##### 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 March 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
    
    41-2021446(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)800 LaSalle Avenue, Suite 2100
Minneapolis, Minnesota
    
    55402(Address of principal executive offices)
    
    (Zip Code)
 (612) 851-1500
 þ o
  Large accelerated filer
o
    
    Accelerated filer
o
    
    Non-accelerated filer o
    
    Smaller reporting company þ
 o þ
   Common Stock, par value $.01 per share
    
    41,875,478(Title of class)
    
    (Outstanding at April 30, 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
    
    
    25Item 4. Controls and Procedures
    
    
    25PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    26Item 1A. Risk Factors
    
    
    26Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    26Item 3. Defaults Upon Senior Securities
    
    
    26Item 4. Submission of Matters to a Vote of Security Holders
    
    
    26Item 5. Other Information
    
    
    26Item 6. Exhibits
    
    
    26Signatures
    
    
    27Fourth Amendment to Credit AgreementAmendment No. 1 to Severance Pay AgremeentsCertification Pursuant to Section 302 - Randal B. ToftelandCertification Pursuant to Section 302 - Gregg A. WaldonCertification Pursuant to Section 906
  2




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##### Table of Contents



PART I.  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 PageConsolidated Balance Sheets as of March 31, 2008 and September 30, 2007 (unaudited)
    
    
    4Consolidated Statements of Operations for the three and six months ended
March 31, 2008 and 2007 (unaudited)
    
    
    5Consolidated Statements of Cash Flows for the six months ended
March 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
 March 31,
    
    
    September 30,(In thousands, except share and per share data)
    
    2008
    
    
    2007(Unaudited)
    
    
    (See Note 1)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    9,400
    
    
    $
    8,682Accounts receivable, net
    
    
    22,814
    
    
    
    15,683Prepaid expenses and other current assets
    
    
    6,829
    
    
    
    4,474Total current assets
    
    
    39,043
    
    
    
    28,839Furniture, fixtures and equipment, net
    
    
    2,292
    
    
    
    2,602Goodwill
    
    
    37,211
    
    
    
    37,271Intangible assets, net
    
    
    5,933
    
    
    
    7,433Other long-term assets
    
    
    523
    
    
    
    439Total assets
    
    $
    85,002
    
    
    $
    76,584LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term obligations
    
    $
    3,463
    
    
    $
    3,510Revolving loan
    
    
    3,001
    
    
    
    1,585Accounts payable
    
    
    4,354
    
    
    
    4,554Accrued expenses
    
    
    8,407
    
    
    
    8,329Accrued restructuring costs
    
    
    283
    
    
    
    423Deferred revenue
    
    
    29,850
    
    
    
    21,015Other current liabilities
    
    
    2,540
    
    
    
    2,354Total current liabilities
    
    
    51,898
    
    
    
    41,770Long-term obligations
    
    
    14,369
    
    
    
    16,082Other long-term liabilities
    
    
    730
    
    
    
    832Total liabilities
    
    
    66,997
    
    
    
    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 $364 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 $121 and $123, respectively
    
    
    5,051
    
    
    
    5,051Common stock, $.01 par value; 110,000,000 shares authorized; 41,875,478
and 41,391,043 shares issued and outstanding, respectively
    
    
    419
    
    
    
    414Additional paid-in capital
    
    
    174,414
    
    
    
    174,009Accumulated other comprehensive loss
    
    
    (828
    )
    
    
    (811
    )Accumulated deficit
    
    
    (184,119
    )
    
    
    (183,831
    )Total stockholders equity
    
    
    18,005
    
    
    
    17,900Total liabilities and stockholders equity
    
    $
    85,002
    
    
    $
    76,584
  4




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##### Table of Contents



SoftBrands, Inc.
 
 Consolidated Statements of Operations
 Three
Months Ended
    
    

Six Months EndedMarch 31,
    
    
    March 31,(In thousands, except per share data)
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007(Unaudited)
    
    (Unaudited)
    
    (Unaudited)
    
    (Unaudited)Revenues:Software licenses
    
    $
    4,012
    
    
    $
    2,871
    
    
    $
    7,009
    
    
    $
    8,333Maintenance and support
    
    
    13,513
    
    
    
    13,481
    
    
    
    27,077
    
    
    
    27,239Professional services
    
    
    4,691
    
    
    
    4,407
    
    
    
    9,617
    
    
    
    9,345Third-party software and hardware
    
    
    1,439
    
    
    
    666
    
    
    
    2,201
    
    
    
    1,503Total revenues
    
    
    23,655
    
    
    
    21,425
    
    
    
    45,904
    
    
    
    46,420Cost of revenues:Software licenses
    
    
    590
    
    
    
    222
    
    
    
    1,178
    
    
    
    1,229Maintenance and support
    
    
    4,151
    
    
    
    4,193
    
    
    
    8,156
    
    
    
    8,099Professional services
    
    
    3,902
    
    
    
    4,294
    
    
    
    8,015
    
    
    
    8,633Third-party software and hardware
    
    
    1,185
    
    
    
    563
    
    
    
    1,917
    
    
    
    1,141Total cost of revenues
    
    
    9,828
    
    
    
    9,272
    
    
    
    19,266
    
    
    
    19,102Gross profit
    
    
    13,827
    
    
    
    12,153
    
    
    
    26,638
    
    
    
    27,318Operating expenses:Selling and marketing
    
    
    4,968
    
    
    
    4,763
    
    
    
    9,920
    
    
    
    9,975Research and product development
    
    
    4,086
    
    
    
    3,853
    
    
    
    7,845
    
    
    
    7,175General and administrative
    
    
    5,571
    
    
    
    5,330
    
    
    
    10,881
    
    
    
    10,519Restructuring related charges
    
    
    
    
    
    
    
    
    
    
    25
    
    
    
    Total operating expenses
    
    
    14,625
    
    
    
    13,946
    
    
    
    28,671
    
    
    
    27,669Operating loss
    
    
    (798
    )
    
    
    (1,793
    )
    
    
    (2,033
    )
    
    
    (351
    )Interest expense
    
    
    (496
    )
    
    
    (472
    )
    
    
    (988
    )
    
    
    (944
    )Other income, net
    
    
    153
    
    
    
    (89
    )
    
    
    510
    
    
    
    (40
    )Loss before provision for
(benefit from) income taxes
    
    
    (1,141
    )
    
    
    (2,354
    )
    
    
    (2,511
    )
    
    
    (1,335
    )Provision for (benefit from) income taxes
    
    
    (1,186
    )
    
    
    457
    
    
    
    (2,223
    )
    
    
    973Net income (loss)
    
    
    45
    
    
    
    (2,811
    )
    
    
    (288
    )
    
    
    (2,308
    )Preferred stock dividends
    
    
    (485
    )
    
    
    (491
    )
    
    
    (976
    )
    
    
    (982
    )Net loss available to common shareholders
    
    $
    (440
    )
    
    $
    (3,302
    )
    
    $
    (1,264
    )
    
    $
    (3,290
    )Basic and diluted loss per common share
    
    $
    (0.01
    )
    
    $
    (0.08
    )
    
    $
    (0.03
    )
    
    $
    (0.08
    )Weighted-average common shares outstanding:Basic and diluted
    
    
    41,827
    
    
    
    41,192
    
    
    
    41,623
    
    
    
    41,121
  5




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##### Table of Contents



SoftBrands, Inc.
 
 Consolidated Statements of Cash Flows
 Six Months Ended March 31,(In thousands)
    
    2008
    
    
    2007(Unaudited)
    
    
    (Unaudited)Cash flows from operating activities:Net loss
    
    $
    (288
    )
    
    $
    (2,308
    )Adjustments to reconcile net loss to net cash
provided by operating activities:Deferred income taxes
    
    
    
    
    
    
    522Amortization
    
    
    1,635
    
    
    
    1,754Depreciation
    
    
    769
    
    
    
    768Stock-based compensation
    
    
    1,305
    
    
    
    847Provision for doubtful accounts
    
    
    783
    
    
    
    70Other, net
    
    
    
    
    
    
    (105
    )Change in operating assets and liabilities:Accounts receivable
    
    
    (8,209
    )
    
    
    (2,639
    )Prepaid expenses and other current assets
    
    
    (2,355
    )
    
    
    (660
    )Accounts payable
    
    
    (200
    )
    
    
    (451
    )Accrued expenses and restructuring costs
    
    
    423
    
    
    
    998Deferred revenue
    
    
    8,835
    
    
    
    3,125Other current liabilities
    
    
    186
    
    
    
    72Other long-term assets and liabilities
    
    
    (308
    )
    
    
    152Net cash provided by operating activities
    
    
    2,576
    
    
    
    2,145Cash flows from investing activities:Purchases of furniture, fixtures and equipment
    
    
    (400
    )
    
    
    (608
    )Purchase of intangible assets
    
    
    (129
    )
    
    
    Change in restricted cash
    
    
    63
    
    
    
    (5
    )Proceeds from sale of furniture, fixtures and equipment
    
    
    
    
    
    
    5Acquisitions, net of cash acquired
    
    
    
    
    
    
    2Net cash used in investing activities
    
    
    (466
    )
    
    
    (606
    )Cash flows from financing activities:Short-term borrowings, net of repayments
    
    
    1,416
    
    
    
    Issuance of long-term obligations
    
    
    
    
    
    
    22Repayment of long-term obligations
    
    
    (1,760
    )
    
    
    (237
    )Net proceeds from issuance of common stock from stock options
    
    
    76
    
    
    
    300Preferred stock dividends paid
    
    
    (981
    )
    
    
    (871
    )Net cash used in financing activities
    
    
    (1,249
    )
    
    
    (786
    )Effect of exchange rates on cash balances
    
    
    (143
    )
    
    
    72Change in cash and cash equivalents
    
    
    718
    
    
    
    825Cash and cash equivalents:Beginning of period
    
    
    8,682
    
    
    
    14,520End of period
    
    $
    9,400
    
    
    $
    15,345
  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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##### Table of Contents



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




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##### Table of Contents



Note 2. Acquisition
 MAI Systems Corporation
  Note 3. Goodwill and Intangible Assets
 Goodwill
  March 31,
    
    
    September 30,2008
    
    
    2007Manufacturing
    
    $
    22,294
    
    
    $
    22,354Hospitality
    
    
    14,917
    
    
    
    14,917$
    37,211
    
    
    $
    37,271
  Intangible Assets
  March 31, 2008
    
    September 30, 2007Gross
    
    
    
    
    
    Net
    
    Gross
    
    
    
    
    
    NetCarrying
    
    Accumulated
    
    Carrying
    
    Carrying
    
    Accumulated
    
    CarryingAmount
    
    Amortization
    
    Amount
    
    Amount
    
    Amortization
    
    AmountAcquired technology
    
    $
    21,257
    
    
    $
    (20,723
    )
    
    $
    534
    
    
    $
    21,257
    
    
    $
    (20,479
    )
    
    $
    778Capitalized software development
    
    
    3,707
    
    
    
    (2,848
    )
    
    
    859
    
    
    
    3,707
    
    
    
    (1,976
    )
    
    
    1,731Consulting and
non compete agreements
    
    
    2,952
    
    
    
    (1,533
    )
    
    
    1,419
    
    
    
    2,952
    
    
    
    (1,290
    )
    
    
    1,662Customer relationships
    
    
    2,700
    
    
    
    (742
    )
    
    
    1,958
    
    
    
    2,700
    
    
    
    (608
    )
    
    
    2,092Other
    
    
    2,080
    
    
    
    (917
    )
    
    
    1,163
    
    
    
    1,946
    
    
    
    (776
    )
    
    
    1,170$
    32,696
    
    
    $
    (26,763
    )
    
    $
    5,933
    
    
    $
    32,562
    
    
    $
    (25,129
    )
    
    $
    7,433
  9




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##### Table of Contents



Remainder of 2008
    
    $
    1,6042009
    
    
    2,5162010
    
    
    7332011
    
    
    5802012
    
    
    500Thereafter
    
    
    $
    5,933
 Note 4. Stock-Based Compensation
 Share-Based Payment
  Three Months Ended
    
    Six Months EndedMarch 31,
    
    March 31,2008
    
    2007
    
    2008
    
    2007Cost of revenues
    
    $
    77
    
    
    $
    77
    
    
    $
    161
    
    
    $
    128Operating expenses:Selling, general and administrative
    
    
    350
    
    
    
    326
    
    
    
    981
    
    
    
    578Research and product development
    
    
    77
    
    
    
    81
    
    
    
    163
    
    
    
    141
  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
    
    
    (7
    )
    
    
    1.55Outstanding, March 31, 2008
    
    
    8,253
    
    
    
    2.21
    
    
    
    4.6
    
    
    
    Exercisable, March 31, 2008
    
    
    7,962
    
    
    
    2.22
    
    
    
    4.5
    
    
    
    
 10




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##### Table of Contents



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
    
    
    
    931
    
    
    
    0.78Vested
    
    
    (415
    )
    
    
    1.85
    
    
    
    Cancelled
    
    
    (42
    )
    
    
    1.78
    
    
    
    (132
    )
    
    
    1.01Outstanding, March 31, 2008
    
    
    1,550
    
    
    
    1.79
    
    
    
    2,810
    
    
    
    0.96
  Note 5. Accrued Expenses
  March 31,
    
    
    September 30,2008
    
    
    2007Accrued compensation and benefits
    
    $
    3,292
    
    
    $
    2,908Accrued dividends on Series C-1 and Series D convertible preferred stock
    
    
    485
    
    
    
    491Professional services
    
    
    132
    
    
    
    396Other
    
    
    4,498
    
    
    
    4,534$
    8,407
    
    
    $
    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
    
    
    
    279Cash payments and other
    
    
    4
    
    
    
    
    
    
    
    4Balance, March 31, 2008
    
    $
    163
    
    
    $
    120
    
    
    $
    283
  11




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##### Table of Contents



Note 7. Income Taxes
    Accounting for
Uncertainty in Income Taxes
 12




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##### Table of Contents



Note 8. Commitments and Contingencies
  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
 13




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##### Table of Contents



Three and Six Months EndedMarch 31,2008
    
    2007Employee and
non-employee stock options
    
    
    8,909
    
    
    
    8,512Warrants
    
    
    6,114
    
    
    
    6,797Restricted stock units
    
    
    1,550
    
    
    
    1,273Stock-settled stock appreciation rights
    
    
    2,810
    
    
    
    1,966Series B convertible preferred stock
    
    
    4,332
    
    
    
    4,332Series C-1 convertible preferred stock
    
    
    8,955
    
    
    
    8,955Series D convertible preferred stock
    
    
    3,593
    
    
    
    3,59336,263
    
    
    
    35,428
 Note 10. Comprehensive Income (Loss)
 Reporting Comprehensive Income
 Three Months Ended
    
    
    Six Months EndedMarch 31,
    
    
    March 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Net income (loss)
    
    $
    45
    
    
    $
    (2,811
    )
    
    $
    (288
    )
    
    $
    (2,308
    )Foreign currency
translation adjustments
    
    
    (276
    )
    
    
    100
    
    
    
    (17
    )
    
    
    30Comprehensive income (loss)
    
    $
    (231
    )
    
    $
    (2,711
    )
    
    $
    (305
    )
    
    $
    (2,278
    )
  Note 11. Segment Reporting
 Disclosures about
Segments of an Enterprise and Related Information
 14




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##### Table of Contents



Three Months Ended March 31,2008
    
    2007Manufacturing
    
    Hospitality
    
    Total
    
    Manufacturing
    
    Hospitality
    
    TotalRevenues
    
    $
    11,916
    
    
    $
    11,739
    
    
    $
    23,655
    
    
    $
    12,119
    
    
    $
    9,306
    
    
    $
    21,425Operating income
(loss)
    
    
    1,699
    
    
    
    (2,497
    )
    
    
    (798
    )
    
    
    770
    
    
    
    (2,563
    )
    
    
    (1,793
    )
 Six Months Ended March 31,2008
    
    2007Manufacturing
    
    Hospitality
    
    Total
    
    Manufacturing
    
    Hospitality
    
    TotalRevenues
    
    $
    24,476
    
    
    $
    21,428
    
    
    $
    45,904
    
    
    $
    24,840
    
    
    $
    21,580
    
    
    $
    46,420Operating income
(loss)
    
    
    3,998
    
    
    
    (6,031
    )
    
    
    (2,033
    )
    
    
    1,991
    
    
    
    (2,342
    )
    
    
    (351
    )
  Three Months Ended
    
    
    Six Months EndedMarch 31,
    
    
    March 31,2008
    
    
    2007
    
    
    2008
    
    
    2007United States
    
    $
    14,298
    
    
    $
    12,705
    
    
    $
    27,336
    
    
    $
    27,889United Kingdom
    
    
    4,525
    
    
    
    4,500
    
    
    
    8,626
    
    
    
    9,475Other
    
    
    4,832
    
    
    
    4,220
    
    
    
    9,942
    
    
    
    9,056$
    23,655
    
    
    $
    21,425
    
    
    $
    45,904
    
    
    $
    46,420
  March 31,
    
    
    September 30,2008
    
    
    2007United States
    
    $
    1,048
    
    
    $
    1,318Other
    
    
    1,244
    
    
    
    1,284$
    2,292
    
    
    $
    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
  15




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##### Table of Contents



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




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##### Table of Contents



Results of Operations
 Revenues.
 Three Months Ended March 31,2008
    
    
    2007Manufacturing
    
    
    Hospitality
    
    
    Total
    
    
    Manufacturing
    
    
    Hospitality
    
    
    TotalSoftware licenses
    
    $
    1,204
    
    
    $
    2,808
    
    
    $
    4,012
    
    
    $
    1,233
    
    
    $
    1,638
    
    
    $
    2,871Maintenance and
support
    
    
    7,817
    
    
    
    5,696
    
    
    
    13,513
    
    
    
    7,884
    
    
    
    5,597
    
    
    
    13,481Professional services
    
    
    2,751
    
    
    
    1,940
    
    
    
    4,691
    
    
    
    2,815
    
    
    
    1,592
    
    
    
    4,407Third-party software
and hardware
    
    
    144
    
    
    
    1,295
    
    
    
    1,439
    
    
    
    187
    
    
    
    479
    
    
    
    666Total
    
    $
    11,916
    
    
    $
    11,739
    
    
    $
    23,655
    
    
    $
    12,119
    
    
    $
    9,306
    
    
    $
    21,425
 % ChangeManufacturing
    
    Hospitality
    
    TotalSoftware licenses
    
    
    -2.4
    %
    
    
    71.4
    %
    
    
    39.7
    %Maintenance and support
    
    
    -0.8
    %
    
    
    1.8
    %
    
    
    0.2
    %Professional services
    
    
    -2.3
    %
    
    
    21.9
    %
    
    
    6.4
    %Third-party software
and hardware
    
    
    -23.0
    %
    
    
    170.4
    %
    
    
    116.1
    %Total
    
    
    -1.7
    %
    
    
    26.1
    %
    
    
    10.4
    %
 Six Months Ended March 31,2008
    
    
    2007Manufacturing
    
    
    Hospitality
    
    
    Total
    
    
    Manufacturing
    
    
    Hospitality
    
    
    TotalSoftware licenses
    
    $
    2,731
    
    
    $
    4,278
    
    
    $
    7,009
    
    
    $
    2,682
    
    
    $
    5,651
    
    
    $
    8,333Maintenance and
support
    
    
    15,913
    
    
    
    11,164
    
    
    
    27,077
    
    
    
    15,957
    
    
    
    11,282
    
    
    
    27,239Professional services
    
    
    5,573
    
    
    
    4,044
    
    
    
    9,617
    
    
    
    5,806
    
    
    
    3,539
    
    
    
    9,345Third-party software
and hardware
    
    
    259
    
    
    
    1,942
    
    
    
    2,201
    
    
    
    395
    
    
    
    1,108
    
    
    
    1,503Total
    
    $
    24,476
    
    
    $
    21,428
    
    
    $
    45,904
    
    
    $
    24,840
    
    
    $
    21,580
    
    
    $
    46,420
 % ChangeManufacturing
    
    Hospitality
    
    TotalSoftware licenses
    
    
    1.8
    %
    
    
    -24.3
    %
    
    
    -15.9
    %Maintenance and support
    
    
    -0.3
    %
    
    
    -1.0
    %
    
    
    -0.6
    %Professional services
    
    
    -4.0
    %
    
    
    14.3
    %
    
    
    2.9
    %Third-party software
and hardware
    
    
    -34.4
    %
    
    
    75.3
    %
    
    
    46.4
    %Total
    
    
    -1.5
    %
    
    
    -0.7
    %
    
    
    -1.1
    %
 17




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##### Table of Contents



Three Months Ended March 31,2008
    
    
    2007Manufacturing
    
    
    Hospitality
    
    
    Total
    
    
    Manufacturing
    
    
    Hospitality
    
    
    TotalAmericas
    
    $
    7,077
    
    
    $
    7,458
    
    
    $
    14,535
    
    
    $
    7,200
    
    
    $
    5,685
    
    
    $
    12,885Europe, Middle East
and Africa
    
    
    3,312
    
    
    
    2,390
    
    
    
    5,702
    
    
    
    3,421
    
    
    
    2,219
    
    
    
    5,640Asia Pacific
    
    
    1,527
    
    
    
    1,891
    
    
    
    3,418
    
    
    
    1,498
    
    
    
    1,402
    
    
    
    2,900Total
    
    $
    11,916
    
    
    $
    11,739
    
    
    $
    23,655
    
    
    $
    12,119
    
    
    $
    9,306
    
    
    $
    21,425
 % ChangeManufacturing
    
    Hospitality
    
    TotalAmericas
    
    
    -1.7
    %
    
    
    31.2
    %
    
    
    12.8
    %Europe, Middle East
and Africa
    
    
    -3.2
    %
    
    
    7.7
    %
    
    
    1.1
    %Asia Pacific
    
    
    1.9
    %
    
    
    34.9
    %
    
    
    17.9
    %Total
    
    
    -1.7
    %
    
    
    26.1
    %
    
    
    10.4
    %
 Six Months Ended March 31,2008
    
    
    2007Manufacturing
    
    
    Hospitality
    
    
    Total
    
    
    Manufacturing
    
    
    Hospitality
    
    
    TotalAmericas
    
    $
    14,671
    
    
    $
    13,236
    
    
    $
    27,907
    
    
    $
    14,392
    
    
    $
    13,995
    
    
    $
    28,387Europe, Middle East
and Africa
    
    
    6,661
    
    
    
    4,334
    
    
    
    10,995
    
    
    
    7,115
    
    
    
    4,610
    
    
    
    11,725Asia Pacific
    
    
    3,144
    
    
    
    3,858
    
    
    
    7,002
    
    
    
    3,333
    
    
    
    2,975
    
    
    
    6,308Total
    
    $
    24,476
    
    
    $
    21,428
    
    
    $
    45,904
    
    
    $
    24,840
    
    
    $
    21,580
    
    
    $
    46,420
 % ChangeManufacturing
    
    Hospitality
    
    TotalAmericas
    
    
    1.9
    %
    
    
    -5.4
    %
    
    
    -1.7
    %Europe, Middle East
and Africa
    
    
    -6.4
    %
    
    
    -6.0
    %
    
    
    -6.2
    %Asia Pacific
    
    
    -5.7
    %
    
    
    29.7
    %
    
    
    11.0
    %Total
    
    
    -1.5
    %
    
    
    -0.7
    %
    
    
    -1.1
    %
 Manufacturing Segment
  Software License Revenue.
 Maintenance and Support Revenue.
 18




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##### Table of Contents



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




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##### Table of Contents



Revenue by Geography.
 Gross Margin.
 Three Months Ended March 31,2008
    
    2007Manufacturing
    
    Hospitality
    
    Total
    
    Manufacturing
    
    Hospitality
    
    TotalSoftware licenses
    
    
    88.8
    %
    
    
    83.8
    %
    
    
    85.3
    %
    
    
    89.4
    %
    
    
    94.5
    %
    
    
    92.3
    %Maintenance and
support
    
    
    77.6
    %
    
    
    57.9
    %
    
    
    69.3
    %
    
    
    78.4
    %
    
    
    56.4
    %
    
    
    68.9
    %Professional services
    
    
    20.2
    %
    
    
    2.7
    %
    
    
    13.0
    %
    
    
    18.6
    %
    
    
    -24.3
    %
    
    
    3.8
    %Third-party software
and hardware
    
    
    -19.9
    %
    
    
    35.8
    %
    
    
    30.2
    %
    
    
    8.3
    %
    
    
    18.2
    %
    
    
    15.4
    %Total
    
    
    64.3
    %
    
    
    52.5
    %
    
    
    58.5
    %
    
    
    64.6
    %
    
    
    47.3
    %
    
    
    56.7
    %
 Six Months Ended March 31,2008
    
    2007Manufacturing
    
    Hospitality
    
    Total
    
    Manufacturing
    
    Hospitality
    
    TotalSoftware licenses
    
    
    88.3
    %
    
    
    79.9
    %
    
    
    83.2
    %
    
    
    84.3
    %
    
    
    85.7
    %
    
    
    85.3
    %Maintenance and
support
    
    
    78.5
    %
    
    
    57.6
    %
    
    
    69.9
    %
    
    
    78.5
    %
    
    
    59.4
    %
    
    
    70.3
    %Professional services
    
    
    20.1
    %
    
    
    7.5
    %
    
    
    14.8
    %
    
    
    17.6
    %
    
    
    -7.6
    %
    
    
    7.6
    %Third-party software
and hardware
    
    
    -26.3
    %
    
    
    27.4
    %
    
    
    21.1
    %
    
    
    15.7
    %
    
    
    27.1
    %
    
    
    24.1
    %Total
    
    
    65.2
    %
    
    
    49.9
    %
    
    
    58.0
    %
    
    
    63.9
    %
    
    
    53.6
    %
    
    
    58.9
    %
 Manufacturing Segment
     20




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##### Table of Contents



Hospitality Segment
      Operating Expenses and Operating Income (Loss).
 Three Months Ended March 31,2008
    
    
    2007Manufacturing
    
    
    Hospitality
    
    
    Total
    
    
    Manufacturing
    
    
    Hospitality
    
    
    TotalSelling and marketing
    
    $
    2,025
    
    
    $
    2,943
    
    
    $
    4,968
    
    
    $
    2,593
    
    
    $
    2,170
    
    
    $
    4,763Research and product
development
    
    
    1,674
    
    
    
    2,412
    
    
    
    4,086
    
    
    
    1,879
    
    
    
    1,974
    
    
    
    3,853General and administrative
    
    
    2,256
    
    
    
    3,315
    
    
    
    5,571
    
    
    
    2,589
    
    
    
    2,741
    
    
    
    5,330Restructuring related charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    5,955
    
    
    $
    8,670
    
    
    $
    14,625
    
    
    $
    7,061
    
    
    $
    6,885
    
    
    $
    13,946Operating income (loss)
    
    $
    1,699
    
    
    $
    (2,497
    )
    
    $
    (798
    )
    
    $
    770
    
    
    $
    (2,563
    )
    
    $
    (1,793
    )
 Six Months Ended March 31,2008
    
    
    2007Manufacturing
    
    
    Hospitality
    
    
    Total
    
    
    Manufacturing
    
    
    Hospitality
    
    
    TotalSelling and marketing
    
    $
    4,155
    
    
    $
    5,765
    
    
    $
    9,920
    
    
    $
    5,441
    
    
    $
    4,534
    
    
    $
    9,975Research and product
development
    
    
    3,282
    
    
    
    4,563
    
    
    
    7,845
    
    
    
    3,416
    
    
    
    3,759
    
    
    
    7,175General and administrative
    
    
    4,480
    
    
    
    6,401
    
    
    
    10,881
    
    
    
    5,008
    
    
    
    5,511
    
    
    
    10,519Restructuring related charges
    
    
    25
    
    
    
    
    
    
    
    25
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    11,942
    
    
    $
    16,729
    
    
    $
    28,671
    
    
    $
    13,865
    
    
    $
    13,804
    
    
    $
    27,669Operating income (loss)
    
    $
    3,998
    
    
    $
    (6,031
    )
    
    $
    (2,033
    )
    
    $
    1,991
    
    
    $
    (2,342
    )
    
    $
    (351
    )
 21




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##### Table of Contents



Selling and Marketing.
 Research and Product Development.
 General and Administrative.
 Restructuring Related Charges.
 Non-Operating Income and Expenses, Income Taxes and Preferred Stock Dividends.
 22




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##### Table of Contents



Three Months Ended
    
    Six Months EndedMarch 31,
    
    March 31,2008
    
    2007
    
    2008
    
    2007Interest expense
    
    $
    (496
    )
    
    $
    (472
    )
    
    $
    (988
    )
    
    $
    (944
    )Other (expense) income, net
    
    
    153
    
    
    
    (89
    )
    
    
    510
    
    
    
    (40
    )Provision for (benefit from) income taxes
    
    
    (1,186
    )
    
    
    457
    
    
    
    (2,223
    )
    
    
    973Preferred stock dividends
    
    
    (485
    )
    
    
    (491
    )
    
    
    (976
    )
    
    
    (982
    )
 Interest
Expense.
 Other Income, Net.
 Provision for Income Taxes.
   Accounting for
Uncertainty in Income Taxes
 Preferred Stock Dividends.
 23




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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
 Managements Discussion and Analysis
of Financial Condition and Results of Operations
   24




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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
  25




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##### Table of Contents



PART II.  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  1.
    
    Election of Director Dann V. Angeloff: For 47,058,640, Withhold 705,699.2.
    
    Election of Director George H. Ellis: For 46,600,848, Withhold 1,163,491.3.
    
    Election of Director John Hunt: For 46,628,219, Withhold 1,136,120.4.
    
    Approval of an amendment to the 2001 Stock Incentive Plan to increase authorized shares
by 1,500,000: For 23,317,649, Against 4,256,573, Abstain 6,432,927, Broker Non-Vote
13,757,190.
 
 Item 5. Other Information
  
 Item 6. Exhibits
 10.20
    
    Fourth Amendment to Credit Agreement dated February 13, 200810.21
    
    Amendment No. 1 to Severance Pay Agreements with Ralf Suerken, Steven VanTassel and Gregg
Waldon
Dated May 12, 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



SIGNATURES
  SoftBrands, Inc.Date: May 12, 2008
    
    By:
    
    /s/ GREGG A. WALDON

Gregg A. WaldonSenior Vice President and Chief Financial Officer(principal financial and accounting officer)
 27