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 March 31, 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):
             
Large accelerated filer  o   Accelerated filer  o   Non-accelerated filer  þ   Smaller reporting company  o
    (Do not check if a smaller reporting company)
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 April 22, 2008, there were 4,136,000 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 March 31, 2008 (Unaudited) and September 30, 2007     3  
 
                   
 
      b)   Unaudited Condensed Statements of Income for the three months ended March 31, 2008 and 2007     4  
 
                   
 
      c)   Unaudited Condensed Statements of Income for the six months ended March 31, 2008 and 2007     5  
 
                   
 
      d)   Unaudited Condensed Statements of Cash Flows for the six months ended March 31, 2008 and 2007     6  
 
                   
 
      e)   Notes to Unaudited Condensed Financial Statements     7-13  
 
                   
    Item 2   Management’s Discussion and Analysis of Financial Condition and Results of Operations     14-22  
 
                   
    Item 3   Quantitative and Qualitative Disclosures About Market Risk     23  
 
                   
    Item 4T   Controls and Procedures     23  
 
                   
PART II — Other Information        
 
                   
    Item 1   Legal Proceedings     24  
 
                   
    Item 1A   Risk Factors     24  
 
                   
    Item 2   Unregistered Sales of Equity Securities and Use of Proceeds     24  
 
                   
    Item 3   Defaults Upon Senior Securities     24  
 
                   
    Item 4   Submission of Matters to a Vote of Security Holders     24  
 
                   
    Item 5   Other Information     24  
 
                   
    Item 6   Exhibits     24-25  
 
                   
Signatures         26  
  EXHIBIT 31.(a)
  EXHIBIT 31.(b)
  EXHIBIT 32

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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CAM COMMERCE SOLUTIONS, INC.
CONDENSED BALANCE SHEETS
(In thousands, except share and per share data)
                 
    MARCH 31,     SEPTEMBER 30,  
    2008     2007  
    (Unaudited)          
ASSETS
               
Current assets:
               
Cash and cash equivalents
  $ 21,460     $ 22,047  
Marketable available-for-sale securities
    5,794       6,388  
Accounts receivable, net
    2,793       2,688  
Inventories
    347       295  
Prepaid income taxes
    1,885        
Deferred income taxes
    76       625  
Other current assets
    139       182  
 
           
Total current assets
    32,494       32,225  
Property and equipment, net
    770       748  
Intangible assets, net
    485       544  
Other assets
    66       72  
 
           
Total assets
  $ 33,815     $ 33,589  
 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
Current liabilities:
               
Accounts payable
  $ 525     $ 713  
Accrued compensation and related expenses
    1,588       1,877  
Deferred service revenue and customer deposits
    1,537       1,622  
Cash dividends payable
    1,283       986  
Other accrued liabilities
    110       372  
 
           
Total current liabilities
    5,043       5,570  
Liability for uncertain tax positions
    58        
 
           
Total liabilities
    5,101       5,570  
 
           
Commitments
               
Stockholders’ equity:
               
Common stock, $0.001 par value; 12,000,000 shares authorized, 4,134,000 shares issued and outstanding at March 31, 2008 and 4,105,000 at September 30, 2007
    4       4  
Capital in excess of par value
    24,284       23,702  
Accumulated other comprehensive loss
    (17 )     (2 )
Retained earnings
    4,443       4,315  
 
           
Total stockholders’ equity
    28,714       28,019  
 
           
Total liabilities and stockholders’ equity
  $ 33,815     $ 33,589  
 
           
See accompanying notes.

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CAM COMMERCE SOLUTIONS, INC.
UNAUDITED CONDENSED STATEMENTS OF INCOME
(In thousands, except per share data)
                 
    THREE MONTHS ENDED  
    MARCH 31, 2008     MARCH 31, 2007  
REVENUES
               
Net payment processing revenues
  $ 5,423     $ 3,342  
Net hardware, software and installation revenues
    2,144       2,576  
Net service revenues
    1,478       1,429  
 
           
Total net revenues
    9,045       7,347  
COSTS AND EXPENSES
               
Cost of payment processing revenues
    232       181  
Cost of hardware, software and installation revenues (1)
    1,221       1,234  
Cost of service revenues (1)
    665       639  
 
           
Total cost of revenues
    2,118       2,054  
Selling, general and administrative expenses (1) (2)
    4,928       3,840  
Research and development expenses (1)
    481       397  
Interest income
    (294 )     (310 )
 
           
Total costs and expenses
    7,233       5,981  
 
           
Income before provision for income taxes
    1,812       1,366  
Provision for income taxes
    446       512  
 
           
Net income
  $ 1,366     $ 854  
 
           
 
               
Basic net income per share
  $ 0.33     $ 0.21  
 
           
 
               
Diluted net income per share
  $ 0.32     $ 0.20  
 
           
 
               
Shares used in computing basic net income per share
    4,124       4,022  
 
               
Shares used in computing diluted net income per share
    4,297       4,220  
 
               
Cash dividends declared per common share
  $ 0.31     $ 0.18  
 
(1)   Includes share-based employee compensation expense as follows:
                 
Cost of hardware, software and installation revenues
  $ 3     $ 3  
Cost of service revenues
    5       5  
Selling, general and administrative expenses
    14       21  
Research and development expenses
    4       7  
     
(2)   Includes $78 and $42 for the three months ended March 31, 2008 and 2007 respectively, for building rent to a related party, Geoff Knapp, officer and director of CAM Commerce.
See accompanying notes.

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CAM COMMERCE SOLUTIONS, INC.
UNAUDITED CONDENSED STATEMENTS OF INCOME
(In thousands, except per share data)
                 
    SIX MONTHS ENDED  
    MARCH 31, 2008     MARCH 31, 2007  
REVENUES
               
Net payment processing revenues
  $ 11,208     $ 6,807  
Net hardware, software and installation revenues
    4,725       4,861  
Net service revenues
    2,957       2,851  
 
           
Total net revenues
    18,890       14,519  
COSTS AND EXPENSES
               
Cost of payment processing revenues
    471       311  
Cost of hardware, software and installation revenues (1)
    2,552       2,418  
Cost of service revenues (1)
    1,336       1,276  
 
           
Total cost of revenues
    4,359       4,005  
Selling, general and administrative expenses (1) (2)
    9,695       7,503  
Research and development expenses (1)
    945       780  
Interest income
    (655 )     (615 )
 
           
Total costs and expenses
    14,344       11,673  
 
           
Income before provision for income taxes
    4,546       2,846  
Provision for income taxes
    1,486       1,024  
 
           
Net income
  $ 3,060     $ 1,822  
 
           
 
               
Basic net income per share
  $ 0.74     $ 0.46  
 
           
 
               
Diluted net income per share
  $ 0.71     $ 0.43  
 
           
 
               
Shares used in computing basic net income per share
    4,117       4,001  
 
               
Shares used in computing diluted net income per share
    4,293       4,206  
 
               
Cash dividends declared per common share
  $ 0.61     $ 0.34  
 
(1)   Includes share-based employee compensation expense as follows:
                 
Cost of hardware, software and installation revenues
  $ 6     $ 6  
Cost of service revenues
    9       10  
Selling, general and administrative expenses
    32       44  
Research and development expenses
    8       14  
     
(2)   Includes $156 and $84 for the six months ended March 31, 2008 and 2007 respectively, for building rent to a related party, Geoff Knapp, officer and director of CAM Commerce.
See accompanying notes.

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CAM COMMERCE SOLUTIONS, INC.
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
                 
    SIX MONTHS ENDED  
    MARCH 31, 2008     MARCH 31, 2007  
Operating activities:
               
Net income
  $ 3,060     $ 1,822  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation and amortization
    319       325  
Provision for doubtful accounts
    (8 )     9  
Change in deferred income taxes
    1,498       1,024  
Share-based compensation
    55       74  
Excess tax benefits from share-based payment arrangements
    (397 )     (496 )
Changes in operating assets and liabilities:
               
Accounts receivable
    (97 )     (271 )
Inventories
    (52 )     83  
Other assets
    50       (172 )
Accounts payable
    (188 )     69  
Accrued compensation and related expenses
    (289 )     (5 )
Deferred service revenue and customer deposits
    (85 )     237  
Income taxes
    (3,034 )     (376 )
Other accrued liabilities
    (1 )     (25 )
 
           
Cash provided by operating activities
     831       2,298  
 
           
Cash flows from investing activities:
               
Purchase of property and equipment
    (187 )     (108 )
Capitalized software development costs
    (95 )     (159 )
Purchase of marketable securities
    (3,407 )     (1,744 )
Proceeds from maturity of marketable securities
    3,965       2,035  
 
           
Cash provided by investing activities
    276       24  
 
           
Cash flows from financing activities:
               
Proceeds from exercise of stock options
    130       390  
Excess tax benefits from share-based payment arrangements
    397       496  
Dividends paid on common stock
    (2,221 )     (1,237 )
 
           
Cash used in financing activities
    (1,694 )     (351 )
 
           
Net increase (decrease) in cash and cash equivalents
    (587 )     1,971  
Cash and cash equivalents at beginning of period
    22,047       15,196  
 
           
Cash and cash equivalents at end of period
  $ 21,460     $ 17,167  
 
           
See accompanying notes.

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CAM COMMERCE SOLUTIONS, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 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 six months ended March 31, 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 March 31, 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 March 31, 2008 and September 30, 2007 were $27 and $4 respectively. There were no realized gains (losses) for the three and six months ended March 31, 2008 and 2007. Amortized cost of the Company’s marketable available-for-sale securities at March 31, 2008 and September 30, 2007 were $5,750 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.

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CAM COMMERCE SOLUTIONS, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 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  
    MARCH 31, 2008     MARCH 31, 2007  
 
               
Net income
  $ 1,366     $ 854  
Unrealized gain (losses) on marketable available-for- sale securities, net of tax
    (14 )     6  
 
           
Comprehensive income
  $ 1,352     $ 860  
 
           
                 
    SIX MONTHS ENDED  
    MARCH 31, 2008     MARCH 31, 2007  
 
               
Net income
  $ 3,060     $ 1,822  
Unrealized gain (losses) on marketable available-for- sale securities, net of tax
    (15 )     12  
 
           
Comprehensive income
  $ 3,045     $ 1,834  
 
           
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 following month of the period the service was performed.

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CAM COMMERCE SOLUTIONS, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 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.

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CAM COMMERCE SOLUTIONS, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 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 March 31, 2008 and at September 30, 2007 were $485 and $544, respectively.
Amortization of capitalized software costs, charged to cost of hardware, software and installation, for the three months ended March 31, 2008 and 2007 were $76 and $74, respectively, and for the six months ended March 31, 2008 and 2007 were $154 and $142, respectively.
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 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 March 31, 2008 and 2007 were $117 and $148, respectively, and for the six months ended March 31, 2008 and 2007 were $216 and $298, 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.”
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 six months ended March 31, 2008 and 2007.

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CAM COMMERCE SOLUTIONS, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2008
(In thousands, except per share data)
The computations of basic and diluted net income per share for the three and six months ended March 31, 2008 and 2007 are as follows:
                 
    THREE MONTHS ENDED  
    MARCH 31, 2008     MARCH 31, 2007  
Numerator:
               
 
               
Net income for basic and diluted net income per share
  $ 1,366     $ 854  
 
           
Denominator:
               
Weighted-average shares outstanding
    4,124       4,022  
 
           
Denominator for basic net income per share:
               
Weighted-average shares
    4,124       4,022  
Effect of dilutive securities:
               
Stock options
    173       198  
 
           
Denominator for diluted net income per share:
               
Weighted average shares and assumed conversions
    4,297       4,220  
 
           
Basic net income per share
  $ 0.33     $ 0.21  
 
           
Diluted net income per share
  $ 0.32     $ 0.20  
 
           
                 
    SIX MONTHS ENDED  
    MARCH 31, 2008     MARCH 31, 2007  
Numerator:
               
 
               
Net income for basic and diluted net income per share
  $ 3,060     $ 1,822  
 
           
Denominator:
               
Weighted-average shares outstanding
    4,117       4,001  
 
           
Denominator for basic net income per share:
               
Weighted-average shares
    4,117       4,001  
Effect of dilutive securities:
               
Stock options
    176       205  
 
           
Denominator for diluted net income per share:
               
Weighted average shares and assumed conversions
    4,293       4,206  
 
           
Basic net income per share
  $ 0.74     $ 0.46  
 
           
Diluted net income per share
  $ 0.71     $ 0.43  
 
           
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 six months ended March 31, 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
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

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CAM COMMERCE SOLUTIONS, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2008
(In thousands, except per share data)
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 March 31, 2008. As of March 31, 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 March 31, 2008. As of March 31, 2008, the Company had 442 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 March 31, 2008, there were $22 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 six months ended March 31, 2008, newly issued shares were issued.
A summary of the stock option plans at March 31, 2008 is as follows:
                                 
                    WEIGHTED    
            WEIGHTED   AVERAGE    
    NUMBER   AVERAGE   REMAINING   AGGREGATE
    OF   EXERCISE   CONTRACTUAL   INTRINSIC
    OPTIONS   PRICE   TERM (IN YEARS)   VALUE
     
Options outstanding at March 31, 2008
    330     $ 7.35       4.1     $ 9,846  
Options expected to vest at March 31, 2008
    329     $ 7.33       4.1     $ 9,810  
Options exercisable at March 31, 2008
    326     $ 7.28       4.1     $ 9,737  
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

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CAM COMMERCE SOLUTIONS, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2008
(In thousands, except per share data)
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 quarter, the Internal Revenue Service settled its audit of the Company’s federal income tax returns for the fiscal 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 six months ended March 31, 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 March 31, 2008, related to the fiscal years ended September 30, 2006 and 2007, is $58. The Company has not identified any new unrecognized tax benefits.
The Company will recognize any future accrued interest and penalties related to unrecognized tax benefits in income tax expense.
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 fiscal years ended September 30, 2006 and September 30, 2007. The fiscal years ended September 30, 2004 and 2005 were “effectively settled” by the IRS audit settlement noted above.
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 fiscal 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.

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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 March 31, 2008 and we do not currently have any such arrangements.

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

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CAM COMMERCE SOLUTIONS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(All dollar amounts in thousands)
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
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.
The value of our capitalized software 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 software 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 software costs. In that event, revenue and cost forecasts would not be achieved, and we could incur additional impairment charges.
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 R&D 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 quarter, the Internal Revenue Service 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 six months ended March 31, 2008. Additionally, we reclassified approximately $112 of the FIN 48

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CAM COMMERCE SOLUTIONS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(All dollar amounts in thousands)
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 March 31, 2008, related to the fiscal years ended September 30, 2006 and 2007, is $58. 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 six months ended March 31, 2008 compared to the three and six months ended March 31, 2007.
                                 
    Three months ended March 31,     Variance  
    2008     2007     Amount     %  
     
Net payment processing revenues
  $ 5,423     $ 3,342     $ 2,081       62 %
Net hardware, software and installation revenues
    2,144       2,576       (432 )     (17 %)
Net service revenues
    1,478       1,429       49       3 %
 
                         
Total net revenues
    9,045       7,347       1,698       23 %
Cost of payment processing revenues
    232       181       51       28 %
Cost of hardware, software and installation revenues
    1,221       1,234       (13 )     (1 %)
Cost of service revenues
    665       639       26       4 %
 
                         
Total cost of revenues
    2,118       2,054       64       3 %
Selling, general and administrative expenses
    4,928       3,840       1,088       28 %
Research and development expenses
    481       397       84       21 %
Interest income
    (294 )     (310 )     (16 )     (5 %)
 
                         
Total costs and expenses
    7,233       5,981       1,252       21 %
 
                         
Income before provision for income taxes
    1,812       1,366       446       33 %
Provision for income taxes
    446       512       (66 )     (13 %)
 
                         
Net income
  $ 1,366     $ 854     $ 512       60 %
 
                         
 
                               
Gross profit on net payment processing revenues
  $ 5,191     $ 3,161     $ 2,030       64 %
Gross profit on net hardware, software and installation revenues
    923       1,342       (419 )     (31 %)
Gross profit on net service revenues
    813       790       23       3 %
 
                         
Total gross profit
  $ 6,927     $ 5,293     $ 1,634       31 %
 
                         
 
                               
Gross margin on net payment processing revenues
    96 %     95 %                
Gross margin on net hardware, software and installation revenues
    43 %     52 %                
Gross margin on net service revenues
    55 %     55 %                
Gross margin on total net revenues
    77 %     72 %                

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CAM COMMERCE SOLUTIONS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(All dollar amounts in thousands)
                                 
    Six months ended March 31,     Variance  
    2008     2007     Amount     %  
     
Net payment processing revenues
  $ 11,208     $ 6,807     $ 4,401       65 %
Net hardware, software and installation revenues
    4,725       4,861       (136 )     (3 %)
Net service revenues
    2,957       2,851       106       4 %
 
                         
Total net revenues
    18,890       14,519       4,371       30 %
Cost of payment processing revenues
    471        311       160       51 %
Cost of hardware, software and installation revenues
    2,552       2,418       134       6 %
Cost of service revenues
    1,336       1,276       60       5 %
 
                         
Total cost of revenues
    4,359       4,005       354       9 %
Selling, general and administrative expenses
    9,695       7,503       2,192       29 %
Research and development expenses
    945       780       165       21 %
Interest income
    (655 )     (615 )     40       7 %
 
                         
Total costs and expenses
    14,344       11,673       2,671       23 %
 
                         
Income before provision for income taxes
    4,546       2,846       1,700       60 %
Provision for income taxes
    1,486       1,024       462       45 %
 
                         
Net income
  $ 3,060     $ 1,822     $ 1,238       68 %
 
                         
 
                               
Gross profit on net payment processing revenues
  $ 10,737     $ 6,496     $ 4,241       65 %
Gross profit on net hardware, software and installation revenues
    2,173       2,443       (270 )     (11 %)
Gross profit on net service revenues
    1,621       1,575       46       3 %
 
                         
Total gross profit
  $ 14,531     $ 10,514     $ 4,017       38 %
 
                         
 
                               
Gross margin on net payment processing revenues
    96 %     95 %                
Gross margin on net hardware, software and installation revenues
    46 %     50 %                
Gross margin on net service revenues
    55 %     55 %                
Gross margin on total net revenues
    77 %     72 %                
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 six months ended March 31, 2008 increased 62% and 65%, respectively, from the corresponding periods of the preceding fiscal year.
Net income for the three and six months ended March 31, 2008 increased 60% and 68%, respectively, compared to the corresponding periods of the preceding fiscal year.
System revenues for the three and six months ended March 31, 2008 decreased 17% and 3%, respectively, compared to the three and six months ended March 31, 2007. This was primarily due to a decrease in software sales.

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CAM COMMERCE SOLUTIONS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(All dollar amounts in thousands)
Service revenues for the three and six months ended March 31, 2008 increased 3% and 4%, respectively, from the corresponding periods of the prior fiscal year, primarily due to an increase in i.STAR web hosting service revenue.
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 support service revenues. Total revenues for the three and six months ended March 31, 2008 increased $1,698, or 23%, and $4,371, or 30%, respectively, compared to the three and six months ended March 31, 2007.
Payment processing revenues for the three months ended March 31, 2008 increased 62% to $5,423, from $3,342 for the corresponding period of the preceding fiscal year. Payment processing revenues for the six months ended March 31, 2008 increased 65% to $11,208, from $6,807 for the six months ended March 31, 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 March 31, 2008 decreased 17% to $2,144, from $2,576 for the corresponding period of last fiscal year. System revenues for the six months ended March 31, 2008 decreased 3% to $4,725, from $4,861 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 March 31, 2008 increased 3% to $1,478, from $1,429 for the three months ended March 31, 2007. Service revenues for the six months ended March 31, 2008 increased 4% to $2,957, from $2,851 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 six months ended March 31, 2008 were both 77%, compared to 72% for both the three and six months ended March 31. 2007. 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 the three and six months ended March 31, 2008 both increased slightly to 96%, from 95% for both the three and six months ended March 31, 2007. Gross margin on system revenues for the three months ended March 31, 2008 decreased to 43%, from 52% for the corresponding quarter ended March 31, 2007. Gross margin on system revenues for the six months ended March 31, 2008 decreased to 46%, from 50% 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 six months ended March 31, 2008 both remained consistent at 55%, compared to the three and six months ended March 31, 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 March 31, 2008 increased $1,088 to $4,928, or 54% of net revenues, from $3,840, or 52% of net revenues, for the three months ended March 31, 2007. Selling, general and administrative expenses for the six months ended March 31, 2008 increased $2,192 to $9,695, or 51% of net revenues, from $7,503, or 52% of net revenues, for the same period of last fiscal year. The increase in selling, general and administrative expenses for the three and six months ended March 31, 2008 was primarily due to the

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CAM COMMERCE SOLUTIONS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(All dollar amounts in thousands)
increase in commissions expense related to higher payment processing revenues, higher payroll costs related to an increase in administrative and sales personnel required for X-Charge revenue growth, and higher trade show expenses.
Research and Development Expenses
Research and development expenses expressed as a percentage of net revenues was flat at 5% for both the three and six months ended March 31, 2008, compared the corresponding periods ended March 31, 2007. Research and development expenses for the three and six months ended March 31, 2008 were $481 and $945, respectively, compared to $397 and $780 for the three and six months ended March 31, 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 six months ended March 31, 2008 were $446 and $1,486, respectively, compared to $512 and $1,024 for the three and six months ended March 31, 2007, respectively. The provision for income tax taxes for the three and six month periods ended March 31, 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 R&D credits. The effective tax rate for the three and six months ended March 31, 2008 were 25% and 33%, respectively, compared to 37% and 36% for the three and six months ended March 31, 2007, respectively. The decrease in effective tax rate 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 March 31, 2008 increased 60% to $1,366, from $854 for the three months ended March 31, 2007. Net income for the six months ended March 31, 2008 increased 68% to $3,060, from $1,822 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 $27,254 on March 31, 2008, compared to $28,435 on September 30, 2007. The decrease resulted primarily from cash used for quarterly cash dividends and estimated income tax payments. During the six months ended March 31, 2008, we generated $831 from operations, expended $282 for fixed assets and capitalized software development, used $3,407 for marketable securities investments and $2,221 for dividend payments, and received $3,965 from maturity of investments and $130 from stock options exercised. During the six months ended March 31, 2007, $2,298 were generated from operations, $267 were used for fixed assets and capitalized software development, $1,744 were used for marketable securities investments, $1,237 were used for dividend payments, $2,035 were received from maturity of investments, and $390 were received from stock options exercised.
The company has a cash dividend policy, which pays stockholders a variable dividend quarterly based on the prior quarter’s results. During the six months ended March 31, 2008, the Board of Directors declared the following dividends:

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CAM COMMERCE SOLUTIONS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(All dollar amounts in thousands)
                         
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
The decision to pay a dividend is re-evaluated quarterly based on our earnings performance, regulatory limitations and other conditions which may affect our desire to pay dividends in the future and is subject to approval by the Board of Directors. Other than performance, there are no restrictions that currently materially limit, or that we reasonably believe are likely to limit materially the future payment of dividends.
At March 31, 2008 cash and cash equivalents plus marketable securities made up 84% of our total current assets. Our current ratio at March 31, 2008 was 6.4. 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 has 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
    TOTAL   LESS THAN 1 YEAR   1-3 YEARS   3-5 YEARS   MORE THAN 5 YEARS
     
Long-term debt
  $     $     $     $     $  
Capital lease obligations
  $     $     $     $     $  
Operating leases
  $ 4,051     $ 391     $ 1,701     $ 1,043     $ 916  
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 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,

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CAM COMMERCE SOLUTIONS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(All dollar amounts in thousands)
statements concerning trends, projected revenue, expenses, gross profit, gross margin and income, our accounting estimates, assumptions and judgments, the impact of our adoption of new rules on accounting for goodwill and other intangible assets, 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.

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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 $66 for the six months ended March 31, 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.

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PART II . OTHER INFORMATION
Item 1 Legal Proceedings
None
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. There have been no material changes in our risk factors from those disclosed in our 2007 Annual Report on Form 10-K.
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).

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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)
 
   
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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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
         
  CAM COMMERCE SOLUTIONS, INC. (Registrant)
 
 
Date: May 12, 2008  By  /s/ Geoffrey D. Knapp
 
         Geoffrey D. Knapp   
         Chief Executive Officer   
 
     
Date: May 12, 2008  By  /s/ Paul Caceres Jr.
 
         Paul Caceres Jr.   
         Chief Financial and Accounting Officer   

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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)
 
   
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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