Mail Stop 4-6

January 19, 2005

James W. Dolan
Chief Financial and Operating Officer
MAI Systems Corporation
26110 Enterprise Way
Lake Forest, California 92630

Re:	MAI Systems Corporation
	Schedule 13E-3 - File No. 5-38111, filed December 16, 2004
	Schedule 14C - File No. 1-09158, filed December 16, 2004
      Form 10-Q for the quarter ended September 30, 2004 - File
No.
1-09158

Dear Mr. Dolan:

      We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments.  If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary.  Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.

      Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects.  We welcome
any questions you may have about our comments or any other aspect
of
our review.  Feel free to call us at the telephone numbers listed
at
the end of this letter.

General

1. Rule 13e-3 requires that each issuer and affiliate engaged in a
going private transaction file a Schedule 13E-3 and furnish the
required disclosures.  Mr. Richard S. Ressler, Orchard Capital
Corporation, James W. Dolan, W. Brian Kretzmer, and HIS Holding,
LLC
approved this reverse stock split by written consent and are
affiliates of the company.  Therefore, we believe they must be
included as filing persons on the Schedule 13E-3.  Please see
Section
III of Release No. 34-17719 and Section II.D.3 of our Current
Issues
and Rulemaking Projects Outline dated November 14, 2000 for
additional guidance.

2. Canyon Capital Advisors, LLC approved the transaction, and will
remain as one of the stockholders after the reverse stock split.
Therefore, we believe that Canyon Capital Advisors, LLC may also
be
engaged in this going private transaction.  Please add this
company
as a filer on the Schedule 13E-3 or supplementally explain why it
should not be so included.

3. Please note that each new filing person must individually
comply
with the filing, dissemination and disclosure requirements of
Schedule 13E-3.  A joint Schedule 13E-3 may be used by all
required
filers, however.  Revise the information to include all of the
information required by Schedule 13E-3 and its instructions for
each
additional filing person.  For example, each filing person must
include a statement as to whether such person believes the Rule
13e-3
transaction to be fair to unaffiliated security holders and an
analysis of the material factors upon which each relied in
reaching
such a conclusion.  Please see Item 1014 with respect to Item 8 of
Schedule 13E-3.  Please also note in particular Instruction C of
Schedule 13E-3 and the disclosure requirements of Items 1002(e)
and
(f) with respect to Item 2 of Schedule 13E-3.

4. Please provide us with your analysis for why the investor
group`s
other purchases of shares during the past year did not constitute
the
first steps in the going private transaction.  Refer to Rule 13e-
3(a)(3) and Question and Answer No. 4 of Exchange Act Release No.
34-
17719 (April 13, 1981).

Schedule 13E-3

Item 6. Purpose of the Transaction and Plans or Proposals.

5. Please provide the disclosure required under Item 1006(c) of
Regulation M-A.  Please see the Instruction to Item 6 of Schedule
13E-3 for additional guidance.

Item 7. Purposes, Alternatives, Reasons and Effects.

6. Please incorporate the section titled "Substantive Factors
Disfavoring the Reverse Stock Split" into Item 7(d) of your
Schedule
13E-3.

Item 8. Fairness of the Transaction.

7. With respect to Item 8(f) of your Schedule 13E-3, please state
whether any officer of the type described in paragraph (viii) of
Instruction 2 to Item 1014 of Regulation M-A has been received.

Item 9. Reports, Opinions, Appraisals and Negotiations.

8. Your incorporation by reference of the section titled "Special
Committee of the Board of Directors" does not appear to address
the
requirements of Item 1015(a) of Regulation M-A.  We note your
disclosure on page 15, however.  Please incorporate the section
entitled "Procedural Factors Disfavoring the Reverse Stock Split;
Interests of Our Chairman and Executive Officers in the Reverse
Stock
Split" or add the required disclosure to the section you have
currently incorporated by reference.

Schedule 14C

9. We note your use of such defined terms "Effective Time,"
"Cashed-
Out Stockholders," "Common Stock" and "Registration and Periodic
Reporting Obligations."  Please refrain from using so many defined
terms in your disclosure as it inhibits the readability of the
document.  Over-reliance on defined terms forces readers to learn
a
new vocabulary in order to understand the disclosure.  Please
revise
your disclosure so that the definitions of your terms are clear
from
their context.

10. The individual members of the "Investor Group" should be
identified where that term is first used.

Summary Term Sheet, pp. 4-6

11. Please revise your summary term sheet to include a discussion
of
the additional filing persons referred to above and their
relationships to you.  Please also briefly discuss their recent
transactions with you.  The expanded disclosure should include a
section discussing their interests in this transaction that are
different from and potentially in conflict with those of
unaffiliated
shareholders generally.

12. The summary term sheet should discuss only the most material
features of this transaction.  In this regard, consider deleting
or
relocating extraneous information that detracts from the
presentation
of the most material aspects of the reverse stock split.  For
example, consider whether the information presented under "Effects
if
Reverse Stock Split is not Consummated" is critical, given the
consents you have received.  In addition, is the disclosure under
"Regulatory Filings and Approvals" necessary to a shareholder`s
understanding of the most materials terms of the reverse stock
split?
Please make these and any other necessary changes in order to
enhance
the readability of this section.

13. Please confirm that there were no negotiations with the
investor
group prior to November 15, 2004.  If there were any such
negotiations, please amend your disclosure here, in your summary
term
sheet, and in your Special Factors section to describe the
entirety
of the company`s dealings with the investor group, including, but
not
limited to, the identity of the members of the investor group, the
date and circumstances of the initial suggestion that the investor
group would become involved in the company`s going-private
transaction, members` relationship to the company, if any, and the
dates and topics of discussion of all meetings and all persons in
attendance.  In this respect, we note that in view of the possible
conflicts of interest involved in the reverse stock split, your
board
of directors unanimously decided on November 15, 2004, that it
would
be advisable to form the special committee of independent members
of
our board of directors consisting of Messrs. Mayer and Ross, with
Mr.
Ross as the chairman of the special committee, to evaluate the
reverse stock split proposal and assess whether the proposal is in
the best interests of stockholders.

Special Factors
The Reverse Stock Split
Effective Time of the Reverse Stock Split, p. 7

14. Please revise your disclosure to clearly state the record date
for the reverse stock split.  Please reconcile your current
disclosure that the record date is to be the "Effective Date" with
your disclosure on the first page which defines "Record Date" as
December 30, 2004.

Approval of the Reverse Stock Split By Our Board of Directors and
Stockholders, pp. 7-8

15. According to your disclosure on page 24, it appears that the
43,172,110 shares held by HIS Holding is comprised of (1)
10,000,000
shares issued pursuant to a private placement of $1,000,000 and
(2)
the conversion of $3,194,156 of indebtedness plus accrued
interest.
Please supplementally reconcile this share holding with the
disclosure you made in your definitive proxy statement filed
August
25, 2004 requesting approval from stockholders for the private
placement and conversion of indebtedness.  Your disclosure in the
proxy statement states that the $3,194,156 of indebtedness was to
be
converted at $.10 per share of common stock without any reference
to
the conversion of accrued interest.  Please inform us of the basis
upon which you were able to convert the accrued interest in light
of
the proxy statement disclosure and your stockholders` approval
based
on such disclosure.  Please also explain why the 2,433,333 shares
acquired by HIS Holding from CSA Private Limited are not reflected
in
HIS Holding`s share holdings.

16. We note, pursuant to your definitive proxy statement filed on
August 25, 2004, that Orchard Capital Corporation, owned by
Richard
Ressler, is managing member of HIS Holding, please state that here
and include such information throughout the document, where you
reference HIS Holding, including the beneficial holders table.
Add
the names of the investors of HIS Holding here, identifying those
who
are affiliated with the company, by title, and detail all shares
made
part of the written consent.

Stock Certificates, p. 8

17. We note your disclosure that "the transfer agent will send a
letter of transmittal to each affected stockholder."  By "affected
stockholder," we assume you mean a shareholder who will not be
cashed
out as a result of the reverse split. Please clarify.

18. Your current disclosure suggests that receipt of physical
stock
certificates are required prior to the exchange agent issuing new
shares or making the cash payment.  Please revise your disclosure
to
include a brief discussion about how stockholders who hold shares
in
street name should respond to the letter of transmittal as such
stockholders do not physically hold stock certificates to
surrender.

Provision for Unaffiliated Stockholders, p. 8

19. Please discuss the reasons for not having made any provision
to
grant unaffiliated stockholders access to corporate files or to
obtain counsel or appraisal services for such stockholders.

Source of Funds and Financial Effect of the Reverse Stock Split,
p. 8

20. Please provide additional disclosure discussing the basis for
your estimate that the reverse stock split will result in a cash
expenditure of approximately $24,000.  How did you arrive at this
amount?  What is the chance that the cash expenditure will be
significantly higher than your estimate?  You should state whether
or
not the company has paid or will be responsible for paying any or
all
expenses.  Please see Item 1007(c) of Regulation M-A.

Special Committee of the Board of Directors, p. 9

21. Disclose the facts and circumstances surrounding the board of
directors` request that your senior management and legal counsel
present an analysis of the positive and negative factors relating
to
the `privatization` of the company.  For example, when and why did
the board first consider the privatization of the company?  How
and
why did it determine to pursue a going private transaction?  Did
all
board members agree that such path should be pursued?

22. You should detail the possible conflicts of interest involved
in
the reverse stock split that the board considered.  We note that
because of these factors the board unanimously decided on November
15, 2004 that it would be advisable to form the special committee
to
evaluate the reverse stock split proposal.  Please disclose the
nature of CIM Group`s affiliate relationship with you.

23. Please disclose any relationship that exist or has existed
between you and Rutan & Tucker, LLP.  We note your disclosure that
Rutan & Tucker, LLP, has no relationship with any of the
independent
directors constituting the special committee.  We also note your
disclosure in the first paragraph of this section stating that
your
legal counsel assisted your board of directors by discussing the
various alternatives for going private.  Please disclose the
identity
of your legal counsel.  Further, we note your statement in the
fourth
paragraph of the sentence stating that the special committee`s
questions were responded to by your "senior management and legal
counsel."  Please confirm whether such questions were directed to
your legal counsel as opposed to Rutan & Tucker, LLP.

24. Please elaborate on the considerations made by the special
committee in determining that a third-party opinion would not be
cost-effective.  Please also elaborate further on why the special
committee felt satisfied in relying on the internal company study.

25. State the date that your board adopted the special committee`s
recommendation regarding the reverse stock split based on the
special
committee`s determination that the reverse stock split was fair
and
in the best interests of the company and the stockholders.

26. Item 1014(a) of Regulation M-A requires a filing person on the
Schedule 13E-3 to state a belief as to the fairness of the
proposed
transaction to "unaffiliated security holders." Your disclosure in
this section states that the special committee and the board
determined that the reverse stock split was fair to the "company
and
our stockholders," which is a different concept.  Please revise
throughout the disclosure materials to provide the finding as to
non-
affiliates as a distinct group, as required by Item 1014(a).  As
indicated in our comment above, such finding must be made by each
filing person, including those you may add as a result of our
comments.

27. Where a transaction will impact different subsets of
shareholders
differently, the fairness determination required by Item 1014(a)
must
be made as to each group separately.  See Q&A No. 19 in Exchange
Act
Release No. 17719 (April 13, 1981).  Revise the disclosure
throughout
this information statement to separately address fairness to those
shareholders being cashed out in the reverse stock split, and
fairness to those who will remain as shareholders in a private
company.

Financial Analysis Performed by Management, pp. 10-12

28. You state that management used financial projections and
forecasts in evaluating the fairness of this transaction.  Such
financial forecasts forming the basis of its fairness analysis
should
be disclosed here.  In addition, the material assumptions
underlying
the projections should be explained.

29. To the extent applicable, consider the need to reconcile any
such
projections to GAAP, pursuant to Regulation G.

30. With respect to each valuation analysis conducted by
management,
please disclose the actual values calculated.  For example, how
did
management conclude that the recommended price of $.10 per share
to
be paid in lieu of issuing fractional shares in connection with
the
reverse stock split was fair to the unaffiliated stockholders?
Please discuss the weight given by management to each valuation
analysis and the reasons a particular valuation analysis was
considered important or rejected in making management`s valuation
determination.

31. Please revise your disclosure with respect to each valuation
analysis in order to describe each valuation methodology and the
application of the methodologies to your particular facts.  What
is
and how do you derive a "going concern value" or a "discounted
cash
flow value?"  For example, with respect to your disclosure under
"Earnings Value," what was the value of the company derived using
this methodology?  What do the implied multiples indicate and what
were the public companies that were used for comparison?  What
were
their implied multiples and what was the basis for selecting the
public companies as comparables?

32. With respect to your disclosure under "Discounted Cash Flow
Value," please disclose and discuss the forecasts, historical
performance, financial conditions, outlook and other factors that
were considered.  Consider if the use of charts and tables may
assist
in your disclosure.

Reasons for the Reverse Stock Split, pp. 13-14

33. Please discuss why you have chosen to engage in a going
private
transaction at this time.  Please see Item 1013(c) of Regulation
M-A.

Substantive and Procedural Factors Considered by the Special
Committee and Our Board of Directors as to the Fairness of the
Reverse Stock Split, p. 14

34. Please provide a discussion of the analysis the special
committee
and your board of directors undertook to determine the fairness of
the reverse stock split.  To the extent practicable, please
discuss
the weight assigned to each enumerated factor.  Please see Item
1014(b) of Regulation M-A for additional guidance.  Further,
please
expressly discuss the board`s opinion of and analysis with respect
to
the fairness of the consideration to be paid in connection with
the
reverse stock split, including the board`s decision to raise the
consideration to $.17 per share.  Please see Instruction 2 to Item
1014 of Regulation M-A.

35. Please note our prior comment regarding the required
determination by each filing person of whether the reverse stock
split is fair to unaffiliated stockholders.  Each filing person
must
discuss in reasonable detail the material factors upon which its
fairness opinion is based.  Each filing person must provide their
own
analysis or, if none was performed by such filing person,
expressly
adopt the analysis of the board of directors as its own.  Please
see
Item 1014 of Regulation M-A and its Instructions for additional
guidance.

Procedural Factors Favoring the Reverse Stock Split

The Reverse Stock Split Provides our Stockholders with Liquidity,
p.
14

36. Please elaborate on why the low trading volume in your stock
is
deemed "illiquid by most standards."  Regardless of the low
volume,
is it not possible for a stockholder to sell her shares in the
OTC-
BB?  Please reconcile this positive factor with the negative
factor
that any unaffiliated stockholder holding in excess of 150 shares
will no longer have a public market in which to sell her shares.
In
this respect, it appears that the reverse stock split will not
provide liquidity, but will in fact create illiquidity.

Procedural Factors Disfavoring the Reverse Stock Split; Interests
of
our Chairman and Executive Officers in the Reverse Stock Split, p.
15

37. Please revise your disclosure to discuss why the enumerated
factors may contribute to the unfairness of the reverse stock
split
for unaffiliated stockholders.  For example, please discuss why
not
having a third-party fairness report may result in unfairness for
unaffiliated stockholders.  Regardless of the fact that the
reverse
stock split affects affiliates and unaffiliated stockholders
equally,
many unaffiliated stockholders will have their shares bought out
at a
price determined to be fair by directors and management who will
likely find their ownership stake in the company increased as a
result of the reverse stock split.  In this revised disclosure,
you
should include the facts and circumstances relevant to each
analysis,
for example, with respect to your first point that the affiliated
stockholders have sufficient shares to approve the reverse stock
split, you should detail the holdings and clearly discuss the fact
that an affiliate of the company, owned by certain directors and
officers, recently acquired a controlling stake in the company.
In
your last point, that members of the investor group will increase
their percentage ownership in the company, you should break out
the
percentage increase by individuals and the investor group as a
whole.

38. It appears that "[b]ecause of the limited trading market" for
common stock, a stockholder may be unable to purchase enough
shares
to retain an equity interest in your company, as described on page
7.
You state here, however, that all stockholders will have the
option
to remain stockholders of the company by purchasing additional
shares
prior to the effective time.  Is this truly a mitigating factor?

39. Please discuss whether an unaffiliated representative was
retained on behalf of unaffiliated stockholders and whether the
transaction was approved by a majority of the directors who are
not
your employees.  Please discuss how the foregoing factors
contributed
to the board`s determination of fairness.  Please see Items
1014(c)
and (d) for additional guidance.

Substantive Factors Disfavoring the Reverse Stock Split

Cessation of Public Sale Opportunities, p. 15

40. We note your statement that "the current public market is
highly
illiquid."  Please provide support for this statement.  Is a
current
stockholder unable to sell her shares or are their significant
obstacles in selling her shares?

Prior Transactions Between the Investor Group and Our Company

Investor Group Purchase of Company Shares Owned by Computer
Sciences
Corporation, p. 24

41. Your disclosure indicates that HIS Holding acquired $3,694,156
of
indebtedness from CSA.  The disclosure in your definitive proxy
statement filed August 25, 2004 indicates, however, that HIS
Holding
acquired $3,194,156 and CSA retained $500,000 of indebtedness.
Please reconcile the disclosures.

Interests of Certain Persons in or Opposition to the Reverse Stock
Split - Security Ownership of Certain Beneficial Owners and
Management, pp. 25-26

42. Please provide disclosure with respect to the interests of the
filing persons in the reverse stock split transaction.  We note
that
Canyon Capital Advisors and Messrs. Ressler, Kretzmer and Dolan
are
members of HIS Holding.  Please disclose each member`s interest in
HIS Holding.  We note your statement in the last sentence of the
last
paragraph on page 24.  Further, please provide the disclosure
required pursuant to Item 3 of Schedule 14C.

43. We note that footnote 4 to your beneficial ownership table
includes a cross-reference to "Compensation Committee Interlocks
and
Insider Participation."  There does not appear to be such a
section
in your disclosure.  Please advise.

44. Please expand footnote 7 to name each member of the investor
group, with their respective affiliation with the company and
title.

Market Prices of Our Common Stock and Dividend Policy, p. 26

45. Please update your market prices to include information with
respect to the fourth quarter of fiscal 2004.

Forward-Looking Statements, p. 27

46. Your disclaimer in the last sentence of this section is
inconsistent with your obligation to amend the information
statement
and Schedule 13E-3 upon a material change in the information
previously disclosed.  Please revise or modify.

Financial Statements, Supplementary Financial Information,
Management`s Discussion and Analysis of Financial Condition and
Results of Operations and Quantitative and Qualitative Disclosure
About Market Risk, p. 27

47. Repetitive disclosure detracts from the readability of your
document and inhibits the understanding by a reader.  Please
consolidate your management`s discussion and analysis in
Appendixes C
and D.  It appears that certain sections are repetitive and/or may
be
consolidated.

Pro Forma Financial Information

Pro Forma Financial Information Showing Effect of the Reverse
Stock
Split and the Management Equity/Conversion Transaction, pp. B-2 to
B-
3

48. The second paragraph on page B-2 states that you have engaged
a
third party expert to perform a valuation of the intangible and
tangible assets.  Was this valuation related to the reverse stock
split?  Did the valuation contribute to the valuation analyses
undertaken for determining the fairness of the reverse stock split
transaction?

49. In the fourth paragraph on page B-2, you state that you
received
stockholder approval to convert the indebtedness acquired from CSA
plus any accrued interest.  Your definitive proxy statement,
however,
appears to state that only approval for the principal amount of
the
acquired indebtedness was sought.  There does not appear to be a
reference to accrued interest.  Please see our prior comment
regarding the same issue.  Please reconcile.

50. We note you disclose that the investor group acquired debt and
shares of common stock from CSA.  Indicate how you determined that
33,172,100 shares of common stock should be issued as full payment
of
the indebtedness while the investor group paid less than $1
million
to acquire the debt.  Clearly disclose the impact this transaction
has on the pro forma information.  That is, describe the effect of
acquiring the debt and the shares of common stock (i.e., if no
impact, clearly state that fact).  We also note that in connection
with the conversion of debt to equity by the investor group you
have
determined a "beneficial conversion right" has been provided in
the
amount of $2.6 million and that you will record this amount as a
charge to interest expense on November 1, 2004.  Indicate why you
are
presenting a "beneficial conversion right" when the conversion
appears to be an extinguishment of debt since the debt did not
have
any conversion rights (e.g., present loss on extinguishment).
Therefore, the presentation of this extinguishment as a beneficial
conversion right is not proper.  Revise your disclosures.

51. Tell us how those shares of common stock the investor group
acquired from CSA were included in the allocation of stockholders
deficiency calculation on page B-3.  Provide us with a summary
that
identifies members of the investor group and the ownership
interest
of this group as of the acquisition of the indebtedness, the
conversion of the indebtedness into equity, and the issuance of an
additional 1,000,000 shares of common stock.  Reconcile this
interest
in the summary to the 4.53% shown in the table presented on page
B-3
and to the beneficial ownership table on page 25.

52. Indicate why you do not include a pro forma adjustment for the
beneficial conversion right (extinguishment of debt) since the pro
forma information reflects the conversion of debt into equity (see
your adjustment (c)).  Revise the pro forma financial statements
to
include this adjustment.

53. We note you believe the conversion of debt to equity and the
purchase of 10,000,000 shares of common stock permits you to use
push-down accounting since the members of the investor group will
hold between 80% and 94% of the voting shares.  Tell us how you
addressed the criteria in EITF D-97 in determining that push-down
accounting is appropriate.  In this regard, you should clearly
disclose the reasons why you believe that the investor group has
control over the company (i.e., acting as a collaborative group).

54. Disclose a schedule showing the calculation of the purchase
price
including the value assigned to non-cash portions.  In your
calculation of "post push down" stockholders equity (deficiency)
we
note $2.25 million is the "new basis."  Help us understand why
$2.25
million is the new basis considering the investor group purchased
common stock for $1 million and converted approximately $3.3
million
(per pro forma financial statements) of debt and accrued interest
to
equity (equity has a value of $5,970,000 at $0.18 per share).
Tell
us why $250,000 of compensation expense should be included in the
new
basis.  Additionally, clearly disclose how you are accounting for
the
minority interest since it resulted in a debit balance (i.e.,
included in stockholder`s equity instead of a separate line item).

Pro Forma Consolidated Balance Sheet, p. B-4

55. We note your pro forma adjustment (adjustment (a)) to debit
common stock subscribed for $1 million.  There does not appear to
be
an offsetting credit to this adjustment.  In this regard, clearly
disclose the purpose of the adjustment (i.e., show the issuance of
the shares of common stock).  Advise and revise as necessary.

Pro Forma Consolidated Statement of Operations, p. B-5

56. We note that you have provided pro forma consolidated
statements
of operations for the three and nine months ended September 30,
2004.
You should also provide a pro forma consolidated statement of
operations for your fiscal year ended December 31, 2003.  Also
provide the book value per share as of the date of your most
recent
balance sheet.  We refer you to Item 1010(b) of Regulation M-A.

Footnotes to Pro Forma Financial Statements, p. B-7

57. Your notes to the pro forma financial statements do not
provide
the basis for some of your adjustments and in some instances are
incomplete.  For example your adjustment for common stock
subscribed
appears to describe a transaction that is already included in your
balance sheet.    In addition your pro forma adjustments (b) and
(f)
relate to amortization and interest expense adjustments but your
disclosure of how these adjustments were calculated is incomplete.
Revise your notes to provide investors a clear explanation of your
adjustments, the amounts being adjusted, how the adjustments were
calculated, if applicable, and the periods that the adjustments
are
recorded.

58. In tabular form, disclose how the purchase price was
allocated.
Describe in detail all intangibles acquired.  Clearly disclose how
you determined the step-up in value of net assets.  Clearly
disclose
how this value was determined.  You disclose in note (b) that
intangible assets will be amortized over a five year life and no
amounts have been allocated to goodwill.  Revise your notes to
disclose your allocation of the purchase price by asset group such
as
furniture fixtures and equipment, intangible assets, goodwill and
the
depreciation/amortization periods for each group.  If you have not
received a valuation of your assets/liabilities, estimate the fair
values to be assigned to each asset/liability group and disclose
that
they are estimated values.

Results of Operations

Year Ended December 31, 2002 Compared to Year Ended December 31,
2003, p. C-8

59. Please quantify the impact of each identified source for
significant changes, from period to period in line items of your
financial statements.  For example, you state that the decrease in
revenue was attributable to reduced volume as well as rates.
Please
quantify how much of the decrease was a result of reduced volume
or
rates.  You indicate that your SG&A expense increased primarily
because of increased selling and marketing expenses.  How much of
the
increase is attributable to such selling and marketing expenses?
Please revise your results of operations discussion here and
elsewhere accordingly.

Contractual Obligations and Commercial Commitments, p. C-7

60. Please prepare a separate section discussing any off-balance
sheet arrangements.  Please see Item 303(a)(4) for additional
guidance.

Report of Independent Certified Public Accountants, pp. C-13 and
C-14

61. Provide updated auditor`s opinions that comply with PCAOB AS
No.
1.  That is, the audit report should indicate that the audit was
conducted in accordance with the standards of the PCAOB.  Please
revise.

Note 12 - Stockholders` Deficiency, pp. C-36 to C-37

62. Your stock option table on page C-37 appears to contain some
errors.  The column titled "Weighted Average Remaining Contractual
Life" appears to be set forth in dollars.  In addition, the
information set forth in the column titled "Weighted Average
Exercise
Price" does not appear to correlate with the range exercise prices
of
the stock options being illustrated.

Pro Forma Financial Information, pp. D-14 to D-17

63. The information presented on pages D-14 to D-17 appears to be
redundant with respect to the information presented in your
Appendix
B.  Please revise accordingly.

Form 10-Q for the quarter ended September 30, 2004

General

64. We note your customer deposits as of September 30, 2004 were
$2.2
million.  Tell us whether your customer deposits as of September
30,
2004 represent advance payments on products or any contracts for
delivery of services that are considered backlog orders.  If not,
tell us what customer deposits represent.  Tell us whether you
have
any backlog orders for your products, or any contracts for
delivery
of services over a future period.  We refer you to paragraph (c
)(1)(viii) of Item 101 of Regulation S-K.  If so, revise to
disclose
this information.  Describe the controls and procedures you have
to
properly identify any backlog.

Item 4(a). Evaluation of Disclosure Controls and Procedures, p. 22

65. We note that your auditors orally informed you of significant
deficiencies in your internal controls.  Tell us whether these
significant deficiencies considered together result in a material
weakness in your internal controls.  In addition tell us whether
these significant deficiencies resulted in any adjustments to your
financial statements identified by your independent auditors, and
if
so, tell us the nature and amounts of the adjustments and the
periods
they occurred.

66. You disclose that management has taken steps to improve the
internal control weaknesses.  Revise to disclose the nature of the
steps you are taking to improve your internal controls, the
timeline
for implementation and what you are doing to mitigate the
weaknesses
in the system improvements to ensure that the financial statements
are fairly presented in accordance with GAAP.

67. We note that in the first paragraph of this section that the
principal executive officer and principal financial officer
concluded, based on their review, that disclosure controls and
procedures are effective.  In the last paragraph of this section
you
disclose that the company has concluded that, except as noted
above,
and subject to the inherent limitation in all control systems the
company`s current disclosure controls and procedures are
sufficient.
Management may not state that disclosure controls and procedures
are
effective except to the extent that certain problems have been
identified or express similar qualified conclusions.  Rather
management must take those problems into consideration when
concluding whether internal control over financial reporting is
effective.  Management may state that internal controls are
ineffective for specific reasons.  We refer you to Release No. 33-
8238.  Revise your disclosures as necessary.

Closing Comments

	 We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision.  Since the filing persons are in possession
of
all facts relating to their disclosure, they are responsible for
the
accuracy and adequacy of the disclosures they have made.

	In connection with responding to our comments, please
provide,
in writing, a statement from the filing persons acknowledging
that:

* the filing persons are responsible for the adequacy and accuracy
of
the disclosure in the filing;

* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and

* the filing persons may not assert staff comments as a defense in
any proceeding initiated by the Commission or any person under the
federal securities laws of the United States.

      In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.


*              *              *              *

      As appropriate, please amend your filing and respond to
these
comments within 10 business days or tell us when you will provide
us
with a response.  You may wish to provide us with marked copies of
the amendment to expedite our review.  Please furnish a cover
letter
with your amendment that keys your responses to our comments and
provides any requested supplemental information.  Detailed cover
letters greatly facilitate our review.  Please understand that we
may
have additional comments after reviewing your amendment and
responses
to our comments.

      You may contact Thomas Ferraro at (202) 824-5367, or Stephen
Krikorian at (202) 942-2959, if you have questions or comments on
the
financial statements and related matters.  Please contact Daniel
Lee
at (202) 942-1871 with any other questions.  If you need further
assistance, you may contact me at (202) 942-2903.

	Sincerely,


	Celeste M. Murphy
Office of Mergers and Acquisitions

cc:	Via Facsimile
	David M. Griffith, Esq.
	General Counsel
	Fax: (949) 598-6324
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Mr. James W. Dolan
January 19, 2005
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