10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

(Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 30, 2013

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.

(Exact name of Registrant as specified in its charter)

Delaware	77-0105228
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

100 Innovation Place, Santa Barbara, California  93108

(Address of principal executive offices)

(805) 566-6000

(Registrant's telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ  No o.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ  No o.

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check One):

Large accelerated filer o	Accelerated filer þ
Non-accelerated filero  (Do not check if a smaller reporting company)	Smaller reporting company o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o  No þ.

As of May 31, 2013, there were 12,421,061 shares of the Registrant’s Class A common stock outstanding and 3,142,825 shares of the Registrant’s Class B common stock outstanding.

QAD INC.

INDEX

PART I - FINANCIAL INFORMATION			Page
	ITEM 1.	Financial Statements (unaudited)
		Condensed Consolidated Balance Sheets as of April 30, 2013 and January 31, 2013	1
		Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three Months Ended April 30, 2013 and 2012	2
		Condensed Consolidated Statements of Cash Flows for the Three Months Ended April 30, 2013 and 2012	3
		Notes to Condensed Consolidated Financial Statements	4
	ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
	ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	25
	ITEM 4.	Controls and Procedures	26
PART II - OTHER INFORMATION
	ITEM 1.	Legal Proceedings	27
	ITEM 1A.	Risk Factors	27
	ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
	ITEM 3.	Defaults upon Senior Securities	27
	ITEM 4.	Mine Safety Disclosure	27
	ITEM 5.	Other Information	27
	ITEM 6.	Exhibits	27
	SIGNATURES		28

PART I

ITEM 1 – FINANCIAL STATEMENTS

QAD INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

(unaudited)

	April 30,			January 31,
	2013			2013
Assets
Current assets:
Cash and equivalents	$	73,781		$	65,009
Accounts receivable, net of allowances of $2,505 and $2,510 at April 30, 2013 and January 31, 2013, respectively		43,264			72,564
Deferred tax assets, net		4,415			4,414
Other current assets		15,184			13,806
Total current assets		136,644			155,793
Property and equipment, net		32,531			32,526
Capitalized software costs, net		3,929			4,180
Goodwill		11,372			11,412
Deferred tax assets, net		16,937			16,431
Other assets, net		5,224			5,606
Total assets	$	206,637		$	225,948
Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of long-term debt	$	376		$	372
Accounts payable		8,089			12,537
Deferred revenue		92,653			101,193
Other current liabilities		26,688			31,415
Total current liabilities		127,806			145,517
Long-term debt		15,376			15,474
Other liabilities		6,967			6,759
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value. Authorized 5,000,000 shares; none issued or outstanding		—			—
Common stock:
Class A, $0.001 par value. Authorized 71,000,000 shares; issued 14,148,905 shares and 14,148,217 shares at April 30, 2013 and January 31, 2013,  respectively		14			14
Class B, $0.001 par value. Authorized 4,000,000 shares; issued 3,536,952 shares and 3,536,822 shares at April 30, 2013 and January 31, 2013, respectively		4			4
Additional paid-in capital		150,460			149,777
Treasury stock, at cost (2,123,263 shares and 2,097,497 shares at April 30, 2013 and January 31, 2013,  respectively)		(31,349	)		(31,093	)
Accumulated deficit		(54,978	)		(52,468	)
Accumulated other comprehensive loss		(7,663	)		(8,036	)
Total stockholders’ equity		56,488			58,198
Total liabilities and stockholders’ equity	$	206,637		$	225,948

See Accompanying Notes to Condensed Consolidated Financial Statements.

1

QAD INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(in thousands, except per share data)

(unaudited)

	Three Months Ended April 30,
	2013			2012
Revenue:
License fees	$	6,218		$	7,865
Maintenance and other		35,201			34,520
Subscription fees		4,042			3,223
Professional services		16,466			18,100
Total revenue		61,927			63,708
Costs of revenue:
License fees		955			881
Maintenance, subscription and other		11,062			10,000
Professional services		16,608			15,738
Total cost of revenue		28,625			26,619
Gross profit		33,302			37,089
Operating expenses:
Sales and marketing		16,056			15,496
Research and development		10,845			9,534
General and administrative		7,946			8,105
Amortization of intangibles from  acquisitions		176			—
Total operating expenses		35,023			33,135
Operating (loss) income		(1,721	)		3,954
Other (income) expense:
Interest income		(97	)		(163	)
Interest expense		203			286
Other (income) expense, net		(273	)		446
Total other (income) expense, net		(167	)		569
(Loss) income before income taxes		(1,554	)		3,385
Income tax (benefit) expense		(291	)		1,541
Net (loss) income	$	(1,263	)	$	1,844
Basic net (loss) income per share
Class A	$	(0.08	)	$	0.12
Class B	$	(0.07	)	$	0.10
Diluted net (loss) income per share
Class A	$	(0.08	)	$	0.12
Class B	$	(0.07	)	$	0.10
Comprehensive (loss) income:
Foreign currency translation adjustment, net of tax		373			145
Total comprehensive (loss) income	$	(890	)	$	1,989

See Accompanying Notes to Condensed Consolidated Financial Statements.

2

QAD INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Three Months Ended
	April 30,
	2013			2012
Cash flows from operating activities:
Net (loss) income	$	(1,263	)	$	1,844
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization		1,473			1,115
Provision for (recovery of) doubtful accounts and sales adjustments		181			(36	)
Stock compensation expense		944			1,039
Change in fair value of a derivative instrument		287			—
Excess tax benefits from share-based payment arrangements		(51	)		(51	)
Other, net		12			—
Changes in assets and liabilities:
Accounts receivable		28,373			19,644
Other assets		(1,490	)		(1,845	)
Accounts payable		(4,313	)		(3,152	)
Deferred revenue		(6,937	)		(8,475	)
Other liabilities		(4,943	)		(4,996	)
Net cash provided by operating activities		12,273			5,087
Cash flows from investing activities:
Purchase of property and equipment		(1,130	)		(685	)
Capitalized software costs		(54	)		(105	)
Other		4			1
Net cash used in investing activities		(1,180	)		(789	)
Cash flows from financing activities:
Repayments of debt		(94	)		(80	)
Tax payments, net of proceeds, related to stock awards		(133	)		(338	)
Excess tax benefits from share-based payment arrangements		51			51
Dividends paid		(947	)		(948	)
Repurchase of common stock		(686	)		(1,791	)
Net cash used in financing activities		(1,809	)		(3,106	)
Effect of exchange rates on cash and equivalents		(512	)		234
Net increase in cash and equivalents		8,772			1,426
Cash and equivalents at beginning of period		65,009			76,927
Cash and equivalents at end of period	$	73,781		$	78,353
Supplemental disclosure of non-cash activities:
Obligations associated with dividend declaration	$	1,083		$	1,100
Dividends paid in stock		145			128

See Accompanying Notes to Condensed Consolidated Financial Statements.

3

QAD INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1.   BASIS OF PRESENTATION

In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements fairly present the financial information contained therein. These statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In management’s opinion, all necessary adjustments, consisting of normal, recurring and non-recurring adjustments, have been included in the accompanying Condensed Consolidated Financial Statements to present fairly the financial position and operating results of QAD Inc. (“QAD” or the “Company”). The Condensed Consolidated Financial Statements do not include all disclosures required by accounting principles generally accepted in the United States of America for annual financial statements and should be read in conjunction with the audited financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended January 31, 2013. The Condensed Consolidated Financial Statements include the results of the Company and its wholly owned subsidiaries. The results of operations for the three months ended April 30, 2013 are not necessarily indicative of the results to be expected for the year ending January 31, 2014.

2.   COMPUTATION OF NET (LOSS) INCOME PER SHARE

The following table sets forth the computation of basic and diluted net (loss) income per share:

	Three Months Ended
	April 30,
	2013			2012
	(in thousands except per share data)
Net (loss) income	$	(1,263	)	$	1,844
Less: Dividends declared		(1,088	)		(1,078	)
Undistributed net (loss) income	$	(2,351	)	$	766
Net (loss) income per share – Class A Common Stock
Dividends declared	$	899		$	890
Allocation of undistributed net (loss) income		(1,942	)		634
Net (loss) income attributable to Class A common stock	$	(1,043	)	$	1,524
Weighted average shares of Class A common stock outstanding—basic		12,429			12,693
Weighted average potential shares of Class A common stock		—			519
Weighted average shares of Class A common stock and potential common shares outstanding—diluted		12,429			13,212
Basic net (loss) income per Class A common share	$	(0.08	)	$	0.12
Diluted net (loss) income per Class A common share	$	(0.08	)	$	0.12
Net (loss) income per share – Class B Common Stock
Dividends declared	$	189		$	188
Allocation of undistributed net (loss) income		(409	)		132
Net (loss) income attributable to Class B common stock	$	(220	)	$	320
Weighted average shares of Class B common stock outstanding—basic		3,145			3,168
Weighted average potential shares of Class B common stock		—			119
Weighted average shares of Class B common stock and potential common shares outstanding—diluted		3,145			3,287
Basic net (loss) income per Class B common share	$	(0.07	)	$	0.10
Diluted net (loss) income per Class B common share	$	(0.07	)	$	0.10

4

Potential common shares consist of the shares issuable upon the release of restricted stock units (“RSUs”) and the exercise of stock options and stock appreciation rights (“SARs”). The Company’s unvested RSUs, unexercised stock options and unexercised SARs are not considered participating securities as they do not have rights to dividends or dividend equivalents prior to release or exercise.

The following table sets forth the number of potential common shares not included in the calculation of diluted earnings per share because their effects were anti-dilutive:

	Three Months Ended
	April 30,
	2013		2012
	(in thousands)
Class A		2,804		2,086
Class B		456		377

3.   FAIR VALUE MEASUREMENTS

When determining fair value the Company uses a three-tier value hierarchy which prioritizes the inputs used in measuring fair value.  Whenever possible, the Company uses observable market data. The Company relies on unobservable inputs only when observable market data is not available.  Classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

The following table sets forth the financial assets, measured at fair value, as of April 30, 2013 and January 31, 2013:

	Fair value measurement at reporting date using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
			(in thousands)
Money market mutual funds as of April 30,2013	$	50,112	$	—		$	—
Money market mutual funds as of January 31, 2013	$	44,871	$	—		$	—
Liability related to interest rate swap as of April 30, 2013	$	—	$	(671	)	$	—
Liability related to interest rate swap as of January 31, 2013	$	—	$	(384	)	$	—

Money market mutual funds are classified as part of “Cash and equivalents” in the accompanying Condensed Consolidated Balance Sheets. In addition, the amount of cash and equivalents, including cash deposited with commercial banks, was $23.7 million and $20.1 million as of April 30, 2013 and January 31, 2013, respectively.

The Company’s line of credit and notes payable both bear a variable market interest rate commensurate with the Company’s credit standing. Therefore, the carrying amounts outstanding under the line of credit and note payable reasonably approximate fair value based on Level 2 inputs.

There have been no transfers between fair value measurements levels during the three months ended April 30, 2013.

5

Derivative Instruments

The Company entered into an interest rate swap in May 2012 to mitigate the exposure to the variability of one month LIBOR for its floating rate debt described in Note 7 “Debt” within these Notes to Condensed Consolidated Financial Statements. The fair value of the interest rate swap is reflected as an asset or liability in the Condensed Consolidated Balance Sheets and the change in fair value is reported in “Other (income) expense” in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). The fair value of the interest rate swap is estimated as the net present value of projected cash flows based upon forward interest rates at the balance sheet date.

The fair values of the derivative instrument at April 30, 2013 and January 31, 2013 were as follows (in thousands):

	Asset/(Liability) Derivative
		Fair Value
	Balance Sheet Location	April 30, 2013			January 31, 2013
Derivative instrument:
Interest rate swap	Other liabilities	$	(671	)	$	(384	)
Total		$	(671	)	$	(384	)

The change in fair value of the interest rate swap recognized in the Condensed Consolidated Statement of Operations and Comprehensive Income (Loss) for the three months ended April 30, 2013 was $287,000.

4.   BUSINESS COMBINATIONS

CEBOS

On December 28, 2012, the Company acquired all of the outstanding stock of CEBOS, Ltd. ("CEBOS"), a provider of quality management and regulatory compliance software solutions, in a nontaxable transaction. CEBOS was founded in 1998 and is headquartered in Michigan, USA. The Company completed the acquisition for the purpose of expanding its product offerings and driving revenue growth. The purchase price consisted of $3.5 million in cash and two future payments of $750,000 each, due April 2014 and April 2015, respectively. Each future payment consists of $250,000 guaranteed and $500,000 contingent upon achievement of certain development and sales-based milestones. The contingent liability was estimated by assessing the probability of achieving each milestone and discounting the amount of each potential payment based on expected timing of the payment. The fair value of the liability-classified contingent consideration is remeasured at each reporting period with any changes in the fair value recorded as income or expense. The potential undiscounted amount of all future cash payments that the Company could be required to make for contingent consideration is between $0.5 million and $1.5 million as of April 30, 2013.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date (in thousands):

Tangible assets, including cash acquired of $0.4 million	$	1,423
Goodwill		2,456
Other intangible assets		3,450
Total assets acquired		7,329
Liabilities assumed		(1,233	)
Deferred tax liability		(1,209	)
Net assets acquired	$	4,887

The Company believes the amount of goodwill resulting from the purchase price allocation is attributable to the workforce of the acquired business and the expected synergistic benefits of being able to leverage CEBOS’s software with the Company’s existing software to provide an integrated suite to the customer bases of both the Company and CEBOS. The acquired goodwill and intangible assets are not deductible for tax purposes.

6

Identified intangible assets will be amortized to cost of license fees and operating expense based upon the nature of the asset ratably over the estimated useful life, as detailed in the table below (in thousands, except year amounts):

	Estimated useful life (years)		Fair value		Estimated annual amortization		Statement of operations classification
Software technology		2 - 5	$	1,750	$	320-395	Cost of license fees
Customer relationships		5		1,500		300	Amortization of intangibles from acquisitions
Trade name		5		200		40	Amortization of intangibles from acquisitions
			$	3,450

The Company has evaluated and continues to reevaluate pre-acquisition contingencies relating to CEBOS that existed as of the acquisition date. The Company has preliminarily determined that certain of these pre-acquisition contingencies are probable in nature and estimable as of the acquisition date and, accordingly, has recorded its best estimates for these contingencies as a part of the purchase price allocation. Although the Company believes the assumptions and estimates made in the past have been reasonable and appropriate, they are based in part on historical experience and information obtained from the management of previously acquired companies and are inherently uncertain. The purchase price allocation process requires the Company to use significant estimates and assumptions as of the business combination date, including the estimated fair value of accounts receivable acquired. The Company continues to gather information and evaluate pre-acquisition contingencies that it has assumed. If the Company makes changes to the amounts recorded or identifies additional pre-acquisition contingencies during the remainder of the measurement period, such amounts recorded will be included in the purchase price allocation.

DynaSys

On June 6, 2012, the Company acquired all of the outstanding stock of DynaSys S.A. ("DynaSys"), a provider of demand and supply chain planning software solutions, in a nontaxable transaction.  DynaSys was founded in 1985 and is headquartered in Strasbourg, France. The total purchase price of $7.5 million was paid in cash on June 6, 2012. The Company completed the acquisition for the purpose of expanding its product offerings and driving revenue growth.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date (in thousands):

Tangible assets, including cash acquired of $2.8 million	$	4,250
Goodwill		2,231
Other intangible assets		3,500
Total assets acquired		9,981
Liabilities assumed		(2,032	)
Deferred tax liability		(450	)
Net assets acquired	$	7,499

The Company believes the amount of goodwill resulting from the purchase price allocation is attributable to the workforce of the acquired business and the expected synergistic benefits of being able to leverage DynaSys' software with the Company’s existing software to provide an integrated suite to the customer bases of both the Company and DynaSys. The acquired goodwill and intangible assets are not deductible for tax purposes.

Identified intangible assets will be amortized to cost of license fees and operating expense based upon the nature of the asset ratably over the estimated useful life, as detailed in the table below (in thousands, except year amounts):

7

	Estimated useful life (years)		Fair value		Estimated annual amortization		Statement of operations classification
Software technology		5	$	1,800	$	360	Cost of license fees
Customer relationships		5		1,400		280	Amortization of intangibles from acquisitions
Trade name		5		300		60	Amortization of intangibles from acquisitions
			$	3,500

The results of operations of DynaSys and CEBOS are included in the Condensed Consolidated Financial Statements from the date of acquisition. The acquisitions were not deemed material, thus pro forma supplemental information has not been provided.

5. CAPITALIZED SOFTWARE COSTS

Capitalized software costs and accumulated amortization at April 30, 2013 and January 31, 2013 were as follows:

	April 30,			January 31,
	2013			2013
	(in thousands)
Capitalized software costs:
Acquired software technology (1)	$	3,742		$	3,741
Capitalized software development costs (1)		1,246			1,253
		4,988			4,994
Less accumulated amortization		(1,059	)		(814	)
Capitalized software costs, net	$	3,929		$	4,180

(1) Acquired software technology and capitalized software development costs include the impact of foreign currency translation.

Acquired software technology costs relate to technology purchased as a result of the Company’s fiscal 2013 acquisitions of DynaSys and CEBOS, as described in Note 4 “Business Combinations” within these Notes to Condensed Consolidated Financial Statements. In addition to the acquired software technology, the Company has capitalized costs related to translations and localizations of QAD Enterprise Applications.

Amortization of capitalized software costs was $0.3 million and $0.1 million for the three months ended April 30, 2013 and 2012, respectively. Amortization of capitalized software costs is included in “Cost of license fees” in the accompanying Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

The following table summarizes the estimated amortization expense relating to the Company’s capitalized software costs as of April 30, 2013:

Fiscal Years	(in thousands)
2014 remaining	$	864
2015		1,033
2016		886
2017		720
2018		426
	$	3,929

8

6.   GOODWILL AND INTANGIBLE ASSETS

Goodwill

The changes in the carrying amount of goodwill for the three months ended April 30, 2013, were as follows:

	Gross Carrying			Accumulated
	Amount			Impairment			Goodwill, Net
	(in thousands)
Balance at January 31, 2013	$	27,020		$	(15,608	)	$	11,412
Impact of foreign currency translation		(40	)		−			(40	)
Balance at April 30, 2013	$	26,980		$	(15,608	)	$	11,372

The Company performed its annual goodwill impairment review during the fourth quarter of fiscal 2013. The analysis compared the Company’s market capitalization to its net assets as of the test date, November 30, 2012. As the market capitalization significantly exceeded the Company’s net assets, there was no indication of goodwill impairment for fiscal 2013. The Company monitors the indicators for goodwill impairment testing between annual tests. No adverse events occurred during the three months ended April 30, 2013, that would cause the Company to test goodwill for impairment.

Intangible Assets

	April 30,			January 31,
	2013			2013
	(in thousands)
Amortizable intangible assets
Customer relationships (1)	$	2,996		$	3,049
Trade name		532			532
		3,528			3,581
Less: accumulated amortization		(449	)		(279	)
Net amortizable intangible assets	$	3,079		$	3,302

(1) Customer relationships include the impact of foreign currency translation.

The Company’s intangible assets are related to the DynaSys and CEBOS acquisitions completed in fiscal 2013. Intangible assets are included in “Other assets, net” in the accompanying Condensed Consolidated Balance Sheets. As of April 30, 2013, all of the Company’s intangible assets were determined to have finite useful lives, and therefore were subject to amortization.

Amortization of intangible assets was $176,000 and zero for the first quarters of fiscal 2014 and 2013 respectively. The following table summarizes the estimated amortization expense relating to the Company’s intangible assets as of April 30, 2013:

Fiscal Years	(in thousands)
2014 remaining	$	529
2015		706
2016		706
2017		706
2018		432
	$	3,079

9

7.   DEBT

	April 30,			January 31,
	2013			2013
	(in thousands)
Note payable	$	15,752		$	15,846
Less current maturities		(376	)		(372	)
Long-term debt	$	15,376		$	15,474

Note Payable

Effective May 30, 2012, QAD Ortega Hill, LLC entered into a variable rate credit agreement (the “2012 Mortgage”) with Rabobank, N.A., to refinance a pre-existing mortgage. The 2012 Mortgage has an original principal balance of $16.1 million and bears interest at the one month LIBOR rate plus 2.25%. One month LIBOR was 0.20% at April 30, 2013. The 2012 Mortgage matures in June 2022 and is secured by the Company’s headquarters located in Santa Barbara, California. In conjunction with the 2012 Mortgage, QAD Ortega Hill, LLC entered into an interest rate swap with Rabobank, N.A. The swap agreement has an initial notional amount of $16.1 million and a schedule matching that of the underlying loan that synthetically fixes the interest rate on the debt at 4.31% for the entire term of the 2012 Mortgage. The terms of the 2012 Mortgage provide for QAD Ortega Hill, LLC to make net monthly payments of $88,100 consisting of principal and interest and one final payment of $11.7 million. The unpaid balance as of April 30, 2013 was $15.8 million.

Credit Facility

On July 8, 2011, the Company entered into an unsecured credit agreement with Rabobank, N.A. (the “Facility”). The Facility provided a one-year commitment through July 15, 2012 for a $20 million line of credit for working capital or other business needs. The Company paid a commitment fee of 0.25% per annum of the daily average of the unused portion of the $20 million Facility. Borrowings under the Facility bore interest at a rate equal to one month LIBOR plus 0.75%. On July 13, 2012, the Company entered into an amendment to the Facility that extended the maturity of the Facility from July 15, 2012 to July 15, 2014. The amendment did not provide for any change in the variable rate of interest or debt covenants.

The Facility provides that the Company maintain certain financial and operating ratios which include, among other provisions, minimum liquidity on a consolidated basis of $25 million in cash and equivalents at all times, a current ratio (calculated using current liabilities excluding deferred revenue) of not less than 1.3 to 1.0 determined at the end of each fiscal quarter, a leverage ratio of not more than 1.5 to 1.0 determined at the end of each fiscal quarter, and a debt service coverage ratio of not less than 1.5 to 1.0 determined at the end of each fiscal year. The Facility also contains customary covenants that could restrict the Company’s ability to incur additional indebtedness. At April 30, 2013, the effective borrowing rate would have been 0.95%.

As of April 30, 2013, there were no borrowings under the Facility and the Company was in compliance with all financial covenants.

8.  INCOME TAXES

The Company recorded income tax (benefit) expense of $(0.3) million and $1.5 million in the first quarter of fiscal 2014 and fiscal 2013, respectively. The effective tax rate decreased to 19% during the first quarter of fiscal 2014 compared to 46% for the same period in the prior year. The estimated annual effective tax rate for the first quarter of fiscal 2014 and first quarter of fiscal 2013 remained consistent at 30%. The decrease in the effective tax rate to 19% was primarily due to the impact of discrete items on the Company’s loss. The effective tax rate of 46% in the prior fiscal period was primarily due to the impact of significant equity compensation shortfall on the Company’s income. A shortfall is a result of stock-based compensation expense recorded in the financial statements being greater than the tax deduction generated by the exercise of SARs and the vesting of RSUs.

The total amount of unrecognized tax benefits was $2.7 million at April 30, 2013. The entire amount of unrecognized tax benefits, if recognized, will impact the Company’s effective tax rate. This liability is classified as long-term unless the liability is expected to conclude within twelve months of the reporting date.  In the next twelve months, due to potential settlements with domestic tax authorities related to tax credits, an estimated $0.2 million of unrecognized tax benefits may be recognized.

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The Company’s policy is to recognize interest and penalties, if any, related to unrecognized tax benefits as a component of income tax expense. As of April 30, 2013, the Company has accrued approximately $0.3 million of interest and penalty expense relating to unrecognized tax benefits.

The Company files U.S. federal, state, and foreign tax returns that are subject to audit by various tax authorities. The Company is currently under audit in India for fiscal years ended March 31, 1998, 1999, 2008, 2009, 2010 and 2011; in California for fiscal years ended 2004 and 2005; and in South Africa and Thailand for the fiscal year ended 2012.

9.  STOCKHOLDERS’ EQUITY

Dividends

The following table sets forth the dividends declared and/or paid by the Company during fiscal 2014:

Declaration Date	Record Date	Payable	Dividend Class A		Dividend Class B		Amount Paid in Cash		Class A Shares Issued		Fair Value of Shares Issued
4/24/2013	5/8/2013	5/15/2013	$	0.072	$	0.06	$	1,083,000		—		—
12/11/2012	12/26/2012	2/08/2013	$	0.072	$	0.06		947,000		10,000		145,000

Shares issued in payment of these dividends were issued out of treasury stock.

Stock Repurchase Activity

In September 2011, the Company’s Board of Directors approved a stock repurchase plan in which up to one million shares could be repurchased. During the first quarter of fiscal 2014 the Company repurchased 45,000 shares and 8,000 shares of Class A and Class B common stock, respectively. The average share price was $13.34 and $12.02 for Class A and Class B stock, respectively, for total cash consideration of $0.7 million including fees. Since the inception of the plan, the Company has repurchased 897,000 and 103,000 shares of the Company’s Class A and Class B common stock, respectively, for total cash consideration of $12.5 million including fees. As of March 2013, all shares authorized under the plan have been repurchased and the plan was closed.

10.  STOCK-BASED COMPENSATION

The Company’s equity awards consist of stock options, SARs and RSUs. For a description of the Company’s stock-based compensation plans, see Note 12 “Stock-Based Compensation” in Notes to Consolidated Financial Statements included in the Annual Report on Form 10-K for the year ended January 31, 2013.

Stock-Based Compensation

The following table sets forth reported stock-based compensation expense for the three months ended April 30, 2013 and 2012:

	Three Months Ended April 30,
	2013		2012
	(in thousands)
Cost of maintenance, subscription and other revenue	$	38	$	48
Cost of professional services		98		111
Sales and marketing		167		188
Research and development		139		153
General and administrative		502		539
Total stock-based compensation expense	$	944	$	1,039

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The following table summarizes the activity for outstanding stock options and SARs for the three months ended April 30, 2013:

	Stock Options/ SARs (in thousands)			Weighted Average Exercise Price per Share		Weighted  Average Remaining Contractual Term (years)		Aggregate Intrinsic Value (in thousands)
Outstanding at January 31, 2013		2,920		$	11.11
Exercised		(41	)		8.63
Expired		(15	)		14.59
Forfeited		(9	)		10.18
Outstanding at April 30, 2013		2,855		$	11.13		4.5	$	4,550
Vested and expected to vest at April 30, 2013 (1)		2,817		$	11.13		4.5	$	4,505
Vested and exercisable at April 30, 2013		1,479		$	11.29		3.0	$	2,671

⁽¹⁾ The expected-to-vest SARs are the result of applying the pre-vesting forfeiture rate assumptions to total outstanding SARs.

The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the aggregate difference between the closing stock price of the Company’s common stock based on the last trading day as of April 30, 2013, and the exercise price for in-the-money stock options and SARs) that would have been received by the holders if all stock options and SARs had been exercised on April 30, 2013. The total intrinsic value of stock options and SARs exercised in the three months ended April 30, 2013 was $164,000.

The number of SARs exercised includes shares withheld on behalf of employees to satisfy minimum statutory tax withholding requirements.  During the quarter ended April 30, 2013, the Company withheld 4,000 shares for payment of these taxes at a value of $54,000.

At April 30, 2013, there was approximately $4.7 million of total unrecognized compensation cost related to unvested SARs. This cost is expected to be recognized over a weighted-average period of approximately 2.4 years.

RSU Information

The estimated fair value of RSUs was calculated based on the closing price of the Company’s common stock on the date of grant, reduced by the present value of dividends foregone during the vesting period.

The following table summarizes the activity for RSUs for the three months ended April 30, 2013:

	RSUs			Weighted Average Grant Date Fair Value
	(in thousands)
Restricted stock at January 31, 2013		385		$	10.49
Vested (1)		(14	)		7.48
Forfeited		(4	)		11.11
Restricted stock at April 30, 2013		367		$	10.60

⁽¹⁾ The number of RSUs vested includes shares withheld on behalf of employees to satisfy statutory tax withholding requirements.

The Company withholds, at the employee’s election, a portion of the vested shares as consideration for the Company’s payment of applicable employee income taxes. During the three months ended April 30, 2013, the Company withheld 6,000 shares for payment of these taxes at a value of $79,000.

Total unrecognized compensation cost related to RSUs was approximately $2.7 million as of April 30, 2013. This cost is expected to be recognized over a weighted-average period of approximately 2.5 years.

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11.  COMMITMENTS AND CONTINGENCIES

Indemnifications

The Company sells software licenses and services to its customers under written agreements. Each agreement contains the relevant terms of the contractual arrangement with the customer and generally includes certain provisions for indemnifying the customer against losses, expenses and liabilities from damages that may be awarded against the customer in the event the Company’s software is found to infringe upon certain intellectual property rights of a third party. The agreements generally limit the scope of and remedies for such indemnification obligations in a variety of industry-standard respects.

The Company believes its internal development processes and other policies and practices limit its exposure related to the indemnification provisions of the agreements. For several reasons, including the lack of prior indemnification claims and the lack of a monetary liability limit for certain infringement cases under the agreements, the Company cannot determine the maximum amount of potential future payments, if any, related to such indemnification provisions.

Legal Actions

The Company is subject to various legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of business. While the outcome of these claims cannot be predicted with certainty, management does not believe that the outcome of any of these legal matters will have a material adverse effect on the Company’s consolidated results of operations, financial position or liquidity.

12.  BUSINESS SEGMENT INFORMATION

The Company markets its products and services worldwide, primarily to companies in the manufacturing industry, including automotive, consumer products, food and beverage, high technology, industrial products and life sciences industries. The Company sells and licenses its products through its direct sales force in four geographic regions: North America, EMEA, Asia Pacific and Latin America and through distributors where third parties can extend sales reach more effectively or efficiently. The North America region includes the United States and Canada. The EMEA region includes Europe, the Middle East and Africa. The Asia Pacific region includes Asia and Australia. The Latin America region includes South America, Central America and Mexico. The Company’s Chief Operating Decision Maker, the Chief Executive Officer, reviews the consolidated results within one operating segment.

License and subscription revenues are assigned to the geographic regions based on both the proportion of users in each region and sales effort. Maintenance revenue is allocated to the region where the end user customer is located. Services revenue is assigned based on the region where the services are performed.

	Three Months Ended April 30,
	2013		2012
Revenue:	(in thousands)
North America (1)	$	26,566	$	28,518
EMEA		19,807		18,549
Asia Pacific		11,654		11,759
Latin America		3,900		4,882
	$	61,927	$	63,708

⁽¹⁾ Sales into Canada accounted for 3% of North America total revenue in the three months ended April 30, 2013 and 2012.

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ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

In addition to historical information, this Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. Any statements contained herein that are not statements of historical fact should be construed as forward looking statements, including statements that are preceded or accompanied by such words as “may,” “believe,” “could,” “anticipate,” “would,” “might,” “plan,” “expect,” “intend” and words of similar meaning or the negative of these terms or other comparable terminology. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in Part I, Item 1A entitled “Risk Factors” within our Annual Report on Form 10-K for the year ended January 31, 2013. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s opinions only as of the date hereof and are subject to risks, uncertainties and assumptions about our business. We undertake no obligation to revise or update or publicly release the results of any revision or update to these forward-looking statements except as required by applicable securities laws. Readers should carefully review the risk factors and other information described in other documents we file from time to time with the Securities and Exchange Commission (“SEC”).

INTRODUCTION

The following discussion should be read in conjunction with the information included within our Annual Report on Form 10-K for the year ended January 31, 2013, and the Condensed Consolidated Financial Statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q.

CRITICAL ACCOUNTING POLICIES

Our condensed consolidated financial statements are prepared applying certain critical accounting policies. The SEC defines “critical accounting policies” as those that require application of management’s most difficult, subjective, or complex judgments. Critical accounting policies require numerous estimates and strategic or economic assumptions that may prove inaccurate or subject to variations and may significantly affect our reported results and financial position for the period or in future periods. Changes in underlying factors, assumptions, or estimates in any of these areas could have a material impact on our future financial condition and results of operations. Our financial statements are prepared in accordance with U.S. GAAP, and they conform to general practices in our industry. We apply critical accounting policies consistently from period to period and intend that any change in methodology occur in an appropriate manner. Accounting policies currently deemed critical, including a) revenue recognition; b) accounts receivable allowances for bad debt and sales returns; c) capitalized software development costs; d) impairment assessments on goodwill and intangible assets; e) business combinations; f) valuation of deferred tax assets and tax contingency reserves; and g) stock-based compensation are further discussed in the Annual Report on Form 10-K for the fiscal year ended January 31, 2013. There have been no significant changes to our accounting policies and estimates as discussed in our Annual Report on Form 10-K for the fiscal year ended January 31, 2013.

BUSINESS OVERVIEW

QAD is a global provider of enterprise software applications, and related services and support. We provide enterprise software applications to global manufacturing companies primarily in the automotive, consumer products, food and beverage, high technology, industrial products and life sciences industries. More than 2,000 global manufacturing companies use QAD software. QAD was founded in 1979, incorporated in California in 1986 and reincorporated in Delaware in 1997.

QAD’s enterprise resource planning (“ERP”) suite is called QAD Enterprise Applications, which is also known as MFG/PRO. QAD Enterprise Applications supports the core business processes of our global manufacturing customers and includes the following functional areas: financials, customer management, manufacturing, demand and supply chain planning, supply chain execution, service and support, enterprise asset management, analytics, interoperability, process and performance, and internationalization. We sell QAD Enterprise Applications as a base ERP product with the option of purchasing various add-on modules depending on the functionality the customer requires.

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QAD offers two options for deploying our ERP products: On Premise and On Demand. With the On Premise model, QAD sells a perpetual license for the software and our customers deploy the software on their own computer servers. Under the perpetual licensing model, customers may separately purchase contracts for maintenance and additional services. With the On Demand model, customers subscribe to a service, and QAD provides access to the software as well as ongoing support services and management of the environment. The majority of QAD customers use the On Premise model, although the On Demand model is increasing in acceptance. As a result, we are focusing on expanding the use of the On Demand model. We also make it possible for customers to operate in a blended environment where some users can be deployed via On Premise and some users deployed via On Demand while offering the same end-user experience.

We have four principal sources of revenue:

· Licenses of our integrated suite of software applications;

· Maintenance and support, including technical support, training materials, product enhancements and upgrades;

· Subscription of our Enterprise Applications through our On Demand offering in a Software as a Service model as well as other hosted Internet applications;

· Professional services, including implementations, technical and application consulting, training, migrations and upgrades.

We operate primarily in the following four geographic regions: North America, Latin America, EMEA and Asia Pacific. In the first quarter of fiscal 2014, approximately 43% of our total revenue was generated in North America, 32% in EMEA, 19% in Asia Pacific and 6% in Latin America. Over 80% of our revenue is generated from large, global customers who have operations in multiple countries. License and subscription revenues are assigned to the geographic regions based on both the proportion of users in each region and sales effort. Maintenance revenue is allocated to the region where the end user is located. Services revenue is assigned based on the region where the services are performed. A significant portion of our revenue and expenses are derived from international operations which are primarily conducted in foreign currencies. As a result, changes in the value of foreign currencies relative to the U.S. dollar have impacted our results of operations and may impact our future results of operations. At April 30, 2013, we employed approximately 1,540 employees worldwide, of which 570 employees were based in North America, 460 employees in Asia Pacific, 440 employees in EMEA and 70 employees in Latin America.

GLOBAL ECONOMIC OUTLOOK AND INDUSTRY TRENDS

Our customer base and our target markets are global manufacturing companies; therefore, our results are heavily influenced by the state of the global manufacturing economy. Our management team monitors several economic indicators, with particular attention to the Global and Country Purchasing Managers’ Indexes (“PMI”). The PMI is a survey conducted on a monthly basis by polling businesses that represent the makeup of respective sectors. Since most of our customers are manufacturers, our revenue has historically correlated with fluctuations in the manufacturing PMI. Global macro economic trends and manufacturing spending are important barometers for our business, and the health of the U.S., Western European and Asian economies have a meaningful impact on our financial results. In the first quarter of fiscal 2014, approximately 57% of our total revenue was generated outside of North America and we expect to continue generating a significant portion of our revenue outside the U.S. The U.S. manufacturing economy has been expanding, as have the economies in many of the Asian and Latin American markets, while the European economies have been more fragile and have, for the most part, been contracting. We plan our business accordingly by deploying additional resources to areas of expansion, while continuing to monitor our overall expenditures given the economic uncertainties of our target markets.

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SUMMARY OF FISCAL 2014 FIRST QUARTER

Total revenue for the first quarter of fiscal 2014 was $61.9 million, representing a $1.8 million, or 3%, decrease from the first quarter of fiscal 2013. We did not meet our license revenue forecast. The decrease in total revenue was primarily driven by lower license and professional services revenue. License revenue was impacted by revenue recognition deferrals and closing a higher amount of On Demand transactions versus license transactions. Services revenue was impacted by multi-element arrangements where we did not have Vendor Specific Objective Evidence (“VSOE”) for all undelivered elements and, therefore, are required to recognize revenue ratably over the longer maintenance term rather than recognizing the revenue over the shorter service performance period. Services costs are expensed as incurred and as a result services margins fluctuate.  Net loss was $1.3 million for the first quarter of fiscal 2014 compared to net income of $1.8 million for the first quarter of fiscal 2013. Our results for the first quarter of fiscal 2014 were negatively impacted by several factors, including lower revenue and additional expenses from DynaSys and CEBOS, the entities we acquired in fiscal 2013.

License revenue. License revenue is primarily derived from software license fees that customers pay for our base product, QAD Enterprise Applications, and any add-on modules they purchase. In the first quarter of fiscal 2014, license revenue totaled $6.2 million, or 10% of total revenue. License revenue growth is influenced by the strength of the manufacturing industry and general economic conditions as well as the competitive position of our software products. Long sales cycles and the unpredictability in determining when license deals will close can have a material impact on our license revenues, net income and earnings per share.  Our first quarter license revenue was negatively impacted by revenue recognition deferrals as well as closing a higher number of On Demand transactions versus On Premise transactions.

Revenue recognition deferrals can have a significant impact on quarterly earnings. When we enter into a multi-element transaction with fixed fee services or when we sell licenses for additional users under a pricing model that does not satisfy VSOE requirements, we may be required to recognize license revenue ratably over the longer of the maintenance period or expected services implementation timeframe rather than recognizing license revenue at the time of sale. Our executives emphasize structuring commercially sound business deals that facilitate long-term, mutually beneficial relationships with our customers and, as a result, do not necessarily structure sales specifically to achieve short-term accounting results. In the first quarter of fiscal 2014, we deferred in full three transactions over $0.1 million totaling $0.9 million of license revenue.  This compared to two license deals over $0.1 million deferred in full totaling $0.3 million in the first quarter of fiscal 2013.

Our success in closing license deals for existing customers, new customers that are affiliates of existing customers and customers that have employees with historical experience working with QAD tends to be higher than with new customers that have no QAD affiliations. As a result, we place increased focus on these opportunities. A majority of our license revenue is generated from existing customers and their affiliates. With global GDP growth and the level of the PMI continuing to be below pre-fiscal 2009 levels, we believe global economic volatility will continue to shape customers’ and prospects’ buying decisions, making it more difficult to forecast the sales cycles for our products and the timing of large software license sales. Our license revenue has not reached pre-fiscal 2009 levels, which we believe is partially caused by economic volatility in certain parts of the world delaying customer buying decisions and partially caused by our increased focus on selling our solution via our On Demand offering.

Maintenance revenue. We offer support services 24 hours a day, seven days a week. In addition, we provide software upgrades which include additional or improved functionality when and if available. Our maintenance and other revenues totaled $35.2 million in the first quarter of fiscal 2014, representing 57% of total revenue. Maintenance revenue fluctuations are influenced by: (1) new license revenue growth; (2) annual renewal of support contracts; (3) increase in customers through acquisitions; (4) fluctuations in currency rates; and (5) adjustments to revenue as a result of revenue recognition rules. The vast majority of our customers renew their annual support contracts. Over the last three years, our annual renewal rate of customers who subscribe to maintenance has been greater than 90%. Maintenance revenue is generally billed on an annual basis and recognized ratably over the term of the agreement, typically twelve months.

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Subscription revenue. The majority of our software continues to be sold via the On Premise model, which generates license revenue. The On Demand model generates subscription revenue, which for the first quarter of fiscal 2014 totaled $4.0 million, or 6% of total revenue. Our On Demand customers include a mix of existing customers who have converted from our On Premise model and new user implementations of our On Demand product. The growth rate of subscription revenue has declined primarily due to slower than expected deployment by existing customers. Subscription revenue is generally billed on a quarterly basis and recognized ratably over the term of the agreement, typically 12 to 36 months. Growing our On Demand product and offering our products as software as a service continues to be a key strategic initiative for us.

Professional services revenue. Our professional services business includes consulting and training services related to our solutions. In the first quarter of fiscal 2014, our professional services revenue totaled $16.5 million, or 27% of total revenue. Our professional services organization provides our customers with expertise and assistance in planning and implementing our software solutions. Consultants typically assist customers with the initial installation of a system, the conversion and transfer of the customer’s historical data into our software, ongoing training and education, and system upgrades. Our professional services enable customers to implement our software efficiently, support a customer’s success with our solution, strengthen our customer relationships, and add to our industry-specific knowledge base for use in future implementations and product innovations. Our services margins tend to range from about breakeven to 10%. We view our services organization as a department supporting the implementation and deployment of our products and improving the overall customer experience. Services margins lower our overall operating margin as services margins are inherently lower than margins for our license, maintenance and subscription revenues.

Although our professional services are optional, many of our customers use these services for some of their planning, implementation, or related needs. Professional services are typically rendered under time and materials-based contracts with services typically billed on an hourly basis. Professional services are sometimes rendered under fixed-fee contracts with payments due on specific dates or milestones. When we enter into multiple element arrangements where we do not have VSOE for one or more of our undelivered elements, we recognize the entire arrangement ratably over the longer of the maintenance term or implementation period. Services costs related to these engagements are expensed as incurred. As a result, our professional services revenues and margins tend to fluctuate.

Our professional services revenue typically trails our license revenue by several quarters as implementation services and related consulting are performed after the purchase of the software. Services revenue growth is contingent upon license revenue growth and customer upgrade cycles, which are influenced by the strength of general economic and business conditions and the competitive position of our software products. We use our partners and subcontractors to supplement our internal professional services resources. This allows us to quickly respond to demand fluctuations while somewhat mitigating low utilization in slow times. We believe working with our partners also helps us extend our global reach by keeping a higher number of partners engaged and knowledgeable about our product. Our professional services business has competitive exposure to offshore providers. All of these factors potentially create the risk of pricing pressure, fewer customer orders and reduced gross margins.

Cash flow and financial condition. During the first quarter of fiscal 2014, we generated cash flow from operating activities of $12.3 million. Our cash and equivalents at April 30, 2013 totaled $73.8 million and the only debt on our balance sheet was $15.8 million related to the mortgage on our Santa Barbara headquarters. Our primary uses of cash have been funding investment in research and development and operations to drive earnings growth, acquisitions, dividend payments and repurchases of common stock.

In fiscal 2014, we anticipate that our priorities for use of cash will be developing sales and services resources and continued investment in research and development to drive and support growth and profitability. We will continue to evaluate acquisition opportunities that are complementary to our product footprint and technology direction. We will also continue to assess share repurchases and dividend payments. We do not anticipate a need for additional borrowing in fiscal 2014.

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RESULTS OF OPERATIONS

We operate in several geographical regions as described in Note 12 “Business Segment Information” within Notes to Condensed Consolidated Financial Statements. In order to present our results of operations without the effects of changes in foreign currency, we provide certain financial information on a “constant currency basis”, which is in addition to the actual financial information presented in the following tables. In order to calculate our constant currency results, we apply the foreign currency exchange rates that were in effect during the prior period to the current period results.

Revenue

				Increase (Decrease)
	Three Months Ended			Compared to Prior Period					Three Months  Ended
	April 30, 2013			$			%		April 30, 2012
(in thousands)
Revenue
License fees	$	6,218		$	(1,647	)	-21	%	$	7,865
Percentage of total revenue		10	%							12	%
Maintenance and other		35,201			681		2	%		34,520
Percentage of total revenue		57	%							54	%
Subscription fees		4,042			819		25	%		3,223
Percentage of total revenue		6	%							5	%
Professional services		16,466			(1,634	)	-9	%		18,100
Percentage of total revenue		27	%							29	%
Total revenue	$	61,927		$	(1,781	)	-3	%	$	63,708

Total Revenue.Total revenue was $61.9 million and $63.7 million for the first quarter of fiscal 2014 and 2013, respectively. Holding foreign currency exchange rates constant to fiscal 2013, total revenue for the current quarter would have been approximately $62.5 million, representing a $1.2 million, or 2%, decrease from the same period last year. When comparing categories within total revenue at constant rates, our current quarter results included decreases in our license and professional services revenue categories and increases in our maintenance and other and subscription revenue categories. Revenue outside the North America region as a percentage of total revenue was 57% and 55% for the first quarter of fiscal 2014 and fiscal 2013, respectively. Total revenue decreased in our North America and Latin America regions, remained relatively flat in our Asia Pacific region and increased in our EMEA region during the first quarter of fiscal 2014 when compared to the same quarter last year. Our fiscal 2013 acquisitions of DynaSys and CEBOS contributed $2.0 million to total revenue during the first quarter of fiscal 2014. Our products are sold to manufacturing companies that operate mainly in the following six industries: automotive, consumer products, food and beverage, high technology, industrial products and life sciences. Given the similarities between food and beverage and consumer products as well as between high technology and industrial products, we aggregate them for management review. Revenue by industry for the first quarter of fiscal 2014 was approximately 28% in automotive, 22% in consumer products and food and beverage, 34% in high technology and industrial products and 16% in life sciences. In comparison, revenue by industry for the first quarter of fiscal 2013 was approximately 29% in automotive, 23% in consumer products and food and beverage, 34% in high technology and industrial products and 14% in life sciences.

License Revenue.  License revenue was $6.2 million and $7.9 million for the first quarter of fiscal 2014 and 2013, respectively. Holding foreign currency exchange rates constant to fiscal 2013, license revenue for the current quarter would have been approximately $6.3 million, representing a $1.6 million, or 20%, decrease from the same period last year. Excluding $0.4 million of revenue recognized from our fiscal 2013 acquisitions, license revenue decreased in our North America and Latin America regions and remained relatively flat in our EMEA and Asia Pacific regions during the first quarter of fiscal 2014 when compared to the same quarter last year.  One of the metrics that management uses to measure license revenue performance is the number of customers that have placed sizable license orders in the period. During the first quarter of fiscal 2014, two customers placed license orders totaling more than $0.3 million and no orders exceeded $1.0 million.  In comparison, during the first quarter of fiscal 2013, three customers placed license orders totaling more than $0.3 million and no orders exceeded $1.0 million. Our license revenue was negatively affected by revenue recognition deferrals. Three license deals over $0.1 million were deferred in full totaling $0.9 million in the first quarter of fiscal 2014. In the first quarter of fiscal 2013, two license deals over $0.1 million were deferred in full totaling $0.3 million.

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Maintenance and Other Revenue.Maintenance and other revenue was $35.2 million and $34.5 million for the first quarter of fiscal 2014 and 2013, respectively. Holding foreign currency exchange rates constant to fiscal 2013, the first quarter of fiscal 2014 maintenance and other revenue would have been approximately $35.6 million, representing a $1.1 million, or 3%, increase from the same period last year. Excluding $0.9 million of revenue recognized from our fiscal 2013 acquisitions, maintenance and other revenue increased in our Asia Pacific region, was relatively flat in our EMEA and Latin America regions, and decreased in our North America region during the first quarter of fiscal 2014 when compared to the same quarter last year.

We track our rate of contract renewals by determining the number of customer sites with active contracts as of the end of the previous reporting period and compare this to the number of customers that renewed, or are in the process of renewing, their maintenance contracts as of the current period end. Our maintenance contract renewal rate has remained in excess of 90% for the first quarters of both fiscal 2014 and 2013.

Subscription Revenue. Subscription revenue was $4.0 million and $3.2 million for the first quarter of fiscal 2014 and 2013, respectively. Holding foreign currency exchange rates constant to fiscal 2013, subscription revenue for the current quarter would have been unchanged at $4.0 million, representing a $0.8 million, or 25%, increase from the same period last year. Subscription revenue increased in our EMEA, Asia Pacific and Latin America regions and was relatively flat in our North America region during the first quarter of fiscal 2014 when compared to the same quarter last year. The increase in subscription revenue was due to additional revenue related to our On Demand product offering. Currently, a majority of our On Demand sales are in the North America region. We expect the growth rate of subscription revenue in the future to be primarily attributable to growth in sales of our On Demand product offering.

Professional Services Revenue.  Professional services revenue was $16.5 million and $18.1 million for the first quarter of fiscal 2014 and 2013, respectively. Holding foreign currency exchange rates constant to fiscal 2013, professional services revenue for the first quarter of fiscal 2014 would have been approximately $16.7 million, representing a $1.4 million, or 8%, decrease from the same period last year. Excluding $0.7 million of revenue recognized from our fiscal 2013 acquisitions, professional services revenue decreased across all our regions during the first quarter of fiscal 2014 compared to the same quarter last year.  The number of engagements was higher in the first quarter of fiscal 2014 than in the same period of last year, but the average revenue per engagement was lower. A main factor contributing to lower average revenue per engagement is the accounting of our multi-element arrangements. During the first quarter of fiscal 2013, we recognized $1.3 million of services revenue related to one customer for which expenses had been recorded in prior periods. Conversely, during the first quarter of fiscal 2014, we deferred services revenue of $600,000 related to two customers for which expenses were recorded in the current quarter.

Cost of Revenue

				Increase
	Three Months  Ended			Compared to Prior Period				Three Months Ended
	April 30, 2013			$		%		April 30, 2012
(in thousands)
Cost of revenue
Cost of license fees	$	955		$	74	8	%	$	881
Cost of maintenance, subscription and other		11,062			1,062	11	%		10,000
Cost of professional services		16,608			870	6	%		15,738
Total cost revenue	$	28,625		$	2,006	8	%	$	26,619
Percentage of revenue		46	%						42	%

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Cost of license fees includes license royalties, amortization of capitalized software costs and shipping costs. Cost of maintenance, subscription and other includes personnel costs of fulfilling maintenance and subscription contracts, stock-based compensation for those employees, travel expense, professional fees, hosting costs, royalties, direct material and an allocation of information technology and facilities costs. Direct material charges include the cost of fulfilling maintenance and subscription contracts, hardware, costs associated with transferring our software to electronic media, printing of user manuals and packaging materials. Cost of professional services includes personnel costs of fulfilling service contracts, stock-based compensation for those employees, third-party contractor expense, travel expense for services employees and an allocation of information technology and facilities costs.

Total Cost of Revenue. Total cost of revenue (combined cost of license fees, cost of maintenance, subscription and other and cost of professional services) was $28.6 million for the first quarter of fiscal 2014 and $26.6 million for the first quarter of fiscal 2013, and as a percentage of total revenue was 46% and 42% for the first quarter of fiscal 2014 and 2013, respectively. Holding foreign currency exchange rates constant to fiscal 2013, total cost of revenue for the first quarter of fiscal 2014 would have been approximately $28.9 million and as a percentage of total revenue would have been unchanged at 46%.  The non-currency related increase in cost of revenue of $2.3 million, or 9%, in the first quarter of fiscal 2014 compared to the first quarter of fiscal 2013 was primarily due to higher personnel and hosting costs associated with higher subscription revenue and higher professional services costs associated with our acquisitions and use of subcontractors.

Cost of License Fees.  Cost of license fees was $1.0 million and $0.9 million for the first quarter of fiscal 2014 and fiscal 2013, respectively. Holding foreign currency exchange rates constant to fiscal 2013, cost of license fees for the first quarter of fiscal 2014 would have been unchanged at $1.0 million, representing an increase of $0.1 million, or 11%. The non-currency related increase in cost of license fees of $0.1 million in the first quarter of fiscal 2014 compared to the first quarter of fiscal 2013 was due to higher amortization of capitalized software costs of $0.2 million related to our fiscal 2013 acquisitions partially offset by lower royalties of $0.1 million associated with lower license revenue.

Cost of Maintenance, Subscription and Other.  Cost of maintenance, subscription and other was $11.1 million and $10.0 million for the first quarter of fiscal 2014 and fiscal 2013, respectively. Holding foreign currency exchange rates constant to fiscal 2013, cost of maintenance, subscription and other in the first quarter of fiscal 2014 would have been unchanged at $11.1 million, representing an increase of $1.1 million, or 11%. The non-currency related increase in cost of maintenance, subscription and other of $1.1 million in the first quarter of fiscal 2014 compared to the first quarter of fiscal 2013 was primarily due to higher subscription costs, which included higher personnel costs of $0.3 million, as a result of increased headcount of four people and higher hosting costs of $0.2 million. The higher subscription costs were incurred to support the growth in our subscription business. In addition, cost of maintenance, subscription and other related to DynaSys and CEBOS was $0.2 million in the first quarter of fiscal 2014.

Cost of Professional Services.  Cost of professional services was $16.6 million and $15.7 million for the first quarter of fiscal 2014 and fiscal 2013, respectively. Holding foreign currency exchange rates constant to fiscal 2013, cost of professional services for the first quarter of fiscal 2014 would have been approximately $16.8 million, representing an increase of $1.1 million, or 7%. The non-currency related increase in cost of professional services of $1.1 million in the first quarter of fiscal 2014 compared to the first quarter of fiscal 2013 was primarily due to $0.8 million of expenses related to DynaSys and CEBOS services operations in addition to $0.2 million of higher subcontractor costs.

Sales and Marketing

				Increase
	Three Months Ended			Compared to Prior Period				Three Months Ended
	April 30, 2013			$		%		April 30, 2012
(in thousands)
Sales and marketing	$	16,056		$	560	4	%	$	15,496
Percentage of revenue		26	%						24	%

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Sales and marketing expense includes salaries, benefits, bonuses, stock-based compensation and travel expense for our sales and marketing employees in addition to costs of programs aimed at increasing revenue, such as trade shows, user group events, advertising and various sales and promotional programs. Sales and marketing expense also includes personnel costs of order processing, sales agent fees and an allocation of information technology and facilities costs.

Sales and marketing expense was $16.1 million and $15.5 million for the first quarter of fiscal 2014 and fiscal 2013, respectively. Holding foreign currency exchange rates constant to fiscal 2013, sales and marketing expense for the first quarter of fiscal 2014 would have been approximately $16.2 million, representing an increase of $0.7 million, or 5%. Sales and marketing expense related to DynaSys and CEBOS was $0.9 million in the first quarter of fiscal 2014.

Research and Development

				Increase
	Three Months Ended			Compared to Prior Period				Three Months Ended
	April 30, 2013			$		%		April 30, 2012
(in thousands)
Research and development	$	10,845		$	1,311	14	%	$	9,534
Percentage of revenue		18	%						15	%

Research and development expense is expensed as incurred and consists primarily of salaries, benefits, bonuses, stock-based compensation and travel expense for research and development employees, professional services, such as fees paid to software development firms and independent contractors, and training. Research and development expense also includes an allocation of information technology and facilities costs, and is reduced by reimbursements from joint development projects.

Research and development expense was $10.8 million and $9.5 million for the first quarter of fiscal 2014 and fiscal 2013, respectively. Holding foreign currency exchange rates constant to fiscal 2013, research and development expense for the first quarter of fiscal 2014 would have been approximately $10.9 million, representing an increase of $1.4 million, or 15%. The non-currency related increase in research and development expense of $1.4 million in the first quarter of fiscal 2014 compared to the first quarter of fiscal 2013 was due to a reduction of our joint development reimbursements of $0.6 million. In addition, research and development expense related to DynaSys and CEBOS was $0.7 million in the first quarter of fiscal 2014. As part of our vertical focus we regularly seek to engage in joint development arrangements with our customers in order to enhance specific functionality and industry experience. The number and size of joint development arrangements may fluctuate.

General and Administrative

				Increase (Decrease)
	Three Months Ended			Compared to Prior Period					Three Months Ended
	April 30, 2013			$			%		April 30, 2012
(in thousands)
General and administrative	$	7,946		$	(159	)	-2	%	$	8,105
Percentage of revenue		13	%							13	%

General and administrative expense includes salaries, benefits, bonuses, stock-based compensation and travel expense for our finance, human resources, legal and executive personnel. General and administrative expense also includes professional fees for accounting and legal services, bad debt expense and an allocation of information technology and facilities costs and is reduced by capitalized costs related to an internal systems upgrade project.

General and administrative expense was $7.9 million and $8.1 million for the first quarter of fiscal 2014 and fiscal 2013, respectively. Holding foreign currency exchange rates constant to fiscal 2013, general and administrative expense for the first quarter of fiscal 2014 would have been approximately $8.0 million, representing a decrease of $0.1 million, or 1%. The non-currency related decrease in general and administrative expense of $0.1 million in the first quarter of fiscal 2014 compared to the first quarter of fiscal 2013 was primarily due to capitalized costs of $0.3 million related to an internal systems upgrade project and lower professional fees of $0.2 million partially offset by higher personnel costs of $0.2 million. In addition, general and administrative expense related to DynaSys and CEBOS was $0.2 million in the first quarter of fiscal 2014.

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Amortization of Intangibles from Acquisitions

Amortization of intangibles from acquisitions totaled $176,000 and zero for first quarter of fiscal 2014 and 2013, respectively. Amortization expense in the first quarter of fiscal 2014 was due to the intangible assets acquired in our fiscal 2013 acquisitions of DynaSys and CEBOS.

Other (Income) Expense

				Increase (Decrease)
	Three Months Ended			Compared to Prior Period					Three Months Ended
	April 30, 2013			$			%		April 30, 2012
(in thousands)
Other (income) expense
Interest income	$	(97	)	$	66		40	%	$	(163	)
Interest expense		203			(83	)	-29	%		286
Other (income) expense, net		(273	)		(719	)	-161	%		446
Total other (income) expense, net	$	(167	)	$	(736	)	-129	%	$	569
Percentage of revenue		0	%							1	%

Net other (income) expense was $(0.2) million and $0.6 million for the first quarter of fiscal 2014 and fiscal 2013, respectively. The change primarily related to a favorable movement in our foreign exchange (gains) losses of $0.9 million partially offset by expense of $0.3 million related to fair market value changes of the interest rate swap associated with the mortgage on our headquarters.

Income Tax (Benefit) Expense

				Increase (Decrease)
	Three Months Ended			Compared to Prior Period					Three Months  Ended
	April 30, 2013			$			%		April 30, 2012
(in thousands)
Income tax (benefit) expense	$	(291	)	$	(1,832	)	-119	%	$	1,541
Percentage of revenue		1	%							2	%
Effective tax rate		19	%							46	%

We recorded income tax (benefit) expense of $(0.3) million and $1.5 million in the first quarter of fiscal 2014 and fiscal 2013, respectively. Our effective tax rate decreased to 19% during the first quarter of fiscal 2014 compared to 46% for the same period in the prior year. The estimated annual effective tax rate for the first quarter of fiscal 2014 and first quarter of fiscal 2013 remained consistent at 30%. The decrease in the effective tax rate to 19% was primarily due to the impact of discrete items on our loss. The effective tax rate of 46% in the prior fiscal period was primarily due to the impact of significant equity compensation shortfall on our income. A shortfall is a result of stock-based compensation expense recorded in the financial statements being greater than the tax deduction generated by the exercise of SARs and the vesting of RSUs.

The Company continues to benefit from operating in foreign locations, such as Ireland, due to the lower statutory income tax rate relative to the U.S. Federal and state tax rate. This benefit is significantly reduced by withholding taxes and foreign base company sales and services income that is taxed both in the U.S. and in the foreign jurisdiction.

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LIQUIDITY AND CAPITAL RESOURCES

Our primary source of cash is from the sale of licenses, maintenance, subscription and professional services to our customers. Our primary use of cash is payment of our operating expenses which mainly consist of employee-related expenses, such as compensation and benefits, as well as general operating expenses for facilities and overhead costs. In addition to operating expenses, we also use cash for capital expenditures, payment of dividends, stock repurchases and investment in our growth initiatives, which include acquisitions of products, technology and businesses.

At April 30, 2013, our principal sources of liquidity were cash and equivalents totaling $73.8 million and net accounts receivable of $43.3 million. At April 30, 2013, our cash and equivalents consisted of current bank accounts, registered money market funds and time delineated deposits. Approximately 75% of our cash and equivalents were held in U.S. dollar denominated accounts as of April 30, 2013. We have a U.S. line of credit facility with Rabobank that permits unsecured short-term borrowings of up to $20 million. Our line of credit agreement contains customary covenants that could restrict our ability to incur additional indebtedness. Our line of credit is available for working capital or other business needs. We have not drawn on the line of credit during any of the last three fiscal years nor do we expect to draw on the line of credit during fiscal 2014.

Our primary commercial banking relationship is with Bank of America and its global affiliates. Our cash and equivalents are held by diversified financial institutions globally, and as of April 30, 2013, the portion of our cash and equivalents held by or invested through Bank of America was approximately 90%. Our largest cash concentration is in Ireland where we pool the cash generated by our EMEA subsidiaries. The majority of our cash and equivalents are held in investment accounts which are predominantly placed in money market mutual funds invested in U.S. Treasury and government securities. The remaining cash and equivalents are held in deposit accounts and certificates of deposit.

The amount of cash and equivalents held by foreign subsidiaries was $65.4 million and $53.3 million as of April 30, 2013 and January 31, 2013, respectively. If these funds are needed for our operations in the U.S., and if U.S. tax has not been previously provided, we would be required to accrue and pay taxes in the U.S. to repatriate these funds. Our current plans do not demonstrate a need to repatriate funds permanently reinvested in our foreign subsidiaries for our operations in the U.S. and it is not practicable to make a worldwide estimate of the amount of tax which may be payable upon distribution.

The following table summarizes our cash flows for the three months ended April 30, 2013 and 2012, respectively.

(in thousands)	Three Months Ended April 30, 2013			Three Months Ended April 30, 2012
Net cash provided by operating activities	$	12,273		$	5,087
Net cash used in investing activities		(1,180	)		(789	)
Net cash used in financing activities		(1,809	)		(3,106	)
Effect of foreign exchange rates on cash and equivalents		(512	)		234
Net increase in cash and equivalents	$	8,772		$	1,426

Typical factors affecting our cash provided by operating activities include our level of revenue and earnings for the period, the timing and amount of employee bonus payments and income tax payments, and the timing of cash collections from our customers which is our largest source of operating cash flow. Net cash flows provided by operating activities was $12.3 million for the first quarter of fiscal 2014 compared to $5.1 million for the first quarter of fiscal 2013. The $7.2 million increase in net cash flows provided by operating activities was primarily attributable to the positive cash flow effect of changes in accounts receivable of $8.7 million due to higher collections during the first quarter of fiscal 2014 compared to the first quarter of 2013 and noncash charges (including depreciation and amortization, stock-based compensation and provisions for doubtful accounts/sales adjustments) of $0.8 million.  These positive cash flow effects were partially offset by a decrease in net income of $3.1 million.

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Capital expenditures were $1.1 million for the first quarter of fiscal 2014, primarily relating to purchases of furniture and office equipment related to office moves and costs incurred and capitalized related to our internal system upgrade. This compared to $0.7 million for the first quarter of fiscal 2013. We expect capital expenditures will increase by approximately $1 million to $2 million in fiscal 2014 when compared to fiscal 2013. We continue to monitor our capital spending and do not believe we are delaying critical capital expenditures required to run our business.

In the first quarter of fiscal 2014 we made a dividend payment consisting of $0.9 million in cash and 10,000 shares of Class A common stock with a fair value of $0.1 million.  In April 2013, the Board of Directors declared an all cash dividend of $0.072 per share of Class A common stock and $0.06 per share of Class B common stock payable on May 15, 2013. On a quarterly basis the Board of Directors evaluates our ability to continue to pay dividends as well as the structure of any potential dividend payments.

On September 22, 2011, we announced that our Board of Directors approved a stock repurchase plan. A total of one million shares were authorized for repurchase under the plan. During the first quarter of fiscal 2014 we repurchased 45,000 shares and 8,000 shares of Class A and Class B common stock, respectively. The average share price was $13.34 and $12.02 for Class A and Class B stock, respectively, for total cash consideration of $0.7 million including fees.  Since the inception of the plan we repurchased 897,000 and 103,000 shares of Class A and Class B common stock, respectively, for total cash consideration of $12.5 million including fees. As of March 2013, all shares authorized under the plan had been repurchased and the plan was closed. The Board of Directors continues to evaluate our position relating to future potential repurchases on a regular basis.

We have historically calculated accounts receivable days’ sales outstanding (“DSO”), using the countback, or last-in first-out, method. This method calculates the number of days of billedrevenue represented by the accounts receivable balance as of period end. When reviewing the performance of our entities, DSO under the countback method is used by management. It is management’s belief that the countback method best reflects the relative health of our accounts receivable as of a given quarter-end or year-end because of the cyclical nature of our billings. Our billing cycle includes high annual maintenance renewal billings at year-end that will not be recognized as earned revenue until future periods.

DSO under the countback method was relatively consistent at 59 days and 62 days at April 30, 2013 and 2012, respectively. DSO using the average method, which is calculated utilizing the accounts receivable balance and earnedrevenue for the most recent quarter, was also consistent at 63 days and 64 days at April 30, 2013 and 2012, respectively. We believe our reserve methodology is adequate, our reserves are properly stated as of April 30, 2013, and the quality of our receivables remains good.

Cash requirements for items other than normal operating expenses are anticipated for capital expenditures, dividend payments and stock repurchases. We may require cash for acquisitions of new businesses, software products or technologies complementary to our business. We believe that our cash on hand, net cash provided by operating activities and the available borrowings under our existing credit facility will provide us with sufficient resources to meet our current and long-term working capital requirements, debt service, dividend payments, share repurchase payments and other cash needs for at least the next twelve months.

CONTRACTUAL OBLIGATIONS

A summary of future obligations under our various contractual obligations and commitments as of January 31, 2013 was disclosed in our Annual Report on Form 10-K for the year ended January 31, 2013.  During the quarter ended April 30, 2013 there have been no material changes in our contractual obligations or commercial commitments outside the ordinary course of business.

Credit Facility

On July 8, 2011, we entered into an unsecured credit agreement with Rabobank, N.A. (the “Facility”). The Facility provided a one-year commitment through July 15, 2012 for a $20 million line of credit for working capital or other business needs. We paid a commitment fee of 0.25% per annum of the daily average of the unused portion of the $20 million Facility. Borrowings under the Facility bore interest at a rate equal to one month LIBOR plus 0.75%. On July 13, 2012, we entered into an amendment to the Facility which extended the maturity of the Facility from July 15, 2012 to July 15, 2014. The amendment did not provide for any change in the variable rate of interest or debt covenants.

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The Facility provides that we maintain certain financial and operating ratios which include, among other provisions, minimum liquidity on a consolidated basis of $25 million in cash and equivalents at all times, a current ratio (calculated using current liabilities excluding deferred revenue) of not less than 1.3 to 1.0 determined at the end of each fiscal quarter, a leverage ratio of not more than 1.5 to 1.0 determined at the end of each fiscal quarter, and a debt service coverage ratio of not less than 1.5 to 1.0 determined at the end of each fiscal year. The Facility also contains customary covenants that could restrict our ability to incur additional indebtedness. At April 30, 2013, the effective borrowing rate would have been 0.95%.

As of April 30, 2013, there were no borrowings under the Facility and we were in compliance with all financial covenants.

Notes Payable

Effective May 30, 2012, QAD Ortega Hill, LLC entered into a variable rate credit agreement (the “2012 Mortgage”) with Rabobank, N.A., to refinance a pre-existing mortgage. The 2012 Mortgage has an original principal balance of $16.1 million and bears interest at the one month LIBOR rate plus 2.25%. One month LIBOR was 0.20% at April 30, 2013. The 2012 Mortgage matures in June 2022 and is secured by our headquarters located in Santa Barbara, California. In conjunction with the 2012 Mortgage, QAD Ortega Hill, LLC entered into an interest rate swap with Rabobank, N.A. The swap agreement has an initial notional amount of $16.1 million and a schedule matching that of the underlying loan that synthetically fixes the interest rate on the debt at 4.31% for the entire term of the 2012 Mortgage. The terms of the 2012 Mortgage provide for QAD Ortega Hill, LLC to make net monthly payments of $88,100 consisting of principal and interest and one final payment of $11.7 million. The unpaid balance as of April 30, 2013 was $15.8 million.

ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Exchange Rates. We have operations in foreign locations around the world and we are exposed to risk resulting from fluctuations in foreign currency exchange rates. The foreign currencies for which we currently have the most significant exposure are the euro, Brazilian real and Mexican peso. These foreign currency exchange rate movements could create a foreign currency gain or loss that could be realized or unrealized for us. Unfavorable movements in foreign currency exchange rates between the U. S. dollar and other foreign currencies may have an adverse impact on our operations. We did not have any foreign currency forward or option contracts or other material foreign currency denominated derivatives or other financial instruments open as of April 30, 2013.

We face two risks related to foreign currency exchange rates—translation risk and transaction risk. Translation risk relates to amounts invested in our foreign operations that are translated into U.S. dollars using period-end exchange rates. The resulting translation adjustments are recorded as a component of accumulated other comprehensive loss in the Condensed Consolidated Balance Sheets. Revenues and expenses in foreign currencies translate into higher or lower revenues and expenses in U.S. dollars as the U.S. dollar weakens or strengthens against other currencies. Furthermore, we have exposure to foreign exchange fluctuations arising from the remeasurement of non-functional currency assets, liabilities and intercompany balances into U.S. dollars for financial reporting purposes. Transaction risk is related to our international subsidiaries holding non-local currency net monetary accounts subject to revaluation into their local currency, which results in realized or unrealized foreign currency gains or losses.

For the three months ended April 30, 2013 and 2012, approximately 40% of our revenue was denominated in foreign currencies. We also incurred a significant portion of our expenses in currencies other than the U.S. dollar, approximately 45% for three months ended April 30, 2013 and 2012. Based on a hypothetical 10% adverse movement in all foreign currency exchange rates, our operating income would be adversely affected by approximately 15% and our expenses would be adversely affected by approximately 5%, partially offset by a positive effect on our revenue of approximately 5%.

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For the three months ended April 30, 2013 and 2012, foreign currency transaction and remeasurement (gains) losses totaled $(0.4) million and $0.5 million, respectively, and are included in “Other (income) expense, net” in our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). We performed a sensitivity analysis on the net U.S. dollar and euro-based monetary accounts subject to revaluation that are held by our international subsidiaries and on the non-functional currency assets, liabilities and intercompany balances that are remeasured into U.S. dollars. A hypothetical 10% adverse movement in all foreign currency exchange rates would result in foreign currency transaction and remeasurement losses of approximately $1.4 million and our income before taxes would be adversely affected by approximately 89%.

These estimates assume adverse shifts in all foreign currency exchange rates against the U.S. dollar, which do not always move in the same direction or in the same degrees. Actual results may differ materially from the hypothetical analysis.

Interest Rates. We invest our surplus cash in a variety of financial instruments, consisting principally of short-term marketable securities with maturities of less than 90 days at the date of purchase. Our investment securities are held for purposes other than trading. Cash balances held by subsidiaries are invested primarily in registered money market funds with local operating banks. Based on an interest rate sensitivity analysis of our cash and equivalents we estimate that a 10% adverse change in interest rates from the 2013 fiscal year-end rates would not have a material adverse effect on our cash flows or financial condition for the next fiscal year.

Our debt is comprised of a loan agreement, secured by real property, which bears interest at the one month LIBOR rate plus 2.25%. In conjunction with the loan agreement, we entered into an interest rate swap. The swap agreement has an initial notional amount and schedule matching that of the underlying loan that synthetically fixes the interest rate on the debt at 4.31%. Additionally, we have an unsecured line of credit which bears interest at the one month LIBOR rate plus 0.75%. As of April 30, 2013 there were no borrowings under our unsecured line of credit.

Our interest rate swap is accounted for using mark-to-market accounting. Accordingly, changes in the fair value of the swap each reporting period are adjusted through earnings, subjecting us to non-cash volatility in our results of operations. We prepared a sensitivity analysis to assess the impact of hypothetical changes in interest rates. Based upon the results of this analysis a 10% adverse change in interest rates from the April 30, 2013, rates would cause a $1.9 million reduction in our results of operations. We believe it is prudent to hedge the expected volatility of the variable rate mortgage on our corporate headquarters. The swap fixes the interest rate on our mortgage to 4.31% over the entire term of the mortgage and effectively lowers our interest rate from the previous mortgage rate of 6.5%. Although the agreement allows us to prepay the loan and exit the agreement early, we have no intention of doing so. As a result, we will have non-cash adjustments through earnings each reporting period. However, over the term of the mortgage, the net impact of these mark-to-market adjustments on earnings will be zero.

ITEM 4 – CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures.  Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective at the reasonable assurance level to ensure that the information required to be disclosed by us in this Quarterly Report on Form 10-Q was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

Changes in internal control over financial reporting.  There were no changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

26

PART II

ITEM 1.LEGAL PROCEEDINGS

The Company is not party to any material legal proceedings. From time to time, QAD is party, either as plaintiff or defendant, to various legal proceedings and claims which arise in the ordinary course of business. While the outcome of these claims cannot be predicted with certainty, management does not believe that the outcome of any of these legal matters will have a material adverse effect on the Company’s consolidated financial position, results of operations or liquidity.

ITEM 1A.  RISK FACTORS

There have been no material changes to the risk factors reported in Item 1A within the Company’s Annual Report on Form 10-K for the year ended January 31, 2013.

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Stock repurchase activity during the three months reported ended April 30, 2013 was as follows:

Period	Shares Repurchased Class A		Average Price per Share Class A		Shares Repurchased Class B		Average Price per Share Class B		Total Number of Shares Purchased as Part of Publicly Announced Plan		Maximum Number of Shares that May Yet Be Purchased Under the Plan (1)
February 1 through February 28, 2013
Shares repurchased		20,347	$	13.58		2,496	$	12.67		22,843		29,323
March 1 through March 31, 2013
Shares repurchased		24,173	$	13.14		5,150	$	11.71		29,323		-
April 1 through April 30, 2013
Shares repurchased		-	$	-		-	$	-		-		-
Total		44,520				7,646				52,166		-

(1) On September 22, 2011, the Company announced a share repurchase plan.  A total of one million shares were repurchased under the plan. The plan ended in March, 2013.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

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 2002
31.2	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 2002
32.1	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 2002
32.2	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
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

27

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	QAD Inc. (Registrant)
Date: June 7, 2013	By:	/s/ DANIEL LENDER
		Daniel Lender
		Executive Vice President, Chief Financial Officer
		(on behalf of the Registrant)
	By:	/s/ KARA BELLAMY
		Kara Bellamy
		Senior Vice President, Corporate Controller
		(Chief Accounting Officer)

28

EX-31.1

Exhibit 31.1

CERTIFICATIONS UNDER

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Karl F. Lopker, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of QAD Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) ) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date:  June 7, 2013

/s/ KARL F. LOPKER

Karl F. Lopker

Chief Executive Officer

QAD Inc.

EX-31.2

Exhibit 31.2

CERTIFICATIONS UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Daniel Lender, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of QAD Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) ) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures tobe designed under our supervision, to ensure that material information relating to the Registrant,including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financialreporting to be designed under our supervision, to provide reasonable assurance regarding the reliabilityof financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in thisreport our conclusions about the effectiveness of the disclosure controls and procedures, as of the end ofthe period covered by this report based on such evaluation; and

d) disclosed in this report any change in the Registrant’s internal control over financial reporting thatoccurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in thecase of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control overfinancial reporting which are reasonably likely to adversely affect the Registrant’s ability to record,process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have asignificant role in the Registrant’s internal control over financial reporting.

Date:  June 7, 2013

/s/ DANIEL LENDER

Daniel Lender

Chief Financial Officer

QAD Inc.

EX-32.1

Exhibit 32.1

CERTIFICATION FURNISHED PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of QAD Inc. (the "Company") on Form 10-Q for the period ending April 30 , 2013 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Karl F. Lopker, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date:  June 7, 2013

/s/ KARL F. LOPKER

Karl F. Lopker

Chief Executive Officer

QAD Inc.

EX-32.2

Exhibit 32.2

CERTIFICATION FURNISHED PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of QAD Inc. (the "Company") on Form 10-Q for the period ending April 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Daniel Lender, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date:  June 7, 2013

/s/ DANIEL LENDER

Daniel Lender

Chief Financial Officer

QAD Inc.

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BUSINESS SEGMENT INFORMATION

3 Months Ended

Apr. 30, 2013

BUSINESS SEGMENT INFORMATION [Abstract]

BUSINESS SEGMENT INFORMATION

12.  BUSINESS SEGMENT INFORMATION

The Company markets its products and services worldwide, primarily to companies in the manufacturing industry, including automotive, consumer products, food and beverage, high technology, industrial products and life sciences industries. The Company sells and licenses its products through its direct sales force in four geographic regions: North America, EMEA, Asia Pacific and Latin America and through distributors where third parties can extend sales reach more effectively or efficiently. The North America region includes the United States and Canada. The EMEA region includes Europe, the Middle East and Africa. The Asia Pacific region includes Asia and Australia. The Latin America region includes South America, Central America and Mexico. The Company's Chief Operating Decision Maker, the Chief Executive Officer, reviews the consolidated results within one operating segment.

License and subscription revenues are assigned to the geographic regions based on both the proportion of users in each region and sales effort. Maintenance revenue is allocated to the region where the end user customer is located. Services revenue is assigned based on the region where the services are performed.

	Three Months Ended  April 30,
	2013		2012
	(in thousands)
Revenue:
North America (1)	$	26,566	$	28,518
EMEA		19,807		18,549
Asia Pacific		11,654		11,759
Latin America		3,900		4,882
	$	61,927	$	63,708

_____________________________________

(1)           Sales into Canada accounted for 3% of North America total revenue in the three months ended April 30, 2013 and 2012.

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Apr. 30, 2013	Apr. 30, 2012
Revenue:
License fees	$ 6,218	$ 7,865
Maintenance and other	35,201	34,520
Subscription fees	4,042	3,223
Professional services	16,466	18,100
Total revenue	61,927	63,708
Costs of revenue:
License fees	955	881
Maintenance, subscription and other	11,062	10,000
Professional services	16,608	15,738
Total cost of revenue	28,625	26,619
Gross profit	33,302	37,089
Operating expenses:
Sales and marketing	16,056	15,496
Research and development	10,845	9,534
General and administrative	7,946	8,105
Amortization of intangibles from acquisitions	176	0
Total operating expenses	35,023	33,135
Operating (loss) income	(1,721)	3,954
Other (income) expense:
Interest income	(97)	(163)
Interest expense	203	286
Other (income) expense, net	(273)	446
Total other (income) expense, net	(167)	569
(Loss) income before income taxes	(1,554)	3,385
Income tax (benefit) expense	(291)	1,541
Net (loss) income	(1,263)	1,844
Comprehensive (loss) income:
Foreign currency translation adjustment, net of tax	373	145
Total comprehensive (loss) income	(890)	1,989
Common Class A [Member]
Other (income) expense:
Net (loss) income	(1,043)	1,524
Basic net (loss) income per share
Earnings per share (in dollars per share)	$ (0.08)	$ 0.12
Diluted net (loss) income per share
Earnings per share (in dollars per share)	$ (0.08)	$ 0.12
Common Class B [Member]
Other (income) expense:
Net (loss) income	$ (220)	$ 320
Basic net (loss) income per share
Earnings per share (in dollars per share)	$ (0.07)	$ 0.10
Diluted net (loss) income per share
Earnings per share (in dollars per share)	$ (0.07)	$ 0.10

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CAPITALIZED SOFTWARE COSTS

3 Months Ended

Apr. 30, 2013

CAPITALIZED SOFTWARE COSTS [Abstract]

CAPITALIZED SOFTWARE COSTS

5. CAPITALIZED SOFTWARE COSTS

Capitalized software costs and accumulated amortization at April 30, 2013 and January 31, 2013 were as follows:

	April 30,			January 31,
	2013			2013
	(in thousands)
Capitalized software costs:
Acquired software technology (1)...............................................................................................................................................................................................................................	$	3,742		$	3,741
Capitalized software development costs (1)...............................................................................................................................................................................................................		1,246			1,253
		4,988			4,994
Less accumulated amortization....................................................................................................................................................................................................................................		(1,059	)		(814	)
Capitalized software costs, net.....................................................................................................................................................................................................................................	$	3,929		$	4,180

__________________________

(1)   Acquired software technology and capitalized software development costs include the impact of foreign currency translation.

Acquired software technology costs relate to technology purchased as a result of the Company's fiscal 2013 acquisitions of DynaSys and CEBOS, as described in Note 4 "Business Combinations" within these Notes to Condensed Consolidated Financial Statements. In addition to the acquired software technology, the Company has capitalized costs related to translations and localizations of QAD Enterprise Applications.

Amortization of capitalized software costs was $0.3 million and $0.1 million for the three months ended April 30, 2013 and 2012, respectively. Amortization of capitalized software costs is included in "Cost of license fees" in the accompanying Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

The following table summarizes the estimated amortization expense relating to the Company's capitalized software costs as of April 30, 2013:

Fiscal Years	(in thousands)
2014 remaining..............................................................................................................................................................................................................................................................................................................	$	864
2015................................................................................................................................................................................................................................................................................................................................		1,033
2016................................................................................................................................................................................................................................................................................................................................		886
2017................................................................................................................................................................................................................................................................................................................................		720
2018................................................................................................................................................................................................................................................................................................................................		426
	$	3,929

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STOCKHOLDERS' EQUITY (Tables)

3 Months Ended

Apr. 30, 2013

STOCKHOLDERS' EQUITY [Abstract]

Dividends declared and/or paid

The following table sets forth the dividends declared and/or paid by the Company during fiscal 2014:

Declaration Date	Record Date	Payable	Dividend Class A			Dividend Class B		Amount Paid in Cash	Class A Shares Issued		Fair Value ofShares Issued
4/24/2013	5/8/2013	5/15/2013	$	0.072	$	0.06	$	1,083,000	-		-
12/11/2012	12/26/2012	2/08/2013	$	0.072	$	0.06	$	947,000		10,000	145,000

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COMPUTATION OF NET (LOSS) INCOME PER SHARE (Tables)

3 Months Ended

Apr. 30, 2013

COMPUTATION OF NET (LOSS) INCOME PER SHARE [Abstract]

Computation of basic and diluted net (loss) income per share

The following table sets forth the computation of basic and diluted net (loss) income per share:

	Three Months Ended
	April 30,
	2013			2012
	(in thousands except per share data)
Net (loss) income	$	(1,263	)	$	1,844
Less: Dividends declared		(1,088	)		(1,078	)
Undistributed net (loss) income	$	(2,351	)	$	766
Net (loss) income per share – Class A Common Stock
Dividends declared	$	899		$	890
Allocation of undistributed net (loss) income		(1,942	)		634
Net (loss) income attributable to Class A common stock	$	(1,043	)	$	1,524
Weighted average shares of Class A common stock outstanding—basic		12,429			12,693
Weighted average potential shares of Class A common stock		—			519
Weighted average shares of Class A common stock and potential common shares outstanding—diluted		12,429			13,212
Basic net (loss) income per Class A common share	$	(0.08	)	$	0.12
Diluted net (loss) income per Class A common share	$	(0.08	)	$	0.12
Net (loss) income per share – Class B Common Stock
Dividends declared	$	189		$	188
Allocation of undistributed net (loss) income		(409	)		132
Net (loss) income attributable to Class B common stock	$	(220	)	$	320
Weighted average shares of Class B common stock outstanding—basic		3,145			3,168
Weighted average potential shares of Class B common stock		—			119
Weighted average shares of Class B common stock and potential common shares outstanding—diluted		3,145			3,287
Basic net (loss) income per Class B common share	$	(0.07	)	$	0.10
Diluted net (loss) income per Class B common share	$	(0.07	)	$	0.10

Number of potential common shares not included in the calculation of diluted earnings per share

The following table sets forth the number of potential common shares not included in the calculation of diluted earnings per share because their effects were anti-dilutive:

	Three Months Ended
	April 30,
	2013	2012
	(in thousands)
Class A	2,804	2,086
Class B	456	377

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COMPUTATION OF NET (LOSS) INCOME PER SHARE (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Apr. 30, 2013	Apr. 30, 2012
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items]
Net (loss) income	$ (1,263)	$ 1,844
Less: Dividends declared	(1,088)	(1,078)
Undistributed net (loss) income	(2,351)	766
Net (loss) income per share [Abstract]
Dividends declared	1,088	1,078
Allocation of undistributed net (loss) income	(2,351)	766
Net (loss) income	(1,263)	1,844
Common Class A [Member]
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items]
Net (loss) income	(1,043)	1,524
Less: Dividends declared	(899)	(890)
Undistributed net (loss) income	(1,942)	634
Net (loss) income per share [Abstract]
Dividends declared	899	890
Allocation of undistributed net (loss) income	(1,942)	634
Net (loss) income	(1,043)	1,524
Weighted average shares of common stock outstanding-basic (in shares)	12,429	12,693
Weighted average potential shares of common stock (in shares)	0	519
Weighted average shares of common stock and potential common shares outstanding-diluted (in shares)	12,429	13,212
Basic net (loss) income per common share (in dollars per share)	$ (0.08)	$ 0.12
Diluted net (loss) income per common share (in dollars per share)	$ (0.08)	$ 0.12
Antidilutive securities excluded from computation of earnings per share (in shares)	2,804	2,086
Common Class B [Member]
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items]
Net (loss) income	(220)	320
Less: Dividends declared	(189)	(188)
Undistributed net (loss) income	(409)	132
Net (loss) income per share [Abstract]
Dividends declared	189	188
Allocation of undistributed net (loss) income	(409)	132
Net (loss) income	$ (220)	$ 320
Weighted average shares of common stock outstanding-basic (in shares)	3,145	3,168
Weighted average potential shares of common stock (in shares)	0	119
Weighted average shares of common stock and potential common shares outstanding-diluted (in shares)	3,145	3,287
Basic net (loss) income per common share (in dollars per share)	$ (0.07)	$ 0.10
Diluted net (loss) income per common share (in dollars per share)	$ (0.07)	$ 0.10
Antidilutive securities excluded from computation of earnings per share (in shares)	456	377

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BUSINESS SEGMENT INFORMATION (Tables)

3 Months Ended

Apr. 30, 2013

BUSINESS SEGMENT INFORMATION [Abstract]

License and subscription revenues assigned to geographic regions

License and subscription revenues are assigned to the geographic regions based on both the proportion of users in each region and sales effort. Maintenance revenue is allocated to the region where the end user customer is located. Services revenue is assigned based on the region where the services are performed.

	Three Months Ended  April 30,
	2013		2012
	(in thousands)
Revenue:
North America (1)	$	26,566	$	28,518
EMEA		19,807		18,549
Asia Pacific		11,654		11,759
Latin America		3,900		4,882
	$	61,927	$	63,708

_____________________________________

(1)           Sales into Canada accounted for 3% of North America total revenue in the three months ended April 30, 2013 and 2012.

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INCOME TAXES (Details) (USD $)	3 Months Ended		12 Months Ended
	Apr. 30, 2013	Apr. 30, 2012	Jan. 31, 2013
Income Tax Contingency [Line Items]
Income tax (benefit) expense	$ (291,000)	$ 1,541,000	$ 1,500,000
Effective income tax rate (in hundredths)	19.00%	46.00%
Estimated annual effective tax rate (in hundredths)	30.00%	30.00%
Unrecognized tax benefits that will impact effective tax rate	2,700,000
Unrecognized tax benefits recognized in next twelve months	200,000
Unrecognized tax benefits, income tax penalties and interest accrued	$ 300,000
California [Member]
Income Tax Contingency [Line Items]
Open tax years	2004 and 2005
India [Member]
Income Tax Contingency [Line Items]
Open tax years	Years ended March 31, 1998, 1999, 2008, 2009, 2010 and 2011
South Africa and Thailand [Member]
Income Tax Contingency [Line Items]
Open tax years	2012

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CAPITALIZED SOFTWARE COSTS (Details) (USD $)	3 Months Ended
	Apr. 30, 2013		Apr. 30, 2012	Jan. 31, 2013
CAPITALIZED SOFTWARE COSTS [Abstract]
Acquired software technology	$ 3,742,000	[1]		$ 3,741,000	[1]
Capitalized software development costs	1,246,000	[1]		1,253,000	[1]
Capitalized software, gross	4,988,000			4,994,000
Less accumulated amortization	(1,059,000)			(814,000)
Capitalized software costs, net	3,929,000			4,180,000
Capitalized computer software amortization	300,000		100,000
Capitalized Software [Member]
Estimated Amortization Expense [Abstract]
2014 remaining	864,000
2015	1,033,000
2016	886,000
2017	720,000
2018	426,000
Amortization expense, total	$ 3,929,000

[1] Acquired software technology and capitalized software development costs include the impact of foreign currency translation.

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STOCK-BASED COMPENSATION (Tables)

3 Months Ended

Apr. 30, 2013

STOCK-BASED COMPENSATION [Abstract]

Allocation of stock-based compensation expense

The following table sets forth reported stock-based compensation expense for the three months ended April 30, 2013 and 2012:

		Three Months Ended  April 30,
		(in thousands)
Cost of maintenance, subscription and other revenue	$	38	$	48
Cost of professional services		98		111
Sales and marketing		167		188
Research and development		139		153
General and administrative		502		539
Total stock-based compensation expense	$	944	$	1,039

Activity for outstanding stock options and SARs

The following table summarizes the activity for outstanding stock options and SARs for the three months ended April 30, 2013:

	Stock Options/ SARs (in thousands)			Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value (in thousands)
Outstanding at January 31, 2013.........................................................................................................................................		2,920		$	11.11
Exercised...........................................................................................................................................................................		(41	)		8.63
Expired...............................................................................................................................................................................		(15	)		14.59
Forfeited............................................................................................................................................................................		(9	)		10.18
Outstanding at April 30, 2013.............................................................................................................................................		2,855		$	11.13		4.5	$	4,550
Vested and expected to vest at April 30, 2013 (1)............................................................................................................		2,817		$	11.13		4.5	$	4,505
Vested and exercisable at April 30, 2013.........................................................................................................................		1,479		$	11.29		3.0	$	2,671

_____________________________________

(1) The expected-to-vest SARs are the result of applying the pre-vesting forfeiture rate assumptions to total outstanding SARs.

Summary of activity for RSUs

The following table summarizes the activity for RSUs for the three months ended April 30, 2013:

	RSUs			Weighted Average Grant Date Fair Value
	(in thousands)
Restricted stock at January 31, 2013............................................................................................................................................................................................................................		385		$	10.49
Vested (1).............................................................................................................................................................................................................................................................................................................................................................		(14	)		7.48
Forfeited.......................................................................................................................................................................................................................................................................		(4	)		11.11
Restricted stock at April 30, 2013................................................................................................................................................................................................................................		367		$	10.60

_____________________________________

(1) The number of RSUs vested includes shares withheld on behalf of employees to satisfy statutory tax withholding requirements.

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BASIS OF PRESENTATION

3 Months Ended

Apr. 30, 2013

BASIS OF PRESENTATION [Abstract]

BASIS OF PRESENTATION

1.   BASIS OF PRESENTATION

In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements fairly present the financial information contained therein. These statements have been prepared in accordance with generally accepted accounting principles ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In management's opinion, all necessary adjustments, consisting of normal, recurring and non-recurring adjustments, have been included in the accompanying Condensed Consolidated Financial Statements to present fairly the financial position and operating results of QAD Inc. ("QAD" or the "Company"). The Condensed Consolidated Financial Statements do not include all disclosures required by accounting principles generally accepted in the United States of America for annual financial statements and should be read in conjunction with the audited financial statements and related notes included in the Company's Annual Report on Form 10-K for the year ended January 31, 2013. The Condensed Consolidated Financial Statements include the results of the Company and its wholly owned subsidiaries. The results of operations for the three months ended April 30, 2013 are not necessarily indicative of the results to be expected for the year ending January 31, 2014.

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FAIR VALUE MEASUREMENTS

3 Months Ended

Apr. 30, 2013

FAIR VALUE MEASUREMENTS [Abstract]

FAIR VALUE MEASUREMENTS

3.   FAIR VALUE MEASUREMENTS

When determining fair value the Company uses a three-tier value hierarchy which prioritizes the inputs used in measuring fair value.  Whenever possible, the Company uses observable market data. The Company relies on unobservable inputs only when observable market data is not available.  Classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.
 

The following table sets forth the financial assets, measured at fair value, as of April 30, 2013 and January 31, 2013:

	Fair value measurement at reporting date using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
			(in thousands)
Money market mutual funds as of April 30,2013	$	50,112	$	—		$	—
Money market mutual funds as of January 31, 2013	$	44,871	$	—		$	—
Liability related to interest rate swap as of April 30,2013	$	—	$	(671	)	$	—
Liability related to interest rate swap as of January 31, 2013	$	—	$	(384	)	$	—

Money market mutual funds are classified as part of "Cash and equivalents" in the accompanying Condensed Consolidated Balance Sheets. In addition, the amount of cash and equivalents, including cash deposited with commercial banks, was $23.7 million and $20.1 million as of April 30, 2013 and January 31, 2013, respectively.

The Company's line of credit and notes payable both bear a variable market interest rate commensurate with the Company's credit standing. Therefore, the carrying amounts outstanding under the line of credit and note payable reasonably approximate fair value based on Level 2 inputs.

There have been no transfers between fair value measurements levels during the three months ended April 30, 2013.

Derivative Instruments

The Company entered into an interest rate swap in May 2012 to mitigate the exposure to the variability of one month LIBOR for its floating rate debt described in Note 7 "Debt" within these Notes to Condensed Consolidated Financial Statements. The fair value of the interest rate swap is reflected as an asset or liability in the Condensed Consolidated Balance Sheets and the change in fair value is reported in "Other (income) expense" in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). The fair value of the interest rate swap is estimated as the net present value of projected cash flows based upon forward interest rates at the balance sheet date.

The fair values of the derivative instrument at April 30, 2013 and January 31, 2013 were as follows (in thousands):

	Asset/(Liability) Derivative
		Fair Value
	Balance Sheet Location	April 30, 2013			January 31, 2013
Derivative instrument:
Interest rate swap........................................................................................................................................................................	Other liabilities	$	(671	)	$	(384	)
Total.........................................................................................................................................................................................		$	(671	)	$	(384	)

The change in fair value of the interest rate swap recognized in the Condensed Consolidated Statement of Operations and Comprehensive Income (Loss) for the three months ended April 30, 2013 was $287,000.

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GOODWILL AND INTANGIBLE ASSETS

3 Months Ended

Apr. 30, 2013

GOODWILL AND INTANGIBLE ASSETS [Abstract]

GOODWILL AND INTANGIBLE ASSETS

6.   GOODWILL AND INTANGIBLE ASSETS

Goodwill

The changes in the carrying amount of goodwill for the three months ended April 30, 2013, were as follows:

	Gross Carrying			Accumulated
	Amount			Impairment			Goodwill, Net
	(in thousands)
Balance at January 31, 2013	$	27,020		$	(15,608	)	$	11,412
Impact of foreign currency translation		(40	)		−			(40	)
Balance at April 30, 2013	$	26,980		$	(15,608	)	$	11,372

The Company performed its annual goodwill impairment review during the fourth quarter of fiscal 2013. The analysis compared the Company's market capitalization to its net assets as of the test date, November 30, 2012. As the market capitalization significantly exceeded the Company's net assets, there was no indication of goodwill impairment for fiscal 2013. The Company monitors the indicators for goodwill impairment testing between annual tests. No adverse events occurred during the three months ended April 30, 2013 that would cause the Company to test goodwill for impairment.

Intangible Assets

	April 30,			January 31,
	2013			2013
	(in thousands)
Amortizable intangible assets
Customer relationships (1)...........................................................................................................................................................................................................................................	$	2,996		$	3,049
Trade name.....................................................................................................................................................................................................................................................................		532			532
		3,528			3,581
Less: accumulated amortization......................................................................................................................................................................................................................................		(449	)		(279	)
Net amortizable intangible assets................................................................................................................................................................................................................................	$	3,079		$	3,302

______________________

(1) Customer relationships include the impact of foreign currency translation.

The Company's intangible assets are related to the DynaSys and CEBOS acquisitions completed in fiscal 2013. Intangible assets are included in "Other assets, net" in the accompanying Condensed Consolidated Balance Sheets. As of April 30, 2013, all of the Company's intangible assets were determined to have finite useful lives, and therefore were subject to amortization.

Amortization of intangible assets was $176,000 and zero for the first quarters of fiscal 2014 and 2013 respectively. The following table summarizes the estimated amortization expense relating to the Company's intangible assets as of April 30, 2013:

Fiscal Years	(in thousands)
2014 remaining..............................................................................................................................................................................................................................................................................................................	$	529
2015................................................................................................................................................................................................................................................................................................................................		706
2016................................................................................................................................................................................................................................................................................................................................		706
2017................................................................................................................................................................................................................................................................................................................................		706
2018................................................................................................................................................................................................................................................................................................................................		432
	$	3,079

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BUSINESS COMBINATIONS

3 Months Ended

Apr. 30, 2013

BUSINESS COMBINATIONS [Abstract]

BUSINESS COMBINATIONS

4.   BUSINESS COMBINATIONS

CEBOS

On December 28, 2012, the Company acquired all of the outstanding stock of CEBOS, Ltd. ("CEBOS"), a provider of quality management and regulatory compliance software solutions, in a nontaxable transaction. CEBOS was founded in 1998 and is headquartered in Michigan, USA. The Company completed the acquisition for the purpose of expanding its product offerings and driving revenue growth. The purchase price consisted of $3.5 million in cash and two future payments of $750,000 each, due April 2014 and April 2015, respectively. Each future payment consists of $250,000 guaranteed and $500,000 contingent upon achievement of certain development and sales-based milestones. The contingent liability was estimated by assessing the probability of achieving each milestone and discounting the amount of each potential payment based on expected timing of the payment. The fair value of the liability-classified contingent consideration is remeasured at each reporting period with any changes in the fair value recorded as income or expense. The potential undiscounted amount of all future cash payments that the Company could be required to make for contingent consideration is between $0.5 million and $1.5 million as of April 30, 2013.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date (in thousands):

Tangible assets, including cash acquired of $0.4 million...........................................................................................................................................................................................................................................	$	1,423
Goodwill..........................................................................................................................................................................................................................................................................................................................		2,456
Other intangible assets...................................................................................................................................................................................................................................................................................................		3,450
Total assets acquired......................................................................................................................................................................................................................................................................................................		7,329
Liabilities assumed.........................................................................................................................................................................................................................................................................................................		(1,233	)
Deferred tax liability......................................................................................................................................................................................................................................................................................................		(1,209	)
Net assets acquired.....................................................................................................................................................................................................................................................................................................	$	4,887

The Company believes the amount of goodwill resulting from the purchase price allocation is attributable to the workforce of the acquired business and the expected synergistic benefits of being able to leverage CEBOS's software with the Company's existing software to provide an integrated suite to the customer bases of both the Company and CEBOS. The acquired goodwill and intangible assets are not deductible for tax purposes.

Identified intangible assets will be amortized to cost of license fees and operating expense based upon the nature of the asset ratably over the estimated useful life, as detailed in the table below (in thousands, except year amounts):

	Estimated useful life (years)		Fair value		Estimated annual amortization		Statement of operations classification
Software technology............................................................................................		2 - 5	$	1,750	$	320-395	Cost of license fees
Customer relationships.......................................................................................		5		1,500		300	Amortization of intangibles from acquisitions
Trade name...........................................................................................................		5		200		40	Amortization of intangibles from acquisitions
			$	3,450

The Company has evaluated and continues to reevaluate pre-acquisition contingencies relating to CEBOS that existed as of the acquisition date. The Company has preliminarily determined that certain of these pre-acquisition contingencies are probable in nature and estimable as of the acquisition date and, accordingly, has recorded its best estimates for these contingencies as a part of the purchase price allocation. Although the Company believes the assumptions and estimates made in the past have been reasonable and appropriate, they are based in part on historical experience and information obtained from the management of previously acquired companies and are inherently uncertain. The purchase price allocation process requires the Company to use significant estimates and assumptions as of the business combination date, including the estimated fair value of accounts receivable acquired. The Company continues to gather information and evaluate pre-acquisition contingencies that it has assumed. If the Company makes changes to the amounts recorded or identifies additional pre-acquisition contingencies during the remainder of the measurement period, such amounts recorded will be included in the purchase price allocation.

DynaSys

On June 6, 2012, the Company acquired all of the outstanding stock of DynaSys S.A. ("DynaSys"), a provider of demand and supply chain planning software solutions, in a nontaxable transaction.  DynaSys was founded in 1985 and is headquartered in Strasbourg, France. The total purchase price of $7.5 million was paid in cash on June 6, 2012. The Company completed the acquisition for the purpose of expanding its product offerings and driving revenue growth.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date (in thousands):

Tangible assets, including cash acquired of $2.8 million	$	4,250
Goodwill		2,231
Other intangible assets		3,500
Total assets acquired		9,981
Liabilities assumed		(2,032	)
Deferred tax liability		(450	)
Net assets acquired	$	7,499

The Company believes the amount of goodwill resulting from the purchase price allocation is attributable to the workforce of the acquired business and the expected synergistic benefits of being able to leverage DynaSys' software with the Company's existing software to provide an integrated suite to the customer bases of both the Company and DynaSys. The acquired goodwill and intangible assets are not deductible for tax purposes.

Identified intangible assets will be amortized to cost of license fees and operating expense based upon the nature of the asset ratably over the estimated useful life, as detailed in the table below (in thousands, except year amounts):

	Estimated useful life (years)		Fair value		Estimated annual amortization		Statement of operations classification
Software technology		5	$	1,800	$	360	Cost of license fees
Customer relationships		5		1,400		280	Amortization of intangibles    from acquisitions
Trade name		5		300		60	Amortization of intangibles from acquisitions
			$	3,500

The results of operations of DynaSys and CEBOS are included in the Condensed Consolidated Financial Statements from the date of acquisition. The acquisitions were not deemed material, thus pro forma supplemental information has not been provided.

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FAIR VALUE MEASUREMENTS (Details) (USD $)			3 Months Ended
	Apr. 30, 2013	Jan. 31, 2013	Apr. 30, 2013 Interest Rate Swap [Member]	Apr. 30, 2013 Interest Rate Swap [Member] Designated as Hedging Instrument [Member] Other Liabilities [Member]	Jan. 31, 2013 Interest Rate Swap [Member] Designated as Hedging Instrument [Member] Other Liabilities [Member]	Apr. 30, 2013 Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] Recurring [Member]	Jan. 31, 2013 Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] Recurring [Member]	Apr. 30, 2013 Significant Other Observable Inputs (Level 2) [Member] Recurring [Member]	Jan. 31, 2013 Significant Other Observable Inputs (Level 2) [Member] Recurring [Member]	Apr. 30, 2013 Significant Unobservable Inputs (Level 3) [Member] Recurring [Member]	Jan. 31, 2013 Significant Unobservable Inputs (Level 3) [Member] Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Money market mutual funds						$ 50,112,000	$ 44,871,000	$ 0	$ 0	$ 0	$ 0
Liability related to interest rate swap						0	0	(671,000)	(384,000)	0	0
Cash deposited with commercial banks	23,700,000	20,100,000
Derivatives, Fair Value [Line Items]
Description of variable rate basis			one month LIBOR
Derivative liability, fair value				(671,000)	(384,000)
Change in fair value recognized in net income			$ (287,000)

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GOODWILL AND INTANGIBLE ASSETS (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Apr. 30, 2013		Apr. 30, 2012	Jan. 31, 2013
Gross Carrying Amount [Abstract]
Gross Carrying Amount	$ 27,020
Impact of foreign currency translation, gross	(40)
Gross Carrying Amount	26,980
Accumulated Impairment [Abstract]
Accumulated Impairment	(15,608)
Accumulated Impairment	(15,608)
Goodwill, Net [Abstract]
Goodwill, Net	11,412
Impact of foreign currency translation	(40)
Goodwill, Net	11,372
Amortizable intangible assets, gross	3,528			3,581
Less: accumulated amortization	(449)			(279)
Net amortizable intangible assets	3,079			3,302
Amortization of intangible assets	176		0
Estimated Amortization Expense [Abstract]
2014	529
2015	706
2016	706
2017	706
2018	432
Net amortizable intangible assets	3,079
Customer Relationships [Member]
Goodwill, Net [Abstract]
Amortizable intangible assets, gross	2,996	[1]		3,049	[1]
Trade Names [Member]
Goodwill, Net [Abstract]
Amortizable intangible assets, gross	$ 532			$ 532

[1] Customer relationships include the impact of foreign currency translation

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BUSINESS SEGMENT INFORMATION (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Apr. 30, 2013 Segment Region		Apr. 30, 2012
BUSINESS SEGMENT INFORMATION [Abstract]
Number of geographic regions	4
Number of operating segments	1
Revenues From External Customers And Long Lived Assets [Line Items]
Revenue	$ 61,927		$ 63,708
Percentage of sales into Canada to North America total revenue (in hundredths)	3.00%		3.00%
North America [Member]
Revenues From External Customers And Long Lived Assets [Line Items]
Revenue	26,566	[1]	28,518	[1]
EMEA [Member]
Revenues From External Customers And Long Lived Assets [Line Items]
Revenue	19,807		18,549
Asia Pacific [Member]
Revenues From External Customers And Long Lived Assets [Line Items]
Revenue	11,654		11,759
Latin America [Member]
Revenues From External Customers And Long Lived Assets [Line Items]
Revenue	$ 3,900		$ 4,882

[1] Sales into Canada accounted for 3% of North America total revenue in the three months ended April 30, 2013 and 2012.

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CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Apr. 30, 2013	Jan. 31, 2013
Current assets:
Accounts receivable, net of allowances	$ 2,505	$ 2,510
Stockholders' equity:
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized (in shares)	5,000,000	5,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock:
Treasury stock, at cost (in shares)	2,123,263	2,097,497
Common Class A [Member]
Common stock:
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)	71,000,000	71,000,000
Common stock, shares issued (in shares)	14,148,905	14,148,217
Common Class B [Member]
Common stock:
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)	4,000,000	4,000,000
Common stock, shares issued (in shares)	3,536,952	3,536,822

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STOCKHOLDERS' EQUITY

3 Months Ended

Apr. 30, 2013

STOCKHOLDERS' EQUITY [Abstract]

STOCKHOLDERS' EQUITY

9.  STOCKHOLDERS' EQUITY

Dividends

The following table sets forth the dividends declared and/or paid by the Company during fiscal 2014:

Declaration Date	Record Date	Payable	Dividend Class A			Dividend Class B		Amount Paid in Cash	Class A Shares Issued		Fair Value ofShares Issued
4/24/2013	5/8/2013	5/15/2013	$	0.072	$	0.06	$	1,083,000	-		-
12/11/2012	12/26/2012	2/08/2013	$	0.072	$	0.06	$	947,000		10,000	145,000

Shares issued in payment of these dividends were issued out of treasury stock.

Stock Repurchase Activity

In September 2011, the Company's Board of Directors approved a stock repurchase plan in which up to one million shares could be repurchased.  During the first quarter of fiscal 2014 the Company repurchased 45,000 shares and 8,000 shares of Class A and Class B common stock, respectively.  The average share price was $13.34 and $12.02 for Class A and Class B stock, respectively, for total cash consideration of $0.7 million including fees.  Since the inception of the plan, the Company has repurchased 897,000 and 103,000 shares of the Company's Class A and Class B common stock, respectively, for total cash consideration of $12.5 million including fees. As of March 2013, all shares authorized under the plan have been repurchased and the plan was closed.

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Apr. 30, 2013	Apr. 30, 2012
Cash flows from operating activities:
Net (loss) income	$ (1,263)	$ 1,844
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization	1,473	1,115
Provision for (recovery of) doubtful accounts and sales adjustments	181	(36)
Stock compensation expense	944	1,039
Change in fair value of a derivative instrument	287	0
Excess tax benefits from share-based payment arrangements	(51)	(51)
Other, net	12	0
Changes in assets and liabilities:
Accounts receivable	28,373	19,644
Other assets	(1,490)	(1,845)
Accounts payable	(4,313)	(3,152)
Deferred revenue	(6,937)	(8,475)
Other liabilities	(4,943)	(4,996)
Net cash provided by operating activities	12,273	5,087
Cash flows from investing activities:
Purchase of property and equipment	(1,130)	(685)
Capitalized software costs	(54)	(105)
Other	4	1
Net cash used in investing activities	(1,180)	(789)
Cash flows from financing activities:
Repayments of debt	(94)	(80)
Tax payments, net of proceeds, related to stock awards	(133)	(338)
Excess tax benefits from share-based payment arrangements	51	51
Dividends paid	(947)	(948)
Repurchase of common stock	(686)	(1,791)
Net cash used in financing activities	(1,809)	(3,106)
Effect of exchange rates on cash and equivalents	(512)	234
Net increase in cash and equivalents	8,772	1,426
Cash and equivalents at beginning of period	65,009	76,927
Cash and equivalents at end of period	73,781	78,353
Supplemental disclosure of non-cash activities:
Obligations associated with dividend declaration	1,083	1,100
Dividends paid in stock	$ 145	$ 128

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CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (USD $) In Thousands, unless otherwise specified	Apr. 30, 2013	Jan. 31, 2013
Current assets:
Cash and equivalents	$ 73,781	$ 65,009
Accounts receivable, net of allowances of $2,505 and $2,510 at April 30, 2013 and January 31, 2013, respectively	43,264	72,564
Deferred tax assets, net	4,415	4,414
Other current assets	15,184	13,806
Total current assets	136,644	155,793
Property and equipment, net	32,531	32,526
Capitalized software costs, net	3,929	4,180
Goodwill	11,372	11,412
Deferred tax assets, net	16,937	16,431
Other assets, net	5,224	5,606
Total assets	206,637	225,948
Current liabilities:
Current portion of long-term debt	376	372
Accounts payable	8,089	12,537
Deferred revenue	92,653	101,193
Other current liabilities	26,688	31,415
Total current liabilities	127,806	145,517
Long-term debt	15,376	15,474
Other liabilities	6,967	6,759
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.001 par value. Authorized 5,000,000 shares; none issued or outstanding	0	0
Common stock:
Additional paid-in capital	150,460	149,777
Treasury stock, at cost (2,123,263 shares and 2,097,497 shares at April 30, 2013 and January 31, 2013, respectively)	(31,349)	(31,093)
Accumulated deficit	(54,978)	(52,468)
Accumulated other comprehensive loss	(7,663)	(8,036)
Total stockholders' equity	56,488	58,198
Total liabilities and stockholders' equity	206,637	225,948
Common Class A [Member]
Common stock:
Common Stock Value	14	14
Common Class B [Member]
Common stock:
Common Stock Value	$ 4	$ 4

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BUSINESS COMBINATIONS (Details) (USD $)			3 Months Ended		3 Months Ended
	Apr. 30, 2013 Minimum [Member]	Apr. 30, 2013 Maximum [Member]	Apr. 30, 2013 CEBOS [Member] Payment	Dec. 28, 2012 CEBOS [Member]	Apr. 30, 2013 DynaSys [Member]	Jun. 06, 2012 DynaSys [Member]
Business Acquisition [Line Items]
Total purchase price of acquisition				$ 3,500,000		$ 7,500,000
Number of separate contingent payments on acquisition on achievement of milestone			2
Future payments required under business acquisition				750,000
Guaranteed future cash payment				250,000
Contingent payments	500,000	1,500,000		500,000
Fair Values of Assets Acquired and Liabilities Assumed [Abstract]
Tangible assets, including cash acquired				1,423,000		4,250,000
Goodwill				2,456,000		2,231,000
Other intangible assets			3,450,000	3,450,000	3,500,000	3,500,000
Total assets acquired				7,329,000		9,981,000
Liabilities assumed				(1,233,000)		(2,032,000)
Deferred tax liability				(1,209,000)		(450,000)
Net assets acquired				4,887,000		7,499,000
Cash acquired from acquisition			$ 400,000		$ 2,800,000

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DEBT (Tables)

3 Months Ended

Apr. 30, 2013

DEBT [Abstract]

Debt

	April 30,			January 31,
	2013			2013
	(in thousands)
Note payable	$	15,752		$	15,846
Less current maturities		(376	)		(372	)
Long-term debt	$	15,376		$	15,474

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STOCKHOLDERS' EQUITY (Details) (USD $)	3 Months Ended		20 Months Ended
	Apr. 30, 2013	Apr. 30, 2012	Apr. 30, 2013	Sep. 30, 2011
Dividends [Abstract]
Fair value of shares issued	$ 145,000	$ 128,000
Stock Repurchase Activity [Abstract]
Number of shares authorized for repurchase (in shares)				1,000,000
Cash consideration for repurchase of common stock	686,000	1,791,000	12,500,000
Dividends Declaration Date One [Member]
Dividends [Abstract]
Declaration date	Apr. 24, 2013
Record date	May 08, 2013
Payable	May 15, 2013
Amount Paid in Cash	1,083,000
Fair value of shares issued	0
Dividends Declaration Date Two [Member]
Dividends [Abstract]
Declaration date	Dec. 11, 2012
Record date	Dec. 26, 2012
Payable	Feb. 08, 2013
Amount Paid in Cash	947,000
Fair value of shares issued	$ 145,000
Common Class A [Member]
Stock Repurchase Activity [Abstract]
Shares repurchased (in shares)	45,000		897,000
Average price per share (in dollars per share)	$ 13.34
Common Class A [Member] | Dividends Declaration Date One [Member]
Dividends [Abstract]
Dividend (in dollars per share)	$ 0.072		$ 0.072
Class A shares issued (in shares)	0
Common Class A [Member] | Dividends Declaration Date Two [Member]
Dividends [Abstract]
Dividend (in dollars per share)	$ 0.072		$ 0.072
Class A shares issued (in shares)	10,000
Common Class B [Member]
Stock Repurchase Activity [Abstract]
Shares repurchased (in shares)	8,000		103,000
Average price per share (in dollars per share)	$ 12.02
Common Class B [Member] | Dividends Declaration Date One [Member]
Dividends [Abstract]
Dividend (in dollars per share)	$ 0.06		$ 0.06
Common Class B [Member] | Dividends Declaration Date Two [Member]
Dividends [Abstract]
Dividend (in dollars per share)	$ 0.06		$ 0.06

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STOCK-BASED COMPENSATION (Details) (USD $)	3 Months Ended					3 Months Ended				3 Months Ended
	Apr. 30, 2013	Apr. 30, 2012	Apr. 30, 2013 Options/SARs [Member]		Jan. 31, 2013 Options/SARs [Member]	Apr. 30, 2013 SARs [Member]	Apr. 30, 2013 RSUs [Member]		Jan. 31, 2013 RSUs [Member]	Apr. 30, 2013 Cost of Maintenance, Subscription and Other Revenue [Member]	Apr. 30, 2012 Cost of Maintenance, Subscription and Other Revenue [Member]	Apr. 30, 2013 Cost of Professional Services [Member]	Apr. 30, 2012 Cost of Professional Services [Member]	Apr. 30, 2013 Sales and Marketing [Member]	Apr. 30, 2012 Sales and Marketing [Member]	Apr. 30, 2013 Research and Development [Member]	Apr. 30, 2012 Research and Development [Member]	Apr. 30, 2013 General and Administrative [Member]	Apr. 30, 2012 General and Administrative [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share-based compensation	$ 944,000	$ 1,039,000								$ 38,000	$ 48,000	$ 98,000	$ 111,000	$ 167,000	$ 188,000	$ 139,000	$ 153,000	$ 502,000	$ 539,000
Stock Options/SARs [Roll Forward]
Exercised (in shares)			(41,000)
Expired (in shares)			(15,000)
Forfeited (in shares)			(9,000)
Outstanding at end of period (in shares)			2,855,000		2,920,000
Vested and expected to vest (in shares)			2,817,000	[1]
Vested and exercisable (in shares)			1,479,000
Weighted Average Exercise Price per Share [Abstract]
Exercised (in dollars per shares)			$ 8.63
Expired (in dollars per shares)			$ 14.59
Forfeited (in dollars per shares)			$ 10.18
Outstanding at end of period (in dollars per shares)			$ 11.13		$ 11.11
Vested and expected to vest (in dollars per share)			$ 11.13	[1]
Vested and exercisable (in dollars per share)			$ 11.29
Additional disclosures [Abstract]
Weighted average remaining contractual term, outstanding at end of period			4 years 6 months
Weighted average remaining contractual term, vested and expected to vest at end of period			4 years 6 months	[1]
Weighted average remaining contractual term, vested and exercisable at end of period			3 years
Aggregate intrinsic value, outstanding at end of period			4,550,000
Aggregate intrinsic value, vested and expected to vest at end of period			4,505,000	[1]
Aggregate intrinsic value, vested and exercisable at end of period			2,671,000
Total intrinsic value of stock options or SARs exercised			164,000
Number of shares withheld for payment of taxes (in shares)						4,000	6,000
Value of shares withheld for payment of taxes						54,000	79,000
Total unrecognized compensation cost						$ 4,700,000	$ 2,700,000
Weighted-average period to recognize total unrecognized compensation cost						2 years 4 months 24 days	2 years 6 months
Summary of activity of RSUs [Roll Forward]
Vested (in shares)							(14,000)	[2]
Forfeited (in shares)							(4,000)
Restricted stock at end of period (in shares)							367,000		385,000
Weighted Average Grant Date Fair Value [Abstract]
Vested (in dollars per share)							$ 7.48	[2]
Forfeited (in dollars per share)							$ 11.11
Restricted stock at end of period (in dollars per share)							$ 10.60		$ 10.49

[1] The expected-to-vest SARs are the result of applying the pre-vesting forfeiture rate assumptions to total outstanding SARs.

[2] The number of RSUs vested includes shares withheld on behalf of employees to satisfy statutory tax withholding requirements.

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INCOME TAXES

3 Months Ended

Apr. 30, 2013

INCOME TAXES [Abstract]

INCOME TAXES

8.  INCOME TAXES

The Company recorded income tax (benefit) expense of $(0.3) million and $1.5 million in the first quarter of fiscal 2014 and fiscal 2013, respectively. The effective tax rate decreased to 19% during the first quarter of fiscal 2014 compared to 46% for the same period in the prior year. The estimated annual effective tax rate for the first quarter of fiscal 2014 and first quarter of fiscal 2013 remained consistent at 30%. The decrease in the effective tax rate to 19% was primarily due to the impact of discrete items on the Company's loss. The effective tax rate of 46% in the prior fiscal period was primarily due to the impact of significant equity compensation shortfall on the Company's income. A shortfall is a result of stock-based compensation expense recorded in the financial statements being greater than the tax deduction generated by the exercise of SARs and the vesting of RSUs.

The total amount of unrecognized tax benefits was $2.7 million at April 30, 2013. The entire amount of unrecognized tax benefits, if recognized, will impact the Company's effective tax rate. This liability is classified as long-term unless the liability is expected to conclude within twelve months of the reporting date.  In the next twelve months, due to potential settlements with domestic tax authorities related to tax credits, an estimated $0.2 million of unrecognized tax benefits may be recognized.

The Company's policy is to recognize interest and penalties, if any, related to unrecognized tax benefits as a component of income tax expense. As of April 30, 2013, the Company has accrued approximately $0.3 million of interest and penalty expense relating to unrecognized tax benefits.

The Company files U.S. federal, state, and foreign tax returns that are subject to audit by various tax authorities. The Company is currently under audit in India for fiscal years ended March 31, 1998, 1999, 2008, 2009, 2010 and 2011; in California for fiscal years ended 2004 and 2005; and in South Africa and Thailand for the fiscal year ended 2012.

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BUSINESS COMBINATIONS, 2 (Details) (USD $) In Thousands, unless otherwise specified											3 Months Ended						3 Months Ended
	Apr. 30, 2013	Jan. 31, 2013	Apr. 30, 2013 Customer Relationships [Member]		Jan. 31, 2013 Customer Relationships [Member]		Apr. 30, 2013 Trade Name [Member]	Jan. 31, 2013 Trade Name [Member]	Apr. 30, 2013 DynaSys [Member]	Jun. 06, 2012 DynaSys [Member]	Apr. 30, 2013 DynaSys [Member] Software Technology [Member] Cost of License [Member]	Apr. 30, 2013 DynaSys [Member] Customer Relationships [Member] Amortization of intangibles from acquisitions [Member]	Apr. 30, 2013 DynaSys [Member] Trade Name [Member] Amortization of intangibles from acquisitions [Member]	Apr. 30, 2013 CEBOS [Member]	Dec. 28, 2012 CEBOS [Member]	Apr. 30, 2013 CEBOS [Member] Software Technology [Member] Cost of License [Member]	Apr. 30, 2013 CEBOS [Member] Software Technology [Member] Minimum [Member] Cost of License [Member]	Apr. 30, 2013 CEBOS [Member] Software Technology [Member] Maximum [Member] Cost of License [Member]	Apr. 30, 2013 CEBOS [Member] Customer Relationships [Member] Amortization of intangibles from acquisitions [Member]	Apr. 30, 2013 CEBOS [Member] Trade Name [Member] Amortization of intangibles from acquisitions [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Estimated useful life											5 years	5 years	5 years				2 years	5 years	5 years	5 years
Fair value	$ 3,528	$ 3,581	$ 2,996	[1]	$ 3,049	[1]	$ 532	$ 532			$ 1,800	$ 1,400	$ 300			$ 1,750			$ 1,500	$ 200
Other intangible assets									3,500	3,500				3,450	3,450
Estimated annual amortization											$ 360	$ 280	$ 60				$ 320	$ 395	$ 300	$ 40

[1] Customer relationships include the impact of foreign currency translation

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COMMITMENTS AND CONTINGENCIES

3 Months Ended

Apr. 30, 2013

COMMITMENTS AND CONTINGENCIES [Abstract]

COMMITMENTS AND CONTINGENCIES

11.  COMMITMENTS AND CONTINGENCIES

Indemnifications

The Company sells software licenses and services to its customers under written agreements. Each agreement contains the relevant terms of the contractual arrangement with the customer and generally includes certain provisions for indemnifying the customer against losses, expenses and liabilities from damages that may be awarded against the customer in the event the Company's software is found to infringe upon certain intellectual property rights of a third party. The agreements generally limit the scope of and remedies for such indemnification obligations in a variety of industry-standard respects.

The Company believes its internal development processes and other policies and practices limit its exposure related to the indemnification provisions of the agreements. For several reasons, including the lack of prior indemnification claims and the lack of a monetary liability limit for certain infringement cases under the agreements, the Company cannot determine the maximum amount of potential future payments, if any, related to such indemnification provisions.

Legal Actions

The Company is subject to various legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of business. While the outcome of these claims cannot be predicted with certainty, management does not believe that the outcome of any of these legal matters will have a material adverse effect on the Company's consolidated results of operations, financial position or liquidity.

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DEBT

3 Months Ended

Apr. 30, 2013

DEBT [Abstract]

DEBT

7.   DEBT

	April 30,			January 31,
	2013			2013
	(in thousands)
Note payable	$	15,752		$	15,846
Less current maturities		(376	)		(372	)
Long-term debt	$	15,376		$	15,474

Note Payable

Effective May 30, 2012, QAD Ortega Hill, LLC entered into a variable rate credit agreement (the "2012 Mortgage") with Rabobank, N.A., to refinance a pre-existing mortgage.  The 2012 Mortgage has an original principal balance of $16.1 million and bears interest at the one month LIBOR rate plus 2.25%.  One month LIBOR was 0.20% at April 30, 2013. The 2012 Mortgage matures in June 2022 and is secured by the Company's headquarters located in Santa Barbara, California. In conjunction with the 2012 Mortgage, QAD Ortega Hill, LLC entered into an interest rate swap with Rabobank, N.A. The swap agreement has an initial notional amount of $16.1 million and a schedule matching that of the underlying loan that synthetically fixes the interest rate on the debt at 4.31% for the entire term of the 2012 Mortgage. The terms of the 2012 Mortgage provide for QAD Ortega Hill, LLC to make net monthly payments of $88,100 consisting of principal and interest and one final payment of $11.7 million. The unpaid balance as of April 30, 2013 was $15.8 million.

Credit Facility

On July 8, 2011, the Company entered into an unsecured credit agreement with Rabobank, N.A. (the "Facility"). The Facility provided a one-year commitment through July 15, 2012 for a $20 million line of credit for working capital or other business needs. The Company paid a commitment fee of 0.25% per annum of the daily average of the unused portion of the $20 million Facility. Borrowings under the Facility bore interest at a rate equal to one month LIBOR plus 0.75%. On July 13, 2012, the Company entered into an amendment to the Facility that extended the maturity of the Facility from July 15, 2012 to July 15, 2014. The amendment did not provide for any change in the variable rate of interest or debt covenants.

The Facility provides that the Company maintain certain financial and operating ratios which include, among other provisions, minimum liquidity on a consolidated basis of $25 million in cash and equivalents at all times, a current ratio (calculated using current liabilities excluding deferred revenue) of not less than 1.3 to 1.0 determined at the end of each fiscal quarter, a leverage ratio of not more than 1.5 to 1.0 determined at the end of each fiscal quarter, and a debt service coverage ratio of not less than 1.5 to 1.0 determined at the end of each fiscal year. The Facility also contains customary covenants that could restrict the Company's ability to incur additional indebtedness. At April 30, 2013, the effective borrowing rate would have been 0.95%.

As of April 30, 2013, there were no borrowings under the Facility and the Company was in compliance with all financial covenants.

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COMPUTATION OF NET (LOSS) INCOME PER SHARE

3 Months Ended

Apr. 30, 2013

COMPUTATION OF NET (LOSS) INCOME PER SHARE [Abstract]

COMPUTATION OF NET (LOSS) INCOME PER SHARE

2.   COMPUTATION OF NET (LOSS) INCOME PER SHARE

The following table sets forth the computation of basic and diluted net (loss) income per share:

	Three Months Ended
	April 30,
	2013			2012
	(in thousands except per share data)
Net (loss) income	$	(1,263	)	$	1,844
Less: Dividends declared		(1,088	)		(1,078	)
Undistributed net (loss) income	$	(2,351	)	$	766
Net (loss) income per share – Class A Common Stock
Dividends declared	$	899		$	890
Allocation of undistributed net (loss) income		(1,942	)		634
Net (loss) income attributable to Class A common stock	$	(1,043	)	$	1,524
Weighted average shares of Class A common stock outstanding—basic		12,429			12,693
Weighted average potential shares of Class A common stock		—			519
Weighted average shares of Class A common stock and potential common shares outstanding—diluted		12,429			13,212
Basic net (loss) income per Class A common share	$	(0.08	)	$	0.12
Diluted net (loss) income per Class A common share	$	(0.08	)	$	0.12
Net (loss) income per share – Class B Common Stock
Dividends declared	$	189		$	188
Allocation of undistributed net (loss) income		(409	)		132
Net (loss) income attributable to Class B common stock	$	(220	)	$	320
Weighted average shares of Class B common stock outstanding—basic		3,145			3,168
Weighted average potential shares of Class B common stock		—			119
Weighted average shares of Class B common stock and potential common shares outstanding—diluted		3,145			3,287
Basic net (loss) income per Class B common share	$	(0.07	)	$	0.10
Diluted net (loss) income per Class B common share	$	(0.07	)	$	0.10

Potential common shares consist of the shares issuable upon the release of restricted stock units ("RSUs") and the exercise of stock options and stock appreciation rights ("SARs"). The Company's unvested RSUs, unexercised stock options and unexercised SARs are not considered participating securities as they do not have rights to dividends or dividend equivalents prior to release or exercise.

The following table sets forth the number of potential common shares not included in the calculation of diluted earnings per share because their effects were anti-dilutive:

	Three Months Ended
	April 30,
	2013	2012
	(in thousands)
Class A	2,804	2,086
Class B	456	377

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DEBT (Details) (USD $)			3 Months Ended	12 Months Ended	3 Months Ended
	Apr. 30, 2013	Jan. 31, 2013	Apr. 30, 2013 Rabobank N.A [Member] Credit Agreement [Member]	Jan. 31, 2012 Rabobank N.A [Member] Credit Agreement [Member]	Apr. 30, 2013 2012 Mortgage [Member] Rabobank N.A [Member] Quad Ortega Hill LLC [Member]	May 30, 2012 2012 Mortgage [Member] Rabobank N.A [Member] Quad Ortega Hill LLC [Member]
Debt Instrument [Line Items]
Note payable	$ 15,752,000	$ 15,846,000
Less current maturities	(376,000)	(372,000)
Long-term debt	15,376,000	15,474,000
Notes Payable [Abstract]
Original principal amount						16,100,000
Principal and interest					88,100
Final principal payment					11,700,000
Unpaid balance					15,800,000
Maturity date			Jul. 15, 2014	Jul. 15, 2012
Basis spread on variable rate (in hundredths)					2.25%
One month LIBOR (in hundredths)					0.20%
Fixed interest rate (in hundredths)					4.31%
Credit Facility [Abstract]
Term of loan			1 year
Maximum borrowing capacity			20,000,000
Unused capacity commitment fee (in hundredths)			0.25%
Variable rate basis			One month LIBOR plus 0.75%.
Basis spread on variable rate (in hundredths)			0.75%
Covenant terms			The Facility provides that the Company maintain certain financial and operating ratios which include, among other provisions, minimum liquidity on a consolidated basis of $25 million in cash and equivalents at all times, a current ratio (calculated using current liabilities excluding deferred revenue) of not less than 1.3 to 1.0 determined at the end of each fiscal quarter, a leverage ratio of not more than 1.5 to 1.0 determined at the end of each fiscal quarter, and a debt service coverage ratio of not less than 1.5 to 1.0 determined at the end of each fiscal year. The Facility also contains customary covenants that could restrict the Company's ability to incur additional indebtedness
Liquidity on a consolidated basis, Minimum			25,000,000
Current ratio, Minimum			1.3
Leverage ratio, Minimum			1.5
Debt service coverage ratio, Minimum			1.5
Effective borrowing rate (in hundredths)			0.95%
Borrowings outstanding			$ 0

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FAIR VALUE MEASUREMENTS (Tables)

3 Months Ended

Apr. 30, 2013

FAIR VALUE MEASUREMENTS [Abstract]

Summary of financial assets, measured at fair value

The following table sets forth the financial assets, measured at fair value, as of April 30, 2013 and January 31, 2013:

	Fair value measurement at reporting date using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
			(in thousands)
Money market mutual funds as of April 30,2013	$	50,112	$	—		$	—
Money market mutual funds as of January 31, 2013	$	44,871	$	—		$	—
Liability related to interest rate swap as of April 30,2013	$	—	$	(671	)	$	—
Liability related to interest rate swap as of January 31, 2013	$	—	$	(384	)	$	—

Fair values of the derivative instrument

The fair values of the derivative instrument at April 30, 2013 and January 31, 2013 were as follows (in thousands):

	Asset/(Liability) Derivative
		Fair Value
	Balance Sheet Location	April 30, 2013			January 31, 2013
Derivative instrument:
Interest rate swap........................................................................................................................................................................	Other liabilities	$	(671	)	$	(384	)
Total.........................................................................................................................................................................................		$	(671	)	$	(384	)

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STOCK-BASED COMPENSATION

3 Months Ended

Apr. 30, 2013

STOCK-BASED COMPENSATION [Abstract]

STOCK-BASED COMPENSATION

10.  STOCK-BASED COMPENSATION

The Company's equity awards consist of stock options, SARs and RSUs. For a description of the Company's stock-based compensation plans, see Note 12 "Stock-Based Compensation" in Notes to Consolidated Financial Statements included in the Annual Report on Form 10-K for the year ended January 31, 2013.

Stock-Based Compensation

The following table sets forth reported stock-based compensation expense for the three months ended April 30, 2013 and 2012:

		Three Months Ended  April 30,
		(in thousands)
Cost of maintenance, subscription and other revenue	$	38	$	48
Cost of professional services		98		111
Sales and marketing		167		188
Research and development		139		153
General and administrative		502		539
Total stock-based compensation expense	$	944	$	1,039

The following table summarizes the activity for outstanding stock options and SARs for the three months ended April 30, 2013:

	Stock Options/ SARs (in thousands)			Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value (in thousands)
Outstanding at January 31, 2013.........................................................................................................................................		2,920		$	11.11
Exercised...........................................................................................................................................................................		(41	)		8.63
Expired...............................................................................................................................................................................		(15	)		14.59
Forfeited............................................................................................................................................................................		(9	)		10.18
Outstanding at April 30, 2013.............................................................................................................................................		2,855		$	11.13		4.5	$	4,550
Vested and expected to vest at April 30, 2013 (1)............................................................................................................		2,817		$	11.13		4.5	$	4,505
Vested and exercisable at April 30, 2013.........................................................................................................................		1,479		$	11.29		3.0	$	2,671

_____________________________________

(1) The expected-to-vest SARs are the result of applying the pre-vesting forfeiture rate assumptions to total outstanding SARs.

The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the aggregate difference between the closing stock price of the Company's common stock based on the last trading day as of April 30, 2013, and the exercise price for in-the-money stock options and SARs) that would have been received by the holders if all stock options and SARs had been exercised on April 30, 2013. The total intrinsic value of stock options and SARs exercised in the three months ended April 30, 2013 was $164,000.

The number of SARs exercised includes shares withheld on behalf of employees to satisfy minimum statutory tax withholding requirements. During the quarter ended April 30, 2013, the Company withheld 4,000 shares for payment of these taxes at a value of $54,000.

At April 30, 2013, there was approximately $4.7 million of total unrecognized compensation cost related to unvested SARs. This cost is expected to be recognized over a weighted-average period of approximately 2.4 years.

RSU Information

The estimated fair value of RSUs was calculated based on the closing price of the Company's common stock on the date of grant, reduced by the present value of dividends foregone during the vesting period.

The following table summarizes the activity for RSUs for the three months ended April 30, 2013:

	RSUs			Weighted Average Grant Date Fair Value
	(in thousands)
Restricted stock at January 31, 2013............................................................................................................................................................................................................................		385		$	10.49
Vested (1).............................................................................................................................................................................................................................................................................................................................................................		(14	)		7.48
Forfeited.......................................................................................................................................................................................................................................................................		(4	)		11.11
Restricted stock at April 30, 2013................................................................................................................................................................................................................................		367		$	10.60

_____________________________________

(1) The number of RSUs vested includes shares withheld on behalf of employees to satisfy statutory tax withholding requirements.

The Company withholds, at the employee's election, a portion of the vested shares as consideration for the Company's payment of applicable employee income taxes. During the three months ended April 30, 2013, the Company withheld 6,000 shares for payment of these taxes at a value of $79,000.

Total unrecognized compensation cost related to RSUs was approximately $2.7 million as of April 30, 2013. This cost is expected to be recognized over a weighted-average period of approximately 2.5 years.

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GOODWILL AND INTANGIBLE ASSETS (Tables)

3 Months Ended

Apr. 30, 2013

GOODWILL AND INTANGIBLE ASSETS [Abstract]

Changes in carrying amount of goodwill

The changes in the carrying amount of goodwill for the three months ended April 30, 2013, were as follows:

	Gross Carrying			Accumulated
	Amount			Impairment			Goodwill, Net
	(in thousands)
Balance at January 31, 2013	$	27,020		$	(15,608	)	$	11,412
Impact of foreign currency translation		(40	)		−			(40	)
Balance at April 30, 2013	$	26,980		$	(15,608	)	$	11,372

Intangible assets

Intangible Assets

	April 30,			January 31,
	2013			2013
	(in thousands)
Amortizable intangible assets
Customer relationships (1)...........................................................................................................................................................................................................................................	$	2,996		$	3,049
Trade name.....................................................................................................................................................................................................................................................................		532			532
		3,528			3,581
Less: accumulated amortization......................................................................................................................................................................................................................................		(449	)		(279	)
Net amortizable intangible assets................................................................................................................................................................................................................................	$	3,079		$	3,302

______________________

(1) Customer relationships include the impact of foreign currency translation.

Estimated amortization expense

Amortization of intangible assets was $176,000 and zero for the first quarters of fiscal 2014 and 2013 respectively. The following table summarizes the estimated amortization expense relating to the Company's intangible assets as of April 30, 2013:

Fiscal Years	(in thousands)
2014 remaining..............................................................................................................................................................................................................................................................................................................	$	529
2015................................................................................................................................................................................................................................................................................................................................		706
2016................................................................................................................................................................................................................................................................................................................................		706
2017................................................................................................................................................................................................................................................................................................................................		706
2018................................................................................................................................................................................................................................................................................................................................		432
	$	3,079

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BUSINESS COMBINATIONS (Tables)

3 Months Ended

Apr. 30, 2013

BUSINESS COMBINATIONS [Abstract]

Fair values of assets acquired and liabilities assumed

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date (in thousands):

Tangible assets, including cash acquired of $0.4 million...........................................................................................................................................................................................................................................	$	1,423
Goodwill..........................................................................................................................................................................................................................................................................................................................		2,456
Other intangible assets...................................................................................................................................................................................................................................................................................................		3,450
Total assets acquired......................................................................................................................................................................................................................................................................................................		7,329
Liabilities assumed.........................................................................................................................................................................................................................................................................................................		(1,233	)
Deferred tax liability......................................................................................................................................................................................................................................................................................................		(1,209	)
Net assets acquired.....................................................................................................................................................................................................................................................................................................	$	4,887

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date (in thousands):

Tangible assets, including cash acquired of $2.8 million	$	4,250
Goodwill		2,231
Other intangible assets		3,500
Total assets acquired		9,981
Liabilities assumed		(2,032	)
Deferred tax liability		(450	)
Net assets acquired	$	7,499

Acquired intangible assets

Identified intangible assets will be amortized to cost of license fees and operating expense based upon the nature of the asset ratably over the estimated useful life, as detailed in the table below (in thousands, except year amounts):

	Estimated useful life (years)		Fair value		Estimated annual amortization		Statement of operations classification
Software technology............................................................................................		2 - 5	$	1,750	$	320-395	Cost of license fees
Customer relationships.......................................................................................		5		1,500		300	Amortization of intangibles from acquisitions
Trade name...........................................................................................................		5		200		40	Amortization of intangibles from acquisitions
			$	3,450

Identified intangible assets will be amortized to cost of license fees and operating expense based upon the nature of the asset ratably over the estimated useful life, as detailed in the table below (in thousands, except year amounts):

	Estimated useful life (years)		Fair value		Estimated annual amortization		Statement of operations classification
Software technology		5	$	1,800	$	360	Cost of license fees
Customer relationships		5		1,400		280	Amortization of intangibles    from acquisitions
Trade name		5		300		60	Amortization of intangibles from acquisitions
			$	3,500

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Document and Entity Information	3 Months Ended
	Apr. 30, 2013	May 31, 2013 Common Class A [Member]	May 31, 2013 Common Class B [Member]
Entity Information [Line Items]
Entity Registrant Name	QAD INC
Entity Central Index Key	0001036188
Current Fiscal Year End Date	--01-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		12,421,061	3,142,825
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q1
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Apr. 30, 2013

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CAPITALIZED SOFTWARE COSTS (Tables)

3 Months Ended

Apr. 30, 2013

CAPITALIZED SOFTWARE COSTS [Abstract]

Schedule of capitalized software costs

Capitalized software costs and accumulated amortization at April 30, 2013 and January 31, 2013 were as follows:

	April 30,			January 31,
	2013			2013
	(in thousands)
Capitalized software costs:
Acquired software technology (1)...............................................................................................................................................................................................................................	$	3,742		$	3,741
Capitalized software development costs (1)...............................................................................................................................................................................................................		1,246			1,253
		4,988			4,994
Less accumulated amortization....................................................................................................................................................................................................................................		(1,059	)		(814	)
Capitalized software costs, net.....................................................................................................................................................................................................................................	$	3,929		$	4,180

__________________________

(1)   Acquired software technology and capitalized software development costs include the impact of foreign currency translation.

Estimated amortization expense

The following table summarizes the estimated amortization expense relating to the Company's capitalized software costs as of April 30, 2013:

Fiscal Years	(in thousands)
2014 remaining..............................................................................................................................................................................................................................................................................................................	$	864
2015................................................................................................................................................................................................................................................................................................................................		1,033
2016................................................................................................................................................................................................................................................................................................................................		886
2017................................................................................................................................................................................................................................................................................................................................		720
2018................................................................................................................................................................................................................................................................................................................................		426
	$	3,929