Morse&
Morse, PLLC
1400 Old Country Road, Suite 302
Westbury,
NY 11590
Tel:
516-487-1446
Fax:
516-487-1452
Email: morgold@aol.com
|
Sharon
Virga, Accountant
|
September
21, 2007
|
Telephone
Number: 202-551-3415
Facsimile
Number. 202-7729205
Mail
Stop 3720
|
Re:
|
Anchor
Funding Services, Inc.
|
| Registration Statement on Form 10-SB |
| Filed on April 30, 2007 |
| File No. 0-52589 |
Dear
Ms.
Virga:
As
counsel to the above captioned corporation, the following letter is in response
to the Staff’s September 17, 2007 comment letter with respect to Anchor Funding
Services, Inc.’s Form 10-SB/A Registration Statement.
|
1.
|
Comment
|
Please
amend your Forms 10-SB and Form 10-QSB to revise the disclosure regarding the
nature of your fee structure, your revenue recognition policy and any revisions of your financial
statements.
Response
We
will comply with your comment by
amending each filing.
|
2.
|
Comment
|
We
note
your response to prior comment 1. Please tell us in detail how you determine
your
yield. Tell us how you aggregate the experience of certain customers and why
you
believe that such aggregation is appropriate.
Response
Yield
is
expressed as a percentage and is calculated as follows:
(Fee
Income/Amount Funded) x (365/# Days Invoice is outstanding) x 100
Our
computer software is using 365 days, not 360 in its calculations.
After
further examination of reports available to us in our software we realized
that
we could use the software’s “ROI” (Return on Investment) reports to evaluate and
estimate the length of time that a purchased invoice is outstanding. These
reports calculate for the period of time requested the yield by customer in
summary and detail.
The
following is an abstract of a client from the detail ROI report for the six
months ended June 30, 2007:
Customer
ABC
|
Inv
#
|
Adv.
Date
|
Rec
Date
|
Days
|
Total
(advance)
|
Fee
|
ROI
|
|
54
|
12/13/2006
|
1/22/2007
|
41
|
$5,740.50
|
$344.43
|
53.41%
|
|
64
|
2/20/2007
|
3/23/2007
|
32
|
$5,731.60
|
$322.40
|
64.16%
|
|
70
|
3/29/2007
|
5/11/2007
|
44
|
$5,980.80
|
$336.42
|
46.66%
|
|
76
|
5/16/2007
|
6/14/2007
|
30
|
$6,817.40
|
$255.66
|
45.63%
|
|
66
|
3/5/2007
|
4/2/2007
|
29
|
$6,336.80
|
$237.63
|
47.20%
|
|
58
|
1/22/2007
|
2/12/2007
|
22
|
$2,536.50
|
$101.46
|
66.36%
|
|
59
|
1/22/2007
|
3/2/2007
|
40
|
$5,907.38
|
$354.44
|
54.75%
|
|
62
|
2/2/2007
|
3/9/2007
|
36
|
$5,707.13
|
$342.43
|
60.83%
|
|
56
|
12/27/2006
|
2/2/2007
|
38
|
$3,704.63
|
$222.28
|
57.63%
|
|
68
|
3/15/2007
|
4/17/2007
|
34
|
$6,230.00
|
$350.44
|
60.39%
|
|
72
|
4/16/2007
|
5/16/2007
|
31
|
$6,835.20
|
$384.48
|
66.23%
|
|
74
|
5/1/2007
|
6/14/2007
|
45
|
$6,746.20
|
$379.48
|
45.63%
|
|
35.2
|
$68,274.14
|
$3,631.55
|
55.21%
|
We
do not
aggregate the experience of certain customers. The report from our software
provides the ROI for every customer as shown above.
|
3.
|
Comment
|
We
note
your response to prior
comment 3. In your letter
dated August 14, 2007, you stated on the last
page of your response that you can not reasonably estimate the
timing of the collection of
the invoices purchased and that your customers are in various industries and
many factors influence the timing of when the debtors will pay the invoices
that
you have purchased. Due to
the foregoing reasons, you stated that you would recognize revenue on the non-refundable factoring
commission using the cost recovery method.
In
your
latest letter dated August 31, 2007, you state that all of your fees
are time based. Furthermore, you state that you had not previously considered
using your yield rate
information to estimate
the timing of your collections. As previously
requested in a telephone conversation, please explain in detail what changed
during the period of time between
letters that permitted you to estimate your yield. Tell us in detail
why you
believe that you have sufficient experience to estimate a yield. Provide
us with a schedule showing estimated yields with the actual yield.
Response
More
facts and circumstances came to our attention. Review of our contracts, per
the
following abstract, indicated that the initial factoring fee which we had
previously categorized as a non-refundable commission is in fact a time based
fee for the first 15 days:
Abstract
from our Factoring and Security Agreement
“1.16
“Factoring Fee Percentage” - 1.50% if a Purchased Account is paid within
the Initial Factoring Fee Period, 2.85% if a Purchased Account is paid within
the second Factoring Fee Period, 4.25% if a Purchased Account is paid within
the
third Factoring Fee Period, and 5.65% if a Purchased Account is paid within
the
fourth Factoring Fee Period.
1.17“Factoring
Fee Period” – Fifteen (15) days.
1.18
“Fees” – The Factoring Fee and Initial Factoring Fee.
1.19
“Initial Factoring Fee” – 1.50% of the Face Amount.
1.20 “Initial
Factoring Fee Period” - Fifteen (15) days”
Other
facts and circumstances evolved from the information in the ROI reports that
we
are able to run from our software. We educated ourselves with the information
in
these reports and how it may be used in connection with determining the length
of time that an invoice is outstanding. As described in Comment 2, above, the
historical information on yield provided in the detailed ROI reports provides
the experience to estimate the yield. If we obtain a new account and do not
have
the historical information, we would use the yield that we targeted to price
the
account; for every account, when we set the pricing, we target a specific yield
that we want to achieve. With history, this yield would subsequently be
adjusted.
Exhibit
I
provides an analysis of a customer and how we would estimate the yield. The
customer’s account debtors’ balances are as of March 31, 2007. This customer’s
accounts receivable as of March 31, 2007 represented approximately 24.8% of
the
total purchased accounts receivable outstanding. We used the historical ROI
from
our computer software for the six months ended March 31, 2007. We then examined
the period after March 31, 2007 to determine when the invoices were paid and
their subsequent ROI. We recalculated the fees using the actual
ROI.
In
comparing the actual to the estimate, there was a 7.3% difference in the fee
accrual in this example.
As
soon
as we hear from the Staff that you have accepted our responses to comment nos.
2
and 3, we intend to promptly comply with comment no. 1.
| Very truly yours, | |||
| MORSE & MORSE, PLLC | |||
|
|
By:
|
/s/ Steven Morse | |
| Steven Morse | |||
| Managing Member | |||
EXHIBIT
1
Comparison
of fees accrued using estimated yield vs. actual yield
Fees
accrued on “ABC” customer as of March 31, 2007
|
Fee
|
||||||||||
|
Account
|
Invoice
|
Advance
|
Age
|
Invoice
|
Advance
|
Historical
|
Accrued
|
Actual
|
Using
|
Fee
|
|
Debtor
|
Date
|
Date
|
Amount
|
Amount
|
Yield
|
Fee
|
Yield
|
Actual
Yield
|
Difference
|
|
|
1
|
1/2/2007
|
1/2/2007
|
88
|
$325.00
|
748.80
|
40.57%
|
73.24
|
35.27%
|
63.67
|
9.57
|
|
1
|
1/8/2007
|
1/9/2007
|
81
|
$1,352.00
|
1,081.60
|
40.57%
|
97.38
|
34.76%
|
83.43
|
13.95
|
|
1
|
1/15/2007
|
1/16/2007
|
74
|
$780.00
|
624.00
|
40.57%
|
51.32
|
34.14%
|
43.19
|
8.13
|
|
1
|
1/22/2007
|
1/23/2007
|
67
|
$468.00
|
374.40
|
40.57%
|
27.88
|
35.43%
|
24.35
|
3.53
|
|
1
|
1/29/2007
|
1/30/2007
|
60
|
$156.00
|
124.80
|
40.57%
|
8.32
|
35.86%
|
7.36
|
0.97
|
|
1
|
2/5/2007
|
2/6/2007
|
53
|
$624.00
|
499.20
|
40.57%
|
29.41
|
35.59%
|
25.80
|
3.61
|
|
1
|
2/12/2007
|
2/13/2007
|
46
|
$156.00
|
124.80
|
40.57%
|
6.38
|
36.03%
|
5.67
|
0.71
|
|
1
|
2/19/2007
|
2/20/2007
|
39
|
$156.00
|
124.80
|
40.57%
|
5.41
|
36.60%
|
4.88
|
0.53
|
|
1
|
2/26/2007
|
2/27/2007
|
32
|
$312.00
|
249.60
|
40.57%
|
8.88
|
35.37%
|
7.74
|
1.14
|
|
1
|
3/5/2007
|
3/6/2007
|
25
|
$312.00
|
249.60
|
40.57%
|
6.94
|
35.78%
|
6.12
|
0.82
|
|
1
|
3/12/2007
|
3/13/2007
|
18
|
$312.00
|
249.60
|
40.57%
|
4.99
|
36.26%
|
4.46
|
0.53
|
|
1
|
3/19/2007
|
3/20/2007
|
11
|
$468.00
|
374.40
|
40.57%
|
4.58
|
49.59%
|
5.60
|
(1.02)
|
|
1
|
3/26/2007
|
3/27/2007
|
4
|
$312.00
|
349.60
|
40.57%
|
1.55
|
46.79%
|
1.79
|
(0.24)
|
|
$5,733.00
|
-
|
-
|
-
|
|||||||
|
2
|
2/5/2007
|
2/6/2007
|
53
|
$3,018.13
|
2,414.50
|
40.57%
|
142.24
|
40.02%
|
140.31
|
1.93
|
|
2
|
2/12/2007
|
2/13/2007
|
46
|
$2,942.50
|
2,354.00
|
40.57%
|
120.36
|
39.33%
|
116.68
|
3.68
|
|
2
|
2/19/2007
|
2/20/2007
|
39
|
$4,722.45
|
3,777.96
|
40.57%
|
163.77
|
40.02%
|
161.55
|
2.22
|
|
2
|
2/26/2007
|
2/27/2007
|
32
|
$3,565.38
|
2,852.30
|
40.57%
|
101.45
|
39.33%
|
98.35
|
3.10
|
|
2
|
3/5/2007
|
3/6/2007
|
25
|
$1,856.25
|
1,485.00
|
40.57%
|
41.26
|
40.74%
|
41.44
|
(0.17)
|
|
2
|
3/12/2007
|
3/13/2007
|
18
|
$4,953.44
|
3,962.75
|
40.57%
|
79.28
|
38.02%
|
74.30
|
4.98
|
|
2
|
3/19/2007
|
3/20/2007
|
11
|
$550.00
|
440.00
|
40.57%
|
5.38
|
43.04%
|
5.71
|
(0.33)
|
|
2
|
3/26/2007
|
3/27/2007
|
4
|
$811.25
|
649.00
|
40.57%
|
2.89
|
45.63%
|
3.25
|
(0.36)
|
|
$22,419.40
|
-
|
-
|
-
|
|||||||
|
3
|
2/19/2007
|
2/20/2007
|
39
|
$11,910.28
|
595.52
|
40.57%
|
25.82
|
40.74%
|
25.92
|
(0.11)
|
|
3
|
2/26/2007
|
2/27/2007
|
32
|
$9,365.16
|
7,492.13
|
40.57%
|
266.48
|
46.56%
|
305.83
|
(39.34)
|
|
3
|
3/5/2007
|
3/6/2007
|
25
|
$9,136.20
|
7,308.96
|
40.57%
|
203.10
|
43.45%
|
217.52
|
(14.42)
|
|
3
|
3/12/2007
|
3/13/2007
|
18
|
$11,796.83
|
9,437.46
|
40.57%
|
188.82
|
50.70%
|
235.96
|
(47.15)
|
|
3
|
3/19/2007
|
3/20/2007
|
11
|
$9,609.89
|
7,687.91
|
40.57%
|
94.00
|
47.20%
|
109.36
|
(15.36)
|
|
3
|
3/26/2007
|
3/27/2007
|
4
|
$8,894.89
|
7,115.91
|
40.57%
|
31.64
|
49.59%
|
38.67
|
(7.03)
|
|
$60,713.25
|
-
|
-
|
-
|
|||||||
|
4
|
2/19/2007
|
2/20/2007
|
39
|
$8,228.00
|
6,582.40
|
40.57%
|
285.34
|
49.59%
|
348.78
|
(63.44)
|
|
4
|
2/26/2007
|
2/27/2007
|
32
|
$9,828.50
|
7,862.80
|
40.57%
|
279.67
|
45.62%
|
314.48
|
(34.81)
|
|
4
|
3/5/2007
|
3/6/2007
|
25
|
$7,884.26
|
6,307.41
|
40.57%
|
175.27
|
42.44%
|
183.35
|
(8.08)
|
|
4
|
3/12/2007
|
3/13/2007
|
18
|
$9,554.88
|
7,643.90
|
40.57%
|
152.93
|
50.70%
|
191.12
|
(38.19)
|
|
4
|
3/19/2007
|
3/20/2007
|
11
|
$7,664.25
|
6,131.40
|
40.57%
|
74.97
|
43.45%
|
80.29
|
(5.32)
|
|
4
|
3/26/2007
|
3/27/2007
|
4
|
$9,344.50
|
7,475.60
|
40.57%
|
33.24
|
52.14%
|
42.72
|
(9.48)
|
|
$52,504.39
|
-
|
-
|
-
|
|||||||
|
5
|
2/26/2007
|
2/27/2007
|
32
|
$6,154.20
|
4,923.36
|
40.57%
|
175.12
|
43.45%
|
187.55
|
(12.43)
|
|
5
|
3/5/2007
|
3/6/2007
|
25
|
$5,912.40
|
4,729.92
|
40.57%
|
131.43
|
46.56%
|
150.84
|
(19.41)
|
|
5
|
3/12/2007
|
3/13/2007
|
18
|
$6,702.80
|
5,362.24
|
40.57%
|
107.28
|
37.22%
|
98.42
|
8.86
|
|
5
|
3/19/2007
|
3/20/2007
|
11
|
$6,861.40
|
5,489.12
|
40.57%
|
67.11
|
43.45%
|
71.88
|
(4.76)
|
|
5
|
3/26/2007
|
3/27/2007
|
4
|
$7,458.10
|
5,966.48
|
40.57%
|
26.53
|
52.14%
|
34.09
|
(7.57)
|
|
$33,088.90
|
-
|
-
|
||||||||
|
Totals
|
$174,458.94
|
3,301.65
|
3,562.40
|
(260.75)
|