SECURITIES
      AND EXCHANGE COMMISSION


**Washington
      D.C. 20549**







FORM
      10-KSB




x
            ANNUAL
                REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934 [FEE REQUIRED]




For
      the
      fiscal year ended September 30, 2007




or




o
            TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934 [NO FEE REQUIRED]





For
      the
      transition period from _____________ to _______________




Commission
      file number 1-12312





CAMINOSOFT
      CORP.


(Name
      of
      small business issuer in its charter)


California
              
              95-3880130(State
                  of incorporation)
              
              (I.R.S.
                  Employer Identification No.)





**600
      Hampshire Road, Suite 105, Westlake Village, California
      91361**


(Address
      of principal executive offices)




Issuer’s
      telephone number: (805) 370-3100




Securities
      registered under Section 12(b) of the Exchange Act: None




Securities
      registered under Section 12(8) of the Exchange Act: Common Stock no par
      value.





Check
      mark indicates whether the issuer is not required to file reports pursuant
      to
      Section 13 or 15(d) of the latest Exchange Act.  o





Check
      mark indicates whether the issuer (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 x   NO
o




Check
      mark indicates that the disclosure of delinquent filers pursuant to Item 405
      of
      Regulation




S-B
      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-KSB or any amendment to this Form 10-KSB.
      o





Check
      mark indicates whether the registrant is a shell company (as defined in Rule
      126-2 of the Exchange Act.)


YES
o NO
        x





Issuer’s
      revenues for its most recent fiscal year were $2,078,690.





The
      aggregate market value of the voting stock held by non-affiliates of the
      registrant as of December 1, 2007 was approximately $476,333.





Number
      of
      shares outstanding of each of the issuer’s classes of common stock as of
      December 1, 2007: 14,258,756 shares of common stock, no par value.





The
      following documents are incorporated by reference into this report:
      None.










FORWARD-LOOKING
      STATEMENTS





In
      this
      annual report we make a number of statements, referred to as “ *forward-looking
      statements,”* which
      are intended to convey our expectations or predictions regarding the occurrence
      of possible future events or the existence of trends and factors that may impact
      our future plans and operating results. These forward-looking statements are
      derived, in part, from various assumptions and analyses we have made in the
      context of our current business plan and information currently available to
      us
      in light of our experience and perceptions of historical trends, current
      conditions and expected future developments and other factors we believe to
      be
      appropriate in the circumstances. You can generally identify forward-looking
      statements through words and phrases such as *“seek”,
      “anticipate”, “believe”, “estimate”, “intend”, “plan”, “budget”, “project”, “may
      be”, “may likely result”,* and
      similar expressions. When reading any forward looking statement you should
      remain mindful that all forward-looking statements are inherently uncertain
      as
      they are based on current expectations and assumptions concerning future events
      or future performance of our company, and that actual results or developments
      may vary substantially from those expected in or implied by that statement
      for a
      number of reasons or factors, including those expressed in the section entitled *“Management’s
      Discussion and Analysis and Plan of Operation.”*





Each
      forward-looking statement should be read in context with, and with an
      understanding of, the various other disclosures concerning our company and
      our
      business made elsewhere in this annual report as well as other public reports
      filed with the United States Securities and Exchange Commission. You should
      not
      place undue reliance on any forward-looking statement as a prediction of actual
      results or developments. We are not obligated to update or revise any
      forward-looking statement contained in this annual report to reflect new events
      or circumstances unless and to the extent required by applicable
      law.





**PART
      I**





Item
      1. DESCRIPTION
      OF BUSINESS.




BUSINESS




OVERVIEW





We
      develop and manufacture software solutions that store, manage, and safeguard
      large quantities of data created in a business and application settings. Our
      software for Microsoft Windows 2000 and 2003 and Novell NetWare environments
      enables organizations to maximize storage resources, reduce backup and recovery
      time and control file retention and is available worldwide through commercial
      distributors, value-added resellers, systems integrators and Original Equipment
      Manufacturers (“O.E.M.”) partners.





CaminoSoft
      Corp. was organized in 1983 as Interscience Computer Services, Inc. to be a
      third-party provider of maintenance services for computer hardware and related
      peripheral equipment. During 1998 and 1999 the hardware maintenance and high
      speed printing toner and fusing agent businesses were sold. On September 17,
      1999, we acquired certain assets (the “Camino Assets”) from Camino Software
      Systems, Inc. (“Camino”) for 468,000 shares of our common stock and the
      assumption of $315,172 of certain Camino liabilities. The Camino Assets
      consisted of the name, Camino Software Systems, Inc., the Highway Server
      hierarchical data storage management (“HSM”) software, certain business
      contracts, and intangible personal property. On April 17, 2000, we changed
      our
      name to CaminoSoft Corp. to reflect the change to a software sales and
      development firm.





In
      November 2001, we entered into a non-exclusive licensing and distribution
      agreement with Novell, Inc., which allowed Novell and its distribution channel
      partners to sell our suite of software solutions.





In
      January 2002, our “managed server and storage server” products for Novell
      NetWare operating systems were included for distribution on the Novell product
      price list. As of June 30, 2003, the products were removed at our request from
      the Novell price list and a new agreement, allowing Novell sales personnel
      to
      sell and promote our products, is now in place. We actively participate in
      Novell’s “technology partner” and PartnerNet “marketing partner” programs.




2





In
      July
      2002, our products were certified as “ca smart,” Computer Associates’
certification for compatibility with its BrightStor Portal and ARCserve line
      of
      enterprise storage management solutions. We also became a Computer Associates
      “partner,” which opens up additional distribution channels for our products in
      conjunction with Computer Associates enterprise software.





In
      July
      2002, our Managed Server HSMTM for Windows 2000 and 2003 operating systems
      received certification for compatibility from Microsoft. We are a member of
      the
      Microsoft “certified partner” program, which allows distribution partners to
      sell and distribute our Windows 2000/2003-based products.





In
      February 2003, we entered into a licensing and distribution agreement with
      Legato Systems, Inc. for marketing, distribution, future development and
      customer service of certain Legato products for Novell NetWare operating
      systems. The products specified are “Standby ServerTM ” for NetWare,
“SnapShotServerTM ” for NetWare, and “OFFSite ArchiveTM ” for NetWare. Legato
      transitioned all customer service to us as of February 2003. We now have a
      broad
      base of products and solutions for the Novell NetWare storage market, which
      include failover, fault tolerance, mirroring, offsite archiving, and improved
      disaster recovery. We continue to sell and service these Novell NetWare specific
      products currently.





In
      March
      2003, we entered into a distribution agreement with Ingram Micro Inc., pursuant
      to which Ingram Micro will distribute our storage management products for
      NetWare and Windows 2000/2003 and our acquired Legato products for NetWare
      in
      North America.





In
      June
      2003, we released a new version of OFFSite Archive for NetWare. OFFSite Archive
      3.0 is the first of a suite of products to be enhanced and released under the
      CaminoSoft name. The product provides a solution for offsite disaster-recovery
      for Novell server-based networks by maintaining asynchronous replicas of
      mission-critical enterprise data in a secure, offsite location, thereby keeping
      the information protected and available.





In
      February 2004, we joined EMC Corporation’s Centera Partner Program and completed
      the integration of The Managed Server storage management - Centera Edition
      with
      the EMC Centera Compliance Edition content addressed storage or CAS solution.
      EMC Centera represents an entirely new software-driven storage architecture
      specifically designed to address the information storage requirements of
      unchanging digital assets, such as print and mail electronic “reference”
documents.





In
      February 2004, we completed the development of a product named Managed Client
      HSMTM for Windows XP. Based on our Managed Server HSM for Windows 2000/2003
      solution, selected as a SIIA 2004 Codie Award “Best Storage Software” finalist,
      this innovative Windows XP-based product brings vital storage management
      capabilities to popular Microsoft desktops.





In
      May
      2004, we joined Hewlett Packard’s Information Lifecycle Management Partner
      Program. Our Managed
      Server HSM software provides a solution for automatically handling reference
      file dispersal and retention based on a consistent set of administrative
      management policies. By combining our software with the HP StorageWorks
      solutions and services portfolio, organizations may simplify and better control
      the provisioning and utilization of their data storage resources.





On
      June
      30, 2005, we signed an OEM licensing and distribution agreement with Computer
      Associates International for our Managed Server HSM for Windows 2000 and 2003,
      Managed Server Library Edition and Managed Server HSM for Windows XP products.
      The OEM agreement allows Computer Associates to distribute these products under
      the BrightStor suite of storage management products for Computer Associates.




3





In
      July
      2005, the Company certified its suite of HSM products for use with the nStor
      line of SATA based storage hardware. nStor’s hardware products are now certified
      to work with the Company’s suite of storage management products to provide
      Information Lifecycle Management storage hardware and software
      solutions.





In
      July
      2005, the Company received “Ready for IBM Tivoli Software” certification for the
      HSM suite of data management products for use with IBM Tivoli storage
      infrastructures. The Company is currently distributing Managed Server HSM Tivoli
      Edition for use in IBM Tivoli back up and storage environments.





In
      August
      2005, the Company did a second round of formal certification with EMC Centera
      compliance and non compliance storage for our Managed Server HSM products.
      The
      Company tested its software products with a third party testing firm and was
      awarded “Centera Proven Edition” status for our HSM products. This EMC
      certification signifies to storage clients, current and prospective, that our
      software is certified and approved for use with EMC Centera data storage
      devices.





In
      September 2006, the Company announced release of an upgraded version of Managed
      Server HSM - Tivoli Edition. The enhanced version of Managed Server HSM supports
      the IBM System Storage DR550. The IBM System Storage DR550 is ideal for clients
      seeking near-line storage application needs at an entry level price point while
      capitalizing on mainframe inspired levels of reliability, security, and
      functionality. The Company’s solution, which has “Ready for IBM Tivoli Software”
validation provides a straightforward, cost-effective solution for managing
      data
      storage across multiple tiers, including the DR550, IBM Tivoli storage pool
      devices, SAN’s, SATA RAID subsystems, NAS target appliances, and general purpose
      servers.





During
      September 2006, the Company released Managed Server HSM for NetApp. The NetApp
      edition runs on a Windows 2000/2003 server and provides true file system
      integration via NetApp’s FPolicy® application program interface. Key advantages
      for customers include, fast efficient recall of migrated files, reclamation
      of
      NetApp NAS data storage space for active production file usage, dramatic
      reduction in the amount of time needed for backup (and recovery in the event
      of
      an outage), and facilitation of compliance with corporate and industry
      regulations governing data file retention and deletion.





During
      February 2007, the Company announced a partnership with RAID Inc. to provide
      data and storage management solutions. RAID is a manufacturer of enterprise
      class storage with options including fibre channel, SAS and SATA solutions
      that
      deliver scalability, redundancy and speed. Organizations can automate file
      migration and retrieval from primary to secondary and tertiary storage utilizing
      the combination of Managed Server HSM and RAID’s line of storage devices to
      address the rapid growth of data while providing storage resource and data
      management.





During
      May 2007, the Company announced support for IBM N series unified storage
      products. The Company successfully completed interoperability testing with
      IBM®
System StorageTM and has been confirmed as IBM System Storage Proven. The program
      allows IBM and third-party partners to deliver products and solutions that
      are
      tested to work together in IBM storage environments. The Company believes the
      latest certification and interoperability testing will open additional
      opportunities for joint selling with IBM sales teams around the world.





On
      September 6, 2007, the Company entered into an Agreement and Plan of Merger
      with
      Shea Development Corp. Upon closing the Merger the shareholders of the Company
      will retain 4.99% of the fully diluted capital stock after giving effect to
      shares of the Company’s Common Stock (i) to be issued to the holders of Shea
      Common Stock; (ii) issuable upon conversion of the Shea Preferred Stock; (iii)
      issuable upon exercise of the newly issued Shea options and warrants; and (iv)
      which will be issued or issuable in connection with financing to be undertaken
      between the signing of the Agreement and Closing with gross proceeds of at
      least
      $6,000,000 at a per share price of not less than $0.50. It is anticipated that
      the merger will be concluded during the first half of calendar year 2008.
      Although no assurance can be given that the merger will in fact be completed,
      the Company’s continuation as a going concern depends on the completion of the
      merger.




4





Research
      and Development





Research
      and development costs, which consist primarily of software development costs,
      are expensed as incurred and amounted to $361,965 and $484,043 for the years
      ended September 30, 2007 and 2006, respectively.





OUR
      PRODUCTS





Our
      products are designed to meet the storage management needs of small, medium,
      and
      enterprise organizations. We serve markets which produce and manage large
      amounts of data such as Banking, Financial Services, Healthcare, Legal Services,
      Engineering and Architectural Services, Federal and State Government, and Higher
      Education. We believe that our products and solutions enable organizations
      to
      (a) reclaim expensive storage resources, (b) reduce manual intervention in
      managing files, (c) reduce the amount of time needed for back-up and recovery,
      (d) establish automated policies for compliance with new laws and regulations
      governing data retention, and (e) set up data lifecycles for different types
      of
      information in production environments.





Managed
      Server HSM





Our
      Managed Server HSM software provides a solution for data management. Designed
      to
      meet the data storage management requirements for local area networks (“LAN”),
      wide area networks (“WAN”), and intranet environments, Managed Server HSM offers
      the ability to manage files on Microsoft Windows and Novell NetWare servers
      in
      environments where mass storage devices are deployed.





Our
      Managed Server HSM can accommodate large volumes of information. We have
      partnered with The Messaging Architects’ to provide a Novell GroupWise e-mail
      archiving solution. Their GWArchive product in conjunction with Managed Server
      HSM, addresses the archival and compliance needs of GroupWise e-mail users.
      For
      GroupWise customers who just want to manage the growth of their e-mail file
      attachments, as opposed to archiving and content searching, Managed Server
      HSM
      can manage GroupWise attachments as it does normal data files.





Our
      Managed Server HSM-Centera Proven Edition provides organizations with a storage
      hierarchy capable of significant expansion, while addressing regulatory
      requirements for data retention. Once relegated to optical disks, tape archives,
      or file cabinets, fixed content data is now being driven to Content Addressable
      Storage (“CAS”) solutions. Organizations running Novell NetWare and Microsoft
      Windows server environments can implement a structured, online data repository
      through which they can manage, access, and protect their fixed content data.
      All
      of the standard benefits of Managed Server HSM are now available for users
      of
      the EMC Centera. By applying a consistent set of policies, network system
      administrators can control the migration, location, and retention of files
      throughout their lifecycle across all storage tiers, including high-performance
      storage area network (“SAN”) and network attached storage (“NAS”) subsystems,
      general purpose disk arrays, and EMC Centera archives. Files migrated in such
      a
      way tend to become more fixed in nature over time as they move along the storage
      hierarchy. The Centera system’s combined features of fixed content optimization,
      high availability, scalability, and cost effectiveness make it very attractive
      as an archive solution for controlling the otherwise explosive growth of an
      organization’s primary storage infrastructure.





Our
      Managed Server HSM-Tivoli Edition directly operates with IBM Tivoli Storage
      Manager. It also provides a straightforward, cost effective solution for
      managing data storage across multiple tiers of storage, including Tivoli storage
      pool devices, SAN’s, RAID subsystems, NAS target appliances and general purpose
      servers. Managed Server HSM Tivoli Edition allows organizations to leverage
      existing investments in Tivoli software and hardware resources by making use
      of
      the storage capacity, high availability, security, and protection provided
      the
      Tivoli Storage Manager policies and infrastructure. It also allows organizations
      to better plan contemplated investment in Tivoli software and hardware by making
      available an automated multi-tiered storage environment based on the current
      and
      planned data growth of the organization.




5





StandbyServer
      for NetWare





StandbyServer
      for NetWare is a server mirroring solution for NetWare servers that connect
      one
      or more primary servers to a standby machine. If a primary server fails, due
      to
      hardware or software failure, the standby machine automatically takes over
      and
      makes the mirrored data and network services available to users in just a few
      moments. Data is mirrored between the servers using a dedicated high-speed
      link,
      creating a fully redundant system that protects users against both hardware
      and
      software failures. The StandbyServer configuration consists of three main
      elements: a primary server, a standby server, and the communications path that
      connects them. The disk devices in the standby machine are treated as external
      disk systems to the primary server.





OFFSite
      Archive for NetWare





OFFSite
      Archive for NetWare is an electronic data vaulting and disaster recovery product
      for NetWare servers that protect data in the event of a disaster by
      electronically transferring a stable point-in-time image of the data to an
      offsite location. OFFSite Archive automatically transfers data to be protected
      from a source server to a target server using the IPX or IP protocol over a
      LAN,
      WAN, or Internet connection. The latest version of OFFSite Archive allows
      multiple source servers to mirror data to a single remotely-located target
      server. OFFSite Archive uses SnapShotServer for NetWare (discussed below)
      technology to create snapshots of protected volumes of data. Each snapshot
      contains all of the data, or a pointer to the data, on the source server’s
      protected volume at the instant the snapshot was taken. This snapshot is then
      transferred from the source server to the target server. Through an initial
      synchronization, all of the data on the source server is mirrored to the target
      server. Then, after the initial synchronization, only the delta changes are
      sent
      to the target server. Since OFFSite Archive does not mirror data in real-time,
      a
      high-speed communications link is not required.





SnapShotServer
      for NetWare





SnapShotServer
      for NetWare gives an administrator more control of the back-up process. With
      the
      capability to capture live data at any time with SnapShotServer, open files
      or
“live” databases can be backed-up at the administrator’s convenience. The
      program creates “snapshot” images of “live” data volumes at
      administrator-defined intervals. These snapshots can then be mounted as regular
      NetWare volumes and backed up by any NetWare approved back-up utility. When
      taking a snapshot of a volume, SnapShotServer creates a virtual image of the
      volume; there is no actual duplication of the entire volume. If changes are
      made
      to the original data after taking the snapshot, the program makes a copy of
      the
      original data before it is changed and stores that copy in its buffer. This
      buffer and the unchanged portions of the disk make up the snapshot volume,
      which
      provides a virtual image of the volume as it was at the time the snapshot was
      taken. SnapShotServer works with both StandbyServer and OFFSite Archive.





COMPETITION





The
      competition in the storage systems market consists of a small group of leading
      vendors, such as EMC, Hewlett Packard, IBM, Hitachi Data Systems, and Network
      Appliance, and a cadre of hardware and software companies who OEM, remarket,
      or
      aggregate storage products from third parties.


Our
      products compete in the data management software segments. The cost barriers
      for
      entry into these markets are relatively low, which means our competitors can
      range from small companies with limited resources to large, more established
      companies with substantial resources. Some competitors have substantially
      greater financial, technical, marketing, sales, distribution, and personnel
      resources.




6





SALES
      AND
      MARKETING STRATEGY





Our
      sales
      and marketing strategy has been to establish partnerships with storage vendors
      and storage channel partners worldwide in order to introduce and promote joint
      solutions. We have been targeting large Novell NetWare and GroupWise customers
      with Managed Server HSM for NetWare and are also now using the same strategy
      to
      target organizations using Microsoft Windows operating systems.





Strategic
      Partnerships





To
      take
      advantage of the large NetWare customer installed base, we have partnered with
      firms such as Novell, Computer Associates, and EMC to solicit introductions
      into
      their accounts as an approved technology partner. We receive numerous leads
      generated from Novell’s website as a result of our partnership, whereby visitors
      to their website can search for third-party NetWare solutions and are provided
      access to our website link. We are also engaging Novell sales and service
      engineers at the field level to gain introductions and access to their accounts.
      Our ability to support both Netware and Windows is an advantage no matter which
      operating system an account wishes to acquire.





We
      partner with EMC to promote joint sales of their Centera (magnetic WORM
      compliance) subsystem through Managed Server HSM - Centera Proven Edition,
      which
      is EMC certified through strict independent testing. EMC selected Veritest
      to
      perform integration testing for EMC Centera, which utilize a range of rigorous
      test criteria designed by EMC and Veritest to ensure each certified partner
      meet
      a very high level of quality and operability.





The
      certification of Managed Server HSM for Windows 2000 and our partnership with
      Microsoft was another milestone in our strategic plan for multi-platform
      distribution. Adding support for Windows 2003 servers has opened up new
      partnering opportunities with other strategic storage vendors.





The
      first
      strategic partnership to specifically utilize Managed Server HSM for Windows
      technology is with CA under the OEM Licensing and Distribution Agreement signed
      on June 30, 2005. As of the date of this filing CA (formerly known as Computer
      Associates) and the Company are working on a plan to jointly sell the Company’s
      products in conjunction with CA’s line of BrightStor and Unicenter products. The
      Company will now directly sell its products into CA customer prospects needing
      the data management and data movement provided by the Company’s ILM product
      line. This will allow CA to focus on its suite of enterprise level products
      while we focus on the mutli tiered storage environment solutions within these
      joint sales.





IBM
      has
      certified our Managed Server products with Ready for IBM Tivoli Software
      validation. The Company can now offer its suite of data management solutions
      for
      use in existing and future IBM Tivoli Storage Manager environments. Managed
      Server HSM Tivoli Edition will provide users of Tivoli back up and Tivoli
      storage pools the full range of benefits provided by automated multi-tiered
      HSM.
      Our strategic plan includes leveraging these capabilities and IBM’s distribution
      channel to help the Company promote this relationship and new product offerings
      in the upcoming fiscal year.





Channel
      Partnerships





In
      addition to working with large storage vendors to gain assess to their installed
      base of customers, CaminoSoft is expanding its value added reseller (“VAR”)
      program to recruit high-end storage resellers, VARs, and Systems Integrators
      to
      do the same with their customer base. During the prior fiscal year we announced
      a Premier Reseller program to target these high-end channel partners with a
      goal
      of having broad geographic and industry coverage.





Working
      with our strategic partner storage vendors, we intend to bring on additional
      non-exclusive distributors worldwide that support our strategy and open new
      markets for our ILM solutions. The strategic partner relationships developed
      during the current fiscal year will also open additional distribution channels
      not previously available to the Company.




7




Major
      Customer





We
      currently rely upon three distributors for approximately 42% of our aggregate
      gross revenues. If we were to lose one or more of these distributors, our
      operations would be materially effected.





Technology
      Partnerships





To
      assist
      us in providing as much of a complete solution as possible for our target
      markets and clients, we will continue to establish technology partnerships
      that
      broaden our product portfolio. We signed an integration and distribution
      agreement with Pegasus Disk Technologies to distribute InveStore archive
      management software drivers for UDO, magneto-optical, and DVD management. The
      Company also completed certification testing and announced solutions combining
      Managed Server HSM for NetWare and Windows 2000/2003 with nStor’s NexStor® 4700
      Serial ATA data storage systems. The combination provides users with reliable
      lower cost storage, and increased data availability for storing migrated
      information from expensive production storage.





We
      have
      also established partnerships with two firms that provide e-mail archiving
      solutions: The Messaging Architects (Novell GroupWise e-mail systems) and
      Executive Technologies (Microsoft Exchange/Outlook email systems). Together,
      we
      provide the basic platform for e-mail and electronic document retention policy
      compliance.





We
      have 7
      full time employees and employ additional people as consultants on a full time
      basis as needed.




Item
      2. DESCRIPTION
      OF PROPERTY





As
      of
      December 1, 2007, the Company leases one office facility in Westlake Village,
      California for the Company’s executive offices pursuant to a lease extension
      expiring January 31, 2008, at a rental rate of $10,335 per month.





Item
      3.  LEGAL
      PROCEEDINGS





The
      Company may, from time to time, be involved in legal proceedings, claims and
      litigation arising in the ordinary course of business. It is possible the
      outcome of such legal proceedings, claims and litigation could have a material
      effect on the operating results or cash flows when resolved in a future period.
      These matters are not expected to have a material adverse effect upon the
      Company’s financial statements.





Currently
      the Company has no ongoing legal proceedings.




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





The
      Company had no submission of matters to a vote of security holders during the
      fourth quarter of the current fiscal year.




**PART
      II**





Item
      5.  MARKET
      FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER
      PURCHASES OF EQUITY SECURITIES





The
      Common Stock is currently traded in the OTC Electronic Bulletin Board under
      the
      symbol “CMSF”. The following table sets forth the high and low sales prices for
      the Common Stock during the two most recent fiscal years. The prices reflect
      inter-dealer prices without retail mark-ups, mark-downs or commissions and
      may
      not represent actual transactions.




8


Common
                  Stock Sales PricesSymbol
                  “CMSF”
              
              High
              
              LowYear
                  Ended September 30, 2006October
                  1, 2005 - December 31, 2005
              
              $
              1.40
              
              $
              0.97January
                  1, 2006 - March 31, 2006
              
              $
              1.14
              
              $
              0.76April
                  1, 2006 - June 30, 2006
              
              $
              0.78
              
              $
              0.40July
                  1, 2006 - September 30, 2006
              
              $
              0.40
              
              $
              0.27Year
                  Ended September 30, 2007October
                  1, 2006 -December 31, 2006
              
              $
              0.45
              
              $
              0.14January
                  1, 2007 - March 31, 2007
              
              $
              0.46
              
              $
              0.17April
                  1, 2007 - June 30, 2007
              
              $
              0.21
              
              $
              0.09July
                  1, 2007 - September 30, 2007
              
              $
              0.14
              
              $
              0.05





As
      of
      December 2003 the Company issued in a private placement 3,243,243 shares of
      common stock and 5 year warrants to purchase 3,243,243 shares with 50% of the
      warrants at an exercise price of $0.74 and 50% at an exercise price of $1.11
      for
      $1,200,000. The funds will be used to support business expansion and
      operations.





During
      July 2004, the Company issued 5 year warrants to purchase 1,415,094 shares
      of
      common stock at $0.53 per share. The warrants were issued in conjunction with
      a
      $750,000 two year loan. The loan matures on July 19, 2006 at which time the
      unpaid principal and all accrued and unpaid interest will become due and
      payable. The note calls for monthly interest payments of 7% of the outstanding
      principal balance beginning September 1, 2004.





During
      the year ended September 30, 2004, the Company issued 2,476,000 options to
      purchase the Company’s common stock at prices ranging from $0.41 to $0.63 per
      share to employees, consultants and directors under the year 2000 employee
      stock
      option plan.





During
      September 2004, the Company issued 340,136 shares of stock as commitment shares
      as part of an equity financing. The commitment shares are part of a common
      stock
      purchase agreement which will allow the Company to draw up to $6,000,000 through
      daily sales of its Common Stock. The Company has agreed to register 3,680,272
      shares which include the commitment shares to sell during a 30 month period.





During
      October 2005, the Company negotiated an extension of the two parts or the
      convertible debenture with a total principal balance of $1,750,000. Pursuant
      to
      a Renewal and Modification agreement dated October 28, 2005, the lender agreed
      to extend the maturity date of the two 6% Convertible Debentures dated November
      27, 2002 in the aggregate principal amount of $1,750,000 to May 27, 2007. In
      consideration of such extension, the Company agreed to grant to the lender
      a
      five-year warrant to purchase 175,000 shares of Company Common Stock at an
      exercise price of $1.14 per share (subject to adjustment). The estimated value
      of the warrant ($166,093) was booked on the Company financial statements as
      debt
      discount and is being amortized over the term of the extension. During the
      year
      ended September 30, 2007, $73,817 of discount was amortized and included in
      the
      statement of operations. On May 7, 2007, RENN Capital Group agreed to extend
      the
      maturity date of $1,750,000 convertible debenture until November 27, 2007.
      The
      Company will continue to pay interest of 6% on the current outstanding principal
      balance of $1,750,000, monthly during the term of the extension.




9





During
      February 2006, the Company issued to the Renaissance Capital Group managed
      funds
      an aggregate of 150,000 warrants to purchase the Company’s common stock at $0.86
      per share in consideration of an agreement to extend the $750,000 loan payable
      maturity date for an additional 18 months. The new maturity date for the notes
      will be January 19, 2008. The Company will continue to pay 7% interest on a
      monthly basis based on the current outstanding principal balance of $750,000.
      The estimated value of the warrants of $77,663 was recorded on the Company’s
      financial statements as debt discount and will be amortized over the term of
      the
      extension. During the year ended September 30, 2007, $42,362 of discount was
      amortized and included in the statement of operations.





On
      February 7, 2007, the Company received an aggregate of $200,000 from two three
      month secured convertible notes from two of RENN Capital Groups managed funds.
      Interest of 8% was paid in monthly installments during the term of the notes.
      The notes matured on May 7, 2007, at which time all principal and accrued and
      unpaid interest was due and payable in full. The notes are convertible at the
      option of the holder, into shares of the Company’s common stock, with an initial
      conversion price of $0.30 per share. The funds are being used to support the
      operations of the Company. Each holder of a note may convert in whole or in
      part
      the outstanding principal plus accrued but unpaid interest into the Company’s
      common stock at a conversion price of $0.30 per share. In the event that the
      Company issues additional common stock, or securities convertible into common
      stock, at a price lower than the conversion price while these notes are
      outstanding, the conversion price of these notes will automatically adjust
      downward to such price at which new common stock has been issued. The conversion
      price of the note, however, shall never be adjusted to less than $0.01 per
      share. Pursuant to renewal and modification agreements dated May 7, 2007, the
      RENN Capital Group agreed to extend the maturity dates of two $100,000 notes
      payable until November 7, 2007. The Company will continue to pay 8% interest
      monthly based on the current outstanding principal balance of $200,000. Also
      included in the amendment is a minimum price per share of not less than $0.01
      per share for the $200,000 notes payable, which have an initial conversion
      price
      of $0.30 per share.





Subsequent
      to September 30, 2007, and prior to the date of this filing the Company
      negotiated to extend the maturity dates of debt due within the next 4 months.
      Pursuant to renewal and modification agreements the Company extended the total
      debt with an aggregate principal balance of $2,700,000 to February 27, 2008.
      In
      addition to extending the debt the Company also converted from cash payments
      of
      interest to interest payments in unregistered common stock beginning November
      1,
      2007.




All
      of
      the foregoing securities were issued pursuant to an exemption from the
      registration requirements of the Securities Act of 1933, as amended, pursuant
      to
      Section 4(2) thereof and Regulation D promulgated thereunder. No commissions
      were paid.





As
      of
      September 30, 2007, there were 132 holders of record of the Company’s common
      stock. To date, the Company has not declared or paid any cash dividends with
      respect to its Common Stock, and the current policy of the Board of Directors
      is
      to retain earnings, if any, to provide for the growth of the Company.
      Consequently, no cash dividends are expected to be paid on the Common Stock
      in
      the foreseeable future.




Item
      6.  MANAGEMENT’S
      DISCUSSION AND ANALYSIS OR PLAN OF OPERATION





The
      following discussion and analysis should be read in conjunction with the
      financial statements and notes thereto appearing elsewhere in this Annual
      Report.




OVERVIEW





CaminoSoft
      Corp. (the “Company”) previously known as Interscience Computer Corporation, was
      incorporated under the laws of the State of California on October 14, 1983,
      to
      be a third party provider of maintenance services for computer hardware and
      related peripheral equipment. On September 17, 1999, the Company acquired the
      assets (the “Camino Assets”) of Camino Software Systems, Inc. (“Camino”), a data
      storage company, for 468,000 shares of the Company’s common stock and assumed
      $315,172 of certain Camino liabilities. The Camino assets consisted of the
      name,
      Camino Software Systems, Inc., the data storage management software, certain
      business contracts, and intangible personal property. The Company allocated
      the
      amount paid and assumed in the amount of $502,372 to the fair value of the
      software.


10


In
      December 2003, we completed certification of Pegasus Disk Technologies archive
      management software for use in conjunction with our data movement and lifecycle
      management solutions. The partnership allows us to create a virtualized data
      pool that expands secondary storage onto any number of archive devices while
      simplifying management of those resources. The combined solution allows
      organizations to meet strict compliance regulations and optimize storage
      investment and utilization. Also in December 2003, we announced completion
      of
      the “library edition” which allows comprehensive tape library management support
      for our information lifecycle management solutions. The Library Edition offers
      all of the features of our standard Managed Server HSM software and extends
      this
      functionality by providing the additional capability to migrate files further
      along a storage hierarchy to tape libraries, autoloaders, and jukeboxes from
      leading vendors such as Hewlett Packard, StorageTek, ADIC and Overland
      Data.





In
      February 2004, we completed integration of the Managed Server HSM software
      with
      EMC Corporations Centera and Centera Compliance edition content addressable
      storage. We also entered into EMC Corporations Centera Partner Program. Our
      Managed Server HSM Centera Edition enables customers to better manage
      utilization of storage resources throughout the enterprise. Our Managed Server
      Centera package combines data management and storage scalability, which are
      requirements that are increasing in the markets we serve. Also in February
      2004,
      we released “Managed Client HSM(TM)” for Windows XP. The new product provides the
      ability to automatically migrate, recall, and delete files based on age and
      activity criteria, supporting standard Windows XP infrastructures including
      wireless communications. “Managed Client HSM(TM)” adds another dimension of
      scalability and affordability to our ILM suite of products and solutions.
“Managed Client HSM(TM)” provides the same type of automated data movement and
      management as the managed server products while running on workstations or
      home
      user pc’s or lap tops. It allows IT administrators to now protect user
      information that was stored on the workstation in the enterprise IT storage
      environment for back up and replication.





On
      June
      30, 2005, the Company signed an OEM software licensing and distribution
      agreement with Computer Associates International, Inc. (“CA”). The Company will
      provide Windows HSM, both server and client editions along with Managed Server
      Library Edition private labeled for CA’s distribution. The Company received a
      non refundable $250,000 payment in July 2005 and has delivered, with CA’s full
      acceptance, the CA branded and licensed versions of the licensed products.
      The
      agreement called for two royalty pre-payments, the first for $500,000 was
      received during October 2005. The second pre payment of $250,000 was paid on
      the
      anniversary date of the contract, June 30, 2006. CA and the Company have agreed
      to jointly sell into CA customer prospects. CA will focus its sales on the
      BrightStor and Unicenter suite of products provided by CA, and the Company
      will
      directly sell and focus on sales of the Company’s ILM suite of products
      compatible with CA’s BrightStor suite of products.





In
      July
      2005, the Company certified its suite of HSM products for use with the nStor
      line of SATA based storage hardware. nStor’s hardware products are now certified
      to work with the Company’s suite of storage management products to provide
      Information Lifecycle Management storage hardware and software
      solutions.





In
      July
      2005, the Company received “Ready for IBM Tivoli Software” certification for the
      HSM suite of data management products for use with IBM Tivoli storage
      infrastructures. The Company is currently distributing Managed Server HSM Tivoli
      Edition for use in IBM Tivoli back up and storage environments.




11





In
      August
      2005, the Company did a second round of formal certification with EMC Centera
      compliance and non compliance storage for our Managed Server HSM products.
      The
      Company tested its software products with a third party testing firm and was
      awarded “Centera Proven Edition” status for our HSM products. This EMC
      certification signifies to storage clients, current and prospective, that our
      software is certified and approved for use with EMC Centera data storage
      devices.





In
      September 2006, the Company announced release of an upgraded version of Managed
      Server HSM - Tivoli Edition. The enhanced version of Managed Server HSM supports
      the IBM System Storage DR550. The IBM System Storage DR550 is ideal for clients
      seeking near-line storage application needs at an entry level price point while
      capitalizing on mainframe inspired levels of reliability, security, and
      functionality. The Company’s solution, which has “Ready for IBM Tivoli Software”
validation provides a straightforward, cost-effective solution for managing
      data
      storage across multiple tiers, including the DR550, IBM Tivoli storage pool
      devices, SAN’s, SATA RAID subsystems, NAS target appliances, and general purpose
      servers.





During
      September 2006, the Company released Managed Server HSM for NetApp. The NetApp
      edition runs on a Windows 2000/2003 server and provides true file system
      integration via NetApp’s FPolicy® application program interface. Key advantages
      for customers include, fast efficient recall of migrated files, reclamation
      of
      NetApp NAS data storage space for active production file usage, dramatic
      reduction in the amount of time needed for backup (and recovery in the event
      of
      an outage), and facilitation of compliance with corporate and industry
      regulations governing data file retention and deletion.





During
      February 2007, the Company announced a partnership with RAID Inc. to provide
      data and storage management solutions. RAID is a manufacturer of enterprise
      class storage with options including fibre channel, SAS and SATA solutions
      that
      deliver scalability, redundancy and speed. Organizations can automate file
      migration and retrieval from primary to secondary and tertiary storage utilizing
      the combination of Managed Server HSM and RAID’s line of storage devices to
      address the rapid growth of data while providing storage resource and data
      management.





During
      May 2007, the Company announced support for IBM N series unified storage
      products. The Company successfully completed interoperability testing with
      IBM®
System StorageTM and has been confirmed as IBM System Storage Proven. The program
      allows IBM and third-party partners to deliver products and solutions that
      are
      tested to work together in IBM storage environments. The Company believes the
      latest certification and interoperability testing will open additional
      opportunities for joint selling with IBM sales teams around the world.





On
      September 6, 2007, the Company entered into an Agreement and Plan of Merger
      with
      Shea Development Corp. Upon closing the Merger the shareholders of the Company
      will retain 4.99% of the fully diluted capital stock after giving effect to
      shares of the Company’s Common Stock (i) to be issued to the holders of Shea
      Common Stock; (ii) issuable upon conversion of the Shea Preferred Stock; (iii)
      issuable upon exercise of the newly issued Shea options and warrants; and (iv)
      which will be issued or issuable in connection with financing to be undertaken
      between the signing of the Agreement and Closing with gross proceeds of at
      least
      $6,000,000 at a per share price of not less than $0.50. Shea delivers business
      process management software solutions and service offerings. Shea’s solutions
      improve its customers’ ability to make better decisions, manage critical
      business processes, reduce expenditures, and improve efficiency.




Our
      software provides products and integrated solutions
      for addressing the increasing need for management of data. Today IT departments
      face a variety of challenges with some of the most critical relating to data
      storage and management. Two of these challenges are (1) reducing the total
      cost
      of ownership of data storage by better leveraging IT resources, both hardware
      and people, and (2) increasing productivity by enabling better access to
      information, thereby making quicker and faster decisions. Our software
      virtualizes pools of stored data both to the end-user transparently and to
      the
      IT administrator while integrating with most operating systems and applications.
      We can reduce the back-up window, lower the overall cost of storage and enhance
      the value of information across the organization. Our strategy has been built
      on
      the benefits our technology brings.





12





RISK
      FACTORS




**We
      have yet to establish any history of profitable
      operations.**




We
      have
      yet to establish any history of profitable operations. We have incurred annual
      operating losses of $507,708 and $1,072,383, for fiscal years 2005 and 2006
      respectively. During the year ended September 30, 2007, we incurred an operating
      loss of $422,491. As a result, at September 30, 2007 we had an accumulated
      deficit of $22,272,494. Our revenues have not been sufficient to sustain our
      operations. Our profitability will require the successful commercialization
      of
      products, solutions and services. No assurances can be given as to if or when
      this will occur or that we will ever be profitable.




**We
      are presently relying on the projected completion of our merger with Shea
      Development Corp. to continue our operations.**




At
      September 30, 2007 we had a cash balance of $72,343. We had operating cash
      flow
      deficits of $1,935,774, $187,113 and $375,504 for fiscal years ended September
      30, 2004, 2005 and 2006 and for the year ended September 30, 2007, an operating
      cash flow deficit of $569,252. We have entered into an agreement to merge with
      Shea Development Corp. which we anticipate will be completed during the first
      half of calendar year 2008. There can be no assurance that we will be able
      to
      complete the merger. Without the timely completion of the merger based on our
      current level of negative cash flow, we will have to cease or substantially
      curtail our operations on or before June 30, 2008.




**Our
      future operating results are unpredictable.**




Our
      operating results will depend on the enhancement of our existing products and
      the ability to market and sell the products. Any future success that we may
      achieve will depend upon many factors including factors which may be beyond
      our
      control or which cannot be predicted at this time. Uncertainties and factors
      which could cause actual results or events to differ materially from those
      set
      forth or implied include:





·
            Inability
                to acquire new customers;




·
            Inability
                to complete successful implementation of our
                software;




·
            Inability
                to provide applications in a manner that is
                scalable;




·
            Inability
                to offer new services that complement our existing offerings;
                or




·
            Inability
                to increase awareness of our brand.





**If
      we are unable to adapt our products to rapidly changing technology, our
      reputation and our ability to grow our revenues could be
      harmed.**




The
      markets we serve are characterized by rapidly changing technology, evolving
      industry standards, emerging competition and the frequent introduction of new
      software. There is no assurance that we will be able to enhance existing
      products or develop new products that meet changing customer needs in a timely
      and cost-effective manner. Prolonged delays resulting from our efforts to adapt
      to rapid technological change, even if ultimately successful, could harm our
      reputation within our industry and our ability to grow our
      revenues.




13




**We
      face significant competition from other providers of computer
      software.**




Our
      competitors in the storage systems market consists of a small group of leading
      vendors, such as EMC, HP, IBM, Hitachi Data Systems, and Network Appliance,
      and
      a cadre of hardware and software companies who OEM, remarket, or aggregate
      storage products from third parties.




Our
      products compete in the data management and high availability software segments.
      The cost barriers for entry into these markets are relatively low, which means
      our competitors range from small companies with limited resources to large,
      more
      established companies with substantial resources. However, among all of these
      competitors (and in some cases technology partners), we believe none offer
      a
      cross-platform Windows/NetWare solution to round out their Information Lifecycle
      Management (“ILM”) solution suites. Some competitors, regardless of size, have
      substantially greater financial, technical, marketing, distribution, personnel
      and other resources. It is possible that we may not have the resources to
      effectively compete with these companies.




**The
      market for our products is new and emerging, and is characterized by rapid
      technological advances, changing customer needs and evolving industry standards.**




We
      may
      not be successful in developing and marketing, on a timely and cost-effective
      basis, enhancements to our software products or new products which respond
      to
      technological advances and satisfy increasingly sophisticated customer needs.
      Our ability to meet our customers’ needs and evolving industry standards will
      depend on our:




·
            Ability
                to timely develop new software products that keep pace with developments
                in technology;





·
            Ability
                to meet evolving customer requirements which are often
                changing;





·
            Success
                at enhancing our current product offerings;
                and





·
            Delivering
                those products through appropriate distribution
                channels.




If
      we
      fail to introduce new products or if new industry standards emerge that we
      do
      not anticipate or adapt to, our software products could be rendered obsolete
      and
      our competitive position will be weakened.




**We
      could incur substantial costs defending our intellectual property from claims
      of
      infringement.**




The
      software industry is characterized by frequent litigation regarding copyright,
      patent, trademark and other intellectual property rights. We may be subject
      to
      future litigation based on claims that our own intellectual property rights
      are
      invalid. We expect that software product developers will increasingly be subject
      to infringement claims as the number of products and competitors in our industry
      segment grows and the functionality of products overlaps. Claims of infringement
      could require us to re-engineer or rename our products or seek to obtain
      licenses from third parties in order to continue offering our products. These
      claims could also result in significant expense to us and the diversion of
      our
      management and technical resources, even if we ultimately prevail. Licensing
      or
      royalty agreements, if required, may not be available on terms acceptable to
      us
      or at all.




14




**We
      may face interruption of production and services due to increased security
      measures in response to terrorism.**




Our
      business depends on the free flow of products and services through the channels
      of commerce. Recently, in response to terrorists’ activities and threats aimed
      at the United States, transportation, mail, financial and other services have
      been slowed or stopped altogether. Further delays or stoppages in
      transportation, mail, financial or other services could have a material adverse
      effect on our business, results of operations and financial condition.
      Furthermore, we may experience an increase in operating costs, such as costs
      for
      transportation, insurance and security as a result of the activities and
      potential activities. We may also experience delays in receiving payments from
      payers that have been affected by the terrorist activities and potential
      activities. The U.S. economy in general is being adversely affected by the
      terrorist activities and potential activities and any economic downturn could
      adversely impact our results of operations, impair our ability to raise capital
      or otherwise adversely affect our ability to grow our business.




CRITICAL
      ACCOUNTING POLICIES AND ESTIMATES





We
      have
      identified the following critical accounting policies and estimates that affect
      our more significant judgments and estimates used in the preparation of our
      financial statements. The preparation of our financial statements in conformity
      with accounting principles generally accepted in the United States of America
      requires that we make estimates and judgments that affect the reported amounts
      of assets and liabilities. We evaluate those estimates on an ongoing basis,
      including those related to asset impairment, contingencies and litigation.
      These
      estimates are based on the information that is currently available to us and
      on
      various other assumptions that we believe to be reasonable under the
      circumstances. Actual results could vary from those estimates under different
      assumptions or conditions. We believe that the following critical accounting
      policies affect significant judgments and estimates used in the preparation
      of
      our financial statements.




Long
      Lived Assets.




·
            We
                review our long-lived assets, which include property and equipment
                and
                capitalized software, for possible impairment whenever events or
                changes
                in circumstances indicate that the carrying value of an asset may
                not be
                recoverable. If the estimated future cash flows (undiscounted and
                without
                interest charges) from the use of an asset are less than its carrying
                value, we record a write-down to reduce that asset to its estimated
                fair
                value. The fair value is determined based on discounted cash flows
                or
                appraised values depending on the nature of the
                asset.





Research
      and development costs.




·
            Research
                and development costs, which consist primarily of software development
                costs, are expensed as incurred. Statement of Financial Accounting
                Standards No. 86, “Accounting for the Cost of Computer Software to be
                Sold, Leased, or Otherwise Marketed” (“SFAS 86”), provides for the
                capitalization of certain software development costs incurred after
                technological feasibility of the software is established. As of September
                30, 2007, the Company has capitalized approximately $325,000 of such
                software development costs. The Company expects to continue research
                and
                development projects into the future along with additional capitalized
                development as projects reach proof of concept stages of development.
                The
                current net balance of capitalized software is approximately $65,724.
                In
                the current fiscal year the Company has not capitalized any new software
                development. Software capitalized is stated at cost. Amortization
                is
                computed on the straight-line method based upon the estimated useful
                life
                of the asset, primarily seven years. During the current year the
                Company
                had approximately $362,000 in R & D expense compared to approximately
                $484,000 during the prior year. The Company will continue the R & D
                program into the future as new products are developed and integrated
                into
                our data management suite of
                solutions.




15


Revenue.




·
            Revenue
                is recognized when persuasive evidence of an arrangement exists,
                delivery
                has occurred or services have been provided, the fee is fixed or
                determinable, and collectibility is probable. We enter into certain
                arrangements where we are obligated to deliver multiple products
                and/or
                services (multiple elements). In these transactions, we allocate
                the total
                revenue among the elements based on the sales price of each element
                when
                sold separately (vendor-specific objective
                evidence).


Revenue
      for products licensed to original equipment manufacturers (OEM’s), and perpetual
      licenses for current products in our server based data management suite of
      products is recognized as products are shipped. If annual service is a part
      of
      the sale agreement that portion of the revenue is recorded as unearned due
      to
      undelivered elements including, annual telephone support and the right to
      receive unspecified upgrades/updates of our data management products on a
      when-and-if-available basis. Unspecified upgrades, or patches, are included
      in
      our product support fee. The upgrades are delivered only on a
      when-and-if-available basis and as defined in SOP 97-2, are considered
      Postcontract Customer Support (“PCS”). Vendor-specific objective evidence does
      exist for these services in the aggregate; 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 for the support
      should be recognized ratably. Because the timing, frequency, and significance
      of
      unspecified upgrades/updates can vary considerably, the point at which
      unspecified upgrades/updates are expected to be delivered should not be used
      to
      support income recognition on other than a straight-line basis. As such, the
      Company recognizes the product support fee consisting of PCS and unspecified
      upgrades/updates ratably over the service contract period.





RESULTS
      OF OPERATIONS





FISCAL
      YEARS ENDED SEPTEMER 30, 2007 AND SEPTEMBER 30, 2006





During
      the current fiscal year, the Company continued to focus on development of
      features and upgrades on products, while expanding their functionalities to
      other operating platforms including Network Applicance filers. The Company
      has
      continued its sales and marketing strategy to focus on development and support
      for its data storage and management solutions, while utilizing its partners’
sales, marketing and distribution channels. Revenues for the current fiscal
      year
      increased by approximately 17%, from $1,773,000 in fiscal year 2006 to
      $2,079,000 for the current fiscal year. The revenue increase was a result of
      multiple factors, including but not limited to transitioning the product line
      for enterprise selling opportunities which include bundling our software with
      partner software and hardware products. These enterprise sales have much longer
      sales cycles in return for an increase in the average sale value. Sales for
      the
      Company’s software products were approximately $1,226,000 or 59% of the total
      revenue for the current fiscal year; annual service contracts constituted
      approximately 39% or approximately $807,000; and the remaining 2% of revenue
      was
      derived from installation and other services. The high availability products,
      StandbyServer and OFFSite Archive for NetWare accounted for approximately 15%
      of
      the total product sale revenue the same as in the prior fiscal year, with the
      Company’s core HSM technology for both NetWare and Windows representing the
      other 85% of the total product sale revenue for the current fiscal year.
      Billings for annual service contracts increased during the current fiscal year
      due to increased product sales of the Company’s HSM product line. Deferred
      revenue decreased from approximately $1,134,000 in the fiscal year ended
      September 30, 2006 to approximately $824,000 for the current fiscal year. The
      decrease in deferred revenue was due to the increase in product sales revenue
      during the current fiscal year related to amortization of the final two years
      of
      CA product sale royalties, which contributed approximately $242,000 to total
      product sales during the current fiscal year. Cost of sales increased from
      approximately $157,000 in the prior fiscal year to approximately $165,000 in
      the
      current fiscal year representing a increase of approximately 5%. Cost of sales
      as a percentage of revenue decreased slightly from approximately 9% in fiscal
      year ended September 30, 2006 to approximately 8% during the current fiscal
      year. Gross profit increased by approximately 18% or $298,000 from $1,616,000
      in
      fiscal year 2006 to $1,914,000 in fiscal year 2007. The increase in gross profit
      resulted from the Company’s increased revenue from product sales during the
      current fiscal year.




16





Selling
      and administrative expenses for the current year were approximately $1,961,000,
      a decrease of approximately $223,000 or 10% as compared to fiscal year 2006.
      The
      decrease was a result of the Company’s continued effort to minimize overhead
      expenses while maintaining sales and marketing support for our partner and
      channel distribution strategy. The change from a direct sales approach to one
      of
      a support role for the Company’s OEM partners sales forces continued during the
      fiscal year, which reduced wage expense related to direct selling, while
      increasing the expense related to marketing and sales support for our OEM
      partners distribution channels. The Company intends to continue expansion of
      the
      sales and marketing support functions for direct selling and to continue
      training for both technical support teams and sales forces of the Company’s
      current and future distribution, and business partners.





Depreciation
      expense for the current fiscal year of approximately $14,000 decreased
      approximately 33% or $7,000 as compared to fiscal year ended September 30,
      2006.
      The depreciation expense decrease is due to the full depreciation of office
      and
      test equipment during the fiscal year.





Research
      and development expense for the current year was approximately $362,000 as
      compared to approximately $484,000 for fiscal year 2006. This decrease is due
      to
      completion of projects and reduction of certain non employee resources during
      the first half of the current fiscal year. During the current fiscal year,
      the
      Company completed and certified its Managed Server HSM with Network Appliance,
      creating Managed Server HSM NetApp Edition. During the current fiscal year
      the
      Company also certified its Managed Server HSM products with IBM Tivoli DR550
      storage platform. The Company now offers Managed Server HSM Tivoli Edition
      compatible with the IBM DR550. The Company began new research and development
      projects during the second half of the current year and plans to continue the
      research and development program during the coming year. As projects complete
      and become viable the Company expects to capitalize portions of the development
      expense. The Company may also add additional consulting development resources
      during the upcoming fiscal year which will contribute to the research and
      development expense during the upcoming fiscal year. These development project
      completions have added to the Company’s ability to gain additional market access
      through the sales and distribution channels of companies like EMC, IBM, Hitachi,
      Network Appliance and Computer Associates.





There
      were no other income items during the current or prior fiscal year. The current
      fiscal year included approximately $312,000 of interest expense related to
      borrowing balances, which is a decrease in interest expense of approximately
      $65,000 over fiscal year 2006. Approximately $145,000 of the total current
      fiscal year interest expense was non cash debt discount representing the expense
      for warrants issued with debt, which is being expensed over the term of the
      debentures and loan that make up the debt. The amount of non cash debt discount
      recorded as expense decreased by approximately $76,000 during the current fiscal
      year. Also included in other expense for the fiscal year ended September 30,
      2006, was a write off of approximately $262,000 in deferred financing expense
      resulting from the Company’s determination it was unlikely the equity would be
      drawn on and therefore the costs were impaired.





LIQUIDITY
      AND CAPITAL RESOURCES




The
      Company incurred a net loss of $734,851 and $1,712,253 for the years ended
      September 30, 2007 and 2006, respectively, and has an accumulated deficit of
      $22,272,494 as of September 30, 2007.  We
      have
      entered into an agreement to merge with Shea Development Corp. which we
      anticipate will be completed during the first half of calendar year 2008. There
      can be no assurance that we will be able to complete the merger. Without the
      timely completion of the merger based on our current level of negative cash
      flow, we will have to cease or substantially curtail our operations on or before
      June 30, 2008.





During
      fiscal year 2007, the Company’s cash position decreased by approximately
      $370,000, from approximately $442,000 at September 30, 2006 to $72,000 at
      September 30, 2007. The Company’s revenues increased during the fiscal year and
      the Company is still not at a break even point operationally. The accounts
      receivable balance as of September 30, 2007 decreased by approximately $58,000
      or 23% as compared to the fiscal year ended September 30, 2006.




17





During
      December 2003, the Company issued in a private placement, 3,243,243 shares
      of
      common stock and 5 year warrants to purchase 3,243,243 shares with 50% of the
      warrants at an exercise price of $0.74 and 50% at an exercise price of $1.11,
      for $1,200,000. The funds were used to support business expansion and
      operations.





During
      July 2004, the Company received $750,000 from a two year secured loan from
      Renaissance Capital Group managed funds. Interest is being paid at 7% in monthly
      installments based on the outstanding principal balance. As part of the funding,
      the Company issued five year warrants to purchase an aggregate of 1,415,094
      shares of Common Stock at an exercise price of $0.53 per share. During February
      2006, the Company issued to the RENN Capital Group managed funds an aggregate
      of
      150,000 warrants to purchase the Company’s common stock at $0.86 per share in
      consideration of an agreement to extend the maturity date for the $750,000
      note
      payable for an additional 18 months. The new maturity date for the notes is
      January 19, 2008. The Company continued to pay interest at 7% on a monthly
      basis
      based on the current outstanding principal balance of $750,000. The estimated
      value of the warrants of $77,663 was recorded on the Company’s financial
      statements as debt discount and is being amortized over the term of the
      extension.





During
      October 2005, the Company negotiated an extension of the two parts of the
      convertible debenture with a total principal balance of $1,750,000. Pursuant
      to
      a Renewal and Modification agreement dated October 28, 2005, the lender agreed
      to extend the maturity date of the two 6% Convertible Debentures dated November
      27, 2002 in the aggregate principal amount of $1,750,000 to May 27, 2007. In
      consideration of such extension, the Company agreed to grant to the lender
      a
      five-year warrant to purchase 175,000 shares of Company Common Stock at an
      exercise price of $1.14 per share (subject to adjustment). The estimated value
      of the warrant ($166,093) was recorded on the Company financial statements
      as
      debt discount and is being amortized over the term of the
      extension.





During
      February 2006, the Company issued to BFS US Special Opportunities Trust PLC
      and
      Renaissance US Growth & Income Trust PLC an aggregate of 697,674 shares of
      common stock at a price of $0.86 per share in a private placement for $600,000.
      The Company agreed to register the resale of its shares as soon as practicable.





On
      February 7, 2007, the Company received an aggregate of $200,000 from two three
      month secured convertible notes from two funds managed by RENN Capital Group,
      Inc. Interest of 8% will be paid in monthly installments during the term of the
      notes. The notes mature on May 7, 2007, at which time all principal and accrued
      and unpaid interest will be due and payable in full. The notes are convertible
      at the option of the holder, into shares of the Company’s common stock, with an
      initial conversion price of $0.30 per share. Each holder of a note may convert
      in whole or in part the outstanding principal plus accrued but unpaid interest
      into the Company’s common stock at a conversion price of $0.30 per share. In the
      event that the Company issues additional common stock, or securities convertible
      into common stock, at a price lower than the conversion price while these notes
      are outstanding, the conversion price of these notes will automatically adjust
      downward to such price at which the new common stock has been issued. The
      conversion price of the notes, however, shall never be adjusted to less than
      $0.01 per share.





Subsequent
      to September 30, 2007, and prior to the date of this filing the Company
      negotiated to extend the maturity dates of debt due within the next 4 months.
      Pursuant to renewal and modification agreements the Company extended the total
      debt with an aggregate principal balance of $2,700,000 to February 27, 2008.
      In
      addition to extending the debt the Company also converted from cash payments
      of
      interest to interest payments in unregistered common stock beginning November
      1,
      2007.





18




Going
      Concern





The
      accompanying consolidated financial statements have been prepared in conformity
      with accounting principles generally accepted in the United States of America,
      which contemplates continuation of the Company as a going concern. The Company
      had a net loss of $734,851 and utilized cash of $569,252 in operating activities
      during the year ended September 30, 2007, and had a working capital deficiency
      of $3,401,743 and shareholders’ deficiency of $3,443,585 at September 30, 2007.
      These factors raise substantial doubt about the Company’s ability to continue as
      a going concern. The consolidated financial statements do not include any
      adjustments relating to the recoverability and classification of recorded asset
      amounts, or amounts and classification of liabilities that might result from
      this uncertainty.





CONTRACTUAL
      OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS





The
      following summarizes our contractual obligations at September 30, 2007 and
      the
      effects such obligations are expected to have on liquidity and cash flow in
      future periods:


Payments
                  due by PeriodLess
                  than
              
              1-3
              
              4-5
              
              AfterTotal
              
              1-year
              
              Years
              
              Years
              
              5
                  YearsNotes
                  payable
              
              $
              2,700,000
              
              $
              2,700,000
              
              $
              —
              
              $
              —
              
              $
              —Interest
                  on notesPayable
              
              
              15,000
              
              
              15,000EmploymentAgreements
              
              
              159,000
              
              
              159,000Operating
                  leases
              
              
              41,340
              
              
              41,340
              
              
              —
              
              
              —
              
              
              —$
              2,915,340
              
              $
              2,915,340
              
              $
              —
              
              $
              —
              
              $
              —





Except
      for the operating leases and employment agreements above, the Company has no
      off-balance sheet arrangements that have or are reasonably likely to have a
      current or future effect on the Company’s financial condition, changes in
      financial condition, revenues, expenses, results of operations, liquidity,
      capital expenditures or capital resources.




NEW
      ACCOUNTING PRONOUNCEMENTS





In
      July
      2006, the FASB issued interpretation No. 48 (“FIN 48”), “Accounting for
      Uncertainty in Income Taxes,” which clarifies the accounting for uncertainty in
      income taxes recognized in the financial statements in accordance with FASB
      Statement No. 109, “Accounting for Income Taxes.” FIN 48 provides guidance on
      the financial statement recognition and measurement of a tax position taken
      or
      expected to be taken in a tax return. FIN 48 also provides guidance on
      derecognition, classification, interest and penalties, accounting in interim
      periods, disclosures, and transition. FIN 48 is effective for fiscal years
      beginning after December 15, 2006. Accordingly, FIN 48 will be adopted
      commencing in the first quarter of the Company’s fiscal year 2008.





In
      September 2006, the Financial Accounting Standards Board issued Statement No.
      157 (“SFAS 157”), “Fair Value Measurements.” FAS 157 establishes a formal
      framework for measuring fair value under GAAP. It defines and codifies the
      many
      definitions of fair value included among various other aurthoritative
      literature, clarifies and, in some instances, expands on the guidance for
      implementing fair value measurements, and increases the level of disclosure
      required for fair value measurements. Although SFAS No. 157 applies to and
      amends the provisions of existing FASB and AICPA pronouncements, it does not,
      of
      itself, require any new fair value measurements, nor does it establish valuation
      standards. SFAS No. 157 applies to all other accounting pronouncements requiring
      or permitting fair value measurements, except for: SFAS No. 123 (R), share-based
      payment and related pronouncements, the practicability exceptions to fair value
      determinations allowed by various other authoritative pronouncements, and AICPA
      Statements of Position 97-2 and 98-9 that deal with software revenue
      recognition. This statement is effective for financial statements issued for
      fiscal years beginning after November 15, 2007, and interim periods within
      those
      fiscal years.




19





In
      September 2006, the Financial Accounting Standards Board issued Statement No.
      158 (“SFAS 158”), “Accounting for Defined Benefit Pension and Other
      Postretirement Plans.” SFAS No. 158 requires that for public companies the full
      funding status of defined benefit pension and other postretirement plans be
      recognized on the balance sheet as an asset (for overfunded plans) or as a
      liability (for underfunded plans). In addition, SFAS No. 158 calls for
      recognition in other comprehensive income or gains or losses any prior service
      costs or credits that are not yet included as components of periodic benefit
      expense. Finally, SFAS No. 158 requires that the measurement of defined benefit
      plan assets and obligations be as of the balance sheet date. The Company plans
      to adopt the recognition provisions of SFAS No. 158 as of the end of the fiscal
      year end after December 15, 2006 and the measurement date provisions as of
      the
      balance sheet date for fiscal years ending after December 15, 2008.





In
      February 2007, the Financial Accounting Standards Board (FASB) issued SFAS
      Statement No. 159, “The Fair Value Option for Financial Assets and Financial
      Liabilities - Including an amendment of FASB Statement No. 115” (SFAS 159). SFAS
      159, which becomes effective for the Company on January 1, 2008, permits
      companies to choose to measure many financial instruments and certain other
      items at fair value and report unrealized gains and losses in earnings. Such
      accounting is optional and is generally to be applied instrument by instrument.
      The company does not anticipate that election, if any, of this fair-value option
      will have a material effect on its consolidated results of operations, financial
      position, or cash flows or disclosures.





The
      Company does not believe that the adoption of the above recent pronouncements
      will have a material effect on the Company’s consolidated financial position or
      results of operations.





Item
      7.  FINANCIAL
      STATEMENTS





The
      following is a list of financial statements filed herewith:





Consolidated
      Balance Sheets as of September 30, 2007 and September 30, 2006





Consolidated
      Statements of Operations for the years ended September 30, 2007 and
      2006





Consolidated
      Statements of Shareholders’ Deficiency for the years ended September 30, 2007
      and 2006





Consolidated
      Statements of Cash Flows for the years ended September 30, 2007 and
      2006





Notes
      to
      Consolidated Financial Statements




Item
      8.  CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
      ACCOUNTING AND FINANCIAL DISCLOSURE





During
      the Company’s fiscal years ended September 30, 2006 and 2007, there were no
      disagreements with Weinberg on any matter of accounting principles or practices,
      financial statement disclosure, or auditing scope of procedure, which
      disagreements if not resolved to the satisfaction of Weinberg would have caused
      it to make reference thereto in its reports on the Company’s financial
      statements. In addition, for the same periods, there have been no reportable
      events (as defined in Regulation S-B Item 304(a)(1)(iv)(B)).





Item
      8
      A.  CONTROLS
      AND PROCEDURES





(a)
            Evaluation
                of Disclosure Controls and
                Procedures




Disclosure
      Controls and procedures are designed to ensure that information required to
      be
      disclosed in the reports filed or submitted under the Exchange Act is recorded,
      processed, summarized and reported, within the time periods specified in the
      SEC’s rules and forms. Disclosure controls and procedures include, without
      limitation, controls and procedures designed to ensure that information required
      to be disclosed in the reports filed under the Exchange Act is accumulated
      and
      communicated to management, including the Chief Executive Officer and Chief
      Financial Officer, as appropriate, to allow timely decisions regarding required
      disclosures.


20


The
      Company carried out an evaluation, under the supervision and with the
      participation of the Company’s management, including the Company’s Chief
      Executive Officer and Chief Financial Officer, of the effectiveness of the
      design and operation of the Company’s disclosure controls and procedures as of
      the end of the period covered by this report. Based upon and as of the date
      of
      that evaluation, the Chief Executive Officer and Chief Financial Officer
      concluded that the Company’s disclosure controls and procedures are effective to
      ensure that the information required to be disclosed in the reports the Company
      files and submits under the Exchange Act is recorded, processed, summarized,
      and
      reported as and when required.





(b)
            Changes
                in Internal Controls





There
      were no changes in the Company’s internal control over financial reporting or in
      other factors that occurred during the Company’s last fiscal quarter that has
      materially affected, or is reasonably likely to materially affect, the Company’s
      internal control over financial reporting.





21


**PART
      III**





Item
      9.  DIRECTORS,
      EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
      WITH SECTION 16(a) OF THE EXCHANGE ACT





As
      of
      September 30, 2007, the directors and executive officers of the Company are
      as
      follows:


Name
                
                Age
                
                PositionRobert
                    Pearson
                
                71
                
                DirectorRobert
                    Degan
                
                68
                
                Chairman
                    of the BoardStephen
                    Crosson
                
                48
                
                Chief
                    Financial Officer,Chief
                    Operating Officer,Secretary
                    & DirectorRussell
                    Cleveland
                68
                
                DirectorMichael
                    Skelton
                
                60
                
                Chief
                    Executive Officer,DirectorLee
                    Pryor
                
                70
                
                Director


Robert
      Pearson. Mr. Pearson, who became a director in 1997, has been associated with
      Renaissance Capital Group (“RCG”) since April 1994. RCG is the investment
      advisor of the largest shareholders of the Company. Presently, Mr. Pearson
      serves as a Senior Vice President and Director of Corporate Finance of RCG.
      He
      served as Executive Vice President of the Thomas Group from May 1990 to March
      1994. For 25 years, Mr. Pearson held various senior management positions at
      Texas Instruments, including Vice President of Finance from October 1983 to
      June
      1985. Mr. Pearson holds directorships in the following companies: Poore
      Brothers, a manufacturer of snack food products; Advanced Power Technology,
      Inc., a power semiconductor manufacturer; eOriginal, Inc., a privately owned
      developer of technology and software for creation of electronic contracts;
      Laserscope, Inc., a marketer and manufacturer of lasers for medial use; Simtek
      Corporation, a fables semiconductor company that designs and markets
      non-volatile static random access memories and Shea Development Corp., a
      business process management software and services firm.




Robert
      Degan. Mr. Degan became a director in January 2001 and was named Chairman in
      March 2006. From 1989 to 1996, Mr. Degan was President and Chief Executive
      Officer of Tylink Corporation, a private company, which designs, manufactures
      and markets digital access products. In August 1996, Tylink Corporation was
      acquired by Sync Research a public company. From August 1996 to December 1996,
      Mr. Degan was Executive Vice President of Sync Research. From 1997 to 1998,
      Mr.
      Degan was Chairman, President and Chief Executive Officer of Summa Four Inc.,
      a
      public company, which is a leading provider of switching platforms. In 1998
      Summa Four, Inc. was acquired by Cisco Systems, Inc. and from November 1998
      through December 1999 Mr. Degan was General Manager of the Enhanced Services
      and
      Migration business unit of Cisco Systems, Inc. From January 2000 to the present,
      Mr. Degan has been a private investor. Mr. Degan holds a directorship with
      Overland Storage, a data storage manufacturing firm and Flexi International,
      both NASDAQ companies. On December 21, 2007, Mr. Degan resigned as Chairman
      of
      the Board and resigned from all related committee positions held as of that
      date. Mr. Degan resigned for personal reasons.




Stephen
      Crosson. Mr. Crosson joined the Company in March 1985 and was manager of
      accounting and government contracts and logistics. In September 1989, Mr.
      Crosson became a financial analysis officer with First Interstate Banks
      Controller’s office. In March 1992, Mr. Crosson returned to the Company as
      Director of Operations. In April 1995, he became Vice President of Operations.
      In January of 1997, Mr. Crosson became Corporate Secretary and in April 1998
      he
      became Chief Operating Officer and Treasurer. In January 2003, Mr. Crosson
      became the Chief Executive Officer, and in August 2003, Mr. Crosson was elected
      a director. In April 2004, Mr. Crosson became the Chief Financial Officer.
      Currently Mr. Crosson is the Chief Financial Officer, Chief Operating Officer
      and Corporate Secretary.




22





Russell
      Cleveland. Mr. Cleveland became a director in February 2004. Mr. Cleveland
      is
      the President, Chief Executive Officer, sole director, and the majority
      shareholder of the RENN Capital Group, Inc. Mr. Cleveland has been with RENN
      Group in these capacities for over ten years since the first fund was formed
      in
      1994. He is a Chartered Financial Analyst with more than 35 years experience
      as
      a specialist in investments for smaller capitalization companies. A graduate
      of
      the Wharton School of Business, Mr. Cleveland serves on the Boards of Directors
      of Renaissance US Growth Investment Trust PLC, BFS US Special Opportunities
      Trust PLC, Renaissance Capital Growth & Income Fund III, Inc., Integrated
      Security Systems, Inc., Tutogen Medical, Inc., Digital Recorders, Inc., and
      Cover-All Technologies, Inc.





Michael
      Skelton. Mr. Skelton joined the Company in April 2004 as the Chief Executive
      Officer. From August 2001 to April 2004, Mr. Skelton was an interim executive
      management consultant working with public and private technology companies.
      From
      1987 to 1992, Mr. Skelton was Vice President and General Manager of TAB Products
      Co., a records management company. From 1993 to 1995, Mr. Skelton was Vice
      President of Sales and Marketing for SCO Inc., a company that provides UNIX
      operating system software. From 1996 to 1997, Mr. Skelton was President and
      C.E.O. of TracePoint Technology, Inc., a provider of software developer tools.
      From 1998 to 1999, Mr. Skelton was Vice President of Sales for NetManage, Inc.,
      a provider of enterprise application integration software and services. From
      January 2000 to July 2001, Mr. Skelton was President and C.E.O. of Menta
      Software, Ltd., which provided technology to web enable Microsoft Windows
      applications. On December 20, 2007, Mr. Skelton resigned as Chief Executive
      Officer and resigned as a member of the Board of Directors. Mr. Skelton resigned
      to pursue other endeavors.





Lee
      Pryor. Mr. Pryor became a director in March 2006. Mr. Pryor is founder and
      chief
      executive officer of Interventures, LLC, an advisory and coaching services
      firm
      assisting start-up and late-stage entrepreneurial companies. During the past
      five years Mr. Pryor has provided advisory services to businesses for strategy
      evaluation, marketing programs and management best practices. Mr. Pryor also
      gives speeches on management and entrepreneurship and provides seminars and
      workshops on the topics of management, marketing and strategy to his clients.
      Mr. Pryor attended Johns Hopkins University, the U.S. Naval Academy, and
      Northwestern University. He is a frequent speaker at venture capital
      conferences, association meetings, and business schools on such topics as
      strategy, leadership, and managing for success.




FAMILY
      RELATIONSHIPS





There
      are
      no family relationships between or among the directors, executive officers
      or
      persons nominated or charged by us to become directors or executive
      officers.




MEETINGS;
      ATTENDANCE; COMMITTEES





The
      Board
      has an Audit Committee. The duties of the Audit Committee include (i)
      recommending to the Board the engagement of the independent auditors, (ii)
      reviewing the scope and results of the yearly audit by the independent auditors,
      (iii) reviewing our system of internal controls of procedures, and (iv)
      investigating, when necessary, matters relating to the audit functions. It
      reports to the Board concerning its activities. The current members of this
      Committee are Messrs Degan and Pryor. The Board of Directors has determined
      that
      Robert Degan is the Audit Committee Financial Expert and Mr. Degan is deemed
      to
      be independent under applicable rules. Mr. Degan serves as the audit committee
      chairman. The audit committee held four meetings during the current fiscal
      year.





The
      Board
      also has a Compensation Committee. The Compensation Committee makes
      recommendations to the Board concerning compensation and other matters relating
      to employees. The Committee also grants options under, and administers, our
      Stock Option Plan. The current members of the Committee are Messrs. Degan and
      Pryor. Mr. Pryor serves as chairman of the compensation committee. The
      Compensation Committee held one meeting during the current fiscal year.




23




DIRECTOR
      COMPENSATION





Directors
      do not receive any annual compensation. Outside directors receive $1,000 each
      for each meeting attended and reimbursement for out-of-pocket expenses for
      attending meetings. Mr. Pearson and Mr. Cleveland have waived the meeting fees.
      The board held ten meetings during the current fiscal year.





EMPLOYMENT
      AGREEMENTS





During
      the fiscal year ended September 30, 2004, the Company entered into an employment
      agreement with Michael Skelton (C.E.O. & Director). Mr. Skelton resigned
      effective December 20, 2007, the Company has agreed to pay Mr. Skelton as a
      consultant $14,000 per month through March 31, 2008.





During
      the fiscal year ended September 30, 2003, the Company entered into a two year
      employment agreement with Mr. Stephen Crosson to be Chief Executive Officer
      of
      the Company reporting to the Chairman of the Board of Directors. The contract
      was for two years beginning August 1, 2003, with an annual salary of $150,000
      per year with the possibility of bonuses at the discretion of the Board of
      Directors. The agreement was amended on April 19, 2004. Mr. Crosson is currently
      the Chief Financial Officer and Chief Operating Officer of the Company and
      will
      receive $12,500 per month for an indeterminate period of time. The contract
      includes a bonus fee of 1% of any acquisition price or licensing fee over
      $1,000,000 paid to the Company. If Mr. Crosson is terminated without cause
      he
      will receive salary and benefits for up to 6 months after termination.




COMPLIANCE
      WITH SECTION 16(a)





Section
      16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s
      executive officers and directors and persons who own more than 10% of a
      registered class of the Company’s equity securities to file with the Securities
      and Exchange Commission initial statements of beneficial ownership, reports
      of
      changes in ownership and annual reports concerning their ownership of common
      stock and other equity securities of the Company, on Forms 3, 4 and 5
      respectively. Executive officers, directors and greater than 10% shareholders
      are required by Commission regulations to furnish the Company with copies of
      all
      Section 16(a) reports they file.





CODE
      OF
      ETHICS





The
      Company has adopted a code of ethics that applies to the Company’s principal
      executive officer, principal financial officer and principal accounting officer.
      We have previously filed a copy of our Code of Ethics as an Exhibit to our
      Annual Report on Form 10-KSB for our fiscal year 2004, and the same is
      incorporated herein by this reference. In addition, a copy of our code of ethics
      can be obtained by writing our company at 600 Hampshire Road, Suite 105,
      Westlake Village, California 91361.


24


Item
      10.  EXECUTIVE
      COMPENSATION





The
      following tables and discussion set forth information with respect to all
      compensation awarded to, earned by or paid to our Chief Executive Officer and
      up
      to four of our executive officers whose annual salary and bonus exceeded
      $100,000 during our last completed fiscal year (collectively referred to in
      this
      discussion as the ‘named executive officers”). The officer designation indicates
      positions held as of September 30, 2007, the end of our last fiscal
      year.


Summary
      Compensation Table


Long
                  TermCompensationAwardsFISCAL
              
              ANNUAL
                  COMPENSATION
              
              SecuritiesYEAR
              
              
              
              
              
              ALL
              
              UnderlyingNAME
                  AND
              
              ENDED
              
              
              
              
              
              OTHER
              
              OptionsPRINCIPAL
                  POSITION
              
              SEPTEMBER
                  30,
              
              SALARY
              
              BONUS
              
              COMPENSATION
              
              SARsMichael
                  Skelton,
              
              
              2007
              
              $
              168,000
              
              
              —
              
              
              —
              
              
              —Chief
                  Executive Officer&
                  DirectorStephen
                  Crosson,
              
              
              2007
              
              $
              150,000
              
              
              —
              
              
              —
              
              
              —Chief
                  Financial Officer,Chief
                  Operating Officer,Corporate
                  Secretary &Director


Discussion
      of Compensation





Our
      compensation program consists of the following three components:




·
            base
                salary;




·
            bonuses;
                and




·
            awards
                of restricted stock or stock options from our Year 2000 Employee
                Stock
                Option Plan.





We
      believe that a combination of cash and common stock or options will allow us
      to
      attract and retain the services of the individuals who will help us achieve
      our
      business objectives, thereby increasing value for our shareholders.





In
      our
      fiscal year ended September 30, 2007, there was no restricted stock, stock
      options or bonuses issued to the named executive officers. Compensation for
      Mr.
      Skelton and Mr. Crosson consisted to annual base salary only.





Director
      Compensation





During
      the current fiscal year there were no fees or options issued to directors as
      compensation for services rendered. The Company intends to reinstate the
      compensation plan for directors in the future including fees for meetings
      attended and annual stock options.





The
      following table sets forth certain information concerning stock option awards
      granted to our executive officers. No options were exercised by our executive
      officers during the fiscal year.





OUTSTANDING
      EQUITY AWARDS AT FISCAL YEAR-END





Number
                of
            
            Number
                ofsecurities
            
            securitiesunderlying
            
            underlyingunexercised
            
            unexercised
            
            Option
            
            Optionoptions
                (#)
            
            options
                (#)
            
            exercise
            
            expirationName
            
            Exercisable
            
            Unexercisable
            
            price
                ($)
            
            dateMichael
                Skelton
            
            
            1,050,000
            
            
            350,000
            
            $
            0.63
            
            
            12/08/09Stephen
                Crosson
            
            
            48,000
            
            
            
            
            $
            0.56
            
            
            12/08/09Stephen
                Crosson
            
            
            60,000
            
            
            
            
            $
            5.00
            
            
            12/08/09Stephen
                Crosson
            
            
            120,000
            
            
            
            
            $
            3.87
            
            
            12/08/09Stephen
                Crosson
            
            
            120,000
            
            
            
            
            $
            1.55
            
            
            12/08/09Stephen
                Crosson
            
            
            50,000
            
            
            
            
            $
            0.95
            
            
            12/08/09Stephen
                Crosson
            
            
            100,000
            
            
            
            
            $
            0.61
            
            
            12/08/09Stephen
                Crosson
            
            
            100,000
            
            
            
            
            $
            0.44
            
            
            12/08/09Stephen
                Crosson
            
            
            300,000
            
            
            
            
            $
            0.55
            
            
            12/08/09Stephen
                Crosson
            
            
            85,000
            
            
            
            
            $
            0.41
            
            
            12/08/09Stephen
                Crosson
            
            
            25,000
            
            
            75,000
            
            $
            1.14
            
            
            12/08/09




25




Item
      11.  SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
      MANAGEMENT AND RELATED STOCKHOLDER MATTERS





The
      following table sets forth certain information regarding the beneficial
      ownership of the Company’s Common Stock as of September 30, 2007 by (I) each
      person who is known by the Company to own beneficially more than 5% of the
      Company’s outstanding Common Stock; (ii) each of the Company’s directors; (iii)
      the named Executive Officers; and (iv) executive officers and directors of
      the
      Company as a group:


COMMON
                  STOCK (1)NUMBER
              
              PERCENTAGE
                  OFOF
              
              OUTSTANDINGNAME
                  AND ADDRESS (2)
              
              SHARES
              
              (3)Robert
                  Pearson (4)Robert
                  Degan
              
              
              303,000
              (5)
              
              2.08Russell
                  Cleveland (4)Lee
                  Pryor
              
              
              35,000
              (6)
              
              0.24Stephen
                  Crosson
              
              
              1,230,770
              (7)
              
              8.06Michael
                  Skelton
              
              
              1,091,785
              (8)
              
              7.13Renaissance
                  Capital Growth &Income
                  Fund III, Inc
              
              
              5,321,226
              (9)
              
              33.178080
                  N. Central ExpresswaySuite
                  210Dallas,
                  Texas 75206Renaissance
                  US Growth &Income
                  Trust PLC
              
              
              4,667,698
              (10)
              
              29.328080
                  N. Central ExpresswaySuite
                  210Dallas,
                  Texas 75206BFSUS
                  Special OpportunitiesTrust
                  PLC
              
              
              7,420,029
              (11)
              
              38.318080
                  N. Central ExpresswaySuite
                  210Dallas,
                  Texas 75206All
                  executive officers anddirectors
                  as a group(6
                  persons)
              
              
              2,660,555
              
              
              15.99









(1) As
      used
      herein, the term beneficial ownership is defined by Rule 13d-3 under the
      Securities Exchange Act of 1934 as consisting of sole or shared voting power
      and/or sole or shared investment power subject to community property laws where
      applicable.




26




(2) Except
      as
      indicated, the address of each person is c/o the Company at 600 Hampshire Road,
      #105, Westlake Village, California 91361.




(3) Based
      on
      14,258,756 shares of Common Stock outstanding as of September 30, 2007.




(4) Does
      not
      include any shares owned by the Renaissance Funds described in the table. Mr.
      Pearson is an executive officer of Renaissance Capital Group, Inc. (“RCG”) which
      is the investment advisor to the Renaissance Funds and BFS US and the investment
      manager of Renaissance U.S.




(5) Includes
      13,000 shares of our common stock and four year non-qualified options from
      the
      Company to purchase 50,000 shares at $.95 per share, 35,000 shares from the
      Company at $.61 per share, 85,000 shares from the Company at $.44 per share,
      options to purchase 85,000 shares from the Company at $0.41 per share and
      options to purchase 35,000 shares from the Company at $0.62 per share.




(6) Includes
      four-year non-qualified options from the Company to purchase 35,000 shares
      at
      $0.62 per share.




(7) Includes
      222,770 shares of our common stock and currently exercisable options to purchase
      48,000 shares from the Company at $.56 per share, 120,000 shares from the
      Company at $3.87 per share, 60,000 shares from the Company at $5.00 per share,
      120,000 shares from the Company at $1.55 per share, 50,000 shares from the
      Company at $.95 per share, 100,000 shares from the Company at $.61 per share,
      100,000 shares from the Company at $.44 per share, options to purchase 300,000
      shares at $0.55 per share, options to purchase 85,000 shares at $0.41 per share,
      and options to purchase 25,000 shares at $1.14 per share, and does not include
      75,000 options not currently exercisable.




(8) Includes
      41,785 shares of our common stock and currently exercisable options from the
      Company to purchase 1,050,000 shares at $0.63 per share. Does not include
      350,000 options not currently exercisable.




(9) RCG
      is
      the investment advisor of the Renaissance Funds. The Common Shares deemed to
      be
      beneficially owned by the Renaissance Capital Growth and Income Fund III, are
      comprised of 3,539,414 shares of our Common Stock, options to purchase 26,500
      shares at $0.95 per share, options to purchase 18,550 shares at $0.61 per share,
      options to purchase 38,250 shares at $0.44 per share, options to purchase 37,400
      shares at $0.41 per share, warrants to purchase 540,541 shares at $0.74 per
      share, warrants to purchase 540,540 shares at $1.11 per share, warrants to
      purchase 471,698 shares at $0.53 per share, warrants to purchase 58,333 shares
      at $1.14 per share and warrants to purchase 50,000 shares at $0.86 per share.
      All of such securities are owned by the Renaissance Funds as described
      herein.




(10) RCG
      is
      the Investment Manager of Renaissance US. The Common Shares deemed to be
      beneficially owned by the Renaissance US Fund are comprised of 3,006,585 shares
      of our Common Stock and warrants to purchase 540,541 shares at $0.74 per share,
      warrants to purchase 540,540 shares at $1.11 per share, warrants to purchase
      471,698 shares at $0.53 per share, warrants to purchase 58,334 shares at $1.14
      per share and warrants to purchase 50,000 shares at $0.86 per
      share.




(11) RCG
      is
      the Investment Advisor for BFS US. The Common Shares deemed to be beneficially
      owned by BFS US are comprised of 2,312,818 shares of Common Stock and 3,446,099
      shares of Common Stock issuable upon conversion of an aggregate of $1,750,000
      of
      6% Convertible Debenture at a weighted average conversion price of $0.51 per
      share. Also includes warrants to purchase 540,541 shares at $0.74 per share,
      warrants to purchase 540,540 shares at $1.11 per share, warrants to purchase
      471,698 shares at $0.53 per share, warrants to purchase 58,333 shares at $1.14
      per share and warrants to purchase 50,000 shares at $0.86 per
      share.


27




Equity
      Compensation Plan Information





The
      following table sets forth certain information regarding the Company’s 2000
      Stock Option Plan. All information set forth below is as of September 30, 2007,
      pursuant to applicable regulations.


Number
                of securities remainingavailable
                for future issuance underequity
                compensation plans (excludingNumber
                of Securities to
            
            Weighted-average
            
            securities
              warrantsBe
                issuedupon exercise
            
            exerciseprice
                of
            
            and
                rightswarrantsOf
                outstandingoptions,
            
            outstanding
                options,
            
            and
                rightsreflectedWarrants
                andrights
            
            warrants
                andrights
            
            in
                (a))(a) (b)(a)
            
            (b)
            
            (c)Equity
                compensationPlans
                approved by
            
            
            8,632,837
            
            $
            0.86
            
            
            2,350,500Security
                holdersEquity
                compensationPlans
                not approved by
            
            
            —
            
            
            —
            
            
            —HoldersTOTAL
            
            
            8,632,837
            
            $
            0.86
            
            
            2,350,500




Shareholder
      Approved Plans:





The
      2000
      Stock Option Plan





The
      Company’s shareholders approved the 2000 Stock Option Plan as amended (the
“Plan”) in April 2001. Currently, the Plan authorizes the grant of options to
      purchase up to 6,000,000 shares of the Company’s Common Stock, of which options
      to purchase 2,350,500 shares were available for future issuance as of September
      30, 2007.





Non-Shareholder-Approved
      Plans:





There
      are
      no Non-Shareholder Approved Plans as of September 30, 2007 .





Item
      12.  CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDANCE




On
      November 27, 2002, the Company entered into a $1,000,000 6% Convertible
      Debenture Agreement with BFS US (the “BFS US Debenture”). The full amount was
      drawn during the fiscal year ended September 30, 2003. Interest of 6% per annum
      will be paid in monthly installments for three years based on the unpaid
      principal balance. The BFS US Debenture originally matured on November 27,
      2005,
      at which time the unpaid Principal Amount, and all accrued and unpaid interest
      and other charges, fees, and payments was due and payable. The conversion price
      is set at $1.00 unless, however, the five (5)-day average closing price for
      the
      Company’s common stock immediately prior to a disbursement is below $1.00, in
      which case, such five (5)-day average shall become the Conversion Price. As
      of
      September 30, 2004, we had a note payable principal balance of $1,000,000 in
      connection with this convertible debenture and no further funds available to
      borrow on this debenture. The debenture has certain non-operating covenants
      associated with the loan. During the fiscal year and as of September 30, 2007,
      the Company was in compliance with these covenants.





During
      July 2003, the BFS US entered into a $750,000 6% Convertible Debenture with
      the
      Company. The full amount was drawn during the fiscal year ended September 30,
      2003. Interest at a rate of 6% per annum is payable in monthly installments
      for
      26 months based on the unpaid principal balance. The debenture originally
      matured on November 27, 2005, at which time the unpaid Principal Amount, and
      all
      accrued and unpaid interest and other charges, fees, and payments then due
      under
      the debenture was due and payable in full. The debenture is convertible, at
      the
      option of the holder into shares of the Company’s common stock, with an initial
      conversion price of $0.50 per share. However, if the five (5)-day average
      closing price for the Common Stock immediately prior to each disbursement is
      below the $0.50 initial conversion price, the average closing price for such
      period shall become the conversion price. As of September 30, 2004, we had
      a
      note payable principal balance of $750,000 in connection with this convertible
      debenture and no further funds available to borrow on this debenture. The
      debenture has certain non-operating covenants associated with the loan. During
      the fiscal year and as of September 30, 2007, the Company was in compliance
      with
      these covenants.




28





During
      October 2005, the Company negotiated an extension of the two parts of the
      Convertible Debenture with a total principal balance of $1,750,000. Pursuant
      to
      a Renewal and Modification agreement dated as of October 28, 2005, the lender
      agreed to extend the maturity date of certain 6% Convertible Debentures in
      the
      aggregate principal amount of $1,750,000 to May 27, 2007. In consideration
      of
      such extension, the Company agreed to grant lender a five-year warrant to
      purchase 175,000 shares of Company Common Stock at an exercise price of $1.14
      per share (subject to adjustment). The estimated value of the warrant ($166,093)
      was recorded on the Company financial statements as debt discount, and was
      amortized over the term of the extension. On May 7, 2007, the lender agreed
      to
      extend the maturity date of the $1,750,000 Convertible Debenture until November
      27, 2007.





On
      December 18, 2003 the Company issued to the Renaissance Funds, BFS US and
      Renaissance US in a private placement an aggregate of 3,243,243 shares of common
      stock and 5-year warrants to purchase an aggregate of 3,243,243 shares with
      50%
      of the warrants at an exercise price of $0.74 per share and 50% at an exercise
      price of $1.11 per share for $1,200,000. The investors are affiliated with
      Renaissance Capital Group, Inc. See “Security Ownership of Certain Beneficial
      Owners and Management and Related Stockholder Matters.”





During
      July 2004, the Company received $750,000 from a two year secured loan from
      Renaissance Capital Group, Inc. managed funds. Interest is payable at 7% per
      annum in monthly installments based on the outstanding principal balance. As
      part of the funding, the Company issued five year warrants to purchase an
      aggregate of 1,415,094 shares of Common Stock at an exercise price of $0.53
      per
      share.





On
      February 21, 2006, the Company issued to Renaissance Capital, BFS US and
      Renaissance US an aggregate of 150,000 warrants to purchase shares of common
      stock at $0.86 per share in consideration of the agreement to extend notes
      payable to Renaissance Capital, BFS US and Renaissance US in the aggregate
      principal amount of $750,000 for an 18 month extension of the maturity date.
      The
      new maturity date for the notes will be January 19, 2008. The Company will
      continue to pay 7% interest on a monthly basis based on the current outstanding
      principal balance of $750,000.





On
      February 21, 2006, the Company issued to BFS US and Renaissance US an aggregate
      of 697,674 shares of common stock at a price of $0.86 per share in a private
      placement for $600,000.





On
      February 7, 2007, the Company received an aggregate of $200,000 from two three
      month secured convertible notes from two of RENN Capital Groups managed funds.
      Interest of 8% will be paid in monthly installments during the term of the
      notes. The notes mature on May 7, 2007, at which time all principal and accrued
      and unpaid interest will be due and payable in full. The notes are convertible
      at the option of the holder, into shares of Company common stock, with an
      initial conversion price of $0.30 per share. Each holder of a note may convert
      in whole or in part the outstanding principal plus accrued but unpaid interest
      into Company common stock at a conversion price of $0.30 per share. In the
      event
      that the Company issues additional common stock, or securities convertible
      into
      common stock, at a price lower than the conversion price while these notes
      are
      outstanding, the conversion price of these notes will automatically adjust
      downward to such price at which the new common stock has been issued. The
      conversion price of the note, however, shall never be adjusted to less than
      $0.01 per share. Pursuant to renewal and modification agreements dated May
      7,
      2007, the RENN Capital Group has agreed to extend the maturity dates of the
      two
      $100,000 notes payable until November 7, 2007. CaminoSoft will continue to
      pay
      8% interest monthly based on the current outstanding principal balance of
      $200,000.





Subsequent
      Event





Pursuant
      to a Renewal and Modification Agreement dated November 12, 2007 (“Modification
      Agreement I”) among BFS US Special Opportunities Trust PLC (“BFS”), Renaissance
      Capital Growth Income Fund III (“RENN III”) and Renaissance US Growth Investment
      Trust PLC (“RUSGIT”) (collectively the “Renaissance Lenders”), on the one hand,
      and CaminoSoft Corp. (“CaminoSoft”), on the other hand, the Renaissance Lenders
      agreed to extend the maturity dates of the secured subordinated promissory
      notes
      from January 19, 2008 to February 27, 2008. Pursuant to Modification Agreement
      I, the Notes were also amended to provide that, commencing with the interest
      payments due on November 1, 2007, all interest payments due thereunder will
      be
      payable in restricted shares of CaminoSoft’s common stock. The number of shares
      to be paid as interest shall be equal to the amount of the interest payment
      due
      divided by the average of the last sale prices, or if there is no last sale
      price, the closing bid prices, for the five trading days immediately preceding
      the payment date.




29





Pursuant
      to a Renewal and Modification Agreement dated November 12, 2007 (“Modification
      Agreement II”) between US Special Opportunities Trust PLC (“USOT”) and
      CaminoSoft, USOT agreed to extend the maturity date of the $1,750,000
      Convertible Debentures from November 27, 2007 to February 27, 2008. Pursuant
      to
      Modification Agreement II, the Debentures were also amended to provide that,
      commencing with the interest payments due on November 1, 2007, all interest
      payments due thereunder will be payable in restricted shares of CaminoSoft’s
      common stock. The number of shares to be paid as interest shall be equal to
      the
      amount of the interest payment due divided by the average of the last sale
      prices, or if there is no last sale price, the closing bid prices, for the
      five
      trading days immediately preceding the payment date.





Pursuant
      to a Renewal and Modification Agreement dated November 12, 2007 (“Modification
      Agreement III”) between Renaissance US Growth Investment Trust PLC (“RUSGIT”)
      and CaminoSoft, RUSGIT agreed to extend the maturity date of the convertible
      promissory note from November 7, 2007 to February 27, 2008. Pursuant to
      Modification Agreement III, the convertible note was also amended to provide
      that, commencing with the interest payments due on November 1, 2007, all
      interest payments due thereunder will be payable in restricted shares of
      CaminoSoft’s common stock. The number of shares to be paid as interest shall be
      equal to the amount of the interest payment due divided by the average of the
      last sale prices, or if there is no last sale price, the closing bid prices,
      for
      the five trading days immediately preceding the payment date.





Pursuant
      to a Renewal and Modification Agreement dated November 12, 2007 (“Modification
      Agreement IV”) between US Special Opportunities Trust PLC (“USOT”) and
      CaminoSoft, USOT agreed to extend the maturity date of the convertible
      promissory note from November 7, 2007 to February 27, 2008. Pursuant to
      Modification Agreement IV, the convertible note was also amended to provide
      that, commencing with the interest payments due on November 1, 2007, all
      interest payments due thereunder will be payable in restricted shares of
      CaminoSoft’s common stock. The number of shares to be paid as interest shall be
      equal to the amount of the interest payment due divided by the average of the
      last sale prices, or if there is no last sale price, the closing bid prices,
      for
      the five trading days immediately preceding the payment date.





Director
      Independence





As
      of the
      date of this Annual Report, only Mr. Pryor is considered “independent” as
      defined under the Nasdaq Stock Market’s listing standards. In determining
      independence, the Board of Directors reviews whether directors have any material
      relationship with us. The Board of Directors considers all relevant facts and
      circumstances. In assessing the materiality of a director’s relationship to us,
      the Board of Directors is guided by the standards set forth below and considers
      the issues from the director’s standpoint and from the perspective of the
      persons or organizations with which the director has an affiliation. The Board
      of Directors reviews commercial, industrial, banking, consulting, legal,
      accounting, charitable and familial relationships, if applicable. An independent
      director must not have any material relationship with us, either directly or
      indirectly as a partner, stockholder or officer of an organization that has
      a
      relationship with us, or any other relationship that would interfere with the
      exercise of independent judgment in carrying out the responsibilities of a
      director.





A
      director will not be considered independent in the following
      circumstances:





(1)  The
      director is, or has been in the past three years, an employee of the Company,
      or
      a family member of the director is, or has been in the past three years, an
      executive officer of the Company.




30





(2)  The
      director has received, or has a family member who has received, compensation
      from us in excess of $100,000 in any 12 month period in the past three years,
      other than compensation for board service, compensation received by the
      director’s family member for service as a non-executive employee, and benefits
      under a tax-qualified plan or other non-discretionary compensation.





(3)  The
      director is, or has a family member who is, a current partner of our outside
      auditor, or was a partner or employee of our outside auditor, who worked on
      our
      audit at any time during any of the past three years.





(4)  The
      director is a family member of an individual who is, or at any time during
      the
      past three years was, employed by the company as an executive
      officer.





(5)  The
      director is, or has a family member who is, employed as an executive officer
      of
      another entity where, at any time during the past three years, any of our
      executive officers served on the compensation committee of that other
      entity.





(6)  The
      director is, or a family member is, a partner in, or a controlling stockholder
      or an executive officer of, any organization to which we made or from which
      we
      received, payments for property or services in the current or any of the past
      three fiscal years that exceed the greater of 5% of the recipient’s consolidated
      gross revenues for that year, or $200,000 .




Item
      13.  EXHIBITS





(a)
            Exhibits





Exhibit
              31
            Certification
                Pursuant to Section 302 of the Sarbanes-OxleyAct
                of 2002





Exhibit
              32
            Certification
                Pursuant to Section 906 of the Sarbanes-OxleyAct
                of 2003





31


Item
      14  PRINCIPAL
      ACCOUNTANT FEES AND SERVICES





AUDIT
      FEES





During
      the Company’s prior fiscal year, Weinberg & Company, P.A., was the principal
      accountant and billed $88,049 for professional services for the audit of the
      Company’s annual financial statements and review of the Company’s financial
      statements included in the Company’s Form 10-QSB’s. The estimated fees for
      professional services associated with the audit of the Company’s annual
      financial statements and review of the Company’s financial statements included
      in the Company’s Form 10-QSB’s for the upcoming fiscal year are $70,000.





The
      Audit
      Committee approves in advance audit and non-audit services to be provided by
      Weinberg & Co. P.A. In other cases, in accordance with Rule 2-01(c)(7) of
      Securities and Exchange Commission Regulation S-X, the Audit Committee has
      delegated pre-approval authority to the Chairman of the Audit Committee for
      matters which arise or otherwise require approval between regularly scheduled
      meetings of the Audit Committee, provided that the Chairman report such
      approvals to the Audit Committee at the next regularly scheduled meeting of
      the
      Audit Committee.




SIGNATURES





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




CAMINOSOFT CORPBy
            /s/
              STEPHEN CROSSONChief
                Financial Officer and
              Chief
                Executive OfficerDate:
                December 27, 2007




In
      accordance with 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.


Signature
              
              Capacity
              
              Date/s/
                  ROBERT PEARSON
              
              Director
              
              December
                  27, 2007Robert
                  Pearson/s/
                  STEPHEN CROSSON
              
              Chief
                  Financial Officer,
              
              December
                  27, 2007Stephen
                  Crosson
              
              Chief
                  Executive Officer
                Secretary,
                    Treasurer
                  and
                      Director/s/
                  RUSSELL CLEVELAND
              
              Director
              
              December
                  27, 2007Russell
                  Cleveland/s/
                  LEE PRYOR
              
              Director
              
              December
                  27, 2007Lee
                  Pryor


32


CAMINOSOFT
      CORP





CONTENTS


Report
                  of Independent Registered Public Accounting Firm
              F-2Consolidated
                  Balance Sheets as of September 30, 2007and
                  September 30, 2006
              F-3Consolidated
                  Statements of Operations for the years endedSeptember
                  30, 2007 and 2006
              F-4Consolidated
                  Statements of Shareholders’ Deficiency for theyears
                  ended September 30, 2007 and 2006
              F-5Consolidated
                  Statements of Cash Flows for the years endedSeptember
                  30, 2007 and 2006
              F-6Notes
                  to Consolidated Financial Statements
              F-7




F-1




REPORT
      OF
      INDEPENDENT REGISTERED ACCOUNTING FIRM




To
      the
      Board of Directors of


CaminoSoft
      Corp.:





We
      have
      audited the accompanying consolidated balance sheets of CaminoSoft Corp. and
      Subsidiary (the "Company"), as of September 30, 2007 and 2006 and the related
      consolidated statements of operations, changes in shareholders' deficiency
      and
      cash flows for the years then ended. These consolidated financial statements
      are
      the responsibility of the Company’s management. Our responsibility is to express
      an opinion on these consolidated financial statements based on our
      audits.




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





In
      our
      opinion, the consolidated financial statements referred to above present fairly
      in all material respects, the financial position of CaminoSoft Corp. and
      Subsidiary as of September 30, 2007 and 2006, and the results of their
      operations and their cash flows for the years then ended, in conformity with
      accounting principles generally accepted in the United States of
      America.




The
      accompanying consolidated financial statements have been prepared assuming
      that
      the Company will continue as a going concern. As discussed in Note 1 to the
      consolidated financial statements the Company incurred a net loss of $734,851
      and a negative cash flow from operating activities of $569,252 for the year
      ended September 30, 2007, and had a working capital deficiency of $3,401,743
      and
      a shareholders’ deficiency of $3,443,585 at September 30, 2007. These factors
      raise substantial doubt about the Company’s ability to continue as a going
      concern. Management’s plans concerning this matter are also described in Note 1.
      The accompanying consolidated financial statements do not include any
      adjustments to reflect the possible future effects on the recoverability and
      classification of assets or the amounts and classification of liabilities that
      may result from the outcome of this uncertainty.








WEINBERG
      & COMPANY, P.A.




Los
      Angeles, CA


December
      19, 2007





F-2





CAMINOSOFT
                CORP.CONSOLIDATED
                BALANCE SHEETS




September
                30,
            
            September
                30,2007
            
            2006ASSETSCurrent
                Assets:Cash
                and cash equivalents
            
            $
            72,343
            
            $
            441,595Accounts
                receivable, net of allowance of $20,000 and $20,000
            
            
            190,607
            
            
            248,672Total
                Current Assets
            
            
            262,950
            
            
            690,267Property
                and Equipment, net of accumulated depreciation of $85,185
                and $71,608
            
            
            4,727
            
            
            18,304Software,
                net of accumulated amortization of $761,666
                and $715,226
            
            
            65,724
            
            
            112,164Deposits
            
            
            9,582
            
            
            9,582Total
                Assets
            
            $
            342,983
            
            $
            830,317LIABILITIES
                AND SHAREHOLDERS' DEFICIENCYCurrent
                Liabilities:Accounts
                payable
            
            $
            239,531
            
            $
            183,144Accrued
                liabilities
            
            
            46,326
            
            
            49,430Deferred
                revenues
            
            
            702,417
            
            
            721,908Notes
                  payable, current portion, net of discountof $23,581 and
                  $144,540
            
            
            2,676,419
            
            
            1,605,460Total
                Current Liabilities
            
            
            3,664,693
            
            
            2,559,942Notes
                payable, net of discountof
                $0 and $23,574
            
            
            -
            
            
            726,426Deferred
                revenues
            
            
            121,875
            
            
            412,500Total
                Liabilities
            
            
            3,786,568
            
            
            3,698,868Shareholders'
                DeficiencyCommon
                stock, no par value; authorized 100,000,000 shares;issued
                and outstanding 14,258,756 and 14,258,756 shares
            
            
            18,828,909
            
            
            18,669,092Accumulated
                Deficit
            
            
            (22,272,494
            )
            
            (21,537,643
            )Total
                Shareholders' Deficiency
            
            
            (3,443,585
            )
            
            (2,868,551
            )Total
                Liabilities and Shareholders' Deficiency
            
            $
            342,983
            
            $
            830,317




See
                accompanying notes to Consolidated Financial
                Statements





F-3




CAMINOSOFT
                CORP.CONSOLIDATED
                STATEMENTS OF OPERATIONS




Years
                EndedSeptember
                30,2007
            
            2006SALES
            
            $
            2,078,690
            
            $
            1,772,671COST
                OF SALES
            
            
            164,901
            
            
            156,523GROSS
                PROFIT
            
            
            1,913,789
            
            
            1,616,148OPERATING
                EXPENSESSales
                and administrative
            
            
            1,960,738
            
            
            2,183,558Depreciation
            
            
            13,577
            
            
            20,930Research
                and Development
            
            
            361,965
            
            
            484,043Total
                Operating Expenses
            
            
            2,336,280
            
            
            2,688,531Loss
                From Operations
            
            
            (422,491
            )
            
            (1,072,383
            )OTHER
                INCOME (EXPENSE)Interest
                expense
            
            
            (312,378
            )
            
            (377,811
            )Interest
                income
            
            
            18
            
            
            16Write
                off of deferred financing costs
            
            
            -
            
            
            (262,075
            )Total
                Other Expense
            
            
            (312,360
            )
            
            (639,870
            )Net
                Loss
            
            
            ($734,851
            )
            
            ($1,712,253
            )Weighted
                average number of common shares outstanding:(basic
                and diluted):
            
            
            14,258,756
            
            
            13,978,763Net
                loss per common share:(basic
                and diluted)
            
            
            ($0.05
            )
            
            ($0.12
            )




See
                accompanying notes to Consolidated Financial
                Statements





F-4




CAMINOSOFT
                CORPCONSOLIDATED
                STATEMENTS OF SHAREHOLDERS' DEFICIENCY




Common
                Stock
            
            AccumulatedShares
            
            Amount
            
            Deficit
            
            TotalBalance
                at October 1, 2005
            
            
            13,551,082
            
            $
            17,687,461
            
            
            ($19,825,390
            )
            $
            (2,137,929
            )Warrant
                issued for debenture financing extension
            
            
            -
            
            
            166,093
            
            
            -
            
            
            166,093Fair
                value of options issued to employees and consultants
            
            
            -
            
            
            133,575
            
            
            -
            
            
            133,575Private
                placement common stock
            
            
            697,674
            
            
            600,000
            
            
            -
            
            
            600,000Warrant
                issued for loan extension
            
            
            -
            
            
            77,663
            
            
            -
            
            
            77,663Common
                stock issued to consultant for services
            
            
            10,000
            
            
            4,300
            
            
            -
            
            
            4,300Net
                loss for the year ended September 30, 2006
            
            
            -
            
            
            -
            
            
            (1,712,253
            )
            
            (1,712,253
            )Balance
                at October 1, 2006
            
            
            14,258,756
            
            
            18,669,092
            
            
            (21,537,643
            )
            
            (2,868,551
            )Fair
                value of options issued to employees and consultants
            
            
            
            
            
            159,817
            
            
            
            
            
            159,817Net
                loss for the year ended September 30, 2007
            
            
            
            
            
            
            
            
            (734,851
            )
            
            (734,851
            )Balance
                at September 30, 2007
            
            
            14,258,756
            
            $
            18,828,909
            
            
            ($22,272,494
            )
            
            ($3,443,585
            )




See
                accompanying notes to Consolidated Financial
                Statements





F-5




CAMINOSOFT
                CORP.CONSOLIDATED
                STATEMENTS OF CASH FLOWS




Years
                EndedSeptember
                30,2007
            
            2006CASH
                FLOWS FROM OPERATING ACTIVITIESNet
                loss
            
            
            ($734,851
            )
            
            ($1,712,253
            )Adjustments
                to reconcile net loss to net cash used inoperating
                activities:Common
                stock issued for services and bonus
            
            
            -
            
            
            4,300Depreciation
                and amortization
            
            
            60,017
            
            
            139,115Fair
                value of common stock options issued to employeesand
                consultants
            
            
            159,817
            
            
            133,575Write
                off of deferred financing fees
            
            
            -
            
            
            262,075Amortization
                of debt discount
            
            
            144,533
            
            
            220,311Bad
                debt expense
            
            
            45,559
            
            
            -Changes
                in operating assets and liabilities:Accounts
                receivable
            
            
            12,506
            
            
            794,504Accounts
                payable and accrued liabilities
            
            
            53,283
            
            
            (74,949
            )Deposits
            
            
            -
            
            
            1,700Deferred
                revenue
            
            
            (310,116
            )
            
            (143,882
            )Net
                cash used in operating activities
            
            
            (569,252
            )
            
            (375,504
            )CASH
                FLOWS FROM INVESTING ACTIVITIESAcquisition
                of fixed assets
            
            
            -
            
            
            (3,087
            )Net
                cash used in investing activities
            
            
            -
            
            
            (3,087
            )CASH
                FLOWS FROM FINANCING ACTIVITIESBorrowing
                on note payable
            
            
            200,000
            
            
            -Proceeds
                from the issuance of common stock
            
            
            -
            
            
            600,000Net
                cash provided by financing activities
            
            
            200,000
            
            
            600,000NET
                (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
            
            
            (369,252
            )
            
            221,409CASH
                AND CASH EQUIVALENTS, beginning of year
            
            
            441,595
            
            
            220,186CASH
                AND CASH EQUIVALENTS, end of year
            
            $
            72,343
            
            $
            441,595Cash
                paid for:Interest
            
            $
            167,845
            
            $
            157,500Income
                taxes
            
            $
            1,600
            
            $
            1,600




Supplemental
                non-cash financing and investing activitiesDuring
                the year ended September 30, 2006, the Company issued warrants valued
                at
                $243,756 for debt extensions, which have
                been accounted for as discount to long term
                debt




See
                accompanying notes to Consolidated Financial
                Statements




F-6




CAMINOSOFT
      CORP.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


YEARS
      ENDED SEPTEMBER 30, 2007 AND 2006


Note
      1 -
      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





DESCRIPTION
      OF BUSINESS AND NATURE OF OPERATIONS





CaminoSoft
      Corp. (the “Company”) previously known as Interscience Computer Corporation, was
      incorporated under the laws of the State of California on October 14, 1983,
      to
      be a third party provider of maintenance services for computer hardware and
      related peripheral equipment. On September 17, 1999, the Company acquired the
      assets (the “Camino Assets”) of Camino Software Systems, Inc. (“Camino”), a data
      storage company. The Camino assets consisted of the name, Camino Software
      Systems, Inc., the data storage management software, certain business contracts
      and intangible personal property.





During
      the year ended September 30, 2000, the Company changed its name to CaminoSoft
      Corp. to reflect the focus on the data management software business. The Company
      is now distributing and developing data management software purchased from
      Camino, which will work with Windows 2000 and Novell operating systems and
      with
      Computer Associates, Veritas, EMC, IBM and other enterprise
      software.





The
      Company is primarily engaged in the business of developing and marketing data
      management software. The Company’s product line includes multiple versions of
      our core HSM technology compatible with operating systems from Novell,
      Microsoft, Network Appliance and for use with a variety of computer hardware
      storage devices, including products from EMC, IBM, HP, Hitachi, NetWork
      Appliance, Dell and others. The Company sells and distributes its products
      through major technology distribution partners including Ingram Micro, Business
      Union in the UK, Orchestra in Germany, Amitron in the Netherlands and many
      other
      resellers and value added distributors.





In
      July
      2003, the Company incorporated a subsidiary CM Medical Systems, Inc., under
      the
      General Corporation Law of California. Currently the subsidiary has no
      employees, has not issued stock and has not begun operations. As of the date
      of
      this filing the Company formally dissolved CM Medical Systems, Inc., as a
      corporation.





GOING
      CONCERN





The
      accompanying consolidated financial statements have been prepared in conformity
      with accounting principles generally accepted in the United States of America,
      which contemplates continuation of the Company as a going concern. The Company
      had a net loss of $734,851 and utilized cash of $569,252 in operating activities
      during the year ended September 30, 2007, and had a working capital deficiency
      of $3,401,743 and shareholders’ deficiency of $3,443,585 at September 30, 2007.
      These factors raise substantial doubt about the Company’s ability to continue as
      a going concern. The financial statements do not include any adjustments
      relating to the recoverability and classification of recorded asset amounts,
      or
      amounts and classification of liabilities that might result from this
      uncertainty.




F-7


CAMINOSOFT
        CORP.
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 YEARS
        ENDED SEPTEMBER 30, 2007 AND 2006




The
      Company’s working capital requirements in the foreseeable future will depend on
      a variety of factors including its ability to implement its sales and marketing
      plan. The Company plans to continue to focus on the integration of its products
      and solutions with O.E.M. partner products for sales and distribution. This
      includes selling products through the distribution channels of the partners.
      The
      Company has new arrangements, which it believes will generate higher levels
      of
      revenue in fiscal 2008. The Company currently expects that new financing will
      provide sufficient cash to fund its projected operations for the immediately
      foreseeable future and believes additional financing will be available if and
      when needed. If the Company is unable to achieve projected operating results
      and/or obtain such additional financing if and when needed, management will
      be
      required to curtail growth plans and scale back development activities. No
      assurances can be given that the Company will achieve increased revenues.
      Further, no assurances can be given that the Company’s current financing will be
      sufficient to support the Company’s planned level of operations. If adequate
      funds are not available or are not available at acceptable terms, the Company’s
      ability to finance its expansion, develop or enhance services or products or
      respond to competitive pressures would be significantly limited.





USE
      OF
      ESTIMATES





The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect certain reported amounts of assets and liabilities and disclosures of
      contingent assets and liabilities at the date of the financial statements and
      the reported amounts of assets and liabilities, revenues and expenses during
      the
      reporting period. Accordingly, actual results could differ from those estimates.





CASH
      AND
      CASH EQUIVALENTS





The
      Company considers all highly liquid investments with an original maturity of
      three months or less when purchased to be cash equivalents.





TRADE
      RECEIVABLES





Trade
      receivables are recorded at net realizable value consisting of the carrying
      amount less an allowance for uncollectible accounts, as needed.





The
      Company uses the allowance method to account for uncollectible trade receivable
      balances. Under the allowance method, if needed, an estimate of uncollectible
      customer balances is made based upon specific account balances that are
      considered uncollectible. Factors used to establish an allowance include the
      credit quality of the customer and whether the balance is significant. At
      September 30, 2007 and 2006, trade receivables had
      a net
      balance in the amount of $190,607 and $248,672, net of allowances of $20,000
      and
      $20,000, respectively.




F-8


CAMINOSOFT
        CORP.
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 YEARS
        ENDED SEPTEMBER 30, 2007 AND 2006




PROPERTY
      AND EQUIPMENT





Property
      and equipment is stated at cost. Depreciation is calculated using accelerated
      methods based upon the estimated useful lives of the related assets, primarily
      three years.





SOFTWARE





Software
      capitalization is stated at cost. Amortization is computed on the straight-line
      method based upon the estimated useful life of the asset, primarily seven years.
      Statement of Financial Accounting Standards No. 86, “Accounting for the Cost of
      Computer Software to be Sold, Leased, or Otherwise Marketed”, provides for the
      capitalization of certain software development costs incurred after
      technological feasibility of the software is established. The Company
      capitalized no development costs during the years ended September 30, 2007
      and
      September 30, 2006.





DEFERRED
      FINANCING COSTS





The
      Company capitalizes costs incurred related to an equity financing until such
      time as the stock is issued, or the equity financing is abandoned or unlikely
      to
      be used by the Company. These costs include attorney’s and accountant’s fees
      directly related to the financing and the related issuance of common stock.
      During the year ended September 30, 2006, the deferred financing costs of
      $262,075 were deemed impaired and were written off. (see Note 5 - Shareholders’
Deficiency)





IMPAIRMENT
      OF LONG-LIVED ASSETS





Management
      regularly reviews long-lived assets for possible impairment. This review occurs
      annually, or more frequently if events or changes in circumstances indicate
      the
      carrying amount of the asset may not be recoverable. If there is an indication
      of impairment, management prepares an estimate of future cash flows
      (undiscounted and without interest charges) expected to result from the use
      of
      the asset and its eventual disposition. If these cash flows are less than the
      carrying amount of the asset, an impairment loss is recognized to write down
      the
      asset to its estimated fair value.





During
      the year ended September 30, 2006, the deferred financing costs of $262,075
      were
      deemed impaired and were written off. (see Note 5 - Shareholders’
Deficiency)




F-9





CAMINOSOFT
      CORP.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


YEARS
      ENDED SEPTEMBER 30, 2007 AND 2006


INCOME
      TAXES





The
      Company uses the asset and liability method of accounting for income taxes.
      Deferred income taxes are recognized based on the differences between financial
      statement and income tax valuations of assets and liabilities using applicable
      tax rates for The
      year
      in which the differences are expected to reverse. Valuation allowances are
      established, when necessary, to reduce deferred tax asset amounts to the amount
      expected to be realized. The provision for income taxes represents the tax
      payable (or benefit) for the period and the change in deferred tax assets and
      liabilities during the year.





REVENUE
      RECOGNITION





Revenue
      is recognized when persuasive evidence of an arrangement exists, delivery has
      occurred or services have been rendered, the fee is fixed or determinable,
      and
      collectibility is probable. We enter into certain arrangements where we are
      obligated to deliver multiple products and/or services (multiple elements).
      In
      these transactions, we allocate the total revenue among the elements based
      on
      the sales price of each element when sold separately (vendor-specific objective
      evidence).





Revenue
      for products licensed to original equipment manufactures (OEM’s), and perpetual
      licenses for current products in our server based data management suite of
      products is recognized as products are shipped or electronically delivered,
      the
      fees are fixed or determinable, collection of the resulting receivable is
      probable and no other significant obligations remain undelivered. If annual
      service is a part of the sale agreement that portion of the revenue is recorded
      as unearned due to undelivered elements including, annual telephone support
      and
      the right to receive unspecified upgrades/updates of our data management
      products on a when-and-if-available basis. Unspecified upgrades, or patches,
      are
      included in our product support fee. The upgrades are delivered only on a
      when-and-if-available basis and as defined in SOP 97-2, are considered,
      Postcontract Customer Support (“PCS”). Vendor-specific objective evidence does
      exist for these services in the aggregate; 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 for the support
      should be recognized ratably. Because the timing, frequency, and significance
      of
      unspecified upgrades/updates can vary considerably, the point at which
      unspecified upgrades/updates are expected to be delivered should not be used
      to
      support income recognition on other than a straight-line basis. As such, the
      Company recognizes the product support fee consisting of PCS and unspecified
      upgrades/updates ratably over the service contract period.




F-10




CAMINOSOFT
        CORP.
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 YEARS
        ENDED SEPTEMBER 30, 2007 AND 2006


Revenues
      from services are comprised of consulting and implementation services, and
      to a
      limited extent training. Services are generally charged on a time-and-materials
      or fixed fee basis and include a range of services including, installation
      of
      software, establishing software policies and limited training. Services are
      generally separable from the other elements under the arrangement since the
      performance of the services is not essential to the functionality of any other
      element of the transaction. Revenues for services are recognized as the services
      are performed.




RESEARCH
      AND DEVELOPMENT





Research
      and development costs, which consist primarily of software development costs,
      are expensed as incurred and amounted to $361,965 and $484,043 for the years
      ended September 30, 2007 and 2006, respectively.





ADVERTISING





Advertising
      costs are charged to expense as incurred and such costs were $4,652 and $3,750
      for the years ended September 30, 2007 and 2006, respectively.





STOCK-BASED
      COMPENSATION





Statement
      of Financial Accounting Standards No. 123, “Accounting for Stock-Based
      Compensation” (“SFAS No. 123”), established a fair value method of accounting
      for stock-based compensation plans and for transactions in which an entity
      acquires goods or services from non-employees in exchange for equity
      instruments. SFAS No. 123 was amended by Statement of Financial Accounting
      Standards No. 148, “Accounting for Stock-Based Compensation - Transition and
      Disclosure”, which required companies to disclose in interim financial
      statements the pro forma effect on net income (loss) and net income (loss)
      per
      common share of the estimated fair market value of stock options or warrants
      issued to employees. Through December 31, 2005, the Company accounted for
      stock-based compensation utilizing the intrinsic value method prescribed in
      Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to
      Employees” (“APB No. 25”), with pro forma disclosures of net income (loss) as if
      the fair value method had been applied. Accordingly, compensation cost for
      stock
      options was measured as the excess, if any, of the fair market price of the
      Company’s stock at the date of grant over the amount an employee must pay to
      acquire the stock.





In
      December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
      123 (revised 2004), “Share Based Payment” (“SFAS No. 123R”), a revision to SFAS
      No. 123, “Accounting for Stock-Based Compensation”. SFAS No. 123R, superseded
      APB No. 25 and amended SFAS No. 95, “Statement of Cash Flows”. Effective January
      1, 2006, SFAS No. 123R requires that the Company measure the cost of employee
      services received in exchange for equity awards based on the grant date fair
      value of the awards,
      with the cost to be recognized as compensation expense in the Company’s
      financial statements over the vesting period of the awards.




F-11




CAMINOSOFT
        CORP.
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 YEARS
        ENDED SEPTEMBER 30, 2007 AND 2006


The
      Company adopted SFAS No. 123R effective January 1, 2006, and is using the
      modified prospective method in which compensation cost is recognized beginning
      with the effective date (a) based on the requirements of SFAS No. 123R for
      all
      share-based payments granted after the effective date and (b) based on the
      requirements of SFAS No. 123R for all awards granted to employees prior to
      the
      effective date of SFAS No. 123R that remain unvested on the effective
      date.





As
      the
      exercise price of stock options and warrants issued to employees was not less
      than the fair market value of the Company’s common stock on the date of grant,
      and in accordance with the accounting for such options utilizing the intrinsic
      value method, there was no related compensation expense recorded in the
      Company’s prior consolidated financial statements. Prior to January 1, 2006, the
      fair value of those stock options and warrants issued to officers, directors
      and
      employees at not less than fair market value of the Company’s common stock on
      the date of grant was estimated using the Black-Scholes option-pricing model,
      and the effect on the Company’s results of operations is showed below as if such
      stock options and warrants had been accounted for pursuant to SFAS No.
      123.





Year
                EndedSeptember
                30, 2006Net
                loss, as reported
            
            $
            (1,712,253
            )Add:
                Stock-based employeeCompensation
                expense included in reported net loss
            
            
            —Deduct:
                Total stock-based employeeCompensation
                expense determinedUnder
                fair value based method for all awards
            
            
            (8,859
            )Net
                loss, pro forma
            
            $
            (1,721,112
            )Basic
                and diluted net loss per Common share, as reported
            
            $
            (.12
            )Pro
                forma
            
            $
            (.12
            )





The
      fair
      value of option grants is estimated on the date of grant utilizing the
      Black-Scholes option-pricing model with the following weighted average
      assumptions for grants in 2006, expected life of options were between 3 years
      and 5 years, expected volatility ranged from 81.5% to 102.5%, respectively,
      risk-free interest rate of 4.32% to 4.88% and a 0% dividend yield. There were
      no
      option grants during the current fiscal year.




F-12




CAMINOSOFT
        CORP.
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 YEARS
        ENDED SEPTEMBER 30, 2007 AND 2006


CONSOLIDATION





The
      accompanying consolidated financial statements include the accounts of the
      Company and its wholly owned subsidiary. Intercompany balances and transactions
      have been eliminated in consolidation.





FAIR
      VALUE OF FINANCIAL INSTRUMENTS





Statement
      of Financial Accounting Standards No. 107, “Disclosures About Fair Value of
      Financial Instruments,” requires disclosure of the fair value of certain
      financial instruments. Accounts receivable, accounts payable, accrued
      liabilities and deferred revenues as reflected in the financial statements
      approximate fair value because of the short-term maturity of these instruments.
      The estimated fair value of notes payable is based on borrowing rates currently
      available to the Company for loans with similar terms and
      maturities.





CONCENTRATIONS





The
      Company’s cash balances on deposit with banks are guaranteed by the Federal
      Deposit Insurance Corporation up to $100,000. The Company may be exposed to
      risk
      for the amount of funds held in one bank in excess of the insurance limit.
      In
      assessing the risk, the Company’s policy is to maintain cash balances with high
      quality financial institutions. The Company had cash balances in excess of
      the
      $100,000 guarantee during the year ended September 30, 2007 and
      2006.





During
      the year ended September 30, 2007, the Company had three customers that
      accounted for 17%, 14% and 11% of the total revenue. During the year ending
      September 30, 2006, the Company had one major customer, whose revenue volume
      comprised approximately 11%, of the Company’s total revenue. As of September 30,
      2007 and 2006 the Company had $41,292 (20%), $30,512 (14%), and $74,008 (35%)
      and $75,090(28%), respectively of gross accounts receivable due from its largest
      customers.




EARNINGS
      (LOSS) PER SHARE





The
      Company computes earnings (loss) per common share under Statement of Financial
      Accounting Standards No. 128, “Earnings per Share” (SFAS No. 128), which
      requires presentation of Basic and Diluted earnings (loss) per share. Basic
      earnings (loss) per share is computed by dividing income (loss) available to
      common shareholders by the weighted average number of common shares outstanding
      for the period. Diluted earnings per share reflects the potential dilution
      of
      securities that could share in the earnings of an entity, such as stock options,
      warrants or convertible debentures, unless antidilutive.





At
      September 30, 2007 and 2006, options, warrants and convertible debentures to
      purchase 12,745,603 and 12,995,189 shares, respectively, were outstanding,
      but
      were not included in the computation of diluted loss per common share as the
      effect would be antidilutive.




F-13




CAMINOSOFT
        CORP.
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 YEARS
        ENDED SEPTEMBER 30, 2007 AND 2006


REPORTING
      SEGMENT





Statement
      of Financial Accounting Standards No. 131, “Disclosures about Segments of an
      Enterprise and Related Information,” (“SFAS No. 131”) requires certain
      disclosures of operating segments, as defined in SFAS No. 131. Management has
      determined that the Company has only one operating segment and therefore does
      not disclose operating segment information.





COMPREHENSIVE
      INCOME





A
      statement of comprehensive income is not presented in our financial statements
      since we do not have any of the items of other comprehensive income in any
      period presented.





RECENT
      ACCOUNTING PRONOUNCEMENTS





In
      July
      2006, the FASB issued interpretation No. 48 (“FIN 48”), “Accounting for
      Uncertainty in Income Taxes,” which clarifies the accounting for uncertainty in
      income taxes recognized in the financial statements in accordance with FASB
      Statement No. 109, “Accounting for Income Taxes.” FIN 48 provides guidance on
      the financial statement recognition and measurement of a tax position taken
      or
      expected to be taken in a tax return. FIN 48 also provides guidance on
      derecognition, classification, interest and penalties, accounting in interim
      periods, disclosures, and transition. FIN 48 is effective for fiscal years
      beginning after December 15, 2006. Accordingly, FIN 48 will be adopted
      commencing in the first quarter of the Company’s 2008 fiscal year.





In
      September 2006, the Financial Accounting Standards Board issued Statement No.
      157 (“SFAS No. 157”), “Fair Value Measurements.” SFAS No. 157 establishes a
      formal framework for measuring fair value under GAAP. It defines and codifies
      the many definitions of fair value included among various other authoritative
      literature, clarifies and, in some instances, expands on the guidance for
      implementing fair value measurements, and increases the level of disclosure
      required for fair value measurements. Although SFAS No. 157 applies to and
      amends the provisions of existing FASB and AICPA pronouncements, it does not,
      of
      itself, require any new fair value measurements, nor does it establish valuation
      standards. SFAS No. 157 applies to all other accounting pronouncements requiring
      or permitting fair value measurements, except for SFAS No. 123 (R), share-based
      payment and related pronouncements, the practicability exceptions to fair value
      determinations allowed by various other authoritative pronouncements, and AICPA
      Statements of Position 97-2 and 98-9 that deal with software revenue
      recognition. This statement is effective for financial statements issued for
      fiscal years beginning after November 15, 2007, and interim periods within
      those
      fiscal years.





In
      September 2006, the Financial Accounting Standards Board issued Statement No.
      158 (“SFAS No. 158”), “Accounting for Defined Benefit Pension and Other
      Postretirement Plans.” SFAS No. 158 requires that for public companies the full
      funding status of defined benefit pension and other postretirement plans be
      recognized on the balance sheet as an asset (for overfunded plans) or as a
      liability (for underfunded plans). In addition, SFAS No. 158 calls for
      recognition in other comprehensive income or gains or losses any prior service
      costs or credits that are not yet included as components of periodic benefit
      expense. Finally, SFAS No. 158 requires that the measurement of defined benefit
      plan assets and obligations be as of the balance sheet date. The Company plans
      to adopt the recognition provisions of SFAS No. 158 as of the end of the fiscal
      year end after December 15, 2006 and the measurement date provisions as of
      the
      balance sheet date for fiscal years ending after December 15, 2008.




F-14




CAMINOSOFT
        CORP.
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 YEARS
        ENDED SEPTEMBER 30, 2007 AND 2006


In
      February 2007, the Financial Accounting Standards Board (FASB) issued SFAS
      Statement No. 159, “The Fair Value Option for Financial Assets and Financial
      Liabilities - Including an amendment of FASB Statement No. 115” (SFAS 159). SFAS
      159, which becomes effective for the Company on January 1, 2008, permits
      companies to choose to measure many financial instruments and certain other
      items at fair value and report unrealized gains and losses in earnings. Such
      accounting is optional and is generally to be applied instrument by instrument.
      The company does not anticipate that election, if any, of this fair-value option
      will have a material effect on its consolidated results of operations, financial
      position, or cash flows or disclosures.





The
      Company does not believe that the adoption of the above recent pronouncements
      will have a material effect on the Company’s consolidated financial position or
      results of operations.




NOTE
      2 -
      PROPERTY AND EQUIPMENT





Property
      and equipment consists of the following:





September
                30,2007
            
            2006Furniture
                and fixtures
            
            $
            13,084
            
            $
            13,084Test
                and training equipment
            
            
            76,828
            
            
            76,82889,912
            
            
            89,912Less
                accumulated depreciation
            
            
            (85,185
            )
            
            (71,608
            )$
            4,727
            
            $
            18,304





Depreciation
      expense was $13,577 and $20,930 for the years ending September 30, 2007 and
      2006, respectively.




F-15




CAMINOSOFT
        CORP.
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 YEARS
        ENDED SEPTEMBER 30, 2007 AND 2006
  NOTE
        3 -
        SOFTWARE





On
      September 17 1999, the Company acquired the assets (the “Camino Assets”) of
      Camino Software Systems, Inc. (“Camino”) for 468,000 shares of the Company’s
      common stock valued at $187,200 and assumed $315,172 of certain Camino
      liabilities. The Camino Assets consisted of the name, Camino Software Systems,
      Inc., the data storage management software, certain business contracts and
      intangible personal property. The Company has allocated the amounts paid and
      assumed in the amount of $502,372 to the fair value of the software acquired.
      The software is being amortized on a straight line basis over seven years.
      Net
      book value of the original purchased software at September 30, 2007 and 2006
      was
      $0.





During
      the years ended September 30, 2007 and 2006 there was no development cost
      capitalized. The net book value for software at September 30, 2007 and 2006
      is
      $65,724 and $112,164, respectively, which includes additional software
      capitalization prior to fiscal year 2003. The estimated aggregate amortization
      expense for each of the five succeeding fiscal years is $100,000 per
      year.





September
                30,2007
            
            2006Software
            
            $
            827,390
            
            $
            827,390Less
                accumulated amortization
            
            
            (761,666
            )
            
            (715,226
            )$
            65,724
            
            $
            112,164





Amortization
      expense was $46,440 and $118,185 for the years ending September 30, 2007 and
      2006, respectively.





NOTE
      4 -
      NOTES PAYABLE




The
      Company has the following notes payable outstanding as of September 30, 2007
      to
      Renaissance Capital Group, Inc. or its affiliate companies. Renaissance Capital
      Group, Inc., owned approximately 62% and 62% of the Company’s outstanding common
      stock of September 30, 2007 and 2006.




In
      December 2002, the Company issued a 6% unsecured convertible debenture for
      $1,000,000. Interest of 6% per annum will be paid in monthly installments for
      three years based on the unpaid principal balance. The full $1,000,000 was
      borrowed during the year ended September 30, 2003 and was outstanding as of
      September 30, 2007 and 2006. The debenture matured on November 27, 2005, at
      which time the unpaid principal amount and all accrued and unpaid interest
      would
      have become due and payable in full. The debenture is convertible, at the option
      of the holder, into shares of the Company’s common stock, with a conversion
      price of $0.62 per share. As part of the funding during the fiscal year ended
      September 30, 2003, the Company issued 5 year warrants to the lender to purchase
      500,000 shares of the Company’s common stock. The warrants were valued at
      $176,224 and recorded as debt discount, and was amortized over the life of
      the
      loan. During the years ended September 30, 2007 and 2006, $0 and $14,685,
      respectively, of discount was amortized and included in the statement of
      operations.




F-16




CAMINOSOFT
        CORP.
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 YEARS
        ENDED SEPTEMBER 30, 2007 AND 2006


During
      July 2003, the Company issued another 6% unsecured convertible debenture for
      up
      to $750,000. Interest at a rate of 6% per annum is payable in monthly
      installments for 26 months based on the unpaid principal balance. The debenture
      matured on November 27, 2005, at which time the unpaid principal amount and
      all
      accrued and unpaid interest would have become due and payable in full. The
      debenture is convertible, at the option of the holder, into shares of the
      Company’s common stock, with a conversion price of $0.41 per share. At September
      30, 2007, the Company had borrowed $750,000, the entire amount
      available.





Pursuant
      to a Renewal and Modification agreement dated October 28, 2005, the Company
      negotiated an extension of the two convertible debentures referenced above
      with
      a total principal balance of $1,750,000. The lender agreed to extend the
      maturity date of the two 6% Convertible Debentures dated November 27, 2002
      in
      the aggregate principal amount of $1,750,000 to May 27, 2007. In consideration
      of such extension, the Company granted the lender a five-year warrant to
      purchase 175,000 shares of the Company’s common stock at an exercise price of
      $1.14 per share (subject to adjustment). The estimated value of the warrant
      of
      $166,093 was recorded on the Company’s financial statements as debt discount and
      was amortized over the term of the extension. During the years ended September
      30, 2007 and 2006, $73,817 and $92,274, respectively, of discount was amortized
      and included in the statement of operations. On
      May 7,
      2007, RENN Capital Group agreed to extend the maturity date of $1,750,000
      convertible debenture until November 27, 2007. The Company will continue to
      pay
      interest of 6% on the current outstanding principal balance of $1,750,000,
      monthly during the term of the extension.




During
      July 2004, the Company received $750,000 from a two year secured loan from
      Renaissance Capital Group managed funds. Interest is paid at 7% in monthly
      installments based on the outstanding principal balance. As part of the funding,
      the Company issued five-year warrants to purchase an aggregate of 1,415,094
      shares of common stock at an exercise price of $0.53 per share. The estimated
      value of the warrants of $311,953 was recorded on the Company’s financial
      statements as debt discount and was amortized over the life of the loan. During
      the years ended September 30, 2007 and 2006, $28,359 and $92,168, respectively,
      of discount was amortized and included in the statement of operations.





During
      February 2006, the Company issued to the Renaissance Capital Group managed
      funds
      an aggregate of 150,000 warrants to purchase the Company’s common stock at $0.86
      per
      share in consideration of an agreement to extend the $750,000 loan payable
      maturity date for an additional 18 months. The new maturity date for the notes
      is January 19, 2008. The Company will continue to pay 7% interest on a monthly
      basis based on the current outstanding principal balance of $750,000. The
      estimated value of the warrants of $77,663 was recorded on the Company’s
      financial statements as debt discount and is being amortized over the term
      of
      the extension. During the year ended September 30, 2007 and 2006, $42,362 and
      $21,181 respectively, of discount was amortized and included in the statement
      of
      operations.




F-17


CAMINOSOFT
        CORP.
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 YEARS
        ENDED SEPTEMBER 30, 2007 AND 2006


On
      February 7, 2007, the Company received an additional $200,000 from two three
      month secured convertible notes from two of RENN Capital Groups managed funds.
      Interest of 8% was paid in monthly installments during the term of the notes.
      The notes matured on May 7, 2007, at which time all principal and accrued and
      unpaid interest was be due and payable in full. The notes are convertible at
      the
      option of the holder, into shares of the Company’s common stock, with an initial
      conversion price of $0.30 per share. The funds were used to support the
      operations of the Company. Each holder of a note may convert in whole or in
      part
      the outstanding principal plus accrued but unpaid interest into the Company’s
      common stock at a conversion price of $0.30 per share. In the event that the
      Company issues additional common stock, or securities convertible into common
      stock, at a price lower than the conversion price while these notes are
      outstanding, the conversion price of these notes will automatically adjust
      downward to such price at which new common stock has been issued. The conversion
      price of the note, however, shall never be adjusted to less than $0.01 per
      share. Pursuant to renewal and modification agreements dated May 7, 2007, the
      RENN Capital Group agreed to extend the maturity dates of two $100,000 notes
      payable until November 7, 2007. The Company will continue to pay 8% interest
      monthly based on the current outstanding principal balance of $200,000.





Subsequent
      to September 30, 2007, and prior to the date of this filing the Company
      negotiated to extend the maturity dates of debt due within the next 4 months.
      Pursuant to renewal and modification agreements the Company extended the total
      debt with an aggregate principal balance of $2,700,000 to February 27, 2008.
      In
      addition to extending the debt the Company also converted from cash payments
      of
      interest to interest payments in unregistered common stock beginning November
      1,
      2007.





Annual
      principal payments for fiscal year 2008 are as follows:




Year
                ending September 30,
            
            Principal
            
            Debt
                Discount
            
            Net2008
            
            $
            2,700,000
            
            
            23,581
            
            $
            2,676,419Total
            
            $
            2,700,000
            
            $
            23,581
            
            $
            2,676,419





F-18


CAMINOSOFT
        CORP.
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 YEARS
        ENDED SEPTEMBER 30, 2007 AND 2006




NOTE
      5 -
      SHAREHOLDER’S DEFICIENCY





During
      September 2004, the Company issued 340,136 shares of stock as commitment shares
      as part of an equity financing. The commitment shares are part of a common
      stock
      purchase agreement which will allow the Company to draw up to $6,000,000 through
      daily sales of the Common Stock. The Company has agreed to register 3,680,272
      shares which include the commitment shares to sell during a 30 month period.
      The
      fair value of the issued shares was $187,075, based upon the fair value of
      the
      common stock at the date of issuance. The fair value of the shares issued in
      September 2004, and $75,000 of legal and professional fees incurred in fiscal
      2005 relating to the registration, were recorded as deferred financing costs
      on
      the Company’s financial statements. During the prior fiscal year the deferred
      financing balance of $262,075 was written off to other expense because the
      Company determined it was unlikely the equity line would be drawn on and
      therefore the costs were impaired. At the time of the write off the price for
      the Company’s common stock was below the minimum price required by the
      agreement.





On
      February 21, 2006, the Company issued to BFS US Special Opportunities Trust
      PLC
      and Renaissance US Growth & Income Trust PLC an aggregate of 697,674 shares
      of common stock at a price of $0.86 per share in a private placement for
      $600,000. The stock purchase also included a registration rights agreement
      requiring the Company to file a registration statement within 180 days of the
      closing of the purchase agreement. The registration rights agreement included
      certain penalties payable in shares of stock if the Company did not file within
      the 180 day period. The Company and the purchasers agreed to amend the
      registration rights agreement to remove the penalty clause from the registration
      rights agreement. The Company has agreed to register the resale of its shares
      as
      soon as practicable.





During
      June of 2006, the Company issued 10,000 shares of restricted common stock for
      investor relations services rendered. The fair value of the issued shares was
      $4,300; this amount was recorded as investor relations expense on the Company’s
      financial statements.




STOCK
      OPTIONS AND WARRANTS





The
      Company has 6,000,000 shares approved for issuance as part of the employee
      stock
      option plan of which approximately 2,350,500 shares remain available for option
      grant under the plan. Upon exercise and payment of a vested option the Company
      would issue the shares for exercise of the option. Each option grant has an
      individual letter agreement outlining terms of the plan, option and exercise
      instructions and option termination conditions. The plan was approved by
      shareholders and is governed by the board of directors and compensation
      committee of the Company.





During
      the year ended September 30, 2007, the Company granted no options or warrants.




F-19




CAMINOSOFT
        CORP.
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 YEARS
        ENDED SEPTEMBER 30, 2007 AND 2006


During
      the year ended September 30, 2006, the Company issued 655,000 options to
      purchase the Company’s common stock at prices ranging from $0.62 to $1.14 to
      employees, directors and others under the year 2000 employee stock option plan.
      The aggregate value of the options vesting from January 1, 2006 to September
      30,
      2006 and during the year ended September 30, 2007 was $133,575 and $159,818,
      respectively, and has been reflected as compensation cost. As of September
      30,
      2006, the aggregate value of unvested options was $258,555, which will be
      amortized as compensation cost as the options vest. During the year ended
      September 30, 2006, the Company also granted 325,000 warrants in relation to
      the
      extension of debt. (See note 4)





The
      option summary and changes during the year are presented below:




Weighted
            
            Weighted
                AvgAverage
            
            Aggregate
            
            RemainingNumber
                of
            
            Exercise
            
            Intrinsic
            
            ContractualShares
            
            Price
            
            Value
            
            Terms(months)Options
                outstandingAt
                September 30, 2005
            
            
            4,603,250
            
            
            1.06Options
                granted
            
            
            655,000
            
            
            1.04Options
                expired
            
            
            (354,750
            )
            
            0.56Options
                outstandingAt
                September 30, 2006
            
            
            4,903,500
            
            $
            1.10Options
                granted
            
            
            —
            
            
            —Options
                expired
            
            
            (1,254,000
            )
            $
            1.61Options
                outstandingAt
                September 30, 2007
            
            
            3,649,500
            
            $
            0.92
            
            $
            —
            
            
            27Options
                exercisableAt
                September 30, 2007
            
            
            3,037,750
            
            $
            0.94
            
            $
            —
            
            
            27Options
                exercisableAt
                September 30, 2006
            
            
            3,467,000
            
            $
            1.21




The
      following table summarizes information about employee’s stock options
      outstanding at September 30, 2007.





Outstanding
            
            ExercisableWeighted
                Average
            
            Weighted
                AverageExercise
            
            
            
            Life
            
            Exercise
            
            
            
            ExercisePrice
            
            Options
            
            (Months)
            
            Price
            
            Options
            
            Price$
            0.41
            
            
            346,750
            
            
            27
            
            $
            0.41
            
            
            328,500
            
            $
            0.410.44
            
            
            334,250
            
            
            27
            
            
            0.44
            
            
            334,250
            
            
            0.440.55
            
            
            302,000
            
            
            27
            
            
            0.55
            
            
            301,500
            
            
            0.550.56
            
            
            54,000
            
            
            27
            
            
            0.56
            
            
            54,000
            
            
            0.560.61
            
            
            170,000
            
            
            27
            
            
            0.61
            
            
            170,000
            
            
            0.610.62
            
            
            70,000
            
            
            31
            
            
            0.62
            
            
            70,000
            
            
            0.620.63
            
            
            1,400,000
            
            
            27
            
            
            0.63
            
            
            1,050,000
            
            
            0.630.87
            
            
            500
            
            
            3
            
            
            0.87
            
            
            500
            
            
            0.870.90
            
            
            70,000
            
            
            27
            
            
            0.90
            
            
            70,000
            
            
            0.900.95
            
            
            159,000
            
            
            27
            
            
            0.95
            
            
            159,000
            
            
            0.951.01
            
            
            5,000
            
            
            39
            
            
            1.01
            
            
            1,250
            
            
            1.011.14
            
            
            329,500
            
            
            27
            
            
            1.14
            
            
            90,250
            
            
            1.141.25
            
            
            25,000
            
            
            27
            
            
            1.25
            
            
            25,000
            
            
            1.251.30
            
            
            15,000
            
            
            27
            
            
            1.30
            
            
            15,000
            
            
            1.301.55
            
            
            120,000
            
            
            27
            
            
            1.55
            
            
            120,000
            
            
            1.553.38
            
            
            2,000
            
            
            27
            
            
            3.38
            
            
            2,000
            
            
            3.383.56
            
            
            52,000
            
            
            27
            
            
            3.56
            
            
            52,000
            
            
            3.563.87
            
            
            134,500
            
            
            27
            
            
            3.87
            
            
            134,500
            
            
            3.875.00
            
            
            60,000
            
            
            27
            
            
            5.00
            
            
            60,000
            
            
            5.
                00$
            0.41-$5.00
            
            
            3,649,500
            
            
            
            
            $
            0.92
            
            
            3,037,750
            
            $
            0.94




F-20


CAMINOSOFT
        CORP.
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 YEARS
        ENDED SEPTEMBER 30, 2007 AND 2006
  A
        summary of the status of the Company’s nonvested shares granted under the
        Company’s stock option plan as of September 30, 2007 and changes during the year
        then ended is presented below:





Weighted
                Average GrantNonvested
                shares
            
            Shares
            
            Date
                Fair ValueNonvested
                at October 1, 2006
            
            
            1,436,500
            
            $
            0.62Granted
            
            
            —Vesting
            
            
            (591,250
            )Expired
            
            
            (233,500
            )Nonvested
                at September 30, 2007
            
            
            611,750
            
            $
            0.83





The
      warrant summary and changes during the year are presented below:




Number
                of Shares
            
            Weighted
                Average Exercise PriceWarrants
                outstandingAt
                September 30, 2005
            
            
            4,678,337
            
            
            0.80Warrants
                granted
            
            
            325,000
            
            
            1.01Warrants
                expired
            
            
            —
            
            
            —Warrants
                outstandingAt
                September 30, 2006
            
            
            5,003,337
            
            $
            0.82Warrants
                granted
            
            
            —
            
            
            —Warrants
                expired
            
            
            20,000
            
            
            0.51Warrants
                outstandingAt
                September 30, 2007
            
            
            4,983,337
            
            $
            0.82Warrants
                exercisableAt
                September 30, 2007
            
            
            4,983,337
            
            $
            0.82




F-21


CAMINOSOFT
        CORP.
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 YEARS
        ENDED SEPTEMBER 30, 2007 AND 2006


The
      following table summarizes information about warrants outstanding at September
      30, 2007.




Outstanding
                and ExercisableWeighted
                AverageExercise
            
            
            
            Life
            
            ExercisePrice
            
            Warrants
            
            (Months)
            
            Price0.53
            
            
            1,415,094
            
            
            22
            
            
            0.530.74
            
            
            1,621,623
            
            
            15
            
            
            0.740.86
            
            
            150,000
            
            
            41
            
            
            0.861.11
            
            
            1,621,620
            
            
            15
            
            
            1.111.14
            
            
            175,000
            
            
            37
            
            
            1.14$
            0.53
                - $1.14
            
            
            4,983,337
            
            
            
            
            $
            0.82





NOTE
      6 -
      COMMITMENTS AND CONTINGENCIES





OPERATING
      LEASES





The
      Company leases its facilities under noncancelable operating leases expiring
      at
      various dates through 2008. Future minimum rental payments required under
      noncancelable operating leases through September 30, 2008 are
      $41,347.





Total
      rent expense for the years ended September 30, 2007 and 2006 amounted to
      $125,777 and $129,142, respectively.





EMPLOYMENT
      CONTRACTS





During
      the fiscal year ended September 30, 2003, the Company signed a two year
      employment agreement with Mr. Stephen Crosson to be the Chief Executive Officer
      of the Company reporting to the Chairman of the Board of Directors. The contract
      is for two years beginning August 1, 2003, with an annual salary of $150,000
      per
      year and the possibility of bonuses at the discretion of the Board of Directors.
      The agreement was amended on April 19, 2004. Mr. Crosson will receive $12,500
      per month for an indeterminate period of time and will receive a bonus fee
      of 1%
      of any acquisition price or licensing fee over $1,000,000 paid to the Company.
      If Mr. Crosson is terminated without cause he will receive salary and benefits
      for up to 6 months after termination.





During
      the Fiscal year ended September 30, 2004, the Company entered into an at will
      employment agreement with Michael Skelton (C.E.O. & Director). Mr. Skelton
      will receive $14,000 per month salary for an indeterminate period of time.
      The
      contract may be terminated by the Company or Mr. Skelton at any time. On
      December 20, 2007, Mr. Skelton resigned as Chief Executive Officer and as a
      Director of the Company. Mr. Skelton will remain on the payroll and health
      insurance through March 31, 2008. These benefits are being provided to Mr.
      Skelton at the discretion of the Board of Directors in lieu of severance
      pay.




F-22


CAMINOSOFT
        CORP.
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 YEARS
        ENDED SEPTEMBER 30, 2007 AND 2006
  LITIGATION





The
      Company may, from time to time, be involved in legal proceedings, claims and
      litigation arising in the ordinary course of business. It is possible the
      outcome of such legal proceedings, claims and litigation could have a material
      effect on the operating results or cash flows when resolved in a future period.
      These matters are not expected to have a material adverse effect upon the
      Company’s financial statements.





NOTE
      7 -
      INCOME TAXES





The
      Company’s net deferred tax assets (using a federal corporate income rate of 34%)
      consist of the following at September 30, 2007 and 2006:




2007
            
            2006Benefit
                of operating loss carryforward
            
            $
            7,200,000
            
            $
            7,400,000Valuation
                allowance
            
            
            (7,200,000
            
            
            (7,400,000)
            )Net
                deferred tax asset
            
            $
            -
            
            $
            -




The
      effective tax rate on loss before income taxes differed from the federal
      statutory tax rate. The following summary reconciles income taxes at the federal
      statutory tax rate with the actual taxes and the effective tax
      rate:





September
                30,2007
            
            2006Federal
                statutory tax rate
            
            
            (34
            %)
            
            (34
            %)State
                tax, net of federal benefit
            
            
            (5
            %)
            
            (5
            %)Permanent
                differences
            
            
            (1
            %)
            
            (1
            %)40
            %
            
            40
            %Change
                in valuation allowance
            
            
            40
            %
            
            40
            %Effective
                tax rate
            
            
            -
            %
            
            -
            %





At
      September 30, 2007, the Company has available net operating loss carry-forwards
      of approximately $19,000,000 for federal income tax purposes which expire in
      varying amounts through 2027. The Company’s ability to utilize NOL
      carry-forwards may be limited in the event that a change in ownership, as
      defined in the Internal Revenue Code, has or does occur in the future.





Deferred
      tax assets, before valuation allowance, as of September 30, 2007 were
      approximately $7,200,000 and primarily arise from the Company’s net operating
      loss carry forwards. A valuation allowance of approximately $7,200,000 was
      provided because management believes that the deferred tax assets are more
      likely than not to be unrealized.




F-23


CAMINOSOFT
        CORP.
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 YEARS
        ENDED SEPTEMBER 30, 2007 AND 2006
  Subsequent
        Events





On
      December 20 and 21, 2007, Mr. Michael Skelton and Mr. Robert Degan resigned
      their positions of CEO and Chairman of the Board of Directors respectively.
      The
      resignations were to be part of the merger and consolidation with Shea
      Development Corp. currently in process. Mr. Degan resigned his position as
      Chairman of the Board at this time for personal reasons. Mr. Skelton resigned
      his position as Chief Executive Officer and as a Director to begin the new
      year
      in pursuit of other endeavors.





On
      September 6, 2007, the Company entered into an Agreement and Plan of Merger
      with
      Shea Development Corp. Upon closing the Merger the shareholders of the Company
      will retain 4.99% of the fully diluted capital stock after giving effect to
      shares of the Company’s Common Stock (i) to be issued to the holders of Shea
      Common Stock; (ii) issuable upon conversion of the Shea Preferred Stock; (iii)
      issuable upon exercise of the newly issued Shea options and warrants; and (iv)
      which will be issued or issuable in connection with financing to be undertaken
      between the signing of the Agreement and Closing with gross proceeds of at
      least
      $6,000,000 at a per share price of not less than $0.50. The Company and Shea
      Development are continuing there preparation of a joint registration and proxy
      statement as part of the process for the acquisition and merger of the two
      organizations. It is anticipated that the filing and merger agreement will
      be
      concluded during the first half of calendar year 2008.





Subsequent
      to September 30, 2007, and prior to the date of this filing the Company
      negotiated to extend the maturity dates of debt due within the next 4 months.
      Pursuant to renewal and modification agreements the Company extended the total
      debt with an aggregate principal balance of $2,700,000 to February 27, 2008.
      In
      addition to extending the debt the Company also converted from cash payments
      of
      interest to interest payments in unregistered common stock beginning November
      1,
      2007.





F-24