Create Kaspersky small Office Security 3 update server/source on local network

Hello Experts,

I set up a local update source for Kaspersky Small Office security like this:


Set PC1 to be the Update source like this:
- Went to Management Console
- Selected PC1 from list
- Clicked on Update tab
- Under Update Source section, Clicked on Button "Use this computer as update source"
- went back to Management Console and see the icon for PC1 has changed to a dark grey computer symbol

Configured PC2 to accept updates from PC1:
- Went to Management Console
- Selected PC2 from list
- Clicked on Update tab
- Went into Run Mode settings
-- Update Sourcesettings: Browsed to PC1/Updates\Updates
-- Run Mode Settings:  Chose Automatically

I then created a share on the Update folder of PC1 so PC2 can access it. The update on PC1 from PC2 seemed to run fine but now the Kaspersky program on PC2 wants to be updated and says databases are out of date.

Can anyone see what I am doing wrong here?

Thanks!