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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 FORM 10-Q
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended June 30, 2005
 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 0-16569
 CAM COMMERCE SOLUTIONS, INC.
 (Exact name of registrant as specified in its Charter)
 Delaware
(State or other jurisdiction
of incorporation or organization)
    
    95-3866450
(IRS Employer
Identification No.)
 17075 Newhope Street
Fountain Valley, California
    
    92708
 (Address of principal
Executive offices)
    
    (Zip code)
 (714) 241-9241
   þ o
  o þ




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CAM COMMERCE SOLUTIONS, INC.
  
 INDEX
 Page NumberPART I Financial InformationItem 1 Financial Statements:a) Condensed Balance Sheets at June 30, 2005 (Unaudited) and September 30, 2004
    
    
    3b) Unaudited Condensed Statements of Income for the three months ended June 30, 2005 and 2004
    
    
    4c) Unaudited Condensed Statements of Income for the nine months ended June 30, 2005 and 2004
    
    
    5c) Unaudited Condensed Statements of Cash Flows for the nine months ended June 30, 2005 and 2004
    
    
    6e) Notes to Unaudited Condensed Financial Statements
    
    
    7-13Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14-23Item 3 Quantitative and Qualitative Disclosures About Market Risk
    
    
    24Item 4 Controls and Procedures
    
    
    24PART II Other InformationItem 1 Legal Proceedings
    
    
    25Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    25Item 3 Defaults Upon Senior Securities
    
    
    25Item 4 Submission of Matters to a Vote of Security Holders
    
    
    25Item 5 Other Information
    
    
    25Item 6 Exhibits
    
    
    25-26Signatures
    
    
    27EXHIBIT 10.(i)EXHIBITI 31.(a)EXHIBITI 31.(b)EXHIBIT 32
  2




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PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 CAM COMMERCE SOLUTIONS, INC.
 
 CONDENSED BALANCE SHEETS
 (In thousands, except share and per share data)
 JUNE 30, 2005
    
    SEPTEMBER 30, 2004(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    16,272
    
    
    $
    16,591Marketable available-for-sale securities
    
    
    3,669
    
    
    
    1,109Accounts receivable, net
    
    
    1,942
    
    
    
    1,919Inventories
    
    
    362
    
    
    
    361Deferred income taxes
    
    
    1,288
    
    
    
    1,629Other current assets
    
    
    115
    
    
    
    137Total current assets
    
    
    23,648
    
    
    
    21,746Deferred income taxes
    
    
    880
    
    
    
    780Property and equipment, net
    
    
    636
    
    
    
    639Intangible assets, net
    
    
    506
    
    
    
    679Other assets
    
    
    56
    
    
    
    80Total assets
    
    $
    25,726
    
    
    $
    23,924LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    462
    
    
    $
    550Accrued compensation and related expenses
    
    
    1,051
    
    
    
    1,093Deferred service revenue and customer deposits
    
    
    1,812
    
    
    
    1,628Other accrued liabilities
    
    
    335
    
    
    
    357Total current liabilities
    
    
    3,660
    
    
    
    3,628CommitmentsStockholders equity:Common stock, $0.001 par value; 12,000,000
shares authorized, 3,834,000 shares issued
and outstanding at June 30, 2005 and
3,754,000 at September 30, 2004
    
    
    4
    
    
    
    4Capital in excess of par value
    
    
    20,054
    
    
    
    19,328Accumulated other comprehensive income (loss)
    
    
    (9
    )
    
    
    2Retained earnings
    
    
    2,017
    
    
    
    962Total stockholders equity
    
    
    22,066
    
    
    
    20,296Total liabilities and stockholders equity
    
    $
    25,726
    
    
    $
    23,924
  3




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CAM COMMERCE SOLUTIONS, INC.
 
 UNAUDITED CONDENSED STATEMENTS OF INCOME
 (In thousands, except per share data)
 THREE MONTHS ENDEDJUNE 30, 2005
    
    JUNE 30, 2004REVENUESNet hardware, software and installation revenues
    
    $
    3,140
    
    
    $
    3,812Net service revenues
    
    
    1,307
    
    
    
    1,374Net payment processing revenues
    
    
    1,824
    
    
    
    1,086Total net revenues
    
    
    6,271
    
    
    
    6,272COSTS AND EXPENSESCost of hardware, software and installation revenues
    
    
    1,581
    
    
    
    1,899Cost of service revenues
    
    
    548
    
    
    
    503Cost of payment processing revenues
    
    
    81
    
    
    
    51Total cost of revenues
    
    
    2,210
    
    
    
    2,453Selling, general and administrative expenses
    
    
    2,978
    
    
    
    2,743Research and development expenses
    
    
    382
    
    
    
    387Interest income
    
    
    (143
    )
    
    
    (87
    )Total costs and expenses
    
    
    5,427
    
    
    
    5,496Income before provisions for income taxes
    
    
    844
    
    
    
    776Provisions for income taxes
    
    
    341
    
    
    
    55Net income
    
    $
    503
    
    
    $
    721Basic net income per share
    
    $
    0.13
    
    
    $
    0.20Diluted net income per share
    
    $
    0.13
    
    
    $
    0.17Shares used in computing basic net income per share
    
    
    3,830
    
    
    
    3,634Shares used in computing diluted net income per share
    
    
    3,982
    
    
    
    4,124
   4




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CAM COMMERCE SOLUTIONS, INC.
 
 UNAUDITED CONDENSED STATEMENTS OF INCOME
 (In thousands, except per share data)
 NINE MONTHS ENDEDJUNE 30, 2005
    
    JUNE 30, 2004REVENUESNet hardware, software and installation revenues
    
    $
    9,715
    
    
    $
    10,632Net service revenues
    
    
    4,034
    
    
    
    4,136Net payment processing revenues
    
    
    4,574
    
    
    
    2,604Total net revenues
    
    
    18,323
    
    
    
    17,372COSTS AND EXPENSESCost of hardware, software and installation revenues
    
    
    4,995
    
    
    
    5,228Cost of service revenues
    
    
    1,599
    
    
    
    1,521Cost of payment processing revenues
    
    
    330
    
    
    
    134Total cost of revenues
    
    
    6,924
    
    
    
    6,883Selling, general and administrative expenses
    
    
    8,850
    
    
    
    7,911Research and development expenses
    
    
    1,159
    
    
    
    1,136Interest income
    
    
    (379
    )
    
    
    (250
    )Total costs and expenses
    
    
    16,554
    
    
    
    15,680Income before provisions for income taxes
    
    
    1,769
    
    
    
    1,692Provisions for income taxes
    
    
    714
    
    
    
    121Net income
    
    $
    1,055
    
    
    $
    1,571Basic net income per share
    
    $
    0.28
    
    
    $
    0.45Diluted net income per share
    
    $
    0.26
    
    
    $
    0.41Shares used in computing basic net income per share
    
    
    3,810
    
    
    
    3,467Shares used in computing diluted net income per share
    
    
    4,020
    
    
    
    3,850
   5




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CAM COMMERCE SOLUTIONS, INC.
 
 UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
 (In thousands)
 NINE MONTHS ENDEDJUNE 30, 2005
    
    JUNE 30, 2004Operating activities:Net income
    
    $
    1,055
    
    
    $
    1,571Adjustments
to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    663
    
    
    
    653Loss on disposal of property, plant and equipment
    
    
    
    
    
    
    2Provision for doubtful accounts
    
    
    98
    
    
    
    78Change in deferred income taxes
    
    
    241
    
    
    
    Income tax deduction from exercise of stock options
    
    
    431
    
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    (121
    )
    
    
    (538
    )Inventories
    
    
    (1
    )
    
    
    (28
    )Other assets
    
    
    46
    
    
    
    (23
    )Accounts payable
    
    
    (88
    )
    
    
    (6
    )Accrued compensation and related expenses
    
    
    (42
    )
    
    
    285Deferred service revenue and customer deposits
    
    
    184
    
    
    
    132Other accrued liabilities
    
    
    (22
    )
    
    
    87Cash provided by operating activities
    
    
    2,444
    
    
    
    2,213Cash flows from investing activities:Purchase of property and equipment
    
    
    (271
    )
    
    
    (135
    )Capitalized software development costs
    
    
    (216
    )
    
    
    (214
    )Purchase of marketable securities
    
    
    (2,564
    )
    
    
    (500
    )Change in marketable securities
    
    
    (7
    )
    
    
    Proceeds from maturity of marketable securities
    
    
    
    
    
    
    1,517Cash provided by (used in) investing activities
    
    
    (3,058
    )
    
    
    668Cash flows from financing activities:Proceeds
from exercise of stock options and warrants
    
    
    295
    
    
    
    2,321Cash provided by financing activities
    
    
    295
    
    
    
    2,321Net increase (decrease) in cash and cash equivalents
    
    
    (319
    )
    
    
    5,202Cash and cash equivalents at beginning of period
    
    
    16,591
    
    
    
    10,889Cash and cash equivalents at end of period
    
    $
    16,272
    
    
    $
    16,091
  6




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CAM COMMERCE SOLUTIONS, INC.
 
 NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
 JUNE 30, 2005
 (In thousands, except per share data)
 ORGANIZATION AND BUSINESS
  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Presentation of Condensed Financial Statements
  Cash Equivalents
  Marketable Securities
  Accounts Receivable and Allowance For Doubtful Accounts
   Concentrations of Credit Risk
  7




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CAM COMMERCE SOLUTIONS, INC.
 NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
 JUNE 30, 2005
 (In thousands, except per share data)
 Inventories
  Comprehensive Income
  THREE MONTHS ENDEDJUNE 30, 2005
    
    JUNE 30, 2004Net income
    
    $
    503
    
    
    $
    721Unrealized gain (loss) on marketable
securities
available for sale, net of tax
    
    
    13
    
    
    
    (4
    )Comprehensive income
    
    $
    516
    
    
    $
    717
 NINE MONTHS ENDEDJUNE 30, 2005
    
    JUNE 30, 2004Net income
    
    $
    1,055
    
    
    $
    1,571Unrealized loss on marketable securities
available for sale, net of tax
    
    
    (11
    )
    
    
    (23
    )Comprehensive income
    
    $
    1,044
    
    
    $
    1,548
 Revenue Recognition Policy
   8




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CAM COMMERCE SOLUTIONS, INC.
 NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
 JUNE 30, 2005
 (In thousands, except per share data)
     THREE MONTHS ENDED
    
    NINE MONTHS ENDEDJUNE 30, 2004
    
    JUNE 30, 2004(Unaudited)
    
    (Unaudited)Revenues
    
    $
    6,272
    
    
    $
    17,372Effect of change in accounting estimate
    
    
    (170
    )
    
    
    (170
    )Revenues without change in accounting estimate
    
    $
    6,102
    
    
    $
    17,202Net income
    
    $
    721
    
    
    $
    1,571Effect of change in accounting estimate
    
    
    (126
    )
    
    
    (126
    )Net income without change in accounting estimate
    
    $
    595
    
    
    $
    1,445Diluted net income per share
    
    $
    0.17
    
    
    $
    0.41Diluted net income per share without change in
accounting estimate
    
    $
    0.14
    
    
    $
    0.38Shares used in computing diluted net income per
share
    
    
    4,124
    
    
    
    3,850
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CAM COMMERCE SOLUTIONS, INC.
 NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
 JUNE 30, 2005
 (In thousands, except per share data)
 Segments
  Recently Issued Accounting Announcements
  Intangible Assets
   Reclassifications
  Use of Estimates
  10




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CAM COMMERCE SOLUTIONS, INC.
 NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
 JUNE 30, 2005
 (In thousands, except per share data)
 Shipping and Handling
  Net Income Per Share
  THREE MONTHS ENDED
    
    NINE MONTHS ENDEDJUNE 30, 2005
    
    JUNE 30, 2004
    
    JUNE 30, 2005
    
    JUNE 30, 2004Options
    
    
    114
    
    
    
    
    
    
    
    
    
    
    
    94Warrants
    
    
    
    
    
    
    175
    
    
    
    
    
    
    
    175
  THREE MONTHS ENDEDJUNE 30, 2005
    
    JUNE 30, 2004Numerator:Net income for basic and diluted net income per
share
    
    $
    503
    
    
    $
    721Denominator:Weighted-average shares outstanding
    
    
    3,830
    
    
    
    3,634Denominator for basic net income per share:Weighted-average shares
    
    
    3,830
    
    
    
    3,634Effect of dilutive securities:Stock options & warrants
    
    
    152
    
    
    
    490Denominator for diluted net income per share:Weighted average shares and assumed conversions
    
    
    3,982
    
    
    
    4,124Basic net income per share
    
    $
    0.13
    
    
    $
    0.20Diluted net income per share
    
    $
    0.13
    
    
    $
    0.17
 11




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CAM COMMERCE SOLUTIONS, INC.
 NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
 JUNE 30, 2005
 (In thousands, except per share data)
 NINE MONTHS ENDEDJUNE 30, 2005
    
    JUNE 30, 2004Numerator:Net income for basic and diluted net income per
share
    
    $
    1,055
    
    
    $
    1,571Denominator:Weighted-average shares outstanding
    
    
    3,810
    
    
    
    3,467Denominator for basic net income per share:Weighted-average shares
    
    
    3,810
    
    
    
    3,467Effect of dilutive securities:Stock options & warrants
    
    
    210
    
    
    
    383Denominator for diluted net income per share:Weighted average shares and assumed conversions
    
    
    4,020
    
    
    
    3,850Basic net income per share
    
    $
    0.28
    
    
    $
    0.45Diluted net income per share
    
    $
    0.26
    
    
    $
    0.41
 Stock Option Plans
  THREE MONTHS ENDEDJUNE 30, 2005
    
    JUNE 30, 2004Net income, as reported
    
    $
    503
    
    
    $
    721Deduct: total stock-based employee
compensation expense
determined under fair value based method,
net of related tax effects
    
    
    (136
    )
    
    
    (170
    )Net income, as adjusted
    
    $
    367
    
    
    $
    551Basic income per share:As reported
    
    $
    0.13
    
    
    $
    0.20Pro forma
    
    $
    0.10
    
    
    $
    0.15Diluted income per share:As reported
    
    $
    0.13
    
    
    $
    0.17Pro forma
    
    $
    0.09
    
    
    $
    0.13
 12




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CAM COMMERCE SOLUTIONS, INC.
 NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
 JUNE 30, 2005
 (In thousands, except per share data)
 NINE MONTHS ENDEDJUNE 30, 2005
    
    JUNE 30, 2004Net income, as reported
    
    $
    1,055
    
    
    $
    1,571Deduct: total stock-based employee
compensation expense
determined under fair value based method,
net of related tax effects
    
    
    (219
    )
    
    
    (264
    )Net income, as adjusted
    
    $
    836
    
    
    $
    1,307Basic income per share:As reported
    
    $
    0.28
    
    
    $
    0.45Pro forma
    
    $
    0.22
    
    
    $
    0.38Diluted income per share:As reported
    
    $
    0.26
    
    
    $
    0.41Pro forma
    
    $
    0.21
    
    
    $
    0.34
 13




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 CAM COMMERCE SOLUTIONS, INC.
 MANAGEMENTS DISCUSSION AND ANALYSIS OF
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Three Months Ended June 30, 2005 as Compared to Three Months Ended June 30, 2004
Nine Months Ended June 30, 2005 as Compared to Nine Months Ended June 30, 2004
(All dollar amounts in thousands)
 CAUTIONARY STATEMENT
   OVERVIEW
   CRITICAL ACCOUNTING POLICIES AND ESTIMATES
   14




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CAM COMMERCE SOLUTIONS, INC.
 MANAGEMENTS DISCUSSION AND ANALYSIS OF
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 (All dollar amounts in thousands)
 Revenue Recognition
    15




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CAM COMMERCE SOLUTIONS, INC.
 MANAGEMENTS DISCUSSION AND ANALYSIS OF
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 (All dollar amounts in thousands)
 THREE MONTHS ENDED
    
    NINE MONTHS ENDEDJUNE 30, 2004
    
    JUNE 30, 2004(Unaudited)
    
    (Unaudited)Revenues
    
    $
    6,272
    
    
    $
    17,372Effect of change in accounting estimate
    
    
    (170
    )
    
    
    (170
    )Revenues without change in accounting estimate
    
    $
    6,102
    
    
    $
    17,202Net income
    
    $
    721
    
    
    $
    1,571Effect of change in accounting estimate
    
    
    (126
    )
    
    
    (126
    )Net income without change in accounting estimate
    
    $
    595
    
    
    $
    1,445Diluted net income per share
    
    $
    0.17
    
    
    $
    0.41Diluted net income per share without change in
accounting estimate
    
    $
    0.14
    
    
    $
    0.38Shares used in computing diluted net income per
share
    
    
    4,124
    
    
    
    3,850
 Receivables
   Inventory
  16




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##### Table of Contents



CAM COMMERCE SOLUTIONS, INC.
 MANAGEMENTS DISCUSSION AND ANALYSIS OF
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 (All dollar amounts in thousands)
 Capitalized Software
  Impairment of Intangible Assets
  Deferred Taxes
  17




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CAM COMMERCE SOLUTIONS, INC.
 MANAGEMENTS DISCUSSION AND ANALYSIS OF
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 (All dollar amounts in thousands)
 RESULTS OF OPERATIONS
  Three Months Ended June 30, 2005 Compared to Three Months Ended June 30, 2004
 Three months ended June 30,
    
    Variance2005
    
    2004
    
    Amount
    
    %Net hardware, software and installation revenues
    
    $
    3,140
    
    
    $
    3,812
    
    
    
    ($672
    )
    
    
    (18
    %)Net service revenues
    
    
    1,307
    
    
    
    1,374
    
    
    
    (67
    )
    
    
    (5
    %)Net payment processing revenues
    
    
    1,824
    
    
    
    1,086
    
    
    
    738
    
    
    
    68
    %Total net revenues
    
    
    6,271
    
    
    
    6,272
    
    
    
    (1
    )
    
    
    Cost of hardware, software and installation revenues
    
    
    1,581
    
    
    
    1,899
    
    
    
    (318
    )
    
    
    (17
    %)Cost of service revenues
    
    
    548
    
    
    
    503
    
    
    
    45
    
    
    
    9
    %Cost of payment processing revenues
    
    
    81
    
    
    
    51
    
    
    
    30
    
    
    
    59
    %Total cost of revenues
    
    
    2,210
    
    
    
    2,453
    
    
    
    (243
    )
    
    
    (10
    %)Selling, general and administrative expenses
    
    
    2,978
    
    
    
    2,743
    
    
    
    235
    
    
    
    9
    %Research and development expenses
    
    
    382
    
    
    
    387
    
    
    
    (5
    )
    
    
    (1
    %)Interest income
    
    
    (143
    )
    
    
    (87
    )
    
    
    56
    
    
    
    64
    %Total costs and expenses
    
    
    5,427
    
    
    
    5,496
    
    
    
    (69
    )
    
    
    (1
    %)Income before provision for income taxes
    
    
    844
    
    
    
    776
    
    
    
    68
    
    
    
    9
    %Provision for income taxes
    
    
    341
    
    
    
    55
    
    
    
    286
    
    
    
    520
    %Net income
    
    $
    503
    
    
    $
    721
    
    
    
    (218
    )
    
    
    (30
    %)Gross profit on hardware, software and installation
revenues
    
    $
    1,559
    
    
    $
    1,913
    
    
    
    (354
    )
    
    
    (19
    %)Gross profit on service revenues
    
    
    759
    
    
    
    871
    
    
    
    (112
    )
    
    
    (13
    %)Gross profit on payment processing revenues
    
    
    1,743
    
    
    
    1,035
    
    
    
    708
    
    
    
    68
    %Total gross profit
    
    $
    4,061
    
    
    $
    3,819
    
    
    
    242
    
    
    
    6
    %Gross margin on hardware, software and
installation revenues
    
    
    50
    %
    
    
    50
    %Gross margin on service revenues
    
    
    58
    %
    
    
    63
    %Gross margin on payment processing revenues
    
    
    96
    %
    
    
    95
    %Gross margin on total net revenues
    
    
    65
    %
    
    
    61
    %
 18




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##### Table of Contents



CAM COMMERCE SOLUTIONS, INC.
 MANAGEMENTS DISCUSSION AND ANALYSIS OF
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 (All dollar amounts in thousands, except in reference to the number of X-Charge accounts)
 Nine Months Ended June 30, 2005 Compared to Nine Months Ended June 30, 2004
 Nine months ended June 30,
    
    Variance2005
    
    2004
    
    Amount
    
    %Net hardware, software and installation revenues
    
    $
    9,715
    
    
    $
    10,632
    
    
    
    ($917
    )
    
    
    (9
    %)Net service revenues
    
    
    4,034
    
    
    
    4,136
    
    
    
    (102
    )
    
    
    (2
    %)Net payment processing revenues
    
    
    4,574
    
    
    
    2,604
    
    
    
    1,970
    
    
    
    76
    %Total net revenues
    
    
    18,323
    
    
    
    17,372
    
    
    
    951
    
    
    
    5
    %Cost of hardware, software and installation revenues
    
    
    4,995
    
    
    
    5,228
    
    
    
    (233
    )
    
    
    (4
    %)Cost of service revenues
    
    
    1,599
    
    
    
    1,521
    
    
    
    78
    
    
    
    5
    %Cost of payment processing revenues
    
    
    330
    
    
    
    134
    
    
    
    196
    
    
    
    146
    %Total cost of revenues
    
    
    6,924
    
    
    
    6,883
    
    
    
    41
    
    
    
    1
    %Selling, general and administrative expenses
    
    
    8,850
    
    
    
    7,911
    
    
    
    939
    
    
    
    12
    %Research and development expenses
    
    
    1,159
    
    
    
    1,136
    
    
    
    23
    
    
    
    2
    %Interest income
    
    
    (379
    )
    
    
    (250
    )
    
    
    129
    
    
    
    52
    %Total costs and expenses
    
    
    16,554
    
    
    
    15,680
    
    
    
    874
    
    
    
    6
    %Income before provision for income taxes
    
    
    1,769
    
    
    
    1,692
    
    
    
    77
    
    
    
    5
    %Provision for income taxes
    
    
    714
    
    
    
    121
    
    
    
    593
    
    
    
    490
    %Net income
    
    $
    1,055
    
    
    $
    1,571
    
    
    
    (516
    )
    
    
    (33
    %)Gross profit on hardware, software and installation
revenues
    
    $
    4,720
    
    
    $
    5,404
    
    
    
    (684
    )
    
    
    (13
    %)Gross profit on service revenues
    
    
    2,435
    
    
    
    2,615
    
    
    
    (180
    )
    
    
    7
    %Gross profit on payment processing revenues
    
    
    4,244
    
    
    
    2,470
    
    
    
    1,774
    
    
    
    72
    %Total gross profit
    
    $
    11,399
    
    
    $
    10,489
    
    
    
    910
    
    
    
    9
    %Gross margin on hardware, software and
installation revenues
    
    
    49
    %
    
    
    51
    %Gross margin on service revenues
    
    
    60
    %
    
    
    63
    %Gross margin on payment processing revenues
    
    
    93
    %
    
    
    95
    %Gross margin on total net revenues
    
    
    62
    %
    
    
    60
    %
 Significant Trends
   19




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CAM COMMERCE SOLUTIONS, INC.
 MANAGEMENTS DISCUSSION AND ANALYSIS OF
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 (All dollar amounts in thousands)
  Revenues
   Gross Margin
    Selling, General and Administrative Expenses
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CAM COMMERCE SOLUTIONS, INC.
 MANAGEMENTS DISCUSSION AND ANALYSIS OF
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 (All dollar amounts in thousands)
  Research and Development Expenses
  Income Taxes
  LIQUIDITY AND CAPITAL RESOURCES
    Contracts and Commitments
  21




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CAM COMMERCE SOLUTIONS, INC.
 MANAGEMENTS DISCUSSION AND ANALYSIS OF
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 (All dollar amounts in thousands)
   PAYMENTS DUE BY PERIODLESS THAN
    
    
    
    
    
    MORE THAN 4TOTAL
    
    1 YEAR
    
    1-3 YEARS
    
    YEARSLong-term debt
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Capital lease obligations
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Operating leases
    
    $
    2,323
    
    
    $
    153
    
    
    $
    1,536
    
    
    $
    634Purchase obligations
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 FORWARD LOOKING STATEMENTS
   RISK FACTORS
  22




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CAM COMMERCE SOLUTIONS, INC.
 MANAGEMENTS DISCUSSION AND ANALYSIS OF
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 (All dollar amounts in thousands)
 We face intense competition in the retail point of sale industry, which could reduce our market
share.
  Our stock is thinly traded. Accordingly, you may not be able to resell your shares of common stock
at or above the price you paid for them.
  The population of our target customers is declining.
  Other factors which may affect quarterly results include:
 
    
    the availability and pricing of competing products and the resulting effects on sales;
    
    the effectiveness of expense and cost control efforts;
    
    the ability to develop and deliver software products to market in a timely manner;
    
    the rate at which present and future customers adopt our new products and services in
our target markets;
    
    the effects of new and emerging technologies;
    
    the ability to retain and hire key executives, management, technical personnel and
other employees that are needed to implement business and product plans;
    
    the level of orders received that can be shipped in a fiscal quarter.
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CAM COMMERCE SOLUTIONS, INC.
 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Interest Rate Risk
  Credit Risk
  
 ITEM 4. CONTROLS AND PROCEDURES
  24




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CAM COMMERCE SOLUTIONS, INC.
 
 PART II . OTHER INFORMATION
 
   
   
   
    VOTESFor
    
    WithheldGeoffrey D. Knapp
    
    
    3,111,872
    
    
    
    459,824Walter Straub
    
    
    3,465,009
    
    
    
    106,687David Frosh
    
    
    3,079,122
    
    
    
    492,574Donald Clark
    
    
    3,420,909
    
    
    
    150,787
  VOTESFor
    
    Against
    
    Abstain3,503,026
    
    
    
    67,950
    
    
    
    720
 
   
     25




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CAM COMMERCE SOLUTIONS, INC.
 PART II  OTHER INFORMATION
            26




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SIGNATURES
  CAM COMMERCE SOLUTIONS, INC.
 Date: August 12, 2005
    
    By
    
    /s/ Geoffrey D. KnappGeoffrey D. KnappChief Executive OfficerDate: August 12, 2005
    
    By
    
    /s/ Paul Caceres Jr.Paul Caceres Jr.Chief Financial andAccounting Officer
 27




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EXHIBIT
INDEX