October 31, 2005
Ms. Linda Cvrkel, Branch Chief
Mail Stop 3561
U.S. Securities and Exchange Commission
450 Fifth St., N.W.
Washington, D.C. 20549
Re: ERF Wireless, Inc. (the "Company" or "ERF")
Amendment 3 to Annual Report on Form 10-KSB for the fiscal year ended
December 31, 2004 Filed April 15, 2005
File No. 000-27467
Amendment 3 to Quarterly Report on Form 10-QSB for the quarter ended
June 30, 2005
Filed August 15, 2005
File No. 000-27467
Dear Ms. Cvrkel:
Please be advised the Company filed its Amendment No. 3 to Form
10-KSB/A for the fiscal year ended December 31, 2004, and Amendment No. 3 to
Form 10-QSB/A for the quarter ended June 30, 2005. The following are our
responses to your comment letter dated October 28, 2005. Our responses are
numbered to correspond with the numbered paragraphs included in your comment
letter.
FORM 10-KSB FOR THE YEAR ENDED DECEMBER 31, 2004
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Note 5. Capital Stock
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1. ERF has determined that we incorrectly presented the statements of
stockholders' equity as related to the 143,800 shares of common stock.
The Company included the 143,800 shares as a component of the
recapitalization which was previously shown in the 1 for 75 reverse
split totaling approximately 335,000 shares and should have reduced the
1 for 75 reverse split shares to approximately 192,000 and
retroactively recorded the 143,800 shares to all periods prior to the
acquisition.
Accordingly, the Company has amended Form 10-KSB - Amendment No. 3 and
Form 10-QSB - Amendment No. 3 to correct Loss Per Share on its
Statements of Operations caused by this error. The Company has also
expanded its Restatement footnote included in Note 1 to its Form 10-KSB
- Amendment No. 3 and has added a Restatement footnote in Note 1 to its
Form 10-QSB - Amendment No. 3 under the heading - Basic Loss Per Share.
FORM 10-QSB FOR THE QUARTER ENDED JUNE 30, 2005
Note 12. Subsequent Events
- --------------------------
2. ERF confirms that we will revise our disclosures in future periods to
include the amortization period for intangible assets identified in
Note 12 - Subsequent Events, related to the Skyvue USA acquisition. ERF
recently included disclosures related to such amortization periods in
Form 8-K/A - Amendment No. 2 filed October 24, 2005. The disclosures
were made in Note 1 to 9.01(b) of the Pro forma Condensed Combined
Financial Statements as follows:
NOTE 1 - PURCHASE PRICE
On August 12, 2005, ERFW Wireless, Inc (ERFW) completed the purchase of assets
from Skyvue USA under the Asset Purchase Agreement dated August 8, 2005. Under
the Asset Purchase Agreement, ERFW acquired the CryptoVue System consisting of
software, site based hardware devices and servers to perform network encryption,
contracts for the construction, operation, monitoring and maintenance of fixed
wireless networks for banking customers, ISP subscriber agreements, trade names,
equipment and software, including the software architecture and design. The
assets were acquired from Skyvue USA East Central Texas Inc., a Texas USA. At
the time of the transaction, there were no material relationships between the
seller and ERFW or any of its affiliates, or any director or officer of ERFW, or
any associate of any such officer or director. ERFW paid $600,000 in cash, notes
and securities and assumed $39,000 in liabilities.
The purchase price allocation is as follows (in thousands):
Accounts receivable $ 13
Inventory 31
Property and equipment 89
Identifiable intangible assets 506
Accounts payable and accrued expenses (39)
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Total adjusted purchase price $ 600
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The amount allocated to identifiable intangible assets was determined by the
company's management. Other intangibles assets are being amortized over their
useful life in accordance with the guidance contained in the Financial
Accounting Standards Board ("FASB") Statement of Financial Accounting Standard
No. 142 ("SFAS 142") "Goodwill and Other Intangible Assets".
Developed technology $ 20 3 years
Non-compete agreement 100 3 years
Workforce in place 125 3 years
Customer relationships 261 3 years
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Total identifiable intangible assets $ 506
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2
The Company looks forward to working with you in completing the review
and respectfully requests an expedited review of our responses to the
two items addressed in your comment letter dated October 28, 2005.
The Company herewith with this filing acknowledges that:
1. the Company is responsible for the adequacy and accuracy of
the disclosures in its filings;
2. 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
3. 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.
Very truly yours,
ERF WIRELESS, INC.
/s/ R. Greg Smith
Chief Executive and Chief Financial Officer