May 16, 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-2
Filed April 12, 2005
File Number: 0-50918
Form 10-KSB/A
Filed April 11, 2005
File Number: 0-50918
Dear Mr. Raja:
We have reviewed your filing and have the following comments.
Feel free to call us at the telephone numbers listed at the end of
this letter.
FORM 10-KSB/A
General
1. We note the discussion in your Form 8-K filed March 22, 2005
that
Mr. Raja was misquoted in an article regarding the possibility
that
Airbee is in preliminary negotiations to acquire three unrelated
companies. Please confirm that you do not have any plans,
proposals
or arrangements for any acquisition or merger.
2. We refer you to prior comment 3. Your website remains
inconsistent with your registration statement and Form 10-KSB/A.
The
front page of your website continues to indicate 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." Also,
it
appears that you have since added graphics to the front of your
website that includes among other images, a plane firing a
missile.
In revising the disclosure in your Form 10-KSB/A, consider
corresponding changes to portions of your website in the interest
of
consistency.
3. We refer your to prior comment 17. We note substantial
reliance
on the Zig-Bee Revolution Technology Report, prepared in the third
quarter of 2003 and the West Strategic Positioning Analysis
prepared
in March, 2004. In view of the fact that the reports are from
2003
and 2004, respectively, please advise whether the disclosure that
relies on these reports remains accurate and current. To the
extent
that the information is no longer accurate or current, please
revise.
PART I
Item 1. Business, p.3
Overview, p. 3
4. Please revise your discussion in this subsection to clarify
that
you have not produced any licensed sales to date.
5. Please revise this section to include the same information as
provided in the fourth paragraph of your 10-SB/A subsection titled
"The Company."
The Market, p. 4
6. We refer you to the reports by On World, Inc. and Wireless Data
Research Group on page 4. The relationship between the findings
in
these reports and your company`s products is unclear from the
disclosure. Please revise to clarify or remove these references.
7. We refer you to previous comment 10. We note that your
disclosure
regarding Bluetooth`s and IEEE`s 802.11b`s failure and limitations
is
based on a 2003 report. Please advise if developments in
Bluetooth
or 802.11(b) standards have changed the dynamics or would effect
any
comparisons or conclusions. Please also revise, if true, to
discuss
that your support relates only to the field of HVAC.
Products, p. 4
8. If true, please revise to indicate there have been no products
from any vendor certified as Zig-Bee compliant to date.
9. Please revise your discussion of Topology in conformity with
your
Form 10-SB/A, specifically the use of charts from the Form 10-SB/A
pages 4, 6 and 7 to enhance your discussion of the various
systems.
Please also provide the additional 10-SB/A information contained
as
the last paragraph to the subsection "Potential Applications."
Competition, p. 8
10. We refer you to prior comment 22. Expand your disclosure to
address the varying degrees of competition" presented by WiFi and
Bluetooth that you discuss earlier in the "Business" section and
to
discuss in qualitative terms your competitive position within the
industry.
Intellectual property, p. 9
11. We note that you "rely upon a combination of patent,
copyright,
trademark and trade secret laws and contractual restrictions to
protect our proprietary technology." However, it appears as if you
have no approved patents, or hold copyright or trademark rights.
Please advise.
PART II
Item 6. Management`s Discussion and Analysis of Financial
Condition
and Results of Operations, p. 12
Overview, p 12
12. You disclose that you recognize revenue from four primary
sources. If true, please clarify that you have not recognized
revenue from any of these four sources to date.
Plan of Operations, p. 12
13. We reissue prior comment 23. Your revised disclosure in the
Form
10-SB/A indicates that certain salaries and general overhead
amounts
have not been allocated to research and development costs. Please
revise to include your discussion of Research and Development from
your Form 10SB/A and 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 previous response indicates that Airbee and its
auditors do not believe that the allocation of compensation and
professional expenses is possible under GAAP for development stage
companies. Tell us 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.
14. We refer you to prior comment 25. Your revised disclosure on
page 14 of your Form 10-SB/A contains a discussion of the costs of
service contracts and hiring additional software engineers that is
not contained in your Form 10-KSB/A. Please revise. Also, in
view
of your limited funds and no software revenue, disclose how you
plan
to fund the described expansion in the first paragraph on page 13.
Liquidity and Capital Resources, p. 13
15. We refer you to prior comment 2. Please expand your liquidity
section to discuss the costs of your reporting obligations and the
potential impact on your liquidity.
16. We refer you to prior comments 26 and 27. It remains unclear
whether cash will be sufficient for you to continue your
operations
for at least the next twelve months. Rather, you only reference
costs over "several months." Please disclose in quantitative
terms
the funds needed over the next 12 months. For example, quantify
the
amount required for operating and capital expenditures that will
be a
material use of your cash resources. Further, 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.
We
note very little forward-looking information on future costs for
Airbee`s development. 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.
Consolidated Balance Sheets, p. 21
17. We note that the number of treasury shares on the balance
sheet
does not reconcile with the number of treasury shares disclosed in
Note 11-Stockholders`Deficit. Please revise.
Consolidated Statement of Cash Flows, p. 25
18. We refer you to prior comment 42. We note your response that
you
have classified salaries converted to notes payable as financing
activity in your Statements of Cash Flows; however, the statement
has
not been revised. Please revise to comply with your response
Note 2 - Summary of Significant Accounting Policies, page 27
Revenue and Cost Recognition, p. 29
19. We refer you to prior comment 44. We note in your disclosure
that revenue from products licensed to original equipment
manufactures (OEM) is recognized when the OEM ships the licensed
products to its customers. Tell us and disclose whether there are
any undelivered elements associated with these agreements, and if
so,
how VSOE is determined.
20. Revise and tell us how revenues are recognized on royalties
that
are charged on a per unit basis. In this regard, clearly disclose
the timing or when revenue is recognized.
21. Revise and tell us how revenue is recognized on contracts that
include services that represent significant customization or
modification of software.
Note 7 - Intellectual Property, p. 34
22. We refer you to prior comment 47. 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 indefinite, but not an infinite useful life. Be
advised that SFAS 142 paragraph 8(i) indicates that SFAS 142 does
not
change the accounting prescribed by SFAS 86. In this regard, SFAS
86
does not allow capitalized software to have an indefinite life
and,
therefore, amortization should begin upon the general release of
the
software. Provide us with your analysis describing the pattern in
which the expected benefits will be consumed or otherwise used up.
Note 11 - Stockholders` Deficit, p. 35
Stock Option Plan and Warrants, p. 36
23. We refer you to prior comments 50 and 83. Your response did
not
fully address our comment and, therefore, we are reissuing the
comment. We note from your response that grantee has the right to
relinquish shares of stock if they choose to exercise their
options
without the payment of cash to the company. In this regard,
indicate
how these right impacts how you accounted for the options granted.
Tell us how you considered the guidance in paragraphs 75 through
101
of EITF 00-23, and whether variable accounting would apply in this
situation.
24. We refer you to prior comment 51. Your response did not fully
address our comment and, therefore, we are reissuing the comment.
We
note from the schedule that you provided in your response on
February
3, 2005 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. For example,
on
October 18, 2002 you sold shares of common stock for $0.22 and on
October 18, 2002 you granted options and used a fair value of
$0.00004. 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 and provide us
with
an update schedule that shows common stock issued and stock
options
granted in chronological order.
Item 8A. Controls and Procedures, p. 39
25. We note your statement in the Form 10-KSB/A referenced above,
that the Principal Executive Officer and Principal Financial
Officer
have concluded that the company`s disclosure controls and
procedures
were effective "in gathering, analyzing and disclosing information
needed to satisfy our disclosure obligations under the Exchange
Act."
This definition of disclosure controls and procedures appears to
be
narrower than Rule 13a-15(e). Please revise your Form 10-KSB/A.
26. You disclose that there were no "significant changes" in
Airbee`s
internal controls over financial reporting that could "affect
those
controls since the most recent evaluation of such controls." In
this
regard it does not appear that your disclosure is consistent with
the
requirements of Item 308(c) of Regulation S-B and Rule 13a-15(d).
Please revise your Form 10-KSB/A to indicate if during the quarter
ended December 31, 2004 there was "any change" that materially
affected or was reasonably likely to materially affect, your
internal
controls over financial reporting.
Part III
Item 12. Certain Relationships and Related Transactions, p. 47
27. We note that you disclose the amounts due to officers as a
result
of promissory notes entered into with officers. Please revise to
also provide a materially complete description of each promissory
note. For example, disclose the original amount of each loan and
clarify at what percentage each note accrues. Also, the liquidity
subsection in your "Management`s Discussion and Analysis of
Financial
Condition and Results of Operations" should address your
commitments
as a result of these notes.
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) 551-3479, or
Stephen
Krikorian, Accounting Branch Chief, at (202) 551-3488, if you have
any questions regarding comments on the financial statements and
related matters. Please contact Adam Halper at (202) 551-3482 or
Jeffrey Werbitt at (202) 551-3456 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-2
Page 1