September 29, 2005
Mail Stop 4561
Mr. John R. Signorello
Chief Financial Officer
IceWEB, Inc.
205 Van Buren Street, Suite 420
Herndon, VA 20170
Re: IceWEB, Inc.
Form 10-KSB for the year ended September 30, 2004
Form 10-QSB for the quarter ended December 31, 2004
Form 10-QSB for the quarter ended March 31, 2005
File No. 0-27865
Dear Mr. Signorello:
We have reviewed your response letters dated August 31, 2005
and September 20, 2005 and have the following additional comments.
In some of our comments, we ask you to provide us with information
so
we may better understand your disclosure. After reviewing this
information, we may 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
filings.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Form 10-KSB for the year ended September 30, 2004
Consolidated Financial Statements
Note 10 - Acquisitions, page 28
1. We have read your response number 1(a) included in your
correspondence to us dated September 20, 2005. Please clarify
whether the cost of the Propster Software approximates fair value
at
the date of acquisition. In addition, as it relates to the
Propster
and DEX Software, please tell us the method used to determine fair
value.
2. We have read your response number 1(d) included in your
correspondence to us dated September 20, 2005. We note that
DevElements and Iplicity have a vast code library containing
source
code developed over the past five years. Please tell us the
method
used to determine fair value at the acquisition date.
3. We have read your response number 1(e) included in your
correspondence to us dated September 20, 2005. We are unable to
locate the third party licenses that you indicate were included in
the asset schedules for Seven, Iplicity and DevElements or in your
footnote disclosures. Please advise us. In addition, please tell
us
why the assets were booked at their depreciated values at the date
of
acquisition rather than at fair value. Tell us your basis in GAAP
for this accounting treatment.
4. We have read your response number 1(f)(2) included in your
correspondence to us dated September 20, 2005. We are unable to
agree with your conclusion that since the customer contracts were
open ended in service hours and dollar amounts you have no
contractual legal rights. If you have a practice of establishing
customer relationships through contracts, the customer
relationships
meet the contractual criterion to be considered an identifiable
intangible asset. Please tell how you considered the guidance in
EITF 02-17 in your evaluation. In addition, please further
clarify
the nature and purpose of the agreements such that the customer
contracts define neither the scope of work nor compensation. You
may
provide us with excerpts from your agreements if appropriate.
5. Further to our previous comment, we note that DevElements and
Iplicity customer relationships existed between specific engineers
and specific customers and were not "capable of being separated or
divided and sold, transferred, licensed, rented, or exchanged" as
defined in SFAS 141. Please clarify whether the Registrant or
your
engineers, acting as independent agents, are party to the
agreements.
In the event the Registrant is party to the agreements, we are
unable
to agree with your conclusion that the customer contracts were
non-
transferable without the engineers. In the event the engineers
are
party to the agreements, the engineers do not appear to represent
an
assembled workforce in which case the underlying contract may meet
the criteria for identification as a separate intangible. Please
advise us.
6. We have read your response to prior comment 2 included in your
correspondence to us dated August 31, 2005. Please clarify
whether
the fiscal 2004 research and development expenses related to
efforts
to "further develop and enhance" certain software products
acquired
during the fiscal year pertain exclusively to the Cashmere
software.
If not, we reissue prior comment 2 and ask you to explain to us
why a
portion of the DevElements purchase price was not allocated to in-
process research and development based upon your disclosure on
page
17 that some research and development was already underway by your
target. Please note that we would expect acquired research and
development assets that are determined to have no alternative
future
use to be charged to expense at the date of acquisition pursuant
to
paragraph 5 of FIN 4.
7. For each separately identified intangible asset for which you
have
assigned value, please tell us the amortization method and useful
life and explain your basis for that method and life.
* * * *
As appropriate, please respond to these comments within 10
business days or tell us when you will provide us with a response.
Please furnish a cover letter that keys your responses to our
comments and provides any requested information. Detailed cover
letters greatly facilitate our review. Please file your cover
letter
on EDGAR. Please understand that we may have additional comments
after reviewing your responses to our comments.
You may contact Rachel Zablow, Staff Accountant, at (202)
551-
3428 or the undersigned at (202) 551-3403 if you have questions.
Sincerely,
Steven Jacobs
Accounting Branch Chief
Mr. John R. Signorello
IceWEB, Inc.
September 29, 2005
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