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UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 30, 2004 OR (  ) 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
    
    95-3866450(State or other jurisdiction
of incorporation or organization)
    
    (IRS Employer
Identification No.)
 17075 Newhope Street
    
    92708Fountain Valley, California(Address of principal
Executive offices)
    
    (Zip code)
 (714) 241-9241 (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 (X) No (  ) Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes (  ) No (X) As of July 14, 2004 there were 3,724,250 shares of common stock outstanding. 1




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CAM COMMERCE SOLUTIONS, INC. INDEX Page NumberPART I Financial InformationItem 1
    
    Financial Statements:a)
    
    Unaudited Condensed Balance Sheets at June 30, 2004 and September 30, 2003
    
    
    3b)
    
    Unaudited Condensed Statements of Operations for the three months ended June 30, 2004 and 2003
    
    
    4c)
    
    Unaudited Condensed Statements of Operations for the nine months ended June 30, 2004 and 2003
    
    
    5d)
    
    Unaudited Condensed Statements of Cash Flows for the nine months ended June 30, 2004 and 2003
    
    
    6e)
    
    Notes to Unaudited Condensed Financial Statements
    
    
    7-12Item 2
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    13-20Item 3
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    21Item 4
    
    Controls and Procedures
    
    
    21PART II Other InformationItem 1
    
    Legal Proceedings
    
    
    22Item 2
    
    Changes in Securities, Use of Proceeds and Issuer Purchase of Equity Securities
    
    
    22Item 3
    
    Defaults Upon Senior Securities
    
    
    22Item 4
    
    Submission of Matters to a Vote of Security Holders
    
    
    22Item 5
    
    Other Information
    
    
    22Item 6
    
    Exhibits and Reports on Form 8-K
    
    
    23Signatures
    
    
    24EXHIBIT 31.(A)EXHIBIT 31.(B)EXHIBIT 32
 2




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PART I. FINANCIAL INFORMATION 
 Item 1. Financial Statements CAM COMMERCE SOLUTIONS, INC. 
 UNAUDITED CONDENSED BALANCE SHEETS (In thousands, except per share data) JUNE 30, 2004
    
    SEPTEMBER 30, 2003ASSETSCurrent assets:Cash and cash equivalents
    
    $
    16,091
    
    
    $
    10,889Marketable available-for-sale securities
    
    
    501
    
    
    
    1,541Accounts receivable, net
    
    
    1,674
    
    
    
    1,214Inventories
    
    
    300
    
    
    
    272Other current assets
    
    
    185
    
    
    
    102Total current assets
    
    
    18,751
    
    
    
    14,018Property and equipment, net
    
    
    574
    
    
    
    710Intangible assets, net
    
    
    738
    
    
    
    908Other assets
    
    
    245
    
    
    
    305Total assets
    
    $
    20,308
    
    
    $
    15,941LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    512
    
    
    $
    518Accrued compensation and related expenses
    
    
    972
    
    
    
    687Deferred service revenue and customer deposits
    
    
    1,587
    
    
    
    1,455Other accrued liabilities
    
    
    350
    
    
    
    263Total current liabilities
    
    
    3,421
    
    
    
    2,923Stockholders equity:Common stock, $0.001 par value; 12,000 shares
authorized, 3,723 shares issued and
outstanding at June 30, 2004 and 3,253 at
September 30, 2003
    
    
    4
    
    
    
    3Paid-in capital in excess of par value
    
    
    16,591
    
    
    
    14,271Accumulated other comprehensive income
    
    
    
    
    
    
    23Retained earnings (accumulated deficit)
    
    
    292
    
    
    
    (1,279
    )Total stockholders equity
    
    
    16,887
    
    
    
    13,018Total liabilities and stockholders equity
    
    $
    20,308
    
    
    $
    15,941
 See accompanying notes. 3




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CAM COMMERCE SOLUTIONS, INC. 
 UNAUDITED CONDENSED STATEMENTS OF OPERATIONS (In thousands, except per share data) THREE MONTHS ENDEDJUNE 30, 2004
    
    JUNE 30, 2003REVENUESNet hardware, software and installation revenues
    
    $
    3,812
    
    
    $
    3,413Net service revenues
    
    
    1,374
    
    
    
    1,341Net payment processing revenues
    
    
    1,086
    
    
    
    410Total net revenues
    
    
    6,272
    
    
    
    5,164COSTS AND EXPENSESCost of hardware, software and installation revenues
    
    
    1,899
    
    
    
    1,610Cost of service revenues
    
    
    503
    
    
    
    526Cost of payment processing revenues
    
    
    51
    
    
    
    30Total cost of revenues
    
    
    2,453
    
    
    
    2,166Selling, general and administrative expenses
    
    
    2,743
    
    
    
    2,494Research and development expenses
    
    
    387
    
    
    
    485Interest income
    
    
    (87
    )
    
    
    (72
    )Total costs and expenses
    
    
    5,496
    
    
    
    5,073Income before provisions for income taxes
    
    
    776
    
    
    
    91Provisions for income taxes
    
    
    55
    
    
    
    5Net income
    
    $
    721
    
    
    $
    86Basic net income per share
    
    $
    0.20
    
    
    $
    0.03Diluted net income per share
    
    $
    0.17
    
    
    $
    0.03Shares used in computing basic net income per share
    
    
    3,634
    
    
    
    3,134Shares used in computing diluted net income per share
    
    
    4,124
    
    
    
    3,257
 See accompanying notes. 4




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CAM COMMERCE SOLUTIONS, INC. 
 UNAUDITED CONDENSED STATEMENTS OF OPERATIONS (In thousands, except per share data) NINE MONTHS ENDEDJUNE 30, 2004
    
    JUNE 30, 2003REVENUESNet hardware, software and installation revenues
    
    $
    10,632
    
    
    $
    9,803Net service revenues
    
    
    4,136
    
    
    
    4,084Net payment processing revenues
    
    
    2,604
    
    
    
    1,076Total net revenues
    
    
    17,372
    
    
    
    14,963COSTS AND EXPENSESCost of hardware, software and installation revenues
    
    
    5,228
    
    
    
    4,838Cost of service revenues
    
    
    1,521
    
    
    
    1,548Cost of payment processing revenues
    
    
    134
    
    
    
    81Total cost of revenues
    
    
    6,883
    
    
    
    6,467Selling, general and administrative expenses
    
    
    7,911
    
    
    
    7,760Research and development expenses
    
    
    1,136
    
    
    
    1,350Interest income
    
    
    (250
    )
    
    
    (209
    )Total costs and expenses
    
    
    15,680
    
    
    
    15,368Income (loss) before provisions for income taxes
    
    
    1,692
    
    
    
    (405
    )Provisions for income taxes
    
    
    121
    
    
    
    5Net income (loss)
    
    $
    1,571
    
    
    $
    (410
    )Basic net income (loss) per share
    
    $
    0.45
    
    
    $
    (0.13
    )Diluted net income (loss) per share
    
    $
    0.41
    
    
    $
    (0.13
    )Shares used in computing basic net income (loss) per share
    
    
    3,467
    
    
    
    3,117Shares used in computing diluted net income (loss) per share
    
    
    3,850
    
    
    
    3,117
 See accompanying notes. 5




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CAM COMMERCE SOLUTIONS, INC. 
 UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS (In thousands) NINE MONTHS ENDEDJUNE 30, 2004
    
    JUNE 30, 2003Operating activities:Net income (loss)
    
    $
    1,571
    
    
    $
    (410
    )Adjustments to reconcile net income (loss) to net
cash provided by operations:Depreciation and amortization
    
    
    653
    
    
    
    790Loss on disposal of property, plant and equipment
    
    
    2
    
    
    
    1Provision for doubtful accounts
    
    
    (3
    )
    
    
    25Changes in operating assets and liabilities:Accounts receivable
    
    
    (457
    )
    
    
    160Inventories
    
    
    (28
    )
    
    
    9Other assets
    
    
    (23
    )
    
    
    47Accounts payable
    
    
    (6
    )
    
    
    (132
    )Accrued compensation and related expenses
    
    
    285
    
    
    
    122Deferred service revenue and customer deposits
    
    
    132
    
    
    
    108Other accrued liabilities
    
    
    87
    
    
    
    (54
    )Cash provided by operating activities
    
    
    2,213
    
    
    
    666Investing activities:Purchase of property and equipment
    
    
    (135
    )
    
    
    (160
    )Capitalized software development costs
    
    
    (214
    )
    
    
    (195
    )Purchase of marketable securities
    
    
    (500
    )
    
    
    (259
    )Proceeds from maturity of marketable securities
    
    
    1,517
    
    
    
    253Cash provided by (used in) investing activities
    
    
    668
    
    
    
    (361
    )Financing activities:Proceeds from exercise of stock options and
warrants
    
    
    2,321
    
    
    
    155Cash provided by financing activities
    
    
    2,321
    
    
    
    155Net increase in cash and cash equivalents
    
    
    5,202
    
    
    
    460Cash and cash equivalents at beginning of period
    
    
    10,889
    
    
    
    9,093Cash and cash equivalents at end of period
    
    $
    16,091
    
    
    $
    9,553
 See accompanying notes. 6




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CAM COMMERCE SOLUTIONS, INC. 
 NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS JUNE 30, 2004 (In thousands, except per share data) ORGANIZATION AND BUSINESS CAM Commerce Solutions, Inc. (the Company) was incorporated in California in
1983, and reincorporated in Delaware in 1987. The Companys principal business
is to provide total commerce solutions for small-to-medium size, traditional
and Web retailers. These solutions are based on the Companys open
architecture software products for managing inventory, point of sale, sales
transaction processing, accounting, and payment processing. In addition to
software, these solutions often include hardware, installation, training,
service and credit card processing services provided by the Company. Sales,
service, research, and development are located in California and Nevada, while
the Companys customers are located throughout the United States. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Presentation of Condensed Financial Statements The accompanying financial statements of the Company for the three and nine
months ended June 30, 2004 and 2003 are unaudited. In the opinion of
management, all adjustments necessary for a fair presentation of such financial
statements have been included. Such adjustments consisted only of normal
recurring items. Interim results are not necessarily indicative of results for
a full year. The condensed financial statements and notes are presented as
permitted by Form 10-Q and, therefore, should be read in conjunction with the
Companys Annual Report on Form 10-K for the year ended September 30, 2003. Cash Equivalents Cash equivalents represent highly liquid investments with original maturities
of three months or less. Marketable Securities All investment securities are considered to be available-for-sale and are
carried at fair value. Management determines the classification at the time of
purchase and re-evaluates its appropriateness at each balance sheet date. The
Companys marketable securities at June 30, 2004 and September 30, 2003
consisted of debt instruments that bear interest at various rates and mature in
two years or less. The gross unrealized gains on securities available-for-sale
at June 30, 2004 and September 30, 2003 were $0 and $23, respectively. There
were no realized gains (losses) for the three and nine months ended June 30,
2004 and 2003. Concentrations of Credit Risk The Company sells its products primarily to small-to-medium size retailers.
Credit is extended based on an evaluation of the customers financial
condition, and collateral is generally not required. Credit losses have
traditionally been minimal and such losses have been within managements
expectations. Inventories Inventories are stated at the lower of cost or market determined on a first-in,
first-out basis, or net realizable value. Inventories are composed of finished
goods, which include electronic point of sale hardware and computer equipment
used in the sale and service of the Companys products. 7




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CAM COMMERCE SOLUTIONS, INC. NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS JUNE 30, 2004 (In thousands, except per share data) Comprehensive Income (Loss) The following table presents the calculation of comprehensive income (loss): THREE MONTHS ENDEDJUNE 30, 2004
    
    JUNE 30, 2003Net income
    
    $
    721
    
    
    $
    86Unrealized gain (loss) on marketable
securities
available for sale, net of tax
    
    
    (4
    )
    
    
    7Comprehensive income
    
    $
    717
    
    
    $
    93
 NINE MONTHS ENDEDJUNE 30, 2004
    
    JUNE 30, 2003Net income (loss)
    
    $
    1,571
    
    
    $
    (410
    )Unrealized gain (loss) on marketable
securities
available for sale, net of tax
    
    
    (23
    )
    
    
    18Comprehensive income (loss)
    
    $
    1,548
    
    
    $
    (392
    )
 Revenue Recognition Policy The Companys revenue recognition policy is significant because revenue is a
key component of results of operations. In addition, revenue recognition
determines the timing of certain expenses such as commissions. Specific
guidelines are followed to measure revenue, although certain judgments affect
the application of our revenue policy. The Company recognizes revenue in
accordance with Statement of Position 97-2 (SOP 97-2), Software Revenue
Recognition, as amended and interpreted by Statement of Position 98-9,
Modification of SOP 97-2, Software Revenue Recognition, With Respect to
Certain Transactions, and Staff Accounting Bulletin No. 104 (SAB 104) Revenue
Recognition. SAB 104 provides further interpretive guidance for public
companies on the recognition, presentation, and disclosure of revenue in
financial statements. The Company derives revenue from the sale of computer hardware, licensing of
computer software, post contract support (PCS), installation and training
services, and payment processing services. System revenue from hardware sales
and software licensing is recognized when a system purchase agreement has been
signed, the hardware and software has been shipped, there are no uncertainties
surrounding product acceptance, the pricing is fixed and determinable, and
collection is considered probable. If a sales transaction contains an
undelivered element, the vendor-specific objective evidence (VSOE) of fair
value of the undelivered element is deferred and the revenue recognized once
the element is delivered. The undelivered elements are primarily installation
and training services. Revenue related to these services are deferred and
recognized when the services have been provided. VSOE of fair value for
installation and training services are based upon standard rates charged since
those services are always sold separately. Installation and training services
are separately priced, are generally available from other suppliers and not
essential to the functionality of the software products. Payments for the
Companys hardware and software are typically due with an initial deposit
payment upon signing the system purchase agreement, with the balance due upon
delivery, although established relationship customers in good credit standing
receive thirty day payment terms. VSOE of fair value for PCS is the price the
customer is required to pay since it is sold separately. 8




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CAM COMMERCE SOLUTIONS, INC. NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS JUNE 30, 2004 (In thousands, except per share data) PCS services are billed on a monthly basis and recorded as revenue in the
applicable month, or on an annual basis with the revenue being deferred and
recognized ratably over the support period. If an arrangement includes
multiple elements, the fees are allocated to the various elements based upon
VSOE of fair value, as described above. Effective in the quarter ended June 30, 2004, the Company began to recognize
payment processing revenues in the period the service is performed, which
resulted from the Companys ability to better estimate the revenues based on
the accumulation of sufficient historical information required to analyze
trends and formulate a reasonable estimate. Formerly, payment processing
revenues were recognized on a cash basis due to the lack of historical
information available to make a reliable estimate. The significant historical
information required to formulate a reliable estimate are the total dollar
volume of credit card transactions processed and the related revenue for these
credit card transactions. The impact of this change resulted in additional
revenues of $170 and net income of $126 for the three and nine months ended
June 30, 2004, related to a change in the accounting estimate for payment
processing revenues during the quarter ended June 30, 2004. Revenues and net
income, excluding the change in estimate, for the three months ended June 30,
2004 were $6,102 and $595 (or $0.14 per fully diluted share), respectively.
Revenues and net income, excluding the effect of the change in estimate, for
the nine months ended June 30, 2004 were $17,202 and $1,445 (or $0.38 per fully
diluted share), respectively. Recently Issued Accounting Announcements In January 2003, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 46 (FIN 46), Consolidation of Variable Interest Entities.
FIN 46 requires that if an entity has a controlling financial interest in a
variable interest entity, the assets, liabilities and results of activities of
the variable interest entity should be included in the consolidated financial
statements of the entity. FIN 46 is effective immediately for all new variable
interest entities created or acquired after January 31, 2003. For variable
interest entities created or acquired prior to February 1, 2003, the provisions
of FIN 46 must be applied for the first interim or annual period beginning
after December 15, 2003. The adoption of FIN 46 did not have a material impact
on the Companys results of operations, financial position or cash flows. Intangible Assets The Company capitalizes costs incurred to develop new marketable software and
enhance the Companys existing systems software. Costs incurred in creating
the software are charged to expense when incurred as research and development
until technological feasibility has been established through the development of
a detailed program design. Once technological feasibility has been
established, software production costs are capitalized and reported at the
lower of amortized cost or net realizable value. License agreements and capitalized software costs are amortized on the
straight-line method over estimated useful lives ranging from three to five
years. Amortization of capitalized software costs commences when the products
are available for general release to customers. Reclassifications Certain reclassifications have been made to the fiscal 2003 financial
statements to conform to the fiscal 2004 presentation. Use of Estimates The preparation of financial statements in accordance with United States
generally accepted accounting principles requires the Company to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and reported amounts of net revenue and
expenses during the reporting period. The Company regularly evaluates
estimates and assumptions related 9




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CAM COMMERCE SOLUTIONS, INC. NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS JUNE 30, 2004 (In thousands, except per share data) to allowances for doubtful accounts, goodwill and intangible asset valuations,
deferred income tax asset valuation allowances, and other contingencies. The
estimates and assumptions are based on historical experience and on various
other factors that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources. To
the extent there are material differences between the Companys estimates and
the actual results, the Companys future results of operations will be
affected. Shipping and Handling Shipping and handling fees and costs are included in the statement of
operations under the line items titled Net hardware, software and installation
revenues and Cost of hardware, software and installation revenues. Net Income (Loss) Per Share Basic net income (loss) per share is based upon the weighted average number of
common shares outstanding for each period presented. Diluted net income (loss)
per share is based upon the weighted average number of common shares and common
equivalent shares outstanding for each period presented. Common equivalent
shares include stock options and warrants assuming conversion under the
treasury stock method. Common equivalent shares are excluded from diluted net
income (loss) per share if their effect is anti-dilutive. Options and warrants
outstanding for the three and nine months ended June 30, 2004 and 2003, which
were excluded from the diluted net income (loss) per share computation because
their effect is anti-dilutive, were as follows: THREE MONTHS ENDED
    
    NINE MONTHS ENDEDJUNE 30, 2004
    
    JUNE 30, 2003
    
    JUNE 30, 2004
    
    JUNE 30, 2003Options
    
    
    
    
    
    
    390
    
    
    
    94
    
    
    
    989Warrants
    
    
    175
    
    
    
    350
    
    
    
    175
    
    
    
    350
 The computations of basic and diluted net income (loss) per share for the three
and nine month periods ended June 30, 2004 and 2003 are as follows: THREE MONTHS ENDEDJUNE 30, 2004
    
    JUNE 30, 2003Numerator:Net income for basic and diluted net income
per share
    
    $
    721
    
    
    $
    86Denominator:Weighted-average shares outstanding
    
    
    3,634
    
    
    
    3,134Denominator for basic net income per share:Weighted-average shares
    
    
    3,634
    
    
    
    3,134Effect of dilutive securities:Stock options & warrants
    
    
    490
    
    
    
    123Denominator for diluted net income per share:Weighted average shares and assumed
conversions
    
    
    4,124
    
    
    
    3,257Basic net income per share
    
    $
    0.20
    
    
    $
    0.03Diluted net income per share
    
    $
    0.17
    
    
    $
    0.03
 10




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CAM COMMERCE SOLUTIONS, INC. NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS JUNE 30, 2004 (In thousands, except per share data) NINE MONTHS ENDEDJUNE 30, 2004
    
    JUNE 30, 2003Numerator:Net income (loss) for basic and diluted net
income (loss) per share
    
    $
    1,571
    
    
    $
    (410
    )Denominator:Weighted-average shares outstanding
    
    
    3,467
    
    
    
    3,117Denominator for basic net income (loss) per share:Weighted-average shares
    
    
    3,467
    
    
    
    3,117Effect of dilutive securities:Stock options
    
    
    383
    
    
    
    Denominator for diluted net income (loss) per
share:Weighted average shares and assumed conversions
    
    
    3,850
    
    
    
    3,117Basic net income (loss) per share
    
    $
    0.45
    
    
    $
    (0.13
    )Diluted net income (loss) per share
    
    $
    0.41
    
    
    $
    (0.13
    )
 Stock Option Plans The Company follows the disclosure-only provisions of Statement of Financial
Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation
(SFAS No. 123), as amended by SFAS No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure, and, accordingly, accounts for its
stock-based compensation plans using the intrinsic value method under
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations. The following tables illustrate the
effect on net income (loss) and income (loss) per share had compensation
expense for the employee stock-based plans been recorded based on the fair
value method under SFAS No. 123: THREE MONTHS ENDEDJUNE 30, 2004
    
    JUNE 30, 2003Net income, as reported
    
    $
    721
    
    
    $
    86Deduct: total stock-based employee
compensation expense
determined under fair value based method,
net of related tax effects
    
    
    (170
    )
    
    
    (96
    )Net income (loss), as adjusted
    
    $
    551
    
    
    $
    (10
    )Basic income (loss) per share:As reported
    
    $
    0.20
    
    
    $
    0.03As adjusted
    
    $
    0.15
    
    
    $
    Diluted income (loss) per share:As reported
    
    $
    0.17
    
    
    $
    0.03As adjusted
    
    $
    0.13
    
    
    $
    
 11




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CAM COMMERCE SOLUTIONS, INC. NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS JUNE 30, 2004 (In thousands, except per share data) NINE MONTHS ENDEDJUNE 30, 2004
    
    JUNE 30, 2003Net income (loss), as reported
    
    $
    1,571
    
    
    $
    (410
    )Deduct: total stock-based employee
compensation expense
determined under fair value based method,
net of related tax effects
    
    
    (264
    )
    
    
    (216
    )Net income (loss), as adjusted
    
    $
    1,307
    
    
    $
    (626
    )Basic income (loss) per share:As reported
    
    $
    0.45
    
    
    $
    (0.13
    )As adjusted
    
    $
    0.38
    
    
    $
    (0.20
    )Diluted income (loss) per share:As reported
    
    $
    0.41
    
    
    $
    (0.13
    )As adjusted
    
    $
    0.34
    
    
    $
    (0.20
    )
 12




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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, 2004 as Compared to Three Months Ended June 30, 2003 Nine Months Ended June 30, 2004 as Compared to Nine Months Ended June 30, 2003 (All dollar amounts in thousands) CAUTIONARY STATEMENT You should read the following discussion and analysis with our Unaudited
Condensed Financial Statements and related Notes thereto contained elsewhere in
this Report. We urge you to carefully review and consider the various
disclosures made in this report and in our other reports filed with the
Securities and Exchange Commission. The section entitled Risk Factors set forth below, and similar discussions in
our other SEC filings, discuss some of the important risk factors that may
affect our business, results of operations and financial condition. You should
carefully consider those risks, in addition to the other information in this
Report and in our other filings with the SEC, before deciding to purchase, hold
or sell our common stock. OVERVIEW We provide total commerce solutions for traditional and web retailers that are
based on our open architecture software products for inventory management,
point of sale, sales transaction processing, accounting, and payment
processing. These solutions often include hardware, installation, training,
service, and payment processing services provided by us. CRITICAL ACCOUNTING POLICIES AND ESTIMATES The preparation of financial statements in accordance with United States
generally accepted accounting principles requires us to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of our financial statements and reported amounts of net revenue and
expenses during the reporting period. We regularly evaluate estimates and
assumptions related to allowances for doubtful accounts, goodwill and
intangible asset valuations, deferred income tax asset valuation allowances,
and other contingencies. The estimates and assumptions are based on historical
experience and on various other factors that we believe are reasonable under
the circumstances, the results of which form the basis for making judgments
about the carrying values of assets and liabilities that are not readily
apparent from other sources. To the extent there are material differences
between our estimates and the actual results, our future results of operations
will be affected. We believe the following critical accounting policies require us to make
significant judgments and estimates in the preparation of our financial
statements: Revenue Recognition We derive revenue from the sale of computer hardware, licensing of computer
software, post contract customer support, installation and training services,
and payment processing services. System revenue from hardware sales and
software licensing is recognized when a system purchase agreement has been
signed, the hardware and software has been shipped, there are no uncertainties
surrounding product acceptance, the pricing is fixed and determinable, and
collection is considered probable. If a sales transaction contains an
undelivered element, the vendor-specific objective evidence (VSOE) of fair
value of the undelivered element is deferred and the revenue recognized once
the element is delivered. The undelivered elements are primarily installation
and training services. Revenue related to these services is deferred and
recognized when the services have been provided. VSOE of fair value for
installation and training services are based 13




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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) upon standard rates charged since those services are always sold separately.
Installation and training services are separately priced, are generally
available from other suppliers and not essential to the functionality of the
software products. Payments for our hardware and software are typically due
with an initial deposit payment upon signing the system purchase agreement,
with the balance due upon delivery, although established relationship customers
in good credit standing receive thirty day payment terms. VSOE of fair value
for post-contract support (PCS) is the price the customer is required to pay
since it is sold separately. PCS services are billed on a monthly basis and
recorded as revenue in the applicable month, or on an annual basis with the
revenue being deferred and recognized ratably over the support period. If an
arrangement includes multiple elements, the fees are allocated to the various
elements based upon VSOE of fair value, as described above. Effective in the quarter ended June 30, 2004, we began to recognize payment
processing revenues in the period the service is performed, which resulted from
the Companys ability to better estimate the revenues based on the accumulation
of sufficient historical information required to analyze trends and formulate a
reasonable estimate. Formerly, payment processing revenues were recognized on
a cash basis due to the lack of historical information available to make a
reliable estimate. The significant historical information required to
formulate a reliable estimate are the total dollar volume of credit card
transactions processed and the related revenue for these credit card
transactions. Receivables and Inventory An allowance for doubtful accounts is maintained for estimated losses resulting
from the inability of customers to make required payments. If the financial
condition of our customers was to deteriorate, resulting in an impairment of
their ability to make payments, additional allowances could be required. Actual
losses have traditionally been minimal and within our expectations. We write down inventory for estimated obsolescence equal to the difference
between the cost of inventory and the estimated realizable value based upon
assumptions about future demand and market conditions. If actual market
conditions are less favorable than those projected by us, additional inventory
write-downs could be required. Historically inventory write-downs have been
minimal and within our expectations. Capitalized Software We capitalize costs incurred to develop new marketable software and enhance our
existing systems software. Costs incurred in creating the software are
expensed when incurred as research and development expense until technological
feasibility has been established through the development of a detailed program
design. Once technological feasibility has been established, software
development costs are capitalized and reported at the lower of amortized cost
or net realizable value. Impairment of Intangible Assets The value of our intangible assets could be impacted by future adverse changes
such as (i) any future declines in our operating results, and (ii) any failure
to meet our future performance projections. An annual impairment review will be
performed during the fourth quarter of each fiscal year or more frequently if
indicators of impairment exist. In the process of the annual impairment review,
we use the income approach methodology of valuation that includes the
discounted cash flow method as well as other generally accepted valuation
methodologies to determine the fair value of our assets. Significant management
judgment is required in the forecast of future operating results that are used
in the discounted cash flow method of valuation. The estimates used are
consistent with the plans and estimates that we use to manage our business. It
is reasonably possible, however, that certain of our products will not gain or
maintain market acceptance, which could result in estimates of anticipated
future net revenue differing materially from those used to assess the
recoverability of these assets. In that event, revenue and cost forecasts would
not be achieved, and we could incur additional impairment charges. 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) RESULTS OF OPERATIONS Three Months Ended June 30, 2004 Compared to Three Months Ended June 30, 2003 Three months ended June 30,
    
    Variance2004
    
    2003
    
    Amount
    
    %Net hardware, software and installation revenues
    
    $
    3,812
    
    
    $
    3,413
    
    
    $
    399
    
    
    
    12
    %Net service revenues
    
    
    1,374
    
    
    
    1,341
    
    
    
    33
    
    
    
    2
    %Net payment processing revenues
    
    
    1,086
    
    
    
    410
    
    
    
    676
    
    
    
    165
    %Total net revenues
    
    
    6,272
    
    
    
    5,164
    
    
    
    1,108
    
    
    
    21
    %Cost of hardware, software and installation revenues
    
    
    1,899
    
    
    
    1,610
    
    
    
    289
    
    
    
    18
    %Cost of service revenues
    
    
    503
    
    
    
    526
    
    
    
    (23
    )
    
    
    (4
    %)Cost of payment processing revenues
    
    
    51
    
    
    
    30
    
    
    
    21
    
    
    
    70
    %Total cost of revenues
    
    
    2,453
    
    
    
    2,166
    
    
    
    287
    
    
    
    13
    %Selling, general and administrative expenses
    
    
    2,743
    
    
    
    2,494
    
    
    
    249
    
    
    
    10
    %Research and development expenses
    
    
    387
    
    
    
    485
    
    
    
    (98
    )
    
    
    (20
    %)Interest income
    
    
    (87
    )
    
    
    (72
    )
    
    
    15
    
    
    
    21
    %Total costs and expenses
    
    
    5,496
    
    
    
    5,073
    
    
    
    423
    
    
    
    8
    %Income before provision for income taxes
    
    
    776
    
    
    
    91
    
    
    
    685
    
    
    
    753
    %Provision for income taxes
    
    
    55
    
    
    
    5
    
    
    
    50
    
    
    
    1000
    %Net income
    
    $
    721
    
    
    $
    86
    
    
    
    635
    
    
    
    738
    %Gross profit on hardware, software and installation
revenues
    
    $
    1,913
    
    
    $
    1,803
    
    
    
    110
    
    
    
    6
    %Gross profit on service revenues
    
    
    871
    
    
    
    815
    
    
    
    56
    
    
    
    7
    %Gross profit on payment processing revenues
    
    
    1,035
    
    
    
    380
    
    
    
    655
    
    
    
    172
    %Total gross profit
    
    $
    3,819
    
    
    $
    2,998
    
    
    
    821
    
    
    
    27
    %Gross margin on hardware, software and
installation revenues
    
    
    50
    %
    
    
    53
    %Gross margin on service revenues
    
    
    63
    %
    
    
    61
    %Gross margin on payment processing revenues
    
    
    95
    %
    
    
    93
    %Gross margin on total net revenues
    
    
    61
    %
    
    
    58
    %
 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) Nine Months Ended June 30, 2004 Compared to Nine Months Ended June 30, 2003 Nine months ended June 30,
    
    Variance2004
    
    2003
    
    Amount
    
    %Net hardware, software and installation revenues
    
    $
    10,632
    
    
    $
    9,803
    
    
    $
    829
    
    
    
    8
    %Net service revenues
    
    
    4,136
    
    
    
    4,084
    
    
    
    52
    
    
    
    1
    %Net payment processing revenues
    
    
    2,604
    
    
    
    1,076
    
    
    
    1,528
    
    
    
    142
    %Total net revenues
    
    
    17,372
    
    
    
    14,963
    
    
    
    2,409
    
    
    
    16
    %Cost of hardware, software and installation revenues
    
    
    5,228
    
    
    
    4,838
    
    
    
    390
    
    
    
    8
    %Cost of service revenues
    
    
    1,521
    
    
    
    1,548
    
    
    
    (27
    )
    
    
    (2
    %)Cost of payment processing revenues
    
    
    134
    
    
    
    81
    
    
    
    53
    
    
    
    65
    %Total cost of revenues
    
    
    6,883
    
    
    
    6,467
    
    
    
    416
    
    
    
    6
    %Selling, general and administrative expenses
    
    
    7,911
    
    
    
    7,760
    
    
    
    151
    
    
    
    2
    %Research and development expenses
    
    
    1,136
    
    
    
    1,350
    
    
    
    (214
    )
    
    
    (16
    %)Interest income
    
    
    (250
    )
    
    
    (209
    )
    
    
    41
    
    
    
    20
    %Total costs and expenses
    
    
    15,680
    
    
    
    15,368
    
    
    
    312
    
    
    
    2
    %Income (loss) before provision for income taxes
    
    
    1,692
    
    
    
    (405
    )
    
    
    2,097
    
    
    
    518
    %Provision for income taxes
    
    
    121
    
    
    
    5
    
    
    
    116
    
    
    
    2320
    %Net income (loss)
    
    $
    1,571
    
    
    $
    (410
    )
    
    
    1,981
    
    
    
    483
    %Gross profit on hardware, software and installation
revenues
    
    $
    5,404
    
    
    $
    4,965
    
    
    
    439
    
    
    
    9
    %Gross profit on service revenues
    
    
    2,615
    
    
    
    2,536
    
    
    
    79
    
    
    
    3
    %Gross profit on payment processing revenues
    
    
    2,470
    
    
    
    995
    
    
    
    1,475
    
    
    
    148
    %Total gross profit
    
    $
    10,489
    
    
    $
    8,496
    
    
    
    1,993
    
    
    
    23
    %Gross margin on hardware, software and
installation revenues
    
    
    51
    %
    
    
    51
    %Gross margin on service revenues
    
    
    63
    %
    
    
    62
    %Gross margin on payment processing revenues
    
    
    95
    %
    
    
    92
    %Gross margin on total net revenues
    
    
    60
    %
    
    
    57
    %
 Significant Trends The quarter ended June 30, 2004 was our seventh consecutive quarter of
increased revenues and our fifth consecutive quarter of increased profits. The
majority of the increase was a result of our credit card payment processing
business known as X-Charge. X-Charge revenues accounted for approximately 15%
of our total revenue for the nine month period ended June 30, 2004 and for
approximately 17% of our total revenues for the three month period ended June
30, 2004. Excluding the additional revenue related to the change in estimate
for revenue recognition as described in Revenue Recognition above, X-Charge
revenues were $916 for the quarter ended June 30, 2004. This is more than
double the X-Charge revenue from the same quarter in the prior year. 16




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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) The X-Charge business was added by us in fiscal year 2001. The growth in
revenue from this business has been primarily due to the continued addition of
new accounts. Revenue from existing accounts does not tend to increase
significantly after the three month start up period. Our ability to continue to
increase our overall revenues is, therefore, currently dependent upon our
ability to continually add new X-Charge accounts. Other than the normal process
of a maturing business, we do not know of any specific trend or event that is
reasonably likely to occur that will have a material impact on our ability to
add new accounts. Revenues We derive revenues from system sales, consisting of computer hardware,
licensing of computer software, installation and training, post contract
customer support service, and payment processing service (X-Charge). Net
revenues for the three months ended June 30, 2004 increased 21% to $6,272,
consisting of a 12% increase in system revenues, a 2% increase in service
revenues, and a 165% increase in payment processing revenues, compared to the
three months ended June 30, 2003. Net revenues for the nine months ended June
30, 2004 increased 16% to $17,372, consisting of a 8% increase in system
revenues, a 1% increase in service revenues, and a 142% increase in payment
processing revenues, compared to the same period of 2003. Net revenues for the
three and nine months ended June 30, 2004 included $170 in additional revenues
related to a change in the accounting estimate for payment processing revenues
during the quarter ended June 30, 2004. Revenues, excluding the effect of the
change in estimate, for the three and nine months ended June 30, 2004 were
$6,102 and $17,202, respectively. The increase in system revenues in the three
and nine months ended June 30, 2004 was primarily due to more system sales in
the Retail Star product line to new customers and existing customers that
upgraded their systems. Service revenues for the three and nine months ended
June 30, 2004 increased slightly due to more support contracts sold for the
Retail Star product line. Payment processing revenues for the three and nine
months ended June 30, 2004 increased significantly due to an increase in new
X-Charge payment processing sign-ups and the $170 additional revenues from the
change in the accounting estimate for revenue recognition as described in
Revenue Recognition above. Gross Margin Gross margin for the three months ended June 30, 2004 was 61%, compared to 58%
for the three months ended June 30, 2003. Gross margin on system revenues
decreased to 50% for the three months ended June 30, 2004 compared to 53% for
the same quarter of 2003. The decrease in margin on system revenues for the
three months ended June 30, 2004 was a result of higher discounts given,
compared to the three months ended June 30, 2003. Gross margin for service
revenue was 63% for the quarter ended June 30, 2004, compared to 61% for the
same period in 2003. Gross margin for payment processing revenues was 95% for
the quarter ended June 30, 2004, compared to 93% for the same quarter of 2003.
Gross margin on system revenues, service revenues, and payment processing
revenues for the nine months ended June 30, 2004 was 51%, 63% and 95%,
respectively, compared to 51%, 62% and 92% for the nine months ended June 30,
2003. The increase in gross margin for service revenue in the three and nine
months ended June 30, 2004 was related to a decrease in payroll costs of
support technicians due to unstaffed positions. The trend of payroll costs
will reverse when the positions are fully staffed. The increase in gross
margin for payment processing revenues in the three and nine months ended June
30, 2004 resulted from higher revenues with a low cost structure. Selling, General and Administrative Expenses Salaries, sales commissions, marketing expenses, and rent expenses represent
the largest expenses of selling, general and administrative expenses. Selling,
general and administrative expenses expressed as a percentage of net revenues
was 44% for the three months and 46% for the nine months ended June 30, 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) 2004, compared to 48% and 52% for the three and nine months ended June 30,
2003, respectively. Selling, general and administrative expenses increased 10%
for the three months and 2% for the nine months ended June 30, 2004, compared
to the same periods ended June 30, 2003. The increase in selling, general and
administrative expenses for the three and nine months ended June 30, 2004 was
primarily due to the increase in sales commissions expense related to higher
payment processing revenues. Research and Development Expenses Research and development expenses expressed as a percentage of revenues was 6%
for the three months and 7% for the nine months ended June 30, 2004, compared
to 9% for the three and nine months ended June 30, 2003. Research and
development expenses decreased 20% for the three months and 16% for the nine
months ended June 30, 2004, as compared to the three and nine months ended June
30, 2003. The decrease for the three and nine months ended June 30, 2004 was
due to lower payroll expense, which was a result of a reduction in personnel
due to cost restructuring in fiscal 2003. We continue to invest in the
enhancements of new features for the existing software products of Retail Star
and CAM32. Income Taxes Provision for income taxes for the three and nine months ended June 30, 2004
was $55 and $121, respectively, compared to $5 for the three months and nine
months ended June 30, 2003. Provision for income taxes was related to
estimated tax expense for various states. There was no provision made for
federal income taxes due to the utilization of net operating loss
carryforwards. LIQUIDITY AND CAPITAL RESOURCES Our cash and cash equivalents plus marketable securities totaled $16,592 on
June 30, 2004 compared to $12,430 on September 30, 2003. The increase resulted
from cash provided from operating activities and proceeds received from the
exercise of stock options and warrants. We generated $2,213 from operations,
expended $349 for fixed assets and capitalized software development, used $500
for marketable securities purchase, received $1,517 from maturity of bond
investments, and received $2,321 from the proceeds of stock options and
warrants exercised during the nine months ended June 30, 2004, compared to $666
generated from operations, $355 used for fixed assets and capitalized software
development, $259 used for marketable securities purchase, $253 received from
maturity of bond investments, and $155 received from the exercise of stock
options for the nine months ended June 30, 2003. At June 30, 2004 cash and cash equivalents plus marketable securities made up
88% of our total current assets. Our current ratio at June 30, 2004 was 5.5.
Management believes our existing working capital, coupled with funds generated
from our operations will be sufficient to fund our presently anticipated
working capital requirements for the foreseeable future. Inflation has had no significant impact on our operations. 18




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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) Contracts and Commitments The following table shows payment obligations for long-term debt, capital
leases, operating leases and purchase obligations for the next five years and
beyond. PAYMENTS DUE BY PERIODTOTAL
    
    1-3 YEARS*
    
    4-5 YEARS**
    
    MORE THAN 5 YEARSLong-term debt
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Capital lease obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating leases
    
    
    1,710
    
    
    
    1,369
    
    
    
    341
    
    
    
    Purchase obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
  *
    
    Includes payments due from July 1, 2004 to fiscal year ending September
30, 2006.  **
    
    Includes payments due from October 1, 2006 to September 30, 2007. FORWARD LOOKING STATEMENTS All statements included or incorporated by reference in this Report, other than
statements of historical fact or explanatory statements, are forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995. Examples of forward-looking statements include, but are not limited
to, statements concerning trends, projected revenue, expenses, gross profit,
gross margin and income, our accounting estimates, assumptions and judgments,
the impact of our adoption of new rules on accounting for goodwill and other
intangible assets, the effectiveness of our expense and cost control and
reduction efforts, the market acceptance and performance of our products,
implications of our lengthy sales cycle, the competitive nature in our markets,
and our future capital requirements. These forward-looking statements are based
on our current expectation, estimates and projections about our industry,
managements beliefs, and certain assumptions made by us. Forward-looking
statements can often be identified by words such as anticipates, expects,
intends, plans, predicts, believes, seeks, estimates, may,
will, should, would, potential, continue, feels, outlook,
forecast, optimistic, similar expressions, and variations or negatives of
these words. In addition, any statements that refer to expectations, projections or other
characterizations of future events or circumstances, including any underlying
assumptions, are forward-looking statements. These statements speak only as of
the date of this report and are based upon the information available to us at
this time. Such information is subject to change. These statements are not
guarantees of future performance and are subject to risks, uncertainties and
assumptions that are difficult to predict. Actual results could differ
materially and adversely from those expressed in any forward-looking statements
as a result of various factors, some of which are set forth below. We
undertake no obligation to revise or update publicly any forward-looking
statement for any reason. RISK FACTORS The risks and uncertainties described below are not the only ones we face.
Additional risks and uncertainties not presently known or that are currently
deemed immaterial may also affect our business. If any of these known or
unknown risks or uncertainties actually occur, they could have a material
adverse 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) effect on our business, financial condition and results of operations. In that
event, the market price for our common stock could decline and you may lose all
or part of your investment.  
    
    We face intense competition in the retail point of sale industry,
which could reduce our market share Intuit and Microsoft both offer competing point of sale software products.
These products were either acquired or licensed from our competitors. Although
we have successfully competed against these products in the past, both Intuit
and Microsoft have significant financial resources to market and modify their
products, and, therefore, we may not be able to continue to successfully
compete against them in the future.  
    
    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. Our common stock has historically maintained a low trading volume of shares per
day. This trend is likely to continue.  
    
    Our operating results have fluctuated significantly from quarter to
quarter in the past and are likely to continue to do so due to a number
of factors which are not within our control, including the intense
competitive pressure on our target customers. Our target customers are small-to-medium size retailers. These target customers
are under intense competitive pressure from large retail chains such as
Wal-Mart and others. These large retailers are gaining market share at the
expense of our target customers and each other. This intense competition
causes some small retailers to go out of business, and others to consolidate
with other small regional retail chains. This results in a shrinking population
of our target customers. This also causes our target customers to be more
cautious about capital spending for their retail business. These factors can
cause substantial fluctuations in our revenues and in our results of
operations. This current trend in the retail industry may exist indefinitely
and could seriously impact our revenue and harm our business, financial
condition and results of operations. 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. Due to all of the foregoing factors, and the other risks discussed in this
Report and our other filings with the Securities and Exchange Commission,
including our reports on Forms 10-K and 8-K, you should not rely on quarter to
quarter comparisons of our operating results as an indication of future
performance. 20




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CAM COMMERCE SOLUTIONS, INC. 
 ITEM 3. QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market risk refers to the risk that a change in the level of one or more market
factors such as interest rates, foreign currency exchange rates, or equity
prices will result in losses for a certain financial instrument or group of
instruments. We are principally exposed to interest rate and credit risks. We
are not exposed to foreign currency exchange rate risk. We do not use
derivative instruments. Interest Rate Risk We maintain a portfolio of cash equivalents with original maturities of three
months or less. Our investment securities portfolio consists solely of debt
instruments all with current maturities of two years or less. Both portfolios
are for investment, not trading purposes. Fluctuations in interest rates will
have an impact on the market value of these investments. This risk is managed
by investing in short term instruments of high quality credit issuers and
limiting the amount of investment in any one issuer. We have no current or
long term debt or outstanding lines of credit. Credit Risk We are currently exposed to credit risk on credit extended to customers which
are mostly small-to-medium-size retailers. We actively monitor this risk
through a variety of control procedures involving senior management.
Historically, credit losses have been small and within our expectations. 
 ITEM 4. CONTROLS AND PROCEDURES As of the end of the period covered by this report, we carried out an
evaluation, under the supervision and with the participation of our management,
including our Chief Executive Officer and our Chief Financial Officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures. Based upon that evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that our disclosure controls and procedures are
effective to ensure that information required to be disclosed by us in the
reports that we file or submit under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the time periods specified
in the Securities and Exchange Commissions rules and forms. 21




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CAM COMMERCE SOLUTIONS, INC. 
 PART II  OTHER INFORMATION 
 Item 1 Legal Proceedings None 
 Item 2 Changes in Securities, Use of Proceeds and Issuer
Purchases of Equity Securities None 
 Item 3 Defaults upon Senior Securities None 
 Item 4 Submission of Matters to a Vote of Security Holders On May 13, 2004, the Company held its annual meeting of shareholders. The
shares voted represented 91% of the outstanding shares. The following items
were voted upon at the annual meeting: 1. The four nominees for directors were elected based upon the following
votes: VOTESFor
    
    WithheldGeoffrey D. Knapp
    
    
    3,239,122
    
    
    
    45,624Walter Straub
    
    
    3,239,122
    
    
    
    45,624David Frosh
    
    
    3,239,122
    
    
    
    45,624Donald Clark
    
    
    3,239,122
    
    
    
    45,624
 2. The ratification of the appointment of Ernst & Young LLP as the independent
auditors of the Company received the following votes. VOTESFor
    
    Against
    
    Abstain3,276,926
    
    6,350
    
    1,470
 3. The proposal to amend the Companys 2000 Stock Option Plan to increase the
number of shares available under the plan received the following votes. VOTESFor
    
    Against
    
    Abstain
    
    Broker non-votes1,442,018
    
    175,418
    
    30,670
    
    1,636,640
 
 Item 5 Other Information None 22




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Item 6 Exhibits and Reports on Form 8-K (A) Exhibits: 3(a) Certification of Incorporation of the Company, as amended (incorporated
by reference to Exhibit 3(a) to the 1988 Annual Report on Form 10-K filed on
January 12, 1989  SEC File No. 0-16569). 3(b) Bylaws of the Company, as amended (incorporated by reference to Exhibit
3(b) to Form 10-Q for the period ended March 31, 2004, filed on May 13, 2004). 10(a) 1993 Stock Option Plan (incorporated by reference to the exhibits on
Form S-8 Registration Statement filed on June 21, 1993). 10(b) Employment Agreement, and Change in Control Agreements for Geoffrey D.
Knapp, dated January 1, 1996, (incorporated by reference to Exhibits 10 (h) and
(i) to the Form 10-Q for the period ended March 31, 1996, filed on May 7,
1996). 10(c) Employment Agreement, and Change in Control Agreements for Paul Caceres,
dated January 1, 1996, (incorporated by reference to Exhibits 10 (j) and (k) to
the Form 10-Q for the period ended March 31, 1996, filed on May 7, 1996). 10(d) Amendment to 1993 Stock Option Plan (incorporated by reference to the
exhibits on Form S-8 Registration Statement filed on June 26, 1998). 10(e) 2000 Stock Option Plan (incorporated by reference to Exhibit 10(i) to
the 2000 Annual Report on Form 10-K filed on December 21, 2000). 10(f) Fountain Valley New Office Lease Agreement (incorporated by reference to
Exhibit 10(j) to the 2001 Annual Report on Form 10-K filed on December 20,
2001). 31(a) Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act 31(b) Certification of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act 32 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act (B) Reports on Form 8-K: Form 8-K, filed on April 23 2004, announcing the issuance of additional shares
of common stock due to the exercise of outstanding warrants. Form 8-K, furnished (not filed), on April 26, 2004 reporting the financial
information for the quarter ended March 31, 2004, as presented in the press
release of April 26, 2004. Form 8-K, filed on April 29 2004, announcing the issuance of additional shares
of common stock due to the exercise of outstanding warrants. 23




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##### Table of Contents



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. CAM COMMERCE SOLUTIONS, INC.(Registrant) Date: August 12, 2004
    
    By
    
    /s/ Geoffrey D. KnappGeoffrey D. KnappChief Executive OfficerDate: August 12, 2004
    
    By
    
    /s/ Paul Caceres, Jr.Paul Caceres, Jr.Chief Financial andAccounting Officer
 24




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##### Table of Contents



EXHIBIT INDEX ExhibitNo.
    
    Exhibit Description3(a)
    
    Certification of Incorporation of the Company, as amended (incorporated
by reference to Exhibit 3(a) to the 1988 Annual Report on Form 10-K filed on
January 12, 1989  SEC File No. 0-16569).3(b)
    
    Bylaws of the Company, as amended (incorporated by reference to Exhibit
3(b) to Form 10-Q for the period ended March 31, 2004, filed on May 13, 2004).10(a)
    
    1993 Stock Option Plan (incorporated by reference to the exhibits on
Form S-8 Registration Statement filed on June 21, 1993).10(b)
    
    Employment Agreement, and Change in Control Agreements for Geoffrey D.
Knapp, dated January 1, 1996, (incorporated by reference to Exhibits 10 (h) and
(i) to the Form 10-Q for the period ended March 31, 1996, filed on May 7,
1996).10(c)
    
    Employment Agreement, and Change in Control Agreements for Paul Caceres,
dated January 1, 1996, (incorporated by reference to Exhibits 10 (j) and (k) to
the Form 10-Q for the period ended March 31, 1996, filed on May 7, 1996).10(d)
    
    Amendment to 1993 Stock Option Plan (incorporated by reference to the
exhibits on Form S-8 Registration Statement filed on June 26, 1998).10(e)
    
    2000 Stock Option Plan (incorporated by reference to Exhibit 10(i) to
the 2000 Annual Report on Form 10-K filed on December 21, 2000).10(f)
    
    Fountain Valley New Office Lease Agreement (incorporated by reference to
Exhibit 10(j) to the 2001 Annual Report on Form 10-K filed on December 20,
2001).31(a)
    
    Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act31(b)
    
    Certification of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act32
    
    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act
 25