Mail Stop 4561
August 5, 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-KSB/A-3 for the fiscal year ended December 31, 2005
Filed July 22, 2005
File No. 0-50918
Form 10-QSB/A for the fiscal year ended December 31, 2005
Filed July 22, 2005
File No. 0-50918
Form 8-K/A
Filed June 29, 2005
File No. 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.
General
1. We refer you to comments 48 and 55 of our letter dated October
7,
2004. Please supplementally provide a more detailed legal
analysis
for why shares issued to Dolphin Bay Capital, Inc. and seven
investors were exempt under Rule 504 of Regulation D and Section
5.1
of the Texas Securities Act and Rule 109.3.C.1 of the Texas
Administrative Code. Similarly, provide your legal analysis for
why
the shares were not subject to resale restrictions under Rule 144.
In this regard, you should specifically address the condition you
relied upon in Rule 504(b). Please tell us in material detail the
prior relationship you had with Dolphin Bay Capital and the five
investors and how they came to your attention as investors.
Please
provide the same legal analysis for the March 2003 Regulation D,
Rule
504 offering, and advise if those shares were subject to resale
restrictions.
Form 10-K/A filed on July 22, 2005
Controls and Procedures, page 47
2. Please revise to describe the events surrounding your
"resolution
of certain accounting matters," including a description of the
specific deficiencies that aggregated to a material weakness.
Your
revision should address when the deficiencies occurred and when
the
deficiencies were discovered. Further, we note your sentence that
the deficiencies arose "in connection with comments received from
the
Staff of the SEC who have raised issues about various rule and
other
GAAP compliance matters." In revising, consider that while the
SEC
may have precipitated a re-evaluation of your accounting
determinations and your conclusion as to effectiveness, the
identification of specific deficiencies and the ultimate
determination as effectiveness of your disclosure controls and
procedures was determined by you at your discretion. Your above-
referenced Form 10-QSB/A should similarly be revised.
3. Please also provide a materially complete description of the
steps
that were taken or are being taken to rectify the material
weakness
in your disclosure controls and procedures so that they will
become
effective and describe changes to your internal controls over
financial reporting and your time frame for implementing any
changes.
Consider for example, expanding your discussion of the "best
efforts"
being undertaken. Further, this information should be provided as
of
the date you provide the conclusion about the ineffective
disclosure
controls and procedures, which is December 31, 2004 for the Form
10-
KSB. The status of your plans to address deficiencies should
speak
as of that date. Please also revise the above-referenced Form 10-
QSB/A. Please also consider revising your disclosure if revisions
pursuant to this comment affect your disclosure pursuant to Item
308(c) of Regulation S-B concerning changes in internal control
over
financial reporting during this period ended December 31, 2004.
Please provide the same analysis for your above-referenced Form
10-
QSB/A.
4. Please provide the same enhanced disclosure discussed in
comments
2 and 3, above, as it relates to the inadequate communications
that
led to the untimely filing of a current report.
5. We note that your chief executive officer and chief financial
officer certified, in their Rule 13a-14(a) certifications, that
based
on their knowledge, "the financial statements, and other financial
information included in [your filings], fairly present in all
material respects the financial condition, results of operations
and
cash flows of the registrant as of, and for, the periods presented
in
[your reports]." Given the material weakness discussed in your
disclosure, disclose why you believe that the financial statements
for the fiscal period covered by your reports fairly present in
all
material respects your financial condition, results of operations
and
cash flows.
Note 11 - Stockholder`s Deficit
Stock Options and Warrants, page 43
6. We note the schedule of common stock issuances and stock option
grants provided in response to prior comment 7 of our letter dated
July 13, 2005. Please provide us with an analysis that shows how
you
calculated the $221,400 of stock-based compensation expense
recognized during 2003 related to options issued below fair market
value. Tell us the grant date and which particular stock option
holder or warrant holder the stock-based compensation expense
relates
to. As part of your response, explain how you determined the
grant
date fair value of the 1,250,000 warrants granted on April 22,
2004,
the 500,000 warrants granted on August 22, 2003, and the 3,000,000
options granted on September 1, 2003 in relation to the price paid
by
third party investors in the most recent stock transactions. Also
indicate the method and the service period used to recognize
stock-
based compensation expense. If the service period does not agree
to
the vesting period, please explain why.
7. We note that your schedule of the pro forma effects of stock-
based
compensation had the compensation expense been determined
consistent
with SFAS 123 does not deduct any of the stock-based compensation
expense recognized during 2003 and 2004. Explain how your pro
forma
net loss considers the amount already recorded using the intrinsic
value in accordance with APB 25. In addition, tell us why you
have
assumed no stock-based compensation expense determined under SFAS
123
in 2003.
Form 8-K/A filed on June 29, 2005
Introduction to Unaudited Pro Forma Condensed Consolidated
Financial
Statements of Airbee Wireless, Inc. and Subsidiaries
8. We note that you valued the shares issued to acquire Identity,
Inc. using the thirty-day average closing price of Airbee`s common
stock through April 25, 2005. Indicate how this valuation
complies
with the guidance in EITF 99-12 that indicates the shares should
be
valued based on the market price for a period of a few days before
and after the terms of the acquisition are agreed to and
announced.
In addition to explaining your use of the thirty-day average, tell
us
why you used April 25, 2005 for the date of measurement
considering
the agreement was entered into and announced on May 2, 2005.
Unaudited Pro Forma Condensed Consolidated Balance Sheet
9. We note from pro forma adjustment (a) that the entire excess
purchase over the net assets acquired has been allocated to
goodwill.
Tell us what consideration you gave to allocating any portion of
the
purchase price to intangible assets. For example, explain how you
considered the agreement with GMAC Risk Services, Inc., the
marketing
agreement with AgentNet, the patent license agreement with Dynamo,
and that Identity is currently developing new and innovative
technologies. Your response should address how you considered the
guidance in paragraph 39 of SFAS 141.
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 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.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing to be certain that the
filing includes all information required under the Securities
Exchange Act of 1934 and that they have provided all information
investors require for an informed investment decision. Since the
company and its management are in possession of all facts relating
to
a company`s disclosure, they are responsible for the accuracy and
adequacy of the disclosures they have made.
In connection with responding to our comments, and as per our
request in our letter dated October 7, 2004, please provide, in
writing, a statement from the company acknowledging that:
* the company is 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 company 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.
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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Mr. Sundaresan Raja
Airbee Wireless, Inc.
Form 10-KSB/A-3
Page 1