CADA Cam Commerce Solutions (MM)

 

 

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, 2008

OR

o		Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                      to                     

Commission file number 0-16569

CAM COMMERCE SOLUTIONS, INC.

(Exact name of registrant as specified in its Charter)

Delaware (State or other jurisdiction of incorporation or organization)		95-3866450 (IRS Employer Identification No.)
17075 Newhope Street Fountain Valley, California (Address of principal Executive offices)		92708 (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  þ      No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  o      No  þ

As of July 21, 2008, there were 4,149,000 shares of common stock outstanding.

 

 

CAM COMMERCE SOLUTIONS, INC.

INDEX

								Page Number
PART I — Financial Information
		Item 1		Financial Statements:
				a)		Condensed Balance Sheets at June 30, 2008 (Unaudited) and September 30, 2007			3
				b)		Unaudited Condensed Statements of Income for the three months ended June 30, 2008 and 2007			4
				c)		Unaudited Condensed Statements of Income for the nine months ended June 30, 2008 and 2007			5
				d)		Unaudited Condensed Statements of Cash Flows for the nine months ended June 30, 2008 and 2007			6
				e)		Notes to Unaudited Condensed Financial Statements			7-14
		Item 2		Management’s Discussion and Analysis of Financial Condition and Results of Operations					15-24
		Item 3		Quantitative and Qualitative Disclosures About Market Risk					25
		Item 4T		Controls and Procedures					25
PART II — Other Information
		Item 1		Legal Proceedings					26
		Item 1A		Risk Factors					26
		Item 2		Unregistered Sales of Equity Securities and Use of Proceeds					26
		Item 3		Defaults Upon Senior Securities					26
		Item 4		Submission of Matters to a Vote of Security Holders					26
		Item 5		Other Information					27
		Item 6		Exhibits					27
Signatures									28
EXHIBIT 31.(A)
EXHBIIT 31.(B)
EXHIBIT 32

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,				SEPTEMBER 30,
		2008				2007
		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	22,742			$	22,047
Marketable available-for-sale securities			4,843				6,388
Accounts receivable, net			3,266				2,688
Inventories			272				295
Prepaid income taxes			905				—
Deferred income taxes			607				625
Other current assets			180				182
Total current assets			32,815				32,225
Property and equipment, net			724				748
Intangible assets, net			1,375				544
Other assets			40				72
Total assets		$	34,954			$	33,589
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	768			$	713
Accrued compensation and related expenses			1,979				1,877
Deferred service revenue and customer deposits			1,569				1,622
Cash dividends payable			1,287				986
Other accrued liabilities			141				372
Total current liabilities			5,744				5,570
Liability for uncertain tax positions			110				—
Total liabilities			5,854				5,570
Commitments
Stockholders’ equity:
Common stock, $0.001 par value; 12,000,000 shares authorized, 4,148,000 shares issued and outstanding at June 30, 2008 and 4,105,000 at September 30, 2007			4				4
Capital in excess of par value			24,654				23,702
Accumulated other comprehensive loss			(2	)			(2	)
Retained earnings			4,444				4,315
Total stockholders’ equity			29,100				28,019
Total liabilities and stockholders’ equity		$	34,954			$	33,589

See accompanying notes.

CAM COMMERCE SOLUTIONS, INC.

UNAUDITED CONDENSED STATEMENTS OF INCOME

(In thousands, except per share data)

		THREE MONTHS ENDED
		JUNE 30, 2008				JUNE 30, 2007
REVENUES
Net payment processing revenues		$	6,530			$	4,322
Net hardware, software and installation revenues			2,504				2,755
Net service revenues			1,455				1,421
Total net revenues			10,489				8,498
COSTS AND EXPENSES
Cost of payment processing revenues			274				191
Cost of hardware, software and installation revenues (1)			1,305				1,287
Cost of service revenues (1)			620				643
Total cost of revenues			2,199				2,121
Selling, general and administrative expenses (1) (2)			5,938				4,288
Research and development expenses (1)			510				398
Interest income			(219	)			(329	)
Total costs and expenses			8,428				6,478
Income before provision for income taxes			2,061				2,020
Provision for income taxes			774				753
Net income		$	1,287			$	1,267
Basic net income per share		$	0.31			$	0.31
Diluted net income per share		$	0.30			$	0.30
Shares used in computing basic net income per share			4,139				4,050
Shares used in computing diluted net income per share			4,295				4,241
Cash dividends declared per common share		$	0.31			$	0.20

Cost of hardware, software and installation revenues		$	1			$	3
Cost of service revenues			2				5
Selling, general and administrative expenses			7				21
Research and development expenses			4				7

See accompanying notes.

CAM COMMERCE SOLUTIONS, INC.

UNAUDITED CONDENSED STATEMENTS OF INCOME

(In thousands, except per share data)

		NINE MONTHS ENDED
		JUNE 30, 2008				JUNE 30, 2007
REVENUES
Net payment processing revenues		$	17,738			$	11,129
Net hardware, software and installation revenues			7,229				7,616
Net service revenues			4,412				4,272
Total net revenues			29,379				23,017
COSTS AND EXPENSES
Cost of payment processing revenues			745				502
Cost of hardware, software and installation revenues (1)			3,857				3,705
Cost of service revenues (1)			1,956				1,919
Total cost of revenues			6,558				6,126
Selling, general and administrative expenses (1) (2)			15,633				11,791
Research and development expenses (1)			1,455				1,178
Interest income			(874	)			(944	)
Total costs and expenses			22,772				18,151
Income before provision for income taxes			6,607				4,866
Provision for income taxes			2,260				1,777
Net income		$	4,347			$	3,089
Basic net income per share		$	1.05			$	0.77
Diluted net income per share		$	1.01			$	0.73
Shares used in computing basic net income per share			4,124				4,017
Shares used in computing diluted net income per share			4,294				4,217
Cash dividends declared per common share		$	0.92			$	0.54

Cost of hardware, software and installation revenues		$	7			$	9
Cost of service revenues			11				15
Selling, general and administrative expenses			39				65
Research and development expenses			12				21

See accompanying notes.

CAM COMMERCE SOLUTIONS, INC.

UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS

(In thousands)

		NINE MONTHS ENDED
		JUNE 30, 2008				JUNE 30, 2007
Operating activities:
Net income		$	4,347			$	3,089
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			500				471
Provision for doubtful accounts			37				(18	)
Change in deferred income taxes			2,260				1,778
Share-based compensation			69				110
Excess tax benefits from share-based payment arrangements			(528	)			(795	)
Changes in operating assets and liabilities:
Accounts receivable			(615	)			(650	)
Inventories			23				148
Other assets			12				(73	)
Accounts payable			55				54
Accrued compensation and related expenses			102				400
Deferred service revenue and customer deposits			(53	)			160
Income taxes			(3,076	)			(571	)
Other accrued liabilities			30				(9	)
Cash provided by operating activities			3,163				4,094
Cash flows from investing activities:
Purchase of property and equipment			(220	)			(347	)
Capitalized software development costs			(146	)			(300	)
Purchase of payment processing portfolio			(941	)			—
Purchase of marketable securities			(3,868	)			(3,014	)
Proceeds from maturity of marketable securities			5,413				3,320
Cash provided (used) by investing activities			238				(341	)
Cash flows from financing activities:
Proceeds from exercise of stock options			269				533
Excess tax benefits from share-based payment arrangements			528				795
Dividends paid on common stock			(3,503	)			(1,963	)
Cash used in financing activities			(2,706	)			(635	)
Net increase in cash and cash equivalents			695				3,118
Cash and cash equivalents at beginning of period			22,047				15,196
Cash and cash equivalents at end of period		$	22,742			$	18,314

See accompanying notes.

CAM COMMERCE SOLUTIONS, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

JUNE 30, 2008

(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 designs, develops, markets, installs and services highly integrated retailing and payment processing solutions for small-to-medium size traditional and eCommerce businesses based on its open architecture software. These integrated solutions include credit and debit card processing, inventory management, point of sale, accounting, Internet sales, gift card and customer loyalty programs, and extensive management reporting. Payment processing services are provided on a transaction based business model.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Presentation of Condensed Financial Statements

The accompanying financial statements of the Company as of and for the three and nine months ended June 30, 2008 and 2007 are unaudited. They have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles (“GAAP”) for complete financial statements. 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, 2007.

Cash Equivalents

Cash equivalents represent highly liquid investments with original maturities of three months or less.

Marketable Securities

All marketable 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 available-for-sale securities at June 30, 2008 and September 30, 2007 consisted of debt instruments and certificates of deposit that bear interest at various rates and mature in two years or less. The gross unrealized losses on marketable available-for-sale securities at June 30, 2008 and September 30, 2007 were $3 and $4 respectively. There were no realized gains (losses) for the three and nine months ended June 30, 2008 and 2007. Amortized cost of the Company’s marketable available-for-sale securities at June 30, 2008 and September 30, 2007 were $4,773 and $6,313, respectively.

Accounts Receivable and Allowance For Doubtful Accounts

The Company has accounts receivable from customers who were given extended payment terms for goods and services rendered. Extended payment terms are generally provided only to established customers in good credit standing, and generally represent net 30 day terms. Payment for goods and services are typically due with an initial deposit payment upon signing the purchase agreement, with the balance due upon the delivery.

Management evaluates accounts receivables that are 30 days past due the payment terms on a regular basis to charge off any accounts deemed uncollectible at the time. An allowance for doubtful accounts is maintained for estimated losses resulting from the inability of customers to make required payments.

CAM COMMERCE SOLUTIONS, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

JUNE 30, 2008

(In thousands, except per share data)

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.

Comprehensive Income

The following tables present the calculations of comprehensive income:

		THREE MONTHS ENDED
		JUNE 30, 2008				JUNE 30, 2007
Net income		$	1,287			$	1,267
Unrealized gain (losses) on marketable available-for- sale securities, net of tax			15				3
Comprehensive income		$	1,302			$	1,270

		NINE MONTHS ENDED
		JUNE 30, 2008				JUNE 30, 2007
Net income		$	4,347			$	3,089
Unrealized gain (losses) on marketable available-for- sale securities, net of tax			—				15
Comprehensive income		$	4,347			$	3,104

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, “Revenue Recognition” (“SAB 104”). 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”), web hosting service, installation and training services, and payment processing services. The Company recognizes payment processing revenues in the period the service is performed and reports revenue on a net basis. Revenues are primarily based on actual cash received in the month following the period the service was performed.

CAM COMMERCE SOLUTIONS, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

JUNE 30, 2008

(In thousands, except per share data)

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 as a separate option and priced independently. Installation and training services are separately priced, are generally available from other suppliers and are 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 customers in good credit standing receive thirty day payment terms.

VSOE of fair value for PCS and web hosting service is the price the customer is required to pay since they are sold as separate options and priced independently. PCS and web hosting 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 service period.

Segments

The Company separately discloses its principal operations in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 131, “Disclosure about Segments of an Enterprise and Related Information.” The Company classifies its business operations into three segments: 1) Payment processing; 2) Hardware, software and installation; and 3) Service. Net revenues and the related cost of revenues by segment are as disclosed on the accompanying Unaudited Condensed Statements of Income. The Company does not allocate selling, general and administrative or research and development expenses, including depreciation and amortization, to segments nor are there any segment reconciling items between the amounts reported on the Unaudited Condensed Statements of Income and income before taxes. In addition, the Company does not separately account for segment assets or liabilities.

Recently Issued Accounting Announcements

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurement” (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value and expands disclosures about assets and liabilities measured at fair value. The Company will be required to adopt SFAS 157 in the first quarter of fiscal 2009. Management is currently evaluating the requirements of SFAS 157 and has not yet determined the impact on the financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of FASB Statement No. 115” (“SFAS 159”). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. Unrealized gains and losses on items for which the fair value option has been elected will be recognized in earnings at each subsequent reporting date. SFAS 159 is effective for financial statements issued for fiscal years beginning after November 15, 2007. Management is currently evaluating the requirements of SFAS 159 and has not yet determined the impact on the financial statements.

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants and the SEC did not or are not believed by management to have a material impact on the Company’s present or future financial statements.

CAM COMMERCE SOLUTIONS, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

JUNE 30, 2008

(In thousands, except per share data)

Intangible Assets

The Company capitalizes costs incurred to develop new marketable software and enhance its 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.

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.

Unamortized capitalized software costs at June 30, 2008 and at September 30, 2007 were $460 and $544, respectively.

Amortization of capitalized software costs, charged to cost of hardware, software and installation, for the three months ended June 30, 2008 and 2007 were $76 and $68, respectively, and for the nine months ended June 30, 2008 and 2007 were $230 and $210, respectively.

In May 2008, the Company purchased a payment processing portfolio for a total price of $941. The portfolio consisted of payment processing accounts. The cost of the purchase was capitalized as an intangible asset and is being amortized on the straight-line method over an estimated 6-year useful live based on projected range of lives of the merchant accounts.

Amortization of payment processing portfolio cost, charged to cost of payment processing, for the three months ended June 30, 2008 were $26.

Use of Estimates

The preparation of financial statements in accordance with United States GAAP 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 to revenue recognition, receivables and inventory, capitalized payment processing portfolio, capitalized software, allowances for doubtful accounts, intangible asset valuations, liability for uncertain tax positions, accounting for share-based compensation, 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.

Advertising

The Company expenses the costs of advertising as incurred. Advertising expenses for the three months ended June 30, 2008 and 2007 were $68 and $157, respectively, and for the nine months ended June 30, 2008 and 2007 were $284 and $455, respectively.

Shipping and Handling

Shipping and handling fees and costs are included in the Unaudited Condensed Statements of Income under the line items titled “Net hardware, software and installation revenues” and “Cost of hardware, software and installation revenues.”

CAM COMMERCE SOLUTIONS, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

JUNE 30, 2008

(In thousands, except per share data)

Net Income Per Share

Basic net income per share is based upon the weighted average number of common shares outstanding for each period presented. Diluted net income 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 assuming conversion under the treasury stock method. Common equivalent shares are excluded from diluted net income per share if their effect is anti-dilutive. There were no anti-dilutive options excluded from the diluted net income per share computation for the three and nine months ended June 30, 2008 and 2007.

The computations of basic and diluted net income per share for the three and nine months ended June 30, 2008 and 2007 are as follows:

		THREE MONTHS ENDED
		JUNE 30, 2008				JUNE 30, 2007
Numerator:
Net income for basic and diluted net income per share		$	1,287			$	1,267
Denominator:
Weighted-average shares outstanding			4,139				4,050
Denominator for basic net income per share:
Weighted-average shares			4,139				4,050
Effect of dilutive securities:
Stock options			156				191
Denominator for diluted net income per share:
Weighted average shares and assumed conversions			4,295				4,241
Basic net income per share		$	0.31			$	0.31
Diluted net income per share		$	0.30			$	0.30

		NINE MONTHS ENDED
		JUNE 30, 2008				JUNE 30, 2007
Numerator:
Net income for basic and diluted net income per share		$	4,347			$	3,089
Denominator:
Weighted-average shares outstanding			4,124				4,017
Denominator for basic net income per share:
Weighted-average shares			4,124				4,017
Effect of dilutive securities:
Stock options			170				200
Denominator for diluted net income per share:
Weighted average shares and assumed conversions			4,294				4,217
Basic net income per share		$	1.05			$	0.77
Diluted net income per share		$	1.01			$	0.73

CAM COMMERCE SOLUTIONS, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

JUNE 30, 2008

(In thousands, except per share data)

Dividends Declared

The Company has a cash dividend policy, which pays stockholders a variable dividend quarterly based on the prior quarter’s results. During the nine months ended June 30, 2008, the Board of Directors declared the following dividends:

		Per Share
Declaration Date		Dividend				Record Date				Total Amount				Payment Date
November 19, 2007		$	0.30			January 7, 2008				$	1,235			January 17, 2008
February 13, 2008		$	0.31			April 4, 2008				$	1,283			April 14, 2008
April 30, 2008		$	0.31			July 3, 2008				$	1,287			July 14, 2008

Share-Based Compensation

In 1993, the stockholders of the Company approved the Company’s 1993 Stock Option Plan (the “1993 Plan”) under which nonstatutory options may be granted to key employees and individuals who provide services to the Company, at an exercise price not less than the fair market value of the stock at the date of grant, and expire ten years from the date of grant. The options are exercisable based on vesting periods as determined by the Board of Directors. The 1993 Plan allowed for the issuance of an aggregate of 1,200 shares of the Company’s common stock. The 1993 Plan had a term of ten years. There have been 1,200 options granted under the 1993 Plan as of June 30, 2008. As of June 30, 2008, the Company had 100 shares reserved for issuance related to the options that remain outstanding under the 1993 Plan.

In April 2000, the Company’s Board of Directors approved the Company’s 2000 Stock Option Plan (the “2000 Plan”) under which nonstatutory options may be granted to key employees and individuals who provide services to the Company, at an exercise price not less than the fair market value of the stock at the date of grant, and expire ten years from the date of grant. The options are exercisable based on vesting periods as determined by the Board of Directors. The plan allows for the issuance of an aggregate of 750 shares of the Company’s common stock. The term of the plan is unlimited in duration. There have been 538 options granted under the plan as of June 30, 2008. As of June 30, 2008, the Company had 429 shares reserved for issuance related to the options that remain outstanding under the 2000 Plan.

Statement of Financial Accounting Standards No. 123 (revised 2004), “Share Based Payment” ( “SFAS 123R”) requires share-based payments, including grants of employee stock options, to be recognized in the Statement of Income as an expense, based on their grant date fair values with such fair values amortized over the estimated service period. The Company elected to utilize the modified prospective method for the transition to SFAS 123R upon adoption in fiscal 2006. Under the modified prospective method, compensation expense will be recognized for all share-based compensation awards granted prior to, but not yet vested as of the adoption of SFAS 123R, based on grant-date fair values estimated in accordance with the original provision of SFAS 123. The Company uses a 0% forfeiture rate for calculating its compensation expense.

At June 30, 2008, there were $9 of total unrecognized compensation cost related to unvested stock options. This cost is expected to be fully recognized in fiscal 2009.

For options exercised during the three and nine months ended June 30, 2008, newly issued shares were issued.

CAM COMMERCE SOLUTIONS, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

JUNE 30, 2008

(In thousands, except per share data)

A summary of the stock option plans at June 30, 2008 is as follows:

										WEIGHTED AVERAGE
										REMAINING				AGGREGATE
		NUMBER OF				WEIGHTED AVERAGE				CONTRACTUAL TERM				INTRINSIC
		OPTIONS				EXERCISE PRICE				(IN YEARS)				VALUE
Options outstanding at June 30, 2008			317			$	7.24				3.8			$	10,287
Options expected to vest at June 30, 2008			316			$	7.23				3.8			$	10,271
Options exercisable at June 30, 2008			315			$	7.21				3.8			$	10,237

Income Taxes

In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty In Income Taxes,” (“FIN 48”), an interpretation of FASB Statement No. 109, “Accounting for Income Taxes,” (“FASB 109”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB 109. This Interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The cumulative effect, if any, of applying FIN 48 is to be reported as an adjustment to the opening balance of retained earnings in the year of adoption.

As of October 1, 2007, the Company has provided $414 of unrecognized tax benefits related to research and development tax credit carryforwards. The cumulative effect of applying this interpretation has been recorded as a decrease of $414 to opening retained earnings with an offsetting increase to accrued FIN 48 liability. This entire amount would reduce the Company’s effective income tax rate if the asset is recognized in future reporting periods.

During the year, the Internal Revenue Service (“IRS”) settled its audit of the Company’s federal income tax returns for the years ended September 30, 2004 and 2005. On March 14, 2008, the Company reached an audit settlement agreement with the IRS. This settlement resulted in the reversal of $244 of unrecognized tax benefits associated with research and development tax credits claimed by the Company, which reduced the Company’s effective tax rate for the three and nine months ended June 30, 2008. Additionally, the Company reclassified approximately $112 of the FIN 48 liability to current income taxes payable related to the amount of research and development credits disallowed by the IRS. The Company’s remaining FIN 48 tax liability as of June 30, 2008, related to the years ended September 30, 2006 and 2007, is $110. The Company has not identified any new unrecognized tax benefits.

The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. As of June 30, 2008, the Company had approximately $4 in accrued interest and penalties which is included as a component of the $110 unrecognized tax benefit noted above.

The Company is subject to U.S. federal income tax and its federal income tax returns are open to audit under the statute of limitations for the years ended September 30, 2006 and September 30, 2007. The fiscal years ended September 30, 2004 and 2005 were settled by the IRS audit settlement noted above.

CAM COMMERCE SOLUTIONS, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

JUNE 30, 2008

(In thousands, except per share data)

The Company is subject to income tax in California and various other state taxing jurisdictions. The Company’s state income tax returns are open to audit under the statute of limitations for the years ended September 30, 2003 through September 30, 2006.

The Company does not anticipate a significant change to the total amount of unrecognized tax benefits within the next 12 months.

DEFINITIVE MERGER AGREEMENT

In June 2008, the Company entered into a definitive merger agreement under which an affiliate of Great Hill Partners (“GHP”), a leading private equity investment firm, will acquire all of the issued and outstanding shares of the Company’s Common Stock for $40.50 per share. The transaction will result in an equity value for the Company of approximately $180 million.

The Company’s Board of Directors and GHP have approved the transaction, which is subject to approval by the stockholders of the Company, the expiration of the waiting period under the Hart Scott Rodino Antitrust Improvements Act of 1976 and satisfaction of other customary closing conditions. The transaction is not subject to any financing contingency. A special meeting of the Company’s stockholders to consider and vote on the proposed merger will be held on August 14, 2008, consistent with the requirements of the Securities and Exchange Commission, The Nasdaq Stock Market and Delaware law. A definitive proxy statement for this special meeting was filed on Form DEFM14A on July 14, 2008. The transaction is expected to close in the fourth quarter of the Company’s fiscal year ending September 30, 2008.

CAM COMMERCE SOLUTIONS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(All dollar amounts in thousands)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

(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 (“SEC”).

The section entitled “Forward Looking Statements” set forth below, the section entitled “Risk Factors” in our report on Form 10-K for the fiscal year ended September 30, 2007, 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, our 10-K report, and in our other filings with the SEC, before deciding to purchase, hold or sell our common stock.

OVERVIEW

We design, develop, market, install and service highly integrated retailing and payment processing solutions for small-to-medium size traditional and eCommerce businesses based on our open architecture software. These integrated solutions include credit and debit card processing, inventory management, point of sale, accounting, Internet sales, gift card and customer loyalty programs, and extensive management reporting. Payment processing services are provided on a transaction based business model.

We provide integrated retailing and payment processing solutions to small-to-medium retailers both on direct basis and through a growing network of resellers. We offer a payment processing software program, called X-Charge, which can be integrated with our point-of-sale systems and our resellers’ systems. This allows our customers to process a sale and credit card payment in one transaction using just the point-of-sale system, eliminating the need to separately process the credit card on a stand-alone credit card terminal. X-Charge is integrated with our five turn-key retailing systems, consisting of: (i) CAM32, which is designed for hard goods retailers whose inventory is re-orderable in nature; (ii) Profit$, which is designed for apparel and shoe retailers whose inventory is seasonal in nature, and color and size oriented; (iii) Retail STAR, which is designed to incorporate multiple functions of both the CAM32 and Profit$ systems; (iv) Retail ICE, which is a single-user derivative of Retail STAR; and (v) Microbiz, which is designed for single-store, hard goods retailers that are generally smaller in size than customers that utilize the CAM32 system. Our systems offer the ability to obtain: (i) automated pricing of each item; (ii) billing for charge account customers; (iii) printing of a customer invoice; (iv) tracking of inventory count on an item by item basis; (v) computation of gross profit, dollars and/or percentage of each item; and (vi) tracking of sales by clerk and department by day and/or month. In addition, our systems provide full management reporting including zero sales reports, inventory ranking, overstock and understock, sales analysis, inventory valuation (last cost, average cost and retail) and other reports. The systems can also provide integrated or interfaced accounting functions including accounts receivable, accounts payable, and general ledger.

OFF BALANCE SHEET ARRANGEMENTS

There were no off balance sheet arrangements as of June 30, 2008 and we do not currently have any such arrangements.

CAM COMMERCE SOLUTIONS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(All dollar amounts in thousands)

DEFINITIVE MERGER AGREEMENT

In June 2008, we entered into a definitive merger agreement under which an affiliate of Great Hill Partners (“GHP”), a leading private equity investment firm, will acquire all of the issued and outstanding shares of our Common Stock for $40.50 per share. The transaction will result in an equity value for us of approximately $180 million.

Our Board of Directors and GHP have approved the transaction, which is subject to approval by our stockholders, the expiration of the waiting period under the Hart Scott Rodino Antitrust Improvements Act of 1976 and satisfaction of other customary closing conditions. The transaction is not subject to any financing contingency. A special meeting of our stockholders to consider and vote on the proposed merger will be held on August 14, 2008, consistent with the requirements of the Securities and Exchange Commission (“SEC”), The Nasdaq Stock Market and Delaware law. A definitive proxy statement for this special meeting was filed on Form DEFM14A on July 14, 2008. The transaction is expected to close in the fourth quarter of our fiscal year ending September 30, 2008.

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 revenue recognition, receivables and inventory, capitalized payment processing portfolio, capitalized software, allowances for doubtful accounts, intangible asset valuations, accounting for share-based compensation related to SFAS 123R, liability for uncertain tax positions, 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, web hosting service, installation and training services, and payment processing services. We recognize payment processing revenues in the period the service is performed and report revenue on a net basis. Revenues are primarily based on actual cash received in the month following the period the service was performed.

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 upon standard rates charged since those services are always sold as a separate option and priced independently. Installation and training services are separately priced, are generally available from other suppliers and are not essential to the functionality of the software products. Payments for our hardware and software are typically due with an initial deposit

CAM COMMERCE SOLUTIONS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(All dollar amounts in thousands)

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”) and web hosting service is the price the customer is required to pay since they are sold as separate options and priced independently. PCS and web hosting 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 service period.

Receivables

We have accounts receivable from customers who were given extended payment terms for goods and services rendered. Extended payment terms are generally provided only to established customers in good credit standing, and generally represent net 30 day terms. Payment for goods and services are typically due with an initial deposit payment upon signing the purchase agreement, with the balance due upon delivery.

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.

Capitalized Software and Payment Processing Portfolio Costs

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.

We capitalized the cost of payment processing portfolio purchase and will amortize the cost on a straight-line method over an estimated 6-year useful life based on projected range of lives of the merchant accounts. The portfolio consisted of payment processing accounts.

The value of our capitalized software and payment processing portfolio costs 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 if indicators of impairment exist. In the process of an annual impairment review, we use the income approach methodology of valuation that includes both the undiscounted and discounted cash flow methods as well as other generally accepted valuation methodologies to determine the fair value of our capitalized costs. 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 the capitalized costs. In that event, revenue and cost forecasts would not be achieved, and we could incur additional impairment charges.

CAM COMMERCE SOLUTIONS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(All dollar amounts in thousands)

Deferred Taxes

We utilize the liability method of accounting for income taxes as set forth in SFAS No. 109, “Accounting for Income Taxes.” We do not carry a valuation allowance for our deferred tax assets. Our deferred tax assets included research and development credits. In assessing the need for a valuation allowance, we consider all positive and negative evidence, including projected future taxable income, and recent financial performance.

Liability for Uncertain Tax Positions — FIN 48

In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes,” (“FIN 48”), an interpretation of FASB Statement No. 109, “Accounting for Income Taxes,” (“FASB 109”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB 109. This Interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The cumulative effect of applying FIN 48 is to be reported as an adjustment to the opening balance of retained earnings in the year of adoption. As a result of the implementation of FIN 48, we recorded a decrease of $414 to opening retained earnings with an offsetting increase to accrued FIN 48 liability. This entire amount would reduce our effective income tax rate if the asset is recognized in future reporting periods.

During the year, the Internal Revenue Service (“IRS”) settled its audit of our federal income tax returns for the fiscal years ended September 30, 2004 and 2005. On March 14, 2008, we reached an audit settlement agreement with the IRS. This settlement resulted in the reversal of $244 of unrecognized tax benefits associated with research and development tax credits, which reduced our effective tax rate for the three and nine months ended June 30, 2008. Additionally, we reclassified approximately $112 of the FIN 48 liability to current income taxes payable related to the amount of research and development credits disallowed by the IRS. Our remaining FIN 48 tax liability as of June 30, 2008, related to the fiscal years ended September 30, 2006 and 2007, is $110. We have not identified any new unrecognized tax benefits, and do not anticipate a significant change to the total amount of unrecognized tax benefits within the next 12 months.

RESULTS OF OPERATIONS

The following tables summarize the results of our operations for the three and nine months ended June 30, 2008 compared to the three and nine months ended June 30, 2007.

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

		Three months ended June 30,								Variance
		2008				2007				Amount				%
Net payment processing revenues		$	6,530			$	4,322			$	2,208				51	%
Net hardware, software and installation revenues			2,504				2,755				(251	)			(9	%)
Net service revenues			1,455				1,421				34				2	%
Total net revenues			10,489				8,498				1,991				23	%
Cost of payment processing revenues			274				191				83				43	%
Cost of hardware, software and installation revenues			1,305				1,287				18				1	%
Cost of service revenues			620				643				(23	)			(4	%)
Total cost of revenues			2,199				2,121				78				4	%
Selling, general and administrative expenses			5,938				4,288				1,650				38	%
Research and development expenses			510				398				112				28	%
Interest income			(219	)			(329	)			(110	)			(33	%)
Total costs and expenses			8,428				6,478				1,950				30	%
Income before provision for income taxes			2,061				2,020				41				2	%
Provision for income taxes			774				753				21				3	%
Net income		$	1,287			$	1,267			$	20				2	%
Gross profit on net payment processing revenues		$	6,256			$	4,131			$	2,125				51	%
Gross profit on net hardware, software and installation revenues			1,199				1,468				(269	)			(18	%)
Gross profit on net service revenues			835				778				57				7	%
Total gross profit		$	8,290			$	6,377			$	1,913				30	%
Gross margin on net payment processing revenues			96	%			96	%
Gross margin on net hardware, software and installation revenues			48	%			53	%
Gross margin on net service revenues			57	%			55	%
Gross margin on total net revenues			79	%			75	%

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,								Variance
		2008				2007				Amount				%
Net payment processing revenues		$	17,738			$	11,129			$	6,609				59	%
Net hardware, software and installation revenues			7,229				7,616				(387	)			(5	%)
Net service revenues			4,412				4,272				140				3	%
Total net revenues			29,379				23,017				6,362				28	%
Cost of payment processing revenues			745				502				243				48	%
Cost of hardware, software and installation revenues			3,857				3,705				152				4	%
Cost of service revenues			1,956				1,919				37				2	%
Total cost of revenues			6,558				6,126				432				7	%
Selling, general and administrative expenses			15,633				11,791				3,842				33	%
Research and development expenses			1,455				1,178				277				24	%
Interest income			(874	)			(944	)			(70	)			(7	%)
Total costs and expenses			22,772				18,151				4,621				25	%
Income before provision for income taxes			6,607				4,866				1,741				36	%
Provision for income taxes			2,260				1,777				483				27	%
Net income		$	4,347			$	3,089			$	1,258				41	%
Gross profit on net payment processing revenues		$	16,993			$	10,627			$	6,366				60	%
Gross profit on net hardware, software and installation revenues			3,372				3,911				(539	)			(14	%)
Gross profit on net service revenues			2,456				2,353				103				4	%
Total gross profit		$	22,821			$	16,891			$	5,930				35	%
Gross margin on net payment processing revenues			96	%			95	%
Gross margin on net hardware, software and installation revenues			47	%			51	%
Gross margin on net service revenues			56	%			55	%
Gross margin on total net revenues			78	%			73	%

Significant Trends

We continued our trend of improving earning results, primarily as a result of our high margin, recurring X-Charge payment processing revenues. X-Charge payment processing revenues for the three and nine months ended June 30, 2008 increased 51% and 59%, respectively, from the corresponding periods of the preceding fiscal year.

System revenues for the three and nine months ended June 30, 2008 decreased 9% and 5%, respectively, compared to the three and nine months ended June 30, 2007. This was primarily due to a decrease in software sales.

Revenues

Our revenues consist of X-Charge payment processing revenues, system revenues (consisting of computer hardware, licensing of computer software, and installation and training), and post-contract customer

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

support service revenues. Total revenues for the three and nine months ended June 30, 2008 increased $1,991, or 23%, and $6,362, or 28%, respectively, compared to the three and nine months ended June 30, 2007.

Payment processing revenues for the three months ended June 30, 2008 increased 51% to $6,530, from $4,322 for the corresponding period of the preceding fiscal year. Payment processing revenues for the nine months ended June 30, 2008 increased 59% to $17,738, from $11,129 for the nine months ended June 30, 2007. The increase in payment processing revenues was primarily due to an increase in the number of new payment processing accounts.

System revenues for the three months ended June 30, 2008 decreased 9% to $2,504, from $2,755 for the corresponding period of last fiscal year. System revenues for the nine months ended June 30, 2008 decreased 5% to $7,229, from $7,616 for the same period of last fiscal year. This was primarily due to a decrease in software sales.

Service revenues for the three months ended June 30, 2008 increased 2% to $1,455, from $1,421 for the three months ended June 30, 2007. Service revenues for the nine months ended June 30, 2008 increased 3% to $4,412, from $4,272 for the corresponding period of last fiscal year. The increase in service revenues was primarily due to an increase in i.STAR web hosting service revenue.

Gross Margin

Gross margin on total net revenues for the three and nine months ended June 30, 2008 were 79% and 78%, respectively, compared to 75% and 73% for the three and nine months ended June 30, 2007, respectively. The increase in gross margin was primarily due to an increase in high margin, recurring X-Charge payment processing revenues.

Gross margin on payment processing revenues for both the three and nine months ended June 30, 2008 were 96%, compared to 96% and 95% for the three and nine months ended June 30, 2007, respectively. Gross margin on system revenues for the three months ended June 30, 2008 decreased to 48%, from 53% for the corresponding quarter ended June 30, 2007. Gross margin on system revenues for the nine months ended June 30, 2008 decreased to 47%, from 51% for the corresponding period of last fiscal year. The decrease in gross margin on system revenues was a result of a decrease in software sales, which generate higher gross profit margins than hardware sales. Gross margin on service revenues for the three and nine months ended June 30, 2008 increased to 57% and 56%, respectively, from 55% for both the three and nine months ended June 30, 2007.

Selling, General and Administrative Expenses

Salaries, sales commissions, marketing expenses, and rent expenses represent the largest components of selling, general and administrative expenses. Selling, general and administrative expenses for the three months ended June 30, 2008 increased $1,650 to $5,938, or 57% of net revenues, from $4,288, or 50% of net revenues, for the three months ended June 30, 2007. Selling, general and administrative expenses for the nine months ended June 30, 2008 increased $3,842 to $15,633, or 53% of net revenues, from $11,791, or 51% of net revenues, for the same period of last fiscal year. The increase in selling, general and administrative expenses for the three and nine months ended June 30, 2008 was primarily due to the increase in commissions expense related to higher payment processing revenues and higher payroll costs related to an increase in administrative and sales personnel required for X-Charge revenue growth. In the quarter ended June 30, 2008, we incurred $583 in fees related to a definitive merger agreement that was entered into during the quarter.

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

Research and Development Expenses

Research and development expenses expressed as a percentage of net revenues were flat at 5% for both the three and nine months ended June 30, 2008, compared to the corresponding periods ended June 30, 2007. Research and development expenses for the three and nine months ended June 30, 2008 were $510 and $1,455, respectively, compared to $398 and $1,178 for the three and nine months ended June 30, 2007, respectively. The increase was primarily due to an increase in salaries expense as a result of a decrease in capitalized software costs and hiring of Vice President of Software Development. 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, 2008 were $774 and $2,260, respectively, compared to $753 and $1,777 for the three and nine months ended June 30, 2007, respectively. The provision for income tax taxes for the nine months ended June 30, 2008 included a $244 tax benefit due to the reversal of an uncertain tax position liability. The reversal was the result of a favorable audit settlement with the Internal Revenue Service concerning research and development credits. The effective tax rate for the three and nine months ended June 30, 2008 were 38% and 34%, respectively, compared to 37% for both the three and nine months ended June 30, 2007, respectively. The decrease in effective tax rate for the nine months ended June 30, 2008 was a result of the $244 tax benefit due to the reversal of an uncertain tax position liability.

Net Income

Net income for the three months ended June 30, 2008 increased 2% to $1,287, from $1,267 for the three months ended June 30, 2007. Net income for the three months ended June 30, 2008 included $583 expenses related to a definitive merger agreement. Net income for the nine months ended June 30, 2008 increased 41% to $4,347, from $3,089 for the same period of last fiscal year. The increase in net income was primarily due to the increase in high margin, recurring X-Charge payment processing revenues.

LIQUIDITY AND CAPITAL RESOURCES

In the last several years, we have financed our operations almost entirely from the cash flow generated from operations. Net income was the primary source of our increase in cash provided from operations. Our cash and cash equivalents plus marketable securities totaled $27,585 on June 30, 2008, compared to $28,435 on September 30, 2007. The decrease resulted primarily from cash used for purchase of payment processing portfolio and estimated income tax payments. During the nine months ended June 30, 2008, we generated $3,163 from operations, expended $366 for fixed assets and capitalized software development, used $3,868 for marketable securities investments, $941 for payment processing portfolio purchase, and $3,503 for dividend payments, and received $5,413 from maturity of investments and $269 from stock options exercised. During the nine months ended June 30, 2007, $4,094 were generated from operations, $647 were used for fixed assets and capitalized software development, $3,014 were used for marketable securities investments, $1,963 were used for dividend payments, $3,320 were received from maturity of investments, and $533 were received from stock options exercised.

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

The company has a cash dividend policy, which pays stockholders a variable dividend quarterly based on the prior quarter’s results. During the nine months ended June 30, 2008, the Board of Directors declared the following dividends:

Declaration Date		Per Share Dividend				Record Date				Total Amount				Payment Date
November 19, 2007		$	0.30			January 7, 2008				$	1,235			January 17, 2008
February 13, 2008		$	0.31			April 4, 2008				$	1,283			April 14, 2008
April 30, 2008		$	0.31			July 3, 2008				$	1,287			July 14, 2008

At June 30, 2008 cash and cash equivalents plus marketable securities made up 84% of our total current assets. Our current ratio at June 30, 2008 was 5.7. 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

Inflation has not had a material impact on our operations in the past, but this could change in the future.

Contracts and Commitments

On December 19, 2006, we signed a lease agreement with our Chief Executive Officer, Geoffrey D. Knapp, for approximately 20,500 square feet of office space in Henderson, Nevada. The building houses our research and development, marketing, inside sales and support employees. The lease is for a ten-year term that commences upon the completion of the building expansion space, which occurred on April 13, 2007. The initial rent of $25,949 per month is subject to annual percentage increases equal to the increases, if any, in the Consumer Price Index. No rent adjustment, however, shall be less than two percent (2%) nor greater than four percent (4%). Our audit committee reviewed and approved this related party lease, finding that the lease is on terms no less favorable than those generally available.

The following table summarizes payment obligations for long-term debt, capital leases, operating leases, purchase obligations, and other long-term obligations for the remaining periods of the current fiscal year and future fiscal years.

		PAYMENTS DUE BY PERIOD
						LESS THAN				1-3				3-5				MORE THAN
		TOTAL				1 YEAR				YEARS				YEARS				5 YEARS
Long-term debt		$	—			$	—			$	—			$	—			$	—
Capital lease obligations		$	—			$	—			$	—			$	—			$	—
Operating leases		$	3,906			$	196			$	1,713			$	1,063			$	934
Purchase obligations		$	—			$	—			$	—			$	—			$	—
Other long-term obligations		$	—			$	—			$	—			$	—			$	—

FORWARD LOOKING STATEMENTS

All statements included or incorporated by reference in this Report, other than statements of historical fact, descriptions, 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

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

rules on accounting for goodwill and other intangible assets, 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,” and other similar expressions, including 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, including, but not limited to the following: (i) our recent growth has been due primarily to the addition of new customers for our X-Charge payment processing services and not increases in revenues from existing customers of those services; (ii) our original core business of computer system sales is in decline; (iii) the population of our target customers is declining; (iv) our stock is thinly traded; (v) we face intense competition in the retail point of sale industry; (vi) the availability and pricing of competing products; (vii) the effectiveness of our expense and cost control efforts; (viii) our ability to develop and deliver software products in a timely manner; (ix) the rate at which customers adopt our new products and services; (x) the effect of new and emerging technologies; (xi) the ability to retain and hire key personnel needed to implement business and product plans; (xii) the level or orders received that can be shipped in any quarter; and (xiii) other risks and factors detailed in our Report on Form 10-K for the fiscal year ended September 30, 2007 filed with the SEC. Undue reliance should not be placed on these forward-looking statements, which are current only as of the date of this report. We undertake no obligation to revise or update publicly any forward-looking statement for any reason.

CAM COMMERCE SOLUTIONS, INC.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

(All dollar amounts in thousands)

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 of debt instruments and certificates of deposits 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. If interest rates were to decrease by 10%, interest income would have decreased by $87 for the nine months ended June 30, 2008. This risk is managed by investing in short term instruments of investment grade 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.

Foreign Exchange Rate Risk

We do no operate internationally and, therefore, are not subject to market risk from changes in foreign exchange rates.

ITEM 4T. 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 our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of such period, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (ii) is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. There were no changes in our internal control over financial reporting that occurred during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II . OTHER INFORMATION

Item 1 Legal Proceedings

On June 16, 2008, the Company was named a defendant in an action against the Company and the individual members of its board of directors in the Delaware Court of Chancery. On July 21, 2008, the plaintiff, John Levin, amended his complaint to include new claims based on the Company’s definitive proxy and added Great Hill Partners, LLC (“GHP”) as a defendant. The amended complaint alleges, among other things, that the proposed merger was the result of an unfair process by which the Company and the members of its board of directors breached the fiduciary duties of care, loyalty, good faith, candor, and independence and that the Company’s definitive proxy statement did not contain adequate disclosures regarding the proposed transaction. The plaintiff seeks certification of the matter as a class action and an injunction prohibiting the consummation of the merger. No discovery has been produced yet in this action. On July 21, 2008, the plaintiff filed a motion for expedited discovery seeking depositions of the directors, GHP, and the Company’s financial advisor, RBC Capital Markets Corp., and document production from the defendants, GHP, and RBC on shortened time. On July 24,2008, a hearing was held on plaintiff’s motion for expedited discovery, and the Court denied the motion. The Company believes the claims asserted in the complaint are without merit and intends to vigorously defend against this action.

On July 18, 2008, the Company was named as a defendant in an action against the Company, individual members of its board of directors, and subsidiaries of GHP in Orange County Superior Court for the State of California. The complaint alleges, among other things, that the proposed merger was the result of an unfair process by which the board of directors breached their fiduciary duties of care, loyalty, good faith, candor, and independence and that the Company’s definitive proxy statement did not contain adequate disclosures regarding the proposed transaction. The plaintiffs, Leon and Rhona Schechter Trust, seek certification of the matter as a class action. On July 23, 2008, the plaintiffs presented an ex parte application for expedited discovery seeking depositions of certain directors and RBC and document production from the defendants, GHP, and RBC on shortened time. The Court denied the application at a hearing the same day. Discovery has not yet commenced. The Company believes the claims asserted in the complaint are without merit and intends to vigorously defend against this action.

Item 1A Risk Factors

In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in our Annual Report on Form 10-K for the year ended September 30, 2007, which could materially affect our business, financial condition or future results. In June 2008, the Company entered into a definitive merger agreement under which an affiliate of Great Hill Partners, a leading private equity investment firm, will acquire all of the issued and outstanding shares of our Common Stock. This transaction is subject to the approval by the Company’s stockholders, the expiration of the waiting period under the Hart Scott Rodino Antitrust Improvements Act of 1976 and satisfaction of other customary closing conditions. If the transaction does not close, it could materially impact the Company’s stock price. While the transaction is pending, the trading volume and price volatility of the Company’s Common Stock could increase substantially.

Item 2 Unregistered Sales of Equity Securities and Use of Proceeds

     None

Item 3 Defaults upon Senior Securities

     None

Item 4 Submission of Matters to a Vote of Security Holders

     None

Item 5 Other Information

     None

Item 6 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).

3(b) Bylaws of the Company, as amended (incorporated by reference to Exhibit 3(b) to the 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 Agreement for Geoffrey D. Knapp, amended on December 20, 2006, (incorporated by reference to the Form 8-K, filed on December 20, 2006).

10(c) Employment Agreement and Change in Control Agreement for Paul Caceres, amended on December 20, 2006, (incorporated by reference to the Form 8-K, filed on December 20, 2006).

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, File No. 333-57907).

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 Office Lease Agreement (incorporated by reference to Exhibit 10(j) to the 2001 Annual Report on Form 10-K filed on December 20, 2001)

10(g) Indemnification Agreements (incorporated by reference to Form 8-K, filed on November 18, 2004)

10(h) Form of the Stock Option Agreement for the 2000 Plan (incorporated by reference to Exhibit 10(h) to the 2004 Annual Report on Form 10-K filed on December 21, 2004)

10(i) Fountain Valley Office Lease Extension Agreement Letter, dated May 26, 2005 (incorporated by reference to Exhibit 10(i) to the Form 10-Q filed on August 12, 2005)

10(j) Henderson, Nevada Office Lease Agreement (incorporated by reference to the Form 8-K filed on December 20, 2006)

10(k) Definitive Merger Agreement (incorporated by reference to Form 8-K, filed on June 9, 2008)

10(l) Definitive Special Notice and Proxy Statement (incorporated by reference to Form DEFM14A, filed on July 14, 2008)

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

The Company’s SEC File No. for all SEC filings referenced, other than the S-8 filings, is 000-16569.

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.

Exhibit Index

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).

3(b) Bylaws of the Company, as amended (incorporated by reference to Exhibit 3(b) to the 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 Agreement for Geoffrey D. Knapp, amended on December 20, 2006, (incorporated by reference to the Form 8-K, filed on December 20, 2006).

10(c) Employment Agreement and Change in Control Agreement for Paul Caceres, amended on December 20, 2006, (incorporated by reference to the Form 8-K, filed on December 20, 2006).

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, File No. 333-57907).

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 Office Lease Agreement (incorporated by reference to Exhibit 10(j) to the 2001 Annual Report on Form 10-K filed on December 20, 2001)

10(g) Indemnification Agreements (incorporated by reference to Form 8-K, filed on November 18, 2004)

10(h) Form of the Stock Option Agreement for the 2000 Plan (incorporated by reference to Exhibit 10(h) to the 2004 Annual Report on Form 10-K filed on December 21, 2004)

10(i) Fountain Valley Office Lease Extension Agreement Letter, dated May 26, 2005 (incorporated by reference to Exhibit 10(i) to the Form 10-Q filed on August 12, 2005)

10(j) Henderson, Nevada Office Lease Agreement (incorporated by reference to the Form 8-K filed on December 20, 2006)

10(k) Definitive Merger Agreement (incorporated by reference to Form 8-K, filed on June 9, 2008)

10(l) Definitive Special Notice and Proxy Statement (incorporated by reference to Form DEFM14A, filed on July 14, 2008)

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

The Company’s SEC File No. for all SEC filings referenced, other than the S-8 filings, is 000-16569.

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