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corresp

Hogan & Hartson

l.l.p.

    COLUMBIA SQUARE

555 THIRTEENTH STREET, NW

WASHINGTON, DC 20004-1109

TEL. (202) 637-5600

FAX (202) 637-5910

WWW.HHLAW.COM

July 19, 2005

Mark P. Shuman

U.S. Securities and Exchange Commission

450 5th Street, NW

Mail Stop 4-6

Washington, DC 20549

    Re:

    ACE*COMM Corporation

Registration Statement on Form S-3

Filed April 26, 2005

File No. 333-124351

Form 10-K for the fiscal year ended 6/30/2004, as amended

Forms 10-Q for the quarterly periods ended 9/30/2004, 12/31/2004 and 3/31/2005

File No. 0-21059

Dear Mr. Shuman:

     On behalf of ACE*COMM Corporation (“ACE*COMM”), set forth below are ACE*COMM’s responses to
the Staff’s comment letter dated July 7, 2005 relating to your review of the above filings and our
previous response dated June 10, 2005.

     ACE*COMM’s responses to the Staff’s comments are set forth below beneath the text of the
corresponding comment from the comment letter.

Form S-3

General

    1.

    We note your responses to our prior comments 1 and 2. You indicate that you believe that
you are not engaging in a public offering of the shares of your common stock underlying
the “B” Warrants and “C” Warrants in light of the fact that you have removed these shares
from your amended registration statement. However, you initially filed a resale
registration statement for the public offering of securities that included securities
underlying these additional investment rights, thereby engaging in a public offering of
such securities, when the sales of these securities to the investors had not been
consummated. Since these securities were part of the March 2005 offering that included the
offer and sale of shares of common stock and the “A” Warrants, the offering,

BERLIN            MUNICH            BRUSSELS            LONDON            PARIS            BUDAPEST PRAGUE            WARSAW            MOSCOW            BEIJING            SHANGHAI            TOKYO

NEW YORK            BALTIMORE            McLEAN            MIAMI            DENVER            BOULDER            COLORADO SPRINGS            LOS ANGELES

Hogan & Hartson L.L.P.

Mark P. Shuman

U.S. Securities & Exchange Commission

July 19, 2005

Page 2

    including the
offer and sale of the common stock and “A” Warrants, was not completed
before the resale registration statement was filed. It appears that amending your
registration statement to remove shares of your common stock underlying the additional
investment rights does not negate the fact that you commenced a public offering of
securities issued in an uncompleted private offering. We reiterate our request that you
provide a detailed factual and legal analysis as to how the filing of the resale
registration statement prior to the completion of the March 2005 private placement is
consistent with the requirements of Section 5 of the Securities Act. Alternatively, please
revise your registration statement to provide appropriate disclosure that indicates the
potential effect on the company of commencing a transaction in unregistered from and then
filing a resale registration statement before completing the issuance transaction. In this
regard, you should consider and disclose the consequences of any significant uncertainty as
to availability of an exemption from the registration requirements of the Securities Act
for the March 2005 unregistered transaction. In responding to this comment, please refer to
Interpretations 3S of the Securities Act portion of the March 1999 supplement to the manual
of publicly available CF telephone Interpretations for guidance.

     Response: A separate response to this comment was filed on July 12, 2005.

     Form 8-K/A: Date of Report: March 24, 2005

    2.

    We note that the financial statements included in this Form 8-K/A includes
historical financial statements for the year ending September 30, 2004. However, the
financial statements of Double Helix Solutions Limited should include historical
financials for the interim period along with footnotes. See Rule 3-05 of Regulation
S-X.

     Response: The Company will file an amended Form 8-K/A to include the required financial
statements of Double Helix Solutions Limited as of December 31, 2004 and December 31, 2003,
including a balance sheet of the most recent interim period, comparative income statement,
statement of cash flows and required footnote disclosures.

Form 10-K/A

    3.

    We note your proposal regarding making changes to your Form 10-K for the
fiscal year ending June 30, 2005 in response to applicable Staff comments. In light of
the potential disclosure issues raised by our comments, we are not able to concur with
your proposal at this time.

     Response: The Company proposes to amend its most recent Form 10-Q to make the disclosures
suggested in the Staff’s comments, including those in response to Comment 9 of this

Hogan & Hartson L.L.P.

Mark P. Shuman

U.S. Securities & Exchange Commission

July 19, 2005

Page 3

letter. The
Company respectfully requests, however, based on discussions between the Company
and the Staff as referred to below in connection with Comment 4, that the Company be permitted
to make the disclosures suggested in the Staff’s comments, including those in response to Comment 4
of this letter, in future filings beginning with our Annual Report of Form 10-K (which is due not
later than September 29, 2005 and which we currently expect to file in early to mid-September).

     Financial Statements

     Consolidated Statements of Operations, page F-5

    4.

    We note your response to our prior comment 7. Your consolidated statements of
operations should present the components of net revenue and cost of revenue on a
disaggregated basis (i.e., present license revenue separate from service revenue)
in order to comply with Rule 5-03(b) of Regulation S-X. Furthermore, tell us why
the Company believes that arbitrary judgment would be involved in allocating the
contract or job costs to the contract elements of products or services. In this
regard, tell us why you have not established such controls to collect the required
information to comply with the Rule and to have effective disclosure and controls
procedures under Rule 307 of Regulation S-X.

     Response: The Company is aware of the requirement to present the components of net revenue
and cost of revenue on a disaggregated basis as required by Rule 5-03(b) of Regulation S-X and
proposes to comply with the requirement on a going forward basis beginning with our Form 10-K for
the fiscal year ending June 30, 2005, which is due on September 29, 2005.

     In a previous response dated March 13, 2001, to the Staff’s comment letter dated February 21,
2001, we addressed a substantially similar comment by the Staff by explaining to the Staff the
reasons for our non-compliance with this requirement. Since neither our business nor the way we
manage our business has materially changed, and since the Staff raised no objection to our March
2001 response, we have continued to show aggregated revenues and cost of revenues. However, the
Company understands the Staff’s position and the Company is willing to show these components on a
disaggregated basis in our Statement of Operations for fiscal years 2003, 2004 and 2005 beginning
with our Form 10-K for fiscal year ending June 30, 2005.

     As discussed between the Company and the Staff, compiling this information for prior years
will take a substantial amount of time. The Company currently does not separate cost of revenue
elements and will be required to develop an allocation method to disaggregate those historical
costs to comply with the requirement. (We inadvertently used the term “arbitrary” to describe this
process in our previous response and intended to convey that we would have to use judgment to
allocate the historical costs.) Starting with fiscal year 2006 (which commenced July

Hogan & Hartson L.L.P.

Mark P. Shuman

U.S. Securities & Exchange Commission

July 19, 2005

Page 4

1, 2005), we
will change our cost accounting structure to capture these costs separately. Once we
develop the allocation methodology, we will have to apply it to prior years, and the
methodology and application to prior years will need to be reviewed by our outside auditors. We
estimate that this process could take 45 to 60 days to complete, which would mean the information
would be filed about the same time ACE*COMM is planning to file its fiscal year 2005 10-K.
Additionally, if we were required by the Staff to amend our fiscal year 2004 10-K to reflect this
approach, we would be required to obtain the consent of our former auditor for fiscal year 2002,
which we think would cause even further delay and significant expense given that our former auditor
would also want to review our methodology and amendments. Additionally, the Company believes that
fiscal year 2002 information, which is now four years old, would not be as meaningful as our three
most recent fiscal years. For the above reasons we request that the Staff permit us to comply with
this requirement on a going forward basis beginning with our Form 10-K for the fiscal year ending
June 30, 2005, due not later than September 29, 2005. We currently expect to file in early to
mid-September.

     Note 12 — Mergers and Acquisitions, page F-17

    5.

    We note your response to prior comment 14. Tell us how you considered EITF
99-12 in your valuation that requires a period of a few days before and after the date
of announcement (i.e., two days before and after the announcement date). That is,
indicate why you believe your valuation methodology is appropriate. Explain why you
are using a multiplier of 0.825 and explain your references to “discounts within the
range estimated to be typical for private financing by a small public company”.
Additionally, indicate how you considered the guidance in paragraphs 83-85 of FIN 44
in determining how to account for the vested and unvested stock options and warrants.
Indicate how you considered disclosing the non-cash activity within the statements
cash flow. See paragraph 32 of SFAS 95.

     Response: Prior to our merger discussions i3 Mobile ceased all revenue producing
operations, sold its assets, had no customers and, other than one custodial employee, had no
employees. Accordingly, the merger with i3 Mobile did not possess the characteristics of a
business combination found in Regulation S-X and Statement of Financial Accounting Standard No.
141. It is the Company’s belief, therefore, that a “Purchase Business Combination” did not occur
and, as a result, EITF 99-12 Determination of the Measurement date for the Market Price of Acquirer
Securities Issues in a Purchase Business Combination would not apply. The Company also believes
that FIN 44 does not apply because the transaction did not meet the requirements of a business
combination and the purchase method of accounting was not used. Indeed, even if had FIN 44 been
applicable the Company does not believe that a new measurement date would have been created as all
options and warrants were out of the money at the merger date.

Hogan & Hartson L.L.P.

Mark P. Shuman

U.S. Securities & Exchange Commission

July 19, 2005

Page 5

     The multiplier of 0.825 (a discount of 17.5%) was a negotiated term in the merger agreement.
We believed that this discount was within the range of terms that are typical for a
private financing by a small public company. The Company inquired with an investment banking
firm for comparable terms and had previously received proposals from firms to provide capital
through a private placement (which we did not consummate). Those precedents indicated that a
discount range of 20 - 25% plus warrant coverage in addition to the discount was typical for such
a transaction.

     We agree with the Staff’s position regarding supplemental non-cash disclosure. The Company’s
future cash flow statements will include such disclosure.

    6.

    We note your response to prior comment 15. Explain why test (3) is not
applicable since both entities reported a loss in the prior fiscal year. When losses
are incurred, the significance test should be performed using absolute amounts.
Provide the significance test for the income test.

     Response: Our previous response was in error and test (3) is applicable using absolute
amounts as both entities had losses. Following is the significance test (3):

     Net loss from continuing operations before income taxes, extraordinary items and cumulative
effect of a change in accounting principle:

         Intasys for the year ended December 31, 2003

    (73,000)

         ACE*COMM for the year ended June 30, 2003

    (1,982,000)

         Ratio

    3.7%

    7.

    We note your response to prior comment 16. We believe that it would be
difficult to judge whether an investor would find this information meaningful and such
disclosures has been required by the SEC. Your disclosures should include the
following for IPR&D:

    •

    Specific nature and fair value of each significant in-process research
and development project acquired

    •

    Completeness, complexity and uniqueness of the projects at the
acquisition date

    •

    Nature, timing and estimated costs of the efforts necessary to complete
the projects, and the anticipated completion dates

    •

    Risks and uncertainties associated with completing development on
schedule, and consequences if it is not completed timely

    •

    Appraisal method used to value projects

Hogan & Hartson L.L.P.

Mark P. Shuman

U.S. Securities & Exchange Commission

July 19, 2005

Page 6

    •

    Significant appraisal assumptions, such as the period in which material
net cash inflows from significant projects are expected to commence,
material anticipated changes from historical pricing, margins and expense
levels, and the risk adjusted discount rate applied to the project’s cash
flows.

    In periods after a significant write-off, discuss the status of efforts to complete
the projects, and the impact of any delays on your expected investment return,
results of operations and financial condition.

     Response: As part of the asset purchase of Intasys, the Company acquired software (JBill
Global) that was in the process of being developed into a new product. JBill is a billing and
customer care solution for certain network operator and service provider markets, which the Company
valued at $1,160,251. On the date of the asset purchase the project was approximately 65%
complete. The IPR&D effort was not related to routine, on-going efforts to refine, enrich, or
otherwise improve upon the qualities of an existing product. At the time of valuation the cost to
complete the development was estimated at $400,000 and this specific project was scheduled to be
completed by the end of calendar year 2004.

     The project was completed in early 2005 and at slightly higher costs than originally
projected. Given the fast moving development of new technology in the Company’s industry, the
Company believes that delays with this project and with follow on development efforts could
adversely impact future revenues and could make the Company’s products less competitive in the
marketplace. To date the Company cannot identify any specific revenue opportunities that were lost
as a result of any delays associated with this project.

     To value the IPR&D we applied the Fair Value standard and calculated the value by discounting
the estimated cash flow streams that would be generated. This analysis involved several key
assumptions to calculate the estimated fair value of IPR&D. The key assumptions are:

    •

    Timing of Cash Flows and Profits — The timing of cash flows and profit margins are
based on management’s detailed forecast of its IPR&D projects for 2004 through 2012.
We forecasted cost of sales of 45% and general and administrative costs of