##### 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, 2007
 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
 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, 2007 and January 31, 2007
    
    
    1Condensed Consolidated Statements of Operations for the Three and Nine Months Ended October 31, 2007 and 2006
    
    
    2Condensed Consolidated Statements of Cash Flows for the Nine Months Ended October 31, 2007 and 2006
    
    
    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)
 October 31,
    
    
    January 31,2007
    
    
    2007AssetsCurrent assets:Cash and equivalents
    
    $
    44,035
    
    
    $
    54,192Restricted cash
    
    
    2,612
    
    
    
    2,612Accounts receivable, net
    
    
    51,089
    
    
    
    68,806Other current assets
    
    
    17,196
    
    
    
    16,352Total current assets
    
    
    114,932
    
    
    
    141,962Property and equipment, net
    
    
    42,819
    
    
    
    42,396Capitalized software costs, net
    
    
    9,214
    
    
    
    9,631Goodwill
    
    
    21,291
    
    
    
    18,834Other assets, net
    
    
    14,671
    
    
    
    14,194Total assets
    
    $
    202,927
    
    
    $
    227,017Liabilities and stockholders equityCurrent liabilities:Current portion of long-term debt
    
    $
    279
    
    
    $
    272Accounts payable
    
    
    8,777
    
    
    
    11,662Deferred revenue
    
    
    64,915
    
    
    
    77,075Other current liabilities
    
    
    36,789
    
    
    
    37,951Total current liabilities
    
    
    110,760
    
    
    
    126,960Long-term debt
    
    
    17,060
    
    
    
    17,271Other liabilities
    
    
    3,264
    
    
    
    4,756Minority interest
    
    
    
    
    
    
    672Commitments 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 35,347,159 and 35,351,923 shares at
October 31, 2007 and January 31, 2007, respectively
    
    
    35
    
    
    
    35Additional paid-in capital
    
    
    133,109
    
    
    
    128,757Treasury stock, at cost (4,145,390 and 3,061,400 shares at
October 31, 2007 and January 31, 2007, respectively)
    
    
    (32,270
    )
    
    
    (22,870
    )Accumulated deficit
    
    
    (24,871
    )
    
    
    (21,216
    )Accumulated other comprehensive loss
    
    
    (4,160
    )
    
    
    (7,348
    )Total stockholders equity
    
    
    71,843
    
    
    
    77,358Total liabilities and stockholders equity
    
    $
    202,927
    
    
    $
    227,017
   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 31,2007
    
    
    2006
    
    
    2007
    
    
    2006Revenue:License fees
    
    $
    14,074
    
    
    $
    10,974
    
    
    $
    39,082
    
    
    $
    34,736Maintenance and other
    
    
    32,287
    
    
    
    30,949
    
    
    
    95,090
    
    
    
    91,847Services
    
    
    20,247
    
    
    
    15,401
    
    
    
    53,277
    
    
    
    42,515Total revenue
    
    
    66,608
    
    
    
    57,324
    
    
    
    187,449
    
    
    
    169,098Costs and expenses:Cost of license fees
    
    
    2,294
    
    
    
    1,852
    
    
    
    6,217
    
    
    
    5,367Cost of maintenance, service and other revenue
    
    
    25,820
    
    
    
    21,311
    
    
    
    73,531
    
    
    
    62,346Sales and marketing
    
    
    17,167
    
    
    
    15,566
    
    
    
    51,154
    
    
    
    47,114Research and development
    
    
    9,986
    
    
    
    9,835
    
    
    
    30,375
    
    
    
    30,092General and administrative
    
    
    8,017
    
    
    
    7,389
    
    
    
    24,726
    
    
    
    21,138Amortization of intangibles from acquisitions
    
    
    168
    
    
    
    107
    
    
    
    576
    
    
    
    148Total costs and expenses
    
    
    63,452
    
    
    
    56,060
    
    
    
    186,579
    
    
    
    166,205Operating income
    
    
    3,156
    
    
    
    1,264
    
    
    
    870
    
    
    
    2,893Other expense (income):Interest income
    
    
    (550
    )
    
    
    (617
    )
    
    
    (1,713
    )
    
    
    (2,008
    )Interest expense
    
    
    325
    
    
    
    320
    
    
    
    1,025
    
    
    
    859Other expense (income), net
    
    
    506
    
    
    
    99
    
    
    
    431
    
    
    
    (1,533
    )Total other expense (income)
    
    
    281
    
    
    
    (198
    )
    
    
    (257
    )
    
    
    (2,682
    )Income before income taxes
    
    
    2,875
    
    
    
    1,462
    
    
    
    1,127
    
    
    
    5,575Income tax expense
    
    
    1,359
    
    
    
    515
    
    
    
    959
    
    
    
    2,099Net income
    
    $
    1,516
    
    
    $
    947
    
    
    $
    168
    
    
    $
    3,476Basic net income per share
    
    $
    0.05
    
    
    $
    0.03
    
    
    $
    0.01
    
    
    $
    0.11Diluted net income per share
    
    $
    0.05
    
    
    $
    0.03
    
    
    $
    0.01
    
    
    $
    0.10
   2




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##### Table of Contents



QAD INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 Nine Months EndedOctober 31,2007
    
    
    2006Cash flows from operating activities:Net income
    
    $
    168
    
    
    $
    3,476Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation and amortization
    
    
    6,850
    
    
    
    5,654Provision for doubtful accounts and sales adjustments
    
    
    496
    
    
    
    67(Gain) loss on disposal of property and equipment
    
    
    (83
    )
    
    
    10Exit costs
    
    
    24
    
    
    
    524Stock compensation expense
    
    
    4,456
    
    
    
    3,887Other, net
    
    
    (366
    )
    
    
    (82
    )Changes in assets and liabilities, net of effects from acquisitions:Accounts receivable
    
    
    18,310
    
    
    
    22,200Other assets
    
    
    1,638
    
    
    
    721Accounts payable
    
    
    (2,935
    )
    
    
    (1,957
    )Deferred revenue
    
    
    (15,485
    )
    
    
    (19,751
    )Other liabilities
    
    
    (2,366
    )
    
    
    (3,806
    )Net cash provided by operating activities
    
    
    10,707
    
    
    
    10,943Cash flows from investing activities:Purchase of property and equipment
    
    
    (3,969
    )
    
    
    (3,714
    )Capitalized software costs
    
    
    (984
    )
    
    
    (1,044
    )Acquisition of businesses, net of cash acquired
    
    
    (3,940
    )
    
    
    (6,973
    )Restricted cash
    
    
    
    
    
    
    (2,612
    )Proceeds from sale of intangible assets
    
    
    
    
    
    
    906Proceeds from sale of property and equipment
    
    
    100
    
    
    
    177Net cash used in investing activities
    
    
    (8,793
    )
    
    
    (13,260
    )Cash flows from financing activities:Repayments of debt
    
    
    (209
    )
    
    
    (244
    )Proceeds from issuance of common stock
    
    
    2,579
    
    
    
    1,384Changes in cash overdraft
    
    
    (1,359
    )
    
    
    950Dividends paid
    
    
    (2,406
    )
    
    
    (2,441
    )Minority shareholder payment
    
    
    
    
    
    
    (389
    )Repurchase of common stock
    
    
    (14,218
    )
    
    
    (5,567
    )Net cash used in financing activities
    
    
    (15,613
    )
    
    
    (6,307
    )Effect of exchange rates on cash and equivalents
    
    
    3,542
    
    
    
    (979
    )Net decrease in cash and equivalents
    
    
    (10,157
    )
    
    
    (9,603
    )Cash and equivalents at beginning of period
    
    
    54,192
    
    
    
    59,971Cash and equivalents at end of period
    
    $
    44,035
    
    
    $
    50,368
   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
 Fair Value Measurements
  Fair Value Option for Financial Assets and Financial Liabilities
   4




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##### Table of Contents



QAD INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
 3. COMPUTATION OF NET INCOME PER SHARE
  Three Months Ended
    
    
    Nine Months EndedOctober 31,
    
    
    October 31,2007
    
    
    2006
    
    
    2007
    
    
    2006(in thousands, except per share data)Net income
    
    $
    1,516
    
    
    $
    947
    
    
    $
    168
    
    
    $
    3,476Weighted average shares of common
stock outstanding  basic
    
    
    31,210
    
    
    
    32,238
    
    
    
    31,829
    
    
    
    32,465Weighted average shares of common
stock equivalents issued using the
treasury stock method
    
    
    813
    
    
    
    673
    
    
    
    708
    
    
    
    727Weighted average shares of common
stock and common stock equivalents
outstanding  diluted
    
    
    32,023
    
    
    
    32,911
    
    
    
    32,537
    
    
    
    33,192Basic net income per share
    
    $
    0.05
    
    
    $
    0.03
    
    
    $
    0.01
    
    
    $
    0.11Diluted net income per share
    
    $
    0.05
    
    
    $
    0.03
    
    
    $
    0.01
    
    
    $
    0.10
  4. COMPREHENSIVE INCOME
  Three Months Ended
    
    
    Nine Months EndedOctober 31,
    
    
    October 31,2007
    
    
    2006
    
    
    2007
    
    
    2006(in thousands)Net income
    
    $
    1,516
    
    
    $
    947
    
    
    $
    168
    
    
    $
    3,476Foreign currency
translation
adjustments
    
    
    1,460
    
    
    
    337
    
    
    
    3,188
    
    
    
    (1,184
    )Comprehensive income
    
    $
    2,976
    
    
    $
    1,284
    
    
    $
    3,356
    
    
    $
    2,292
  5




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##### Table of Contents



QAD INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
 5. BUSINESS COMBINATIONS
  FBO Systems, Inc.
   Precision Software Limited
    Bisgen Ltd.
    6




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##### Table of Contents



QAD INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
 5. BUSINESS COMBINATIONS (Continued)
 Soft Cell N.V.
      6. CAPITALIZED SOFTWARE COSTS
  October 31,
    
    
    January 31,2007
    
    
    2007(in thousands)Capitalized software costs:Acquired software technology
    
    $
    8,803
    
    
    $
    9,996Capitalized software development costs
    
    
    2,699
    
    
    
    2,63911,502
    
    
    
    12,635Accumulated amortization
    
    
    (2,288
    )
    
    
    (3,004
    )Capitalized software costs, net
    
    $
    9,214
    
    
    $
    9,631
   7




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##### Table of Contents



QAD INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
 6. CAPITALIZED SOFTWARE COSTS (Continued)
   7. GOODWILL AND INTANGIBLE ASSETS
 Goodwill
  North
    
    
    
    
    
    
    Asia
    
    
    LatinAmerica
    
    
    EMEA
    
    
    Pacific
    
    
    America
    
    
    Total(in thousands)Balances, January 31, 2007
    
    $
    3,563
    
    
    $
    14,151
    
    
    $
    316
    
    
    $
    804
    
    
    $
    18,834Additions
    
    
    36
    
    
    
    36
    
    
    
    568
    
    
    
    
    
    
    
    640Impact of foreign currency
translation
    
    
    
    
    
    
    1,791
    
    
    
    
    
    
    
    26
    
    
    
    1,817Balances, October 31, 2007
    
    $
    3,599
    
    
    $
    15,978
    
    
    $
    884
    
    
    $
    830
    
    
    $
    21,291
   Intangible Assets
 October 31,
    
    
    January 31,2007
    
    
    2007(in thousands)Amortizable intangible assetsCustomer relationships
    
    $
    1,517
    
    
    $
    1,430Trade name
    
    
    555
    
    
    
    499Covenant not to compete
    
    
    193
    
    
    
    203Other
    
    
    
    
    
    
    342,265
    
    
    
    2,166Less: accumulated amortization
    
    
    (959
    )
    
    
    (382
    )Net amortizable intangible assets
    
    $
    1,306
    
    
    $
    1,784
  8




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##### Table of Contents



QAD INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
 7. GOODWILL AND INTANGIBLE ASSETS (Continued)
  8. DEBT
 October 31,
    
    
    January 31,2007
    
    
    2007(in thousands)Total debtNotes payable
    
    $
    17,303
    
    
    $
    17,479Capital lease obligations
    
    
    36
    
    
    
    6417,339
    
    
    
    17,543Less current maturities
    
    
    (279
    )
    
    
    (272
    )Long-term debt
    
    $
    17,060
    
    
    $
    17,271
 Notes Payable
  Credit Facility
     9




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##### Table of Contents



QAD INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
 9. INCOME TAXES
     United States  federal
    
    Fiscal years ended January 31, 2002 and laterUnited States  states
    
    Fiscal years ended January 31, 2002 and laterAustralia
    
    Fiscal years ended January 31, 2002 and laterFrance
    
    Fiscal years ended January 31, 2004 and laterIreland
    
    Fiscal years ended January 31, 1999 and laterNetherlands
    
    Fiscal years ended January 31, 2002 and laterUnited Kingdom
    
    Fiscal years ended January 31, 2004 and later
  10. STOCKHOLDERS EQUITY
 Stock Based Compensation
   10




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##### Table of Contents



QAD INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
 10. STOCKHOLDERS EQUITY (Continued)
  Three Months Ended
    
    
    Nine Months EndedOctober 31,
    
    
    October 31,2007
    
    
    2006
    
    
    2007
    
    
    2006(in thousands)Stock-based compensation expense by function:Cost of maintenance, service and other revenue
    
    $
    251
    
    
    $
    240
    
    
    $
    760
    
    
    $
    701Sales and marketing
    
    
    418
    
    
    
    315
    
    
    
    1,074
    
    
    
    940Research and development
    
    
    247
    
    
    
    214
    
    
    
    579
    
    
    
    639General and administrative
    
    
    540
    
    
    
    522
    
    
    
    2,043
    
    
    
    1,607Total stock-based compensation expense
    
    $
    1,456
    
    
    $
    1,291
    
    
    $
    4,456
    
    
    $
    3,887
   Nine Months EndedOctober 31,2007
    
    
    2006Expected life in years (1)
    
    
    5.25
    
    
    
    5.22Risk free interest rate (2)
    
    
    4.58
    %
    
    
    4.96
    %Volatility (3)
    
    
    59
    %
    
    
    71
    %Dividend rate (4)
    
    
    1.05
    %
    
    
    1.31
    %
 (1)
    
    The expected life of options and 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 equity awards 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 the equity award.(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)
 10. STOCKHOLDERS EQUITY (Continued)
  Weighted
    
    
    WeightedAverage
    
    
    Average
    
    
    AggregateOptions/
    
    
    Exercise
    
    
    Remaining
    
    
    IntrinsicSARs
    
    
    Price per
    
    
    Contractual
    
    
    Value(in thousands)
    
    

Share
    
    
    Term (years)
    
    
    (in thousands)Outstanding at January 31, 2007
    
    
    5,634
    
    
    $
    7.38
    
    
    
    5.4
    
    
    $
    7,472Granted
    
    
    1,135
    
    
    
    9.14Exercised
    
    
    (646
    )
    
    
    4.11Expired
    
    
    (155
    )
    
    
    11.45Forfeited
    
    
    (241
    )
    
    
    8.01Outstanding at October 31, 2007
    
    
    5,727
    
    
    $
    7.96
    
    
    
    5.6
    
    
    $
    7,982Vested and expected to vest at
October 31, 2007 (1)
    
    
    4,946
    
    
    $
    7.92
    
    
    
    5.5
    
    
    $
    7,206Vested and exercisable at October 31, 2007
    
    
    2,542
    
    
    $
    7.56
    
    
    
    4.4
    
    
    $
    5,011
 
 (1)
    
    The expected to vest options and SARs are the result of applying the
pre-vesting forfeiture rate assumptions to total outstanding equity
awards.
   Stock Repurchase Programs
    12




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QAD INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
 10. STOCKHOLDERS EQUITY (Continued)
  Stock Repurchase Activity
    11. COMMITMENTS AND CONTINGENCIES
 Indemnifications
   Legal Actions
   13




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##### Table of Contents



QAD INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
 12. BUSINESS SEGMENT INFORMATION
    Three Months Ended
    
    
    Nine Months EndedOctober 31,
    
    
    October 31,2007
    
    
    2006
    
    
    2007
    
    
    2006(in thousands)Revenue:North America
    
    $
    29,531
    
    
    $
    24,514
    
    
    $
    82,407
    
    
    $
    72,508EMEA
    
    
    21,329
    
    
    
    19,660
    
    
    
    60,916
    
    
    
    56,792Asia Pacific
    
    
    11,146
    
    
    
    9,116
    
    
    
    31,512
    
    
    
    28,235Latin America
    
    
    4,602
    
    
    
    4,034
    
    
    
    12,614
    
    
    
    11,563$
    66,608
    
    
    $
    57,324
    
    
    $
    187,449
    
    
    $
    169,098Operating income (loss):North America
    
    $
    4,578
    
    
    $
    4,932
    
    
    $
    12,076
    
    
    $
    13,503EMEA
    
    
    1,997
    
    
    
    526
    
    
    
    2,271
    
    
    
    856Asia Pacific
    
    
    204
    
    
    
    639
    
    
    
    979
    
    
    
    1,706Latin America
    
    
    241
    
    
    
    (75
    )
    
    
    219
    
    
    
    (545
    )Corporate
    
    
    (3,864
    )
    
    
    (4,758
    )
    
    
    (14,675
    )
    
    
    (12,627
    )$
    3,156
    
    
    $
    1,264
    
    
    $
    870
    
    
    $
    2,893
 October 31,
    
    
    January 31,2007
    
    
    2007(in thousands)Identifiable assets:North America
    
    $
    109,905
    
    
    $
    126,633EMEA
    
    
    60,393
    
    
    
    70,489Asia Pacific
    
    
    24,433
    
    
    
    21,051Latin America
    
    
    8,196
    
    
    
    8,844$
    202,927
    
    
    $
    227,017
  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
      15




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##### Table of Contents



CRITICAL ACCOUNTING POLICIES
  Revenue Recognition.
   License Revenue.
   Maintenance Revenue.
 Services Revenue.
   16




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##### Table of Contents



Accounts Receivable Allowances.
 Goodwill and Intangible Assets.
   Capitalized Software Costs.
  17




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##### Table of Contents



Valuation of Deferred Tax Assets and Tax Contingency Reserves.
  Equity-based Compensation Expense.
    18




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##### Table of Contents



RESULTS OF OPERATIONS
  Three Months Ended
    
    
    Nine Months EndedOctober 31,
    
    
    October 31,2007
    
    
    2006
    
    
    2007
    
    
    2006Revenue:License fees
    
    
    21
    %
    
    
    19
    %
    
    
    21
    %
    
    
    21
    %Maintenance and other
    
    
    49
    
    
    
    54
    
    
    
    51
    
    
    
    54Services
    
    
    30
    
    
    
    27
    
    
    
    28
    
    
    
    25Total revenue
    
    
    100
    
    
    
    100
    
    
    
    100
    
    
    
    100Costs and expenses:Cost of license fees
    
    
    3
    
    
    
    3
    
    
    
    3
    
    
    
    3Cost of maintenance, service and other revenue
    
    
    39
    
    
    
    37
    
    
    
    40
    
    
    
    37Sales and marketing
    
    
    26
    
    
    
    27
    
    
    
    27
    
    
    
    28Research and development
    
    
    15
    
    
    
    17
    
    
    
    16
    
    
    
    18General and administrative
    
    
    12
    
    
    
    13
    
    
    
    13
    
    
    
    12Amortization of intangibles from acquisitions
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    Total costs and expenses
    
    
    95
    
    
    
    98
    
    
    
    99
    
    
    
    98Operating income
    
    
    5
    
    
    
    2
    
    
    
    1
    
    
    
    2Other expense (income)
    
    
    1
    
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )Income before income taxes
    
    
    4
    
    
    
    3
    
    
    
    1
    
    
    
    3Income tax expense
    
    
    2
    
    
    
    1
    
    
    
    1
    
    
    
    1Net income
    
    
    2
    %
    
    
    2
    %
    
    
    
    %
    
    
    2
    %
 Total Revenue
   19




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License Revenue
  Maintenance and Other Revenue
   Services Revenue.
  20




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##### Table of Contents



Total Cost of Revenue.
  Sales and Marketing.
   21




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##### Table of Contents



Research and Development.
  General and Administrative.
  Other (Income) Expense
  Income Tax Expense.
  LIQUIDITY AND CAPITAL RESOURCES
   22




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##### Table of Contents



Working Capital
    billed
 earned
 Cash Flows
  Operating Activities
 Investing Activities
  23




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##### Table of Contents



Financing Activities
    Contractual Obligations
 Notes Payable
  Credit Facility
     24




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##### Table of Contents



Minority Interest
  
 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
  Total Number
    
    Maximum Numberof Shares
    
    of Shares thatPurchased as
    
    May Yet BeTotal Number
    
    Average
    
    Part of
    
    Purchased Underof Shares
    
    Price Paid
    
    Publicly Announced
    
    the PlansPeriod
    
    Purchased
    
    per Share
    
    Plans or Programs
    
    or Programs (1)8/1/07  8/31/07
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    9/1/07  9/30/07
    
    
    178,000
    
    
    $
    8.45
    
    
    
    178,000
    
    
    
    822,00010/1/07  10/31/07
    
    
    48,000
    
    
    $
    8.97
    
    
    
    48,000
    
    
    
    774,000
 (1)
    
    In September 2007, the Board of Directors authorized an open market repurchase program for one year to buy up to
one million shares of QAD common stock. As of October 31, 2007, 226,000 shares had been repurchased under the program.
 
 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
 31.1
    
    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: December 7, 2007
    By:
    /s/ DANIEL LENDERDaniel LenderExecutive Vice President, Chief Financial Officer
(on behalf of the Registrant)  27




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##### Table of Contents



Exhibit No.
    
    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