SecProbe.io

CORRESP
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filename1.htm

      April
      18, 2005

      CaminoSoft
      Corp

      600
      Hampshire Road, #105

      Westlake
      Village, CA 91361

      Tel
      (805) 370-3100

      Fax
      (805) 370-3200

      www.caminosoft.com

Craig
Wilson

Senior
Assistant Chief Accountant

United
States Securities and Exchange Commission

450 Fifth
Street, N.W.

Washington,
D.C. 20549

      Re:

      CaminoSoft Corp. File no. 033-064534-LA

      Form 10-KSB: For the Year Ended September 30,
  2004

      Form 10-QSB: For the Quarterly Period Ended December 31,
      2004

 Dear Mr.
Wilson:

On behalf
of CaminoSoft Corp. (“CaminoSoft” or the “Company”), we hereby submit responses
to the comments set forth in the letter from the Securities and Exchange
Commission (the “Commission”) dated April 5, 2005.

Annual
Report on Form 10-KSB for the Year Ended September 30, 2004

Note 1
- Summary of Significant Accounting Policies

Revenue
Recognition, page F-8

    1.

      You
      indicate in your response to our comment no. 3 that you do not have any
      multiple element arrangements and your software arrangements always
      include one year of support and update. Considering your software
      arrangements always include software, support and updates it would appear
      that your software arrangements have multiple elements. Help us understand
      why your software arrangements, which include software, support and
      updates are not multiple element arrangements. Specifically address your
      consideration of paragraph 9 of SOP 97-2 in your response. We refer you to
      paragraphs 9 and 34-72 of SOP 97-2.

Company
Response:

In the
Company’s prior response to comment number 3, we indicated that we did not have
multiple element arrangements. However, upon further review of SOP 97-2, the
Company has concluded that certain of its sales contain multiple element
arrangements. The Company notes that SOP 97-2, provides that the fee for each
item making up the multiple elements should be allocated to the various elements
based on vendor-specific objective evidence of fair value, regardless of any
separate prices stated within the contract for each element. SOP 97-2 provides
that one form of vendor-specific objective evidence of fair value is the price
charged when the same element is sold separately. Based on this definition of
vendor-specific objective evidence, the Company has properly allocated the
revenue between the product and support items based on the individual list price
of each element of the arrangement.

The sales
of both product and service are based on an evidence of an arrangement (almost
always a purchase order specific to the purchase of either software or annual
service or both listed separately). In the case of product, the Company
recognizes revenue when delivery has occurred. In either a product or annual
service sale the Company’s fee is fixed and determinable. All sales are based on
the individual clients credit terms, based on history and outside credit
information, therefore the Company believes collectibility is probable. The
Company’s software product sales do not require significant production,
modification, or customization and can be installed and operated by a client
with out any further interface with the Company. Therefore the Company
recognizes product revenue after receipt of a purchase order, delivery of the
product with a fixed fee, with credit terms normally net 30 days based on the
clients credit worthiness, which makes collection probable. Other services are
recognized when the services are rendered. Annual support services revenue is
recognized ratably over the term of the contract period.

    2.

      It
      does not appear from your response to our comment no. 3 that you have
      established VSOE for the fair value of your perpetual software licenses,
      considering “all” software license arrangements include one year of
      support and updates. Tell us whether you have established VSOE for your
      perpetual licenses pursuant to paragraph 10 of SOP 97-2. If you have not
      established VSOE for your perpetual software licenses, confirm that you
      are recognizing revenue in accordance with the residual method. Tell us
      how you have considered SOP 98-9 in applying the residual method, if
      applicable, and specifically address your consideration of paragraphs .06
      a and b. Revise your revenue recognition policy as
  needed.

Company
Response:

The
Company has established VSOE for both its product and services. Each item on the
Company’s price list can be sold with other products or annual service or on a
stand-alone basis. Sales of a perpetual software license for our products can be
made on a stand-alone basis without a service contract or as in virtually all of
the sales of these licenses can be sold with an annual service contract. Each
product and the annual service for each product have a consistent list price.
Many clients purchase additional server licenses for use after the initial sale.
These licenses are sold for the same list price as the initial sale and the same
list price with or with out an annual service contract. After the initial sale
of product and annual service the clients will purchase a second year of annual
service based on the same list price for annual service as the first year of
service. Most clients renew service contracts for the duration of their use of
the product. Therefore, we sell annual service year after year to clients based
on the same price as the initial year creating VSOE for the annual service
contracts. As defined in SOP 97-2, one example of vendor-specific objective
evidence of fair value is the price charged when the same element is sold
separately. Based on this definition of vendor-specific objective evidence, the
Company has properly allocated the revenue between the product and support items
based on the individual list price.

As the
Company has established VSOE for both the product and the service, it does not
recognize revenue in accordance with the residual method. Notwithstanding the
foregoing, the Company believes its revenue recognition policy would remain the
same. There is vendor-specific objective evidence of the fair values of all
undelivered elements in the arrangements as noted above. In this regard, if a
fee were recognized using the residual method, the arrangement fee is recognized
as follows: (a) the total fair value of the undelivered elements, as indicated
by vendor-specific objective evidence, is deferred and (b) the difference
between the total arrangement fee and the amount deferred for the undelivered
elements is recognized as revenue related to the delivered elements. Based on
this method, the revenue amount of the initial sale for the undelivered element
(the annual service) would be taken ratably over the term of the contract. The
remaining balance of the sale, which would be for the perpetual software
license, would be recognized when the applicable revenue recognition criteria
under the SOP are met; evidence of an arrangement to purchase the product exist,
the delivery has occurred, the price is fixed and determinable based on the list
price for the product, and based on credit policies, collectibility is probable.
Therefore the Company would recognize the revenue for each individual item the
same way as dictated by the current revenue recognition policy. However, since
the Company is not utilizing the residual method, we feel it would not be proper
to change our revenue recognition policy.

    3.

      We
      note from your response to comment no. 3 that product support is based on
      a percentage of new product license fees and support can be purchased
      separately. Considering your response refers specifically to product
      support as a percentage of license fees, confirm that “updates”, which
      include unspecified upgrades, maintenance releases and patches, are
      included in your product support fee. Tell us the fee or range of fees, as
      a percentage of “new” license fees, for product support included with you
      software arrangements, product software renewals stipulated in your
      software arrangements and for product support sold separately. We may have
      further comments based on your response.

Company
Response:

Unspecified
upgrades, or patches, are included in our product support fee. The Upgrades are
deliverable only on a when-and-if-available basis and as defined in SOP 97-2,
are considered PCS. Vendor-specific objective evidence does exist for these
services in the aggregate as described above; however, no vendor-specific
objective evidence exists for the unspecified upgrades on a stand-alone basis.
When-and-if-available deliverables should be considered in determining whether
an arrangement includes multiple elements; however, SOP 97-2 states that if
sufficient vendor-specific objective evidence does not exist for the allocation
of revenue to the various elements of the arrangement, and if the only
undelivered element in an arrangement is PCS, the entire fee should be
recognized ratably. Because the timing, frequency, and significance of
unspecified upgrades can vary considerably, the point at which unspecified
upgrades are expected to be delivered should not be used to support income
recognition on other than a straight-line basis. As such, the Company has
recognized the product support fee consisting of PCS and unspecified upgrades
ratably over the service contract period.

    4.

      We
      note from your response from our comment no. 7 that the relative fair
      values of debt and warrants were allocated at the time of issuance. It is
      not evident from your response whether the $750,000 of proceeds from this
      issuance were allocated to warrants and debt based on their relative fair
      values. Supplementally, provide your computation for allocating the
      proceeds from this issuance to warrants and debt. In your computation
      clearly indicate the interest rate you utilized in arriving at the fair
      value of the debt without warrants. Also provide your computations for
      allocating proceeds from any other issuances of debt, which included
      warrants or other equity instruments. We refer you to paragraphs 15 and 16
      of APB 14.

Company
Response:

The
computation for allocating the proceeds from the issuance to warrants and debt
was as follows:

    July
      2004

      Allocation
      of

      Allocation
      of

      Fair
      Value

      Proceeds

      Fair
      Value of Warrants

      $

      500,000

      42

      %

      $

      312,500

      Fair
      Value of Debt

      700,000

      58

      %

      437,500

      $

      1,200,000

      100

      %

      $

      750,000

The value
of the warrants was based on the Black-Scholes calculation resulting in a fair
value of approximately $500,000. The fair value of the debt without warrants was
discounted based on an interest rate of 10% rather than the stated rate of
7%.

In August
2002, a warrant to purchase 500,000 shares of common stock, previously issued to
Renaissance Capital Group, Inc., was extended three years in conjunction with
and as a requirement to anticipated additional financing for the Company. The
estimated value based on the Black-Scholes calculation of $176,224 was allocated
in full to the warrant at the time it was extended since there was neither debt
issued nor proceeds.

In
December 2002, the Company issued a 6% convertible debenture for up to
$1,000,000 to Renaissance Capital Group, Inc. The Company made monthly draws
based on cash flow to replenish operating funds and the full amount was drawn
during fiscal year 2003.

    5.

      In
      your response to our prior comment no. 7 you confirm that you will
      “re-class” debt discount in future filings. Supplementally provide the
      amounts classified in deferred financing costs that relate to debt
      discount as of September 30, 2004 and 2003 and each interim period for
      2005, 2004 and 2003 and the issuances to which they relate. In your
      response include your assessment of the materiality of the “re-class” for
      all the aforementioned periods pursuant to SAB Topic 1M. Also specifically
      address your consideration of the impact of the “re-class” on any debt
      covenants.

Company
Response:

The
amounts classified in deferred financing costs that relate to debt discount are
as follows:

      Quarter
      Ended

      Quarter
      Ended

      Quarter
      Ended

      Year
      Ended

      December
      31,

      March
      31,

      June
      30,

      September
      30

      2002

      2003

      2003

      2003

      August
      2002 issuance

      $

      176,224

      $

      161,539

      $

      146,854

      $

      132,169

      July
      2004 issuance

      --

      --

      --

      --

      $

      176,224

      $

      161,539

      $

      146,854

      $

      132,169

      Quarter
      Ended

      Quarter
      Ended

      Quarter
      Ended

      Year
      Ended

      December
      31,

      March
      31,

      June
      30,

      September
      30

      2003

      2004

      2004

      2004

      August
      2002 issuance

      $

      117,484

      $

      102,799

      $

      88,114

      $

      73,429

      July
      2004 issuance

      --

      --

      --

      285,957

      $

      117,484

      $

      102,799

      $

      88,114

      $

      359,386

      Quarter
      Ended

      December
      31,

      2004

      August
      2002 issuance

      $

      58,744

      July
      2004 issuance

      246,963

      305,707

The
Company considered the relevant facts and circumstances in assessing the
materiality of “re-class” for the previous periods.

The
factors included:

    ·

      Whether
      the misstatement masks a change in earnings or other
  trends

    ·

      Whether
      the misstatement hides a failure to meet analysts’ consensus expectations
      for the enterprise

    ·

      Whether
      the misstatement changes a loss into income or vice
  versa

    ·

      Whether
      the misstatement has the effect of increasing management’s
      compensation

The
resulting re-class is a balance sheet only adjustment and would not affect net
losses, loss per share or cash flows for the pervious periods.

    ·

      Compliance
      with loan covenants or other contractual
requirements

The
resulting re-class would not affect any loan covenants.

In
addition, the amounts of the previously classified deferred financing costs were
clearly identified in the balance sheet and not buried in another line item.
Furthermore, the footnotes clearly disclose the nature and amounts of such costs
as well as the accounting treatment, including the method and timing of the
subsequent amortization. The Company believes that a reasonable person relying
upon the previously filed financial reports would not have been influenced by
the correction of this item.

All
questions and comments regarding the foregoing can be addressed to David
Ficksman on (310) 789-1291 or the undersigned on (805) 370-3100.

Kind
regards,

Stephen
W. Crosson

Chief
Financial Officer

CaminoSoft
Corp.

cc: David
Ficksman

Sheri
Watts

Michael
Skelton

Martin
Casaus