##### 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 October 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 organization)
    
    (I.R.S. Employer Identification No.)
 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 October 31, 2008 and January 31, 2008
    
    
    1Condensed Consolidated Statements of Operations for the Three and Nine Months Ended October 31, 2008 and 2007
    
    
    2Condensed Consolidated Statements of Cash Flows for the Nine Months Ended October 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
    
    
    26PART II  OTHER INFORMATIONITEM 1 Legal Proceedings
    
    
    27ITEM 1A Risk Factors
    
    
    27ITEM 2 Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    27ITEM 3 Defaults Upon Senior Securities
    
    
    27ITEM 4 Submission of Matters to a Vote of Security Holders
    
    
    27ITEM 5 Other Information
    
    
    27ITEM 6 Exhibits
    
    
    27SIGNATURES
    
    
    28Exhibit 10.72Exhibit 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)
 October 31,
    
    
    January 31,2008
    
    
    2008AssetsCurrent assets:Cash and equivalents
    
    $
    36,228
    
    
    $
    45,613Accounts receivable, net
    
    
    53,660
    
    
    
    83,027Other current assets
    
    
    23,851
    
    
    
    22,742Total current assets
    
    
    113,739
    
    
    
    151,382Property and equipment, net
    
    
    41,769
    
    
    
    42,450Capitalized software costs, net
    
    
    6,722
    
    
    
    8,783Goodwill
    
    
    20,472
    
    
    
    22,591Other assets, net
    
    
    11,632
    
    
    
    10,687Total assets
    
    $
    194,334
    
    
    $
    235,893Liabilities and stockholders equityCurrent liabilities:Current portion of long-term debt
    
    $
    262
    
    
    $
    274Accounts payable
    
    
    9,702
    
    
    
    12,249Deferred revenue
    
    
    63,466
    
    
    
    89,349Other current liabilities
    
    
    33,081
    
    
    
    40,664Total current liabilities
    
    
    106,511
    
    
    
    142,536Long-term debt
    
    
    16,789
    
    
    
    16,998Other liabilities
    
    
    3,815
    
    
    
    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
October 31, 2008 and January 31, 2008, respectively
    
    
    35
    
    
    
    35Additional paid-in capital
    
    
    139,312
    
    
    
    135,362Treasury stock, at cost (4,675,229 and 4,596,476 shares at
October 31, 2008 and January 31, 2008, respectively)
    
    
    (37,187
    )
    
    
    (36,336
    )Accumulated deficit
    
    
    (28,228
    )
    
    
    (21,596
    )Accumulated other comprehensive loss
    
    
    (6,713
    )
    
    
    (4,870
    )Total stockholders equity
    
    
    67,219
    
    
    
    72,595Total liabilities and stockholders equity
    
    $
    194,334
    
    
    $
    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
    
    
    Nine Months EndedOctober 31,
    
    
    October 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenue:License fees
    
    $
    13,055
    
    
    $
    14,074
    
    
    $
    36,448
    
    
    $
    39,082Maintenance and other
    
    
    32,687
    
    
    
    32,287
    
    
    
    101,341
    
    
    
    95,090Services
    
    
    22,025
    
    
    
    20,247
    
    
    
    66,329
    
    
    
    53,277Total revenue
    
    
    67,767
    
    
    
    66,608
    
    
    
    204,118
    
    
    
    187,449Costs and expenses:Cost of license fees
    
    
    2,689
    
    
    
    2,294
    
    
    
    7,474
    
    
    
    6,217Cost of maintenance, service and other revenue
    
    
    28,548
    
    
    
    25,820
    
    
    
    86,200
    
    
    
    73,531Sales and marketing
    
    
    17,825
    
    
    
    17,167
    
    
    
    55,938
    
    
    
    51,154Research and development
    
    
    10,794
    
    
    
    9,986
    
    
    
    33,165
    
    
    
    30,375General and administrative
    
    
    8,260
    
    
    
    8,017
    
    
    
    25,180
    
    
    
    24,726Amortization of intangibles from acquisitions
    
    
    184
    
    
    
    168
    
    
    
    559
    
    
    
    576Total costs and expenses
    
    
    68,300
    
    
    
    63,452
    
    
    
    208,516
    
    
    
    186,579Operating (loss) income
    
    
    (533
    )
    
    
    3,156
    
    
    
    (4,398
    )
    
    
    870Other expense (income):Interest income
    
    
    (366
    )
    
    
    (550
    )
    
    
    (1,213
    )
    
    
    (1,713
    )Interest expense
    
    
    309
    
    
    
    325
    
    
    
    948
    
    
    
    1,025Other expense (income), net
    
    
    20
    
    
    
    506
    
    
    
    456
    
    
    
    431Total other expense (income)
    
    
    (37
    )
    
    
    281
    
    
    
    191
    
    
    
    (257
    )(Loss) income before income taxes
    
    
    (496
    )
    
    
    2,875
    
    
    
    (4,589
    )
    
    
    1,127Income tax expense (benefit)
    
    
    1,325
    
    
    
    1,359
    
    
    
    (605
    )
    
    
    959Net (loss) income
    
    $
    (1,821
    )
    
    $
    1,516
    
    
    $
    (3,984
    )
    
    $
    168Basic net (loss) income per share
    
    $
    (0.06
    )
    
    $
    0.05
    
    
    $
    (0.13
    )
    
    $
    0.01Diluted net (loss) income per share
    
    $
    (0.06
    )
    
    $
    0.05
    
    
    $
    (0.13
    )
    
    $
    0.01
   2




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##### Table of Contents



QAD INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 Nine Months EndedOctober 31,2008
    
    
    2007Cash flows from operating activities:Net (loss) income
    
    $
    (3,984
    )
    
    $
    168Adjustments to reconcile net (loss) income to net cash provided by
operating activities:Depreciation and amortization
    
    
    8,232
    
    
    
    6,850Provision for doubtful accounts and sales adjustments
    
    
    562
    
    
    
    496Gain on disposal of property and equipment
    
    
    
    
    
    
    (83
    )Exit costs
    
    
    206
    
    
    
    24Stock compensation expense
    
    
    4,468
    
    
    
    4,456Other, net
    
    
    (278
    )
    
    
    (366
    )Changes in assets and liabilities, net of effects from acquisitions:Accounts receivable
    
    
    26,410
    
    
    
    18,310Other assets
    
    
    (2,180
    )
    
    
    1,877Accounts payable
    
    
    95
    
    
    
    (2,935
    )Deferred revenue
    
    
    (21,840
    )
    
    
    (15,485
    )Other liabilities
    
    
    (2,085
    )
    
    
    (1,838
    )Net cash provided by operating activities
    
    
    9,606
    
    
    
    11,474Cash flows from investing activities:Purchase of property and equipment
    
    
    (4,810
    )
    
    
    (3,969
    )Capitalized software costs
    
    
    (821
    )
    
    
    (984
    )Acquisition of businesses, net of cash acquired
    
    
    (6,235
    )
    
    
    (4,706
    )Proceeds from sale of marketable securities
    
    
    275
    
    
    
    Proceeds from sale of property and equipment
    
    
    3
    
    
    
    100Net cash used in investing activities
    
    
    (11,588
    )
    
    
    (9,559
    )Cash flows from financing activities:Repayments of debt
    
    
    (221
    )
    
    
    (209
    )Proceeds from issuance of common stock
    
    
    456
    
    
    
    2,579Changes in cash overdraft
    
    
    (1,015
    )
    
    
    (1,359
    )Dividends paid
    
    
    (2,300
    )
    
    
    (2,407
    )Repurchase of common stock
    
    
    (2,219
    )
    
    
    (14,218
    )Net cash used in financing activities
    
    
    (5,299
    )
    
    
    (15,614
    )Effect of exchange rates on cash and equivalents
    
    
    (2,104
    )
    
    
    3,542Net decrease in cash and equivalents
    
    
    (9,385
    )
    
    
    (10,157
    )Cash and equivalents at beginning of period
    
    
    45,613
    
    
    
    54,192Cash and equivalents at end of period
    
    $
    36,228
    
    
    $
    44,035
   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
    
    
    Nine Months EndedOctober 31,
    
    
    October 31,2008
    
     
    2007
    
    
    2008
    
    
    2007(in thousands, except per share data)Net (loss) income
    
    $
    (1,821
    )
    
    $
    1,516
    
    
    $
    (3,984
    )
    
    $
    168Weighted average shares of common
stock outstanding  basic
    
    
    30,671
    
    
    
    31,210
    
    
    
    30,656
    
    
    
    31,829Weighted average shares of common
stock equivalents issued using the
treasury stock method
    
    
    
    
    
    
    813
    
    
    
    
    
    
    
    708Weighted average shares of common
stock and common stock equivalents
outstanding  diluted
    
    
    30,671
    
    
    
    32,023
    
    
    
    30,656
    
    
    
    32,537Basic net (loss) income per share
    
    $
    (0.06
    )
    
    $
    0.05
    
    
    $
    (0.13
    )
    
    $
    0.01Diluted net (loss) income per share
    
    $
    (0.06
    )
    
    $
    0.05
    
    
    $
    (0.13
    )
    
    $
    0.01
  4. COMPREHENSIVE (LOSS) INCOME
  Three Months Ended
    
    
    Nine Months EndedOctober 31,
    
    
    October 31,2008
    
    
    2007
    
    
    2008
    
    
    2007(in thousands)Net (loss) income
    
    $
    (1,821
    )
    
    $
    1,516
    
    
    $
    (3,984
    )
    
    $
    168Foreign currency translation adjustments
    
    
    (2,143
    )
    
    
    1,460
    
    
    
    (1,843
    )
    
    
    3,188Comprehensive (loss) income
    
    $
    (3,964
    )
    
    $
    2,976
    
    
    $
    (5,827
    )
    
    $
    3,356
  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
    
    
    SignificantOctober 31,
    
    
    Identical Assets
    
    
    Observable Inputs
    
    
    Unobservable InputsDescription
    
    2008
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Cash equivalents:Money market mutual funds
    
    $
    27,677
    
    
    $
    27,677
    
    
    $
    
    
    
    $
    Total
    
    $
    27,677
    
    
    $
    27,677
    
    
    $
    
    
    
    $
    
   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
  October 31,
    
    
    January 31,2008
    
    
    2008(in thousands)Capitalized software costs:Acquired software technology
    
    $
    8,627
    
    
    $
    8,884Capitalized software development costs
    
    
    3,840
    
    
    
    3,10312,467
    
    
    
    11,987Less: accumulated amortization
    
    
    (5,745
    )
    
    
    (3,204
    )Capitalized software costs, net
    
    $
    6,722
    
    
    $
    8,783
  7




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##### Table of Contents



QAD INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
 7. CAPITALIZED SOFTWARE COSTS (Continued)
   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
    
    
    429
    
    
    
    428
    
    
    
    
    
    
    
    
    
    
    
    857Impact of foreign
currency translation
    
    
    
    
    
    
    (2,741
    )
    
    
    (106
    )
    
    
    (129
    )
    
    
    (2,976
    )Balances, October 31, 2008
    
    $
    4,562
    
    
    $
    14,337
    
    
    $
    885
    
    
    $
    688
    
    
    $
    20,472
 
   8




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##### Table of Contents



QAD INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
 8. GOODWILL AND INTANGIBLE ASSETS (Continued)
 Intangible Assets
 October 31,
    
    
    January 31,2008
    
    
    2008(in thousands)Amortizable intangible assets:Customer relationships
    
    $
    1,546
    
    
    $
    1,528Trade name
    
    
    499
    
    
    
    565Covenant not to compete
    
    
    150
    
    
    
    1852,195
    
    
    
    2,278Less: accumulated amortization
    
    
    (1,489
    )
    
    
    (1,130
    )Amortizable intangible assets, net
    
    $
    706
    
    
    $
    1,148
  9. DEBT
 October 31,
    
    
    January 31,2008
    
    
    2008(in thousands)Total debt:Notes payable
    
    $
    17,051
    
    
    $
    17,245Capital lease obligations
    
    
    
    
    
    
    2717,051
    
    
    
    17,272Less current maturities
    
    
    (262
    )
    
    
    (274
    )Long-term debt
    
    $
    16,789
    
    
    $
    16,998
 Notes Payable
  Credit Facility
   9




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##### Table of Contents



QAD INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
 9. DEBT (Continued)
   10. INCOME TAXES
    11. STOCK-BASED COMPENSATION
   10




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##### Table of Contents



QAD INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
 11. STOCK-BASED COMPENSATION (Continued)
  Three Months Ended
    
    
    Nine Months EndedOctober 31,
    
    

October 31,2008
    
    
    2007
    
    
    2008
    
    
    2007(in thousands)Stock-based compensation expense:Cost of maintenance, service and other revenue
    
    $
    271
    
    
    $
    251
    
    
    $
    884
    
    
    $
    760Sales and marketing
    
    
    299
    
    
    
    418
    
    
    
    1,107
    
    
    
    1,074Research and development
    
    
    207
    
    
    
    247
    
    
    
    667
    
    
    
    579General and administrative
    
    
    494
    
    
    
    540
    
    
    
    1,810
    
    
    
    2,043Total stock-based compensation expense
    
    $
    1,271
    
    
    $
    1,456
    
    
    $
    4,468
    
    
    $
    4,456
   Nine Months EndedOctober 31,2008
    
    
    2007Expected life in years (1)
    
    
    5.25
    
    
    
    5.25Risk free interest rate (2)
    
    
    3.20
    %
    
    
    4.58
    %Volatility (3)
    
    
    50
    %
    
    
    59
    %Dividend rate (4)
    
    
    1.37
    %
    
    
    1.05
    %
 (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.  11




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##### Table of Contents



QAD INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
 11. STOCK-BASED COMPENSATION (Continued)
  Weighted
    
    
    WeightedAverage
    
    
    AverageExercise
    
    
    RemainingOptions/
    
    
    Price per
    
    
    Contractual
    
    
    AggregateSARs
    
    
    Share
    
    
    Term
    
    
    Intrinsic Value(in thousands)
    
    


    
    

(years)
    
    
    (in thousands)Outstanding at January 31, 2008
    
    
    5,628
    
    
    $
    7.98
    
    
    
    5.4
    
    
    $
    7,273Granted
    
    
    1,220
    
    
    
    7.45Exercised
    
    
    (124
    )
    
    
    3.91Expired
    
    
    (92
    )
    
    
    10.13Forfeited
    
    
    (197
    )
    
    
    8.02Outstanding at October 31, 2008
    
    
    6,435
    
    
    $
    7.92
    
    
    
    5.1
    
    
    $
    979Vested and expected to vest at
October 31, 2008 (1)
    
    
    6,080
    
    
    $
    7.93
    
    
    
    5.0
    
    
    $
    978Vested and exercisable at October 31, 2008
    
    
    3,432
    
    
    $
    7.96
    
    
    
    3.9
    
    
    $
    977
 (1)
    
    The expected-to-vest options and SARs are the result of applying the
pre-vesting forfeiture rate assumptions to total outstanding equity
awards.     WeightedAverageGrant DateRSUs
    
    
    Fair Value(in thousands)Balance at January 31, 2008
    
    
    334
    
    
    $
    8.17Granted
    
    
    553
    
    
    
    5.57Vested
    
    
    (74
    )
    
    
    8.25Forfeited
    
    
    (27
    )
    
    
    8.25Balance at October 31, 2008
    
    
    786
    
    
    $
    5.99
   12




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##### Table of Contents



QAD INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
 12. STOCKHOLDERS EQUITY
 Stock Repurchase Program
  13. COMMITMENTS AND CONTINGENCIES
 Indemnifications
   Legal Actions
  14. BUSINESS SEGMENT INFORMATION
    13




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QAD INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
 14. BUSINESS SEGMENT INFORMATION (Continued)
  Three Months Ended
    
    
    Nine Months EndedOctober 31,
    
    
    October 31,2008
    
    
    2007
    
    
    2008
    
    
    2007(in thousands)Revenue:North America (1)
    
    $
    30,504
    
    
    $
    29,531
    
    
    $
    88,803
    
    
    $
    82,407EMEA
    
    
    21,487
    
    
    
    21,329
    
    
    
    64,790
    
    
    
    60,916Asia Pacific
    
    
    11,308
    
    
    
    11,146
    
    
    
    36,647
    
    
    
    31,512Latin America
    
    
    4,468
    
    
    
    4,602
    
    
    
    13,878
    
    
    
    12,614$
    67,767
    
    
    $
    66,608
    
    
    $
    204,118
    
    
    $
    187,449Operating income (loss):North America
    
    $
    2,958
    
    
    $
    4,578
    
    
    $
    8,698
    
    
    $
    12,076EMEA
    
    
    (934
    )
    
    
    1,997
    
    
    
    (1,622
    )
    
    
    2,271Asia Pacific
    
    
    268
    
    
    
    204
    
    
    
    2,450
    
    
    
    979Latin America
    
    
    (125
    )
    
    
    241
    
    
    
    (383
    )
    
    
    219Corporate
    
    
    (2,700
    )
    
    
    (3,864
    )
    
    
    (13,541
    )
    
    
    (14,675
    )$
    (533
    )
    
    $
    3,156
    
    
    $
    (4,398
    )
    
    $
    870
 October 31,
    
    
    January 31,2008
    
    
    2008(in thousands)Property and equipment, net:North America
    
    $
    34,905
    
    
    $
    34,682EMEA
    
    
    5,156
    
    
    
    6,082Asia Pacific
    
    
    1,287
    
    
    
    1,247Latin America
    
    
    421
    
    
    
    439$
    41,769
    
    
    $
    42,450
 (1)
    
    Sales into Canada accounted for 4% and 3% of North America total revenue in the three- and
nine-month periods ended October 31, 2008, respectively, compared to 3% of North America total revenue for the
three- and nine- month periods ended October 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 (SFAS 142).
  note 8
 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
    
    
    Nine Months EndedOctober 31,
    
    
    October 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenue:License fees
    
    
    19
    %
    
    
    21
    %
    
    
    18
    %
    
    
    21
    %Maintenance and other
    
    
    48
    
    
    
    49
    
    
    
    50
    
    
    
    51Services
    
    
    33
    
    
    
    30
    
    
    
    32
    
    
    
    28Total revenue
    
    
    100
    
    
    
    100
    
    
    
    100
    
    
    
    100Costs and expenses:Cost of license fees
    
    
    4
    
    
    
    3
    
    
    
    4
    
    
    
    3Cost of maintenance, service and other revenue
    
    
    42
    
    
    
    39
    
    
    
    42
    
    
    
    40Sales and marketing
    
    
    27
    
    
    
    26
    
    
    
    28
    
    
    
    27Research and development
    
    
    16
    
    
    
    15
    
    
    
    16
    
    
    
    16General and administrative
    
    
    12
    
    
    
    12
    
    
    
    12
    
    
    
    13Amortization of intangibles from acquisitions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total costs and expenses
    
    
    101
    
    
    
    95
    
    
    
    102
    
    
    
    99Operating (loss) income
    
    
    (1
    )
    
    
    5
    
    
    
    (2
    )
    
    
    1Other expense (income)
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    (Loss) income before income taxes
    
    
    (1
    )
    
    
    4
    
    
    
    (2
    )
    
    
    1Income tax expense (benefit)
    
    
    2
    
    
    
    2
    
    
    
    
    
    
    
    1Net (loss) income
    
    
    (3
    )%
    
    
    2
    %
    
    
    (2
    )%
    
    
    
    %
 Total Revenue
   19




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##### Table of Contents



License Revenue
 year-to-date
 Maintenance and Other Revenue
   Services Revenue.
  20




---



##### Table of Contents



multi-national
 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).
  22




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
  Working Capital
  acquisition-related
     23




---



##### Table of Contents



Cash Flows
  Operating Activities
  Investing Activities
  Financing Activities
    24




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##### Table of Contents



Contractual Obligations
 Credit Facility
    Notes Payable
 non-recourse
 Obligations Associated with Acquisitions
  
 ITEM 3  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Foreign Exchange
   25




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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.
  26




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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
  
 ITEM 5. OTHER INFORMATION
  
 ITEM 6. EXHIBITS
 Exhibits
 10.72
    
    
    Employment
agreement between the Registrant and Daniel Lender, dated
October 10, 200831.1
    
    
    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
  27




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##### Table of Contents



QAD Inc.
(Registrant)Date: December 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)  28




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##### Table of Contents



ExhibitNo.
    
    Description10.72
    
    
    Employment
agreement between the Registrant and Daniel Lender, dated
October 10, 200831.1
    
    
    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
  29