SECURITIES EXCHANGE ACT OF 1934
Release No. 48359 / August 18, 2003

ADMINISTRATIVE PROCEEDING
File No. 3-11182

In the Matter of

Xaibe, Inc.
Lowell Nicholas,

Respondents.

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 ORDER MAKING FINDINGS AND IMPOSING CEASE-AND-DESIST ORDER PURSUANT TO SECTION 21C OF THE SECURITIES EXCHANGE ACT OF 1934 AS TO LOWELL NICHOLAS

I.

The Securities and Exchange Commission ("Commission") instituted public cease-and-desist proceedings pursuant to Section 21C of the Securities Exchange Act of 1934 ("Exchange Act") against Lowell Nicholas ("Respondent") on July 16, 2003.

II.

Respondent has submitted an Offer of Settlement (the "Offer") which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission, or to which the Commission is a party, and prior to a hearing pursuant to the Commission's Rules of Practice, 17 C.F.R. § 201.1 et seq., and without admitting or denying the findings herein, except as to the Commission's jurisdiction over him and the subject matter of these proceedings, which are admitted, Respondent consents to the entry of this Order Making Findings and Imposing Cease-and-Desist Order Pursuant to Section 21C of the Securities Exchange Act of 1934 as to Lowell Nicholas ("Order"), as set forth below.

III.

On the basis of this Order and Respondent's Offer, the Commission finds1 that:

  1. Xaibe, Inc. ("Xaibe"), a Nevada corporation headquartered in Houston, Texas, is registered pursuant to Section 12(g) of the Exchange Act (file no. 0-27647).

  2. Xaibe Inc.'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 were concluded in March 2003.

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

  4. 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. This Form 10-KSB should have been filed on October 15, 2001.

  5. 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. Xaibe's independent auditing firm had performed the field work for the audit, but had not completed the audit and had not issued an audit report at the time Nicholas caused Xaibe to file the Form 10-KSB. Indeed, the auditing firm never completed the audit and never issued a report on Xaibe's June 30, 2001 financial statements.

  6. 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. At this time, the auditing firm advised Nicholas that, among other items, it needed a signed management representation letter and final payment for the audit.

  7. By filing the materially false and misleading Form 10-KSB, Nicholas violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.

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

  9. 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 violated, and Nicholas was a cause of Xaibe's violation of, Section 13(a) of the Exchange Act and Rule 13a-11 thereunder.

  10. While its stock was registered with the Commission, Xaibe failed to file its annual report on Form 10-KSB for the 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 violated, and Nicholas was a cause of Xaibe's violation of Section 13(a) of the Exchange Act and Rules 13a-1 and 13a-13 thereunder.

IV.

In view of the foregoing, the Commission deems it appropriate to impose the sanctions specified in Respondent Nicholas's Offer.

Accordingly, it is hereby ORDERED that Respondent Nicholas cease and desist from committing or causing any violations and any future violation of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder and causing any violations and any future violations of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, and 13a-13 thereunder.

For the Commission, by its Secretary, pursuant to delegated authority.

Jonathan G. Katz
Secretary

 

1 The findings herein are made pursuant to Respondent's Offer of Settlement and are not binding on any other person or entity in this or any other proceeding.