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, AccountantSeptember 27, 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 25, 2007 comment letter with respect to Anchor Funding
Services, Inc.’s Form 10-SB/A Registration Statement.
|
1.
|
Comment
|
Note
2. Summary of Significant Accounting Policies Revenue
Recognition,
page F-6
We
note
your response to prior comment 2. We understand that you determine your yield
for new customers based on the yield that you targeted to price the account.
Please tell us in detail how you determine this yield. Tell us how you adjust
for the difference between your actual yield and your estimated yield for all
customers. Tell us how you revise your estimated yields to consider historical
experience for purposes of accruing your fees.
1
Response
We
determine pricing for a new account using a simple worksheet similar to the
following:
|
In
000's
|
Enter
Sales
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|||||
|
Estimated
Annual Sales
|
500
|
500
|
500
|
500
|
||
|
Receivable
turn in days
|
15
|
30
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45
|
60
|
||
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AVERAGE
A/R
|
21
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42
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63
|
83
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||
|
FUNDS
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ADVANCED
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80%
|
17
|
33
|
50
|
67
|
|
Enter
% Rate
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Enter
Advance Rate
|
|||||
|
Collection
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||||||
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Rate
Table
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Interval
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|||||
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1.50
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1-15
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8
|
||||
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3.00
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16-30
|
15
|
||||
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4.50
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31-45
|
23
|
||||
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6.00
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46-60
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30
|
||||
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FEES
|
8
|
15
|
23
|
30
|
||
|
TARGET
ROI / YIELD
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45.0%
|
45.0%
|
45.0%
|
45.0%
|
||
this
worksheet, we enter the sales and the advance rate and then we adjust the rates
in the rate table until the worksheet calculates and reveals the targeted
“yield;” in this example the targeted yield is 45%, the advance rate is 80%, and
the variable rates are in the rate table.
The
difference between the actual yield and the estimated yield is adjusted per
the
following example provided in our August 31, 2007 response:
Base
Assumptions
Invoice
amount purchased - $10,000
|
Factor
commission –
|
2.00%
if purchased invoice is outstanding for any portion of 1 to 15
days
|
|
|
3.00%
if purchased invoice is outstanding for any portion of 16 to 30
days
|
|
|
4.00%
if purchased invoice is outstanding for any portion of 31 to 44
days
|
| 5.00% if purchased invoice is outstanding for over 45 days |
| Withheld Amount – | 2.00% of purchased invoice |
| Advance Rate – | 75% |
| Date Acquired – | 7-1-07 |
| Historical Yield Rate – | 49% |
Using
above base assumptions and a date collected of 8-8-07.
2
Our
journal entries for the month of July 2007 would be:
|
Debits
|
Credits
|
||||
|
#1 To
record purchase
|
|||||
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Retained
Interest in Purchased Accounts Receivable
|
10,000
|
|
|||
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Unearned
Fee Income
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200
|
||||
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Reserve
Payable
|
2,500
|
||||
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Cash
|
7,300
|
||||
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#2 To
accrue fee income
|
|||||
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Earned
but Uncollected Fee Income
|
316
|
|
|||
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Factoring
Commissions
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316
|
||||
|
(31/360
x 7,500 x .49 =316)
|
|||||
|
Our
journal entries for the month of August 2007 would be:
|
|||||
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#1 To
record collection
|
|||||
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Cash
|
10,000
|
|
|||
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Retained
Interest in Purchased Accounts Receivable
|
10,000
|
||||
|
#2 To
record settlement with customer
|
|||||
|
Reserve
Payable
|
2,500
|
|
|||
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Unearned
Fee Income
|
200
|
|
|||
|
Factoring
Revenues
|
400
|
||||
|
Cash
|
2,300
|
||||
|
#3
To reverse 7-31 fee income accrual
|
|||||
|
Factoring
Revenues
|
316
|
|
|||
|
Earned
but Uncollected Fee Income
|
316
|
||||
In journal entry # 2 above, we are recording the actual fee income. Journal entry # 3 reverses our accrual as of July 31, 2007 based on our estimate. Only the actual fee income remains on our books.
We
plan
to use a client’s six month yield history, if available, as a current and
reasonable historical period of experience. As in the example provided in our
September 18, 2007 response, we used the historical ROI from our computer
software for the six months ended March 31, 2007 to calculate the fee accrual
as
of March 31, 2007. For the period ended June 30, 2007, we would use the
historical ROI from our computer software for the six months ended June 30,
2007
to calculate the fee accrual as of June 30, 2007; as of any date we would look
back at the prior six months history.
|
2.
|
Comment
|
We
note
your response to prior comment 3. Please tell what the column Account Debtor
represents in Exhibit 1. Tell us why you continued to use the same yield
percentage, 40.57%, for the purpose of estimating your fees when you had more
current information. If this customer represents 24.8% of your accounts
receivable balance at March 31, 2007, tell us why your fees per the Exhibit
do
not represent a corresponding percentage of your fees for the
quarter.
3
Response
Account
debtor represents our customer’s customer in Exhibit I, with the actual names
substituted with numbers. Exhibit I shows the invoices that we purchased from
our customer “ABC” that were still outstanding as of March 31, 2007. The
invoices are listed by account debtor or ABC’s customer who ABC rendered a
service to.
We
use
the same yield percentage of 40.57% because this was the historical yield
calculated by our software for ABC customer for the six months ended March
31,
2007. The purpose was to show an example of how we are estimating fees when
we
do not have current information and then to look subsequently to compare to
actual results per your request.
Per
your
prior request, Exhibit I is an analysis of Accrued fees for an
Anchor customer, “ABC,” as of March 31, 2007 with estimated accrued fees
compared to actual. These are not the fees for ABC customer for the entire
quarter, but just the fees that we would accrue for ABC customer as of March
31,
2007. Therefore, they would not represent a corresponding percentage of the
fees
for the quarter. In addition, a company that represents x% of our accounts
receivable at the end of any period may not necessarily represent the same
x% of
our fee income for the quarter. The pricing, collection period, and volume
of
invoices purchased are other but not all inclusive factors which could influence
fee income during any period.
| Very truly yours, | |||
| MORSE & MORSE, PLLC | |||
|
|
By:
|
/s/ Steven Morse, Managing Member | |
4