10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 2006

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from:                      to                     

Commission file number : 0-16569

CAM COMMERCE SOLUTIONS, INC.

(Exact name of registrant as specified in its Charter)

Delaware	95-3866450
(State or other jurisdiction	(I.R.S. Employer
of incorporation or organization)	Identification No.)

17075 Newhope Street, Suite A
Fountain Valley, California	92708
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (714) 241-9241

Securities registered pursuant to Section 12(b) of the Act:

NONE

Securities registered pursuant to Section 12(g) of the Act:

Title of each class
Common Stock $.001 par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. o Yes       þ No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. o Yes       þ No

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer o       Accelerated Filer o       Non-accelerated Filer þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 1b-2 of the Act). o Yes       þ No

The aggregate market value of voting stock held by non-affiliates of the Registrant as of March 31, 2006 was approximately $67,477,000.

As of November 20, 2006, there were 3,968,360 outstanding shares of common stock of the Registrant.

DOCUMENTS INCORPORATED BY REFERENCE

Part II	Annual Report to Stockholders for
	fiscal year ended September 30, 2006

TABLE OF CONTENTS

PART I
	ITEM 1. BUSINESS
	ITEM 1A. RISK FACTORS
ITEM 1B. UNRESOLVED STAFF COMMENTS
	ITEM 2. PROPERTIES
	ITEM 3. LEGAL PROCEEDINGS
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
PART II
	ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
	ITEM 9A. CONTROLS AND PROCEDURES
	ITEM 9B. OTHER INFORMATION
PART III
	ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
	ITEM 11. EXECUTIVE COMPENSATION
	ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
	ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
	ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
PART IV
	ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
SIGNATURES
EXHIBIT INDEX
EXHIBIT 13.(A)
EXHIBIT 23.(A)
EXHIBIT 23.(B)
EXHIBIT 31.(A)
EXHIBIT 31.(B)
EXHIBIT 32

PART I

Cautionary Statement

All statements included or incorporated by reference in this Report on Form 10-K, other than statements of historical fact, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are intended to be subject to the safe harbor provisions of such act. Examples of forward-looking statements include, but are not limited to, future competition and market conditions, new products, new system sales, statements concerning 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, the future effectiveness of our expense and cost control and reduction efforts, the future market acceptance and performance of our products, implications of our lengthy sales cycle, 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,” and similar expressions, as well as 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, and we will not necessarily inform you of such changes. These statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, our actual results could differ materially and adversely from those expressed in any forward–looking statements as a result of various factors, some of which are set forth in “Risk Factors,” below. We undertake no obligation to revise or update publicly any forward-looking statement for any reason.

ITEM 1. BUSINESS

The Company

CAM Commerce Solutions, Inc. was incorporated in California in 1983, and reincorporated in Delaware in 1987. Our principal business is to provide total commerce solutions for small to medium size, traditional retailers and Web retailers. We offer complete retailing systems, consisting of software, hardware, installation, training, technical support services and web hosting services. We also offer comprehensive payment processing solutions and services that integrate with our retailing systems as well as other suppliers’ systems. These solutions are based on our open architecture software products for managing inventory, point of sale, sales transaction processing, accounting and payment processing. Sales, service, research, and development staff are located in California and Nevada, while our customers are located throughout the United States.

Payment Processing Services (X-Charge)

We provide payment processing services for our customers utilizing our X-Charge software and a third party credit card payment processor. This generates revenues for us based on the number of credit card transactions processed by our customers.

X-Charge is integrated with our point of sale software, which allows our customers to integrate their payment processing with their point of sale system. This integration means they no longer need the stand alone credit card terminals. When one of our retailers who is using X-Charge rings up a sale at the cash register and selects to take payment with a credit card, the X-Charge software takes over automatically. It asks the operator to swipe the card on the cash register and then handles the approval, printing of the customer receipt on the cash register and all settlement functions and reporting after the fact. Thus, the sale takes place for the customer and the retailer in one transaction rather than the two transactions it would take to separately ring up the credit card on a stand alone credit card terminal in addition to ringing the sale on the cash register. Transactions are faster and more efficient with X-Charge.

1

Our X-Charge customer accounts can be broken up into two types. First, there are customers who have our own retailing solutions, such as Retail ICE, Retail Star, CAM-32, Profit$ or MicroBiz. Second, there are the customers of our resellers who are using a business software solution that the reseller has developed for their customers.

The Systems

We offer the following turnkey systems:

(1)	CAM32 – designed for hard goods retailers whose inventory is re-orderable in nature.
(2)	Profit$ – designed for apparel and shoe retailers whose inventory is seasonable in nature, and color and size oriented.
(3)	Retail STAR – a Windows-based system designed to incorporate multiple functions of both the CAM and Profit$ systems.
(4)	Retail ICE – single-user derivative of Retail STAR.
(5)	MicroBiz – a Windows-based system 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. Our systems integrate Intel-based personal computers, computer point of sale stations, hand-held and table top barcode laser scanners, computer workstations, laser printers, and our software. Each system is configured to meet the customer’s particular needs and, as a result, the components included in each system, including the personal computer, printer, point of sale station and our software, depend on the needs, the size and the industry type of the customer.

We provide to each customer a turnkey system, which includes all of the hardware and the software as well as installation of the system at the customer’s premises. All systems, except the MicroBiz and Retail ICE systems, are capable of handling multiple stores. In a multiple-store system, we either install a computer network or work with the existing network infrastructure of the customer. The server computer at each store communicates with the server computer at the customer’s main office. The main server computer compiles all information from the other locations for processing and reporting.

Inventory Management

We believe that inventory control is the most important and time consuming task facing the management of retail stores. Each of our systems was designed to address the retailer’s need for simpler and yet more accurate means of controlling a large and diverse inventory. All inventory information, once entered into the system, is updated for each sale that is transmitted from the point-of-sale station to the server computer. The following managerial reports are examples of the type of reporting that the systems are capable of providing:

(1)	Popularity Ranking. The systems will report on the popularity of each item in the store by producing a report listing each item of inventory ranked according to the number of sales of each item. The report is generated automatically or manually, and can produce a list of daily, weekly, monthly, year-to-date and/or trailing 12 or 13 months of sales basis. The systems will also analyze popularity data and indicate to the retailer which particular items of inventory are needed and which items are overstocked.
(2)	Zero Sales Report. The systems provide a sales analysis on a monthly and year-to-date basis for inventory items for which no sales have been made. The analysis can be reported on a total sales basis or on a departmental or item level basis.
(3)	Inventory Tabulation and Valuation. The systems provide reports listing all inventory on hand, the valuation of such inventory on a cost and retail basis, the average cost of each item in inventory, and all items of inventory on order but not yet received.
(4)	Automatic Purchasing. The systems provide a report listing all items that should be ordered based upon historical data stored in the system, including the number of items in inventory, the number on the shelf, the

2

	number on order and the minimum quantities required. Certain systems can also automatically provide a purchase order if desired.
(5)	Pricing. The systems are capable of producing price stickers in various label formats, assigning Uniform Purchase Code numbers and printing barcodes directly upon the price labels for reading by laser scanners. In addition, if there is a price change, the systems will automatically update the pricing information and, if desired, print new pricing labels.
(6)	Reports. The systems permit the retailer to produce customized reports and forms utilizing data in the system.

Accounting Management

We have developed our own accounting software called Retail STAR Accounting, which is integrated with Retail STAR and Retail ICE software products. The accounting modules include Sales Order, Accounts Receivable, Accounts Payable, General Ledger, and Bank Reconciliation.

i.STAR

We provide retailers the ability to set up an internet storefront with our i.STAR software that is integrated with Retail STAR and CAM32 systems. The internet storefront is established within the system as a virtual store location in a chain of stores. The integrated accounting features (i.e. order processing and accounts receivable) are used to process, track, and ship the orders that are received from the internet storefront. As a one source solution for our customers, we also provide web hosting service for i.STAR.

Service and Support

Customer service and support is a critical element in maintaining customer satisfaction. For a monthly fee, each purchaser of a system receives service and support from us. The service and support we provide includes:

(1)	Technical Phone Support and Software Enhancements. We provide technical support by troubleshooting the customer’s systems problems via the telephone and via modem. We do not significantly customize our software for particular customers, but we are receptive to comments from customers concerning our software. Such comments, together with planned enhancements to the software, result in improvements, which are provided without additional cost to all customers on a service contract.
(2)	Installation and Training. In order to assure customers that they will be able to properly integrate our system into their business, we offer on-site installation and training on the use and application of our systems to each customer. The training can take place at our in-house training facilities or at the customer’s location. The amount of training required depends upon the knowledge and experience of the user plus the complexity of the business to which the system is being implemented. We also offer training to our customers via the telephone.
(3)	Hardware Service. We offer hardware service to our customers on a time and material billing basis. Our service representatives are trained to determine the source of the problem or malfunction in the hardware and, once determined, replace the defective component. Defective components are either repaired at our facility or sent to a manufacturer’s authorized service center for repair.

Marketing

Direct Sales

We market our systems and services primarily through our direct sales force consisting of 45 salespersons and sales associates, all of whom work exclusively for us. Our marketing efforts extend nationwide with offices in the states of California, Nevada, Washington, Georgia, Florida, Missouri, Massachusetts, Texas and New Jersey. Each salesperson is assigned a specific geographical territory and is responsible for following up on sales leads in that territory. Each salesperson is provided with a sales kit and demonstration equipment. Each salesperson is trained by us to be able to define the needs of the potential customer, recommend a system configuration, and provide appropriate price quotes. Upon the execution of a typical sales contract, we are generally able to ship and install an entire system within four to six weeks. We are paid directly by the customer or by third-party leasing companies. Compensation for salespeople is based on a percentage of contract prices for each system sold.

3

Brochures, Trade Shows, and Advertising Media

We market our systems by advertising in trade journals, the Internet, and other print media targeted at retail businesses, by attending industry specific trade shows, by using sales promotional DVDs, and by direct mail advertising.

Sources of Supply

The computer hardware, which makes up our systems, consists primarily of standard components purchased by us from outside distributors and includes products such as Intel-based personal computers, Hewlett-Packard printers, Symbol Technologies hand-held laser scanners and portable data terminals, and Epson receipt printers. For most computer hardware components, we have more than one source of supply. We do not maintain a significant inventory of hardware component parts.

Customers

We have a wide base of customers with no single customer accounting for 10% or more of our revenues.

Backlog

We purchase component hardware for our systems based upon system purchase orders and our forecast of demand for our products. Orders from customers are usually shipped by us pursuant to an agreed upon schedule. Orders, however, may be canceled or rescheduled by the customer with a minimal penalty. For this reason, we believe such backlog information is not indicative of our future sales or business trends and is subject to fluctuation. As of September 30, 2006, backlog was approximately $719,000, as compared to $535,000 on September 30, 2005. This backlog is based upon purchase orders placed with us which we believe are firm orders that will be filled during fiscal year 2007.

Competition

The industry in which we operate is highly competitive. We compete with suppliers dedicated to servicing just one type of business and software suppliers that provide functions similar to our software to a variety of types of businesses. Most competitors sell their products through independent dealers on a regional and national basis. We sell our systems on a direct sales basis.

We consider our systems to have greater capabilities for the small and medium size retailers than suppliers of other systems. We believe that we offer unique software features including i.STAR (fully integrated Web store), gift card processing, and integrated accounting software. Included among such capabilities are ongoing software enhancements and a service organization in place to support the customer after the initial sale. We compete on the basis of product features, customer support, and our direct sales force against competitors that typically compete on the basis of lower pricing.

We also compete with vertical market suppliers of automated retail systems, which include hardware and software intended for use by a particular retail industry segment. Some of these suppliers compete with us on the basis of lower pricing.

Our ability to meet competition will depend upon, among other things, our ability to maintain our marketing effort, increase the capabilities of our systems through ongoing enhancements and improvements, and obtain financing when, and if, needed.

Intuit and Microsoft both offer competing point of sale software products. These products were either acquired or licensed from existing competitors in our marketplace. We have successfully competed against these products in the past. We believe our software products with their strong feature set will allow us to continue to compete successfully against Intuit and Microsoft’s products, but there is no assurance of this because of the significant financial resources available to Intuit and Microsoft and their ability to market and modify their products.

4

Patents and Trademarks

We have obtained federal trademark registration for the following trademarks: Retail STAR, Retail ICE, A-Trade and X-Charge. We are not aware of any infringement on our trademarks, nor of any claim that our trademarks infringe on the rights of any other party.

We rely on a combination of trade secrets, copyright laws, and technical measures to protect our proprietary software. The software included in a system is not accessible by customers for purposes of revisions or copying, because we do not release the software source code to customers. We do not hold any patents and believe that our competitive position is not materially dependent upon patent protection. We believe that most of the technology used in the design and manufacture of most of our products is generally known and available to others. Consequently, there are no assurances that others will not develop, market and sell products substantially equivalent to our products, or utilize technologies similar to those used by us.

Seasonality

We experience a decline in demand for new systems from late November through early January because many retailers are reluctant to purchase and implement a point-of-sale system during their busy season. To offset our slow season for system sales, we have built a base of recurring revenue from existing customers primarily through our X-Charge payment processing service. The revenue from this service increases during the retailers’ busy season because of the increase in credit card sales.

Software Development

We develop our software using a modular approach, wherever possible, which allows a programmer to incorporate, replace or delete parts of an existing computer software program into a new program without affecting the operation of the remaining parts of the program. The incorporation of existing software, which has already been fully tested, into new product designs reduces the time and expense that we would otherwise incur in developing and enhancing our products.

We spent approximately $1,808,000, $1,706,000, and $1,725,000 on software development, including amounts capitalized during the years ended September 30, 2006, 2005, and 2004, respectively. We anticipate we will continue to incur software development costs in connection with enhancements and improvements of our software and the development of new products. These activities may require an increase in our programming and technical staff.

Employees

As of September 30, 2006, we had 188 full time employees, including 19 employed in finance, administration and executive officers, 20 in programming and quality assurance, 49 in sales and marketing, 22 in training and installation, 69 in technical support and customer service, and 9 in operations.

None of our employees are represented by a labor union and we believe that we enjoy harmonious relationships with our employees.

Environmental Regulations

There has been no material effect on us from compliance with environmental regulations.

ITEM 1A. RISK FACTORS

Before deciding to buy, hold or sell our common stock, you should carefully consider the risks described below, in addition to the other information contained in this Report and in our other filings with the Securities and Exchange Commission, including our reports on Forms 10-Q and 8-K. The risks and uncertainties described below are what we consider our most significant risks, but they are not the only ones we face. Additional risks and uncertainties not presently known or that are currently deemed immaterial may also affect our business. If any of these known or unknown risks or uncertainties actually occurs, they could have a material adverse effect on our business, financial

5

condition, results of operations, and cash flows. In that event, the market price for our common stock could decline and you may lose all or part of your investment.

The growth in our X-Charge payment processing business is primarily the result of adding new customers.

The revenue from our payment processing services grew by approximately 63% from fiscal 2005 to fiscal 2006 and accounted for approximately 39% of all revenue in fiscal 2006. This growth was due primarily to adding new customers, rather than increases in revenue from existing customers. We may not be able to continue to add new customers at the same rate in the future, in which case, our revenue growth may slow down substantially.

Our original core business of computer system sales is in decline.

The sales of turnkey computer systems for the retail market declined by approximately 14% in fiscal 2006. This decline is due to market factors outside of our control and may continue. We cannot predict if and when a turn around in our system sales will occur. In response to this decline, we have shifted our business emphasis to the processing of credit card payments and other similar transactions, but still continue to strive for improvement in our system sales.

The population of our target customers is declining.

Our target customers are small-to-medium size retailers. These target customers are under intense competitive pressure from large retail chains such as Wal-Mart and others. These large retailers are gaining market share at the expense of our target customers. This intense competition causes some small retailers to go out of business, and others to consolidate with other small regional retail chains. This results in a shrinking population of our target customers. This also causes our target customers to be more cautious about capital spending for their retail business. These factors can cause substantial fluctuations in our revenues and in our results of operations. This current trend in the retail industry may exist indefinitely and could seriously impact our revenue and harm our business, financial condition and results of operations.

Our stock is thinly traded. Accordingly, you may not be able to resell your shares of common stock at or above the price you paid for them.

Our common stock has historically maintained a low trading volume of shares per day. This trend is likely to continue.

We face intense competition in the retail point of sale industry, which could reduce our market share.

Intuit and Microsoft both offer competing point of sale software products. These products were either acquired or licensed from our competitors. Although we have successfully competed against these products in the past, both Intuit and Microsoft have significant financial resources to market and modify their products, and, therefore, we may not be able to continue to successfully compete against them in the future.

We may face patent or proprietary rights litigation in the future.

Although we believe that our products do not infringe on any third party’s patents, we may become involved in litigation involving patents or proprietary rights. Patent and proprietary rights litigation entails substantial legal and other costs, and we may not have the necessary financial or management resources to defend or prosecute our rights in connection with any litigation.

Other factors which may affect operating results include:

- the availability and pricing of competing products and the resulting effects on sales;

- the effectiveness of expense and cost control efforts;

- the ability to develop and deliver software products to market in a timely manner;

- the rate at which present and future customers adopt our new products and services in our target markets;

- the effects of new and emerging technologies;

6

- the ability to retain and hire key executives, management, technical personnel and other employees that are needed to implement business and product plans;

- the level of orders received that can be shipped in a fiscal quarter.

Due to all of the foregoing factors, and the other risks discussed in this report, you should not rely on past operating results as an indication of future performance.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

We lease approximately 26,000 square feet of space in Fountain Valley, California. On May 26, 2005, we signed a letter agreement with our landlord extending the term of the lease from five years to eight years, expiring March 31, 2010. This facility houses our corporate headquarters, which includes executive and administrative offices, service and support staff, system integration staff, and our inventory warehouse.

In addition, we lease approximately 11,000 square feet of office space in Henderson, Nevada from our Chief Executive Officer pursuant to a ten-year lease that expires on May 31, 2007. The facility houses our research and development team, our inside sales team and X-Charge group. We also lease approximately 1,900 square feet of office space in Upper Saddle River, New Jersey for the MicroBiz Division pursuant to a three-year lease that expires on August 31, 2007 and have various immaterial leases for sales offices throughout the country.

ITEM 3. LEGAL PROCEEDINGS

Other than the ordinary routine litigation incidental to our business that we are involved in or threatened with from time to time, there are no material pending legal proceedings to which we are a party or to which any of our properties are subject.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report.

PART II

Pursuant to General Instruction G (2), Items 5, 6, 7, and 8 have been omitted since the required information is contained in our 2006 Annual Report to Stockholders pursuant to Rule 14a-3(b), which is filed as an exhibit and incorporated herein by reference below.

FORM 10-K	ANNUAL REPORT TO STOCKHOLDERS
ITEM 5: MARKET FOR REGISTRANT’S	PAGE 28: STOCK AND DIVIDEND DATA
COMMON EQUITY, RELATED
STOCKHOLDER’S MATTERS, AND ISSUER	PAGES 22-25: SHARE-BASED
PURCHASES OF EQUITY SECURITIES	COMPENSATION
ITEM 6: SELECTED FINANCIAL DATA	PAGE 29: SELECTED FINANCIAL DATA
	SEE NOTE (A) BELOW
ITEM 7: MANAGEMENT’S DISCUSSION	PAGES 4-12: MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL	AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF	CONDITION AND RESULTS OF
OPERATIONS	OPERATIONS
ITEM 8: FINANCIAL STATEMENTS AND	SEE NOTE (B) BELOW
SUPPLEMENTARY DATA

7

Note (A) The selected financial data incorporated herein by reference to our 2006 Annual Report to Stockholders as of September 30, 2006 and 2005 and for each of the years in the three-year period ended September 30, 2006, have been derived from our audited financial statements included elsewhere in this report by reference. The selected financial data as of September 30, 2004 and for the years ended September 30, 2003 and 2002 have been derived from our audited financial statements not included herein. The data is qualified in its entirety by reference to, and should be read in conjunction with our financial statements and related notes, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this report by reference.

Note (B) Information for Item 8 is included in our financial statements as of September 30, 2006 and 2005, and for each of the years in the three-year period ended September 30, 2006, and our unaudited quarterly financial data for the two years ended September 30, 2006 and 2005, on pages 13 through 25 and page 29, respectively, of our 2006 Annual Report to Stockholders which is hereby incorporated by reference. The reports of the independent auditors are included on pages 26 and 27 of the Annual Report to Stockholders.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

At September 30, 2006 and 2005, our cash and cash equivalents were approximately $15,196,000 and $15,763,000, respectively. At September 30, 2006 and 2005, we also held $8,457,000 and $5,300,000, respectively, of marketable available-for-sale securities consisting of debt instruments and certificate of deposits that bear interest rate risk. We place substantially all of our interest bearing investments with major financial and corporate institutions to limit risk. A 10% decline in interest rate yields would have resulted in a decrease in interest income of approximately $97,000 and $56,000 for the years ended September 30, 2006 and 2005, respectively.

Equity Price Risk

We do not invest in available-for-sale equity securities, and, therefore, are not subject to significant equity price risk.

Foreign Exchange Rate Risk

We do not operate internationally and, therefore, are not subject to market risk from changes in foreign exchange rates.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (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 our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and are effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the

8

desired control objectives. Our management necessarily applied its judgment in evaluating the cost-benefit relationship of such controls and procedures.

There has been no change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our fourth quarter that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Our executive officers and directors and their ages are as follows:

Name	Age		Position with the Company
Geoffrey D. Knapp		48	Chief Executive Officer, Director, Chairman of the Board, and Secretary
Paul Caceres		46	Chief Financial Officer and Chief Accounting Officer
Walter W. Straub		63	Director
David A. Frosh		48	Director
Donald A. Clark		56	Director

     Geoffrey D. Knapp, founder of the company, has been a director, and the Chief Executive Officer of the company since its organization in September 1983. Mr. Knapp received a bachelor’s degree in marketing from the University of Oregon.

     Paul Caceres has been our Chief Financial Officer and Chief Accounting Officer since July 1987. Mr. Caceres is a Certified Public Accountant, licensed in the state of California. He received a bachelor’s degree in business administration from the University of Southern California.

     Walter W. Straub has been a director of the company since May 1989. From 1984 to 2004, he served as the President, Chief Executive and Director of Rainbow Technologies, Inc., a public company engaged in the business of designing, developing, manufacturing and marketing of proprietary computer related security products. Mr. Straub is a Director of SafeNet, Inc., a public company that merged with Rainbow Technologies, Inc. in 2004. In October 2006, Mr. Straub was named Chairman of the Board and interim CEO of SafeNet, Inc. Mr. Straub received a bachelor’s degree in electrical engineering and a master’s degree in finance from Drexel University. In May 1993, Mr. Straub was elected to the Board of Trustees of Drexel University. Mr. Straub serves on the Concordia University President’s Advisory Council.

     David A. Frosh has been a member of the Board of Directors since August 1991. He is presently the President of Sperry Van Ness, a commercial real estate brokerage firm. Mr. Frosh was employed by the company as President from June 1996 to March 2001. From June 1990 to June 1996, Mr. Frosh was employed as sales executive for the national accounts division of Automatic Data Processing “ADP.” ADP provides computerized transaction processing, data communications and information services. From June 1988 to June 1990, Mr. Frosh served as Director of Marketing for Optima Retail Systems, a privately held company, which manufactured and marketed inventory control systems for the retail apparel industry. Mr. Frosh received a bachelor’s degree in marketing from Central Michigan University and a master’s degree in business administration from Claremont Graduate School.

9

     Donald A. Clark has been a member of the Board of Directors since November 2002. Mr. Clark has over 30 years of experience in retail operations and selling to retail businesses. He presently is the President and CEO of C&C Companies, a private, diversified apparel marketing and manufacturing company. Mr. Clark has held various executive positions with C&C Companies since 1983. C&C Companies designs, manufactures, markets and distributes apparel and accessories under the brand names of Rusty and Sanuk USA. The company directly distributes products in the USA and Canada. Mr. Clark attended the University of Arizona as a marketing and business major.

The terms of office of directors expire at the next Annual Meeting of Shareholders, or at such time as their successors have been duly elected and qualified. There are no arrangements or understandings by or between any director or executive officer and any other person(s), pursuant to which he or she was or is to be selected as a director or officer, respectively.

Beginning in fiscal 2006, our directors who are not officers each receive $5,000 for every Board meeting they attend. Prior to fiscal 2006, they received an option to purchase 7,500 shares of common stock at fair market value on the date of grant when they are elected at the annual shareholders meeting each year. Directors are entitled to an expense reimbursement for attending meetings. Officers serve at the discretion of the Board of Directors.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires our officers and directors, and persons who own more than ten percent of our common stock to file reports of ownership and changes in ownership with the Securities and Exchange Commission (“SEC”). Officers, directors, and greater than ten percent shareholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. Based solely on a review of the copies of such reports furnished to us, we believe all Section 16(a) filing requirements applicable to all such persons were complied with during the fiscal year covered by this report.

Certain Significant Employees

We do not have any significant employees who are not officers.

Family Relationships

There are no family relationships by or between any of our directors and officers.

Code of Ethics

We have adopted a Code of Ethics that applies to directors, officers, and employees. This Code of Ethics is publicly available on our website at www.camcommerce.com.

Audit Committee and Audit Committee Financial Expert

We have a separately-designated standing Audit Committee, which consists of Walter W. Straub, David A. Frosh and Donald A. Clark, each of whom meets the independence requirements of the NASDAQ Stock Market. The Board of Directors has determined that Walter Straub is an “audit committee financial expert” as defined under applicable rules of the Securities and Exchange Commission.

Stockholder Nominees

There have been no material changes to the procedures by which stockholders may recommend nominees to our Board of Directors since our last proxy statement.

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth information concerning compensation paid by us for services rendered to us during fiscal year ended September 30, 2006, and the prior two fiscal years, to our Chief Executive Officer and each additional executive officer whose total compensation exceeded $100,000 (each a “Named Executive Officer”):

10

SUMMARY COMPENSATION TABLE

											Long-Term
Annual Compensation											Compensation
											Awards		Long-
							Other				Securities		Term
Name and							Annual		Restricted		Underlying		Incentive		All Other
Principal	Fiscal				(1)		Com-		Stock		Options/		Plan		Com-
Position	Year		Salary		Bonus		pensation		Award(s)		SARs (#)		Payouts		pensation
Geoffrey Knapp		2006	$	317,000	$	138,000	$	0	$	0		0	$	0	$	0
Chairman of the		2005	$	305,000	$	94,000	$	0	$	0		0	$	0	$	0
Board and CEO		2004	$	270,000	$	62,000	$	0	$	0		0	$	0	$	0
Paul Caceres		2006	$	201,000	$	88,000	$	0	$	0		0	$	0	$	0
CFO and CAO		2005	$	193,000	$	59,000	$	0	$	0		0	$	0	$	0
		2004	$	167,000	$	39,000	$	0	$	0		0	$	0	$	0

(1) Bonuses paid to the Named Executive Officers are pursuant to annual incentive compensation programs established each year for selected employees, including executive officers. Under this program, performance goals, relating to such matters as income before taxes and net income, were established each year. Incentive compensation, in the form of cash bonuses, was awarded based on the extent to which the company and the individual achieved or exceeded the performance goals.

Stock Options Granted and Exercised During Fiscal 2006

There were no stock options granted to executive officers during the fiscal year covered by this report.

The following table sets forth certain information concerning options exercised by the Named Executive Officers during the fiscal year covered by this report, and outstanding options at the end of such year held by the Named Executive Officers.

AGGREGATE OPTION EXERCISES AND FISCAL YEAR END OPTION VALUES

					Number of Securities		Value of Unexercised In-
	Shares				Underlying Unexercised		the-Money Options at
	Acquired on		Value (1)		Options at Sept. 30, 2006		Sept. 30, 2006 (2)
Name	Exercise		Realized		Exercisable/Unexercisable		Exercisable/Unexercisable
Geoff Knapp		0	$	0		70,000/0	$	1,056,000/$0
Paul Caceres		10,000	$	193,000		34,000/1,000	$	524,000/$17,000

(1)	Market value of the underlying securities of the exercised options at the exercise date minus the exercise price of the options.
(2)	Market value of the underlying securities of such options at such date minus the exercise price of the options.

Compensation of Directors

The compensation plan for non-employee directors has changed. Beginning in fiscal 2006, they each receive $5,000 for every Board meeting they attend. During the fiscal year ended September 30, 2006, they each received $10,000. Prior to fiscal 2006, they were each granted options to purchase 7,500 shares of common stock when they were elected at the annual shareholders meeting each year. The non-employee directors are Walter Straub, David Frosh, and Donald Clark. These directors were also reimbursed for their expenses in attending meetings of the Board of Directors and committees of the Board. Directors who are employees of the company receive no compensation for serving on the Board of Directors.

11

Employment agreements

In 1996, we entered into employment agreements with Geoffrey D. Knapp, Chief Executive Officer, and Paul Caceres, Chief Financial Officer. The agreements call for the officers to serve in their respective executive positions for 12-month terms and renew automatically on an annual basis. The agreements terms currently include a minimum annual base salary of $314,000 for Mr. Knapp and $199,000 for Mr. Caceres. The agreements also include a provision for annual bonuses to be paid based on achieving annual performance goals.

Change in Control agreements

We have change in control agreements in place with Geoffrey D. Knapp, Chief Executive Officer, and Paul Caceres, Chief Financial Officer. The agreements call for the officers’ position, duties, title, authority and responsibilities to be at least commensurate with those held prior to any change in control. If after a change in control the executive is terminated without cause or resigns due to a reduction in authority and responsibilities, the officer will receive payments equal to 299% of their base salary and bonus based on the executive’s compensation from prior year. The term of the agreement is for 12 months and renews on an annual basis.

A “Change of Control” shall be deemed to have occurred if: (i) a third person, including a “group” as defined in Article 13(d)(3) of the Securities Exchange Act of 1934, becomes the beneficial owner of shares of the company (a) having 30% or more of the total number of votes that may be cast for the election of directors of the company in 1996; and (b) having 30% or more of the total number of votes that may be cast for the election of directors of the company in 1997 and thereafter; or (ii) as the result of, or in connection with, any cash tender or exchange offer, merger of other business combination, sale of assets or contested election, or any combination of the foregoing
transactions (a “Transaction”), the persons who were directors of the company before the Transaction shall cease to constitute a majority of the Board of Directors (the “Board”) of the company or any successor to the company.

REPORT OF COMPENSATION COMMITTEE
TO: THE BOARD OF DIRECTORS

As members of the Compensation Committee, it is our duty to review and recommend the compensation levels for members of the company’s management, evaluate the performance of management and administer the company’s various incentive plans. This Committee has reviewed in detail the Compensation of the company’s two executive officers. In the opinion of the Committee, the compensation of all the executive officers of the company is reasonable in view of its performance and the respective contributions of such officers to the company’s performance.

In determining the management compensation, this Committee compares the compensation paid to management to the level and structure of compensation paid to management of competing companies. Additionally, the Committee considers the sales and earnings performance of the company compared to competing and similarly situated companies. The Committee also takes into account such relevant external factors as general economic conditions, geographic market of work place, stock price performance and stock market prices.

Management compensation is designed to be comprised of 65% to 75% of fixed salary, and 25% to 35% of variable compensation based on performance factors. Stock options are granted at the discretion of the Board of Directors, and there is no set minimum or maximum amount of options that can be issued. Performance factors that determine management compensation are sales, net income of the company, and individual performance.

The Committee examines compilations of executive compensation such as various industry compensation surveys for middle market companies. In fiscal 2006, the compensation for the Chief Executive Officer and the other executive officers was comparable to other Chief Executive Officers and other executive officers of middle market companies in related industries.

Compensation Committee

Walter Straub, Donald Clark, and David Frosh
November 1, 2006

12

The Report of the Compensation Committee will not be deemed to be incorporated by reference into any filing by us under the Securities Act of 1933 or the Securities Act of 1934, except to the extent we specifically incorporate the report by reference.

Compensation Committee Interlocks and Insider Participation

As noted above, the members of the Compensation Committee during the fiscal year ended September 30, 2006 were Walter Straub, Donald Clark, and David Frosh. Neither Walter Straub nor Donald Clark has ever been an officer or employee of our company. David Frosh was formerly employed by our company as President from June 1996 to March 2001. None of our executive officers served as a member of the Compensation Committee (or other board committee performing equivalent functions or, in the absence of such committee, the entire Board of Directors) of another entity during the fiscal year ended September 30, 2006.

No member of the Compensation Committee had, or will have, a direct or indirect material interest in any transaction or series of similar transactions that have occurred since the beginning of our fiscal year ended September 30, 2006, or in any currently proposed transaction or series of similar transactions to which we were or are to be a party in which the amount involved exceeds $60,000.

1993 Stock Option Plan

In April 1993, our shareholders approved our 1993 Stock Option Plan (the “1993 Plan”) under which non-statutory options may be granted to key employees and individuals who provide services to us, at a price not less than the fair market value at the date of grant. The options are exercisable based on vesting periods as determined by the Board of Directors and expire ten years from the date of grant. The 1993 Plan expired in April 2003. At the time, options exercisable for all 1,200,000 shares of our common stock authorized for issuance under the 1993 Plan had been granted.

2000 Stock Option Plan

In April 2000, our Board of Directors approved our 2000 Stock Option Plan (the “2000 Plan”) under which non-statutory options may be granted to key employees and individuals who provide services to us, at a price not less than the fair market value at the date of grant. The options are exercisable based on vesting periods as determined by the Board of Directors and expire ten years from the date of grant. The 2000 Plan was not formally approved by our shareholders. The 2000 Plan allows for the issuance of an aggregate of 750,000 shares of our common stock. The 2000 Plan term is unlimited in duration. Options for 541,000 shares of our common stock have been granted under the 2000 Plan as of September 30, 2006.

Information required to be disclosed for options, warrants and rights is hereby incorporated by reference to our 2006 Annual Report on pages 22-25; footnote 5 “Share-Based Compensation.”

401(k) Plan

In July 1991, we adopted a contributory profit-sharing plan under Section 401(k) of the Internal Revenue Code, which covers substantially all employees. Under the plan, eligible employees are able to contribute up to 15% of their compensation. Our contributions are at the discretion of the Board of Directors. We made a matching contribution of $136,000 for the fiscal year ended September 30, 2006.

Stock Price Performance Graph

The following graph shows a comparison of cumulative total returns for our company, the NASDAQ Composite Stock Market Index and the NASDAQ Computer and Data Processing Services Index, during the period commencing on September 30, 2001 and ending on September 30, 2006. The comparison assumes $100 was invested on September 30, 2001 in each of our common stock, the NASDAQ Stock Market Composite Index, and the NASDAQ Computer and Data Processing Services Stock Index and assumes the reinvestment of all dividends, if any.

13

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth as of September 30, 2006, certain information regarding ownership of our common stock by (i) each person that we know is the beneficial owner of more than 5% of our outstanding common stock, (ii) each of our directors, director nominees, and executive officers who owns common stock and (iii) all directors and officers as a group.

		Shares Beneficially Owned
	Name and Address of	Amount & Nature of
Title of Class	Beneficial Owner	Beneficial Owner (3)		Percentage of Class (3)
Common Stock	Geoffrey D. Knapp, Chairman of the Board and CEO (1)		537,000		13.3	%
Common Stock	Paul Caceres, Chief Financial Officer (1)		34,000		*
Common Stock	Walter W. Straub, Director (1)		130,000		3.2	%
Common Stock	David Frosh, Director (1)		22,000		*
Common Stock	Donald Clark, Director (1)		26,000		*
Common Stock	Ken Templeton, Beneficial Owner (2)		522,000		13.2	%
Common Stock	All Directors and Officers as a Group (of 5 persons)		749,000		18	%

* less than 1%

14

(1)	The address of each beneficial owner is in care of CAM Commerce Solutions, Inc., 17075 Newhope Street, Fountain Valley, California 92708.
(2)	Address of beneficial owner is 3311 S. Rainbow Blvd., Las Vegas, NV 89146.
(3)	Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of common stock subject to options or warrants held by that person that are currently exercisable, or will become exercisable within 60 days from September 30, 2006, are deemed outstanding, but are not treated as outstanding for the purpose of computing the percentage of ownership of any other person. The total amount of these shares with respect to which all of the above have rights to acquire beneficial ownership in sixty (60) days are as follows: Geoffrey Knapp 70,000; Paul Caceres 34,000; Walter Straub 78,000; David Frosh 22,000; and Donald Clark 26,000. To our knowledge, each person named in the table has the sole voting and investment power with respect to all shares of common stock shown as beneficially owned by such person or entity.

We do not know of any arrangements, including any pledge of our securities by any person, the operation of which may at a subsequent date result in a change in control of the company.

The following table sets forth the number of shares to be issued upon exercise of outstanding options, the weighted- average exercise price of such options, and the number of shares remaining available for issuance as of the end of the company’s most recently completed fiscal year.

			(c)
			Number of securities
	(a)	(b)	remaining available for
	Number of securities to be	Weighted-average	future issuance under
	issued upon exercise of	exercise price of	equity compensation plans
	outstanding options,	outstanding options,	(excluding securities
Plan Category	warrants and rights	warrants and rights	reflected in column (a))
1993 Stock Option Plan approved by security holders	207,000	$4.08	—
2000 Stock Option Plan not approved by security holders	300,000	$8.25	209,000

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Since 1997, we have leased a building in Henderson, Nevada from the Chief Executive Officer of the company, Geoffrey D. Knapp. We paid $164,000 in lease payments to Mr. Knapp during the fiscal year ended September 30, 2006. The lease will expire on May 31, 2007. The annual rate increase under the lease agreement is based on increases in the consumer price index.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Audit Fees

The aggregate fees incurred for services provided by McGladrey & Pullen, LLP for fiscal 2006 and fiscal 2005 were as follows:

			% Pre-Approved by					% Pre-Approved by
Category	Fiscal 2006		Audit Committee			Fiscal 2005		Audit Committee
Audit Fees*	$	121,000		100	%	$	109,000		100	%
Audit-Related Fees**		23,000		100	%		19,500		100	%
Tax Fees		—		—			—		—
All Other Fees		—					—		—

*	Includes annual audit and quarterly reviews
**	Fees for work related to our SFAS123R adoption and compliance with Section 404 of the Sarbanes- Oxley Act.

15

We appointed McGladrey & Pullen, LLP as our new independent registered public accounting firm, to perform auditing services beginning with fiscal 2005. Ernst & Young LLP was our independent registered public accounting firm for the 2004 fiscal year.

Audit Committee Pre-Approval Policies

Our Audit Committee has adopted detailed pre-approval policies and procedures pursuant to which audit, audit-related and tax services, and all permissible non-audit services, are pre-approved by category of service. All of these services were pre-approved in fiscal years 2005 and 2006. The fees are budgeted, and actual fees versus the budget are monitored throughout the year. During the year, circumstances may arise when it may become necessary to engage the independent auditor for additional services not contemplated in the original pre-approval. In those instances, we will obtain the specific pre-approval of the Audit Committee before engaging the independent auditor. The policies require the Audit Committee to be informed of each service, and the policies do not include any delegation of the Audit Committee’s responsibilities to management. The Audit Committee may delegate pre-approval authority to one or more of its members. The member to whom such authority is delegated will report any pre-approval decisions to the Audit Committee no later than at its next scheduled meeting.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) The following documents are filed as part of this report.

     1. Financial Statements

The financial statements required by Item 8 of this report are incorporated by reference to our 2006 Annual Report to Stockholders (See Index to Financial Statements and Financial Statement Schedule on page 19) .

     2. Financial Statement Schedule

See the Index to Financial Statements and Financial Statement Schedule on page 19 referenced above.

     3. Exhibits

3(a) Certification of Incorporation, 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) By-Laws, as amended (incorporated by reference to Exhibit 3(b) to Form 10-Q for the period ended March 31, 2004, filed on May 13, 2004).

10(a) 1993 Stock Option Plan (incorporated by reference to the exhibits on Form S-8 Registration Statement filed on June 21, 1993-SEC File No. 333-121541).

10(b) Employment Agreement, and Change in Control Agreements for Geoffrey D. Knapp, dated January 1, 1996, (incorporated by reference to Exhibits 10 (h) and (i) to the Form 10-Q for the period ended March 31, 1996, filed on May 7, 1996).

16

10(c) Employment Agreement, and Change in Control Agreements for Paul Caceres, dated January 1, 1996, (incorporated by reference to Exhibits 10 (j) and (k) to the Form 10-Q for the period ended March 31, 1996, filed on May 7, 1996).

10(d) Amendment to 1993 Stock Option Plan (incorporated by reference to the exhibits on Form S-8 Registration Statement filed on June 26, 1998 — SEC 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 New Office Lease Agreement (incorporated by reference to Exhibit 10(j) to the 2001 Annual Report on Form 10-K filed on December 20, 2001).

10(g) Indemnity 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 Form 10-Q filed on August 12, 2005)

13(a) Annual Report to Stockholders for the fiscal year ended September 30, 2006

23a Consent and Report on Schedule of Independent Registered Public Accounting Firm

23b Consent and Report on Schedule of Independent Registered Public Accounting Firm

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 of Chief Executive Officer and Chief Financial Officer 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.

17

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be filed on its behalf by the undersigned, thereunto duly authorized.

CAM COMMERCE SOLUTIONS, INC.
By:	/s/ Geoffrey D. Knapp
	Geoffrey D. Knapp,
	Chief Executive Officer
By:	/s/ Paul Caceres
	Paul Caceres,
	Chief Financial Officer and
	Chief Accounting Officer
Date: December 15, 2006

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

/s/ Geoffrey D. Knapp Geoffrey D. Knapp	Chief Executive Officer and Chairman of the Board	December 15, 2006
/s/ David Frosh David Frosh	Director	December 15, 2006
/s/ Walter W. Straub Walter W. Straub	Director	December 15, 2006
/s/ Donald Clark	Director	December 15, 2006
Donald Clark

18

CAM COMMERCE SOLUTIONS, INC.
INDEX TO
FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULE

ITEM 15(a)

	Page Reference
	Annual Report
	to Stockholders		Form 10-K
Reports of Independent Registered Public Accounting Firms		26-27
Balance Sheets at September 30, 2006 and 2005		13
Statements of Income for the Years Ended September 30, 2006, 2005 and 2004		14
Statements of Cash Flows for the Years Ended September 30, 2006, 2005 and 2004		15
Statements of Stockholders’ Equity for the Years Ended September 30, 2006, 2005 and 2004		16
Notes to Financial Statements		17-25
Schedule II. Valuation and Qualifying Accounts for the Years Ended September 30, 2006, 2005 and 2004				20
Consent and Report on Schedule of Independent Registered Public Accounting Firm			Exhibit 23a
Consent and Report on Schedule of Independent Registered Public Accounting Firm			Exhibit 23b

All other financial statement schedules are omitted as the required information is inapplicable or the information is presented in the financial statements or related notes.

19

CAM Commerce Solutions, Inc.
Schedule II – Valuation and Qualifying Accounts
Years Ended September 30, 2006, 2005, and 2004

	Balance at		Additions		Deductions/Accounts
	Beginning of		Charged to		Written Off Net of		Balance at End
	Year		Income		Recoveries		of Year
Allowance for Doubtful Accounts Receivable
2006	$	146,000	$	37,000	$	29,000	$	154,000
2005	$	155,000	$	178,000	$	187,000	$	146,000
2004	$	140,000	$	113,000	$	98,000	$	155,000

20

EXHIBIT INDEX

Exhibit	Description
3(a)	Certification of Incorporation, 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)	By-Laws, as amended (incorporated by reference to Exhibit 3(b) to Form 10-Q for the period ended March 31, 2004, filed on May 13, 2004).
10(a)	1993 Stock Option Plan (incorporated by reference to the exhibits on Form S-8 Registration Statement filed on June 21, 1993-SEC File No. 333-121541).
10(b)	Employment Agreement, and Change in Control Agreements for Geoffrey D. Knapp, dated January 1, 1996, (incorporated by reference to Exhibits 10 (h) and (i) to the Form 10-Q for the period ended March 31, 1996, filed on May 7, 1996).
10(c)	Employment Agreement, and Change in Control Agreements for Paul Caceres, dated January 1, 1996, (incorporated by reference to Exhibits 10 (j) and (k) to the Form 10-Q for the period ended March 31, 1996, filed on May 7, 1996).
10(d)	Amendment to 1993 Stock Option Plan (incorporated by reference to the exhibits on Form S-8 Registration Statement filed on June 26, 1998 — SEC 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 New Office Lease Agreement (incorporated by reference to Exhibit 10(j) to the 2001 Annual Report on Form 10-K filed on December 20, 2001).
10(g)	Indemnity 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 Form 10-Q filed on August 12, 2005)
13(a)	Annual Report to Stockholders for the fiscal year ended September 30, 2006
23a	Consent and Report on Schedule of Independent Registered Public Accounting Firm
23b	Consent and Report on Schedule of Independent Registered Public Accounting Firm
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 of Chief Executive Officer and Chief Financial Officer 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.

21

EX-13.(A)

EXHIBIT 13(a)

Letter to Shareholders

Dear Shareholder,

I am happy to report that fiscal 2006 was another record year for our company. Pre-tax earnings increased by 53% as a result of a 63% increase in our X-Charge payment processing revenues. This part of our business was very strong, and was our largest revenue source in the last two quarters of the year, eclipsing system sales for the first time. While we can certainly be happy with our overall bottom line company performance, we could have done better. We continued to experience a shortfall in system sales in each quarter of the year, resulting in a decrease in system revenues of 14% year over year, even while overall revenues grew 9% to $27.2 million.

Below I will discuss the performance and outlook for the primary revenue drivers of our business. I would like to refer any new investors to the investor presentation on our website at camcommerce.com to get a better understanding of our business model. We update this presentation with current information with the release of each quarterly report.

System Sales
We have been working very hard to find the answer to getting our system revenues going in the right direction, and will continue to do so. There have been some fundamental changes in the market in regards to competition and pricing. Our lead flow appears to be fairly strong and we have a significant competitive advantage in important segments of the market, such as integrated e-commerce for brick and mortar retailers, that I feel we should be able to capitalize on. It is thus frustrating that we have not performed better recently in system sales. We are currently investing in re-loading and revitalizing our direct sales force, and at the same time adapting our expense structure to the market opportunity. We are totally committed to the systems portion of our business and it is important for our investors to understand that a large piece of our X-Charge revenues is tied to the retention of our system customers as is our service revenues. It is important that we continue to invest in our system business and to move forward, which we are doing. It is my expectation that we can hold system revenues flat or gain some small improvement in fiscal 2007, but then again I made the same prediction last year and did not accurately predict the 14% decline we experienced.

Service Revenue
Service revenues were relatively flat in fiscal 2006 as forecasted and should be similar in fiscal 2007. After more than 23 years in business, our system customer base has grown to a size that we are not able to add enough new service accounts to exceed those lost to normal attrition without an increase in system sales, resulting in the flat revenue trend.

X-Charge Payment Processing
In fiscal 2006, we saw X-Charge payment processing revenues over-take system revenues on a quarterly basis and it will certainly be our largest revenue source in fiscal 2007, barring some unforeseen event. X-Charge is our highest margin revenue and with the revenues being recurring, growth in this part of our business will have the greatest positive impact on our results. We have done a good job predicting our growth and building the X-Charge side of the business. We have excellent controls in place that will allow us to grow efficiently and effectively. We have a superior business model, which shows no signs of slowing down. We have more than 8,500 payment processing accounts representing approximately $2.5 billion in annual credit card transactions. Our net growth rate after attrition is currently in the $1 billion per year range in annual credit card transactions, representing a $4 million to $5 million annual growth rate in X-Charge revenues. Margins in payment processing revenues have remained consistent.

Future growth of our X-Charge payment processing revenues is not significantly tied to our system revenues. In the 4^th quarter of fiscal 2006, our reseller channel accounted for approximately 85% of the new X-Charge accounts we signed up. We continue to grow our reseller base, having added approximately 75 new resellers in fiscal 2006 for a total of more than 200 active resellers. My expectation is for similar results in this area in fiscal 2007. Please refer to graphs at the end of this letter for growth trend of X-Charge results.

During the year, we installed 4,020 new processing accounts, as compared to 3,072 in fiscal 2005. Thus, the rate at which we were able to add new accounts grew by 31% year over year. This was all the result of new resellers and some existing resellers that performed better in fiscal 2006 than in fiscal 2005. As the overall number of processing accounts grows, the number we lose each year to normal attrition will also grow even if our very low attrition rates continue to hold, due to the larger account

1

Letter to Shareholders cont.

base. Our attrition rates are much lower than the industry average, which is a direct result of our superior business model of providing integrated payment processing solutions. I am unaware of anyone in the payment processing business that does a better job of customer retention than we do.

In the past, I have stated that the best way for us to grow our X-Charge payment processing revenues and our company is by adding more resellers and helping the ones we have to be more successful. This continues to be true as we look forward and we are executing in these areas. I often get asked how big the potential market for resellers is and how far we think we can go. It is certainly a finite market and I am not sure we know how large it is as a result of the high level of fragmentation, but I think it is reasonable to say that our reseller base can at least double from here over the next 5 years. Whether it will or not remains to be seen.

Dividends and Cash Flow
We delivered on our promise to pay to shareholders 75% or more of our net profit in dividends. In fiscal 2006, $0.57 per share in dividends were declared. It is our intent to continue our dividend policy in fiscal 2007 and beyond.

One of the driving factors behind our dividend policy is our large cash position combined with our strong and predictable cash flow, which our Board determined was far more than adequate to fund any growth strategy we currently have in place. Our judgment was and is that further growing our cash balance does not benefit shareholders as much as returning the earnings to them, given the current low tax rates on dividend income. Our dividend policy also makes us fairly unique as a small growth company and has the added benefit of helping a small company like ours to stand out in the financial markets. With more than a year of dividend history behind us, we are starting to attract interest from investors who have taken notice of our strategy. Paying out the dividend in no way impacts our opportunities as a growth company. Yet even with paying the dividend, our cash position still grew by $2.6 million in fiscal 2006 to $23.7 million or $5.97 per outstanding share. While we are showing an expense for Federal income taxes, we did not have to pay those taxes in fiscal 2006 due to the utilization of net operating loss carry fowards.

Stock performance
Creating shareholder value is one of my top priorities. Our stock price opened fiscal 2006 at $17.75 per share and closed the year at $20.00 per share, which is a 12.7% increase for the year. When adding the dividend of $0.57 per share, our shareholders who owned the stock for the entire year realized a return of approximately 16%. My expectation was higher but 16% is not a bad return. When you consider that this follows years of 68%, 150% and 24% gains beginning in fiscal 2003, we have done a good job for shareholders the past 4 years. Not surprisingly, this correlates directly with the immergence of our X-Charge payment processing services.

Based on my assumptions of continued performance of our X-Charge payment processing revenues and no serious decline in our system revenues, I think we are well positioned to deliver another good year of shareholder value in fiscal 2007.

Our Identity
Who are we as a company? Are we a software and systems company or a payment processing company? Of course the answer is that we are both, but the financial markets view of us relates directly to our valuation. There is no question that, due to the more desirable business model, payment processing companies generally get higher valuations than a “business software and services” company, yet we are generally seen as the latter due to our history. It is my expectation and hope that in fiscal 2007 and beyond, as we clearly establish the payment processing piece of our business as the largest, that a change will take place in the financial markets as to who follows us and how we are viewed. I would also like to see the unique role that the systems portion of our business plays in supporting our business model on the payment processing side gain some recognition and be valued accordingly. It is one of my goals in fiscal 2007 to accomplish this.

Summary
We had a very good year, even if it could have been better. With each year that we can show solid improvement in establishing a history of producing results, we improve the attractiveness of our company in the market. I look forward to what I believe will be the continuation of that trend in fiscal 2007.

2

Letter to Shareholders cont.

As always, I would like to thank our hard working and dedicated CAM employees who make the extra effort for our customers and drive the success of our company.

All the best,

/s/ Geoff Knapp

Geoff Knapp
CEO & Chairman
CAM Commerce Solutions, Inc.

3

Management’s Discussion and Analysis of Financial Condition and Results of Operations (Unless otherwise indicated, all dollar figures in thousands except per share data)

Cautionary Statement

You should read the following discussion and analysis with our Audited 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 “Risk Factors” set forth in our Form 10-K Report, and similar discussions in our other SEC filings, discuss some of the important risk factors that may affect the business, results of operations, financial condition, and cash flows. You should carefully consider those risks, in addition to the other information in this Report and in our other filings with the SEC, before deciding to purchase, hold or sell our common stock.

All statements included or incorporated by reference in this Report, other than statements of historical fact, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are intended to be subject to the safe harbor provisions of such act. Examples of forward-looking statements include, but are not limited to, future competition and market conditions, new products, new system sales, statements concerning projected revenue, expenses, gross profit, gross margin and income, our accounting estimates, assumptions and judgments, the impact of our adoption of new rules on accounting for goodwill and other intangible assets, the future effectiveness of our expense and cost control and reduction efforts, the future market acceptance and performance of our products, implications of our lengthy sales cycle, and our future capital requirements. These forward-looking statements are based on our current expectations, 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,” 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, and we will not necessarily inform you of such changes. These statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, our actual results could differ materially and adversely from those expressed in any forward–looking statements as a result of various factors, some of which are set forth in “Risk Factors” in our Form 10-K Report. We undertake no obligation to revise or update publicly any forward-looking statement for any reason.

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 inventory management, point of sale, accounting, credit and debit card processing, Internet sales, gift card and customer loyalty programs, and extensive management reporting. Payment processing services are provided on a transaction based business model.

Our revenues are derived from systems sales, service and support payments, and payment processing fees through our X-Charge system, which represent approximately 41%, 20%, and 39%, respectively, of our fiscal 2006 revenues. Our customer base consists of small to medium size retailers located throughout the United States.

We provide integrated retailing and payment processing solutions for 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, that 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 turnkey systems, consisting of: CAM32, which is designed for hard goods retailers whose inventory is re-orderable in nature; Profit$, which is designed for apparel and shoe retailers whose inventory is seasonal in nature, and color and size oriented; Retail STAR, which is designed to incorporate multiple functions of both the CAM32 and Profit$ systems; Retail ICE, which is a single-user derivative of Retail STAR; and MicroBiz, which is designed for single-store, hard goods retailers that are generally smaller in size than customers that utilize the CAM32 system.

4

Management’s Discussion and Analysis of Financial Condition and Results of Operations (Unless otherwise indicated, all dollar figures in thousands except per share data)

Contracts and Commitments

During the twelve month period ended September 30, 2006, there were no material changes outside of our ordinary business in our long term debt, capital leases, operating leases, purchase obligations, or other long term obligations reflected on our balance sheet at September 30, 2006.

The following table summarizes payment obligations for long-term debt, capital leases, operating leases, purchase obligations and other long term obligations for future fiscal years.

	Payments Due By Period
			Less						More
			Than 1		1-3		3-5		Than 5
	Total		Year		Years		Years		Years
Long-term debt	$	—	$	—	$	—	$	—	$	—
Capital lease obligations		—		—		—		—		—
Operating leases		1,560		557		1,003		—		—
Purchase obligations		—		—		—		—		—
Other long term obligations		—		—		—		—		—
Total	$	1,560	$	557	$	1,003	$	—	$	—

Off Balance Sheet Arrangements
There are no off balance sheet items as of September 30, 2006.

Critical Accounting Policies and Estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires us 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 revenues 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, deferred income tax asset valuation allowances, accounting for share-based compensation related to Statement of Financial Accounting Standards No. 123R, Share Based Payments (“SFAS 123R”), 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 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 the consolidated financial statements:

Revenue Recognition
Our 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. We recognize revenue in accordance with Statement of Position 97-2 (SOP 97-2), “Software Revenue Recognition,” as amended and interpreted by Statement of Position 98-9, “Modification of SOP 97-2, Software Revenue Recognition, With Respect to Certain Transactions,” and Staff Accounting Bulletin No. 104 (SAB 104) “Revenue Recognition.” SAB 104 provides further interpretive guidance for public companies on the recognition, presentation, and disclosure of revenue in financial statements.

We derive revenue from the sale of computer hardware, licensing of computer software, post contract support (“PCS”), installation and training services, and payment processing services. System revenue from hardware sales and software licensing is recognized when a system purchase agreement has been signed, the hardware and software has been shipped, there are no uncertainties surrounding product acceptance, the pricing is fixed and determinable, and collection is considered probable. If a sales transaction contains an undelivered element, the vendor-specific objective evidence (“VSOE”) of fair value of the undelivered element is deferred and the revenue recognized once the element is delivered. The undelivered elements are primarily installation and training services. Revenue related to these services are deferred and recognized when the services have been provided. VSOE of fair value for installation and training services are based upon standard rates charged since those services are always sold separately. Installation and training services are separately priced, are generally available from other suppliers and not essential to the functionality of the software products. Payments for our hardware and software are typically due with an initial deposit payment upon signing the system purchase agreement, with

5

Management’s Discussion and Analysis of Financial Condition and Results of Operations (Unless otherwise indicated, all dollar figures in thousands except per share data)

the balance due upon delivery, although established relationship customers in good credit standing receive thirty day payment terms. VSOE of fair value for PCS is the price the customer is required to pay since it is sold separately. PCS services are billed on a monthly basis and recorded as revenue in the applicable month, or on an annual basis with the revenue being deferred and recognized ratably over the support period.

We recognize payment processing revenues in the period the service is performed. Revenues are estimated based on the accumulation of sufficient historical information required to analyze trends and formulate a reasonable estimate. The significant historical information required to formulate a reliable estimate are the total dollar volume of credit card transactions processed and the related revenue for these credit card transactions.

Receivables
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 relationship 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.

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 were 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.

Inventory
We write down inventory for estimated obsolescence equal to the difference between the cost of inventory and the estimated realizable value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory write-downs could be required. Historically, inventory write-downs have been minimal and within our expectations.

Capitalized Software
We capitalize costs incurred to develop new marketable software and enhance our existing systems software. Costs incurred in creating the software are 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.

Impairment of Intangible Assets
The value of our intangible assets could be impacted by future adverse changes such as (i) any future declines in our operating results, or (ii) any failure to meet our future performance projections. We evaluate these assets used in operations on an annual basis or more frequently if indicators of impairment exist. An annual impairment review is performed during the fourth quarter of each year or more frequently if indicators of impairment exist. In the process of the annual impairment review, we use the income approach methodology of valuation that includes both the undiscounted and discounted cash flow methods as well as other generally accepted valuation methodologies to determine the fair value of our assets. Significant management judgment is required in the forecast of future operating results that are used in the discounted cash flow method of valuation. The estimates used are consistent with the plans and estimates that we use to manage our business. It is reasonably possible, however, that certain of our products will not gain or maintain market acceptance, which could result in estimates of anticipated future net revenue differing materially from those used to assess the recoverability of these assets. In that event, revenue and cost forecasts will not be achieved, and we could incur impairment charges.

Deferred Taxes
We utilize the liability method of accounting for income taxes as set forth in Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (SFAS 109). Prior to 2004, we recorded a valuation allowance to reduce our deferred tax assets to the amount that we believed was more likely than not to be realized. During 2004, the valuation allowance was reversed based on our belief that sufficient future income from operations is expected to be able to recognize the net deferred tax assets. In assessing the need for a valuation allowance, we consider all positive and negative evidence, including projected future taxable income, and recent financial performance.

6

Management’s Discussion and Analysis of Financial Condition and Results of Operations (Unless otherwise indicated, all dollar figures in thousands except per share data)

Results of Operations

The following table summarizes the fluctuation analysis of results of our operations for fiscal 2006 compared with fiscal 2005.

	Years Ended September 30,						Variance
	2006			2005			Amount			%
Net hardware, software and installation revenues	$	11,199		$	13,006		$	(1,807	)		(14	%)
Net service revenues		5,324			5,374			(50	)		(1	%)
Net payment processing revenues		10,689			6,556			4,133			63	%
Total net revenues		27,212			24,936			2,276			9	%
Cost of hardware, software and installation		5,967			6,580			(613	)		(9	%)
Cost of service revenues		2,465			2,276			189			8	%
Cost of payment processing revenues		533			422			111			26	%
Total cost of revenues		8,965			9,278			(313	)		(3	%)
Selling, general and administrative expenses		13,393			11,993			1,400			12	%
Research and development expenses		1,537			1,417			120			8	%
Interest income		(969	)		(559	)		410			73	%
Total costs and expenses		22,926			22,129			797			4	%
Income before provision for income taxes		4,286			2,807			1,479			53	%
Provision for income taxes		1,639			1,033			606			59	%
Net income	$	2,647		$	1,774		$	873			49	%
Gross margin on hardware, software and installation revenues		47	%		49	%
Gross margin on service revenues		54	%		58	%
Gross margin on payment processing revenues		95	%		94	%
Gross margin on total net revenues		67	%		63	%

The following table summarizes the fluctuation analysis of results of our operations for fiscal 2005 compared with fiscal 2004.

	Years Ended September 30,						Variance
	2005			2004			Amount			%
Net hardware, software and installation revenues	$	13,006		$	14,420		$	(1,414	)		(10	%)
Net service revenues		5,374			5,541			(167	)		(3	%)
Net payment processing revenues		6,556			3,673			2,883			78	%
Total net revenues		24,936			23,634			1,302			6	%
Cost of hardware, software and installation		6,580			7,015			(435	)		(6	%)
Cost of service revenues		2,276			2,097			179			9	%
Cost of payment processing revenues		422			224			198			88	%
Total cost of revenues		9,278			9,336			(58	)		(1	%)
Selling, general and administrative expenses		11,993			10,872			1,121			10	%
Research and development expenses		1,417			1,446			(29	)		(2	%)
Interest income		(559	)		(361	)		198			55	%
Total costs and expenses		22,129			21,293			836			4	%
Income before provision for income taxes		2,807			2,341			466			20	%
Provision for income taxes		1,033			100			933			933	%
Net income	$	1,774		$	2,241		$	(467	)		(21	%)
Gross margin on hardware, software and installation revenues		49	%		51	%
Gross margin on service revenues		58	%		62	%
Gross margin on payment processing revenues		94	%		94	%
Gross margin on total net revenues		63	%		61	%

7

Management’s Discussion and Analysis of Financial Condition and Results of Operations (Unless otherwise indicated, all dollar figures in thousands except per share data)

Significant Trends
Pre-tax earnings for fiscal year ended September 30, 2006 was a record at $4,286, a 53% increase over last fiscal year. Pre-tax profit margin for the fiscal year was also a record at 16%. The continued growth in recurring, high margin X-Charge payment processing revenues was the primary contribution of these results. X-Charge payment processing revenues increased over $4,000, or 63%, compared to last fiscal year. For the last two quarters of fiscal 2006, X-Charge payment processing revenues have been our largest revenue source, out performing our system revenues for the first time. This trend is expected to continue. We are continuing to add new processing accounts every quarter. During fiscal 2006, we installed a record 4,020 new X-Charge accounts, which was a 31% increase from fiscal 2005. As of September 30, 2006, we had over 8,500 merchant accounts that are generating X-Charge revenues. A large percentage of our new processing accounts are signed on through our reseller channel. We are continuing to grow our reseller base. At the end of fiscal 2006, we had 275 resellers who had active processing accounts earning residuals, which was an increase of 75 resellers during the year.

We had a shortfall in system sales again this year. Our system revenues for fiscal 2006 declined 14%, in comparison to last fiscal year. We have been working hard to reverse this downward trend. We are continuing to evaluate our marketing strategies and are currently investing in training programs and increasing our direct sales force.

Service revenues for fiscal 2006 were relatively flat, compared to fiscal 2005. During the year, we added new support contracts and new web hosting accounts, however these were not enough to offset the cancellations caused by the decline in new system sales. We expect to see service revenues for fiscal 2007 to be consistent with fiscal 2006.

Results of Operations
Fiscal 2006 Compared with Fiscal 2005
Net revenues
Net revenues for the fiscal year ended September 30, 2006 increased 9% to $27,212, compared to $24,936 for fiscal year 2005. This increase consisted of a 63% increase in X-Charge payment processing revenues, a 14% decrease in system revenues, and a 1% decrease in service revenues from fiscal 2005 to fiscal 2006. The significant increase in payment processing revenues resulted from an increase in X-Charge processing sign-ups contributed primarily from the successful reseller channel program. The decrease in system revenues was due to a decline in sales to both new and existing customers. Service revenues were relatively flat as a result of new support contracts sold and an increase in i.Star web hosting revenues offset by support contract cancellations and a loss of a high-dollar support contract, which occurred in the second quarter of fiscal 2005.

Gross margin
Gross margin on net revenues for the twelve months ended September 30, 2006 increased to 67%, compared to 63% for the same period of last fiscal year. Gross margin on payment processing revenues for fiscal 2006 was relatively flat at 95%, compared to 94% for fiscal 2005. We generate the highest margins from payment processing revenues due to low cost structure. Gross margin on system and service revenues for the fiscal year ended September 30, 2006 decreased slightly to 47% and 54%, respectively, compared to 49% and 58%, respectively, for the same period of 2005. The decrease in gross margin on system revenues was primarily due to a decrease in software sales. Gross margin on service revenues decreased as a result of an increase in labor costs.

Selling, General and Administrative Expenses
Selling, general, and administrative expenses consist primarily of salaries, sales commissions, employee benefits, marketing, advertising and tradeshow expenses, facilities expense, telephone, travel, insurance, and depreciation expense. Selling, general and administrative expenses expressed as a percentage of net revenues increased slightly to 49% for the fiscal year ended September 30, 2006 as compared to 48% for the same period of 2005. Selling, general and administrative expenses for the fiscal year ended September 30, 2006 increased to $13,393, compared to $11,993 for the fiscal year ended September 30, 2005. The increase was mainly attributable

8

Management’s Discussion and Analysis of Financial Condition and Results of Operations (Unless otherwise indicated, all dollar figures in thousands except per share data)

to higher X-Charge commissions paid on higher payment processing revenues and an increase in salaries for the additional headcount in administrative and sales personnel needed for X-Charge payment processing growth. X-Charge commission expense is expected to continue to increase, correlating to the expected increase in payment processing revenues generated from the growth of our reseller base.

Research and Development Expense

Research and development expense consists primarily of salaries and related costs of employees engaged in design, development, and quality assurance activities to develop new software products and to enhance existing software products. Research and development expense for fiscal 2006 increased to $1,537, compared to $1,417 for the fiscal year ended September 30, 2005. This increase was due to the lower rate of software capitalization.

Interest Income

Interest income reflects interest earned on average cash and cash equivalents and marketable available-for-sale debt securities. Interest income for the fiscal year ended September 30, 2006 was $969, a 73% increase, compared to $559 for the fiscal year ended September 30, 2005. The increase resulted primarily from an increase in invested cash balances and higher yields.

Income Taxes

The effective tax rate for the fiscal year ended September 30, 2006 was 38% compared to 37% for the prior fiscal year. The higher effective tax rate was due to the non-renewal of the R&D credit by congress in 2006.

Liquidity and Capital Resources

Our cash and cash equivalent plus marketable securities increased $2,590 to $23,653 at September 30, 2006, compared to $21,063 on September 30, 2005. The increase resulted primarily from cash provided from operations. During the twelve months ended September 30, 2006, we generated $3,800 from operations, expended $511 for fixed assets and capitalized software development, used $8,700 for marketable securities investments and $2,028 for dividend payments, and received $5,562 from maturity of investments and $594 from the proceeds of stock options exercised, compared to the twelve months ended September 30, 2005, in which $3,655 was generated from operations, $632 was used for fixed assets and capitalized software development, $4,311 was used for marketable securities investments, $100 was received from maturity of investments and $360 was received from the proceeds of stock options exercised.

At September 30, 2006 cash and cash equivalents plus marketable securities made up 87% of our total current assets. Our current ratio at September 30, 2006 was 7.2.

In August 2005, the Board of Directors approved a new dividend policy, which pays stockholders a variable dividend based on the quarterly results. During the twelve months ended September 30, 2006, the Board of Directors declared the following dividends:

	Per
Declaration	Share		Record		Total		Payment
Date	Dividend		Date		Amount		Date
11/16/05	$	0.14		01/03/06	$	541		01/12/06
02/14/06	$	0.14		04/04/06	$	549		04/14/06
05/02/06	$	0.14		07/05/06	$	553		07/14/06
08/08/06	$	0.15		10/05/06	$	594		10/16/06

We did not pay dividends for quarterly results prior to the third quarter of fiscal 2005.

The decision to pay a dividend will be 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.

We have no significant commitments for expenditures. Management believes our existing working capital, coupled with funds generated from our operations will be sufficient to fund its presently anticipated working capital requirements for the foreseeable future.

Inflation has had no significant impact on our operations.

9

Management’s Discussion and Analysis of Financial Condition and Results of Operations (Unless otherwise indicated, all dollar figures in thousands except per share data)

Results of Operations
Fiscal 2005 Compared with Fiscal 2004

Net Revenues

Net revenues for the fiscal year ended September 30, 2005 increased 6% to $24.9 million, compared to $23.6 million for fiscal year 2004. This consisted of a 78% increase in X-Charge payment processing revenues, a 10% decrease in system revenues, and a 3% decrease in service revenues. The significant increase in payment processing revenues resulted from an increase in X-Charge processing sign-ups contributed primarily from our reseller channel program. The decrease in system revenues was due to a decrease in both new system sales and peripheral hardware sales. Service revenues decreased mainly due to the loss of our single large support contract.

Gross Margin

Gross margin for the twelve months ended September 30, 2005 was 63% compared to 61% for the same period last year. Gross margin for payment processing revenues for fiscal 2005 was flat at 94%, compared to fiscal 2004. We generate the highest margins from payment processing revenues due to our low cost structure. Gross margin on system and service revenues for the fiscal year ended September 30, 2005 decreased slightly to 49% and 58%, respectively, compared to 51% and 62%, respectively, for the same period of 2004.

Selling, General and Administrative Expenses

Selling, general, and administrative expenses consist primarily of salaries, sales commissions, employee benefits, marketing, advertising and tradeshow expenses, facilities expense, telephone, travel, insurance, and depreciation expense. Selling, general and administrative expenses expressed as a percentage of net revenues increased to 48% for the fiscal year ended September 30, 2005 as compared to 46% for the same period of 2004. Selling, general and administrative expenses for the fiscal year ended September 30, 2005 totaled $11,993 as compared to $10,872 for the fiscal year ended September 30, 2004. The increase was attributable to higher X-Charge commissions paid on higher payment processing revenues and higher consulting fees paid for an accounting system upgrade.

Research and Development Expense

Research and development expense consists primarily of salaries and related costs of employees engaged in design, development, and quality assurance activities to develop new software products and to enhance existing software products. Research and development expense for fiscal 2005 decreased to $1,417, in comparison to $1,446 for the fiscal year ended September 30, 2004. The decrease was due to lower capitalizable payroll expense.

Interest Income

Interest income reflects interest earned on average cash and cash equivalents and marketable available-for-sale debt securities. Interest income for the fiscal year ended September 30, 2005 was $559, a 55% increase, compared to $361 for the fiscal year ended September 30, 2004. The increase resulted primarily from an increase in invested cash balances and higher yields.

Income Taxes

Provision for state and federal income taxes for fiscal year 2005 was $1,033, compared to $100 for the fiscal year ended September 30, 2004. The provision for fiscal year 2004 was less than the statutory rate due to the utilization of net loss carryforwards and the reversal of our valuation allowance.

Liquidity and Capital Resources

Our cash and cash equivalent plus marketable securities totaled $21,063 at September 30, 2005, compared to $17,700 on September 30, 2004. During the twelve months ended September 30, 2005, we generated $3,655 from operations, expended $632 for fixed assets and capitalized software development, used $4,311 for marketable securities investments, and received $100 from maturity of bond investments and $360 from the proceeds of stock options exercised, compared to the twelve months ended September 30, 2004, in which $3,311 was generated from operations, $569 was used for fixed assets and capitalized software development, $1,100 was used for marketable securities investments, $1,511 was received from maturity of investments and $2,549 was received from the proceeds of stock options and warrants exercised.

On August 3, 2005, the Board of Directors authorized a new dividend policy, which pays stockholders a variable dividend based on the quarterly results. On October 14, 2005, we paid a dividend of approximately $385 ($0.10 per common share) to stockholders of record on October 3, 2005 for June quarter results. For September quarter results, the Board of Directors declared a dividend of $0.14 per common share, payable on January 12, 2006 to stockholders of record on January 3, 2006. We did not pay dividends in the prior fiscal years.

At September 30, 2005 cash and cash equivalents plus marketable securities made up 86% of our total current assets. Our current ratio at September 30, 2005 was 6.2.

10

Management’s Discussion and Analysis of Financial Condition and Results of Operations (Unless otherwise indicated, all dollar figures in thousands except per share data)

Related Party Transactions

We lease the office building located in Nevada from our Chief Executive Officer. The lease has a ten-year term and will expire on May 31, 2007. The payment due for the lease for fiscal year 2007 is $111.

Recently Issued Accounting Pronouncements

In June 2006, the Financial Accounting Standards Board (the “FASB”) issued FASB Interpretation No. 48, Accounting for Income Tax Uncertainties, an interpretation of FASB Statement No. 109 (“FIN 48”). FIN 48 clarifies the accounting for income tax uncertainties and defines the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. FIN 48 also prescribes a two-step approach for evaluating tax positions and requires expanded disclosures at each interim and annual reporting period. FIN 48 is effective for fiscal years beginning after December 15, 2006 and will require that differences between the amounts recognized in the statements of financial position prior to the adoption of FIN 48 and the amounts reported after adoption are to be accounted for as cumulative-effect adjustments to beginning retained earnings. We plan to adopt FIN 48 in the first quarter of fiscal 2008 and are currently evaluating the impact on our financial statements.

In September 2006, the SEC staff issued Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”). SAB 108 provides interpretive guidance on how the effects of the carryover or reversal of prior year misstatements should be considered in quantifying a current year misstatement. The SEC staff has stated that registrants should quantify errors using both a balance sheet and income statement approach and evaluate whether either approach results in quantifying a misstatement that, when all relevant quantitative and qualitative factors are considered, is material. SAB 108 will be effective for fiscal years ending on or after November 15, 2006. We will be required to adopt SAB 108 in the first quarter of fiscal 2007. We do not expect that SAB 108 will have a material impact on our financial condition, results of operations, or cash flows.

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. SFAS 157 is effective for fiscal years beginning after November 15, 2007. We 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 June 2006, the FASB ratified the consensus reached in EITF Issue No. 06-3, “How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross versus Net Presentation).” EITF 06-3 is effective in interim and annual periods beginning after December 15, 2006. The scope of this issue includes any tax assessed by a governmental authority that is imposed concurrently on a specific revenue-producing transaction between seller and a customer. The Board requires the amount of those taxes that is recognized on a gross basis (included in revenues and cost) in interim and annual financial statements for each period for which an income statement is presented to be disclosed if those amounts are significant. We currently and will continue to present sales taxes on a net basis (excluded from revenues) in our income statement.

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 our present or future financial statements.

Adoption of SFAS 123R

Effective October 1, 2005, we adopted SFAS 123R. Prior to October 1, 2005, we followed the disclosure-only provisions of SFAS No. 123, “Accounting for Stock-Based Compensation” (SFAS 123), as amended by SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure,” and, accordingly, accounted for our stock-based compensation plans using the intrinsic value method under Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”) and related interpretations. 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. We elected to utilize the modified prospective method for the transition to SFAS 123R. Under the modified prospective method, SFAS 123R applies to all awards granted or modified after the date of adoption. In addition, under the modified prospective method, compensation expense will be recognized for all stock-based compensation awards granted prior to, but not yet vested as of October 1, 2005, based on grant-date fair values estimated in accordance with the

11

Management’s Discussion and Analysis of Financial Condition and Results of Operations (Unless otherwise indicated, all dollar figures in thousands except per share data)

original provisions of SFAS 123. In accordance with the modified prospective method of transition to SFAS 123R, prior periods were not restated to reflect the impact of adopting the new standard.

Under SFAS 123, we based our expense calculation for the stock compensation pro forma footnote disclosure on actual forfeitures; however, SFAS 123R requires an estimate of forfeitures be used in the calculation. Upon adoption of SFAS 123R, we changed our methodology to include an estimate of forfeitures.

The adoption of SFAS 123R did not have a significant impact on our financial position or our results of operations.

Share-based compensation expense of $172 and the related tax benefits of $66 were recognized in the Statement of Income for the fiscal year ended September 30, 2006 as required by our adoption of SFAS 123R. As a result of the requirements of SFAS 123R adoption, income before income taxes and net income decreased $172 and $106, respectively. The impact of share-based compensation on both basic and diluted earnings per share for the twelve-month period was $0.02. In addition, in connection with the adoption of SFAS 123R, net cash provided by operations decreased and net cash provided by financing activities increased in the twelve months of fiscal 2006 by $716 related to excess tax benefits from share-based payment arrangements.

At September 30, 2006, there was $233 of total unrecognized compensation cost related to unvested stock options. This cost is expected to be recognized over a weighted-average period of approximately 1.5 years.

The impact of adoption of SFAS 123R is discussed in further detail under the subheading “Shared-Based Compensation” in the Notes to Financial Statements.

12

Balance Sheets (In thousands, except per share data)

	September 30,
	2006			2005
Assets
Current assets:
Cash and cash equivalents	$	15,196		$	15,763
Marketable available-for-sale securities		8,457			5,300
Accounts receivable, net of an allowance for doubtful accounts of $154 in 2006 and $146 in 2005		1,936			1,930
Inventories		391			306
Deferred income taxes — short term		991			1,188
Other current assets		138			132
Total current assets		27,109			24,619
Deferred income taxes — long term		56			714
Property and equipment, net		484			610
Intangible assets, net		445			467
Other assets		51			51
Total assets	$	28,145		$	26,461
Liabilities & Stockholders’ Equity
Current liabilities:
Accounts payable	$	301		$	445
Accrued compensation and related expenses		1,255			1,154
Deferred service revenue and customer deposits		1,499			1,728
Cash dividends payable		594			385
Other accrued liabilities		103			260
Total current liabilities		3,752			3,972
Commitments and contingencies (note 4)
Stockholders’ equity:
Common stock, $.001 par value, 12,000 shares authorized, 3,961 shares issued and outstanding in 2006 and 3,846 shares in 2005		4			4
Paid-in capital in excess of par value		21,634			20,152
Accumulated other comprehensive loss		(6	)		(18	)
Retained earnings		2,761			2,351
Total stockholders’ equity		24,393			22,489
Total liabilities and stockholders’ equity	$	28,145		$	26,461

See accompanying notes.

13

Statements of Income (In thousands, except per share data)

	Years Ended September 30,
	2006			2005			2004
Revenues
Net hardware, software and installation revenues	$	11,199		$	13,006			$	14,420
Net service revenues		5,324			5,374				5,541
Net payment processing revenues		10,689			6,556				3,673
Total net revenues		27,212			24,936				23,634
Costs and Expenses
Cost of hardware, software and installation(1)		5,967			6,580				7,015
Cost of service revenues(1)		2,465			2,276				2,097
Cost of payment processing revenues		533			422				224
Total cost of revenues		8,965			9,278				9,336
Selling, general and administrative expenses(1)(2)		13,393			11,993				10,872
Research and development expenses (1)		1,537			1,417				1,446
Interest income		(969	)		(559	)			(361	)
Total costs and expenses		22,926			22,129				21,293
Income before taxes		4,286			2,807				2,341
Provision for income taxes		1,639			1,033				100
Net income	$	2,647		$	1,774			$	2,241
Basic net income per share	$	0.68		$	0.46			$	0.63
Diluted net income per share	$	0.64		$	0.44			$	0.57
Shares used in computing basic net income per share		3,906			3,817				3,543
Shares used in computing diluted net income per share		4,154			4,045				3,937
Cash dividends declared per common share	$	0.57		$	0.10			$	—

⁽¹⁾ Includes stock-based employee compensation expense as follows:

Cost of hardware, software and installation revenues	$	16	$	—	$	—
Cost of service revenues	$	22	$	—	$	—
Selling, general, and administrative expenses	$	99	$	—	$	—
Research and development expenses	$	35	$	—	$	—

⁽²⁾ Includes $164, $158, and $154 for the twelve months ended September 30, 2006, 2005, and 2004, respectively, for building rent to a related party, Geoff Knapp, officer and director of CAM Commerce Solutions, Inc.

See accompanying notes.

14

Statements of Cash Flows (In thousands)

	Years Ended September 30,
	2006			2005			2004
Operating activities:
Net income	$	2,647		$	1,774		$	2,241
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		659			873			869
Provision for doubtful accounts		37			178			113
Change in deferred income taxes		848			507			100
Income tax deduction from excercise of stock options		—			464			—
Share-based compensation		172			—			—
Excess tax benefits from share-based payment arrangements		(716	)		—			—
Changes in operating assets and liabilities:
Accounts receivable		(43	)		(189	)		(818	)
Inventories		(85	)		55			(89	)
Other current assets		(6	)		5			(35	)
Other assets		—			29			225
Accounts payable		(144	)		(105	)		32
Accrued compensation and related expenses		101			61			406
Deferred service revenue and customer deposits		(229	)		100			173
Other accrued liabilities		559			(97	)		94
Cash provided by operating activities		3,800			3,655			3,311
Investing activities:
Purchase of property and equipment		(240	)		(343	)		(290	)
Capitalized software		(271	)		(289	)		(279	)
Purchase of marketable securities		(8,700	)		(4,311	)		(1,100	)
Proceeds from maturity of marketable securities		5,562			100			1,511
Cash used in investing activities		(3,649	)		(4,843	)		(158	)
Financing activities:
Proceeds from exercise of stock options and warrants		594			360			2,549
Excess tax benefits from share-based payment arrangements		716			—			—
Dividends paid on common stock		(2,028	)		—			—
Cash provided by (used in) financing activities		(718	)		360			2,549
Net increase (decrease) in cash and cash equivalents		(567	)		(828	)		5,702
Cash and cash equivalents at beginning of year		15,763			16,591			10,889
Cash and cash equivalents at end of year	$	15,196		$	15,763		$	16,591

See accompanying notes.

15

Statements of Stockholders’ Equity
Years Ended September 30, 2006, 2005, and 2004 (In thousands)

							Accumulated
							other			Retained
					Capital in		compre-			Earnings
	Common Stock				excess of par		hensive			(accumulated
	Shares		Amount		value		income (loss)			deficit)			Total
Balance at September 30, 2003		3,253	$	3	$	14,271	$	23		$	(1,279	)	$	13,018
Issuance of common stock upon exercise of stock options		501		1		2,548		—			—			2,549
Tax benefit from exercise of stock options		—		—		2,509		—			—			2,509
Net income		—		—		—		—			2,241			2,241
Other comprehensive loss:
Net unrealized loss on marketable securities		—		—		—		(21	)		—			(21	)
Comprehensive income														2,220
Balance at September 30, 2004		3,754		4		19,328		2			962			20,296
Issuance of common stock upon exercise of stock options		92		—		360		—			—			360
Tax benefit from exercise of stock options		—		—		464		—			—			464
Dividends declared		—		—		—		—			(385	)		(385	)
Net income		—		—		—		—			1,774			1,774
Other comprehensive loss:
Net unrealized loss on marketable securities		—		—		—		(20	)		—			(20	)
Comprehensive income														1,754
Balance at September 30, 2005		3,846		4		20,152		(18	)		2,351			22,489
Issuance of common stock upon exercise of stock options		115		—		594		—			—			594
Tax benefit from exercise of stock options		—		—		716		—			—			716
Dividends declared		—		—		—		—			(2,237	)		(2,237	)
Share-based compensation		—		—		172		—			—			172
Net income		—		—		—		—			2,647			2,647
Other comprehensive income:
Net unrealized gain on marketable securities		—		—		—		12			—			12
Comprehensive income														2,659
Balance at September 30, 2006		3,961	$	4	$	21,634	$	(6	)	$	2,761		$	24,393

See accompanying notes.

16

Notes to Financial Statements
September 30, 2006 (In thousands, except per share data)

1. Summary of significant accounting policies

Organization, business, and presentation

CAM Commerce Solutions Inc., (“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 the company’s open architecture software. These integrated solutions include inventory management, point of sale, accounting, credit and debit card processing, Internet sales, gift card and customer loyalty programs, and extensive management reporting. Payment processing services are provided on a transaction based business model.

Cash equivalents

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

Marketable securities

All investment securities are considered to be available-for-sale and are carried at fair value. Management determines the classification at the time of purchase and re-evaluates its appropriateness at each balance sheet date. The Company’s marketable securities at September 30, 2006 consisted of debt instruments that bear interest at various rates and mature in two years or less. The gross unrealized losses on securities available-for-sale at September 30, 2006 and 2005 were $(10) and $(29), respectively. There were no realized gains (losses) for the three years ended September 30, 2006, 2005 and 2004. Amortized cost of the Company’s marketable securities at September 30, 2006 and 2005 were $8,350 and $5,274, respectively.

Fair value of financial instruments

The Company’s financial instruments consist principally of cash and cash equivalents, marketable securities, accounts receivable and accounts payable. The Company believes all of the financial instruments’ recorded values approximated their fair values at September 30, 2006 and 2005.

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 relationship 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 receivable 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, based on assessment of the collectibility of specific accounts, the aging of accounts receivable, and the Company’s history of bad debts.

Concentrations of credit risk

The Company sells its products primarily to small to medium size retailers located domestically. 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 determined on a first-in, first-out basis, or net realizable value, and are composed of finished goods electronic point of sale hardware and computer equipment used in the sale and service of the Company’s products.

Property and equipment

Property and equipment is stated at cost and is composed of the following:

	September 30,
	2006		2005
Computer equipment and furniture	$	1,978	$	1,752
Automobiles		38		38
Demonstration and loaner equipment		106		92
		2,122		1,882
Less accumulated depreciation		1,638		1,272
	$	484	$	610

Depreciation is provided on the straight-line method over the estimated useful lives (primarily three to five years) of the respective assets. Depreciation expense for the years ended September 30, 2006, 2005, and 2004 was $366, $371, and $359, respectively.

Long–lived assets

The Company records impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of those assets.

17

Notes to Financial Statements
September 30, 2006 (In thousands, except per share data)

During the quarter ended September 30, 2006, the Company performed a review for impairment of all long-lived assets. Based on its evaluation, the Company believes no impairment exists related to long-lived assets at September 30, 2006.

Use of estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States 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, deferred income tax asset valuation allowances, accounting for share-based compensation related to SFAS 123R, 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 estimates and the actual results, future results of operations will be affected.

Revenue recognition policy

The Company’s revenue recognition policy is significant because revenue is a key component of results of operations. In addition, revenue recognition determines the timing of certain expenses such as commissions. Specific guidelines are followed to measure revenue, although certain judgments affect the application of our revenue policy. The Company recognizes revenue in accordance with Statement of Position 97-2 (SOP 97-2), “Software Revenue Recognition,” as amended and interpreted by Statement of Position 98-9, “Modification of SOP 97-2, Software Revenue Recognition, With Respect to Certain Transactions,” and Staff Accounting Bulletin No. 104 (SAB 104) “Revenue Recognition.” SAB 104 provides further interpretive guidance for public companies on the recognition, presentation, and disclosure of revenue in financial statements.

The Company derives revenue from the sale of computer hardware, licensing of computer software, post contract support (“PCS”), installation and training services, and payment processing services. System revenue from hardware sales and software licensing is recognized when a system purchase agreement has been signed, the hardware and software has been shipped, there are no uncertainties surrounding product acceptance, the pricing is fixed and determinable, and collection is considered probable. If a sales transaction contains an undelivered element, the vendor-specific objective evidence (“VSOE”) of fair value of the undelivered element is deferred and the revenue recognized once the element is delivered. The undelivered elements are primarily installation and training services. Revenue related to these services are deferred and recognized when the services have been provided. VSOE of fair value for installation and training services is based upon standard rates charged since those services are always sold separately. Installation and training services are separately priced, are generally available from other suppliers and not essential to the functionality of the software products. Payments for the Company’s hardware and software are typically due with an initial deposit payment upon signing the system purchase agreement, with the balance due upon delivery, although established relationship customers in good credit standing receive thirty day payment terms. VSOE of fair value for PCS is the price the customer is required to pay since it is sold separately. PCS services are billed on a monthly basis and recorded as revenue in the applicable month, or on an annual basis with the revenue being deferred and recognized ratably over the support period.

The Company recognizes payment processing revenues in the period the service is performed. Revenues are estimated based on the accumulation of sufficient historical information required to analyze trends and formulate a reasonable estimate. The significant historical information required to formulate a reliable estimate are the total dollar volume of credit card transactions processed and the related revenue for these credit card transactions.

18

Notes to Financial Statements
September 30, 2006 (In thousands, except per share data)

Per share information

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 and warrants assuming conversion under the treasury stock method. Common equivalent shares are excluded from diluted income per share if their effect is anti-dilutive. For the fiscal year ended September 30, 2004, there were 92 options and 175 warrants excluded from the computation because their effect was anti-dilutive. For the fiscal years ended September 30, 2006 and 2005, there were no options and warrants excluded from the computation. All warrants expired in fiscal 2005.

The computation of basic and diluted earnings per share for the three years ended September 30, 2006, 2005, and 2004 is as follows:

	Years Ended September 30,
	2006		2005		2004
Numerator:
Net income for basic and diluted net income per share	$	2,647	$	1,774	$	2,241
Denominator:
Weighted-average shares outstanding		3,906		3,817		3,543
Denominator for basic net income per share – weighted-average shares		3,906		3,817		3,543
Effect of dilutive securities:
Stock options and warrants		248		228		394
Denominator for diluted net income per share – weighted-average shares and assumed conversions		4,154		4,045		3,937
Basic net income per share	$	0.68	$	0.46	$	0.63
Diluted net income per share	$	0.64	$	0.44	$	0.57

Advertising

The Company expenses the costs of advertising as incurred. Advertising expenses for the years ended September 30, 2006, 2005, and 2004 were $593, $550 and $654, respectively.

Shipping and handling

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

Dividends Declared

In August 2005, the Board of Directors approved a new dividend policy, which pays stockholders a variable dividend based on the quarterly results. During the twelve months ended September 30, 2006, the Board of Directors declared the following dividends:

Declar-	Per						Pay-
ation	Share		Record		Total		ment
Date	Dividend		Date		Amount		Date
11/16/05	$	0.14		01/03/06	$	541		01/12/06
02/14/06	$	0.14		04/04/06	$	549		04/14/06
05/02/06	$	0.14		07/05/06	$	553		07/14/06
08/08/06	$	0.15		10/05/06	$	594		10/16/06

The Company did not pay dividends for quarterly results prior to the third quarter of fiscal 2005.

The decision to pay a dividend will be 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.

Segments

The Company separately discloses its principal operations in accordance with SFAS No. 131, “Disclosure about Segments of an Enterprise and Related Information.” The Company classifies its business operations into three segments: 1) Hardware, software and installation; 2) Service; and 3) Payment processing. Net revenues and the related cost of revenues by segment are as disclosed on the accompanying Statement of Income. The Company does not allocate selling, general and administrative or research and

19

Notes to Financial Statements
September 30, 2006 (In thousands, except per share data)

development expenses, including depreciation and amortization, to segments nor are there any segment reconciling items between the amounts reported on the Statement of Income and income before taxes. In addition, the Company does not separately account for segment assets or liabilities.

Net hardware, software, and installation revenues reported in financial statements include revenue for installation services of $1,585, $1,668 and $1,962 and sales of hardware and software product of $9,614, $11,338 and $12,458 for fiscal years 2006, 2005, and 2004, respectively.

Reclassifications

Certain reclassifications have been made to the fiscal 2005 and 2004 financial statements to conform with the fiscal 2006 presentation.

Recently issued accounting pronouncements

In June 2006, the Financial Accounting Standards Board (the “FASB”) issued FASB Interpretation No. 48, Accounting for Income Tax Uncertainties, an interpretation of FASB Statement No. 109 (“FIN 48”). FIN 48 clarifies the accounting for income tax uncertainties and defines the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. FIN 48 also prescribes a two-step approach for evaluating tax positions and requires expanded disclosures at each interim and annual reporting period. FIN 48 is effective for fiscal years beginning after December 15, 2006 and will require that differences between the amounts recognized in the statements of financial position prior to the adoption of FIN 48 and the amounts reported after adoption are to be accounted for as cumulative-effect adjustments to beginning retained earnings. The Company plans to adopt FIN 48 in the first quarter of fiscal 2008 and management is currently evaluating the impact on the financial statements.

In September 2006, the SEC staff issued Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”). SAB 108 provides interpretive guidance on how the effects of the carryover or reversal of prior year misstatements should be considered in quantifying a current year misstatement. The SEC staff has stated that registrants should quantify errors using both a balance sheet and income statement approach and evaluate whether either approach results in quantifying a misstatement that, when all relevant quantitative and qualitative factors are considered, is material. SAB 108 will be effective for fiscal years ending on or after November 15, 2006. The Company will be required to adopt SAB 108 in the first quarter of fiscal 2007. The Company does not expect that SAB 108 will have a material impact on its financial condition, results of operations, or cash flows.

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. SFAS 157 is effective for fiscal years beginning after November 15, 2007. 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 June 2006, the FASB ratified the consensus reached in EITF Issue No. 06-3, “How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross versus Net Presentation).” EITF 06-3 is effective in interim and annual periods beginning after December 15, 2006. The scope of this issue includes any tax assessed by a governmental authority that is imposed concurrently on a specific revenue-producing transaction between seller and a customer. The Board requires the amount of those taxes that is recognized on a gross basis (included in revenues and cost) in interim and annual financial statements for each period for which an income statement is presented to be disclosed if those amounts are significant. The Company currently and will continue to present sales taxes on a net basis (excluded from revenues) in our income statement.

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 our present or future financial statements.

2. Intangible assets

The Company capitalizes costs incurred to develop new marketable software and enhance the Company’s existing systems software. Costs incurred in creating the software are charged to expense when incurred as research and development until technological feasibility has been established through the development of a detailed program design. Once technological feasibility has been established, software production costs are capitalized and reported at the lower of amortized cost or net realizable value.

License agreements, capitalized software, and purchased intangible assets are amortized on the straight-line method over estimated useful lives ranging from three to five years.

20

Notes to Financial Statements
September 30, 2006 (In thousands, except per share data)

Amortization of capitalized software costs commence when the products are available for general release to customers.

Intangible assets are stated at cost and consist of the following:

	September 30,
	2006			2005
Capitalized software:
Gross carrying amount	$	3,827		$	3,556
Accumulated amortization		(3,382	)		(3,098	)
		445			458
Purchased intangible assets:
Gross carrying amount		843			843
Accumulated amortization		(843	)		(834	)
		—			9
Total intangible assets	$	445		$	467

During the current fiscal year, the Company capitalized $271 in software costs related to the CAM and Star products.

Amortization of capitalized software costs and purchased intangible assets, charged to cost of hardware, software and installation, and expense for the fiscal years ended September 30, 2006, 2005 and 2004, were $293, $501, and $508, respectively.

Amortization expense of intangible assets for the fiscal years ended September 30, 2007, 2008 and 2009 are estimated at $240, $149 and $56, respectively.

3. Income Taxes

The Company utilizes the liability method of accounting for income taxes whereby deferred taxes are determined based on differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the period in which the differences are expected to affect taxable income.

The provision for income taxes consists of the following:

	Years Ended September 30,
	2006		2005		2004
Current:
Federal	$	36	$	26	$	821
State		40		29		100
		76		55		921
Deferred:
Federal		1,339		797		(767	)
State		224		181		(54	)
		1,563		978		(821	)
Total provision	$	1,639	$	1,033	$	100

A reconciliation of taxes computed at the statutory federal income tax rate to income tax expense is as follows:

	Years Ended September 30,
	2006			2005			2004
Income tax at statutory rate	$	1,457		$	954		$	796
Increases (decreases) in taxes resulting from:
Change in valuation allowance		—			—			(821	)
Research and development tax credit		(4	)		(163	)		53
State income taxes, net of federal benefit		185			141			66
Meals and entertainment		3			4			6
Other, net		(2	)		97			—
Total provision	$	1,639		$	1,033		$	100

Deferred income taxes are recorded to reflect the tax consequences on future years of differences between the tax bases of assets and liabilities and their bases for financial reporting purposes. Temporary differences and net operating loss carryforwards which give rise to deferred tax assets and liabilities are as follows:

	September 30,
	2006			2005			2004
Deferred tax assets:
Accruals not currently deductible for tax	$	223		$	272		$	401
Non cash stock based compensation		65			—			—
Goodwill		142			155			127
Book depreciation in excess of tax depreciation		25			57			54
Tax credit carryforwards		713			667			476
Net operating loss carryforwards		59			937			1,583
Total deferred tax assets		1,227			2,088			2,641
Deferred tax liabilities:
Software costs capitalized		(180	)		(186	)		(232	)
Net deferred tax asset	$	1,047		$	1,902		$	2,409
Current deferred tax asset	$	991		$	1,188		$	1,629
Non-current deferred tax asset		56			714			780
Net deferred tax asset	$	1,047		$	1,902		$	2,409

Income taxes paid were $111, $36, and $27 during the fiscal years ended September 30, 2006, 2005 and 2004, respectively.

21

Notes to Financial Statements
September 30, 2006 (In thousands, except per share data)

At September 30, 2006, federal and state net operating loss carryforwards were $20 and $820, respectively. Federal net operating loss carryforwards begin to expire in 2020, while state net operating loss carryforwards begin to expire in 2007. The Company has federal and state tax credits of $710 and $3 respectively, that can be carried forward indefinitely until fully utilized.

At September 30, 2004, the Company had net deferred tax assets of $2,409. During 2004, a valuation allowance was reversed based upon management’s determination that the assets are more likely than not to be realized as a result of recent operating profitability and anticipated operating profits from future operations.

4. Commitments and Contingencies

The Company is committed at September 30, 2006 under various operating leases for office facilities and equipment through March 2010. Minimum payments due under these leases, including amounts due to a related party as discussed below, are as follows:

Years ending September 30,
2007	$	557
2008		401
2009		401
2010		201
2011		—
	$	1,560

Total rent expense for the fiscal years ended September 30, 2006, 2005 and 2004 was $667, $645 and $673, respectively.

In June 1997, the Company entered into a lease agreement with Geoffrey D. Knapp, Chief Executive Officer of the Company, to lease a building for a term of ten years, at fair market value rates. The total original commitment under this lease term was $1,300. Rent expense incurred under this lease for the fiscal years ended September 30, 2006, 2005 and 2004 totaled $164, $158 and $154, respectively.

On May 26, 2005, the Company signed a letter agreement with its landlord, Pelican Center Limited Partnership, extending for three years the term of the lease of its corporate headquarters located at 17075 Newhope Street, Fountain Valley, California. The new expiration date of the lease is March 6, 2010. All other terms and provisions of the lease originally entered into on December 12, 2000, including rent and the annual adjustment thereof as provided in the lease, shall remain in full force and effect.

Because of the nature of its business, the Company is from time to time threatened or involved in legal actions that are ordinary, routine litigation incidental to the business of the Company. The Company does not believe any actions now pending against it will have a material adverse effect on it.

5. Share-Based Compensation

The Company adopted the Statement of Financial Accounting Standards (“SFAS”) No. 123 (revised 2004), “Share-Based Payment” effective October 1, 2005. Prior to October 1, 2005, the Company followed the disclosure-only provisions of SFAS No. 123, “Accounting for Stock-Based Compensation” (SFAS 123), as amended by SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure,” and, accordingly, accounted for its stock-based compensation plans using the intrinsic value method under Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”) and related interpretations.

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. Under the modified prospective method, SFAS 123R applies to all awards granted or modified after the date of adoption. In addition, under the modified prospective method, compensation expense will be recognized for all stock-based compensation awards granted prior to, but not yet vested as of October 1, 2005, based on grant-date fair values estimated in accordance with the original provisions of SFAS 123.

On November 10, 2005, the FASB issued FASB Staff Position No. FAS 123(R)-3, “Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards” (the FSP). The FSP provides that companies may elect to use a specified “short-cut” method to calculate the historical pool of windfall tax benefits upon adoption of SFAS 123R. The Company has elected to use this short-cut method to calculate the historical pool of windfall tax benefits, and has elected to use one accounting pool for the windfall tax benefits related to employees and non-employees on a combined basis.

22

Notes to Financial Statements
September 30, 2006 (In thousands, except per share data)

No stock-based employee compensation cost and related tax benefits was recognized in the Statement of Income for the fiscal years ended September 30, 2005 and 2004, as all options granted under those plans had an exercise price equal to the market value for the underlying common stock on the date of grant. In accordance with the modified prospective method of transition to SFAS 123R, prior periods were not restated to reflect the impact of adopting the new standard.

Under SFAS 123 the Company based its expense calculation for the stock compensation pro forma footnote disclosure on actual forfeitures; however, SFAS 123R requires an estimate of forfeitures be used in the calculation. Upon adoption of SFAS 123R the Company changed its methodology to include an estimate of forfeitures.

Share-based compensation expense included in expenses and the related tax benefits for the twelve months ended September 30, 2006 were $172 and $66, respectively. No share-based compensation was capitalized for the twelve months ended September 30, 2006, 2005 and 2004. The impact of share-based compensation on both basic and diluted earnings per share for the twelve-month period was $0.02. In addition, in connection with the adoption of SFAS 123R, net cash provided by operations decreased and net cash provided by financing activities increased in the twelve months of fiscal 2006 by $716 related to excess tax benefits from share-based payment arrangements. Income before income taxes and net income for the fiscal year ended September 30, 2006 decreased by $172 and $106, respectively, as a result of the share-based compensation expense and the related tax benefit recognized in the Statement of Income during the fiscal year, as required by SFAS 123R.

Prior to the adoption of SFAS 123R, the Company presented all tax benefits of deductions resulting from the exercise of stock options as operating cash flows in the Statement of Cash Flows. SFAS 123R requires the cash flows related to the tax benefits resulting from tax deductions in excess of the compensation cost recognized for those options (excess tax benefits) to be classified as financing cash flows. The $716 excess tax benefit classified as a financing cash inflow would have been classified as an operating cash inflow if the Company had not adopted SFAS 123R.

At September 30, 2006, there was $233 of total unrecognized compensation cost related to unvested stock options. This cost is expected to be recognized over a weighted-average period of approximately 1.5 years.

The pro forma line items in the following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS 123 to stock-based employee compensation for periods prior to adoption of SFAS 123R.

	Years Ended September 30
	2005			2004
Reported net income	$	1,774		$	2,241
Add: Share-based compensation expense included in reported net income, net of related tax effects		—			—
Deduct: Share-based compensation expense determined under fair-value method for all awards, net of related tax effects		(250	)		(321	)
Pro forma net income	$	1,524		$	1,920
Earnings per share:
Basic — as reported	$	0.46		$	0.63
Basic — pro forma	$	0.40		$	0.54
Diluted — as reported	$	0.44		$	0.57
Diluted — pro forma	$	0.38		$	0.49

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 September 30, 2006. The Company currently has 207 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 541 options

23

Notes to Financial Statements
September 30, 2006 (In thousands, except per share data)

granted under the plan as of September 30, 2006. The Company has 509 shares reserved for issuance related to the options that remain outstanding and yet to be issued under the 2000 Plan.

Outstanding unvested stock options generally vest ratably over four years based upon continuous service. The Company accounts for these grants as single grants and recognizes share-based compensation cost using the straight-line method.

The Company’s stock option plans provide for accelerated vesting of unvested options in the event of a change in control. A change in control provision meets the criteria of a performance condition under SFAS 123R. All outstanding unvested options at September 30, 2006 are subject to accelerated vesting under this provision.

A summary of changes in the stock option plans for the twelve months ended September 30, 2006 is as follows:

					Weighted
					Average
			Weighted		Remaining		Aggre-
	Number		Average		Contractual		gate
	of		Exercise		Term		Intrinsic
	Options		Price		(In Years)		Value
Options outstanding at September 30, 2005		626	$	6.32		5.5	$	7,157
Granted		—		N/A		N/A		N/A
Exercised		115	$	5.18		N/A	$	1,884
Forfeited		4	$	10.02		N/A		N/A
Expired		—		N/A		N/A		N/A
Options outstanding at September 30, 2006		507	$	6.54		4.7	$	7,340
Vested and expected to vest at September 30, 2006		492	$	6.41		4.6	$	7,195
Options exercisable at September 30, 2006		464	$	6.10		4.4	$	6,902
Options that would become exercisable at September 30, 2006 pursuant to the Company’s option plans in the event of a change in control		507	$	6.54		4.7	$	7,340

For the twelve-month period ended September 30, 2006, the amount of cash received from the exercise of stock options was $594 and the related tax benefit was $716.

For options exercised during the twelve-month periods ended September 30, 2006, 2005 and 2004, newly issued shares were issued.

The Company uses the Black-Scholes-Merton option valuation model to determine the weighted average fair value of options. The Company utilizes assumptions on expected life, risk-free rate, expected volatility, and dividend yield to determine such values.

The following table shows assumptions that were used to determine the weighted-average fair value for the options granted in fiscal years ended September 30, 2005 and 2004:

	Years Ended September 30,
	2005			2004
Risk-free rate		4.0	%		4.0	%
Volatility factor		0.394			0.383
Dividend Yield		—			—
Weighted-average life	6 Years			8 Years

The Company did not disclose assumptions for the twelve months ended September 30, 2006 because there were no grants in this period. If grants were to occur, the expected life of options granted would be derived from historical data on employee exercise and post-vesting termination behavior. The risk-free rate would be based on treasury instruments in effect at the time of grant whose terms are consistent with the expected life of the Company’s stock options. Expected volatility would be based on historical volatility of the Company’s stock. The dividend yield would be based on historical experience and expected future changes.

A summary of the grant-date fair value and intrinsic value information for the twelve months ended September 30, 2006, 2005 and 2004 is as follows:

	Years ended
	September 30,
	2006		2005		2004
Weighted-average grant-date fair value per share		—	$	6.22	$	6.77
Intrinsic value of options exercised	$	1,884	$	1,205	$	2,777
Total fair value of shares vested during the year	$	177	$	389	$	486

24

Notes to Financial Statements
September 30, 2006 (In thousands, except per share data)

The following table summarizes information about stock options outstanding at September 30, 2006:

			Weighted Average
			Remaining		Weighted
	Number		Contractual		Average
	Outstanding		Life		Exercise Price
Outstanding:
Range of Exercise Prices
$2.38 to $3.00		60		1.3	$	2.93
$3.13 to $4.70		155		3.6	$	3.70
$4.71 to $6.38		169		4.6	$	5.23
$7.15 to $11.56		21		7.8	$	4.09
$14.41 to $15.21		102		7.8	$	14.65
		507		4.7	$	6.54

			Weighted
	Number		Average
	Exercisable		Exercise Price
Exercisable:
Range of Exercise Prices
$2.38 to $3.00		60	$	2.93
$3.13 to $4.70		155	$	3.70
$4.71 to $6.38		160	$	5.24
$7.15 to $11.56		9	$	5.99
$14.41 to $15.21		80	$	14.72
Total:		464	$	6.10

The weighted-average remaining contractual life of stock options outstanding at September 30, 2006, 2005 and 2004 was 4.7 years, 5.5 years and 6.1 years, respectively.

At September 30, 2006 there were no warrants outstanding.

6. Benefit plan

The Company sponsors a 401(k) Plan for all eligible employees. The costs for the benefit plan totaled $21 for the year ended September 30, 2006. The Company made a matching contribution of $136 in fiscal 2006, $73 in fiscal 2005, and $37 in fiscal 2004.

25

Report of Independent Registered Public Accounting Firm

To the Board of Directors
CAM Commerce Solutions, Inc.
Fountain Valley, California

We have audited the balance sheets of CAM Commerce Solutions, Inc. as of September 30, 2006 and 2005, and the related statements of operations, stockholders’ equity and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provided a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of CAM Commerce Solutions, Inc. as of September 30, 2006 and 2005, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

As discussed in Note 5 to the financial statements, effective October 1, 2005, the Company changed its method of accounting for share-based payments to conform with Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment.”

/s/ McGladrey & Pullen, LLP

Irvine, California
December 7, 2006

26

Report of Independent Registered Public Accounting Firm

Board of Directors
CAM Commerce Solutions, Inc.

We have audited the accompanying statements of operations, stockholders’ equity, and cash flows for the year ended September 30, 2004. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audit included consideration of the internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of CAM Commerce Solutions, Inc. at September 30, 2004, and the results of its operations and its cash flows for the year ended September 30, 2004, in conformity with U.S. generally accepted accounting principles.

/s/ Ernst & Young LLP

Orange County, California
November 12, 2004

27

Stock and Dividend Data

The common stock of CAM Commerce Solutions, Inc., is traded on the NASDAQ Global Market under the NASDAQ symbol CADA. The quarterly market price information shown below represents the high and low sales prices for the periods.

Fiscal Year Ended September 30, 2006

Quarter Ended:	High		Low
December 31	$	21.40	$	16.22
March 31		24.99		20.13
June 30		24.90		21.20
September 30		22.19		19.16

Fiscal Year Ended September 30, 2005

Quarter Ended:	High		Low
December 31	$	20.93	$	14.76
March 31		19.90		14.50
June 30		15.74		11.38
September 30		18.48		12.86

As of November 2, 2006, there were approximately 200 holders of record of the Company’s common stock. The Company estimates there are in excess of 2,000 beneficial owners of the Company’s common stock.

In August 2005, the Board of Directors approved a new dividend policy, which pays stockholders a variable dividend based on the quarterly results. During the twelve months ended September 30, 2006, the Board of Directors declared the following dividends:

	Per Share
Declaration Date	Dividend		Record Date	Total Amount		Payment Date
November 16, 2005	$	0.14	January 3, 2006	$	541	January 12, 2006
February 14, 2006	$	0.14	April 4, 2006	$	549	April 14, 2006
May 2, 2006	$	0.14	July 5, 2006	$	553	July 14, 2006
August 8, 2006	$	0.15	October 5, 2006	$	594	October 16, 2006

The Company did not pay dividends for quarterly results prior to the third quarter of fiscal 2005.

The decision to pay a dividend will be 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.

During the last fiscal year ended September 30, 2006, the Company did not repurchase any equity securities or sell any registered or unregistered equity securities.

28

Selected Quarterly Financial Data (Unaudited)

	2006 Fiscal Quarter Ended
In thousands, except per share data.	Dec 31		Mar 31		June 30		Sept 30
Net revenues	$	6,986	$	6,483	$	6,770	$	6,973
Gross profit		4,609		4,242		4,613		4,783
Income before taxes		1,180		678		1,127		1,301
Net income		742		417		686		802
Basic net income per share		0.19		0.11		0.17		0.20
Diluted net income per share		0.18		0.10		0.16		0.19

	2005 Fiscal Quarter Ended
In thousands, except per share data.	Dec 31		Mar 31		June 30		Sept 30
Net revenues	$	6,150	$	5,902	$	6,271	$	6,613
Gross profit		3,785		3,493		4,026		4,354
Income before taxes		673		252		844		1,038
Net income		402		150		503		719
Basic net income per share		0.11		0.04		0.13		0.19
Diluted net income per share		0.10		0.04		0.13		0.18

Selected Financial Data
For The Five Years Ended September 30, 2006

In thousands, except per share data.	2006		2005		2004		2003			2002
Net revenues	$	27,212	$	24,936	$	23,634	$	20,129		$	20,475
Income (loss) before taxes		4,286		2,807		2,341		(110	)		(81	)
Net income (loss)		2,647		1,774		2,241		(134	)		284
Basic net income (loss) per share		0.68		0.46		0.63		(0.04	)		0.09
Diluted net income (loss) per share		0.64		0.44		0.57		(0.04	)		0.09
Total assets		28,145		26,461		23,924		15,941			15,411
Working capital		23,357		20,647		18,118		11,095			10,284
Long-term debt		—		—		—		—			13
Cash dividends declared per common share		0.57		0.10		—		—			—
Stockholders’ equity	$	24,393	$	22,489	$	20,296	$	13,018		$	12,758
Shares used in computing net income (loss) per share:
Basic		3,906		3,817		3,543		3,143			3,060
Diluted		4,154		4,045		3,937		3,143			3,189

29

Company Information

Board of Directors

Geoffrey D. Knapp
Chairman and Chief Executive Officer
CAM Commerce Solutions, Inc.

David Frosh
President
Sperry Van Ness

Walter Straub
Chief Executive Officer
SafeNet, Inc.

Donald A. Clark
Chief Executive Officer
C & C Companies

Officers

Geoffrey D. Knapp
Chief Executive Officer

Paul Caceres Jr.
Chief Financial Officer

Corporate Office

17075 Newhope Street
Fountain Valley, CA 92708
(714) 241-9241
Facsimile: (714) 241-9893
Internet address: http://www.camcommerce.com

Registrar and Transfer Agent

American Stock Transfer Company
59 Maiden Lane
New York, NY 10007

Independent Registered Public Accounting Firm

McGladrey & Pullen, LLP
18401 Von Karman Avenue, 5th Floor
Irvine, CA 92612

Securities Counsel

Haddan & Zepfel LLP
500 Newport Center Drive, Suite 580
Newport Beach, CA 92660

General Counsel

Lundell & Spadafore
1065 Asbury Street
San Jose, CA 95126

Form 10-K

A copy of the Company’s annual report on Form 10-K, (without exhibits), as filed with the Securities and Exchange Commission, and Code of Ethics, will be furnished to any stockholder free of charge upon written request to the Company’s Corporate Finance Department 17075 Newhope Street, Suite A, Fountain Valley, CA 92708.

30

EX-23.(A)

Exhibit 23a

CONSENT AND REPORT ON SCHEDULE OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM

To the Board of Directors
CAM Commerce Solutions, Inc.
Fountain Valley, California

We consent to the incorporation by reference in the previously filed Registration Statements on Form S-8 (File Nos. 333-64856, 333-57907, 333-52782, and 333-121541) of CAM Commerce Solutions, Inc. of our report dated December 7, 2006 relating to our audits of the financial statements, appearing in the 2006 Annual Report to Shareholders and incorporated by reference in the Annual Report on Form 10-K of CAM Commerce Solutions, Inc. for the year ended September 30, 2006.

Our audits of the financial statements referred to in our aforementioned report also included the financial statement schedule of CAM Commerce Solutions, Inc., listed in Item 15(a). This financial statement schedule is the responsibility of CAM Commerce Solutions, Inc.’s management. Our responsibility is to express an opinion based on our audits of the financial statements. In our opinion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

/s/ McGladrey & Pullen, LLP

Irvine, California
December 13, 2006

EX-23.(B)

Exhibit 23b

CONSENT AND REPORT ON SCHEDULE OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in this Annual Report (Form 10-K) of CAM Commerce Solutions, Inc. of our report dated November 12, 2004, with respect to the financial statements of CAM Commerce Solutions, Inc., included in the 2006 Annual Report to Stockholders of CAM Commerce Solutions, Inc.

Our audit also included the financial statement schedule of CAM Commerce Solutions, Inc. listed in Item 15(a). This schedule is the responsibility of CAM Commerce Solutions, Inc.’s management. Our responsibility is to express an opinion based on our audit. In our opinion, as to which the date is November 12, 2004, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

We also consent to the incorporation by reference in the Registration Statements (Form S-8 Nos. 333-64856, 333-57907, 333-52782, and 333-121541) of our report dated November 12, 2004, with respect to the financial statements of CAM Commerce Solutions, Inc. incorporated herein by reference, and our report included in the preceding paragraph with respect to the financial statement schedule of CAM Commerce Solutions, Inc. included in this Annual Report (Form 10-K) for the year ended September 30, 2006.

/s/ ERNST & YOUNG LLP  

Orange County, California
December 13, 2006

EX-31.(A)

Exhibit 31 (a)

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Geoffrey D. Knapp, certify that:

1. I have reviewed this Annual Report on Form 10-K of CAM Commerce Solutions, Inc;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) [Reserved]

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: December 15, 2006

By:	/s/Geoffrey D. Knapp
Geoffrey D. Knapp
Chief Executive Officer

EX-31.(B)

Exhibit 31 (b)

CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Paul Caceres, certify that:

1. I have reviewed this Annual Report on Form 10-K of CAM Commerce Solutions, Inc;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) [Reserved]

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: December 15, 2006

By:	/s/Paul Caceres
Paul Caceres
Chief Financial and Accounting Officer

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), each of the undersigned officers of CAM Commerce Solutions, Inc. (the “Company”), does hereby certify with respect to the Annual Report of the company on Form 10-K for the year ended September 30, 2006 as filed with the Securities and Exchange Commission (the “10-K Report”) that to their knowledge:

(1)	the 10-K Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	the information contained in the 10-K Report fairly presents, in all material respects, the financial condition and results of operations of the company.

/s/ Geoffrey D. Knapp

Geoffrey D. Knapp

Chief Executive Officer

December 15, 2006

/s/ Paul Caceres

Paul Caceres

Chief Financial and Accounting Officer

December 15, 2006

This certification accompanies this 10-K Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the company for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended.