##### Table of Contents



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, 2006
 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
    
    95-3866450(State or other jurisdiction
    
    (IRS Employerof incorporation or organization)
    
    Identification No.)17075 Newhope Street
Fountain Valley, California
    
    92708(Address of principal
    
    (Zip code)Executive offices)
 (714) 241-9241
   þ o
  o o þ
  o þ




---



##### 



CAM COMMERCE SOLUTIONS, INC.
 INDEX
 Page NumberPART I  Financial InformationItem 1
    
    Financial Statements:a)
    
    Condensed Balance Sheets at June 30, 2006 (Unaudited) and September 30, 2005
    
    
    3b)
    
    Unaudited Condensed Statements of Income for the three months ended June 30, 2006 and 2005
    
    
    4c)
    
    Unaudited Condensed Statements of Income for the nine months ended June 30, 2006 and 2005
    
    
    5d)
    
    Unaudited Condensed Statements of Cash Flows for the nine months ended June 30, 2006 and 2005
    
    
    6e)
    
    Notes to Unaudited Condensed Financial Statements
    
    
    7-16Item 2
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    17-25Item 3
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    26Item 4
    
    Controls and Procedures
    
    
    26PART II  Other InformationItem 1
    
    Legal Proceedings
    
    
    27Item 1A
    
    Risk Factors
    
    
    27Item 2
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    27Item 3
    
    Defaults Upon Senior Securities
    
    
    27Item 4
    
    Submission of Matters to a Vote of Security Holders
    
    
    27Item 5
    
    Other Information
    
    
    27Item 6
    
    Exhibits
    
    
    28Signatures
    
    
    
    
    29EXHIBIT 31.(A)EXHIBIT 31.(B)EXHIBIT 32
  2




---



##### Table of Contents



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, 2006
    
    
    SEPTEMBER 30, 2005(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    16,318
    
    
    $
    15,763Marketable available-for-sale securities
    
    
    6,476
    
    
    
    5,300Accounts receivable, net
    
    
    1,941
    
    
    
    1,930Inventories
    
    
    256
    
    
    
    306Deferred income taxes
    
    
    1,185
    
    
    
    1,188Other current assets
    
    
    180
    
    
    
    132Total current assets
    
    
    26,356
    
    
    
    24,619Deferred income taxes
    
    
    317
    
    
    
    714Property and equipment, net
    
    
    505
    
    
    
    610Intangible assets, net
    
    
    459
    
    
    
    467Other assets
    
    
    51
    
    
    
    51Total assets
    
    $
    27,688
    
    
    $
    26,461LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    242
    
    
    $
    445Accrued compensation and related expenses
    
    
    1,191
    
    
    
    1,154Deferred service revenue and customer deposits
    
    
    1,598
    
    
    
    1,728Cash dividends payable
    
    
    553
    
    
    
    385Other accrued liabilities
    
    
    125
    
    
    
    260Total current liabilities
    
    
    3,709
    
    
    
    3,972CommitmentsStockholders equity:Common stock, $0.001 par value; 12,000,000
shares authorized, 3,946,000 shares issued
and outstanding at June 30, 2006 and
3,846,000 at September 30, 2005
    
    
    4
    
    
    
    4Capital in excess of par value
    
    
    21,434
    
    
    
    20,152Accumulated other comprehensive loss
    
    
    (12
    )
    
    
    (18
    )Retained earnings
    
    
    2,553
    
    
    
    2,351Total stockholders equity
    
    
    23,979
    
    
    
    22,489Total liabilities and stockholders equity
    
    $
    27,688
    
    
    $
    26,461
  3




---



##### Table of Contents



CAM COMMERCE SOLUTIONS, INC.
 
 UNAUDITED CONDENSED STATEMENTS OF INCOME
 (In thousands, except per share data)
 THREE MONTHS ENDEDJUNE 30, 2006
    
    
    JUNE 30, 2005REVENUESNet hardware, software and installation revenues
    
    $
    2,651
    
    
    $
    3,140Net service revenues
    
    
    1,327
    
    
    
    1,307Net payment processing revenues
    
    
    2,792
    
    
    
    1,824Total net revenues
    
    
    6,770
    
    
    
    6,271COSTS AND EXPENSESCost of hardware, software and installation revenues (1)
    
    
    1,395
    
    
    
    1,581Cost of service revenues (1)
    
    
    633
    
    
    
    583Cost of payment processing revenues
    
    
    129
    
    
    
    81Total cost of revenues
    
    
    2,157
    
    
    
    2,245Selling, general and administrative expenses (1) (2)
    
    
    3,351
    
    
    
    2,978Research and development expenses (1)
    
    
    385
    
    
    
    347Interest income
    
    
    (250
    )
    
    
    (143
    )Total costs and expenses
    
    
    5,643
    
    
    
    5,427Income before provisions for income taxes
    
    
    1,127
    
    
    
    844Provisions for income taxes
    
    
    441
    
    
    
    341Net income
    
    $
    686
    
    
    $
    503Basic net income per share
    
    $
    0.17
    
    
    $
    0.13Diluted net income per share
    
    $
    0.16
    
    
    $
    0.13Shares used in computing basic net income per share
    
    
    3,932
    
    
    
    3,830Shares used in computing diluted net income per share
    
    
    4,180
    
    
    
    3,982Cash dividends declared per common share
    
    $
    0.14
    
    
    $
    (1)

Includes stock-based employee compensation expense as follows:Cost of hardware, software and installation revenues
    
    $
    4
    
    
    $
    Cost of service revenues
    
    
    6
    
    
    
    Selling, general and administrative expenses
    
    
    26
    
    
    
    Research and development expenses
    
    
    10
    
    
    
    
 
 (2)
Includes $41 and $39 for the three months ended June 30, 2006 and 2005,
respectively, for building rent to a related party, Geoff Knapp, officer and director of CAM
Commerce.  4




---



##### Table of Contents



CAM COMMERCE SOLUTIONS, INC.
 
 UNAUDITED CONDENSED STATEMENTS OF INCOME
 (In thousands, except per share data)
 NINE MONTHS ENDEDJUNE 30, 2006
    
    
    JUNE 30, 2005REVENUESNet hardware, software and installation revenues
    
    $
    8,563
    
    
    $
    9,715Net service revenues
    
    
    3,982
    
    
    
    4,034Net payment processing revenues
    
    
    7,694
    
    
    
    4,574Total net revenues
    
    
    20,239
    
    
    
    18,323COSTS AND EXPENSESCost of hardware, software and installation revenues (1)
    
    
    4,568
    
    
    
    4,995Cost of service revenues (1)
    
    
    1,834
    
    
    
    1,694Cost of payment processing revenues
    
    
    373
    
    
    
    330Total cost of revenues
    
    
    6,775
    
    
    
    7,019Selling, general and administrative expenses (1) (2)
    
    
    10,010
    
    
    
    8,850Research and development expenses (1)
    
    
    1,148
    
    
    
    1,064Interest income
    
    
    (679
    )
    
    
    (379
    )Total costs and expenses
    
    
    17,254
    
    
    
    16,554Income before provisions for income taxes
    
    
    2,985
    
    
    
    1,769Provisions for income taxes
    
    
    1,140
    
    
    
    714Net income
    
    $
    1,845
    
    
    $
    1,055Basic net income per share
    
    $
    0.47
    
    
    $
    0.28Diluted net income per share
    
    $
    0.44
    
    
    $
    0.26Shares used in computing basic net income per share
    
    
    3,890
    
    
    
    3,810Shares used in computing diluted net income per share
    
    
    4,148
    
    
    
    4,020Cash dividends declared per common share
    
    $
    0.42
    
    
    $
    (1)
Includes stock-based employee compensation expense as follows:Cost of hardware, software and installation revenues
    
    $
    12
    
    
    $
    Cost of service revenues
    
    
    16
    
    
    
    Selling, general and administrative expenses
    
    
    72
    
    
    
    Research and development expenses
    
    
    26
    
    
    
    
 
 (2) Includes $122 and $118 for the nine months ended June 30. 2006 and 2005,
respectively, for building rent to a related party, Geoff Knapp, officer and director of CAM
Commerce.  5




---



##### Table of Contents



CAM COMMERCE SOLUTIONS, INC.
 
 UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
 (In thousands)
 NINE MONTHS ENDEDJUNE 30, 2006
    
    
    JUNE 30, 2005Operating activities:Net income
    
    $
    1,845
    
    
    $
    1,055Adjustments to reconcile net income to net
cash provided by operating activities:Depreciation and amortization
    
    
    498
    
    
    
    663Provision for doubtful accounts
    
    
    13
    
    
    
    98Change in deferred income taxes
    
    
    398
    
    
    
    241Income tax deduction from exercise of stock options
    
    
    
    
    
    
    431Share-based compensation
    
    
    126
    
    
    
    Excess tax benefits from share-based payment arrangements
    
    
    (642
    )
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    (24
    )
    
    
    (121
    )Inventories
    
    
    50
    
    
    
    (1
    )Other assets
    
    
    (48
    )
    
    
    46Accounts payable
    
    
    (203
    )
    
    
    (88
    )Accrued compensation and related expenses
    
    
    37
    
    
    
    (42
    )Deferred service revenue and customer deposits
    
    
    (130
    )
    
    
    184Other accrued liabilities
    
    
    507
    
    
    
    (22
    )Cash provided by operating activities
    
    
    2,427
    
    
    
    2,444Cash flows from investing activities:Purchase of property and equipment
    
    
    (166
    )
    
    
    (271
    )Capitalized software development costs
    
    
    (219
    )
    
    
    (216
    )Purchase of marketable securities
    
    
    (3,967
    )
    
    
    (2,571
    )Proceeds from maturity of marketable securities
    
    
    2,799
    
    
    
    Cash used in investing activities
    
    
    (1,553
    )
    
    
    (3,058
    )Cash flows from financing activities:Proceeds from exercise of stock options and warrants
    
    
    514
    
    
    
    295Excess tax benefits from share-based payment arrangements
    
    
    642
    
    
    
    Dividends paid on common stock
    
    
    (1,475
    )
    
    
    Cash provided by (used in) financing activities
    
    
    (319
    )
    
    
    295Net increase (decrease) in cash and cash equivalents
    
    
    555
    
    
    
    (319
    )Cash and cash equivalents at beginning of period
    
    
    15,763
    
    
    
    16,591Cash and cash equivalents at end of period
    
    $
    16,318
    
    
    $
    16,272
  6




---



##### Table of Contents



CAM COMMERCE SOLUTIONS, INC.
 
 NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
 JUNE 30, 2006
 (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




---



##### Table of Contents



CAM COMMERCE SOLUTIONS, INC.
 NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
 JUNE 30, 2006
 (In thousands, except per share data)
 Inventories
  Comprehensive Income
  THREE MONTHS ENDEDJUNE 30, 2006
    
    
    JUNE 30, 2005Net income
    
    $
    686
    
    
    $
    503Unrealized gain on marketable securities
available for sale, net of tax
    
    
    1
    
    
    
    13Comprehensive income
    
    $
    687
    
    
    $
    516
 NINE MONTHS ENDEDJUNE 30, 2006
    
    
    JUNE 30, 2005Net income
    
    $
    1,845
    
    
    $
    1,055Unrealized gain (loss) on marketable
securities
available for sale, net of tax
    
    
    6
    
    
    
    (11
    )Comprehensive income
    
    $
    1,851
    
    
    $
    1,044
 Revenue Recognition Policy
   8




---



##### Table of Contents



CAM COMMERCE SOLUTIONS, INC.
 NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
 JUNE 30, 2006
 (In thousands, except per share data)
   Segments
  Recently Issued Accounting Announcements
  Intangible Assets
   9




---



##### Table of Contents



CAM COMMERCE SOLUTIONS, INC.
 NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
 JUNE 30, 2006
 (In thousands, except per share data)
 Reclassifications
  Use of Estimates
  Shipping and Handling
  Net Income Per Share
  THREE MONTHS ENDED
    
    NINE MONTHS ENDEDJUNE 30, 2006
    
    JUNE 30, 2005
    
    JUNE 30, 2006
    
    JUNE 30, 2005Options
    
    
    
    
    
    
    114
    
    
    
    
    
    
    
    
 10




---



##### Table of Contents



CAM COMMERCE SOLUTIONS, INC.
 NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
 JUNE 30, 2006
 (In thousands, except per share data)
  THREE MONTHS ENDEDJUNE 30, 2006
    
    
    JUNE 30, 2005Numerator:Net income for basic and diluted net income per
share
    
    $
    686
    
    
    $
    503Denominator:Weighted-average shares outstanding
    
    
    3,932
    
    
    
    3,830Denominator for basic net income per share:Weighted-average shares
    
    
    3,932
    
    
    
    3,830Effect of dilutive securities:Stock options
    
    
    248
    
    
    
    152Denominator for diluted net income per share:Weighted average shares and assumed conversions
    
    
    4,180
    
    
    
    3,982Basic net income per share
    
    $
    0.17
    
    
    $
    0.13Diluted net income per share
    
    $
    0.16
    
    
    $
    0.13
 NINE MONTHS ENDEDJUNE 30, 2006
    
    
    JUNE 30, 2005Numerator:Net income for basic and diluted net income per
share
    
    $
    1,845
    
    
    $
    1,055Denominator:Weighted-average shares outstanding
    
    
    3,890
    
    
    
    3,810Denominator for basic net income per share:Weighted-average shares
    
    
    3,890
    
    
    
    3,810Effect of dilutive securities:Stock options
    
    
    258
    
    
    
    210Denominator for diluted net income per share:Weighted average shares and assumed conversions
    
    
    4,148
    
    
    
    4,020Basic net income per share
    
    $
    0.47
    
    
    $
    0.28Diluted net income per share
    
    $
    0.44
    
    
    $
    0.26
 Dividends Declared
  Declaration Date
    
    Per Share Dividend
    
    Record Date
    
    Total Amount
    
    Payment DateNovember 16, 2005
    
    $
    0.14
    
    
    January 3, 2006
    
    $
    541
    
    
    January 12, 2006February 14, 2006
    
    $
    0.14
    
    
    April 4, 2006
    
    $
    549
    
    
    April 14, 2006May 2, 2006
    
    $
    0.14
    
    
    July 5, 2006
    
    $
    553
    
    
    July 14, 2006
  11




---



##### Table of Contents



CAM COMMERCE SOLUTIONS, INC.
 NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
 JUNE 30, 2006
 (In thousands, except per share data)
 Share-Based Compensation
        12




---



##### Table of Contents



CAM COMMERCE SOLUTIONS, INC.
 NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
 JUNE 30, 2006
 (In thousands, except per share data)
   THREE MONTHS ENDEDJUNE 30, 2006SFAS
    
    APB123R
    
    25Income before income taxes
    
    $
    1,127
    
    
    $
    1,173Net income
    
    $
    686
    
    
    $
    714Basic net income per share
    
    $
    0.17
    
    
    $
    0.18Diluted net income per share
    
    $
    0.16
    
    
    $
    0.17
 NINE MONTHS ENDEDJUNE 30, 2006SFAS
    
    APB123R
    
    25Income before income taxes
    
    $
    2,985
    
    
    $
    3,111Net income
    
    $
    1,845
    
    
    $
    1,922Basic net income per share
    
    $
    0.47
    
    
    $
    0.49Diluted net income per share
    
    $
    0.44
    
    
    $
    0.46Cash flow from operations
    
    $
    2,427
    
    
    $
    3,069Cash flow from financing activities
    
    ($
    319
    )
    
    ($
    961
    )
  13




---



##### Table of Contents



CAM COMMERCE SOLUTIONS, INC.
 NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
 JUNE 30, 2006
 (In thousands, except per share data)
  THREE MONTHS ENDEDJUNE 30, 2005Reported net income
    
    $
    503Add: Share-based compensation expense included in
reported net income, net of related tax effects
    
    
    Deduct: Share-based compensation expense determined
under fair-value method for all awards, net of related
tax effects
    
    
    (136
    )Pro forma net income
    
    $
    367Earnings per share:Basic  as reported
    
    $
    0.13Basic  pro forma
    
    $
    0.10Diluted  as reported
    
    $
    0.13Diluted  pro forma
    
    $
    0.09
 NINE MONTHS ENDEDJUNE 30, 2005Reported net income
    
    $
    1,055Add: Share-based compensation expense included in
reported net income, net of related tax effects
    
    
    Deduct: Share-based compensation expense determined
under fair-value method for all awards, net of related
tax effects
    
    
    (219
    )Pro forma net income
    
    $
    836Earnings per share:Basic  as reported
    
    $
    0.28Basic  pro forma
    
    $
    0.22Diluted  as reported
    
    $
    0.26Diluted  pro forma
    
    $
    0.21
   14




---



##### Table of Contents



CAM COMMERCE SOLUTIONS, INC.
 NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
 JUNE 30, 2006
 (In thousands, except per share data)
     WEIGHTEDWEIGHTED
    
    
    AVERAGENUMBER
    
    
    AVERAGE
    
    
    REMAINING
    
    
    AGGREGATEOF
    
    
    EXERCISE
    
    
    LIFE
    
    
    INTRINSICOPTIONS
    
    
    PRICE
    
    
    (IN YEARS)
    
    
    VALUEOptions outstanding
at September 30, 2005
    
    
    626
    
    
    $
    6.32
    
    
    
    5.5
    
    
    $
    7,157Granted
    
    
    
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/AExercised
    
    
    100
    
    
    $
    5.14
    
    
    
    N/A
    
    
    $
    1,666Forfeited
    
    
    
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/AExpired
    
    
    
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/AOptions outstanding at
June 30, 2006
    
    
    526
    
    
    $
    6.54
    
    
    
    4.9
    
    
    $
    8,111Vested and expected
to vest at June 30,
2006
    
    
    507
    
    
    $
    6.38
    
    
    
    4.8
    
    
    $
    7,903Options exercisable at
June 30, 2006
    
    
    469
    
    
    $
    6.01
    
    
    
    4.6
    
    
    $
    7,485Options that would
become exercisable at
June 30, 2006
pursuant to the
Companys option
plans in the event of
a change in control
    
    
    526
    
    
    $
    6.54
    
    
    
    4.9
    
    
    $
    8,111
    15




---



##### Table of Contents



CAM COMMERCE SOLUTIONS, INC.
 NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
 JUNE 30, 2006
 (In thousands, except per share data)
   THREE MONTHS ENDEDJUNE 30, 2006
    
    JUNE 30, 2005Weighted-average grant-date fair value per share
    
    
    
    
    
    $
    6.22Intrinsic value of options exercised
    
    $
    479
    
    
    $
    99Total fair value of shares vested during the
period
    
    $
    46
    
    
    $
    206
 NINE MONTHS ENDEDJUNE 30, 2006
    
    JUNE 30, 2005Weighted-average grant-date fair value per share
    
    
    
    
    
    $
    6.22Intrinsic value of options exercised
    
    $
    1,666
    
    
    $
    1,071Total fair value of shares vested during the year
    
    $
    126
    
    
    $
    337
 16




---



##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 (All dollar amounts in thousands)
 CAUTIONARY STATEMENT
   OVERVIEW
    CRITICAL ACCOUNTING POLICIES AND ESTIMATES
   17




---



##### Table of Contents



CAM COMMERCE SOLUTIONS, INC.
 MANAGEMENTS DISCUSSION AND ANALYSIS OF
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 (All dollar amounts in thousands)
 Revenue Recognition
   Receivables
   Inventory
  Capitalized Software
  18




---



##### Table of Contents



CAM COMMERCE SOLUTIONS, INC.
 MANAGEMENTS DISCUSSION AND ANALYSIS OF
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 (All dollar amounts in thousands)
  Impairment of Intangible Assets
  Deferred Taxes
  19




---



##### Table of Contents



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,
    
    
    Variance2006
    
    
    2005
    
    
    Amount
    
    
    %Net hardware, software and installation
revenues
    
    $
    2,651
    
    
    $
    3,140
    
    
    
    ($489
    )
    
    
    (16
    %)Net service revenues
    
    
    1,327
    
    
    
    1,307
    
    
    
    20
    
    
    
    2
    %Net payment processing revenues
    
    
    2,792
    
    
    
    1,824
    
    
    
    968
    
    
    
    53
    %Total net revenues
    
    
    6,770
    
    
    
    6,271
    
    
    
    499
    
    
    
    8
    %Cost of hardware, software and
installation revenues
    
    
    1,395
    
    
    
    1,581
    
    
    
    (186
    )
    
    
    (12
    %)Cost of service revenues
    
    
    633
    
    
    
    583
    
    
    
    50
    
    
    
    9
    %Cost of payment processing revenues
    
    
    129
    
    
    
    81
    
    
    
    48
    
    
    
    59
    %Total cost of revenues
    
    
    2,157
    
    
    
    2,245
    
    
    
    (88
    )
    
    
    (4
    %)Selling, general and administrative
expenses
    
    
    3,351
    
    
    
    2,978
    
    
    
    373
    
    
    
    13
    %Research and development expenses
    
    
    385
    
    
    
    347
    
    
    
    38
    
    
    
    11
    %Interest income
    
    
    (250
    )
    
    
    (143
    )
    
    
    107
    
    
    
    75
    %Total costs and expenses
    
    
    5,643
    
    
    
    5,427
    
    
    
    216
    
    
    
    4
    %Income before provision for income taxes
    
    
    1,127
    
    
    
    844
    
    
    
    283
    
    
    
    34
    %Provision for income taxes
    
    
    441
    
    
    
    341
    
    
    
    100
    
    
    
    29
    %Net income
    
    $
    686
    
    
    $
    503
    
    
    
    183
    
    
    
    36
    %Gross profit on hardware, software and
installation Revenues
    
    $
    1,256
    
    
    $
    1,559
    
    
    
    (303
    )
    
    
    (19
    %)Gross profit on service revenues
    
    
    694
    
    
    
    724
    
    
    
    (30
    )
    
    
    (4
    %)Gross profit on payment processing
revenues
    
    
    2,663
    
    
    
    1,743
    
    
    
    920
    
    
    
    53
    %Total gross profit
    
    $
    4,613
    
    
    $
    4,026
    
    
    
    587
    
    
    
    15
    %Gross margin on hardware, software and
installation revenues
    
    
    47
    %
    
    
    50
    %Gross margin on service revenues
    
    
    52
    %
    
    
    55
    %Gross margin on payment processing
revenues
    
    
    95
    %
    
    
    96
    %Gross margin on total net revenues
    
    
    68
    %
    
    
    64
    %
 20




---



##### Table of Contents



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,
    
    
    Variance2006
    
    
    2005
    
    
    Amount
    
    
    %Net hardware, software and installation
revenues
    
    $
    8,563
    
    
    $
    9,715
    
    
    
    ($1,152
    )
    
    
    (12
    %)Net service revenues
    
    
    3,982
    
    
    
    4,034
    
    
    
    (52
    )
    
    
    (1
    %)Net payment processing revenues
    
    
    7,694
    
    
    
    4,574
    
    
    
    3,120
    
    
    
    68
    %Total net revenues
    
    
    20,239
    
    
    
    18,323
    
    
    
    1,916
    
    
    
    10
    %Cost of hardware, software and
installation revenues
    
    
    4,568
    
    
    
    4,995
    
    
    
    (427
    )
    
    
    (9
    %)Cost of service revenues
    
    
    1,834
    
    
    
    1,694
    
    
    
    140
    
    
    
    8
    %Cost of payment processing revenues
    
    
    373
    
    
    
    330
    
    
    
    43
    
    
    
    13
    %Total cost of revenues
    
    
    6,775
    
    
    
    7,019
    
    
    
    (244
    )
    
    
    (3
    %)Selling, general and administrative
expenses
    
    
    10,010
    
    
    
    8,850
    
    
    
    1,160
    
    
    
    13
    %Research and development expenses
    
    
    1,148
    
    
    
    1,064
    
    
    
    84
    
    
    
    8
    %Interest income
    
    
    (679
    )
    
    
    (379
    )
    
    
    300
    
    
    
    79
    %Total costs and expenses
    
    
    17,254
    
    
    
    16,554
    
    
    
    700
    
    
    
    4
    %Income before provision for income taxes
    
    
    2,985
    
    
    
    1,769
    
    
    
    1,216
    
    
    
    69
    %Provision for income taxes
    
    
    1,140
    
    
    
    714
    
    
    
    426
    
    
    
    60
    %Net income
    
    $
    1,845
    
    
    $
    1,055
    
    
    
    790
    
    
    
    75
    %Gross profit on hardware, software and
installation Revenues
    
    $
    3,995
    
    
    $
    4,720
    
    
    
    (725
    )
    
    
    (15
    %)Gross profit on service revenues
    
    
    2,148
    
    
    
    2,340
    
    
    
    (192
    )
    
    
    (8
    %)Gross profit on payment processing
revenues
    
    
    7,321
    
    
    
    4,244
    
    
    
    3,077
    
    
    
    73
    %Total gross profit
    
    $
    13,464
    
    
    $
    11,304
    
    
    
    2,160
    
    
    
    19
    %Gross margin on hardware, software and
installation revenues
    
    
    47
    %
    
    
    49
    %Gross margin on service revenues
    
    
    54
    %
    
    
    58
    %Gross margin on payment processing
revenues
    
    
    95
    %
    
    
    93
    %Gross margin on total net revenues
    
    
    67
    %
    
    
    62
    %
 21




---



##### 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 and
resellers)
 Significant Trends
    Revenues
     22




---



##### Table of Contents



CAM COMMERCE SOLUTIONS, INC.
 MANAGEMENTS DISCUSSION AND ANALYSIS OF
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 (All dollar amounts in thousands)
 Gross Margin
   Selling, General and Administrative Expenses
  Research and Development Expenses
  Income Taxes
  23




---



##### Table of Contents



CAM COMMERCE SOLUTIONS, INC.
 MANAGEMENTS DISCUSSION AND ANALYSIS OF
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 (All dollar amounts in thousands)
 Net Income
  LIQUIDITY AND CAPITAL RESOURCES
   Declaration Date
    
    Per Share Dividend
    

Record
Date

    
    Total Amount
    

Payment
DateNovember 16, 2005
    
    $
    0.14
    
    
    January 3, 2006
    
    $
    541
    
    
    January 12, 2006February 14, 2006
    
    $
    0.14
    
    
    April 4, 2006
    
    $
    549
    
    
    April 14, 2006May 2, 2006
    
    $
    0.14
    
    
    July 5, 2006
    
    $
    553
    
    
    July 14, 2006
     Contracts and Commitments
  24




---



##### Table of Contents



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
    
    
    
    
    
    3-5
    
    MORE THAN 5TOTAL
    
    1 YEAR
    
    1-3 YEARS
    
    YEARS
    
    YEARSLong-term debt
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Capital lease obligations
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Operating leases
    
    $
    1,732
    
    
    $
    148
    
    
    $
    1,370
    
    
    $
    214
    
    
    $
    Purchase obligations
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Other long-termliabilities
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 FORWARD LOOKING STATEMENTS
   25




---



##### Table of Contents



CAM COMMERCE SOLUTIONS, INC.
 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Interest Rate Risk
  Credit Risk
  
 ITEM 4. CONTROLS AND PROCEDURES
  26




---



##### Table of Contents



PART II . OTHER INFORMATION
 
   
   
   
   
    VOTESFor
    
    
    WithheldGeoffrey D. Knapp
    
    
    3,437,457
    
    
    
    107,818Walter Straub
    
    
    3,436,457
    
    
    
    108,818David Frosh
    
    
    3,447,235
    
    
    
    98,040Donald Clark
    
    
    3,450,585
    
    
    
    94,690
   VOTESFor
    
    Against
    
    
    Abstain3,528,320
    

    15,300
    
    
    

    1,654
 
   27




---



##### Table of Contents



28




---



##### Table of Contents



SIGNATURES
  CAM COMMERCE SOLUTIONS, INC.
 Date: August 11, 2006
    
    By
    
    /s/ Geoffrey D. KnappGeoffrey D. KnappChief Executive OfficerDate: August 11, 2006
    
    By
    
    /s/ Paul Caceres Jr.Paul Caceres Jr.Chief Financial andAccounting Officer
 29




---



##### Table of Contents



EXHIBIT INDEX