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MAIL STOP 4-6

Ms. Barbara C. Jacobs, Esq.

Mr. Jeffrey Werbitt

Securities and Exchange Commission

450 Fifth Street NW

Washington, DC 20549

Re:                               SoftBrands, Inc.

Form 10/A filed March 15, 2005

Form 10-Q filed March 15, 2005 for the period ended December 31,
2004

Form 10-Q/A filed March 17, 2005 for the period ended December 31,
2004

File No. 0-51118

Dear Ms. Jacobs and Mr. Werbitt:

This letter is in response to your letter dated April 14,
2005 relating to the above filings.  We
are filing via EDGAR, simultaneous with this letter, an amended Form 10
and an amended Form 10-Q that we believe address your comments.  With respect to each of your comments, we
have repeated the text of your comment below followed by our response.  If our response includes a revision to our Form 10/A
or Form 10-Q, where practical, we have also included the text of the
revision.

Form 10/A

Management’s
Discussion and Analysis of Financial Condition and Results of Operations, page 22.

Critical
Accounting Policies and Estimates, page 23

1.
It seems that any failure of your controls over contract preparation and review
could have adverse consequences in addition to recognizing less revenue. Revise
to expand your disclosure to include the impact of possible “ineffective”
conclusions regarding your disclosure controls and procedures and internal
control over financial reporting.

In
response to your comment and upon further review of the disclosure, we have
revised the critical accounting policy on revenue recognition to omit the
language “Although we anticipate that our controls over contract preparation
and review are adequate to avoid these revenue issues, if we fail to properly
document sales, or if the objective evidence of the value of the other elements
in a multi-element contract change, we might be required to record less, or
even no, revenue on shipment of products.”
This language is omitted for two reasons – 1) it inappropriately implied
that we experience revenue deferrals due to issues with our internal controls,
which is not accurate, and 2) the main point of the sentence is a repeat of the
language earlier in the paragraph, that is, that revenue is not necessarily
recognized upon shipment but only when all criteria of revenue recognition are
met.  We have replaced this language with
a new sentence that further clarifies that, if necessary, revenue is deferred
until all revenue recognition criteria are clearly met.  The paragraph, as revised, is as follows:

“We generate revenue primarily from sale of licenses
to our software under perpetual license agreements, from sale of software
maintenance or “customer support” for that software, from sale of services
related to the software, and in some instances from sale of related hardware.
In many cases in which we sell a software license, we also sell customer
support services, implementation services and hardware.  We generally recognize software license
revenue when we ship product to a customer.
In order to do so, we must make a determination that the software
license fees are fixed or determinable, that the shipment is not contingent on
customer acceptance or on the delivery of any other element of services or
products we provide, and that it is likely that we will collect the license
fees.  We must also have vendor-specific
objective evidence of fair value for each element of the contract that is not
delivered with the license and these elements can not be essential to the
performance of the software in order for revenue to be recognized
up-front.   We document our sales with contracts
or purchase orders that make it clear that the purchase of the software license
is not contingent or conditioned on the delivery of another element.   Although infrequent, if for any reason
documentation of an arrangement is incomplete or if our achievement of the
other criteria described above is not clear, we defer all or part of the
related revenue until the revenue recognition criteria are met.”

Liquidity
and Capital Resources, page 44

2.  We have read your response to prior comment
23 and the corresponding revised disclosure, which includes the non-GAAP
measure “working capital surplus, excluding the impact of deferred revenue.”
Given that this measure excludes deferred revenue, but includes the cash
generated by the transactions that resulted in the deferred revenue, it is not
clear to us why you believe that this measure is useful to investors.
Additionally, given that your failure to perform according to the terms of the
underlying arrangements could result in you refunding deferred amounts to your
customers, it is not clear to us why you believe that presentation of this
measure is appropriate under Rule 10(e)(1)(ii)(A) of Regulation S-K.
Accordingly, explain to us why you believe your presentation complies with the
requirements of Item 10(e) of Regulation S-K. Alternatively, consider
removing this measure.

We acknowledge your
comment and the nature of “working capital as adjusted for deferred revenue” as
a non-GAAP financial measure.  In
response to your comment, we have revised the disclosure in the enclosed Form 10/A
as follows:

“We
believe that cash flows from operations together with our cash and cash
equivalents will be sufficient to meet our commitments and our cash
requirements for at least the next twelve months.  Our working capital
deficit (current assets less current liabilities) of $13.4 million at September 30,
2004, included $18.0 million of deferred revenue representing our obligation to
provide maintenance services.  We
typically satisfy our obligations for maintenance services at a cost of
approximately 30% to 35% of the deferred revenue and fund the cost of that
obligation from cash flow and from renewals from the next subsequent annual
contract period for the maintenance contracts.”

In
addition, in response to this question
we have revised similar liquidity and capital resources disclosure in the December 31,
2004 Form 10-Q on page 17 as follows:

“As of
December 31, 2004, we had $9.7 million of cash and cash equivalents and
$899,000 of restricted cash.  Our working
capital deficit (current assets less current liabilities), increased from $13.4
million at September 30, 2004 to $15.6 million at December 31,
2004.  This increase in working capital
deficit is due to the reclassification from long-term to current of the $2.0
million principal payment of debt that is due on December 31, 2005.  The working capital deficit at December 31,
2004 includes deferred revenue of $19.9 million.  These deferred revenue obligations are
typically satisfied for substantially less than the carrying value. Deferred
maintenance revenues comprise the majority of our deferred revenues and our
cost to perform these revenues has recently been between 30% and 35% of total
maintenance revenue.  Our most significant
source of operating cash flows is derived from license, maintenance and service
fees.  Our primary uses of cash from
operating activities are for employee costs, third-party costs for services and
the cost of our facilities.”

Consolidated
Financial Statements

Note
1. Nature of Business and Company Operations

Basis
of Presentation, page F-7

3.
Supplementally, explain to us, in detail, how you evaluated the legal and
accounting impact of AremisSoft’s bankruptcy on SoftBrands. In your response,
indicate whether your evaluation would have changed had SoftBrands been
identified as the accounting spinee under EITF 02-11.

We
considered all relevant legal and accounting matters as a result of AremisSoft’s
bankruptcy.  We would have preferred to
find a basis upon which to treat SoftBrands as the accounting spinnee, which
would have allowed us to register with the SEC much earlier than we have.  We met with the SEC Staff on August 22,
2002, and we emphasized that SoftBrands had separate facilities and was never
integrated into AremisSoft.  We requested
dispensation – seeking either 1) that SoftBrands to be treated as the
accounting spinnee (rather than the spinnor) or 2) that carve-out financials be
considered adequate for Rule 3-05 purposes.  We presented this in detail at the meeting as
well as in follow-up letters dated August 28, 2002 and September 27,
2002.  The SEC staff, however, was unable
to provide any dispensation.

With
this background, we evaluated various legal and accounting issues regarding the
bankruptcy and related transactions.  In
particular, we evaluated whether the separation should be treated as a forward
or reverse spin, we considered whether fresh start accounting applied and we
evaluated whether to report AremisSoft as a discontinued operation.  Each of these is discussed below in detail.

Forward
or reverse spin

Legal
view: Legally,
SoftBrands was spun off as a NEWCO.
After August 2, 2002, SoftBrands had no further interaction with
AremisSoft qua former
parent.  Historically, the activities of
AremisSoft and its non-SoftBrands subsidiaries had minimal interaction with
SoftBrands, and post spin, SoftBrands has had no “privileged” status in
transactions between the two entities.

Accounting
view: Although EITF 02-11
did not technically apply to a spin transaction in August 2002, given that
it was effective for spinoffs completed after September 12, 2002, we still
considered it at the time and disclosed consideration of EITF 02-11 in our
footnotes.  This GAAP guidance
articulated long-standing views of the Staff such as those articulated in Mr. R.
Scott Blackley’s speech on December 4, 2000.

From an accounting
perspective, SoftBrands spun off the non-operating and much smaller parent as a
discontinued subsidiary.  Based on the facts and circumstances, it was determined
that AremisSoft did not represent the larger, more substantive business.  In fact, AremisSoft did not even qualify as a
business under EITF 98-3 as it did not have the required inputs, processes and
outputs to conduct normal operations.
SoftBrands had all of the operations and clearly was intended to be the
ongoing operation.

In accordance with EITF 02-11, as well as
informal SEC guidance from prior to the effective date of the EITF, we
concluded that the legal spinoff of SoftBrands from AremisSoft should be accounted
for as a reverse spinoff.  As previously
mentioned, we considered the issuance of EITF 02-11
to be simply confirming GAAP and SEC guidance that existed prior to this
formalization.  Each of the indicators noted in paragraph 8 of EITF 02-11 support
treating this as a reverse spinoff, as follows:

•              The size of the legal spinnor and the legal
spinnee – In all respects including assets, revenues and earnings, SoftBrands
(the legal spinnee) was significantly larger than AremisSoft (the legal
spinnor) on August 2, 2002.

•              The fair value of the legal spinnor and the
legal spinnee – The fair value of SoftBrands was greater than the fair value of
AremisSoft on August 2, 2002.
SoftBrands fair value was approximately $20 million, while the fair
value of AremisSoft on a stand-alone basis, given all the fraud and legal
issues, was essentially zero.

•              Senior management – SoftBrands retained the
senior management of the formerly combined entity (AremisSoft), including the
CEO, COO and CFO.

•              Length of time to be held – SoftBrands is the
only operating entity continuing following the bankruptcy/spinoff.  AremisSoft still exists as a legal entity,
but it is dormant and is expected to be legally shut down in the near future.

In
conclusion, we considered both the form (or the legal aspect) as well as the substance (or the accounting aspect) of this
spin and ultimately concluded that the substantive approach is the most
accurate depiction of the substance of the transaction for shareholders and
other users of the financial statements.
To quote the words of Mr. Blackley, we believe this is the “most relevant presentation and clearly is a
faithful representation of the transaction”.

Fresh
start accounting

Legal
view: From a legal
perspective, AremisSoft entered bankruptcy.
SoftBrands did not.  Therefore,
fresh start accounting cannot apply to SoftBrands.

Accounting
view: As a
precaution, and due to the fact SoftBrands was the clear accounting successor,
we evaluated the impact of the transaction from a substantive standpoint.  With SoftBrands having the only operations
and the only businesses, we evaluated as if SoftBrands had been in bankruptcy,
whether fresh start accounting would apply.
As described in our response to prior comment 36 and further described
in our responses to comments 5 and 6 below, it was clear to us then that the
insolvency criteria did not apply and it appeared that the greater than 50%
change in equity did not apply as well.
Now, as described in our response to comment 6 below, we continue to
believe that both criteria did not apply.

Discontinued
operations of AremisSoft

Legal view – Under normal circumstances, AremisSoft’s
disposition of SoftBrands would have required AremisSoft to report SoftBrands’
results as discontinued operations, and freed SoftBrands of any responsibility
for recording AremisSoft’s activities, beyond historical related-party
disclosures.

Accounting
view - In accordance with footnote 2 of EITF
02-11, “the accounting spinnee should be reported as a discontinued operation
by the accounting spinnor if the spinnee is a component
of an entity (paragraph 41 of Statement 144) and meets the
conditions for such reporting contained in paragraph 42 of Statement 144.”

Using
this guidance, we concluded that AremisSoft should be presented as a
discontinued operation.  From a reverse
spinoff perspective, AremisSoft was essentially a wholly-owned subsidiary of
SoftBrands.  The operations of this “subsidiary”
were discontinued prior to December 31, 2001, and the only transactions
taking place for AremisSoft in 2002 were the legal expenses and other wind-down
costs.  In addition, the operations and
cash flows of AremisSoft were, as of August 2, 2002, eliminated from the
ongoing operations of SoftBrands, and SoftBrands did not have any significant
continuing involvement in AremisSoft’s operations.

4.
Supplementally, explain how you determined that the spin-off of SoftBrands to
both AremisSoft stockholders and class action claimants was considered a pro
rata distribution in accordance with paragraph 3 of EITF 02-11.

As mentioned in our response
to the previous comment, EITF 02-11 did not technically apply.  Nonetheless, paragraph 3 of EITF 02-11, which
references APB Opinion 29
paragraph 23, is copied below, with emphasis added to the section relevant
to our response to your comment.

3.   The accounting guidance for spinoffs is
provided in Opinion 29.  Although the basic principle underlying Opinion
29 is that the accounting for nonmonetary transactions should be based on the
fair values of the assets (or services) involved, it provides a modification to
that

basic principle for nonreciprocal
transfers to owners (such as spinoffs).  Opinion 29, paragraph 23 (as
amended by Statement 144), states:

Accounting for the distribution of nonmonetary assets to owners of an
enterprise in a spin-off or other form of reorganization or liquidation or in a
plan that is in substance the rescission of a prior business combination should
be based on the recorded amount (after reduction, if appropriate, for an
indicated impairment of value) of the nonmonetary assets distributed.  A
prorata distribution to owners of an enterprise of shares of a subsidiary or
other investee company that has been or is being consolidated or that has been
or is being accounted for under the equity method is to be considered to be
equivalent to a spin-off.  Other
nonreciprocal transfers of nonmonetary assets to owners should be accounted for
at fair value if the fair value of the nonmonetary asset distributed is
objectively measurable and would be clearly realiz