1036188--4/14/2006--QAD

related topics

{product, market, service}

{customer, product, revenue}

{operation, international, foreign}

{property, intellectual, protect}

{system, service, information}

{stock, price, operating}

{control, financial, internal}

{product, liability, claim}

{product, candidate, development}

{condition, economic, financial}

RISK OF FLUCTUATIONS IN REVENUE AND EXPENSES Because of the significant fluctuations in our revenue, period-to -period comparisons of our revenue or profit may not be meaningful. A significant portion of our revenue in any quarter may be derived from a limited number of large, non-recurring license sales. The services business may fluctuate. Fixed expense level is based on expected revenues. Our recently announced continuous engagement strategy by Global Services may involve some risks. RISKS ASSOCIATED WITH SALES CYCLE Our products involve a long sales cycle and the timing of sales is difficult to predict. We are dependent on third-party products, particularly Progress software. The market for QAD applications is characterized by rapid technological change. New software releases and enhancements may adversely affect our software sales. Our success is dependent upon our proprietary technology and other intellectual property. The success of our business is highly dependent on maintenance of intellectual property rights. We may be exposed to product liability claims. The market for Enterprise Applications is uncertain. The underlying technology for our applications is regularly updated and is dependent on specific technologies. We are dependent upon achieving success in certain concentrated markets. DEPENDENCE UPON DEVELOPMENT AND MAINTENANCE OF THIRD PARTY RELATIONSHIPS TO PROVIDE SALES, SERVICES AND MARKETING FUNCTIONS We are dependent upon the development and maintenance of sales and marketing channels. We have separate agreements with our alliances, channels and service providers. Our intellectual property rights may be significantly affected by third-party relationships and actions. Failure to establish or maintain successful relationships with these third-parties as appropriate or failure of these third-parties to fulfill their responsibilities could have an adverse effect on us. INTEGRATION OF ACQUIRED BUSINESS AND INTELLECTUAL PROPERTY RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS Our operations are international in scope, which exposes us to additional risk, including currency-related risk. Economic, political and market conditions can adversely affect our revenue growth and profitability. Labor laws vary by country exposing us to potential costs not typically borne in the United States. RISKS DUE TO BUSINESS INTERRUPTIONS The ERP software market has experienced significant consolidation. THE MARKET FOR OUR STOCK IS VOLATILE The market prices for securities of technology companies, such as QAD, have been quite volatile. INTERNAL CONTROL OVER FINANCIAL REPORTING Failure to maintain effective internal controls can adversely effect our ability to meet our reporting requirements.

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1036188--4/14/2006--QAD_INC