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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

August 16, 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 August 12, 2005 relating to your review of the above filings and
our previous response dated July 19, 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 10-K/A for the fiscal year ended June 30, 2004

     Financial Statements

     Consolidated Statements of Operations, page F-5

     Prior Comment No. 4

1.     We note your response to prior comment number 4 in which you indicate that you plan to
comply with Rule 5-03(b) of Regulation S-X on a going forward basis. In the light of this
noncompliance, tell us whether your officers continue to believe that your disclosure
controls and procedures were effective as of June 30, 2004. Also indicate how this has
impacted the officers’ assessment of disclosure controls and procedures as of June 30,
2005. Provide the basis for your conclusions.

BERLIN MUNICH BRUSSELS LONDON PARIS BUDAPEST PRAQUE 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

August 16, 2005

Page 2

     Response: The Company’s officers continue to believe that its disclosure controls and
procedures were effective as of June 30, 2004. The officers were 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. However, they believed, in view of the prior correspondence with
the SEC Staff in 2001 regarding this requirement, that because Ace*Comm’s business and the way it
manages its business had not materially changed since the Staff raised no objection to the
Company’s position in the 2001 correspondence, it was acceptable to continue to show aggregated
revenues and cost of revenues. Ace*Comm has confirmed that there are
no other accounting issues as to which it is taking a position not in compliance with applicable
accounting rules based on prior correspondence with the staff, and has added to its internal
disclosure control guidelines an item to discuss specifically with any internal auditor or auditing
consultants, its outside auditors and its counsel whether it is appropriate to take any proposed
position that appears to the Company’s officers not to be compliant with applicable accounting
rules. The Company acknowledges that it is its responsibility to comply with the rules and regulations
of the SEC and further acknowledges that the Staff is not bound by statements the Staff makes in its prior correspondence.

     In view of the adoption of this internal guideline, the officer’s assessment of disclosure
controls and procedures as of June 30, 2005 will include a step in the disclosure
review process in the event that the Company’s officers identify any accounting position that
appears not to be compliant with applicable accounting rules. In addition, the Company’s officers
have been changing Ace*Comm’s cost accounting structure to capture the costs relevant to future
reporting, and review of those costs will be included in the Company’s disclosure control
processes.

     Note 12 – Mergers and Acquisitions, page F-17

     Prior Comment No. 7

    2.

    We note that in response to prior comment number 3 in your letter dated July
19, 2005 you indicate that you propose to amend your most recent Form 10-Q for the
period ended March 31, 2004. In light of the fact that the Intasys acquisition
occurred during the prior interim period presented in your Form 10-Q for the period
ended March 31, 2005, tell us what consideration you have given to also including a
discussion of IPR&D similar to the response to prior comment number 7 in your letter
dated July 19, 2005.

     Response: The Company has added the following discussion in an amended Form 10-Q for the
period ended March 31, 2005.

Hogan & Hartson L.L.P.

Mark P. Shuman

U.S. Securities & Exchange Commission

August 16, 2005

Page 3

     [Inserts in Note 6 – Mergers and Acquisitions]

     [The following language was inserted at the end of the section on Double Helix Solutions
Limited]

     As part of the acquisition of 2helix, the Company acquired three software tools (Network
Inspector, Network Visualization and Discrepancy Inspector) that were in the process of being
developed into new products.

     Network Inspector is a powerful data collection, enhancement and reporting tool. Network
Visualization is used for network planning and allows operators a visual representation of the
physical network in relation to existing customers, prospective customers, network infrastructure
and the available unused capacity. Discrepancy Inspector is a powerful analysis and reporting tool
that allows users to identify and investigate discrepancies in data between the network, OSS and
upstream business systems. The fair value of each project at the date of acquisition was
$2,274,601 for Network Inspector, $1,705,951 for Network Visualization and $1,137,300 for
Discrepancy Inspector.

     On the date of the purchase the projects were approximately 50% completed. At the time of
valuation the cost to complete the projects was $950,000 and the projects were to be completed by
March 31, 2006.

     Delays with these projects and with additional development efforts could adversely impact
future revenues and could make the Company’s products less competitive in the marketplace. Our
ability to realize the full value of the acquisition of 2helix is dependent upon the completion of
these projects. To complete the projects we must be able to maintain our existing development team
and recruit additional resources to complete projects on time. Any failure to do this will limit
the market into which we can sell or products and services. Further, customers are always looking
for the most advanced technology available. To the extent that competitors can offer more advanced
technology within a given price range our sales would be adversely affected.

     To value the in-process research and development 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 in-process
research and development. The key assumptions are:

    Ø

    Timing of Cash Flows and Profits — The timing of cash flows and profit margins are
based on management’s detailed forecast of its in-process research and development
projects for fiscal year (June 30 year end) 2006 through 2011. We forecasted cost of

Hogan & Hartson L.L.P.

Mark P. Shuman

U.S. Securities & Exchange Commission

August 16, 2005

Page 4

    sales of 55% and general and administrative costs of 20% consistent with 2helix’s other
operations. Additionally, an income tax rate of 35% was applied.

    Ø

    Contributory Charges – Contributory charges for working capital, fixed assets, and
assembled workforce were taken into account. Historical balances were used to
estimate the contributory balances, when available.

    Ø

    Discount Rate – The discount rate is specific to the intangible assets that are
being valued, and are effectively based on the risk profile of the acquired company.
A weighted average cost of capital was used for discounted cash flow calculations that
were based on free cash flow to invested capital economic earnings streams. We
considered the cost of debt, the risk-free rate, the equity risk premium and the size
risk premium in establishing the weighted average cost of capital. A discount rate of
21% was used in the in-process research and development calculation.

     [The following language was inserted at the end of the section on Intasys]

     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
in-process research and development 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 in-process research and development 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 in-process
research and development. The key assumptions are:

    Ø

    Timing of Cash Flows and Profits — The timing of cash flows and profit margins are
based on management’s detailed forecast of its in-process research and development
projects for 2004 through 2012. We forecasted cost of sales of 45% and general and

Hogan & Hartson L.L.P.

Mark P. Shuman

U.S. Securities & Exchange Commission

August 16, 2005

Page 5

    administrative costs of 34% consistent with Intasys’s other operations. Additionally,
an income tax rate of 35% was applied.

    Ø

    Contributory Charges – Contributory charges for working capital, fixed assets, and
assembled workforce were taken into account. Historical balances were used to
estimate the contributory balances, when available.

    Ø

    Discount Rate – The discount rate is specific to the intangible assets that are
being valued, and are effectively based on the risk profile of the acquired company.
A weighted average cost of capital was used for discounted cash flow calculations that
were based on free cash flow to invested capital economic earnings streams. We
considered the cost of debt, the risk-free rate, the equity risk premium and the size
risk premium in establishing the weighted average cost of capital. A discount rate of
18% was used in the in-process research and development calculation.

* * * * *

     Your attention to this response is greatly appreciated. Should you have any questions
concerning the above, please do not hesitate to call me at (202) 637-5736 or Frank A. Bacelli at
(202) 637-8769.

Respectfully submitted,

Steven M. Kaufman

Enclosures

    cc:

    Steven R. Delmar

Frank A. Bacelli