<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended JULY 31, 2000
-------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition 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 (IRS Employer Identification No.)
incorporation or organization)
6450 Via Real, Carpinteria, California 93013
(Address of principal executive offices)
(805) 684-6614
(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 filing requirements
for the past 90 days. Yes X No
----- -----
The number of shares outstanding of the issuer's common stock as of the close of
business on August 31, 2000 was 33,446,503.
<PAGE>
QAD INC.
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I
FINANCIAL INFORMATION
ITEM 1 Financial Statements
Condensed Consolidated Balance Sheets as of 1
July 31, 2000 and January 31, 2000
Condensed Consolidated Statements of Operations 2
for the Three and Six Months Ended July 31, 2000 and 1999
Condensed Consolidated Statements of Cash Flows 3
for the Six Months Ended July 31, 2000 and 1999
Notes to Condensed Consolidated Financial 4
Statements
ITEM 2 Management's Discussion and Analysis of 6
Financial Condition and Results of Operations
ITEM 3 Quantitative and Qualitative Disclosures 9
About Market Risk
PART II
OTHER INFORMATION
ITEM 2 Changes in Securities 10
ITEM 4 Submission of Matters to a Vote of Security Holders 10
ITEM 6 Exhibits and Reports on Form 8-K 10
</TABLE>
<PAGE>
PART 1
ITEM 1 - FINANCIAL STATEMENTS
QAD INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
JULY 31, JANUARY 31,
2000 2000
---------------- ---------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 27,215 $ 35,936
Accounts receivable, net 73,163 98,567
Other current assets 12,119 15,523
---------------- ---------------
Total current assets 112,497 150,026
Property and equipment, net 30,692 32,729
Capitalized software development costs, net 7,765 8,233
Other assets, net 21,897 23,383
---------------- ---------------
Total assets $ 172,851 $ 214,371
================ ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and capital lease obligations $ 1,160 $ 1,240
Accounts payable 18,104 17,671
Accrued expenses 24,570 34,647
Deferred revenue and deposits 55,710 64,731
---------------- ---------------
Total current liabilities 99,544 118,289
Notes payable and capital lease obligations, less current portion 15,271 21,890
Other liabilities 187 200
Minority interest 475 563
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.001 par value. Authorized 5,000,000
shares; none issued or outstanding - -
Common stock, $0.001 par value. Authorized 150,000,000
shares; issued and outstanding 33,446,503 and 33,012,210
shares at July 31, 2000 and January 31, 2000, respectively 33 33
Additional paid-in-capital 112,930 111,553
Accumulated deficit (52,497) (34,876)
Unearned compensation - restricted stock (112) (146)
Accumulated other comprehensive loss (2,980) (3,135)
---------------- ---------------
Total stockholders' equity 57,374 73,429
---------------- ---------------
Total liabilities and stockholders' equity $ 172,851 $ 214,371
================ ===============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
1
<PAGE>
QAD INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JULY 31, JULY 31,
----------------------------- -----------------------------
2000 1999 2000 1999
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Revenue:
License fees $ 18,235 $ 20,562 $ 33,320 $ 41,023
Maintenance and other 23,848 23,283 47,777 44,284
Services 11,165 14,469 23,748 26,345
------------ ----------- ------------ -----------
Total revenue 53,248 58,314 104,845 111,652
Costs and expenses:
Cost of license fees 2,675 4,345 6,426 9,900
Other cost of revenue 21,856 21,813 44,179 41,574
Sales and marketing 17,020 18,572 34,070 40,079
Research and development 9,153 8,457 18,844 17,463
General and administrative 5,858 5,632 11,519 11,609
Amortization of intangibles from acquisitions 1,251 965 2,344 1,901
Restructuring charge - 1,152 - 1,152
------------ ----------- ------------ -----------
Total costs and expenses 57,813 60,936 117,382 123,678
------------ ----------- ------------ -----------
Operating loss (4,565) (2,622) (12,537) (12,026)
Other (income) expense:
Interest income (338) (105) (758) (212)
Interest expense 515 499 1,187 793
Other (income) expense 312 (189) 298 163
------------ ----------- ------------ -----------
Total other (income) expense 489 205 727 744
------------ ----------- ------------ -----------
Loss before income taxes (5,054) (2,827) (13,264) (12,770)
Income tax expense 3,791 1,142 4,357 1,142
------------ ----------- ------------ -----------
Net loss $ (8,845) $ (3,969) $ (17,621) $ (13,912)
============ =========== ============ ===========
Basic and diluted net loss per share $ (.26) $ (.13) $ (.53) $ (.46)
============ =========== ============ ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE>
QAD INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JULY 31,
-----------------------------
2000 1999
----------- ------------
<S> <C> <C>
Net cash provided by (used in) operating activities $ 4,830 $ (2,402)
Cash flows from investing activities:
Purchase of property and equipment (3,580) (2,621)
Investment in software development (1,293) (1,915)
Proceeds from sale of short-term investments - 3,000
Investment in equity securities - (500)
Acquisition of business, net of cash acquired (574) (81)
Other, net - 85
----------- ------------
Net cash used in investing activities (5,447) (2,032)
Cash flows from financing activities:
Proceeds from notes payable - 16,059
Reduction of notes payable (7,555) (12,585)
Issuance of common stock for cash 1,259 891
Other, net (40) (41)
----------- ------------
Net cash provided by (used in) financing activities (6,336) 4,324
Effect of exchange rates on cash and equivalents (1,768) (676)
----------- ------------
Net decrease in cash and equivalents (8,721) (786)
Cash and equivalents at beginning of period 35,936 16,078
----------- ------------
Cash and equivalents at end of period $ 27,215 $ 15,292
=========== ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
QAD INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
In the opinion of management, the accompanying condensed consolidated financial
statements contain all adjustments necessary (consisting only of
reclassifications and normal recurring adjustments) to present fairly the
financial information contained therein. These statements do not include all
disclosures required by generally accepted accounting principles and should be
read in conjunction with the audited financial statements and related notes
included in our Form 10-K for the year ended January 31, 2000. The results of
operations for the six months ended July 31, 2000 are not necessarily indicative
of the results to be expected for the year ending January 31, 2001.
Certain prior period financial statement items have been reclassified to conform
to current period presentation.
2. COMPREHENSIVE LOSS
Comprehensive loss includes changes in the balances of items that are reported
directly in a separate component of stockholders' equity on the Condensed
Consolidated Balance Sheets. The components of comprehensive loss are as
follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JULY 31, JULY 31,
--------------------------- -----------------------------
2000 1999 2000 1999
----------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
(In thousands)
Net loss $ (8,845) $ (3,969) $ (17,621) $ (13,912)
Foreign currency translation adjustments (210) (415) 155 (676)
----------- ---------- ------------ -----------
Comprehensive loss $ (9,055) $ (4,384) $ (17,466) $ (14,588)
=========== ========== ============ ===========
</TABLE>
3. PER SHARE INFORMATION
Net income (loss) per share is computed in accordance with Statement of
Financial Accounting Standards No. 128, Earnings Per Share. Basic income (loss)
per share is computed using the weighted average number of common shares
outstanding during the period. Diluted income (loss) per share is computed using
the weighted average number of common and dilutive common stock equivalents
outstanding during the period. Common stock equivalents consist of the shares
issuable upon the exercise of warrants and stock options using the treasury
stock method. The following table sets forth the computation of basic and
diluted income (loss) per share:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JULY 31, JULY 31,
--------------------------- -----------------------------
(In Thousands, Except Per Share Amounts) 2000 1999 2000 1999
----------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
Numerator:
Net loss $ (8,845) $ (3,969) $ (17,621) $ (13,912)
=========== ========== ============ ===========
Denominator:
Weighted average basic shares outstanding 33,402 30,169 33,285 30,052
Effect of dilutive common stock equivalents - - - -
----------- ---------- ------------ -----------
Weighted average diluted shares outstanding 33,402 30,169 33,285 30,052
=========== ========== ============ ===========
Basic and diluted loss per share $ (.26) $ (.13) $ (.53) $ (.46)
=========== ========== ============ ===========
</TABLE>
4
<PAGE>
Common stock equivalent shares of approximately 421,000 and 979,000 for the
three months and six months ended July 31, 2000, and 143,000 and 169,000 for the
three months and six months ended July 31, 1999, respectively, were not included
in the diluted calculations because, due to the net loss positions, they were
anti-dilutive.
4. RESTRUCTURING CHARGE
In response to changes in customers' manufacturing capital software spending
patterns during fiscal year 1999, we undertook a restructuring program that more
closely aligned costs with sales expectations. The program included the
consolidation of certain facilities and an approximate reduction of 230
positions across a broad cross-section of QAD. This program was continued in
fiscal year 2000 with a $1.2 million charge recorded in the second quarter. As
of July 31, 2000, $5.3 million of the total $5.5 million restructuring charge
was utilized, and we expect to pay the remaining balance by January 31, 2001.
5. BUSINESS SEGMENT INFORMATION
QAD operates in geographic regions. 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.
Operating income attributable to each business segment is based upon the
management assignment of revenue and costs. Regional cost of revenue includes
the cost of goods produced by QAD's manufacturing operations at the transfer
price charged to the distribution operation. Income from manufacturing
operations is included in the Corporate operating segment. Research and
development costs are also included in the Corporate operating segment.
Identifiable assets are assigned by region based upon the location of each legal
entity.
During the latter part of fiscal year 2000, management changed the composition
of our reportable segments for operating income (loss), in order to disclose
components related to the corporate segment. Prior period segment information
has not been restated to separately disclose corporate segment data, as it is
impracticable to do so.
<TABLE>
<CAPTION>
(In Thousands) THREE MONTHS ENDED SIX MONTHS ENDED
JULY 31, JULY 31,
---------------------------- ----------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUE
North America $ 20,310 $ 25,026 $ 41,401 $ 45,900
EMEA 21,674 21,034 42,081 42,119
Asia Pacific 9,358 9,318 17,282 17,236
Latin America 1,906 2,936 4,081 6,397
----------- ----------- ----------- -----------
$ 53,248 $ 58,314 $ 104,845 $ 111,652
=========== =========== =========== ===========
OPERATING INCOME (LOSS):
North America $ 1,836 $ 309 $ 3,041 $ (5,819)
EMEA (502) (918) (1,390) (2,881)
Asia Pacific (1,737) (203) (4,004) (1,517)
Latin America (1,573) (658) (2,662) (657)
Corporate (2,589) - (7,522) -
Restructuring charge - (1,152) - (1,152)
----------- ----------- ----------- -----------
$ (4,565) $ (2,622) $ (12,537) $ (12,026)
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
JULY 31, JANUARY 31,
2000 2000
----------- ------------
<S> <C> <C>
IDENTIFIABLE ASSETS:
North America $ 60,374 $ 96,853
EMEA 77,136 84,233
Asia Pacific 27,194 24,575
Latin America 8,147 8,710
=========== ============
$ 172,851 $ 214,371
=========== ============
</TABLE>
5
<PAGE>
6. BUSINESS ACQUISITIONS
In July 2000, we acquired certain assets and liabilities of an Italy-based
distributor, Atos Italy S.p.A. The cost of the acquisition totaled $1.7 million.
The acquisition was accounted for using the purchase method. Goodwill related to
the acquisition of $1.0 million is being amortized over ten years.
Results of operations have been included in the financial statements since the
acquisition date. The historical operations of the acquired company are not
material to our consolidated operations or financial position.
Therefore, supplemental pro forma information has not been presented.
7. SUBSEQUENT EVENTS
On August 22, 2000, we announced an initiative to sharpen the focus of our
e-business and business intelligence solutions for multinational customers. In
connection with this shift, we expect to take a restructuring charge in the
third quarter ending October 31, 2000. Our initial estimate of this charge is
between $3.0 million and $5.0 million. The charge will primarily relate to costs
associated with the reduction of personnel and facilities consolidation.
On September 8, 2000, we entered into a five-year secured credit facility
("the facility") with Foothill Capital Corporation ("Foothill"). The maximum
available amount of borrowings under the credit facility is $30.0 million.
The facility is secured by certain assets of QAD Inc. The facility includes a
$15.0 million term loan with a five-year amortization schedule. The term loan
may be re-loaded to $15.0 million on an annual basis. Borrowings under the
term loan portion of the facility bear interest at prime rate plus 3.75%. The
maximum borrowings under the revolving portion of the facility are subject to
the borrowing base less the amount of term loan outstanding and bear interest
based on a floating rate of either LIBOR or prime rate plus the corresponding
margin. We pay an annual commitment fee of 0.375% calculated on the average
unused portion of the $30.0 million credit line.
On September 11, 2000, we drew $15.0 million on the term portion of the
facility and $10.0 million of these proceeds were used to retire the existing
debt with Bank One in its entirety. As of September 11, 2000, approximately
$4.8 million was available and unused on the revolving portion of the
Foothill credit facility.
ITEM 2 - MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD LOOKING STATEMENT
In addition to historical information, this Quarterly Report on Form 10-Q
contains forward-looking statements. These statements typically are preceded or
accompanied by words like "believe," "anticipate," "expect" and words of similar
meaning. These forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
reflected in these forward-looking statements. Factors that might cause such a
difference include, but are not limited to, those discussed in the section
entitled "Management's Discussion and Analysis of Financial Condition and
Results of Operations," as well as other factors detailed in our Annual Report
on Form 10-K for the year ended January 31, 2000. Readers are cautioned not to
place undue reliance on these forward-looking statements, which reflect
management's opinions only as of the date hereof. QAD undertakes no obligation
to revise, update or publicly release the results of any revision or update to
these forward-looking statements. Readers should carefully review the risk
factors described in other documents QAD files from time to time with the
Securities and Exchange Commission, including future Quarterly Reports on Form
10-Q to be filed by QAD in fiscal year 2001.
The following discussion should be read in conjunction with the condensed
consolidated financial statements and notes thereto included elsewhere in this
Quarterly Report on Form 10-Q.
6
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage of
total revenue represented by certain items reflected in our statements of
operations:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JULY 31, JULY 31,
---------------------------- ---------------------------
2000 1999 2000 1999
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue:
License fees 34% 35% 32% 37%
Maintenance and other 45 40 45 40
Services 21 25 23 23
------------ ----------- ----------- -----------
Total revenue 100 100 100 100
Costs and expenses:
Cost of license fees 5 8 6 9
Other cost of revenue 41 37 42 37
Sales and marketing 32 32 33 36
Research and development 17 14 18 16
General and administrative 11 10 11 10
Amortization of intangibles from acquisitions 3 2 2 2
Restructuring charge 0 2 0 1
------------ ----------- ----------- -----------
Total costs and expenses 109 105 112 111
------------ ----------- ----------- -----------
Operating loss (9) (5) (12) (11)
Other expense 1 0 1 0
------------ ----------- ----------- -----------
Loss before income taxes (10) (5) (13) (11)
Income tax expense 7 2 4 1
------------ ----------- ----------- -----------
Net loss (17)% (7)% (17)% (12)%
============ =========== =========== ===========
</TABLE>
TOTAL REVENUE. Total revenue for the second quarter of fiscal year 2001 was
$53.2 million, a decline of $5.1 million, or 9% from $58.3 million in the second
quarter of fiscal year 2000. Total revenue for the six months ended July 31,
2000 was $104.8 million, a decline of 6% or $6.8 million from $111.7 million in
the comparable prior year period. This decrease in total revenue on both a
quarter-to-quarter and year-to-year basis was primarily due to declines in
license fee and services revenues.
Although the Year 2000 capital spending lock-down is substantially over,
customers have not yet resumed former buying levels. They are instead taking the
time to evaluate their e-business strategies before investing in associated
software, resulting in our license revenue decline. The decrease in services
revenue relates to decreased utilization of our service consultants in
conjunction with lower license sales. Maintenance revenue continues to grow due
to expansion of our installed base.
As a result of these factors, our revenue mix has shifted away from higher
margin license revenue, from 37% of total revenue in the first six months of
fiscal year 2000 to 32% in the first six months of fiscal year 2001, toward
lower margin maintenance and other revenue.
TOTAL COST OF REVENUE. Total cost of revenue (combined cost of license fees and
other cost of revenue) as a percentage of total revenue increased slightly from
45% in the second quarter of fiscal year 2000 to 46% in the second quarter of
fiscal year 2001. Total cost of revenue also increased slightly from 46% in the
first six months of fiscal year 2000 to 48% in the first six months of fiscal
year 2001. These increases were primarily due to the shift in revenue mix away
from the higher margin license business and toward lower margin maintenance and
other revenue.
SALES AND MARKETING. Sales and marketing expense decreased 8% to $17.0 million
for the second quarter of fiscal year 2001 from $18.6 million in the comparable
prior year period. On a year-to-date basis, sales and marketing expense declined
$6.0 million or 15% to $34.1 million compared to the first six months of fiscal
year 2000. The decline in spending was primarily due to continued cost control
measures, as well as lower commission expense on decreased revenue.
7
<PAGE>
RESEARCH AND DEVELOPMENT. Research and development expense increased 8% to $9.2
million for the second quarter of fiscal 2001 from $8.5 million in the second
quarter of fiscal 2000. During the six months ended July 31, 2000, research and
development expense increased 8% to $18.8 million from $17.5 million in the same
prior year period. These changes were primarily due to increased investment in
QAD eQ and our web-enabled ERP products.
GENERAL AND ADMINISTRATIVE. General and administrative expense remained
relatively flat for both the three-month and six-month periods of fiscal years
2001 and 2000 at $5.9 million and $5.6 million for the quarter ended July 31,
2000 and 1999 and $11.5 million and $11.6 million for the six-month period ended
July 31, 2000 and 1999, respectively.
RESTRUCTURING CHARGE. In response to changes in customers' manufacturing capital
software spending patterns, we undertook a restructuring program in October 1998
that more closely aligned costs with sales expectations. This program was
continued in fiscal year 2000 with an additional charge of $1.2 million recorded
in the second quarter.
On August 22, 2000, we announced an initiative to sharpen the focus of our
e-business and business intelligence solutions for multinational customers. In
connection with this shift, we expect to take a restructuring charge in the
third quarter ending October 31, 2000. Our initial estimate of this charge is
between $3.0 million and $5.0 million. The charge will primarily relate to costs
associated with the reduction of personnel and facilities consolidation.
INCOME TAXES. We recorded income tax expense of $4.4 million for the six months
ended July 31, 2000. This includes $1.2 million for taxes in the jurisdictions
that were profitable for the first six months and a $3.2 million valuation
allowance on U.S. deferred tax assets recorded in the second quarter. This
compares to income tax expense of $1.1 million for the first six months of
fiscal year 2000, representing taxes for the jurisdictions that were profitable
during that period. We have not provided benefit for the jurisdictions in loss
positions due to management's determination regarding the uncertainty of the
realization of these benefits in the current year.
LIQUIDITY AND CAPITAL RESOURCES
We have historically financed our operations and met our capital expenditure
requirements through cash flows from operations, sale of equity securities and
borrowings. We had working capital of $13.0 million and $31.7 million as of July
31, 2000 and January 31, 2000, respectively. Cash and equivalents were $27.2
million and $35.9 million at July 31, 2000 and January 31, 2000, respectively.
Accounts receivable, net of allowances, decreased to $73.2 million at July 31,
2000 from $98.6 million at January 31, 2000. Accounts receivable days sales
outstanding decreased to 124 days at July 31, 2000 from 125 days at January 31,
2000. We are continuing our focus on sales terms and collection processes to
further improve cash flows and working capital.
Net cash provided by (used in) operating activities was $4.8 million and $(2.4)
million for the six months ended July 31, 2000 and 1999, respectively. The
year-over-year improvement relates primarily to higher accounts receivable
collections.
Net cash used in investing activities primarily relates to the purchase of
property and equipment and the sale of short-term cash investments in the six
months ended July 31, 1999, and aggregated $5.4 million and $2.0 million in the
six months ended July 31, 2000 and 1999, respectively. At July 31, 2000 we had
no material commitments for capital expenditures.
Net cash provided by (used in) financing activities totaled $(6.3) million and
$4.3 million for the six months ended July 31, 2000 and 1999, respectively, and
was composed of net proceeds and repayments of borrowings and issuance of common
stock.
On September 8, 2000, we entered into a five-year secured credit facility
with Foothill Capital Corporation. The maximum available amount of borrowings
under the credit facility is $30.0 million. The facility includes a $15.0
million term loan with a five-year amortization schedule. The term loan may
be re-loaded to $15.0 million on an annual basis. The maximum borrowings
under the revolving portion of the facility are subject to the borrowing base
less the amount of term loan. On September 11, 2000, we drew $15.0 million on
the term portion of the facility and $10.0 million of these proceeds were
used to retire the existing debt with Bank One in its entirety. As of
September 11, 2000, approximately $4.8 million was available and unused on
the revolving portion of the Foothill credit facility.
8
<PAGE>
We believe that the cash on hand, net cash provided by operating activities and
the available borrowings under our new credit facility will provide us with
sufficient resources to meet our current and long-term working capital
requirements, debt service and other cash needs.
RECENT ACCOUNTING STANDARDS
In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation" (FIN 44). FIN 44 provides guidance for issues arising in applying
APB Opinion No. 25, "Accounting for Stock Issued to Employees." FIN 44 applies
specifically to new awards, exchanges of awards in a business combination,
modification to outstanding awards, and changes in grantee status that occur on
or after July 1, 2000, except for the provisions related to repricings and the
definition of an employee, which apply to awards issued after December 15, 1998.
Application of FIN 44 did not have an effect on our financial reporting.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information concerning market risk is contained on Page 26 of our annual report
on Form 10-K for the year ended January 31, 2000 and is incorporated by
reference to such annual report.
9
<PAGE>
PART II
ITEM 2 - CHANGES IN SECURITIES
During the quarter, we issued an aggregate of 290,205 shares of our
common stock upon the exercise of outstanding options to purchase our
common stock. A portion of those shares were issued pursuant to an
exemption by reason of Rule 701 under the Securities Act of 1933.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the annual meeting of stockholders held on June 8, 2000, the
following proposals were adopted:
(1) To elect two directors to hold office for a term of three
years until the annual meeting of stockholders in the year
2003 (Class II Directors):
<TABLE>
<CAPTION>
VOTES FOR VOTES WITHHELD
---------- --------------
<S> <C> <C>
Karl F. Lopker 30,702,077 280,332
Pamela M. Lopker 30,838,222 144,187
</TABLE>
(2) Ratification of appointment of KPMG LLP as the Company's
independent auditors for the Company's 2001 fiscal year:
<TABLE>
<CAPTION>
VOTES FOR VOTES AGAINST ABSTENTIONS
---------- ------------- -----------
<S> <C> <C> <C>
30,888,821 35,162 58,426
</TABLE>
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
27 Financial Data Schedule
b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended
July 31, 2000.
10
<PAGE>
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: September 13, 2000 By /s/ KATHLEEN M. FISHER
------------------------------
Kathleen M. Fisher
Chief Financial Officer
(on behalf of the registrant)
By /s/ CHERYL M. SLOMANN
------------------------------
Cheryl M. Slomann
Chief Accounting Officer
(Principal Accounting Officer)
11
