##### 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, 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
(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
  Large accelerated filer oAccelerated filer oNon-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)
    
    44,767,667
(Outstanding at January 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
    
    
    16Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    24Item 4.
    
    Controls and Procedures
    
    
    24PART II  OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    25Item 1A.
    
    Risk Factors
    
    
    25Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    25Item 3.
    
    Defaults Upon Senior Securities
    
    
    25Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    26Item 5.
    
    Other Information
    
    
    26Item 6.
    
    Exhibits
    
    
    26Signatures
    
    
    
    
    27EX-10.6EX-10.25EX-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 December 31, 2008 (unaudited) and September 30, 2008
    
    
    4Consolidated Statements of Operations
for the three months ended December 31, 2008 and 2007 (unaudited)
    
    
    5Consolidated Statements of Cash Flows
for the three months ended December 31, 2008 and 2007 (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,(In thousands, except share and per share data)
    
    2008
    
    
    2008(Unaudited)
    
    
    (See Note 1)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    10,857
    
    
    $
    11,948Accounts receivable, net
    
    
    24,730
    
    
    
    21,665Prepaid expenses and other current assets
    
    
    5,012
    
    
    
    4,791Total current assets
    
    
    40,599
    
    
    
    38,404Furniture, fixtures and equipment, net
    
    
    1,880
    
    
    
    2,095Goodwill
    
    
    35,309
    
    
    
    35,591Intangible assets, net
    
    
    3,636
    
    
    
    4,346Other long-term assets
    
    
    229
    
    
    
    425Total assets
    
    $
    81,653
    
    
    $
    80,861LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term obligations
    
    $
    3,360
    
    
    $
    3,407Revolving loan
    
    
    8,076
    
    
    
    7,782Accounts payable
    
    
    4,431
    
    
    
    5,194Accrued expenses
    
    
    6,813
    
    
    
    7,474Deferred revenue
    
    
    21,127
    
    
    
    21,500Other current liabilities
    
    
    3,162
    
    
    
    2,820Total current liabilities
    
    
    46,969
    
    
    
    48,177Long-term obligations
    
    
    11,857
    
    
    
    12,667Other long-term liabilities
    
    
    496
    
    
    
    487Total liabilities
    
    
    59,322
    
    
    
    61,331Commitments and contingencies (Note 4)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 $0 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 $0 and $123, respectively
    
    
    5,051
    
    
    
    5,051Common stock, $.01 par value; 110,000,000 shares authorized; 44,325,827
and 41,931,386 shares issued and outstanding, respectively
    
    
    443
    
    
    
    419Additional paid-in capital
    
    
    175,279
    
    
    
    174,348Accumulated other comprehensive loss
    
    
    (1,144
    )
    
    
    (939
    )Accumulated deficit
    
    
    (180,366
    )
    
    
    (182,417
    )Total stockholders equity
    
    
    22,331
    
    
    
    19,530Total liabilities and stockholders equity
    
    $
    81,653
    
    
    $
    80,861
  4




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##### Table of Contents



SoftBrands, Inc.
 
 Consolidated Statements of Operations
 Three Months EndedDecember 31,(In thousands, except per share data)
    
    2008
    
    
    2007(Unaudited)
    
    
    (Unaudited)Revenues:Software licenses
    
    $
    6,739
    
    
    $
    2,997Maintenance and support
    
    
    12,944
    
    
    
    13,564Professional services
    
    
    4,906
    
    
    
    4,926Third-party software and hardware
    
    
    963
    
    
    
    762Total revenues
    
    
    25,552
    
    
    
    22,249Cost of revenues:Software licenses
    
    
    1,090
    
    
    
    588Maintenance and support
    
    
    3,833
    
    
    
    4,005Professional services
    
    
    4,290
    
    
    
    4,113Third-party software and hardware
    
    
    898
    
    
    
    732Total cost of revenues
    
    
    10,111
    
    
    
    9,438Gross profit
    
    
    15,441
    
    
    
    12,811Operating expenses:Selling and marketing
    
    
    4,009
    
    
    
    4,952Research and product development
    
    
    4,028
    
    
    
    3,759General and administrative
    
    
    4,979
    
    
    
    5,310Restructuring related charges
    
    
    
    
    
    
    25Total operating expenses
    
    
    13,016
    
    
    
    14,046Operating income (loss)
    
    
    2,425
    
    
    
    (1,235
    )Interest expense
    
    
    (345
    )
    
    
    (492
    )Other income, net
    
    
    36
    
    
    
    357Income (loss) from continuing operations
before provision for (benefit from)
income taxes
    
    
    2,116
    
    
    
    (1,370
    )Provision for (benefit from) income taxes
    
    
    427
    
    
    
    (1,037
    )Income (loss) from continuing operations
    
    
    1,689
    
    
    
    (333
    )Income from discontinued operations, net of tax
    
    
    362
    
    
    
    Net income (loss)
    
    
    2,051
    
    
    
    (333
    )Preferred stock dividends
    
    
    (491
    )
    
    
    (491
    )Net income (loss) available to common shareholders
    
    $
    1,560
    
    
    $
    (824
    )Weighted-average shares outstanding:Basic
    
    
    46,294
    
    
    
    41,419Diluted
    
    
    46,391
    
    
    
    41,419Basic and diluted earnings (loss) per common share:Continuing operations
    
    $
    0.02
    
    
    $
    (0.02
    )Discontinued operations
    
    
    0.01
    
    
    
    Net income (loss) available to common
shareholders
    
    $
    0.03
    
    
    $
    (0.02
    )
  5




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##### Table of Contents



SoftBrands, Inc.
 
 Consolidated Statements of Cash Flows
 Three Months Ended December 31,(In thousands)
    
    2008
    
    
    2007(Unaudited)
    
    
    (Unaudited)Cash flows from operating activities:Income (loss) from continuing operations
    
    $
    1,689
    
    
    $
    (333
    )Adjustments to reconcile income (loss) from continuing operations to net cash
provided by (used in) operating activities:Deferred income taxes
    
    
    249
    
    
    
    Amortization
    
    
    693
    
    
    
    831Depreciation
    
    
    255
    
    
    
    423Stock-based compensation
    
    
    459
    
    
    
    801Provision for doubtful accounts
    
    
    255
    
    
    
    192Other
    
    
    (12
    )
    
    
    Change in operating assets and liabilities:Accounts receivable
    
    
    (3,197
    )
    
    
    (501
    )Prepaid expenses and other current assets
    
    
    (221
    )
    
    
    (1,340
    )Accounts payable
    
    
    (763
    )
    
    
    145Accrued expenses
    
    
    (349
    )
    
    
    181Deferred revenue
    
    
    (373
    )
    
    
    434Other current liabilities
    
    
    520
    
    
    
    777Other long-term assets and liabilities
    
    
    184
    
    
    
    (316
    )Net cash provided by (used in) continuing operations
    
    
    (611
    )
    
    
    1,294Net cash provided by discontinued operations
    
    
    362
    
    
    
    Net cash provided by (used in) operating activities
    
    
    (249
    )
    
    
    1,294Cash flows from investing activities:Purchases of furniture, fixtures and equipment
    
    
    (135
    )
    
    
    (284
    )Purchase of intangible assets
    
    
    
    
    
    
    (129
    )Change in restricted cash
    
    
    
    
    
    
    64Net cash used in investing activities
    
    
    (135
    )
    
    
    (349
    )Cash flows from financing activities:Short-term borrowings, net of repayments
    
    
    294
    
    
    
    1,011Repayment of long-term obligations
    
    
    (857
    )
    
    
    (879
    )Net proceeds from issuance of common stock from stock options
    
    
    
    
    
    
    76Net cash provided by (used in) financing activities
    
    
    (563
    )
    
    
    208Effect of exchange rates on cash balances
    
    
    (144
    )
    
    
    109Change in cash and cash equivalents
    
    
    (1,091
    )
    
    
    1,262Cash and cash equivalents:Beginning of period
    
    
    11,948
    
    
    
    8,682End of period
    
    $
    10,857
    
    
    $
    9,944
  6




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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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New Accounting Pronouncements
 Fair
Value Measurements Effective Date of FASB Statement No.
157
 Business Combinations Goodwill and Other
Intangible Assets,
 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
 8




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##### Table of Contents



Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entitys
Own Stock Accounting for Derivative Instruments
and Hedging Activities
 Note 2. Goodwill and Intangible Assets
 Goodwill
  December 31,
    
    
    September 30,2008
    
    
    2008Manufacturing
    
    $
    20,392
    
    
    $
    20,674Hospitality
    
    
    14,917
    
    
    
    14,917$
    35,309
    
    
    $
    35,591
  Goodwill and Other
Intangible Assets
  9




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Intangible Assets




December 31, 2008
    
    September 30, 2008Gross
    
    
    
    
    
    Net
    
    Gross
    
    
    
    
    
    NetCarrying
    
    Accumulated
    
    Carrying
    
    Carrying
    
    Accumulated
    
    CarryingAmount
    
    Amortization
    
    Amount
    
    Amount
    
    Amortization
    
    AmountAcquired technology
    
    $
    21,220
    
    
    $
    (20,993
    )
    
    $
    227
    
    
    $
    21,216
    
    
    $
    (20,923
    )
    
    $
    293Capitalized software
development
    
    
    3,707
    
    
    
    (3,166
    )
    
    
    541
    
    
    
    3,707
    
    
    
    (2,950
    )
    
    
    757Consulting and
non compete agreements
    
    
    2,952
    
    
    
    (2,491
    )
    
    
    461
    
    
    
    2,952
    
    
    
    (2,244
    )
    
    
    708Customer relationships
    
    
    2,700
    
    
    
    (1,205
    )
    
    
    1,495
    
    
    
    2,700
    
    
    
    (1,085
    )
    
    
    1,615Other
    
    
    2,037
    
    
    
    (1,125
    )
    
    
    912
    
    
    
    2,059
    
    
    
    (1,086
    )
    
    
    973$
    32,616
    
    
    $
    (28,980
    )
    
    $
    3,636
    
    
    $
    32,634
    
    
    $
    (28,288
    )
    
    $
    4,346






Remainder of 2009
    
    $
    1,5742010
    
    
    7302011
    
    
    5672012
    
    
    2602013
    
    
    79Thereafter
    
    
    426$
    3,636


Note 3. Accrued Expenses




December 31,
    
    
    September 30,2008
    
    
    2008Compensation and benefits
    
    $
    2,601
    
    
    $
    2,815Sales taxes
    
    
    734
    
    
    
    584Lease obligations
    
    
    644
    
    
    
    912Professional services
    
    
    326
    
    
    
    263Preferred stock dividends
    
    
    
    
    
    
    491Other
    
    
    2,508
    
    
    
    2,409$
    6,813
    
    
    $
    7,474


Note 4. Commitments and Contingencies




10



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Note 5. 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
  Note 6. Stock-Based Compensation
 Share-Based Payment
  Three Months EndedDecember 31,2008
    
    2007Cost of revenues
    
    $
    51
    
    
    $
    84Selling and marketing expense
    
    
    36
    
    
    
    49Research and product development
expense
    
    
    52
    
    
    
    86General and administrative expense
    
    
    320
    
    
    
    582
 11




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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
    
    
    (471
    )
    
    
    1.58Outstanding, December 31,
2008
    
    
    7,774
    
    
    
    2.24
    
    
    
    4.0
    
    
    
    Exercisable, December 31,
2008
    
    
    7,705
    
    
    
    2.25
    
    
    
    4.0
    
    
    
    
  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
    
    
    
    1,070
    
    
    
    0.35Vested
    
    
    (49
    )
    
    
    2.06
    
    
    
    
    
    
    
    Cancelled
    
    
    (171
    )
    
    
    1.72
    
    
    
    (225
    )
    
    
    0.97Outstanding, December 31,
2008
    
    
    2,448
    
    
    
    1.17
    
    
    
    3,907
    
    
    
    0.74
  Note 7. Income Taxes
    12




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Note 8. Discontinued Operations
   Note 9. 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
 13




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Three Months Ended December 31, 2008Basic
    
    
    DilutedIncome
    
    
    Shares
    
    
    
    
    
    
    Income
    
    
    Shares(Numerator)
    
    
    (Denominator)
    
    
    Per Share
    
    
    (Numerator)
    
    
    (Denominator)
    
    
    Per ShareIncome from continuing operations
    
    $
    1,689
    
    
    
    
    
    
    
    
    
    
    $
    1,689
    
    
    
    Preferred stock dividends
    
    
    (491
    )
    
    
    
    
    
    
    
    
    
    
    (491
    )
    
    
    Weighted average common shares
outstanding
    
    
    
    
    
    
    41,962
    
    
    
    
    
    
    
    
    
    
    
    41,962Series B preferred
    
    
    
    
    
    
    4,332
    
    
    
    
    
    
    
    
    
    
    
    4,332Restricted stock units
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    97Income from continuing operations
available to common shareholders
    
    
    1,198
    
    
    
    46,294
    
    
    $
    0.026
    
    
    
    1,198
    
    
    
    46,391
    
    
    $
    0.026Income from discontinued operations,
net of tax
    
    
    362
    
    
    
    46,294
    
    
    
    0.008
    
    
    
    362
    
    
    
    46,391
    
    
    
    0.008Net income available to common
shareholders
    
    
    1,560
    
    
    
    46,294
    
    
    $
    0.034
    
    
    
    1,560
    
    
    
    46,391
    
    
    $
    0.034
   Three Months EndedDecember 31,2008
    
    2007Employee and non-employee stock options
    
    
    8,430
    
    
    
    8,912Warrants
    
    
    6,114
    
    
    
    6,114Restricted stock units
    
    
    2,248
    
    
    
    1,972Stock-settled stock appreciation rights
    
    
    3,907
    
    
    
    2,860Series B convertible preferred stock
    
    
    
    
    
    
    4,332Series C-1 convertible preferred stock
    
    
    9,165
    
    
    
    8,955Series D convertible preferred stock
    
    
    3,672
    
    
    
    3,59333,536
    
    
    
    36,738
 14




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Note 10. Comprehensive Income (Loss)
 Reporting Comprehensive Income
 Three Months EndedDecember 31,2008
    
    
    2007Net income (loss)
    
    $
    2,051
    
    
    $
    (333
    )Foreign currency
translation adjustments
    
    
    (205
    )
    
    
    259Comprehensive income (loss)
    
    $
    1,846
    
    
    $
    (74
    )
  Note 11. Segment Reporting
 Disclosures about Segments of an Enterprise and Related Information
   Three Months Ended December 31,2008
    
    2007Manufacturing
    
    Hospitality
    
    Total
    
    Manufacturing
    
    Hospitality
    
    TotalRevenues
    
    $
    10,654
    
    
    $
    14,898
    
    
    $
    25,552
    
    
    $
    12,560
    
    
    $
    9,689
    
    
    $
    22,249Operating income (loss)
    
    
    1,139
    
    
    
    1,286
    
    
    
    2,425
    
    
    
    2,299
    
    
    
    (3,534
    )
    
    
    (1,235
    )
  Three Months EndedDecember 31,2008
    
    
    2007United States
    
    $
    18,130
    
    
    $
    13,038United Kingdom
    
    
    3,024
    
    
    
    4,101Other
    
    
    4,398
    
    
    
    5,110$
    25,552
    
    
    $
    22,249
 15




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##### Table of Contents



December 31,
    
    
    September 30,2008
    
    
    2008United States
    
    $
    1,072
    
    
    $
    1,093Other
    
    
    808
    
    
    
    1,002$
    1,880
    
    
    $
    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
  Critical Accounting Policies and Estimates
   
    
    revenue recognition;
    
    the valuation of deferred tax assets;
    
    the valuation of accounts receivable; and
    
    the valuation of goodwill and intangible assets.
  16




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##### Table of Contents



Results of Operations
 Revenues.
 Three Months Ended December 31,2008
    

    2007Manufacturing
    
    
    Hospitality
    
    
    Total
    
    
    Manufacturing
    
    
    Hospitality
    
    
    TotalSoftware licenses
    
    $
    1,089
    
    
    $
    5,650
    
    
    $
    6,739
    
    
    $
    1,527
    
    
    $
    1,470
    
    
    $
    2,997Maintenance and
support
    
    
    7,598
    
    
    
    5,346
    
    
    
    12,944
    
    
    
    8,096
    
    
    
    5,468
    
    
    
    13,564Professional services
    
    
    1,882
    
    
    
    3,024
    
    
    
    4,906
    
    
    
    2,822
    
    
    
    2,104
    
    
    
    4,926Third party software
and hardware
    
    
    85
    
    
    
    878
    
    
    
    963
    
    
    
    115
    
    
    
    647
    
    
    
    762Total
    
    $
    10,654
    
    
    $
    14,898
    
    
    $
    25,552
    
    
    $
    12,560
    
    
    $
    9,689
    
    
    $
    22,249
 % ChangeManufacturing
    
    Hospitality
    
    TotalSoftware licenses
    
    
    -28.7
    %
    
    
    284.4
    %
    
    
    124.9
    %Maintenance and
support
    
    
    -6.2
    %
    
    
    -2.2
    %
    
    
    -4.6
    %Professional services
    
    
    -33.3
    %
    
    
    43.7
    %
    
    
    -0.4
    %Third party software
and hardware
    
    
    -26.1
    %
    
    
    35.7
    %
    
    
    26.4
    %Total
    
    
    -15.2
    %
    
    
    53.8
    %
    
    
    14.8
    %
  Three Months Ended December 31,2008
    
    
    2007Manufacturing
    
    
    Hospitality
    
    
    Total
    
    
    Manufacturing
    
    
    Hospitality
    
    
    TotalAmericas
    
    $
    6,609
    
    
    $
    11,757
    
    
    $
    18,366
    
    
    $
    7,594
    
    
    $
    5,778
    
    
    $
    13,372Europe, Middle East
and Africa
(EMEA)
    
    
    2,646
    
    
    
    1,383
    
    
    
    4,029
    
    
    
    3,349
    
    
    
    1,944
    
    
    
    5,293Asia Pacific (APAC)
    
    
    1,399
    
    
    
    1,758
    
    
    
    3,157
    
    
    
    1,617
    
    
    
    1,967
    
    
    
    3,584Total
    
    $
    10,654
    
    
    $
    14,898
    
    
    $
    25,552
    
    
    $
    12,560
    
    
    $
    9,689
    
    
    $
    22,249
 % ChangeManufacturing
    
    Hospitality
    
    TotalAmericas
    
    
    -13.0
    %
    
    
    103.5
    %
    
    
    37.3
    %Europe, Middle East
and Africa (EMEA)
    
    
    -21.0
    %
    
    
    -28.9
    %
    
    
    -23.9
    %Asia Pacific (APAC)
    
    
    -13.5
    %
    
    
    -10.6
    %
    
    
    -11.9
    %Total
    
    
    -15.2
    %
    
    
    53.8
    %
    
    
    14.8
    %
 17




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##### Table of Contents



Manufacturing Segment
  Software License Revenue.
 Maintenance and Support Revenue.
 Professional Services Revenue.
 Third Party Software and Hardware Revenue.
 Revenue by Geography.
 Hospitality Segment
  Software License Revenue.
 18




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##### Table of Contents



Maintenance and Support Revenue.
 Professional Services.
 Third Party Software and Hardware Revenue.
 Revenue by Geography.
 Gross Margin.
 Three Months Ended December 31,2008
    
    2007Manufacturing
    
    Hospitality
    
    Total
    
    Manufacturing
    
    Hospitality
    
    TotalSoftware licenses
    
    
    44.0
    %
    
    
    91.5
    %
    
    
    83.8
    %
    
    
    87.9
    %
    
    
    72.6
    %
    
    
    80.4
    %Maintenance and
support
    
    
    80.4
    %
    
    
    56.2
    %
    
    
    70.4
    %
    
    
    79.3
    %
    
    
    57.4
    %
    
    
    70.5
    %Professional services
    
    
    -6.8
    %
    
    
    24.6
    %
    
    
    12.6
    %
    
    
    19.9
    %
    
    
    11.9
    %
    
    
    16.5
    %Third party software
and hardware
    
    
    -0.5
    %
    
    
    7.5
    %
    
    
    6.8
    %
    
    
    -34.4
    %
    
    
    10.7
    %
    
    
    3.9
    %Total
    
    
    60.6
    %
    
    
    60.3
    %
    
    
    60.4
    %
    
    
    66.0
    %
    
    
    46.7
    %
    
    
    57.6
    %
 Manufacturing Segment
      19




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##### Table of Contents



Hospitality Segment
      Operating Expenses and Operating Income (Loss).
 Three Months Ended December 31,2008
    
    
    2007Manufacturing
    
    
    Hospitality
    
    
    Total
    
    
    Manufacturing
    
    
    Hospitality
    
    
    TotalSelling and marketing
    
    $
    1,801
    
    
    $
    2,208
    
    
    $
    4,009
    
    
    $
    2,130
    
    
    $
    2,822
    
    
    $
    4,952Research and product
development
    
    
    1,504
    
    
    
    2,524
    
    
    
    4,028
    
    
    
    1,608
    
    
    
    2,151
    
    
    
    3,759General and
administrative
    
    
    2,013
    
    
    
    2,966
    
    
    
    4,979
    
    
    
    2,224
    
    
    
    3,086
    
    
    
    5,310Restructuring related
charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25
    
    
    
    
    
    
    
    25Total
    
    $
    5,318
    
    
    $
    7,698
    
    
    $
    13,016
    
    
    $
    5,987
    
    
    $
    8,059
    
    
    $
    14,046Operating income (loss)
    
    $
    1,139
    
    
    $
    1,286
    
    
    $
    2,425
    
    
    $
    2,299
    
    
    $
    (3,534
    )
    
    $
    (1,235
    )
   Selling and Marketing.
 20




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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 EndedDecember 31,2008
    
    2007Interest expense
    
    $
    (345
    )
    
    $
    (492
    )Other income, net
    
    
    36
    
    
    
    357Provision for (benefit from) income taxes
    
    
    427
    
    
    
    (1,037
    )Income from discontinued operations, net of tax
    
    
    362
    
    
    
    Preferred stock dividends
    
    
    (491
    )
    
    
    (491
    )
 Interest Expense.
 Other Income, Net.
 Provision for Income Taxes.
 21




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##### Table of Contents



Income from Discontinued Operations.
  Preferred Stock Dividends.
 22




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##### Table of Contents



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
   23




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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
  Changes in Internal Control over Financial Reporting
  24




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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
  25




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##### Table of Contents



Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  
 Item 6. Exhibits
 10.6
    
    Fiscal 2009 Bonus Plans for Randy Tofteland, Gregg Waldon and Jo-Ann Masters10.25
    
    Dividend Payment Agreement dated December 31, 200831.1
    
    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
 26




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##### Table of Contents



SIGNATURE
  SoftBrands, Inc.Date: February 13, 2009
    By:
    /s/ GREGG A. WALDONGregg A. WaldonSenior Vice President and Chief Financial Officer
(principal financial and accounting officer) 27