##### 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, 2009
 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
(State or other jurisdiction of incorporation or organization)
    
    41-2021446
(I.R.S. Employer Identification No.)800 LaSalle Avenue, Suite 2100
Minneapolis, Minnesota
(Address of principal executive offices)
    
    55402
(Zip Code)
 (612) 851-1500
  þ o
 o o
  Large accelerated filer o
Accelerated filer o
Non-accelerated filer o(Do not check if a smaller reporting company)
Smaller reporting company þ o þ
   Common Stock, par value $.01 per share
(Title of class)
    
    44,866,535
(Outstanding at July 31, 2009)




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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
    
    
    20Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    34Item 4. Controls and Procedures
    
    
    34PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    35Item 1A. Risk Factors
    
    
    35Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    36Item 3. Defaults Upon Senior Securities
    
    
    36Item 4. Submission of Matters to a Vote of Security Holders
    
    
    36Item 5. Other Information
    
    
    36Item 6. Exhibits
    
    
    36Signatures
    
    
    37EX-31.1EX-31.2EX-32
  2




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##### Table of Contents



PART I.  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 PageConsolidated Balance Sheets
as of June 30, 2009 (unaudited) and September 30, 2008
    
    
    4Consolidated Statements of Operations
for the three and nine months ended June 30, 2009 and 2008 (unaudited)
    
    
    5Consolidated Statements of Cash Flows
for the nine months ended June 30, 2009 and 2008 (unaudited)
    
    
    6Notes to Consolidated Financial Statements (unaudited)
    
    
    7
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##### Table of Contents



SoftBrands, Inc.
 Consolidated Balance Sheets
 June 30,
    
    
    September 30,2009
    
    
    2008(In thousands, except share and per share data)
    
    (Unaudited)
    
    
    (See Note 1)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    14,967
    
    
    $
    11,948Accounts receivable, net
    
    
    19,400
    
    
    
    21,665Prepaid expenses and other current assets
    
    
    4,213
    
    
    
    4,791Total current assets
    
    
    38,580
    
    
    
    38,404Furniture, fixtures and equipment, net
    
    
    1,772
    
    
    
    2,095Goodwill
    
    
    35,411
    
    
    
    35,591Intangible assets, net
    
    
    2,272
    
    
    
    4,346Other long-term assets
    
    
    323
    
    
    
    425Total assets
    
    $
    78,358
    
    
    $
    80,861LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term obligations
    
    $
    3,264
    
    
    $
    3,407Revolving loan
    
    
    8,074
    
    
    
    7,782Accounts payable
    
    
    2,858
    
    
    
    5,194Accrued expenses
    
    
    6,970
    
    
    
    7,474Deferred revenue
    
    
    21,560
    
    
    
    21,500Other current liabilities
    
    
    1,751
    
    
    
    2,820Total current liabilities
    
    
    44,477
    
    
    
    48,177Long-term obligations
    
    
    10,240
    
    
    
    12,667Other long-term liabilities
    
    
    516
    
    
    
    487Total liabilities
    
    
    55,233
    
    
    
    61,331Commitments and contingencies (Note 5)Stockholders 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 $724 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 $241 and $123, respectively
    
    
    5,051
    
    
    
    5,051Common stock, $.01 par value; 110,000,000 shares authorized; 44,866,535
and 41,931,386 shares issued and outstanding, respectively
    
    
    448
    
    
    
    419Additional paid-in capital
    
    
    175,043
    
    
    
    174,348Accumulated other comprehensive loss
    
    
    (1,067
    )
    
    
    (939
    )Accumulated deficit
    
    
    (179,418
    )
    
    
    (182,417
    )Total stockholders equity
    
    
    23,125
    
    
    
    19,530Total liabilities and stockholders equity
    
    $
    78,358
    
    
    $
    80,861
  4




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##### Table of Contents



SoftBrands, Inc.
 Consolidated Statements of Operations
 Three Months Ended
    
    
    Nine Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(In thousands, except per share data)
    
    (Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)Revenues:Software licenses
    
    $
    2,229
    
    
    $
    4,278
    
    
    $
    11,791
    
    
    $
    11,287Maintenance and support
    
    
    12,726
    
    
    
    14,360
    
    
    
    38,249
    
    
    
    41,437Professional services
    
    
    4,676
    
    
    
    7,177
    
    
    
    14,304
    
    
    
    16,794Third-party software and hardware
    
    
    1,001
    
    
    
    1,548
    
    
    
    3,196
    
    
    
    3,749Total revenues
    
    
    20,632
    
    
    
    27,363
    
    
    
    67,540
    
    
    
    73,267Cost of revenues:Software licenses
    
    
    355
    
    
    
    499
    
    
    
    1,949
    
    
    
    1,677Maintenance and support
    
    
    3,596
    
    
    
    3,907
    
    
    
    10,965
    
    
    
    12,063Professional services
    
    
    3,835
    
    
    
    4,199
    
    
    
    12,500
    
    
    
    12,214Third-party software and hardware
    
    
    612
    
    
    
    1,535
    
    
    
    2,418
    
    
    
    3,452Total cost of revenues
    
    
    8,398
    
    
    
    10,140
    
    
    
    27,832
    
    
    
    29,406Gross profit
    
    
    12,234
    
    
    
    17,223
    
    
    
    39,708
    
    
    
    43,861Operating expenses:Selling and marketing
    
    
    3,140
    
    
    
    4,578
    
    
    
    10,775
    
    
    
    14,498Research and product development
    
    
    3,514
    
    
    
    4,305
    
    
    
    11,447
    
    
    
    12,150General and administrative
    
    
    4,409
    
    
    
    4,556
    
    
    
    13,499
    
    
    
    15,437Restructuring related charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25Total operating expenses
    
    
    11,063
    
    
    
    13,439
    
    
    
    35,721
    
    
    
    42,110Operating income
    
    
    1,171
    
    
    
    3,784
    
    
    
    3,987
    
    
    
    1,751Interest expense
    
    
    (259
    )
    
    
    (303
    )
    
    
    (831
    )
    
    
    (1,291
    )Other income (expense), net
    
    
    (145
    )
    
    
    183
    
    
    
    (47
    )
    
    
    693Income from continuing operations before
provision for income taxes
    
    
    767
    
    
    
    3,664
    
    
    
    3,109
    
    
    
    1,153Provision for income taxes
    
    
    22
    
    
    
    3,236
    
    
    
    472
    
    
    
    1,013Income from continuing operations
    
    
    745
    
    
    
    428
    
    
    
    2,637
    
    
    
    140Income from discontinued operations, net of tax
    
    
    
    
    
    
    
    
    
    
    362
    
    
    
    Net income
    
    
    745
    
    
    
    428
    
    
    
    2,999
    
    
    
    140Preferred stock dividends
    
    
    (485
    )
    
    
    (485
    )
    
    
    (1,456
    )
    
    
    (1,461
    )Net income (loss) available to common shareholders
    
    $
    260
    
    
    $
    (57
    )
    
    $
    1,543
    
    
    $
    (1,321
    )Weighted-average common shares outstanding:Basic
    
    
    49,298
    
    
    
    41,880
    
    
    
    48,257
    
    
    
    41,708Diluted
    
    
    49,412
    
    
    
    41,880
    
    
    
    48,352
    
    
    
    41,708Basic and diluted earnings (loss) per common share:Continuing operations
    
    $
    0.01
    
    
    $
    
    
    
    $
    0.02
    
    
    $
    (0.03
    )Discontinued operations
    
    
    
    
    
    
    
    
    
    
    0.01
    
    
    
    Net income (loss)
    
    $
    0.01
    
    
    $
    
    
    
    $
    0.03
    
    
    $
    (0.03
    )
  5




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SoftBrands, Inc.
 Consolidated Statements of Cash Flows
 Nine Months Ended June 30,2009
    
    
    2008(In thousands)
    
    (Unaudited)
    
    
    (Unaudited)Cash flows from operating activities:Income from continuing operations
    
    $
    2,637
    
    
    $
    140Adjustments to reconcile income from continuing operations to net cash
provided by operating activities:Deferred income taxes
    
    
    249
    
    
    
    1,013Amortization
    
    
    2,068
    
    
    
    2,442Depreciation
    
    
    724
    
    
    
    1,065Stock-based compensation
    
    
    1,186
    
    
    
    1,706Provision for doubtful accounts
    
    
    903
    
    
    
    775Other
    
    
    7
    
    
    
    40Change in operating assets and liabilities:Accounts receivable
    
    
    1,439
    
    
    
    (9,600
    )Prepaid expenses and other current assets
    
    
    578
    
    
    
    (609
    )Accounts payable
    
    
    (2,336
    )
    
    
    (432
    )Accrued expenses
    
    
    (978
    )
    
    
    110Deferred revenue
    
    
    60
    
    
    
    5,628Other current liabilities
    
    
    (1,069
    )
    
    
    62Other long-term assets and liabilities
    
    
    77
    
    
    
    (299
    )Net cash provided by continuing operations
    
    
    5,545
    
    
    
    2,041Net cash provided by discontinued operations
    
    
    362
    
    
    
    Net cash provided by operating activities
    
    
    5,907
    
    
    
    2,041Cash flows from investing activities:Purchases of furniture, fixtures and equipment
    
    
    (470
    )
    
    
    (583
    )Purchase of intangible assets
    
    
    
    
    
    
    (129
    )Change in restricted cash
    
    
    
    
    
    
    63Net cash used in investing activities
    
    
    (470
    )
    
    
    (649
    )Cash flows from financing activities:Short-term borrowings, net of repayments
    
    
    292
    
    
    
    5,530Repayment of long-term obligations
    
    
    (2,570
    )
    
    
    (2,643
    )Net proceeds from issuance of common stock from stock options
    
    
    
    
    
    
    76Preferred stock dividends paid
    
    
    
    
    
    
    (981
    )Net cash provided by (used in) financing activities
    
    
    (2,278
    )
    
    
    1,982Effect of exchange rates on cash balances
    
    
    (140
    )
    
    
    (34
    )Change in cash and cash equivalents
    
    
    3,019
    
    
    
    3,340Cash and cash equivalents:Beginning of period
    
    
    11,948
    
    
    
    8,682End of period
    
    $
    14,967
    
    
    $
    12,022
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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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Concentrations of Credit Risk
  Subsequent Events
 Subsequent
Events
 New Accounting Pronouncements
 Fair
Value Measurements Effective Date of FASB Statement No.
157 Determining Whether a Market Is
Not Active and a Transaction Is Not Distressed
 Business Combinations Goodwill and Other Intangible Assets
 8




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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
 Determination of the Useful Life of
Intangible Assets Goodwill and Other
Intangible Assets
 Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entitys
Own Stock Accounting for Derivative Instruments
and Hedging Activities
 Note 2. Pending Merger
  9




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
    
    Each share of our common stock issued and outstanding will be converted into the right
to receive a cash amount of $0.92, without interest;
    
    Each share of our Series B Convertible Preferred Stock issued and outstanding will be
converted into the right to receive a cash amount of $1.06, without interest;
    
    Each share of our Series C-1 and Series D Convertible Preferred Stock issued and
outstanding will be converted into the right to receive a cash amount of $1,000.00 plus any
accrued but unpaid dividends, without interest;
    
    Each warrant outstanding to purchase our common stock that has not been canceled or
exercised at such time will be canceled and converted into the right to receive a lump sum
cash payment, without interest, equal to the excess, if any, of: (i) $0.92 multiplied by
the number of shares of common stock subject to such warrant; over (ii) the exercise price
per share multiplied by the number of shares subject to such warrant;
    
    Each option to purchase our common stock or stock appreciation rights outstanding,
whether or not vested or exercisable, will be accelerated and canceled, and converted into
the right to receive a lump sum cash payment, without interest, equal to the excess, if
any, of: (i) $0.92 multiplied by the number of shares of common stock subject to such
option or stock appreciation right; over (ii) the exercise price per share multiplied by
the number of shares of subject to such option or stock appreciation right; and
    
    Each of our unvested restricted stock units, restricted shares and similar stock-based
awards outstanding will be accelerated and canceled, and converted into the right to
receive a lump sum cash payment, without interest, equal to product of: (i) $0.92
multiplied by (ii) the number of shares of common stock subject to issuance upon settlement
of such stock-based awards.
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
    
    will carry on our business in the usual, regular and ordinary course substantially in
the same manner as it was conducted prior to entering into the Merger Agreement and in
compliance with all applicable legal requirements and the requirements of all material
contracts;
    
    will not issue, authorize for issuance, sell, grant, pledge, encumber, deliver or
otherwise dispose of any of our securities, except for the issuance and sale of our common
stock pursuant to options to purchase our common stock or stock-based awards outstanding
prior to the date of the merger agreement; and
    
    will not declare, set aside or pay any dividend on, or other distribution (whether in
cash, shares or property) in respect of, any of our capital stock.
    Note 3. Goodwill and Intangible Assets
 Goodwill
  June 30,
    
    
    September 30,2009
    
    
    2008Manufacturing
    
    $
    20,494
    
    
    $
    20,674Hospitality
    
    
    14,917
    
    
    
    14,917$
    35,411
    
    
    $
    35,591
  Goodwill and Other
Intangible Assets
  11




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12




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Intangible Assets
  June 30, 2009
    
    September 30, 2008Gross
    
    
    
    
    
    Net
    
    Gross
    
    
    
    
    
    NetCarrying
    
    Accumulated
    
    Carrying
    
    Carrying
    
    Accumulated
    
    CarryingAmount
    
    Amortization
    
    Amount
    
    Amount
    
    Amortization
    
    AmountAcquired technology
    
    $
    21,215
    
    
    $
    (21,111
    )
    
    $
    104
    
    
    $
    21,216
    
    
    $
    (20,923
    )
    
    $
    293Capitalized software
development
    
    
    3,707
    
    
    
    (3,600
    )
    
    
    107
    
    
    
    3,707
    
    
    
    (2,950
    )
    
    
    757Consulting and
non compete agreements
    
    
    2,952
    
    
    
    (2,943
    )
    
    
    9
    
    
    
    2,952
    
    
    
    (2,244
    )
    
    
    708Customer relationships
    
    
    2,700
    
    
    
    (1,475
    )
    
    
    1,225
    
    
    
    2,700
    
    
    
    (1,085
    )
    
    
    1,615Other
    
    
    2,057
    
    
    
    (1,230
    )
    
    
    827
    
    
    
    2,059
    
    
    
    (1,086
    )
    
    
    973$
    32,631
    
    
    $
    (30,359
    )
    
    $
    2,272
    
    
    $
    32,634
    
    
    $
    (28,288
    )
    
    $
    4,346
   Remainder of 2009
    
    $
    3492010
    
    
    7312011
    
    
    6552012
    
    
    1102013
    
    
    100Thereafter
    
    
    327$
    2,272
 Note 4. Accrued Expenses
  June 30,
    
    
    September 30,2009
    
    
    2008Compensation and benefits
    
    $
    2,932
    
    
    $
    2,815Preferred stock dividends
    
    
    965
    
    
    
    491Lease obligations
    
    
    581
    
    
    
    912Sales taxes
    
    
    434
    
    
    
    584Professional services
    
    
    403
    
    
    
    263Other
    
    
    1,655
    
    
    
    2,409$
    6,970
    
    
    $
    7,474
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Note 5. Commitments and Contingencies
     Note 6. Stockholders Equity
   Before
    
    
    
    
    
    AfterAdjustment
    
    Adjustment
    
    AdjustmentSeries B convertible preferred stock
    
    
    4,332
    
    
    
    103
    
    
    
    4,435Series C-1 convertible preferred stock
    
    
    8,955
    
    
    
    210
    
    
    
    9,165Series D convertible preferred stock
    
    
    3,593
    
    
    
    79
    
    
    
    3,672Total
    
    
    16,880
    
    
    
    392
    
    
    
    17,272
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Note 7. Stock-Based Compensation
 Share-Based Payment
   Three Months Ended
    
    Nine Months EndedJune 30,
    
    June 30,2009
    
    2008
    
    2009
    
    2008Cost of revenues
    
    $
    52
    
    
    $
    38
    
    
    $
    154
    
    
    $
    199Selling and marketing expense
    
    
    42
    
    
    
    30
    
    
    
    121
    
    
    
    116Research and product development
expense
    
    
    61
    
    
    
    68
    
    
    
    179
    
    
    
    231General and administrative expense
    
    
    205
    
    
    
    265
    
    
    
    732
    
    
    
    1,160
  Weighted
    
    Weighted-Average
    
    AggregateNumber
    
    Average
    
    Remaining
    
    Intrinsicof Options
    
    Exercise
    
    Contractual
    
    Value(in thousands)
    
    Price
    
    Life (Years)
    
    (in thousands)Outstanding, September 30, 2008
    
    
    8,245
    
    
    $
    2.21
    
    
    
    4.1
    
    
    $
    Cancelled
    
    
    (785
    )
    
    
    1.57Outstanding, June 30, 2009
    
    
    7,460
    
    
    
    2.27
    
    
    
    3.4
    
    
    
    Exercisable, June 30, 2009
    
    
    7,447
    
    
    
    2.27
    
    
    
    3.4
    
    
    
    
 15




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Restricted Stock Units
    
    Stock Appreciation RightsWeighted
    
    
    
    
    
    WeightedNumber
    
    Average
    
    Number
    
    Averageof Awards
    
    Grant Date
    
    of Awards
    
    Grant Date(in thousands)
    
    Fair Value
    
    (in thousands)
    
    Fair ValueOutstanding, September 30, 2008
    
    
    1,504
    
    
    $
    1.78
    
    
    
    3,062
    
    
    $
    0.89Granted
    
    
    1,164
    
    
    
    0.52
    
    
    
    1,180
    
    
    
    0.35Vested
    
    
    (571
    )
    
    
    1.48
    
    
    
    
    
    
    
    Cancelled
    
    
    (266
    )
    
    
    1.61
    
    
    
    (471
    )
    
    
    0.98Outstanding, June 30, 2009
    
    
    1,831
    
    
    
    1.09
    
    
    
    3,771
    
    
    
    0.71
  Note 8. Income Taxes
     16




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Note 9. Discontinued Operations
   Note 10. Earnings (Loss) Per Share
 Earning per Share
 Participating Securities and the Two-Class Method under FASB
Statement No. 128 The Effect of Contingently Convertible Instruments on Diluted
Earnings per share
 17




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Three Months Ended June 30, 2009Basic
    
    
    DilutedIncome
    
    
    Shares
    
    
    
    
    
    
    Income
    
    
    Shares(Numerator)
    
    
    (Denominator)
    
    
    Per Share
    
    
    (Numerator)
    
    
    (Denominator)
    
    
    Per ShareIncome from continuing operations
    
    $
    745
    
    
    
    
    
    
    
    
    
    
    $
    745
    
    
    
    Preferred stock dividends
    
    
    (485
    )
    
    
    
    
    
    
    
    
    
    
    (485
    )
    
    
    Weighted average common shares
outstanding
    
    
    
    
    
    
    44,863
    
    
    
    
    
    
    
    
    
    
    
    44,863Series B preferred
    
    
    
    
    
    
    4,435
    
    
    
    
    
    
    
    
    
    
    
    4,435Non-employee stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42Restricted stock units
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    72Income from continuing operations
available to common
shareholders
    
    
    260
    
    
    
    49,298
    
    
    $
    0.01
    
    
    
    260
    
    
    
    49,412
    
    
    $
    0.01Income from discontinued operations,
net of tax
    
    
    
    
    
    
    49,298
    
    
    
    
    
    
    
    
    
    
    
    49,412
    
    
    
    Net income available to common
shareholders
    
    
    260
    
    
    
    49,298
    
    
    $
    0.01
    
    
    
    260
    
    
    
    49,412
    
    
    $
    0.01
 Nine Months Ended June 30, 2009Basic
    
    
    DilutedIncome
    
    
    Shares
    
    
    
    
    
    
    Income
    
    
    Shares(Numerator)
    
    
    (Denominator)
    
    
    Per Share
    
    
    (Numerator)
    
    
    (Denominator)
    
    
    Per ShareIncome from continuing operations
    
    $
    2,637
    
    
    
    
    
    
    
    
    
    
    $
    2,637
    
    
    
    Preferred stock dividends
    
    
    (1,456
    )
    
    
    
    
    
    
    
    
    
    
    (1,456
    )
    
    
    Weighted average common shares
outstanding
    
    
    
    
    
    
    43,856
    
    
    
    
    
    
    
    
    
    
    
    43,856Series B preferred
    
    
    
    
    
    
    4,401
    
    
    
    
    
    
    
    
    
    
    
    4,401Non-employee stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14Restricted stock units
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    81Income from continuing operations
available to common
shareholders
    
    
    1,181
    
    
    
    48,257
    
    
    $
    0.02
    
    
    
    1,181
    
    
    
    48,352
    
    
    $
    0.02Income from discontinued operations,
net of tax
    
    
    362
    
    
    
    48,257
    
    
    
    0.01
    
    
    
    362
    
    
    
    48,352
    
    
    
    0.01Net income available to common
shareholders
    
    
    1,543
    
    
    
    48,257
    
    
    $
    0.03
    
    
    
    1,543
    
    
    
    48,352
    
    
    $
    0.03
  18




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##### Table of Contents



Three and NineMonths EndedJune 30,2008Employee and non-employee stock options
    
    
    8,904Warrants
    
    
    6,114Restricted stock units
    
    
    1,504Stock-settled stock appreciation rights
    
    
    2,737Series B convertible preferred stock
    
    
    4,332Series C-1 convertible preferred stock
    
    
    8,955Series D convertible preferred stock
    
    
    3,59336,139
 Note 11. Comprehensive Income
 Reporting Comprehensive Income
 Three Months Ended
    
    
    Nine Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net income
    
    $
    745
    
    
    $
    428
    
    
    $
    2,999
    
    
    $
    140Foreign currency translation adjustments
    
    
    164
    
    
    
    (36
    )
    
    
    (128
    )
    
    
    (53
    )Comprehensive income
    
    $
    909
    
    
    $
    392
    
    
    $
    2,871
    
    
    $
    87
  Note 12. Segment Reporting
 Disclosures about Segments of an Enterprise and Related Information
  19




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##### Table of Contents



Three Months Ended June 30,2009
    
    2008Manufacturing
    
    Hospitality
    
    Total
    
    Manufacturing
    
    Hospitality
    
    TotalRevenues
    
    $
    10,146
    
    
    $
    10,486
    
    
    $
    20,632
    
    
    $
    12,463
    
    
    $
    14,900
    
    
    $
    27,363Operating income
(loss)
    
    
    2,415
    
    
    
    (1,244
    )
    
    
    1,171
    
    
    
    2,708
    
    
    
    1,076
    
    
    
    3,784Nine Months Ended June 30,2009
    
    2008Manufacturing
    
    Hospitality
    
    Total
    
    Manufacturing
    
    Hospitality
    
    TotalRevenues
    
    $
    30,904
    
    
    $
    36,636
    
    
    $
    67,540
    
    
    $
    36,939
    
    
    $
    36,328
    
    
    $
    73,267Operating income
(loss)
    
    
    5,484
    
    
    
    (1,497
    )
    
    
    3,987
    
    
    
    6,706
    
    
    
    (4,955
    )
    
    
    1,751
  Three Months Ended
    
    
    Nine Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008United States
    
    $
    13,496
    
    
    $
    17,670
    
    
    $
    46,486
    
    
    $
    45,006United Kingdom
    
    
    2,775
    
    
    
    4,086
    
    
    
    8,171
    
    
    
    12,712Other
    
    
    4,361
    
    
    
    5,607
    
    
    
    12,883
    
    
    
    15,549$
    20,632
    
    
    $
    27,363
    
    
    $
    67,540
    
    
    $
    73,267
  June 30,
    
    
    September 30,2009
    
    
    2008United States
    
    $
    1,055
    
    
    $
    1,093Other
    
    
    717
    
    
    
    1,002$
    1,772
    
    
    $
    2,095
 
 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 2008 Annual
Report on Form 10-K . We undertake no obligation to update any information in our forward-looking
statements.
 Fiscal Year
  20




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##### Table of Contents



Pending Merger
   
    
    Each share of our common stock issued and outstanding will be converted into the right
to receive a cash amount of $0.92, without interest;
    
    Each share of our Series B Convertible Preferred Stock issued and outstanding will be
converted into the right to receive a cash amount of $1.06, without interest;
    
    Each share of our Series C-1 and Series D Convertible Preferred Stock issued and
outstanding will be converted into the right to receive a cash amount of $1,000.00 plus any
accrued but unpaid dividends, without interest;
    
    Each warrant outstanding to purchase our common stock that has not been canceled or
exercised at such time will be canceled and converted into the right to receive a lump sum
cash payment, without interest, equal to the excess, if any, of: (i) $0.92 multiplied by
the number of shares of common stock subject to such warrant; over (ii) the exercise price
per share multiplied by the number of shares subject to such warrant;
    
    Each option to purchase our common stock or stock appreciation rights outstanding,
whether or not vested or exercisable, will be accelerated and canceled, and converted into
the right to receive a lump sum cash payment, without interest, equal to the excess, if
any, of: (i) $0.92 multiplied by the number of shares of common stock subject to such
option or stock appreciation right; over (ii) the exercise price per share multiplied by
the number of shares of subject to such option or stock appreciation right; and
    
    Each of our unvested restricted stock units, restricted shares and similar stock-based
awards outstanding will be accelerated and canceled, and converted into the right to
receive a lump sum cash payment, without interest, equal to product of: (i) $0.92
multiplied by (ii) the number of shares of common stock subject to issuance upon settlement
of such stock-based awards.
  21




---



##### Table of Contents




    
    will carry on our business in the usual, regular and ordinary course substantially in
the same manner as it was conducted prior to entering into the Merger Agreement and in
compliance with all applicable legal requirements and the requirements of all material
contracts;
    
    will not issue, authorize for issuance, sell, grant, pledge, encumber, deliver or
otherwise dispose of any of our securities, except for the issuance and sale of our common
stock pursuant to options to purchase our common stock or stock-based awards outstanding
prior to the date of the merger agreement; and
    
    will not declare, set aside or pay any dividend on, or other distribution (whether in
cash, shares or property) in respect of, any of our capital stock.
    Critical Accounting Policies and Estimates
   
    
    revenue recognition;
 22




---



##### Table of Contents




    
    the valuation of deferred tax assets;
    
    the valuation of accounts receivable; and
    
    the valuation of goodwill and intangible assets.
  23




---



##### Table of Contents



Results of Operations
 Revenues.
 Three Months Ended June 30,2009
    
    
    2008Manufacturing
    
    
    Hospitality
    
    
    Total
    
    
    Manufacturing
    
    
    Hospitality
    
    
    TotalSoftware licenses
    
    $
    657
    
    
    $
    1,572
    
    
    $
    2,229
    
    
    $
    1,346
    
    
    $
    2,932
    
    
    $
    4,278Maintenance and
support
    
    
    7,153
    
    
    
    5,573
    
    
    
    12,726
    
    
    
    7,873
    
    
    
    6,487
    
    
    
    14,360Professional services
    
    
    2,193
    
    
    
    2,483
    
    
    
    4,676
    
    
    
    3,015
    
    
    
    4,162
    
    
    
    7,177Third party software
and hardware
    
    
    143
    
    
    
    858
    
    
    
    1,001
    
    
    
    229
    
    
    
    1,319
    
    
    
    1,548Total
    
    $
    10,146
    
    
    $
    10,486
    
    
    $
    20,632
    
    
    $
    12,463
    
    
    $
    14,900
    
    
    $
    27,363
 % ChangeManufacturing
    
    Hospitality
    
    TotalSoftware licenses
    
    
    -51.2
    %
    
    
    -46.4
    %
    
    
    -47.9
    %Maintenance and
support
    
    
    -9.1
    %
    
    
    -14.1
    %
    
    
    -11.4
    %Professional services
    
    
    -27.3
    %
    
    
    -40.3
    %
    
    
    -34.8
    %Third party software
and hardware
    
    
    -37.6
    %
    
    
    -35.0
    %
    
    
    -35.3
    %Total
    
    
    -18.6
    %
    
    
    -29.6
    %
    
    
    -24.6
    %
 Nine Months Ended June 30,2009
    
    
    2008Manufacturing
    
    
    Hospitality
    
    
    Total
    
    
    Manufacturing
    
    
    Hospitality
    
    
    TotalSoftware licenses
    
    $
    2,816
    
    
    $
    8,975
    
    
    $
    11,791
    
    
    $
    4,077
    
    
    $
    7,210
    
    
    $
    11,287Maintenance and
support
    
    
    21,885
    
    
    
    16,364
    
    
    
    38,249
    
    
    
    23,786
    
    
    
    17,651
    
    
    
    41,437Professional services
    
    
    5,863
    
    
    
    8,441
    
    
    
    14,304
    
    
    
    8,588
    
    
    
    8,206
    
    
    
    16,794Third party software
and hardware
    
    
    340
    
    
    
    2,856
    
    
    
    3,196
    
    
    
    488
    
    
    
    3,261
    
    
    
    3,749Total
    
    $
    30,904
    
    
    $
    36,636
    
    
    $
    67,540
    
    
    $
    36,939
    
    
    $
    36,328
    
    
    $
    73,267
 % ChangeManufacturing
    
    Hospitality
    
    TotalSoftware licenses
    
    
    -30.9
    %
    
    
    24.5
    %
    
    
    4.5
    %Maintenance and
support
    
    
    -8.0
    %
    
    
    -7.3
    %
    
    
    -7.7
    %Professional services
    
    
    -31.7
    %
    
    
    2.9
    %
    
    
    -14.8
    %Third party software
and hardware
    
    
    -30.3
    %
    
    
    -12.4
    %
    
    
    -14.8
    %Total
    
    
    -16.3
    %
    
    
    0.8
    %
    
    
    -7.8
    %
 24




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##### Table of Contents



Three Months Ended June 30,2009
    
    
    2008Manufacturing
    
    
    Hospitality
    
    
    Total
    
    
    Manufacturing
    
    
    Hospitality
    
    
    TotalAmericas
    
    $
    6,394
    
    
    $
    7,283
    
    
    $
    13,677
    
    
    $
    7,659
    
    
    $
    10,270
    
    
    $
    17,929Europe, Middle East
and Africa
(EMEA)
    
    
    2,498
    
    
    
    1,267
    
    
    
    3,765
    
    
    
    3,243
    
    
    
    2,103
    
    
    
    5,346Asia Pacific (APAC)
    
    
    1,254
    
    
    
    1,936
    
    
    
    3,190
    
    
    
    1,561
    
    
    
    2,527
    
    
    
    4,088Total
    
    $
    10,146
    
    
    $
    10,486
    
    
    $
    20,632
    
    
    $
    12,463
    
    
    $
    14,900
    
    
    $
    27,363
 % ChangeManufacturing
    
    Hospitality
    
    TotalAmericas
    
    
    -16.5
    %
    
    
    -29.1
    %
    
    
    -23.7
    %Europe, Middle East
and Africa
(EMEA)
    
    
    -23.0
    %
    
    
    -39.8
    %
    
    
    -29.6
    %Asia Pacific (APAC)
    
    
    -19.7
    %
    
    
    -23.4
    %
    
    
    -22.0
    %Total
    
    
    -18.6
    %
    
    
    -29.6
    %
    
    
    -24.6
    %
 Nine Months Ended June 30,2009
    
    
    2008Manufacturing
    
    
    Hospitality
    
    
    Total
    
    
    Manufacturing
    
    
    Hospitality
    
    
    TotalAmericas
    
    $
    19,422
    
    
    $
    27,643
    
    
    $
    47,065
    
    
    $
    22,330
    
    
    $
    23,506
    
    
    $
    45,836Europe, Middle East
and Africa
(EMEA)
    
    
    7,457
    
    
    
    3,745
    
    
    
    11,202
    
    
    
    9,904
    
    
    
    6,437
    
    
    
    16,341Asia Pacific (APAC)
    
    
    4,025
    
    
    
    5,248
    
    
    
    9,273
    
    
    
    4,705
    
    
    
    6,385
    
    
    
    11,090Total
    
    $
    30,904
    
    
    $
    36,636
    
    
    $
    67,540
    
    
    $
    36,939
    
    
    $
    36,328
    
    
    $
    73,267
 % ChangeManufacturing
    
    Hospitality
    
    TotalAmericas
    
    
    -13.0
    %
    
    
    17.6
    %
    
    
    2.7
    %Europe, Middle East
and Africa
(EMEA)
    
    
    -24.7
    %
    
    
    -41.8
    %
    
    
    -31.4
    %Asia Pacific (APAC)
    
    
    -14.5
    %
    
    
    -17.8
    %
    
    
    -16.4
    %Total
    
    
    -16.3
    %
    
    
    0.8
    %
    
    
    -7.8
    %
 Manufacturing Segment
  25




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##### Table of Contents



Software License Revenue.
 Maintenance and Support Revenue.
 Professional Services Revenue.
 Third Party Software and Hardware Revenue.
 Revenue by Geography.
 Hospitality Segment
  Software License Revenue.
 26




---



##### Table of Contents



Maintenance and Support Revenue.
 Professional Services.
 Third Party Software and Hardware Revenue.
 Revenue by Geography.
 Gross Margin.
 Three Months Ended June 30,2009
    
    2008Manufacturing
    
    Hospitality
    
    Total
    
    Manufacturing
    
    Hospitality
    
    TotalSoftware licenses
    
    
    83.7
    %
    
    
    84.2
    %
    
    
    84.1
    %
    
    
    88.5
    %
    
    
    88.2
    %
    
    
    88.3
    %Maintenance and
support
    
    
    80.6
    %
    
    
    60.3
    %
    
    
    71.7
    %
    
    
    80.7
    %
    
    
    63.2
    %
    
    
    72.8
    %Professional services
    
    
    19.6
    %
    
    
    16.5
    %
    
    
    18.0
    %
    
    
    23.9
    %
    
    
    54.2
    %
    
    
    41.5
    %Third party software
and hardware
    
    
    30.7
    %
    
    
    40.2
    %
    
    
    38.8
    %
    
    
    2.2
    %
    
    
    0.6
    %
    
    
    0.9
    %Total
    
    
    66.9
    %
    
    
    51.9
    %
    
    
    59.3
    %
    
    
    66.4
    %
    
    
    60.1
    %
    
    
    62.9
    %
 Nine Months Ended June 30,2009
    
    2008Manufacturing
    
    Hospitality
    
    Total
    
    Manufacturing
    
    Hospitality
    
    TotalSoftware licenses
    
    
    67.1
    %
    
    
    88.6
    %
    
    
    83.5
    %
    
    
    88.4
    %
    
    
    83.3
    %
    
    
    85.1
    %Maintenance and
support
    
    
    80.6
    %
    
    
    58.9
    %
    
    
    71.3
    %
    
    
    79.2
    %
    
    
    59.7
    %
    
    
    70.9
    %Professional services
    
    
    3.1
    %
    
    
    19.2
    %
    
    
    12.6
    %
    
    
    21.4
    %
    
    
    33.4
    %
    
    
    27.3
    %Third party software
and hardware
    
    
    28.5
    %
    
    
    23.9
    %
    
    
    24.3
    %
    
    
    -12.9
    %
    
    
    11.0
    %
    
    
    7.9
    %Total
    
    
    64.1
    %
    
    
    54.3
    %
    
    
    58.8
    %
    
    
    65.6
    %
    
    
    54.1
    %
    
    
    59.9
    %
 27




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Manufacturing Segment
      Hospitality Segment
      28




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##### Table of Contents



Operating Expenses and Operating Income (Loss).
 Three Months Ended June 30,2009
    
    
    2008Manufacturing
    
    
    Hospitality
    
    
    Total
    
    
    Manufacturing
    
    
    Hospitality
    
    
    TotalSelling and marketing
    
    $
    1,431
    
    
    $
    1,709
    
    
    $
    3,140
    
    
    $
    2,077
    
    
    $
    2,501
    
    
    $
    4,578Research and product
development
    
    
    1,346
    
    
    
    2,168
    
    
    
    3,514
    
    
    
    1,560
    
    
    
    2,745
    
    
    
    4,305General and
administrative
    
    
    1,600
    
    
    
    2,809
    
    
    
    4,409
    
    
    
    1,932
    
    
    
    2,624
    
    
    
    4,556Restructuring related
charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    4,377
    
    
    $
    6,686
    
    
    $
    11,063
    
    
    $
    5,569
    
    
    $
    7,870
    
    
    $
    13,439Operating income (loss)
    
    $
    2,415
    
    
    $
    (1,244
    )
    
    $
    1,171
    
    
    $
    2,708
    
    
    $
    1,076
    
    
    $
    3,784
 Nine Months Ended June 30,2009
    
    
    2008Manufacturing
    
    
    Hospitality
    
    
    Total
    
    
    Manufacturing
    
    
    Hospitality
    
    
    TotalSelling and marketing
    
    $
    4,858
    
    
    $
    5,917
    
    
    $
    10,775
    
    
    $
    6,232
    
    
    $
    8,266
    
    
    $
    14,498Research and product
development
    
    
    4,284
    
    
    
    7,163
    
    
    
    11,447
    
    
    
    4,842
    
    
    
    7,308
    
    
    
    12,150General and
administrative
    
    
    5,189
    
    
    
    8,310
    
    
    
    13,499
    
    
    
    6,412
    
    
    
    9,025
    
    
    
    15,437Restructuring related
charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25
    
    
    
    
    
    
    
    25Total
    
    $
    14,331
    
    
    $
    21,390
    
    
    $
    35,721
    
    
    $
    17,511
    
    
    $
    24,599
    
    
    $
    42,110Operating income (loss)
    
    $
    5,484
    
    
    $
    (1,497
    )
    
    $
    3,987
    
    
    $
    6,706
    
    
    $
    (4,955
    )
    
    $
    1,751
   Selling and Marketing.
 29




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##### Table of Contents



Research and Product Development.
 General and Administrative.
 Restructuring Related Charges.
 Non-Operating Income and Expenses, Income Taxes, Discontinued Operations and Preferred Stock
Dividends.
 Three Months Ended
    
    Nine Months EndedJune 30,
    
    June 30,2009
    
    2008
    
    2009
    
    2008Interest expense
    
    $
    (259
    )
    
    $
    (303
    )
    
    $
    (831
    )
    
    $
    (1,291
    )Other income (expense), net
    
    
    (145
    )
    
    
    183
    
    
    
    (47
    )
    
    
    693Provision for income taxes
    
    
    22
    
    
    
    3,236
    
    
    
    472
    
    
    
    1,013Income from discontinued
operations, net of tax
    
    
    
    
    
    
    
    
    
    
    362
    
    
    
    Preferred stock dividends
    
    
    (485
    )
    
    
    (485
    )
    
    
    (1,456
    )
    
    
    (1,461
    )
 30




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##### Table of Contents



Interest Expense.
 Other Income (Expense), Net.
 Provision for Income Taxes.
     Income from Discontinued Operations.
  31




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##### Table of Contents



Preferred Stock Dividends.
 Liquidity and Capital Resources
 Cash and Cash Equivalents.
 Working Capital Deficit.
  Cash Flows from Operating Activities.
 32




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##### Table of Contents



Cash Flows from Investing Activities.
 Cash Flows from Financing Activities.
 Commitments and Capital Adequacy
     Off-Balance Sheet Arrangements
  New Accounting Pronouncements
  33




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##### Table of Contents



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
  34




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##### Table of Contents



PART II.  OTHER INFORMATION
 
 Item 1. Legal Proceedings
     
 Item 1A. Risk Factors
     35




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##### Table of Contents



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
 36




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##### Table of Contents



SIGNATURE
  SoftBrands, Inc.Date: August 6, 2009
    By:
    /s/ GREGG A. WALDONGregg A. WaldonSenior Vice President and Chief Financial Officer  
(principal financial and accounting officer) 37