##### 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 July 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 0-22823
 QAD Inc.
  Delaware
    
    77-0105228(State or other jurisdiction of incorporation or
    
    (I.R.S. Employer Identification No.)organization)
 100 Innovation Place, Santa Barbara, California 93108
 (805) 566-6000
 þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



QAD INC.
INDEX
 PagePART I  FINANCIAL INFORMATIONITEM 1 Financial Statements (unaudited)Condensed Consolidated Balance Sheets as of July 31, 2008 and January 31, 2008
    
    
    1Condensed Consolidated Statements of Operations for the Three and Six Months Ended July 31, 2008 and 2007
    
    
    2Condensed Consolidated Statements of Cash Flows for the Six Months Ended July 31, 2008 and 2007
    
    
    3Notes to Condensed Consolidated Financial Statements
    
    
    4ITEM 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
    
    
    27Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2




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##### Table of Contents



PART I
 
 ITEM 1
 FINANCIAL STATEMENTS
 QAD INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (in thousands, except share data)
 (unaudited)
 July 31,
    
    
    January 31,2008
    
    
    2008AssetsCurrent assets:Cash and equivalents
    
    $
    43,189
    
    
    $
    45,613Marketable securities
    
    
    228
    
    
    
    Accounts receivable, net
    
    
    56,836
    
    
    
    83,027Other current assets
    
    
    24,993
    
    
    
    22,742Total current assets
    
    
    125,246
    
    
    
    151,382Property and equipment, net
    
    
    42,769
    
    
    
    42,450Capitalized software costs, net
    
    
    7,794
    
    
    
    8,783Goodwill
    
    
    23,807
    
    
    
    22,591Other assets, net
    
    
    11,330
    
    
    
    10,687Total assets
    
    $
    210,946
    
    
    $
    235,893Liabilities and stockholders equityCurrent liabilities:Current portion of long-term debt
    
    $
    267
    
    
    $
    274Accounts payable
    
    
    7,064
    
    
    
    12,249Deferred revenue
    
    
    75,063
    
    
    
    89,349Other current liabilities
    
    
    37,053
    
    
    
    40,664Total current liabilities
    
    
    119,447
    
    
    
    142,536Long-term debt
    
    
    16,866
    
    
    
    16,998Other liabilities
    
    
    3,972
    
    
    
    3,764Commitments and contingenciesStockholders equity:Preferred stock, $0.001 par value. Authorized 5,000,000
shares; none issued and outstanding
    
    
    
    
    
    
    Common stock, $0.001 par value. Authorized 150,000,000
shares; issued 35,350,481 and 35,347,367 shares at
July 31, 2008 and January 31, 2008, respectively
    
    
    35
    
    
    
    35Additional paid-in capital
    
    
    138,064
    
    
    
    135,362Treasury stock, at cost (4,686,634 and 4,596,476 shares at
July 31, 2008 and January 31, 2008, respectively)
    
    
    (37,271
    )
    
    
    (36,336
    )Accumulated deficit
    
    
    (25,597
    )
    
    
    (21,596
    )Accumulated other comprehensive loss
    
    
    (4,570
    )
    
    
    (4,870
    )Total stockholders equity
    
    
    70,661
    
    
    
    72,595Total liabilities and stockholders equity
    
    $
    210,946
    
    
    $
    235,893
   1




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##### Table of Contents



QAD INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (in thousands, except per share data)
 (unaudited)
 Three Months Ended
    
    
    Six Months EndedJuly 31,
    
    
    July 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenue:License fees
    
    $
    11,432
    
    
    $
    14,811
    
    
    $
    23,393
    
    
    $
    25,008Maintenance and other
    
    
    34,495
    
    
    
    31,766
    
    
    
    68,654
    
    
    
    62,803Services
    
    
    23,586
    
    
    
    17,620
    
    
    
    44,304
    
    
    
    33,030Total revenue
    
    
    69,513
    
    
    
    64,197
    
    
    
    136,351
    
    
    
    120,841Costs and expenses:Cost of license fees
    
    
    2,497
    
    
    
    2,060
    
    
    
    4,785
    
    
    
    3,923Cost of maintenance, service and other revenue
    
    
    29,963
    
    
    
    24,792
    
    
    
    57,652
    
    
    
    47,711Sales and marketing
    
    
    19,864
    
    
    
    17,894
    
    
    
    38,113
    
    
    
    33,987Research and development
    
    
    11,297
    
    
    
    9,946
    
    
    
    22,371
    
    
    
    20,389General and administrative
    
    
    8,597
    
    
    
    8,582
    
    
    
    16,920
    
    
    
    16,709Amortization of intangibles from acquisitions
    
    
    197
    
    
    
    197
    
    
    
    375
    
    
    
    408Total costs and expenses
    
    
    72,415
    
    
    
    63,471
    
    
    
    140,216
    
    
    
    123,127Operating (loss) income
    
    
    (2,902
    )
    
    
    726
    
    
    
    (3,865
    )
    
    
    (2,286
    )Other expense (income):Interest income
    
    
    (462
    )
    
    
    (578
    )
    
    
    (847
    )
    
    
    (1,163
    )Interest expense
    
    
    323
    
    
    
    381
    
    
    
    639
    
    
    
    700Other expense (income), net
    
    
    94
    
    
    
    1
    
    
    
    436
    
    
    
    (75
    )Total other (income) expense
    
    
    (45
    )
    
    
    (196
    )
    
    
    228
    
    
    
    (538
    )(Loss) income before income taxes
    
    
    (2,857
    )
    
    
    922
    
    
    
    (4,093
    )
    
    
    (1,748
    )Income tax (benefit) expense
    
    
    (1,424
    )
    
    
    378
    
    
    
    (1,930
    )
    
    
    (400
    )Net (loss) income
    
    $
    (1,433
    )
    
    $
    544
    
    
    $
    (2,163
    )
    
    $
    (1,348
    )Basic net (loss) income per share
    
    $
    (0.05
    )
    
    $
    0.02
    
    
    $
    (0.07
    )
    
    $
    (0.04
    )Diluted net (loss) income per share
    
    $
    (0.05
    )
    
    $
    0.02
    
    
    $
    (0.07
    )
    
    $
    (0.04
    )
   2




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##### Table of Contents



QAD INC.
 
 CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in thousands)
 (unaudited)
 Six Months EndedJuly 31,2008
    
    
    2007Cash flows from operating activities:Net loss
    
    $
    (2,163
    )
    
    $
    (1,348
    )Adjustments to reconcile net loss to net cash provided by operating
activities:Depreciation and amortization
    
    
    5,450
    
    
    
    4,280Provision for doubtful accounts and sales adjustments
    
    
    47
    
    
    
    337Gain on disposal of property and equipment
    
    
    (1
    )
    
    
    (85
    )Exit costs
    
    
    
    
    
    
    24Stock compensation expense
    
    
    3,197
    
    
    
    3,000Other, net
    
    
    (154
    )
    
    
    (255
    )Changes in assets and liabilities, net of effects from acquisitions:Accounts receivable
    
    
    27,108
    
    
    
    15,882Other assets
    
    
    (2,672
    )
    
    
    1,907Accounts payable
    
    
    (3,601
    )
    
    
    (3,418
    )Deferred revenue
    
    
    (15,968
    )
    
    
    (9,567
    )Other liabilities
    
    
    (4,167
    )
    
    
    (2,659
    )Net cash provided by operating activities
    
    
    7,076
    
    
    
    8,098Cash flows from investing activities:Purchase of property and equipment
    
    
    (2,918
    )
    
    
    (2,302
    )Capitalized software costs
    
    
    (434
    )
    
    
    (733
    )Acquisition of businesses, net of cash acquired
    
    
    (2,491
    )
    
    
    (990
    )Proceeds from sale of property and equipment
    
    
    3
    
    
    
    99Net cash used in investing activities
    
    
    (5,840
    )
    
    
    (3,926
    )Cash flows from financing activities:Repayments of debt
    
    
    (139
    )
    
    
    (144
    )Proceeds from issuance of common stock
    
    
    435
    
    
    
    1,723Changes in cash overdraft
    
    
    (610
    )
    
    
    (1,359
    )Dividends paid
    
    
    (1,533
    )
    
    
    (1,626
    )Repurchase of common stock
    
    
    (2,219
    )
    
    
    (12,283
    )Net cash used in financing activities
    
    
    (4,066
    )
    
    
    (13,689
    )Effect of exchange rates on cash and equivalents
    
    
    406
    
    
    
    2,113Net decrease in cash and equivalents
    
    
    (2,424
    )
    
    
    (7,404
    )Cash and equivalents at beginning of period
    
    
    45,613
    
    
    
    54,192Cash and equivalents at end of period
    
    $
    43,189
    
    
    $
    46,788
   3




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##### Table of Contents



QAD INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)
 1. BASIS OF PRESENTATION
  2. RECENT ACCOUNTING PRONOUNCEMENTS
 Determination of the Useful Life of Intangible Assets
  Business Combinations
  Minority Interests
   4




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##### Table of Contents



QAD INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
 3. COMPUTATION OF NET (LOSS) INCOME PER SHARE
  Three Months Ended
    
    
    Six Months EndedJuly 31,
    
    
    July 31,2008
    
    
    2007
    
    
    2008
    
    
    2007(in thousands, except per share data)Net (loss) income
    
    $
    (1,433
    )
    
    $
    544
    
    
    $
    (2,163
    )
    
    $
    (1,348
    )Weighted average shares of common
stock outstanding  basic
    
    
    30,620
    
    
    
    31,871
    
    
    
    30,648
    
    
    
    32,144Weighted average shares of common
stock equivalents issued using the
treasury stock method
    
    
    
    
    
    
    822
    
    
    
    
    
    
    
    Weighted average shares of common
stock and common stock equivalents
outstanding  diluted
    
    
    30,620
    
    
    
    32,693
    
    
    
    30,648
    
    
    
    32,144Basic net (loss) income per share
    
    $
    (0.05
    )
    
    $
    0.02
    
    
    $
    (0.07
    )
    
    $
    (0.04
    )Diluted net (loss) income per share
    
    $
    (0.05
    )
    
    $
    0.02
    
    
    $
    (0.07
    )
    
    $
    (0.04
    )
  4. COMPREHENSIVE (LOSS) INCOME
  Three Months Ended
    
    
    Six Months EndedJuly 31,
    
    
    July 31,2008
    
    
    2007
    
    
    2008
    
    
    2007(in thousands)Net (loss) income
    
    $
    (1,433
    )
    
    $
    544
    
    
    $
    (2,163
    )
    
    $
    (1,348
    )Foreign currency translation adjustments
    
    
    (17
    )
    
    
    380
    
    
    
    300
    
    
    
    1,728Comprehensive (loss) income
    
    $
    (1,450
    )
    
    $
    924
    
    
    $
    (1,863
    )
    
    $
    380
  5




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##### Table of Contents



QAD INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
 5. FAIR VALUE MEASUREMENTS
        Fair value measurement at reporting date usingQuoted Prices inActive Markets for
    
    
    Significant Other
    
    
    SignificantJuly 31,
    
    
    Identical Assets
    
    
    Observable Inputs
    
    
    Unobservable InputsDescription
    
    2008
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Cash equivalents:Money market mutual funds
    
    $
    31,454
    
    
    $
    31,454
    
    
    $
    
    
    
    $
    Marketable securities:Auction rate preferred securities
    
    
    228
    
    
    
    
    
    
    
    
    
    
    
    228Total
    
    $
    31,682
    
    
    $
    31,454
    
    
    $
    
    
    
    $
    228
  (Level 3)Balance at January 31, 2008
    
    $
    Marketable securities
    
    
    228Balance at July 31, 2008
    
    $
    228
   6




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##### Table of Contents



QAD INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
 6. BUSINESS COMBINATIONS
 FullTilt
  Thailand Subsidiary Minority Interest
  7. CAPITALIZED SOFTWARE COSTS
  July 31,
    
    
    January 31,2008
    
    
    2008(in thousands)Capitalized software costs:Acquired software technology
    
    $
    9,573
    
    
    $
    8,884Capitalized software development costs
    
    
    3,519
    
    
    
    3,10313,092
    
    
    
    11,987Less: accumulated amortization
    
    
    (5,298
    )
    
    
    (3,204
    )Capitalized software costs, net
    
    $
    7,794
    
    
    $
    8,783
    7




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##### Table of Contents



QAD INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
 8. GOODWILL AND INTANGIBLE ASSETS
 Goodwill
  North
    
    
    
    
    
    
    Asia
    
    
    LatinAmerica
    
    
    EMEA
    
    
    Pacific
    
    
    America
    
    
    Total(in thousands)Balances, January 31, 2008
    
    $
    4,133
    
    
    $
    16,650
    
    
    $
    991
    
    
    $
    817
    
    
    $
    22,591Additions related to
FullTilt acquisition
    
    
    189
    
    
    
    190
    
    
    
    
    
    
    
    
    
    
    
    379Impact of foreign
currency translation
    
    
    
    
    
    
    838
    
    
    
    (66
    )
    
    
    65
    
    
    
    837Balances, July 31, 2008
    
    $
    4,322
    
    
    $
    17,678
    
    
    $
    925
    
    
    $
    882
    
    
    $
    23,807
  Intangible Assets
 July 31,
    
    
    January 31,2008
    
    
    2008(in thousands)Amortizable intangible assets:Customer relationships
    
    $
    1,730
    
    
    $
    1,528Trade name
    
    
    608
    
    
    
    565Covenant not to compete
    
    
    184
    
    
    
    1852,522
    
    
    
    2,278Less: accumulated amortization
    
    
    (1,535
    )
    
    
    (1,130
    )Amortizable intangible assets, net
    
    $
    987
    
    
    $
    1,148
   8




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##### Table of Contents



QAD INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
 9. DEBT
 July 31,
    
    
    January 31,2008
    
    
    2008(in thousands)Total debt:Notes payable
    
    $
    17,124
    
    
    $
    17,245Capital lease obligations
    
    
    9
    
    
    
    2717,133
    
    
    
    17,272Less current maturities
    
    
    (267
    )
    
    
    (274
    )Long-term debt
    
    $
    16,866
    
    
    $
    16,998
 Notes Payable
  Credit Facility
    10. INCOME TAXES
   9




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##### Table of Contents



QAD INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
 10. INCOME TAXES (Continued)
   11. STOCK-BASED COMPENSATION
   Three Months Ended
    
    
    Six Months EndedJuly 31,
    
    
    July 31,2008
    
    
    2007
    
    
    2008
    
    
    2007(in thousands)Stock-based compensation expense:Cost of maintenance, service and other revenue
    
    $
    320
    
    
    $
    261
    
    
    $
    613
    
    
    $
    509Sales and marketing
    
    
    421
    
    
    
    305
    
    
    
    808
    
    
    
    656Research and development
    
    
    216
    
    
    
    203
    
    
    
    460
    
    
    
    424General and administrative
    
    
    636
    
    
    
    754
    
    
    
    1,316
    
    
    
    1,411Total stock-based compensation expense
    
    $
    1,593
    
    
    $
    1,523
    
    
    $
    3,197
    
    
    $
    3,000
   10




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##### Table of Contents



QAD INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
 11. STOCK-BASED COMPENSATION (Continued)
  Six Months EndedJuly 31,2008
    
    
    2007Expected life in years (1)
    
    
    5.25
    
    
    
    5.25Risk free interest rate (2)
    
    
    3.22
    %
    
    
    4.59
    %Volatility (3)
    
    
    50
    %
    
    
    59
    %Dividend rate (4)
    
    
    1.31
    %
    
    
    1.04
    %
 (1)
    
    The expected life of SARs granted under the stock plans is based on historical exercise
patterns, which the Company believes are representative of future behavior.(2)
    
    The risk-free interest rate is based on the U.S. Treasury yield for a term consistent with
the expected life of the SARs in effect at the time of grant.(3)
    
    The Company estimates the volatility of its common stock at the date of grant based on the
historical volatility of the Companys common stock, which it believes is representative of
the expected volatility over the expected life of SARs.(4)
    
    The Company expects to continue paying quarterly dividends at the same rate as it has over
the last year.  Weighted
    
    
    WeightedAverage
    
    
    AverageOptions/
    
    
    Exercise
    
    
    Remaining
    
    
    AggregateSARs
    
    
    Price per
    
    
    Contractual
    
    
    Intrinsic Value(in thousands)
    
    
    Share
    
    
    Term (years)
    
    
    (in thousands)Outstanding at January 31, 2008
    
    
    5,628
    
    
    $
    7.98
    
    
    
    5.4
    
    
    $
    7,273Granted
    
    
    1,096
    
    
    
    7.69Exercised
    
    
    (115
    )
    
    
    4.03Expired
    
    
    (82
    )
    
    
    10.46Forfeited
    
    
    (78
    )
    
    
    8.17Outstanding at July 31, 2008
    
    
    6,449
    
    
    $
    7.96
    
    
    
    5.5
    
    
    $
    1,869Vested and expected to vest at
July 31, 2008 (1)
    
    
    6,050
    
    
    $
    7.96
    
    
    
    5.4
    
    
    $
    1,868Vested and exercisable at July 31, 2008
    
    
    3,341
    
    
    $
    7.96
    
    
    
    4.3
    
    
    $
    1,855
 
 (1)
    
    The expected-to-vest options and SARs are the result of applying the
pre-vesting forfeiture rate assumptions to total outstanding equity
awards.    11




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##### Table of Contents



QAD INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
 11. STOCK-BASED COMPENSATION (Continued)
   WeightedAverageRSUs
    
    
    Grant Date(in thousands)
    
    
    Fair ValueBalance at January 31, 2008
    
    
    334
    
    
    $
    8.17Granted
    
    
    122
    
    
    
    7.02Vested
    
    
    (70
    )
    
    
    8.22Balance at July 31, 2008
    
    
    386
    
    
    $
    7.79
  12. STOCKHOLDERS EQUITY
 Stock Repurchase Program
  13. COMMITMENTS AND CONTINGENCIES
 Indemnifications
   12




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##### Table of Contents



QAD INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
 13. COMMITMENTS AND CONTINGENCIES (Continued)
  Legal Actions
  14. BUSINESS SEGMENT INFORMATION
    Three Months Ended
    
    
    Six Months EndedJuly 31,
    
    
    July 31,2008
    
    
    2007
    
    
    2008
    
    
    2007(in thousands)Revenue:North America (1)
    
    $
    29,997
    
    
    $
    29,908
    
    
    $
    58,299
    
    
    $
    52,876EMEA
    
    
    21,948
    
    
    
    19,724
    
    
    
    43,303
    
    
    
    39,587Asia Pacific
    
    
    13,206
    
    
    
    10,335
    
    
    
    25,339
    
    
    
    20,366Latin America
    
    
    4,362
    
    
    
    4,230
    
    
    
    9,410
    
    
    
    8,012$
    69,513
    
    
    $
    64,197
    
    
    $
    136,351
    
    
    $
    120,841Operating income (loss):North America
    
    $
    2,594
    
    
    $
    5,160
    
    
    $
    5,740
    
    
    $
    7,498EMEA
    
    
    (403
    )
    
    
    83
    
    
    
    (688
    )
    
    
    274Asia Pacific
    
    
    1,130
    
    
    
    432
    
    
    
    2,182
    
    
    
    775Latin America
    
    
    (501
    )
    
    
    73
    
    
    
    (258
    )
    
    
    (22
    )Corporate
    
    
    (5,722
    )
    
    
    (5,022
    )
    
    
    (10,841
    )
    
    
    (10,811
    )$
    (2,902
    )
    
    $
    726
    
    
    $
    (3,865
    )
    
    $
    (2,286
    )
  13




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##### Table of Contents



QAD INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
 14. BUSINESS SEGMENT INFORMATION (Continued)
 July 31,
    
    
    January 31,2008
    
    
    2008(in thousands)Property and equipment, net:North America
    
    $
    34,833
    
    
    $
    34,682EMEA
    
    
    6,317
    
    
    
    6,082Asia Pacific
    
    
    1,118
    
    
    
    1,247Latin America
    
    
    501
    
    
    
    439$
    42,769
    
    
    $
    42,450
 
 (1)
    
    Sales into Canada accounted for 4% and 3% of North America total revenue in the three- and
six-month periods ended July 31, 2008 and for 3% of North America total revenue for the three- and
six-month periods ended July 31, 2007.  14




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##### Table of Contents



ITEM 2 
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 FORWARD-LOOKING STATEMENTS
  INTRODUCTION
  OVERVIEW
 The Business
   CRITICAL ACCOUNTING POLICIES
  Revenue Recognition
   15




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##### Table of Contents



License Revenue.
   Maintenance Revenue.
 Services Revenue.
   Accounts Receivable Allowances
  16




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##### Table of Contents



Goodwill and Intangible Assets
   Capitalized Software Development Costs.
 Valuation of Deferred Tax Assets and Tax Contingency Reserves
  17




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##### Table of Contents



Stock-based Compensation Expense
    18




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##### Table of Contents



RESULTS OF OPERATIONS
  Three Months Ended
    
    
    Six Months EndedJuly 31,
    
    
    July 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenue:License fees
    
    
    16
    %
    
    
    23
    %
    
    
    17
    %
    
    
    21
    %Maintenance and other
    
    
    50
    
    
    
    50
    
    
    
    50
    
    
    
    52Services
    
    
    34
    
    
    
    27
    
    
    
    33
    
    
    
    27Total revenue
    
    
    100
    
    
    
    100
    
    
    
    100
    
    
    
    100Costs and expenses:Cost of license fees
    
    
    4
    
    
    
    3
    
    
    
    4
    
    
    
    3Cost of maintenance, service and other revenue
    
    
    43
    
    
    
    39
    
    
    
    42
    
    
    
    40Sales and marketing
    
    
    29
    
    
    
    28
    
    
    
    28
    
    
    
    28Research and development
    
    
    16
    
    
    
    16
    
    
    
    16
    
    
    
    17General and administrative
    
    
    12
    
    
    
    13
    
    
    
    13
    
    
    
    14Amortization of intangibles from acquisitions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total costs and expenses
    
    
    104
    
    
    
    99
    
    
    
    103
    
    
    
    102Operating (loss) income
    
    
    (4
    )
    
    
    1
    
    
    
    (3
    )
    
    
    (2
    )Other (income) expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1
    )(Loss) income before income taxes
    
    
    (4
    )
    
    
    1
    
    
    
    (3
    )
    
    
    (1
    )Income tax (benefit) expense
    
    
    (2
    )
    
    
    
    
    
    
    (1
    )
    
    
    Net (loss) income
    
    
    (2
    )%
    
    
    1
    %
    
    
    (2
    )%
    
    
    (1
    )%
 Total Revenue
   19




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##### Table of Contents



License Revenue
  Maintenance and Other Revenue
   Services Revenue.
   20




---



##### Table of Contents



Total Cost of Revenue.
  Sales and Marketing.
  Research and Development.
   21




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##### Table of Contents



General and Administrative.
  Amortization of Intangibles from Acquisitions.
  Other Expense (Income)
  Income
Tax Expense (Benefit).
  LIQUIDITY AND CAPITAL RESOURCES
   22




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##### Table of Contents



Working Capital
      Cash Flows
  Operating Activities
   23




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##### Table of Contents



Investing Activities
  Financing Activities
   Contractual Obligations
 Credit Facility
    Notes Payable
   24




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##### Table of Contents



Obligations Associated with Acquisitions
  
 ITEM 3  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Foreign Exchange
  Interest Rates.
  
 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
 
 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
   Votes For
    
    
    Votes WithheldKarl F. Lopker
    
    
    24,414,984
    
    
    
    5,403,595Pamela M. Lopker
    
    
    24,413,975
    
    
    
    5,404,604Peter R. van Cuylenburg
    
    
    28,824,058
    
    
    
    994,521Scott J. Adelson
    
    
    29,616,285
    
    
    
    202,294Thomas J. OMalia
    
    
    29,368,636
    
    
    
    449,943Terence R. Cunnigham
    
    
    29,367,636
    
    
    
    450,943Lee D. Roberts
    
    
    29,369,036
    
    
    
    449,543
 
 ITEM 5. OTHER INFORMATION
  
 ITEM 6. EXHIBITS
 Exhibits31.1
    
    
    Certification by the Chief Executive Officer pursuant to Rule 13a-14(a) of the
Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 200231.2
    
    
    Certification by the Chief Financial Officer pursuant to Rule 13a-14(a) of the
Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 200232.1
    
    
    Certification by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    
    Certification by the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
  26




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##### Table of Contents



QAD Inc.
(Registrant)Date: September 10, 2008
    By:
    /s/ DANIEL LENDERDaniel LenderExecutive Vice President, Chief Financial Officer
(on behalf of the Registrant)By:
    /s/ KARA BELLAMYKara BellamyVice President, Corporate Controller
(Chief Accounting Officer)  27




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##### Table of Contents



Exhibit Index
 ExhibitNumber
    
    Description31.1
    
    Certification by the Chief Executive Officer pursuant to Rule 13a-14(a) of the
Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 200231.2
    
    Certification by the Chief Financial Officer pursuant to Rule 13a-14(a) of the
Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 200232.1
    
    Certification by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    Certification by the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
  28