UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended September 30, 2007
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from:
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Commission file number : 0-16569
CAM COMMERCE SOLUTIONS, INC.
(Exact name of registrant as specified in its Charter)
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Delaware
(State or other jurisdiction
of incorporation or organization)
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95-3866450
(I.R.S. Employer
Identification No.)
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17075 Newhope Street, Suite A
Fountain Valley, California
(Address of Principal Executive Offices)
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92708
(Zip Code)
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Registrant’s telephone number, including area code:
(714) 241-9241
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock $.001 par value
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.
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No
Indicate by check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Act.
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Yes
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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
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No
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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.
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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
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Accelerated Filer
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Non-accelerated Filer
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 1b-2
of the Act).
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No
The aggregate market value of voting stock held by non-affiliates of the Registrant as of March
31, 2007 was approximately $68,539,000.
As of November 9, 2007, there were 4,112,290 outstanding shares of common stock of the
Registrant.
DOCUMENTS INCORPORATED BY REFERENCE
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Part II
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Annual Report to Stockholders for
fiscal year ended September 30, 2007
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TABLE OF CONTENTS
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 market payment processing services to our customers. Our customers utilize our X-Charge
software to process credit card transactions. The payment processing services are provided by a
third party credit card payment processor. This generates revenues for us based on the number of
credit card transactions processed for 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 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
automatically processes the transaction. 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. 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
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card terminal in addition to ringing up the sale on the cash register. Transactions are faster and
more efficient with X-Charge.
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 revenues from X-Charge accounted for approximately 50%, 39%, and 26% of our total revenues for
the fiscal years ended September 30, 2007, 2006 and 2005, respectively.
The Systems
We offer the following turnkey systems:
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(1)
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CAM32
— designed for hard goods retailers whose inventory is re-orderable in nature.
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(2)
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Profit$
— designed for apparel and shoe retailers whose inventory is seasonable in
nature, and color and size oriented.
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(3)
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Retail STAR
— a Windows-based system designed to incorporate multiple functions of
both the CAM and Profit$ systems.
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(4)
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Retail ICE
— single-user derivative of Retail STAR.
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(5)
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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.
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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, which is optional to the
customer. 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:
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(1)
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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. The
systems will also analyze popularity data and indicate to the retailer which particular
items of inventory are needed and which items are overstocked.
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(2)
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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.
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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.
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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 number on order and the minimum quantities
required. Certain systems can also automatically provide a purchase order if desired.
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(5)
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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.
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(6)
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Reports.
The systems permit the retailer to produce customized reports and forms
utilizing data in the system.
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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
a 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:
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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
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.
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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 at which the system is being implemented. We also offer training to our
customers via the telephone.
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Hardware Service.
We offer hardware service to our customers on a time and materials
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.
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Marketing
Direct Sales
We market our systems and services primarily through our direct sales force consisting of 51
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
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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.
Compensation for salespeople is based on a percentage of contract prices for each system sold.
Brochures, Trade Shows, and Advertising Media
We market our systems by advertising in trade journals, on the Internet, and in 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 make up our systems, consist 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 backlog information is not indicative of our future sales or
business trends and is subject to fluctuation
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However, as of September 30, 2007, backlog was
approximately $471,000, as compared to $719,000 on September 30, 2006. This backlog is based upon
purchase orders placed with us which we believe are firm orders that will be filled during fiscal
year 2008.
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, if a support contract was purchased. 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.
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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 $1,963,000, $1,808,000, and $1,706,000 on software development, including
amounts capitalized during the years ended September 30, 2007, 2006, and 2005, 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, 2007, we had 196 full time employees, including 18 employed in finance,
administration and executive officers, 22 in programming and quality assurance, 61 in sales and
marketing, 20 in training and installation, 67 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.
Foreign Operations
We do not engage in business outside of the United States.
Information Available on Our Website and Elsewhere
We make available free of charge on our internet website at www.camcommerce.com, our annual reports
on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those
reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934 as soon
as reasonably practicable after we electronically file such material with, or furnish it to, the
Securities and Exchange Commission (“SEC”). Our SEC filings, as well as those of other companies
that file electronically with the SEC, are available at the SEC’s
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Internet website at www.sec.gov. You may also read and copy any materials that we file with the SEC
at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C., 20549. Information
on the operation of the public reference room may be obtained by calling the SEC at 1-800-SEC-0330.
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 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 51% from fiscal 2006 to
fiscal 2007 and accounted for approximately 50% of all revenue in fiscal 2007. 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.
We would be adversely affected by the loss of a single payment processor.
Global Payments processes the payment transactions for our merchants, which represents about 95% of
our total payment processing revenues. If Global Payments were to cease doing business with us for
any reason, we would have to attempt to move these merchants to a new payment processor or
processors. This would be extremely disruptive to our business and we could lose a substantial
number of X-Charge accounts to our competitors in the process. The disruption in business, which
could include the inability to collect revenues from Global Payments on payment processing
transactions, could have a material adverse effect on our operating results.
Our original core business of computer system sales is in decline.
The sales of turnkey computer systems for the retail market declined by approximately 8% in fiscal
2007. 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.
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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:
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the availability and pricing of competing products and the resulting effects on sales;
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the effectiveness of expense and cost control efforts;
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the ability to develop and deliver software products to market in a timely manner;
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the rate at which present and future customers adopt our new products and services in
our target markets;
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the effects of new and emerging technologies;
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the ability to retain and hire key executives, management, technical personnel and
other employees that are needed to implement business and product plans;
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the level of orders received that can be shipped in a fiscal quarter.
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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. This facility
houses our corporate headquarters, which includes executive and administrative offices, service and
support staff, system integration staff, and our inventory warehouse. The lease will expire on
March 31, 2010.
In addition, we lease approximately 20,500 square feet of office space in Henderson, Nevada from
our Chief Executive Officer pursuant to a ten-year lease that expires on March 31, 2017. The
facility houses our research and development team, our inside sales team and X-Charge group. We
also 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.
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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 2007 Annual Report to Stockholders pursuant to Rule 14a-3(b), which
is filed as an exhibit and incorporated herein by reference below.
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FORM 10-K
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ANNUAL REPORT TO STOCKHOLDERS
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ITEM 5: MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER’S MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES
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PAGE 27: STOCK AND DIVIDEND DATA
PAGES 21-24: SHARE-BASED COMPENSATION
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ITEM 6: SELECTED FINANCIAL DATA
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PAGE 28: SELECTED FINANCIAL DATA SEE
NOTE (A) BELOW
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ITEM 7: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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PAGES 4-11: MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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SEE NOTE (B) BELOW
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Note (A) The selected financial data incorporated herein by reference to our 2007 Annual Report to
Stockholders as of September 30, 2007 and 2006 and for each of the years in the three-year period
ended September 30, 2007, have been derived from our audited financial statements included
elsewhere in this report by reference. The selected financial data as of September 30, 2005 and for
the years ended September 30, 2004 and 2003 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
incorporation by reference.
Note (B) Information for Item 8 is included in our financial statements as of September 30, 2007
and 2006, and for each of the years in the three-year period ended September 30, 2007, and our
unaudited quarterly financial data for the two years ended September 30, 2007 and 2006, on pages 12
through 24 and page 28, respectively, of our 2007 Annual Report to Stockholders which is hereby
incorporated by reference. The reports of the independent registered public accounting firms are
included on pages 25 and 26 of the Annual Report to Stockholders.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
At September 30, 2007 and 2006, our cash and cash equivalents were approximately $22,047,000 and
$15,196,000, respectively. At September 30, 2007 and 2006, we also held $6,388,000 and $8,457,000,
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
$132,000 and $97,000 for the years ended September 30, 2007 and 2006, respectively.
Equity Price Risk
We do not invest in available-for-sale equity securities, and, therefore, are not subject to
significant equity price risk.
8
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 9AT. 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.
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, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Our executive officers and directors and their ages are as follows:
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Name
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Age
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Position with the Company
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Geoffrey D. Knapp
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49
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Chief Executive Officer, Director, Chairman of the Board, and Secretary
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Paul Caceres
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47
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Chief Financial Officer and Chief Accounting Officer
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Walter W. Straub
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64
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Director
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David A. Frosh
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49
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Director
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Donald A. Clark
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57
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Director
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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.
9
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 was 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. until April 2007 when SafeNet was
acquired. 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. Mr. Frosh is
currently a business consultant. From 2001 to 2006, he served as the President of Sperry Van Ness,
a commercial real estate brokerage firm, which he resigned in December 2006. 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. Mr. Frosh is a Professor of Marketing at Pepperdine University and Member of
Pepperdine’s board of trustees. He is also a Director for Nexregen, a real estate investment
trust, and serves on the advisory board of Therapy Solutions, a provider of technology based
solutions for chronic muscular and skeletal disorders. 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.
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 Stockholders, 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
stockholders meeting each year. Directors are entitled to an expense reimbursement for attending
meetings. Subject to the terms of the employment agreements described in Item 11 below, 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 stockholders 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
.
10
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
Compensation Discussion and Analysis
Overview
Our Compensation Committee has responsibility for setting our overall compensation strategy and
aligning it with our business goals. This includes determining the compensation of our chief
executive officer and other executive officers, overseeing our equity incentive plans and other
benefit plans and ensuring that our compensation programs are fair, reasonable and competitive. In
determining compensation, the Compensation Committee seeks to ensure that the compensation of our
executive officers that aligns their interests with the interests of our stockholders. The
Compensation Committee must also review and approve all forms of deferred compensation and
incentive compensation, including stock option grants, stock grants, and other forms of incentive
compensation granted to our executive officers.
Compensation Philosophy and Program Objectives
Our executive compensation program is designed (i) to attract and retain outstanding executive
officers capable of leading the company to fulfillment of its business objectives, and (ii) to
establish an appropriate link between executive compensation and achievement of our strategic and
financial performance goals, including the enhancement of shareholder value. Our compensation
program is specifically designed to reward our executive officers for individual performance, years
of experience, contributions to our financial success, and creation of stockholder value. Our
compensation philosophy is to provide overall compensation levels that (i) are sufficient to
attract and retain talented executives and to motivate those executives to achieve superior
results, (ii) align executives’ interests with our corporate strategies, our business objectives,
and the long-term interests of our stockholders, (iii) enhance executives’ incentives to increase
our stock price and maximize stockholder value, and (iv) are consistent with our constant focus on
controlling costs. In many instances we build our compensation elements around long term retention
and development together with annual rewards based on specific focus areas.
In hiring and retaining executive management, we compete with a variety of companies, including
larger companies with greater resources. Accordingly, the Compensation Committee believes it is
appropriate to offer executives, subject to performance goals being met, long-term incentive
compensation that is intended to align their interests more closely with those of all stockholders.
These long-term equity incentive grants are generally targeted to a composite group of companies.
Based upon its deliberations and analysis, the Compensation Committee believes that within the
framework defined above our executive compensation practices provide an overall level of
compensation that is competitive with the level of compensation of companies of similar size,
complexity, revenue and growth potential, and that its executive compensation practices recognize
the caliber, level of experience and performance of our management.
Assessing Executive Performance and Results
The Compensation Committee assesses the performance of the chief executive officer and it works
with the chief executive officer in determining the performance assessments of the other executive
officers. Performance is assessed and recognized through the annual planning and budget process.
During this process, key strategies and
11
objectives are established for both the short and long
term. During the initial planning meeting and then each quarter, results are reviewed against the
plan and budget. We do not use specific quantitative targets or formulas to assess executive
performance or determine compensation.
Although the compensation process is managed and driven and decisions made by the Compensation
Committee, the views of certain of our executive officers are taken into account in connection with
setting the compensation of other executive officers. Executive officers participate in the
preparation of materials requested by the Compensation Committee for use and consideration at
Compensation Committee meetings and the Compensation Committee has the opportunity to meet with
each of the executive officers at various times during the year to assess performance. In assessing
the performance of the executive officers, the Compensation Committee does not assign specific
weights to the factors considered.
Our chief executive officer prepares recommendations regarding the individual and corporate
performance goals and objectives of our other officers that are periodically established.
Additionally, the chief executive officer recommends compensation and other terms of employment for
these officers. The Compensation Committee reviews and considers these recommendations in its
deliberations, taking into account the officer’s success in achieving his or her individual
performance goals and objectives and the corporate performance goals and objectives deemed relevant
to the officer as established by the Compensation Committee. The chief executive officer may be
present during these deliberations, but does not vote.
The same criteria are key elements in the assessment of the chief executive officer’s performance
by the Compensation Committee. The Board of Directors determines, in its sole discretion, the
compensation and other terms of employment of our chief executive officer, based on the
Compensation Committees’ recommendation and evaluation of the chief executive officer’s performance
in light of relevant corporate performance goals and objectives. The chief executive officer is not
present for the discussion and does not participate in the decisions regarding his compensation.
Elements of Compensation
Our executive compensation program has two major elements, fixed salary and incentive compensation.
Incentive compensation consists of cash bonuses and non-qualified stock options. Our compensation
program also consists of providing our senior executive officers with employee benefits that are
generally available to all of our employees including, matching contributions to a defined
contribution (401(k)) retirement plan and health insurance benefits. The mix of fixed salary and
incentive compensation is determined by the Compensation Committee to provide the right balance of
market competitiveness and align the executive’s incentive compensation with business performance
and stockholder return.
Salary
Salary is intended to compensate executive officers at a level which is appropriate for an
executive in his or her position, consistent with experience and capabilities and in an amount
which is competitive with the level of compensation paid by companies of similar size, complexity,
revenues and growth potential. The Compensation Committee reviews the salary information of a
broader survey group of similar sized companies in the industry and a peer group of companies and
uses such information as a guideline in establishing the salary for each executive officer. We
believe that offering competitive salaries gives us the opportunity to attract and retain talented
managerial employees.
Incentive Bonuses
The Compensation Committee believes that the relative portion of an executive officer’s
compensation that is variable rather than fixed should increase as the scope and level of the
individual’s business responsibilities increase. This allows us to more closely match total
compensation with our actual performance. Accordingly, the calculation of annual incentive bonus
payments under our senior management incentive plan for executive officers is determined based on
the company’s actual performance measured against objective performance criteria approved by the
Compensation Committee as described below.
12
Performance goals are established on an annual basis in connection with our budgeting process.
These measures are believed to best reflect the short-term performance of the company, as they are
directly influenced by management’s actions and exclude investment income and other non-operating
factors that affect pre-tax income. For fiscal 2007, achievement of the target bonus was based on
achieving specified pre-tax income goal. The Compensation Committee believes the goals set are
challenging, but achievable. When appropriate, the Compensation Committee will subsequently
consider adjusting the targets to take into account developments which occur after the budget
process has concluded.
Bonuses are based on achievement of pre-tax income goals and are intended to motivate short-term
financial performance of the company. It is intended that high levels of achievement will provide
executives with above average levels of current compensation, and that lower levels of achievement
will provide executives with below average levels of current compensation.
Stock Options Compensation
We no longer grant stock options to executives as a form of compensation.
Employee Benefit Programs
Our 401(k) plan is based on employee contributions and partial company matching. The Compensation
Committee believes that the contribution levels to the 401(k) plan are typical and necessary to
recruit and retain qualified executives.
We cover the cost of health care benefits for executives and their families. The terms of our
health care programs for both current employees and retirees do not discriminate in scope, term or
operation in favor of our executive employees.
All salaried employees are entitled to payment of salary for any accumulated but unused vacation
days upon termination of employment.
Deferred Compensation Plan
We do not have a deferred compensation plan.
Miscellaneous Benefits
We do not provide special perquisites and benefits to executive officers. Executive officers are
compensated through salary and incentive compensation only. We do not provide cars, private air
travel, family travel reimbursement or other special travel benefits to executive officers. Except
for the 401(k) plan described above, we have no pension or retirement plan. We do not maintain
lodging for the benefit of executive officers or reimburse executive officers for lodging expenses
except in connection with business travel, including company requested relocations. We do not
provide tax planning assistance, financial planning or other personal services to executive
officers nor do we reimburse executive officers for any such services. Except for the tax gross ups
in connection with a change in control described below, we do not provide tax assistance to
executive officers. We do not provide club memberships or other personal social or entertainment
benefits to executive officers, nor do we reimburse executive officers for any such costs. We do
not make loans or provide guarantees to executive officers.
Allocations Between Forms of Compensation
Executive compensation is designed to be comprised of 55% to 65% of fixed salary and 35% to 45% of
variable compensation based on performance factors.
CEO Performance and Compensation
Within the framework described above, the Compensation Committee evaluates the performance of our
chief
13
executive officer and determines the officer’s salary and bonus on an annual basis. The
Compensation Committee sets qualitative objectives and responsibilities for the chief executive
officer consistent with our business model. These include creating shareholder value through
revenue and profit growth, strategic planning and new product development, enhancement of
stockholder value and effective Board and stockholder communications.
Accounting and Tax Implications
Section 162(m) of the Internal Revenue Code limits deductions for executive compensation in excess
of $1 million, except for certain compensation which qualifies for a performance-based exception.
Certain types of compensation in excess of $1 million are deductible by us if performance criteria
are specified in detail and are contingent on stockholder approval of the compensation arrangement.
The equity grants under our stock option plans are not subject to deduction limit. Cash
compensation paid to our named executive officers did not exceed the Section 162(m) thresholds in
fiscal 2007.
While the Compensation Committee will continue to consider deductibility under Section 162(m) with
respect to future compensation arrangements with executives, deductibility will not be the only
factor used in ascertaining appropriate levels or modes of compensation. Since corporate objectives
may not always be consistent with the requirements for full deductibility, it is possible that the
Compensation Committee may, in the future, enter into compensation arrangements where the payments
are not fully deductible under Section 162(m).
Beginning on October 1, 2005, we began accounting for stock-based compensation in accordance with
the requirements of SFAS 123(R).
Change in Control agreements
We have change in control agreements in place with Geoffrey Knapp, our Chief Executive Officer, and
Paul Caceres, our Chief Financial Officer. The agreements require each officer’s 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 a bonus based on their compensation from the fiscal year
ended prior to the year in which the termination takes place. The agreements include a provision
for participation in the Company’s benefit plans, including medical, disability and life insurance,
and fringe benefits, for 18 months following termination other than for cause after a change of
control. The agreements also include provisions to gross up payments made following termination of
employment after a change in control in order to eliminate, to the extent possible, the effect of
the excise tax on such payments that might be imposed by Sections 280G and 4999 of the Internal
Revenue Code to the extent possible. If a triggering event of a change in control was to occur on
the last business day of the most recently completed fiscal year, the agreement calls for a lump
sum payment of $1,360,000 to Mr. Knapp and $900,000 to Mr. Caceres, in addition to the applicable
gross up payments. Each agreement is for a term of 12 months and automatically 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.
Compensation of Directors
The compensation plan for non-employee directors has changed. Beginning in fiscal 2006, they each
receive $5,000 for every Board meeting they attend. Prior to fiscal 2006, they were each granted
options to purchase 7,500 shares of common stock when they were elected at the annual stockholders
meeting each year. The non-employee directors are Walter Straub, David Frosh, and Donald Clark.
These directors were also eligible to be reimbursed for their expenses in attending meetings of the
Board of Directors and committees of the Board. Directors who are employees of the company receive
no compensation for serving on the Board of Directors.
14
The following table sets forth information concerning compensation paid by us for services rendered
to us during fiscal year ended September 30, 2007 to our non-employee directors.
DIRECTOR COMPENSATION
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Pension
|
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|
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|
|
|
|
|
|
|
|
|
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|
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Value and
|
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|
|
|
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|
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|
|
|
|
|
|
|
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|
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|
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Nonqualified
|
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Fees Earned
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Non-Equity
|
|
Deferred
|
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|
|
|
|
|
|
or Paid
|
|
Stock
|
|
Option
|
|
Incentive Plan
|
|
Compensation
|
|
All Other
|
|
|
|
Name
|
|
in Cash
|
|
Awards
|
|
Awards
|
|
Compensation
|
|
Earnings
|
|
Compensation
|
|
Total
|
|
Walter Straub
|
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$
|
20,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
20,000
|
|
|
David Frosh
|
|
$
|
20,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
20,000
|
|
|
Donald Clark
|
|
$
|
20,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
20,000
|
|
Employment agreements
Geoffrey Knapp, Chief Executive Officer, and Paul Caceres, Chief Financial Officer, each have
12-month employment agreements that renew automatically on an annual basis. On December 20, 2006,
the Company amended the employment agreements. Other than each executive’s base salary, the terms
of the employment agreements are substantially identical. Severance payment for termination other
than for cause was increased in 2006 from 100% of the executive’s base salary and annual bonus in
the fiscal year prior to the year in which the termination occurred to 299% of such amount. In
addition to terminations for good reason by the executive because of a breach of the employment
agreement by the company or substantial adverse change in his authority or responsibilities, the
executive may also terminate the agreement and receive the severance payment if he is required to
be based or perform services at an office or location other than the one he is based at immediately
prior to a change of control, except for reasonable travel requirements. The agreements provide a
minimum annual base salary of $326,500 for Mr. Knapp and $207,000 for Mr. Caceres. The agreements
also include a provision for annual bonuses to be paid based on achieving annual performance goals.
The following table sets forth information concerning compensation paid by us for services rendered
to us during fiscal year ended September 30, 2007, and the prior two fiscal years, to our Chief
Executive Officer and each additional executive officer whose total compensation exceeded $100,000
(each a “Named Executive Officer”):
SUMMARY COMPENSATION TABLE
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Non-Equity
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Non-Qualified
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Name and Principal
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Fiscal
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|
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(1)
|
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Stock
|
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Option
|
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Incentive Plan
|
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Deferred
|
|
All Other
|
|
|
|
Position
|
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Year
|
|
Salary
|
|
Bonus
|
|
Awards
|
|
Awards
|
|
Compensation
|
|
Compensation Earnings
|
|
Compensation
|
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Total
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Geoffrey Knapp
|
|
|
2007
|
|
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$
|
332,000
|
|
|
$
|
237,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
0
|
|
|
|
$0
|
|
|
|
$0
|
|
|
$
|
569,000
|
|
|
Chairman of the
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|
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2006
|
|
|
$
|
317,000
|
|
|
$
|
138,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
0
|
|
|
|
$0
|
|
|
|
$0
|
|
|
$
|
455,000
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Board and CEO
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2005
|
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$
|
305,000
|
|
|
$
|
94,000
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|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
0
|
|
|
|
$0
|
|
|
|
$0
|
|
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$
|
399,000
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Paul Caceres
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2007
|
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$
|
210,000
|
|
|
$
|
150,000
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|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
0
|
|
|
|
$0
|
|
|
|
$0
|
|
|
$
|
360,000
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|
CFO and CAO
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2006
|
|
|
$
|
201,000
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|
|
$
|
88,000
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|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
0
|
|
|
|
$0
|
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|
|
$0
|
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|
$
|
289,000
|
|
|
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2005
|
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|
$
|
193,000
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|
$
|
59,000
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|
|
$
|
0
|
|
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$
|
0
|
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|
|
0
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|
|
$0
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$0
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|
$
|
252,000
|
|
|
|
|
|
|
(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 , were established each year. Incentive
|
15
|
|
|
|
|
|
|
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 2007
There were no stock options granted to executive officers during the fiscal year covered by this
report.
The following tables set 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.
OUTSTANDING EQUITY AWARDS AT SEPTEMBER 30, 2007
|
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|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
OPTION AWARDS
|
|
STOCK AWARDS
|
|
|
|
Number of
|
|
Equity Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Incentive
|
|
|
|
|
|
Securities
|
|
Plan Awards: # of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Awards: # of
|
|
|
|
|
|
Underlying
|
|
Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market Value of
|
|
Unearned Shares,
|
|
Value of Unearned
|
|
|
|
Unexercised Options
|
|
Underlying
|
|
Option
|
|
Options
|
|
# of Shares or
|
|
Shares or Units of
|
|
Units or Other
|
|
Shares, Units or
|
|
|
|
Exercisable/
|
|
Unexercised
|
|
Exercise
|
|
Expiration
|
|
Units of Stock That
|
|
Stock That Have Not
|
|
Rights That Have
|
|
Other Rights That
|
|
Name
|
|
Unexercisable
|
|
Unearned Options
|
|
Price
|
|
Date
|
|
Have Not Vested
|
|
Vested
|
|
Not Vested
|
|
Have Not Vested
|
|
Geoff Knapp
|
|
|
50,000/0
|
|
|
|
—
|
|
|
$
|
5.38
|
|
|
|
8/2/2010
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Paul Caceres
|
|
|
15,000/0
|
|
|
|
—
|
|
|
$
|
5.38
|
|
|
|
8/2/2010
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
15,000/0
|
|
|
|
|
|
|
$
|
3.56
|
|
|
|
4/26/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000/0
|
|
|
|
|
|
|
$
|
4.98
|
|
|
|
8/20/2013
|
|
|
|
|
|
|
|
|
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OPTION EXERCISES AND STOCK VESTED
|
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|
|
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OPTION AWARDS
|
|
STOCK AWARDS
|
|
|
|
# of Shares
|
|
Value
|
|
# of Shares
|
|
Value
|
|
|
|
Acquired on
|
|
Realized on
|
|
Acquired on
|
|
Realized on
|
|
Name
|
|
Exercise
|
|
Exercise (1)
|
|
Vesting
|
|
Vesting
|
|
Geoff Knapp
|
|
|
20,000
|
|
|
$
|
373,200
|
|
|
|
—
|
|
|
|
—
|
|
|
Paul Caceres
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
(1)
|
|
Market value of the underlying securities of the exercised options at the exercise date
minus the exercise price of the options.
|
Report of the Compensation Committee
The Compensation Committee has reviewed and discussed with management the Compensation Discussion
and Analysis contained in this annual report. Based on this review and the discussion, the
Compensation Committee recommended to the Board of Directors that the Compensation Discussion and
Analysis be included in this annual report.
Compensation Committee
Walter Straub, Donald Clark, and David Frosh
November 1, 2007
16
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, 2007 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) or as an executive officer of
another entity during the fiscal year ended September 30, 2007.
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, 2007, 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 $120,000.
1993 Stock Option Plan
In April 1993, our stockholders 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 stockholders. 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 538,000 shares of our common stock have been granted under
the 2000 Plan as of September 30, 2007.
Information required to be disclosed for options, warrants and rights is hereby incorporated by
reference to our 2007 Annual Report on pages 21-24; 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 $176,000 for the fiscal year ended
September 30, 2007.
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, 2002 and ending on September 30, 2007. The comparison assumes
$100 was invested on September 30, 2002 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.
17
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
The following table sets forth as of September 30, 2007, 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 (4)
|
|
Percentage of Class (4)
|
|
Common Stock
|
|
Geoffrey D. Knapp, Chairman of the Board and CEO (1)
|
|
467,000
|
|
11.2%
|
|
Common Stock
|
|
Paul Caceres, Chief Financial Officer (1)
|
|
35,000
|
|
*
|
|
Common Stock
|
|
Walter W. Straub, Director (1)
|
|
123,000
|
|
2.9%
|
|
Common Stock
|
|
David Frosh, Director (1)
|
|
22,000
|
|
*
|
|
Common Stock
|
|
Donald Clark, Director (1)
|
|
26,000
|
|
*
|
|
Common Stock
|
|
Ken Templeton, Beneficial Owner (2)
|
|
620,000
|
|
15.1%
|
|
Common Stock
|
|
Bares Capital Management, Beneficial Owner (3)
|
|
394,000
|
|
9.6%
|
|
Common Stock
|
|
All Directors and Officers as a Group (of 5 persons)
|
|
673,000
|
|
15.6%
|
18
|
|
|
|
|
(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)
|
|
The address of the beneficial owner is 221 W. 6th Street, Suite 1225, Austin, TX 78701.
|
|
|
|
(4)
|
|
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, 2007, 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 50,000; Paul Caceres 35,000;
Walter Straub 70,000; 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)
|
|
|
|
|
|
|
|
(b)
|
|
Number of securities
|
|
|
|
(a)
|
|
Weighted-average exercise
|
|
remaining available for
|
|
|
|
Number of securities to be
|
|
price of
|
|
future issuance under
|
|
|
|
issued upon exercise of
|
|
outstanding
|
|
equity compensation plans
|
|
|
|
outstanding options,
|
|
options, warrants
|
|
(excluding securities
|
|
Plan Category
|
|
warrants and rights
|
|
and rights
|
|
reflected in column (a))
|
|
1993 Stock Option
Plan approved by
security holders
|
|
|
118,000
|
|
|
$
|
4.60
|
|
|
|
—
|
|
|
2000 Stock Option
Plan not approved
by security holders
|
|
|
242,000
|
|
|
$
|
8.34
|
|
|
|
212,000
|
|
ITEM 13. CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
On December 19, 2006, we renewed a lease agreement with our Chief Executive Officer, Geoffrey D.
Knapp, for approximately 20,500 square feet of office space in Henderson, Nevada. The lease is for
a ten-year term that commences upon the completion of the building expansion space, which occurred
on April 13, 2007. The initial rent of $25,949 per month is subject to annual percentage increases
equal to the increases, if any, in the Consumer Price Index. No rent adjustment, however, shall be
less than two percent (2%) nor greater than four percent (4%).
In accordance with our written Related Party Transactions Policy, out Audit Committee reviewed and
approved this related party transaction, finding that the lease is on terms no less favorable to
the company than those generally available from third parties. Pursuant to our Related Party
Transactions Policy, our Audit Committee is responsible for reviewing and approving the terms and
conditions of all related party transactions. Any material financial transaction with an officer,
director, 5% or more shareholder or immediate family member of any of the foregoing would need to
be approved by our Audit Committee.
In determining whether to approve or ratify a related party transaction, our Related Party
Transactions Policy requires the Audit Committee to review the material facts of the transaction
and take into account, among other factors the Audit Committee may deem appropriate, whether the
transaction is on terms no less favorable than terms
19
generally available to or from an unaffiliated
third-party under the same or similar circumstances and the extent of the related party’s interest
in the transaction.
There were no transactions required to be reported under applicable Securities and Exchange
Commission rules since October 1, 2006 where our related party transactions policies and procedures
did not require review, approval or ratification or where such policies and procedures were not
followed.
Our Board of Directors consists of Geoffrey Knapp, Walter Straub, David A. Frosh and Donald A.
Clark. Mr. Straub, Mr. Frosh and Mr. Clark meet the criteria for independence as required by
NASDAQ Global Market listing standards. These three individuals are the members of our Audit,
Compensation and Nominating Committees.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Audit Fees
The aggregate audit fees incurred for services provided for fiscal 2007 and fiscal 2006 were as
follows:
|
|
|
|
|
|
|
|
|
|
|
Category
|
|
Fiscal 2007
|
|
Fiscal 2006
|
|
Audit Fees
(1)
|
|
$
|
158,000
|
(3)
|
|
$
|
121,000
|
|
|
Audit-Related Fees
(2)
|
|
|
—
|
|
|
|
23,000
|
|
|
Tax Fees
|
|
|
—
|
|
|
|
—
|
|
|
All Other Fees
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
(1)
|
|
Includes annual audit and quarterly reviews.
|
|
|
|
(2)
|
|
Fees for work related to our SFAS123R adoption and compliance with Section 404 of the
Sarbanes- Oxley Act.
|
|
|
|
(3)
|
|
Breakdown of the total fees is as follow: Ernst & Young LLP-$106,000 and McGladrey &
Pullen, LLP- $52,000
|
We appointed Ernst & Young LLP as our new independent registered public accounting firm in June
2007. McGladrey & Pullen, LLP was our independent registered public accounting firm for the 2005
fiscal year through June 2007.
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 2006 and 2007. 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 accountant 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 accountant.
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
2007 Annual Report to Stockholders (See Index to Financial Statements and Financial Statement
Schedule on page 23) .
20
2. Financial Statement Schedule
See the Index to Financial Statements and Financial Statement Schedule on page 23.
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 Agreement for Geoffrey D. Knapp, amended on
December 20, 2006, (incorporated by reference to the Form 8-K, filed on December 20, 2006).
10(c) Employment Agreement and Change in Control Agreement for Paul Caceres, amended on December
20, 2006, (incorporated by reference to the Form 8-K, filed on December 20, 2006).
10(d) Amendment to 1993 Stock Option Plan (incorporated by reference to the exhibits on Form S-8
Registration Statement filed on June 26, 1998 — 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)
10(j) Henderson, Nevada Office Lease Agreement (incorporated by reference to the Form 8-K filed on
December 19, 2006)
13(a) Annual Report to Stockholders for the fiscal year ended September 30, 2007
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
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: November 19, 2007
|
|
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
|
|
November 19, 2007
|
|
|
|
|
|
|
/s/ David Frosh
David Frosh
|
|
Director
|
|
November 19, 2007
|
|
|
|
|
|
|
/s/ Walter W. Straub
Walter W. Straub
|
|
Director
|
|
November 19, 2007
|
|
|
|
|
|
|
/s/ Donald Clark
Donald Clark
|
|
Director
|
|
November 19, 2007
|
22
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
|
|
|
25-26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheets at
September 30, 2007 and 2006
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statements of Income for the Years
Ended September 30, 2007, 2006 and 2005
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statements of Cash Flows for the Years
Ended September 30, 2007, 2006 and 2005
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statements of Stockholders’ Equity
for the Years Ended September 30, 2007,
2006 and 2005
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Financial Statements
|
|
|
16-24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schedule II. Valuation and Qualifying Accounts
for the Years Ended September 30, 2007, 2006 and 2005
|
|
|
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
23
CAM Commerce Solutions, Inc.
Schedule II — Valuation and Qualifying Accounts
Years Ended September 30, 2007, 2006, and 2005
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Deductions/Accounts
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Balance at
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Additions Charged
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Written Off Net of
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Balance at End of
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Beginning of Year
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to Income
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Recoveries
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Year
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Allowance for Doubtful Accounts Receivable
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2007
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$
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154,000
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$
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21,000
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$
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53,000
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$
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122,000
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2006
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|
$
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146,000
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$
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37,000
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$
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29,000
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$
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154,000
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2005
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$
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155,000
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$
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178,000
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$
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187,000
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$
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146,000
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24
EXHIBIT INDEX
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Exhibit
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Description
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3(a)
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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).
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3(b)
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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).
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10(a)
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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).
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10(b)
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Employment Agreement and Change in Control Agreement for Geoffrey D. Knapp, amended on
December 20, 2006, (incorporated by reference to the Form 8-K, filed on December 20, 2006).
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10(c)
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Employment Agreement and Change in Control Agreement for Paul Caceres, amended on December
20, 2006, (incorporated by reference to the Form 8-K, filed on December 20, 2006).
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10(d)
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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).
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10(e)
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2000 Stock Option Plan (incorporated by reference to Exhibit 10(i) to the 2000 Annual Report
on Form 10-K filed on December 21, 2000).
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10(f)
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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).
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10(g)
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Indemnity Agreements (incorporated by reference to Form 8-K, filed on November 18, 2004)
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10(h)
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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)
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10(i)
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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)
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|
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10(j)
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Henderson, Nevada Office Lease Agreement (incorporated by reference to the Form 8-K filed on
December 19, 2006)
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13(a)
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Annual Report to Stockholders for the fiscal year ended September 30, 2007
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23a
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Consent and Report on Schedule of Independent Registered Public Accounting Firm
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23b
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Consent and Report on Schedule of Independent Registered Public Accounting Firm
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31 (a)
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Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act.
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31 (b)
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Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act.
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|
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32
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Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of
the Sarbanes-Oxley Act.
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The company’s SEC File No. for all SEC filings referenced, other than the S-8 filings, is
000-16569.
25
Cam Commerce Solutions (MM) (NASDAQ:CADA)
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Cam Commerce Solutions (MM) (NASDAQ:CADA)
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