##### 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 April 30, 2010
 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
(State or other jurisdiction of
incorporation or
 organization)
    
    77-0105228
(I.R.S. Employer Identification No.)
 100 Innovation Place, Santa Barbara, California 93108
 (805) 566-6000
 Yes þ No o.
 Yes o No o.
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company þ
 o þ




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##### 



QAD INC.
INDEX
 PagePART I  FINANCIAL INFORMATIONITEM 1 Financial Statements (unaudited)Condensed Consolidated Balance Sheets as of April 30, 2010 and January 31, 2010
    
    
    1Condensed Consolidated Statements of Operations for the Three Months Ended April 30, 2010 and 2009
    
    
    2Condensed Consolidated Statements of Cash Flows for the Three Months Ended April 30, 2010 and 2009
    
    
    3Notes to Condensed Consolidated Financial Statements
    
    
    4ITEM 2 Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    13ITEM 3 Quantitative and Qualitative Disclosures About Market Risk
    
    
    21ITEM 4 Controls and Procedures
    
    
    22PART II  OTHER INFORMATIONITEM 1 Legal Proceedings
    
    
    23ITEM 1A Risk Factors
    
    
    23ITEM 6 Exhibits
    
    
    23SIGNATURES
    
    
    24Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2




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PART I
 
 ITEM 1   FINANCIAL STATEMENTS
 QAD INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (in thousands, except share data)
(unaudited)
 April 30,
    
    
    January 31,2010
    
    
    2010AssetsCurrent assets:Cash and equivalents
    
    $
    56,865
    
    
    $
    44,678Accounts receivable, net
    
    
    40,017
    
    
    
    61,089Deferred tax assets, net
    
    
    3,550
    
    
    
    3,548Other current assets
    
    
    14,184
    
    
    
    13,680Total current assets
    
    
    114,616
    
    
    
    122,995Property and equipment, net
    
    
    36,122
    
    
    
    37,219Capitalized software costs, net
    
    
    1,788
    
    
    
    2,446Goodwill
    
    
    6,420
    
    
    
    6,348Long-term deferred tax assets, net
    
    
    19,890
    
    
    
    19,411Other assets, net
    
    
    2,705
    
    
    
    2,755Total assets
    
    $
    181,541
    
    
    $
    191,174Liabilities and stockholders equityCurrent liabilities:Current portion of long-term debt
    
    $
    289
    
    
    $
    285Accounts payable
    
    
    6,482
    
    
    
    7,952Deferred revenue
    
    
    81,276
    
    
    
    85,745Other current liabilities
    
    
    21,496
    
    
    
    24,835Total current liabilities
    
    
    109,543
    
    
    
    118,817Long-term debt
    
    
    16,367
    
    
    
    16,443Other liabilities
    
    
    5,655
    
    
    
    6,363Commitments and contingenciesStockholders equity:Preferred stock, $0.001 par value. Authorized 5,000,000
shares; none issued and outstandingCommon stock, $0.001 par value. Authorized 150,000,000
shares; issued 35,351,281 shares at both April 30, 2010 and
January 31, 2010
    
    
    35
    
    
    
    35Additional paid-in capital
    
    
    144,540
    
    
    
    143,121Treasury stock, at cost (3,951,005 and 4,011,526 shares at
April 30, 2010 and January 31, 2010, respectively)
    
    
    (31,828
    )
    
    
    (32,275
    )Accumulated deficit
    
    
    (54,691
    )
    
    
    (52,480
    )Accumulated other comprehensive loss
    
    
    (8,080
    )
    
    
    (8,850
    )Total stockholders equity
    
    
    49,976
    
    
    
    49,551Total liabilities and stockholders equity
    
    $
    181,541
    
    
    $
    191,174
   1




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QAD INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (in thousands, except per share data)
(unaudited)
 Three Months EndedApril 30,2010
    
    
    2009Revenue:License fees
    
    $
    6,446
    
    
    $
    6,251Maintenance and other
    
    
    32,052
    
    
    
    32,817Services
    
    
    12,343
    
    
    
    15,930Total revenue
    
    
    50,841
    
    
    
    54,998Costs and expenses:Cost of license fees
    
    
    1,544
    
    
    
    1,769Cost of maintenance, service and other revenue
    
    
    21,108
    
    
    
    24,003Sales and marketing
    
    
    13,506
    
    
    
    13,889Research and development
    
    
    9,327
    
    
    
    10,326General and administrative
    
    
    7,427
    
    
    
    7,380Amortization of intangibles from acquisitions
    
    
    14
    
    
    
    173Total costs and expenses
    
    
    52,926
    
    
    
    57,540Operating loss
    
    
    (2,085
    )
    
    
    (2,542
    )Other expense (income):Interest income
    
    
    (133
    )
    
    
    (161
    )Interest expense
    
    
    298
    
    
    
    303Other expense (income), net
    
    
    (23
    )
    
    
    249Total other expense net
    
    
    142
    
    
    
    391Loss before income taxes
    
    
    (2,227
    )
    
    
    (2,933
    )Income tax benefit
    
    
    (1,007
    )
    
    
    (268
    )Net loss
    
    $
    (1,220
    )
    
    $
    (2,665
    )Basic net loss per share
    
    $
    (0.04
    )
    
    $
    (0.09
    )Diluted net loss per share
    
    $
    (0.04
    )
    
    $
    (0.09
    )
   2




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QAD INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (in thousands)
 (unaudited)
 Three Months EndedApril 30,2010
    
    
    2009Cash flows from operating activities:Net loss
    
    $
    (1,220
    )
    
    $
    (2,665
    )Adjustments to reconcile net loss to net cash provided by operating activities:Depreciation and amortization
    
    
    2,008
    
    
    
    2,754Provision for (recovery of) doubtful accounts and sales adjustments
    
    
    (41
    )
    
    
    652Stock compensation expense
    
    
    1,470
    
    
    
    1,238Other, net
    
    
    (81
    )
    
    
    (118
    )Changes in assets and liabilities:Accounts receivable
    
    
    20,770
    
    
    
    19,011Other assets
    
    
    (731
    )
    
    
    (907
    )Accounts payable
    
    
    (1,391
    )
    
    
    (2,562
    )Deferred revenue
    
    
    (4,178
    )
    
    
    (3,666
    )Other liabilities
    
    
    (3,441
    )
    
    
    (6,405
    )Net cash provided by operating activities
    
    
    13,165
    
    
    
    7,332Cash flows from investing activities:Purchase of property and equipment
    
    
    (345
    )
    
    
    (322
    )Capitalized software costs
    
    
    (58
    )
    
    
    (111
    )Other
    
    
    2
    
    
    
    8Net cash used in investing activities
    
    
    (401
    )
    
    
    (425
    )Cash flows from financing activities:Repayments of debt
    
    
    (72
    )
    
    
    (69
    )Net proceeds from issuance of common stock
    
    
    14
    
    
    
    Changes in book overdraft
    
    
    
    
    
    
    (1,512
    )Cash dividends paid
    
    
    (606
    )
    
    
    (769
    )Net cash used in financing activities
    
    
    (664
    )
    
    
    (2,350
    )Effect of exchange rates on cash and equivalents
    
    
    87
    
    
    
    584Net increase in cash and equivalents
    
    
    12,187
    
    
    
    5,141Cash and equivalents at beginning of period
    
    
    44,678
    
    
    
    31,467Cash and equivalents at end of period
    
    $
    56,865
    
    
    $
    36,608Supplemental disclosure of non-cash activities:Future obligations associated with dividend declaration
    
    $
    784
    
    
    $
    Dividends paid in stock
    
    
    178
    
    
    
    
   3




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QAD INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (unaudited)
 1. BASIS OF PRESENTATION
  2. COMPUTATION OF NET LOSS PER SHARE
  Three Months EndedApril 30,2010
    
    
    2009(in thousands)Net loss
    
    $
    (1,220
    )
    
    $
    (2,665
    )Weighted average shares of commonstock outstanding  basic
    
    
    31,362
    
    
    
    30,753Weighted average potential common
shares
    
    
    
    
    
    
    Weighted average shares of common
stock and potential common shares
outstanding  diluted
    
    
    31,362
    
    
    
    30,753Basic net loss per share
    
    $
    (0.04
    )
    
    $
    (0.09
    )Diluted net loss per share
    
    $
    (0.04
    )
    
    $
    (0.09
    )
   4




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##### Table of Contents



3. COMPREHENSIVE LOSS
  Three Months EndedApril 30,2010
    
    
    2009(in thousands)Net loss
    
    $
    (1,220
    )
    
    $
    (2,665
    )Foreign currency translation adjustments
    
    
    770
    
    
    
    (650
    )Comprehensive loss
    
    $
    (450
    )
    
    $
    (3,315
    )
 4. FAIR VALUE MEASUREMENTS
  Fair value measurement at reporting date usingQuoted Prices inActive Markets for
    
    
    Significant Other
    
    
    SignificantIdentical Assets
    
    
    Observable Inputs
    
    
    Unobservable Inputs(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)(in thousands)Money market
mutual funds as of
April 30, 2010
    
    $
    43,812
    
    
    $
    
    
    
    $
    Money market mutual
funds as of
January 31, 2010
    
    $
    26,930
    
    
    $
    
    
    
    $
    
    5




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5. CAPITALIZED SOFTWARE COSTS
  April 30,
    
    
    January 31,2010
    
    
    2010(in thousands)Capitalized software costs:Acquired software technology
    
    $
    4,378
    
    
    $
    4,402Capitalized software development costs
    
    
    4,130
    
    
    
    4,1678,508
    
    
    
    8,569Less accumulated amortization
    
    
    (6,720
    )
    
    
    (6,123
    )Capitalized software costs, net
    
    $
    1,788
    
    
    $
    2,446
   6. GOODWILL
  Gross Carrying
    
    
    AccumulatedAmount
    
    
    Impairment
    
    
    Goodwill, Net(in thousands)Balance at January 31, 2010
    
    $
    21,956
    
    
    $
    (15,608
    )
    
    $
    6,348Impact of foreign currency translation
    
    
    72
    
    
    
    
    
    
    
    72Balance at April 30, 2010
    
    $
    22,028
    
    
    $
    (15,608
    )
    
    $
    6,420
   6




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7. DEBT
 April 30,
    
    
    January 31,2010
    
    
    2010(in thousands)Note payable
    
    $
    16,656
    
    
    $
    16,728Less current maturities
    
    
    (289
    )
    
    
    (285
    )Long-term debt
    
    $
    16,367
    
    
    $
    16,443
 Note Payable
  Credit Facility
    8. INCOME TAXES
     7




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9. STOCKHOLDERS EQUITY
 Dividends
   10. STOCK-BASED COMPENSATION
  Stock-Based Compensation
  Three Months EndedApril 30,2010
    
    
    2009(in thousands)Cost of maintenance, service and other revenue
    
    $
    302
    
    
    $
    256Sales and marketing
    
    
    327
    
    
    
    217Research and development
    
    
    256
    
    
    
    193General and administrative
    
    
    585
    
    
    
    572Total stock-based compensation expense
    
    $
    1,470
    
    
    $
    1,238
 Option/SAR Information
  Three Months EndedApril 30,2010
    
    
    2009Expected life in years (1)
    
    
    4.75
    
    
    
    5.25Risk free interest rate (2)
    
    
    1.11
    %
    
    
    1.88
    %Volatility (3)
    
    
    70
    %
    
    
    57
    %Dividend rate (4)
    
    
    2.04
    %
    
    
    3.91
    %
 
 (1)
    
    The expected life of SARs granted under the stock-based compensation plans is based
on historical vested stock option and SAR exercise and post-vest forfeiture patterns and
includes an estimate of the expected term for stock options and SARs that were fully vested
and outstanding.(2)
    
    The risk-free interest rate is based on the U.S. Treasury yield for a term
consistent with the expected life of SARs in effect at the time of grant.  8




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##### Table of Contents



(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 for a period equivalent to the
expected life of the SARs, which it believes is representative of the expected volatility over
the expected life of the SARs.(4)
    
    The Company expects to continue paying quarterly dividends at the same rate as it
has over the last year.  Weighted
    
    
    WeightedAverage
    
    
    AverageStock Options/
    
    
    Exercise
    
    
    Remaining
    
    
    AggregateSARs
    
    
    Price per
    
    
    Contractual
    
    
    Intrinsic Value(in thousands)
    
    
    Share
    
    
    Term (years)
    
    
    (in thousands)Outstanding at January 31, 2009
    
    
    5,967
    
    
    $
    7.99Granted (1)
    
    
    2,586
    
    
    
    4.26Exercised
    
    
    (91
    )
    
    
    2.98Expired
    
    
    (344
    )
    
    
    7.80Forfeited
    
    
    (314
    )
    
    
    6.94Cancelled (2)
    
    
    (3,378
    )
    
    
    8.15Outstanding at January 31, 2010
    
    
    4,426
    
    
    $
    5.88Granted
    
    
    1
    
    
    
    5.47Exercised
    
    
    (17
    )
    
    
    3.10Expired
    
    
    (27
    )
    
    
    8.50Forfeited
    
    
    (26
    )
    
    
    4.76Outstanding at April 30, 2010
    
    
    4,357
    
    
    $
    5.88
    
    
    
    4.7
    
    
    $
    3,627Vested and expected to vest at
April 30, 2010 (3)
    
    
    4,109
    
    
    $
    5.96
    
    
    
    4.6
    
    
    $
    3,372Vested and exercisable at April 30, 2010
    
    
    1,631
    
    
    $
    8.05
    
    
    
    3.0
    
    
    $
    529
 
 (1)
    
    On August 12, 2009, the Company completed a one-time Stock Option and Stock
Appreciation Right Exchange Program (the Program). As a result of the Program, a total of
1,539,372 SARs were granted during the third quarter of fiscal 2010 with an exercise price of
$3.91.(2)
    
    Stock options and SARs cancelled during the third quarter of fiscal 2010 as a part
of the Program.(3)
    
    The expected-to-vest stock options and SARs are the result of applying the
pre-vesting forfeiture rate assumptions to total outstanding stock options and SARs.    RSU Information
   9




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##### Table of Contents



WeightedAverageGrant DateRSUs
    
    
    Fair Value(in thousands)Restricted stock at January 31, 2009
    
    
    747
    
    
    $
    6.39Granted
    
    
    415
    
    
    
    4.20Vested (1)
    
    
    (203
    )
    
    
    6.65Forfeited
    
    
    (9
    )
    
    
    6.74Restricted stock at January 31, 2010
    
    
    950
    
    
    $
    5.37Granted
    
    
    40
    
    
    
    4.95Vested (1)
    
    
    (16
    )
    
    
    2.88Forfeited
    
    
    (1
    )
    
    
    4.88Restricted stock at April 30, 2010
    
    
    973
    
    
    $
    5.43Restricted stock expected to vest as of April 30, 2010 (2)
    
    
    948
    
    
    $
    5.45
 
 (1)
    
    The number of RSUs vested includes shares withheld on behalf of employees to satisfy
statutory tax withholding requirements.(2)
    
    RSUs expected to vest are RSUs expected to be released net of estimated future
forfeitures.   11. RESTRUCTURING CHARGES
   Three Months EndedApril 30, 2009(in thousands)Cost of maintenance, services and other revenue
    
    $
    412Sales and marketing
    
    
    290Research and development
    
    
    86General and administrative
    
    
    31Total restructuring charges
    
    $
    819
  10




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Q4 Fiscal 2009 Restructuring Plan
  Q2 Fiscal 2010 Restructuring Plan
  Q3 Fiscal 2010 Restructuring Plan
  Restructuring Accruals
  Q4 Fiscal 2009
    
    
    Q2 Fiscal 2010
    
    
    Q3 Fiscal 2010Restructuring
    
    
    Restructuring
    
    
    RestructuringPlan
    
    
    Plan
    
    
    Plan
    
    
    Total(in thousands)Balance as of January 31, 2008
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Employee severance pay and related expenses
    
    
    3,351
    
    
    
    
    
    
    
    
    
    
    
    3,351Cash paid
    
    
    (479
    )
    
    
    
    
    
    
    
    
    
    
    (479
    )Balance as of January 31, 2009
    
    $
    2,872
    
    
    $
    
    
    
    $
    
    
    
    $
    2,872Employee severance pay and related expenses
    
    
    819
    
    
    
    1,496
    
    
    
    927
    
    
    
    3,242Cash paid
    
    
    (3,526
    )
    
    
    (1,456
    )
    
    
    (930
    )
    
    
    (5,912
    )(Reversal of) adjustment to previous charges
    
    
    (92
    )
    
    
    (43
    )
    
    
    9
    
    
    
    (126
    )Impact of foreign currency translation
    
    
    24
    
    
    
    3
    
    
    
    
    
    
    
    27Balance as of January 31, 2010
    
    $
    97
    
    
    $
    
    
    
    $
    6
    
    
    $
    103Cash paid
    
    
    (90
    )
    
    
    
    
    
    
    (4
    )
    
    
    (94
    )Impact of foreign currency translation
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    (4
    )Balance as of April 30, 2010
    
    $
    3
    
    
    $
    
    
    
    $
    2
    
    
    $
    5
 12. COMMITMENTS AND CONTINGENCIES
 Indemnifications
    11




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Legal Actions
  13. BUSINESS SEGMENT INFORMATION
    Three Months EndedApril 30,2010
    
    
    2009(in thousands)Revenue:North America (1)
    
    $
    21,497
    
    
    $
    24,468EMEA
    
    
    15,624
    
    
    
    16,792Asia Pacific
    
    
    10,138
    
    
    
    10,040Latin America
    
    
    3,582
    
    
    
    3,698$
    50,841
    
    
    $
    54,998Operating income (loss):North America
    
    $
    3,213
    
    
    $
    2,844EMEA
    
    
    1,570
    
    
    
    (388
    )Asia Pacific
    
    
    787
    
    
    
    683Latin America
    
    
    708
    
    
    
    121Corporate
    
    
    (8,363
    )
    
    
    (5,802
    )$
    (2,085
    )
    
    $
    (2,542
    )
 
 (1)
    
    Sales into Canada accounted for 5% and 4% of North America total revenue in the
three months ended April 30, 2010 and 2009, respectively.  12




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ITEM 2 
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 FORWARD-LOOKING STATEMENTS
  INTRODUCTION
  OVERVIEW
       13




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CRITICAL ACCOUNTING POLICIES
  RESULTS OF OPERATIONS
  Revenue
 Three Months
    
    
    Change compared
    
    
    Three MonthsEnded
    
    
    to prior period
    
    
    Ended(in thousands)
    
    April 30, 2010
    
    
    $
    
    
    %
    
    
    April 30, 2009RevenueLicense fees
    
    $
    6,446
    
    
    $
    195
    
    
    
    3
    %
    
    $
    6,251Percentage of total revenue
    
    
    13
    %
    
    
    
    
    
    
    
    
    
    
    11
    %Maintenance and other
    
    
    32,052
    
    
    
    (765
    )
    
    
    (2
    )%
    
    
    32,817Percentage of total revenue
    
    
    63
    %
    
    
    
    
    
    
    
    
    
    
    60
    %Services
    
    
    12,343
    
    
    
    (3,587
    )
    
    
    (23
    )%
    
    
    15,930Percentage of total revenue
    
    
    24
    %
    
    
    
    
    
    
    
    
    
    
    29
    %Total revenue
    
    $
    50,841
    
    
    $
    (4,157
    )
    
    
    (8
    )%
    
    $
    54,998
 Total Revenue
  14




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##### Table of Contents



License Revenue.
 Maintenance and Other Revenue
  Services Revenue.
 Costs and Expenses
 Restructuring
   15




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##### Table of Contents



Three Months EndedApril 30, 2009(in thousands)Cost of maintenance, services and other revenue
    
    $
    412Sales and marketing
    
    
    290Research and development
    
    
    86General and administrative
    
    
    31Total restructuring charges
    
    $
    819
 Total Cost of Revenue
 Three Months
    
    
    Change compared
    
    
    Three MonthsEnded
    
    
    to prior period
    
    
    Ended(in thousands)
    
    April 30, 2010
    
    
    $
    
    
    %
    
    
    April 30, 2009Cost of revenueCost of license fees
    
    $
    1,544
    
    
    $
    225
    
    
    
    13
    %
    
    $
    1,769Cost of maintenance, services
and other
    
    
    21,108
    
    
    
    2,895
    
    
    
    12
    %
    
    
    24,003Total cost revenue
    
    $
    22,652
    
    
    $
    3,120
    
    
    
    12
    %
    
    $
    25,772Percentage of revenue
    
    
    45
    %
    
    
    
    
    
    
    
    
    
    
    47
    %
     16




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##### Table of Contents



Sales and Marketing
 Three Months
    
    
    Change compared
    
    
    Three MonthsEnded
    
    
    to prior period
    
    
    Ended(in thousands)
    
    April 30, 2010
    
    
    $
    
    
    %
    
    
    April 30, 2009Sales and marketing
    
    $
    13,506
    
    
    $
    383
    
    
    
    3
    %
    
    $
    13,889Percentage of revenue
    
    
    27
    %
    
    
    
    
    
    
    
    
    
    
    25
    %
   Research and Development
 Three Months
    
    
    Change compared
    
    
    Three MonthsEnded
    
    
    to prior period
    
    
    Ended(in thousands)
    
    April 30, 2010
    
    
    $
    
    
    %
    
    
    April 30, 2009Research and development
    
    $
    9,327
    
    
    $
    999
    
    
    
    10
    %
    
    $
    10,326Percentage of revenue
    
    
    18
    %
    
    
    
    
    
    
    
    
    
    
    19
    %
    17




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##### Table of Contents



General and Administrative
 Three Months
    
    
    Change compared
    
    
    Three Months YearEnded
    
    
    to prior period
    
    
    Ended(in thousands)
    
    April 30, 2010
    
    
    $
    
    
    %
    
    
    April 30, 2009General and administrative
    
    $
    7,427
    
    
    $
    (47
    )
    
    
    (1
    )%
    
    $
    7,380Percentage of revenue
    
    
    14
    %
    
    
    
    
    
    
    
    
    
    
    13
    %
   Amortization of Intangibles from Acquisitions.
 Other Expense (Income)
 Three Months
    
    
    Change compared
    
    
    Three MonthsEnded
    
    
    to prior period
    
    
    Ended(in thousands)
    
    April 30, 2010
    
    
    $
    
    
    %
    
    
    April 30, 2009Other (income) expenseInterest income
    
    $
    (133
    )
    
    $
    (28
    )
    
    
    (17
    )%
    
    $
    (161
    )Interest expense
    
    
    298
    
    
    
    5
    
    
    
    2
    %
    
    
    303Other (income) expense, net
    
    
    (23
    )
    
    
    272
    
    
    
    109
    %
    
    
    249Total other (income) expense
    
    $
    142
    
    
    $
    249
    
    
    
    64
    %
    
    $
    391Percentage of revenue
    
    
    
    %
    
    
    
    
    
    
    
    
    
    
    1
    %
   18




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##### Table of Contents



Income Tax Benefit
 Three Months
    
    
    Change compared
    
    
    Three MonthsEnded
    
    
    to prior period
    
    
    Ended(in thousands)
    
    April 30, 2010
    
    
    $
    
    
    %
    
    
    April 30, 2009Income tax benefit
    
    $
    (1,007
    )
    
    $
    739
    
    
    
    276
    %
    
    $
    (268
    )Percentage of revenue
    
    
    (2)
    %
    
    
    
    
    
    
    
    
    
    
    
    %Effective tax rate
    
    
    45
    %
    
    
    
    
    
    
    
    
    
    
    9
    %
   LIQUIDITY AND CAPITAL RESOURCES
     19




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##### Table of Contents



Three Months
    
    
    Three MonthsEnded
    
    
    Ended(in thousands)
    
    April 30, 2010
    
    
    April 30, 2009Net cash provided by operating activities
    
    $
    13,165
    
    
    $
    7,332Net cash used in investing activities
    
    
    (401
    )
    
    
    (425
    )Net cash used in financing activities
    
    
    (664
    )
    
    
    (2,350
    )Effect of foreign exchange rates on cash and cash equivalents
    
    
    87
    
    
    
    584Net increase in cash and equivalents
    
    $
    12,187
    
    
    $
    5,141
      earned
  20




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##### Table of Contents



CONTRACTUAL OBLIGATIONS
 Credit Facility
    Notes Payable
  
 ITEM 3
    
     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Foreign Exchange Rates.
  21




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##### Table of Contents



Interest Rates.
  
 ITEM 4
    
     CONTROLS AND PROCEDURES
 Evaluation of disclosure controls and procedures.
 Changes in internal control over financial reporting.
  22




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##### Table of Contents



PART II
 
 ITEM 1.
    
    LEGAL PROCEEDINGS
  
 ITEM 1A.
    
    RISK FACTORS
  
 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
  23




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##### Table of Contents



QAD Inc.
(Registrant)Date: June 10, 2010
    By:
    /s/ DANIEL LENDERDaniel LenderExecutive Vice President, Chief Financial Officer
(on behalf of the Registrant)By:
    /s/ KARA BELLAMYKara BellamySenior Vice President, Corporate Controller
(Chief Accounting Officer)  24