Mail Stop 4-6
March 10, 2005
Mr. Sundaresan Raja
Airbee Wireless, Inc.
President and Chief Executive Officer
9400 Key West Avenue
Rockville, MD 20850-3322
RE: Airbee Wireless, Inc.
Form 10-SB/A
Filed February 4, 2005
File Number: 0-50918
Dear Mr. Raja:
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. Feel free to call us at the telephone numbers listed at
the end of this letter.
FORM 10-SB
General
1. We remind you that your registration statement became effective
by
operation of law 60 days after it was filed (i.e. October 26,
2004).
You are responsible for filing reports including but not limited
to,
quarterly and other reports required by Section 13 of the Exchange
Act and proxy statements required by Section 14 of the Exchange
Act.
2. We refer you to prior comment 3. Your response indicates that
reporting obligations will have no material costs on the company.
We
also note you are expending only about $55,000 per month and there
are numerous costs, including legal, accounting, printing and
filing
fees associated with this registration and ongoing reporting
obligations. Also, consider the imminent costs associated with
preparing your Form 10-KSB. In light of these factors, please
revise
your disclosure or advise.
3. We refer you to prior comment 4. Although we note revisions to
your website, your website still appears to be inconsistent with
your
registration statement. For example, from your disclosure it
appears
you only have a few products embedded with your software; however
your website states, "Airbee provides a comprehensive portfolio of
IEEE 802.15.4 and ZigBee ready software products." Also, the front
page of your website indicates that, "[w]e offer intelligent
wireless
technology unlike anything else now available at less than half
the
cost, a faster speed, one-tenth of the power, three times the
operating range and superior reliability." In revising disclosure
in
this registration statement consider corresponding changes to
portions of your website in the interest of consistency.
4. We refer you to prior comment 5. Please advise if any party
engaged by Airbee or its affiliates has any agreement,
understanding
or knowledge of WSSCR. Please also advise if Airbee, its
affiliates
or any party engaged by Airbee or its affiliates has any
relationship
with MicroTech Trader or The Wall Street Small Cap Reporter.
5. We note an investment opinion was issued by Level 3 Securities
Inc. on November 9, 2004. We also note that the Level 3 has been
hired as a consultant by a third party for the publication and
circulation of the opinion. Supplementally identify the third
party
that paid Level 3 for the publication and circulation of the press
opinion. Also, tell us the relationship of this third party and
the
compensation that has been paid to Level 3.
PART I
Item I. Description of Business, p.1
General
6. We refer you to prior comment 6. Please furnish a timetable
for
the commencement of revenue-generating activity. This disclosure
should include both development and financial requirements.
The Company, p. 2
7. You disclose that "[t]he ZigBee Alliance has defined the global
standards for reliable, short range, cost-effective, low-power
wireless applications." Please disclose the basis for your
statement. Also, reconcile this with your disclosure that "the
current market for short distance wireless communications is
dominated by two major technologies: (1) Bluetooth and (2) the
IEEE
802.11b standard."
8. We note that you are seeking $5,000,000 to fund sales and
marketing and further development of your software. Please
clarify
whether additional financing aggregating $5,000,000 is required to
offer your software for commercial application in the first
quarter
of 2005.
The Market, p. 2
9. For each statistic cited, supplementally furnish the source of
the
statistic from the organization or entity. For example, but not
exclusively, this includes the statistics cited to from a report
by
ON World, Inc. and a research report prepared by West Technology
Research Solutions. To expedite our review, clearly mark each
source
to highlight the applicable portion or section containing the
statistic.
10. We refer you to the disclosure regarding your belief of
Bluetooth`s failure and limitations. Please revise to provide the
basis for your beliefs to support your disclosure. In the
alternative, explain how your technology differs from Bluetooth,
rather than providing unsupported beliefs regarding the failures
and
shortcomings of Bluetooth devices. For example, if you believe
that
that Bluetooth devices are expensive and/or support only simple
features, discuss why you believe that your software is less
expensive and can support more complex features.
Products Developed and in Development, p. 3
11. You refer to terms such as "ZigBee-Compliant protocols" and
"ZigBee-Compliant." Please clarify these terms by explaining the
benefits that accompany "ZigBee-Compliant protocols" and "ZigBee-
Compliant" products. Also, explain the difference between ZigBee-
Compliant and ZigBee-Ready. Is there any difference other than
the
receipt of a certification from an independent testing facility?
12. Please clarify whether the sale of your products is dependent
upon certification by an independent third party. We note
disclosure
in "The Company" above that it costs about $60,000 per software
product certification. Please advise of aggregate estimates of
certification costs in connection with your business plan over the
next twelve months. Also, in light of your limited cash on hand,
explain the costs in having your software certified. Do you need
to
raise a portion of the $5,000,000 that you are seeking to pay for
this certification? Please also update your "Results of
Operations"
section accordingly.
13. Please expand the discussion of your peer-to-peer protocol,
star
protocol, mesh and mobile mesh protocol to further explain the
purpose of each product and how they function. In this regard,
explain how these products communicate and identify the products
that
can currently be used with your software and how these products
utilize your software. Also, explain whether your products work
independently from each other or whether they may be used
together.
14. Please provide support for the disclosure that you can offer
similar products at less than half the cost, greater operating
range
and better reliability than Bluetooth.
15. We note that you refer to "ZigBee Ready software," "software
stack" and "Airbee Core." Please clarify if these products are
separate from Airbee`s proprietary software such as its peer-to-
peer
protocol and its star protocol. In this regard, you disclose that
ZigBee Ready software is distinct from your proprietary products.
Also, explain the purpose of each product and explain how they
function. To the extent these products work with your proprietary
software, please clarify. Further, clarify whether each of these
products are currently operational or whether they require further
development. If they require further development, disclose the
stage
of the development process.
16. We refer you to prior comment 11. Considering you are still
developing the ZigBee enabled protocols, explain the basis for
your
belief that your products will have similar battery life to other
ZigBee compliant products.
Potential Applications, p. 5
17. We note that you provide a list of the application areas for
your
products. Please explain your relationship with West Technology
Research Solutions. Also, clarify whether West Technology
Research
Solutions and the other research reports referenced specifically
addressed the potential application areas in which Airbee`s
products
are expected to be embedded or whether these reports referenced
ZigBee compliant products. To the extent that the research
reports
did not specifically reference Airbee, please disclose. Further,
clarify whether you have plans and the resources to apply your
software to all of the potential application areas listed. For
example, do you have plans to produce a PCMCIA Airbee modem?
18. We refer you to prior comment 13. Supplementally provide
accessible support for your claim that Airbee`s models are 22
times
faster than Bluetooth and consider expanding your discussion in
the
registration statement concerning IEEE statements. We note that
the
IEEE specifications are obtained through a password-protected site
and may not be available to certain investors.
Airbee-ZNMS - ZigBee Network Management System, p. 6
19. We note that you provide disclosure regarding a series of
"recently announced" software products. Please revise to
specifically disclose whether each of these software products are
developed and are operational. To the extent they are not
complete,
explain the development stage of each software product. Also, in
light of your limited resources, explain how you plan to continue
development of these products and fund the sales and marketing of
your other software products. Do you plan to apply any of the
$5,000,000 you are hoping to raise to these products?
20. Please clarify whether Airbee-ZNMS, Airbee-ZAgent, Airbee-
ZStack
and Airbee-ZStudio are all separate products or whether these
products operate under the Airbee-ZNMS network management system.
Also, please advise who developed the Airbee ZNMS software and all
other software products discussed in this section and describe the
operational capabilities of the software products. Further,
explain
the relationship between these products and your UltraLite line of
software. Are they interoperable or are they independent?
Business Strategy Evolution, p. 7
21. We refer you to prior comment 14. We note you changed your
disclosure concerning quality assurance, to read. "Since the
software
will be embedded at the customer location and the application
software is written by the customer to its customer requirements,
the
proper application of our software will, for the most part, be
under
the control of our customers." However you do not discuss any
internal quality assurance programs, if applicable, and do not
define
the qualifying term "for the most part." Please revise or advise.
Competition, p. 8
22. Please advise as to your belief that there is only one
competitor
for your products. For example, you state there are no
comparisons
to be made with developers of Bluetooth standard products. We note
your disclosure concerning the proposed advantages of ZigBee
compliant products on a prospective basis; however please advise
that
currently Bluetooth-compliant companies are not competing with
your
products. Please also advise that with the substantial growth of
the
ZigBee alliance that no competitors have subsequently entered the
market since your initial filing. Further, consider why you have
not
at minimum, addressed competition from non ZigBee compliant or
Bluetooth-enabled devices. Consider revising your competition
section.
Research and Development, p. 8
23. We note your response to prior comment 16. Your revised
disclosure indicates that certain salaries and general overhead
amounts have not been allocated to research and development costs.
Revise your disclosure and your statements of operation to present
the proper amounts of salaries and general overhead that should be
allocated to research and development costs. Furthermore, your
response indicates that the Company and its auditors do not
believe
that the allocation of compensation and professional expenses is
possible under GAAP for development stage companies. Please advise
why you do not believe that allocation of compensation and
professional expenses is possible under GAAP for development stage
companies and cite the authoritative literature to support your
response.
Item 2. Management`s Discussion and Analysis or Plan of Operation,
p.
9
Overview, p. 9
24. We refer you to prior comment 21. Please reconcile your
disclosure in your response to our prior comment 21 with your
disclosure on pages 2 and 10 that state you plan to raise
approximately $5,000,000.
Plan of Operations, p. 9
25. We note your intent to hire thirty to forty software engineers
(ten in the next quarter). Please disclose the aggregate funds
necessary and availability of those funds to hire these engineers
and
additional sales personnel, even at lower foreign wages. Further,
you
discuss prospective intent to enter maintenance contracts with
your
customers in your Notes to your Financial Statements but do not
mention the costs associated anywhere in you md&a section. Please
advise.
Liquidity and Capital Resources, p. 10
26. We refer you to prior comment 25. We note your disclosure
that
you do not have specific plans to raise $5,000,000 over the next
12
months. We still note nowhere in your disclosure is a statement
that
cash would be sufficient for you to continue your operations for
at
least the next twelve months. Please disclose how you will be
able
to continue your operations for such period with the approximately
$21,000 on hand at September 30, 2004 and at least $170,000 in
arrears to outside creditors. In this regard, you should clearly
disclose in quantitative terms the funds needed over the next 12
months. We note that since inception you have had negative cash
flows to date. Please provide detailed disclosure regarding your
plan of operation, which should consider the possibility that you
receive minimal additional funding. Your plan of operation should
explain each present and proposed activity and the precise
activities
to be engaged in, each material event or step required in the
start-
up of your operations until revenues are generated and the
conditions
or contingencies to the achievement of those events. This
disclosure
should include a discussion of the relationship between the
development of your products or services, marketing of each
product
or service and the additional funds you receive over the next 12
months. See Item 303(a) of Regulation S-B.
27. Consider also including disclosure of how you would allocate
resources even if you were successful in raising $5,000,000.
Please
advise if this amount is sufficient for twelve months or would
satisfy the company`s liquidity needs for a longer period.
Further
advise if any proceeds would be used to pay down debt,
specifically
notes held by related parties and the priority for the $5,000,000
after product development.
28. We refer you to prior comment 32. Please also indicate any
repercussions in the next twelve months if your cash flows do not
allow payment of the $170,000 in trade payables.
Item 5. Directors, Executive Officers, Promoters and Control
Persons, p. 12
29. We refer you to prior comment 37. Please advise under what
circumstances, Mr. Mal Gurian was "appointed" as a director of
Airbee. Please advise as to consideration given to filing a Form
8-K
with your press release.
Item 6. Executive Compensation, p. 14
30. Please be advised that you will need to update the disclosure
contained in this section with your fiscal year 2004 information.
31. Please file your "Outside Directors Stock Option Plan" as
required by Item 601(b)(10)(ii) of Regulation S-B.
PART II
Item 2. Legal Proceedings, p. 23
32. We refer you to prior comment 49. Please disclose in what
state
the Buddy Brown action was commenced. See Item 103(a) of
Regulation
S-B.
Item 4. Recent Sale of Unregistered Securities, p. 23
33. We refer you to prior comment 50. Please describe the
"financial
services" discussed in your response.
34. We refer you to prior comments 53 and 55. Please describe the
nature of the legal services performed. See Item 701(c) of
Regulation S-B.
PART III
Index to Exhibits, p. 19
35. We reissue prior comment 56. Please also revise the labeling
of
exhibits pursuant to Item 601 of Regulation S-B.
Consolidated Balance Sheet, p. 2
36. We refer you to prior comment 61. There appear to be related
party amounts that are not separately disclosed on the face of the
September 30, 2004 financial statements. Related party
transactions
should be separately identified and the amounts should be stated
on
the face of the balance sheet, income statement, and statement of
cash flows (i.e., at a minimum such amounts should be cross-
reference
to applicable notes). Please revise.
Consolidated Statements of Operations, p. 3
37. We refer you to prior comment 63. The consulting revenues
have
specific identifiable costs, however, you still have not presented
any corresponding amounts as cost of sales. Revise.
38. We refer you to prior comment 64. The impairment charge
should
be included within your operating expense and should not be
characterized as "other". This presentation is similar to
recognizing a gain or loss on the sale of fixed assets. See SAB
Topic 13(B).
Statement of Stockholders Deficit, p. 4
39. We refer you to prior comment 66. The revised Statement of
Stockholder`s Deficit does not retroactively restate for the
effect
of the stock split. Revise your Statement of Stockholder`s
Deficit
to retroactively restate for the effect of the stock split. See
SAB
Topic 4C.
40. We also note that your Statement of Stockholder`s Deficit does
not reconcile to the Consolidated Balance Sheet for the year ended
December 31, 2003. Please revise.
Statement of Cash Flows, p. 6
41. We refer your to prior comment 70. Revise your disclosure to
provide non-cash investing and financing activity for this
acquisition. See paragraph 32 of SFAS 95.
42. We also note that you have recorded salaries converted to
notes
payable as an operating activity in your Statement of Cash Flows.
Tell us why you believe this should be recorded as an operating
activity instead of a financing activity. See paragraph 18 of
SFAS
95.
43. We refer you to prior comment 71. Your response states that
the
US dollar is the functional currency for the company. Therefore,
the
company should convert the financial statements using the
remeasurement method as describe in paragraph 47 of SFAS 52. The
remeasurement method requires that adjustments resulting for the
remeasurement be charged to income or loss in the statement of
operations.
Revenue Recognition, p. 11
44. We refer you to prior comment 73. The revised disclosures do
not
tell us or describe the revenue recognition policy for each of the
elements that will be included in a sales transaction.
Furthermore,
the revised revenue recognition policy does not thoroughly
consider
the criteria in determining how to allocate and when to recognize
revenue. Tell us and revise your disclosure to describe all the
elements that will be included in each type of sales transaction,
such as product services, outsourcing, support and software.
Disclose the revenue recognition policy for each of the elements
and
the criteria you will consider in determining how to allocate and
when to recognize revenue. Explain whether all revenue recognized
is
earned from royalties.
45. Please also tell us why you believe revenue attributable to
the
undelivered elements, including technical support, should be
recognized over the product life cycle rather than the contract
period.
46. We refer you to prior comment 74. The revised disclosure
still
does not tell us why revenue attributable to undelivered elements
is
based on the average sales price rather than on the renewal rate
for
those elements. Indicate why the average sale price represents
VSOE.
Your response should address paragraph 10 of SOP 97-2.
Furthermore,
indicate why your ability to reasonably estimate return impacts
how
your ability to determine VSOE.
Note 7 - Intellectual Property, p. 21
47. We refer you to prior comment 78. We note in your response
that
no amortization expense appears in cost of sales for capitalized
software costs because management has determined that the
intangible
assets have an indeterminable useful life. Tell us why you
believe
the intangible assets have an indeterminable useful life and no
amortization should be recorded. Your response should address the
guidance in paragraphs 11 and 12 of SFAS 142.
Note 8 - Acquisitions, p. 21
48. We refer you to prior comment 80. Revise your disclosure to
include a condensed balance sheet that discloses the amount
assigned
to each major asset and liability of the acquired entity at the
acquisition date. See 51(e) of SFAS 141.
Note 11 - Stockholders` Deficit, p.16
49. We refer you to prior comment 82. Identify the literature
that
supports your accounting. Furthermore, we note from your response
that grantees has the right to relinquish shares of stock if they
choose to exercise their options without the payment of cash to
the
company. Tell us how you considered the guidance in FIN 44, and
whether variable accounting would apply in this situation.
50. We refer you to prior comment 83. We note from the schedule
that
you provided in your response that shares of common stock, stock
options, and warrants appear to be issued at discounts from the
fair
market value of the common stock. Tell us why you have not
recorded
any compensation expense for the issuances below fair market
value.
In addition, we note that the schedule provided shows different
fair
values being applied to overtime. For example, on June 9, 2004
you
sold shares of common stock for $0.42 and on July 1, 2004 you
granted
options and used a fair value of $0.38. Be advised that price
paid
by third party investors represents the best evidence of fair
value.
Therefore, the fair value subsequent to these third party investor
purchases should agree to the last such sale. For example, the
options granted after September 1, 2003, November 18, 2003, and
June
9, 2004 should use a fair value of $0.20, $0.1138, and $0.42.
Revise.
51. We refer you to prior comment 84. We do not see the revised
disclosures in the financial statements. In accordance with FAS
123,
revise the disclosure for the stock option plan to include the
following in each year an income statement is presented: a) a
description of the vesting requirements, b) total compensation
cost
recognized in income for stock-based compensation and c) the
weighted-average contractual life of the outstanding stock
options.
52. We refer you to prior comment 86. It appears that some of the
stock options reflected in the financial statements do not give
retroactive recognition to the stock split. Revise your
disclosures
to give retroactive recognition to the stock split for all stock
options issued.
Closing
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 Morgan Youngwood at (202) 942-5531, or
Stephen
Krikorian, Accounting Branch Chief, at (202) 942-4310, if you have
any questions regarding comments on the financial statements and
related matters. Please contact Adam Halper at (202) 824-5523, or
Jeffrey Werbitt at (202) 942-1957 with any other questions.
Sincerely,
Barbara C. Jacobs
Assistant Director
cc: Brian A. Pearlman
Adorno & Yoss
350 East Las Olas Boulevard
Suite 1700
Fort Lauderdale, Florida 33301
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Airbee Wireless, Inc.
Form 10-SB/A
Page 1