##### 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 December 31, 2007
 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 þ
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller Reporting Company o
 o þ
   Common Stock, par value $.01 per share
    
    41,790,964(Title of class)
    
    (Outstanding at January 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
    
    
    22Item 4. Controls and Procedures
    
    
    22PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    23Item 1A. Risk Factors
    
    
    23Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    23Item 3. Defaults Upon Senior Securities
    
    
    23Item 4. Submission of Matters to a Vote of Security Holders
    
    
    23Item 5. Other Information
    
    
    23Item 6. Exhibits
    
    
    23Signatures
    
    
    24Third Amendment to Credit AgreementCertificationCertificationCertification
  2




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##### Table of Contents



PART I.  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 PageConsolidated Balance Sheets as of December 31, 2007 and September 30, 2007 (unaudited)
    
    
    4Consolidated Statements of Operations for the three months ended December 31, 2007 and 2006 (unaudited)
    
    
    5Consolidated Statements of Cash Flows for the three months ended December 31, 2007 and 2006 (unaudited)
    
    
    6Notes to Consolidated Financial Statements (unaudited)
    
    
    7
 3




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##### Table of Contents



SoftBrands, Inc.
 
 Consolidated Balance Sheets
 December 31,
    
    
    September 30,2007
    
    
    2007(In thousands, except share and per share data)
    
    (Unaudited)
    
    
    (See Note 1)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    9,944
    
    
    $
    8,682Accounts receivable, net
    
    
    16,142
    
    
    
    15,683Prepaid expenses and other current assets
    
    
    5,814
    
    
    
    4,474Total current assets
    
    
    31,900
    
    
    
    28,839Furniture, fixtures and equipment, net
    
    
    2,463
    
    
    
    2,602Goodwill
    
    
    37,271
    
    
    
    37,271Intangible assets, net
    
    
    6,731
    
    
    
    7,433Other long-term assets
    
    
    592
    
    
    
    439Total assets
    
    $
    78,957
    
    
    $
    76,584LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term obligations
    
    $
    3,487
    
    
    $
    3,510Revolving loan
    
    
    2,596
    
    
    
    1,585Accounts payable
    
    
    4,699
    
    
    
    4,554Accrued expenses
    
    
    9,001
    
    
    
    8,329Accrued restructuring costs
    
    
    279
    
    
    
    423Deferred revenue
    
    
    21,449
    
    
    
    21,015Other current liabilities
    
    
    3,275
    
    
    
    2,354Total current liabilities
    
    
    44,786
    
    
    
    41,770Long-term obligations
    
    
    15,226
    
    
    
    16,082Other long-term liabilities
    
    
    733
    
    
    
    832Total liabilities
    
    
    60,745
    
    
    
    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 $736 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 $245 and $123, respectively
    
    
    5,051
    
    
    
    5,051Common stock, $.01 par value; 110,000,000 shares authorized; 41,448,993
and 41,391,043 shares issued and outstanding, respectively
    
    
    414
    
    
    
    414Additional paid-in capital
    
    
    174,395
    
    
    
    174,009Accumulated other comprehensive loss
    
    
    (552
    )
    
    
    (811
    )Accumulated deficit
    
    
    (184,164
    )
    
    
    (183,831
    )Total stockholders equity
    
    
    18,212
    
    
    
    17,900Total liabilities and stockholders equity
    
    $
    78,957
    
    
    $
    76,584
  4




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SoftBrands, Inc.
 
 Consolidated Statements of Operations
 Three Months EndedDecember 31,2007
    
    
    2006(In thousands, except per share data)
    
    (Unaudited)
    
    
    (Unaudited)Revenues:Software licenses
    
    $
    2,997
    
    
    $
    5,462Maintenance and support
    
    
    13,564
    
    
    
    13,758Professional services
    
    
    4,926
    
    
    
    4,938Third-party software and hardware
    
    
    762
    
    
    
    837Total revenues
    
    
    22,249
    
    
    
    24,995Cost of revenues:Software licenses
    
    
    588
    
    
    
    1,007Maintenance and support
    
    
    4,005
    
    
    
    3,906Professional services
    
    
    4,113
    
    
    
    4,339Third-party software and hardware
    
    
    732
    
    
    
    578Total cost of revenues
    
    
    9,438
    
    
    
    9,830Gross profit
    
    
    12,811
    
    
    
    15,165Operating expenses:Selling and marketing
    
    
    4,952
    
    
    
    5,212Research and product development
    
    
    3,759
    
    
    
    3,322General and administrative
    
    
    5,310
    
    
    
    5,189Restructuring related charges
    
    
    25
    
    
    
    Total operating expenses
    
    
    14,046
    
    
    
    13,723Operating income (loss)
    
    
    (1,235
    )
    
    
    1,442Interest expense
    
    
    (492
    )
    
    
    (472
    )Other income, net
    
    
    357
    
    
    
    49Income (loss) before provision for
(benefit from) income taxes
    
    
    (1,370
    )
    
    
    1,019Provision for (benefit from) income taxes
    
    
    (1,037
    )
    
    
    516Net income (loss)
    
    
    (333
    )
    
    
    503Preferred stock dividends
    
    
    (491
    )
    
    
    (491
    )Net income (loss) available to common shareholders
    
    $
    (824
    )
    
    $
    12Basic and diluted earnings (loss) per common share
    
    $
    (0.02
    )
    
    $
    0.00Weighted-average common shares outstanding:Basic
    
    
    41,419
    
    
    
    45,382Diluted
    
    
    41,419
    
    
    
    47,499
  5




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SoftBrands, Inc.
 
 Consolidated Statements of Cash Flows
 Three Months Ended December 31,2007
    
    
    2006(In thousands)
    
    (Unaudited)
    
    
    (Unaudited)Cash flows from operating activities:Net income (loss)
    
    $
    (333
    )
    
    $
    503Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:Deferred income taxes
    
    
    
    
    
    
    354Amortization
    
    
    831
    
    
    
    892Depreciation
    
    
    423
    
    
    
    350Stock-based compensation
    
    
    801
    
    
    
    363Provision for doubtful accounts
    
    
    192
    
    
    
    (239
    )Change in operating assets and liabilities:Accounts receivable
    
    
    (501
    )
    
    
    (3,153
    )Prepaid expenses and other current assets
    
    
    (1,340
    )
    
    
    (157
    )Accounts payable
    
    
    145
    
    
    
    (111
    )Accrued expenses and restructuring costs
    
    
    37
    
    
    
    (316
    )Deferred revenue
    
    
    434
    
    
    
    47Other current liabilities
    
    
    921
    
    
    
    582Other long-term assets and liabilities
    
    
    (316
    )
    
    
    (45
    )Net cash provided by (used in) operating activities
    
    
    1,294
    
    
    
    (930
    )Cash flows from investing activities:Purchases of furniture, fixtures and equipment
    
    
    (284
    )
    
    
    (302
    )Purchase of intangible assets
    
    
    (129
    )
    
    
    Change in restricted cash
    
    
    64
    
    
    
    (3
    )Acquisitions, net of cash acquired
    
    
    
    
    
    
    (4
    )Net cash used in investing activities
    
    
    (349
    )
    
    
    (309
    )Cash flows from financing activities:Short-term borrowings (repayments), net
    
    
    1,011
    
    
    
    Repayment of long-term obligations
    
    
    (879
    )
    
    
    Net proceeds from issuance of common stock from stock options
    
    
    76
    
    
    
    116Preferred stock dividends paid
    
    
    
    
    
    
    (491
    )Net cash provided by (used in) financing activities
    
    
    208
    
    
    
    (375
    )Effect of exchange rates on cash balances
    
    
    109
    
    
    
    (69
    )Change in cash and cash equivalents
    
    
    1,262
    
    
    
    (1,683
    )Cash and cash equivalents:Beginning of period
    
    
    8,682
    
    
    
    14,520End of period
    
    $
    9,944
    
    
    $
    12,837
  6




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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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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
 Note 2. Acquisitions
 MAI Systems Corporation
  8




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Note 3. Goodwill and Intangible Assets
 Goodwill
  Manufacturing
    
    $
    22,354Hospitality
    
    
    14,917Total
    
    $
    37,271
 Intangible Assets
  December 31, 2007
    
    September 30, 2007Gross
    
    
    
    
    
    Net
    
    Gross
    
    
    
    
    
    NetCarrying
    
    Accumulated
    
    Carrying
    
    Carrying
    
    Accumulated
    
    CarryingAmount
    
    Amortization
    
    Amount
    
    Amount
    
    Amortization
    
    AmountAcquired technology
    
    $
    21,257
    
    
    $
    (21,013
    )
    
    $
    244
    
    
    $
    21,257
    
    
    $
    (20,479
    )
    
    $
    778Capitalized software development
    
    
    3,707
    
    
    
    (2,005
    )
    
    
    1,702
    
    
    
    3,707
    
    
    
    (1,976
    )
    
    
    1,731Consulting and
non compete agreements
    
    
    2,952
    
    
    
    (1,429
    )
    
    
    1,523
    
    
    
    2,952
    
    
    
    (1,290
    )
    
    
    1,662Customer relationships
    
    
    2,700
    
    
    
    (675
    )
    
    
    2,025
    
    
    
    2,700
    
    
    
    (608
    )
    
    
    2,092Other
    
    
    2,075
    
    
    
    (838
    )
    
    
    1,237
    
    
    
    1,946
    
    
    
    (776
    )
    
    
    1,170$
    32,691
    
    
    $
    (25,960
    )
    
    $
    6,731
    
    
    $
    32,562
    
    
    $
    (25,129
    )
    
    $
    7,433
   Remainder of 2008
    
    $
    2,4062009
    
    
    2,5142010
    
    
    7312011
    
    
    5802012
    
    
    500Thereafter
    
    
    $
    6,731
 Note 4. Stock-Based Compensation
 Share-Based Payment
 9




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Three Months EndedDecember 31,2007
    
    
    2006Cost of revenues
    
    $
    84
    
    
    $
    51Operating expenses:Selling, general and administrative
    
    
    631
    
    
    
    252Research and product development
    
    
    86
    
    
    
    60
  Weighted
    
    Weighted-Average
    
    AggregateNumber
    
    Average
    
    Remaining
    
    Intrinsicof Options
    
    Exercise
    
    Contractual
    
    Value(in 000s)
    
    Price
    
    Life (Years)
    
    (in 000s)Outstanding, September 30, 2007
    
    
    8,311
    
    
    $
    2.20
    
    
    
    5.1
    
    
    $
    1,599Granted
    
    
    Exercised
    
    
    (51
    )
    
    
    1.50
    
    
    
    
    
    
    
    20Cancelled
    
    
    (4
    )
    
    
    1.54Outstanding, December 31, 2007
    
    
    8,256
    
    
    
    2.21
    
    
    
    4.9
    
    
    
    1,141Exercisable, December 31, 2007
    
    
    7,614
    
    
    
    2.26
    
    
    
    4.7
    
    
    
    1,010
  Restricted Stock Units
    
    Stock Appreciation RightsWeighted
    
    
    
    
    
    WeightedNon-Vested
    
    Average
    
    Number
    
    AverageShares
    
    Grant Date
    
    of SARs
    
    Grant Date(in 000s)
    
    Fair Value
    
    (in 000s)
    
    Fair ValueOutstanding, September 30, 2007
    
    
    1,231
    
    
    $
    1.78
    
    
    
    2,011
    
    
    $
    0.96Granted
    
    
    776
    
    
    
    1.85
    
    
    
    871
    
    
    
    0.78Vested
    
    
    (7
    )
    
    
    1.90
    
    
    
    Cancelled
    
    
    (28
    )
    
    
    1.84
    
    
    
    (22
    )
    
    
    0.93Outstanding, December 31, 2007
    
    
    1,972
    
    
    
    1.80
    
    
    
    2,860
    
    
    
    0.97
  10




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Note 5. Accrued Expenses
  December 31,
    
    
    September 30,2007
    
    
    2007Accrued compensation and benefits
    
    $
    2,675
    
    
    $
    2,908Accrued dividends on Series C-1 and Series D convertible preferred stock
    
    
    981
    
    
    
    491Professional services
    
    
    174
    
    
    
    396Other
    
    
    5,171
    
    
    
    4,534$
    9,001
    
    
    $
    8,329
 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
    
    
    (163
    )
    
    
    (6
    )
    
    
    (169
    )Balance, December 31, 2007
    
    $
    159
    
    
    $
    120
    
    
    $
    279
      11




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Note 7. Income Taxes
    Accounting for
Uncertainty in Income Taxes
   Note 8. Commitments and Contingencies
  12




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Note 9. Net Income (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
  Three Months Ended December 31,2007
    
    
    2006Income
    
    
    Shares
    
    
    
    
    
    
    Income
    
    
    Shares(Numerator)
    
    
    (Denominator)
    
    
    Per Share
    
    
    (Numerator)
    
    
    (Denominator)
    
    
    Per ShareBasic:Net income (loss) available to
common shareholders
    
    $
    (824
    )
    
    
    
    
    
    
    
    
    
    $
    12
    
    
    
    Common shares outstanding
    
    
    
    
    
    
    41,419
    
    
    
    
    
    
    
    
    
    
    
    41,050Series B preferred
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,332(824
    )
    
    
    41,419
    
    
    $
    (0.02
    )
    
    
    12
    
    
    
    45,382
    
    
    $
    Effect of Dilutive Securities:Options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    417Warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,687Restricted stock units
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13Diluted
    
    $
    (824
    )
    
    
    41,419
    
    
    $
    (0.02
    )
    
    $
    12
    
    
    
    47,499
    
    
    $
    
  Three Months EndedDecember 31,2007
    
    2006Options
    
    
    8,912
    
    
    
    4,865Warrants
    
    
    6,114
    
    
    
    1,993Restricted stock units
    
    
    1,972
    
    
    
    Stock-settled stock appreciation rights
    
    
    2,860
    
    
    
    208Series B convertible preferred stock
    
    
    4,332
    
    
    
    Series C-1 convertible preferred stock
    
    
    8,955
    
    
    
    8,955Series D convertible preferred stock
    
    
    3,593
    
    
    
    3,59336,738
    
    
    
    19,614
 13




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Note 10. Comprehensive Income (Loss)
 Reporting Comprehensive Income
 Three Months EndedDecember 31,2007
    
    
    2006Net income (loss)
    
    $
    (333
    )
    
    $
    503Foreign currency translation adjustments
    
    
    259
    
    
    
    (70
    )Comprehensive income (loss)
    
    $
    (74
    )
    
    $
    433
  Note 11. Segment Reporting
 Disclosures about
Segments of an Enterprise and Related Information
  Three Months Ended December 31,2007
    
    2006Manufacturing
    
    Hospitality
    
    Total
    
    Manufacturing
    
    Hospitality
    
    TotalRevenues
    
    $
    12,560
    
    
    $
    9,689
    
    
    $
    22,249
    
    
    $
    12,721
    
    
    $
    12,274
    
    
    $
    24,995Operating income (loss)
    
    
    2,299
    
    
    
    (3,534
    )
    
    
    (1,235
    )
    
    
    1,221
    
    
    
    221
    
    
    
    1,442
  Three Months EndedDecember 31,2007
    
    
    2006United States
    
    $
    13,038
    
    
    $
    15,184United Kingdom
    
    
    4,101
    
    
    
    4,975Other
    
    
    5,110
    
    
    
    4,836$
    22,249
    
    
    $
    24,995
 14




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##### Table of Contents



December 31,
    
    
    September 30,2007
    
    
    2007United States
    
    $
    1,134
    
    
    $
    1,318Other
    
    
    1,329
    
    
    
    1,284$
    2,463
    
    
    $
    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.
 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
  15




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Results of Operations
 Revenues.
 Three Months Ended December 31,2007
    
    
    2006Manufacturing
    
    
    Hospitality
    
    
    Total
    
    
    Manufacturing
    
    
    Hospitality
    
    
    TotalSoftware licenses
    
    $
    1,527
    
    
    $
    1,470
    
    
    $
    2,997
    
    
    $
    1,449
    
    
    $
    4,013
    
    
    $
    5,462Maintenance and
support
    
    
    8,096
    
    
    
    5,468
    
    
    
    13,564
    
    
    
    8,073
    
    
    
    5,685
    
    
    
    13,758Professional services
    
    
    2,822
    
    
    
    2,104
    
    
    
    4,926
    
    
    
    2,991
    
    
    
    1,947
    
    
    
    4,938Third-party software
and hardware
    
    
    115
    
    
    
    647
    
    
    
    762
    
    
    
    208
    
    
    
    629
    
    
    
    837Total
    
    $
    12,560
    
    
    $
    9,689
    
    
    $
    22,249
    
    
    $
    12,721
    
    
    $
    12,274
    
    
    $
    24,995
 % ChangeManufacturing
    
    Hospitality
    
    TotalSoftware licenses
    
    
    5.4
    %
    
    
    -63.4
    %
    
    
    -45.1
    %Maintenance and support
    
    
    0.3
    %
    
    
    -3.8
    %
    
    
    -1.4
    %Professional services
    
    
    -5.7
    %
    
    
    8.1
    %
    
    
    -0.2
    %Third-party software
and hardware
    
    
    -44.7
    %
    
    
    2.9
    %
    
    
    -9.0
    %Total
    
    
    -1.3
    %
    
    
    -21.1
    %
    
    
    -11.0
    %
 16




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##### Table of Contents



Three Months Ended December 31,2007
    
    
    2006Manufacturing
    
    
    Hospitality
    
    
    Total
    
    
    Manufacturing
    
    
    Hospitality
    
    
    TotalAmericas
    
    $
    7,594
    
    
    $
    5,778
    
    
    $
    13,372
    
    
    $
    7,192
    
    
    $
    8,310
    
    
    $
    15,502Europe, Middle East
and Africa
    
    
    3,349
    
    
    
    1,944
    
    
    
    5,293
    
    
    
    3,694
    
    
    
    2,391
    
    
    
    6,085Asia Pacific
    
    
    1,617
    
    
    
    1,967
    
    
    
    3,584
    
    
    
    1,835
    
    
    
    1,573
    
    
    
    3,408Total
    
    $
    12,560
    
    
    $
    9,689
    
    
    $
    22,249
    
    
    $
    12,721
    
    
    $
    12,274
    
    
    $
    24,995
 % ChangeManufacturing
    
    Hospitality
    
    TotalAmericas
    
    
    5.6
    %
    
    
    -30.5
    %
    
    
    -13.7
    %Europe, Middle East
and Africa
    
    
    -9.3
    %
    
    
    -18.7
    %
    
    
    -13.0
    %Asia Pacific
    
    
    -11.9
    %
    
    
    25.0
    %
    
    
    5.2
    %Total
    
    
    -1.3
    %
    
    
    -21.1
    %
    
    
    -11.0
    %
 Manufacturing Segment
  Software License Revenue. Fourth Shift Edition
 Maintenance and Support Revenue. Fourth Shift Edition
 Professional Services Revenue.
 Third-Party Software and Hardware Revenue.
 Revenue by Geography. Fourth Shift
Edition
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##### Table of Contents



Hospitality Segment
  Software License Revenue.
 Maintenance and Support Revenue.
 Professional Services.
 Third-Party Software and Hardware Revenue.
 Revenue by Geography.
 Gross Margin.
 Three Months Ended December 31,2007
    
    2006Manufacturing
    
    Hospitality
    
    Total
    
    Manufacturing
    
    Hospitality
    
    TotalSoftware licenses
    
    
    87.9
    %
    
    
    72.6
    %
    
    
    80.4
    %
    
    
    80.1
    %
    
    
    82.1
    %
    
    
    81.6
    %Maintenance and support
    
    
    79.3
    %
    
    
    57.4
    %
    
    
    70.5
    %
    
    
    78.6
    %
    
    
    62.3
    %
    
    
    71.6
    %Professional services
    
    
    19.9
    %
    
    
    11.9
    %
    
    
    16.5
    %
    
    
    16.6
    %
    
    
    6.1
    %
    
    
    12.2
    %Third-party software
and hardware
    
    
    -34.4
    %
    
    
    10.7
    %
    
    
    3.9
    %
    
    
    22.4
    %
    
    
    33.8
    %
    
    
    31.0
    %Total
    
    
    66.0
    %
    
    
    46.7
    %
    
    
    57.6
    %
    
    
    63.3
    %
    
    
    58.4
    %
    
    
    60.7
    %
 Manufacturing Segment
  Fourth Shift Edition
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##### Table of Contents



Hospitality Segment
    Operating Expenses and Operating Income (Loss).
 Three Months Ended December 31,2007
    
    
    2006Manufacturing
    
    
    Hospitality
    
    
    Total
    
    
    Manufacturing
    
    
    Hospitality
    
    
    TotalSelling and marketing
    
    $
    2,130
    
    
    $
    2,822
    
    
    $
    4,952
    
    
    $
    2,848
    
    
    $
    2,364
    
    
    $
    5,212Research and product development
    
    
    1,608
    
    
    
    2,151
    
    
    
    3,759
    
    
    
    1,537
    
    
    
    1,785
    
    
    
    3,322General and administrative
    
    
    2,224
    
    
    
    3,086
    
    
    
    5,310
    
    
    
    2,419
    
    
    
    2,770
    
    
    
    5,189Restructuring costs
    
    
    25
    
    
    
    
    
    
    
    25
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    5,987
    
    
    $
    8,059
    
    
    $
    14,046
    
    
    $
    6,804
    
    
    $
    6,919
    
    
    $
    13,723Operating income (loss)
    
    $
    2,299
    
    
    $
    (3,534
    )
    
    $
    (1,235
    )
    
    $
    1,221
    
    
    $
    221
    
    
    $
    1,442
 Selling and Marketing.
 Research and Product Development.
 General and Administrative.
 19




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##### Table of Contents



Restructuring Costs.
 Non-Operating Income and Expenses, Income Taxes and Preferred Stock Dividends.
 Three Months EndedDecember 31,2007
    
    2006Interest expense
    
    $
    (492
    )
    
    $
    (472
    )Other (expense) income, net
    
    
    357
    
    
    
    49Provision for (benefit from) income taxes
    
    
    (1,037
    )
    
    
    516Preferred stock dividends
    
    
    (491
    )
    
    
    (491
    )
 Interest Expense.
 Other Income, Net.
 Provision for Income Taxes.
   20




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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.
 Cash Flows from Financing Activities.
 Commitments and Capital Adequacy
 Managements Discussion
and Analysis of Financial Condition and Results of Operations
  21




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##### Table of Contents



Off-Balance Sheet Arrangements
  New Accounting Pronouncements
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  22




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##### Table of Contents



Changes in Internal Control over Financial Reporting
  
 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
 10.19
    
    Third Amendment to Credit Agreement dated February 11, 2008.31.1
    
    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
 23




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##### Table of Contents



SIGNATURES
  SoftBrands, Inc.Date: February 11, 2008
    
    By:
    
    /s/ GREGG A. WALDONGregg A. WaldonSenior Vice President and Chief Financial Officer(principal financial and accounting officer)
 24