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U.S. Securities and Exchange Commission

UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION

Securities Exchange Act of 1934
Release No. 48467 / September 10, 2003

Administrative Proceeding
File No. 3-11182


 
In the Matter of
 
XAIBE, INC. and     
LOWELL NICHOLAS,  
Respondent
 


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ORDER MAKING FINDINGS AND IMPOSING SANCTION BY DEFAULT AGAINST XAIBE, INC.

The Securities and Exchange Commission (Commission) initiated this proceeding on July 16, 2003, with an Order Instituting Proceedings (OIP). On August 18, 2003, the Commission accepted an Offer of Settlement from Respondent Lowell Nicholas (Nicholas).

On July 22, 2003, Respondent Xaibe, Inc. (Xaibe), was served with the OIP by certified mail on Respondent Nicholas's counsel. Respondent Nicholas is the director and chief executive officer (CEO) of Xaibe. See 17 C.F.R. §§ 201.141, .150. Additionally, Respondent Xaibe was served with the OIP via certified mail on August 19, 2003. As of September 10, 2003, Respondent Xaibe has failed to file an answer, due within twenty days after service of the OIP. See 17 C.F.R. § 201.220. Xaibe also failed to appear at the telephonic prehearing conference held on August 19, 2003. On August 20, 2003, the Division of Enforcement (Division) filed a motion for default against Respondent Xaibe. In a separate Order issued on August 21, 2003, I ordered Respondent Xaibe to show cause, on or by September 5, 2003, why it should not be held in default and why the registration of its stock should not be revoked pursuant to Section 12(j) of the Securities Exchange Act of 1934 (Exhange Act).

Respondent Xaibe has failed to show cause why it should not be held in default. Pursuant to Rules 155(a) and 220(f) of the Commission's Rules of Practice, 17 C.F.R. §§ 201.155(a), .220(f), Respondent Xaibe is in default for failing to file an answer to the OIP within twenty days after service of the OIP and for failing to appear at the prehearing conference. I find the following allegations in the OIP to be true only as to Xaibe:

The common stock of Xaibe, a Nevada corporation headquartered in Houston, Texas, is registered pursuant to Section 12(g) of the Exchange Act. Xaibe's corporate charter expired in August 2002, and it now exists as a public shell. During the relevant period, Xaibe manufactured and marketed a product designed to improve the cooling efficiency of air conditioning systems. Xaibe's assets, which were held by its subsidiary, PolarShield, Inc., were liquidated in Chapter 7 bankruptcy proceedings that concluded in March 2003.

Nicholas, a resident of Sherwood, Arkansas, was appointed chief operating officer (COO) and director of Xaibe in May 2001. In June 2001, Nicholas was terminated as COO but continued working for Xaibe as a consultant performing the same duties. Nicholas became Xaibe's CEO and chairman of the board in September 2001. Before joining Xaibe, Nicholas worked as a registered representative at various broker-dealers.

On November 16, 2001, Nicholas caused Xaibe to file a Form 10-KSB with the Commission for Xaibe's fiscal year ended June 30, 2001. The Form 10-KSB should have been filed on October 15, 2001.

The Form 10-KSB filed by Nicholas was materially false and misleading because it purported to include audited financial statements. In fact, the financial statements were not audited. At the time Nicholas caused Xaibe to file the Form 10-KSB, Xaibe's independent auditing firm had performed the fieldwork for the audit, but it had not completed the audit and had not issued an audit report. Shortly before Nicholas filed the Form 10-KSB, Xaibe's independent auditing firm had informed him that certain matters needed to be resolved before the firm could issue its audit report. The auditing firm advised Nicholas that, among other items, it needed a signed management representation letter and final payment for the audit. The auditing firm never completed the audit and never issued a report on Xaibe's June 30, 2001, financial statements.

By filing the materially false and misleading Form 10-KSB, Xaibe failed to comply with Section 13(a) of the Exchange Act and Rules 12b-20 and 13a-1. Nicholas was a cause of Xaibe's failure to comply with these provisions. Additionally, because the filing was late, Xaibe failed to comply with Section 13(a) of the Exchange Act and Rule 13a-1 thereunder. Nicholas was a cause of Xaibe's failure to comply with these provisions.

In May 2002, Xaibe's auditing firm discovered that Xaibe had filed the Form 10-KSB that included the firm's purported audit report. The auditing firm thereafter sent a letter to Xaibe resigning from the engagement, but Xaibe failed to file a current report on Form 8-K with the Commission to report the resignation. Xaibe thereby failed to comply with, and Nicholas was a cause of Xaibe's failure to comply with, Section 13(a) of the Exchange Act and Rule 13a-11 thereunder.

While its stock was registered with the Commission, Xaibe failed to file its annual report on Form 10-KSB for the fiscal year ended June 30, 2002, and quarterly reports on Forms 10-QSB for the quarters ended March 31, 2002, September 30, 2002, December 31, 2002, and March 31, 2003. Xaibe thereby failed to comply with, and Nicholas was a cause of Xaibe's failure to comply with, Section 13(a) of the Exchange Act and Rules 13a-1 and 13a-13 thereunder.

On the basis of the foregoing, it is necessary and appropriate for the protection of investors to impose the sanction against Xaibe, Inc., as requested by the Division.

IT IS ORDERED, pursuant to Section 12(j) of the Securities Exchange Act of 1934, that the registration of the common stock of Xaibe, Inc., be and it hereby is REVOKED.

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Lillian A. McEwen
Administrative Law Judge

 

http://www.sec.gov/litigation/admin/34-48467.htm


Modified: 09/23/2003