospitality Segment
      21




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##### Table of Contents



Operating Expenses and Operating Income (Loss).
 Three Months Ended June 30,2008
    
    
    2007Manufacturing
    
    
    Hospitality
    
    
    Total
    
    
    Manufacturing
    
    
    Hospitality
    
    
    TotalSelling and marketing
    
    $
    2,077
    
    
    $
    2,501
    
    
    $
    4,578
    
    
    $
    2,749
    
    
    $
    2,592
    
    
    $
    5,341Research and product development
    
    
    1,560
    
    
    
    2,745
    
    
    
    4,305
    
    
    
    1,552
    
    
    
    1,847
    
    
    
    3,399General and administrative
    
    
    1,932
    
    
    
    2,624
    
    
    
    4,556
    
    
    
    2,073
    
    
    
    2,916
    
    
    
    4,989Restructuring related charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,630
    
    
    
    
    
    
    
    1,630Total
    
    $
    5,569
    
    
    $
    7,870
    
    
    $
    13,439
    
    
    $
    8,004
    
    
    $
    7,355
    
    
    $
    15,359Operating income (loss)
    
    $
    2,708
    
    
    $
    1,076
    
    
    $
    3,784
    
    
    $
    462
    
    
    $
    (1,886
    )
    
    $
    (1,424
    )
 Nine Months Ended June 30,2008
    
    
    2007Manufacturing
    
    
    Hospitality
    
    
    Total
    
    
    Manufacturing
    
    
    Hospitality
    
    
    TotalSelling and marketing
    
    $
    6,232
    
    
    $
    8,266
    
    
    $
    14,498
    
    
    $
    8,190
    
    
    $
    7,126
    
    
    $
    15,316Research and product development
    
    
    4,842
    
    
    
    7,308
    
    
    
    12,150
    
    
    
    4,968
    
    
    
    5,606
    
    
    
    10,574General and administrative
    
    
    6,412
    
    
    
    9,025
    
    
    
    15,437
    
    
    
    7,081
    
    
    
    8,427
    
    
    
    15,508Restructuring related charges
    
    
    25
    
    
    
    
    
    
    
    25
    
    
    
    1,630
    
    
    
    
    
    
    
    1,630Total
    
    $
    17,511
    
    
    $
    24,599
    
    
    $
    42,110
    
    
    $
    21,869
    
    
    $
    21,159
    
    
    $
    43,028Operating income (loss)
    
    $
    6,706
    
    
    $
    (4,955
    )
    
    $
    1,751
    
    
    $
    2,453
    
    
    $
    (4,228
    )
    
    $
    (1,775
    )
 Selling and Marketing.
 Research and Product Development.
 22




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##### Table of Contents



General and Administrative.
 Restructuring Related Charges.
 Non-Operating Income and Expenses, Income Taxes and Preferred Stock Dividends.
 Three Months Ended
    
    Nine Months EndedJune 30,
    
    June 30,2008
    
    2007
    
    2008
    
    2007Interest expense
    
    $
    (303
    )
    
    $
    (492
    )
    
    $
    (1,291
    )
    
    $
    (1,436
    )Other income (expense), net
    
    
    183
    
    
    
    (118
    )
    
    
    693
    
    
    
    (158
    )Provision for (benefit from) income taxes
    
    
    3,236
    
    
    
    (387
    )
    
    
    1,013
    
    
    
    586Preferred stock dividends
    
    
    (485
    )
    
    
    (485
    )
    
    
    (1,461
    )
    
    
    (1,467
    )
 Interest Expense.
 Other Income, Net.
 Provision for Income Taxes.
  23




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##### Table of Contents



Accounting for
Uncertainty in Income Taxes
 Preferred Stock Dividends.
 Liquidity and Capital Resources
 Cash and Cash Equivalents.
 Working Capital Deficit.
 Cash Flows from Operating Activities.
 Cash Flows from Investing Activities.
 24




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##### Table of Contents



Cash Flows from Financing Activities.
 Commitments and Capital Adequacy
 Managements Discussion and Analysis
of Financial Condition and Results of Operations
    Off-Balance Sheet Arrangements
  25




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##### Table of Contents



New Accounting Pronouncements
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
  26




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##### Table of Contents



PART II.  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  
 Item 6. Exhibits
 31.1
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act  Randal B. Tofteland31.2
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act  Gregg A. Waldon32
    
    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act
 27




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##### Table of Contents



SIGNATURES
  SoftBrands, Inc.Date: August 11, 2008
    
    By:
    
    /s/ GREGG A. WALDON

Gregg A. WaldonSenior Vice President and Chief Financial Officer(principal financial and accounting officer)
 28