H1B transfer question, please help

My wife had a H1B working for company A from 08/2003 to 07/2005 (from I-94) and she filed another H1B application to work for company B in 05/2004. She got the notice, stopped working for company A and started working for company B. However, she never got the aprroval notice for the second H1B application. Actually this case is currently still pending. She worked for company B until 07/2005 which is the expiration date of the first H1B. She changed to F2 later in 07/2005. I was wondering if there is any problem about status or employment authorization for this period of time from 08/2003 to 07/2005.