 | Anthony R. Paesano apaesano@paalawfirm.com 7457 Franklin Road, Suite 200 Bloomfield Hills, Michigan 48301 www.paesanoakkashian.com T 248.792.6886 F 248.792.6885 |
FILED ON EDGAR
Larry Spirgel
Assistant Director
United States Securities and Exchange Commission
Division of Corporation Finance
Washington, D.C. 20549
RE: AMERICATOWNE, INC.
FORM 10-K FOR FISCAL YEAR ENDED DECEMBER 31, 2014, AS AMENDED
FILED APRIL 17, 2015 AND JULY 27, 2015, AS AMENDED
RESPONSE DATED JULY 27, 2015
FILE NO. 000-55206
Dear Mr. Spirgel:
This letter is in response to your August 4, 2015 comment letter to Alton Perkins, Chairman of the Board, Chief Executive Officer and President for AmericaTowne, Inc. (the "Company"). This correspondence supplements the Company's August 5, 2015 response, and responses to your oral comments from August 11, 2015 regarding related party transactions disclosed at Note 6 on the Company's Form 10-K for the year ending December 31, 2014 and Form 10-Q for the quarter ending March 31, 2015.
I have been retained by the Company to respond to your comments and to subsequently amend the above-referenced filings; however, please continue to communicate directly with Mr. Perkins in the ordinary course, and please feel free to contact me with any follow up questions or comments.
Form 10-K/A for Fiscal Year Ended December 31, 2014
Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations for Period from Inception (April 22, 2014) to December 31, 2014, Revenues, page 50
1) Refer to the second paragraph. It appears to us that you recognized the total service fee from each of your four Exporter Service Agreements entered into in August, October and November 2014. In Note 2, Revenue Recognition, on page F-11, you disclose that you are accounting for your Exporter Service Agreements as multiple-element arrangements pursuant to ASC 605-25 and each separate unit of accounting is recognized when it is delivered. We also note that your total accounts receivable balance consists of the service fee revenues from your Exporter Service Agreements recognized in 2014. Please address the following comments for each Exporter Service Agreement:
Page 1
- In your letter dated December 22, 2014, you stated that your service fee consists of two separate deliverables (analysis and plan related to the exporter's products and services and IC-DISC information services) and the related revenues are recognized when each deliverable is satisfied. We note from the Exporter Service Agreements that your service fee is for services to be provided by you in the AmericaTowne Platform, Sample and Test Market Program and if applicable, Accepted Market Program. Based on this, please tell me how you determined your two separate deliverables. Include in your response how the services related to AmericaTowne Platform, Sample and Test Market Program and Accepted Market program are included in your two separate deliverables or if there are additional deliverables. Please confirm to us that you have no further obligations for such deliverables once the deliverable is satisfied. Since the Accepted Market Program services are conditional, tell us your basis for including such services in the respective deliverable of if these services represent a separate deliverable.
- It is unclear to us whether the service fee provided through Yilaime Corporation pursuant to the Exporter Service Agreements are included in the two separate deliverables. Tell us and disclose whether or not the Yilaime Corporation services are included in one of your two separate deliverables and the basis for your conclusion.
- We note that terms of the Exporter Service Agreements range from 24 months to 15 years. Tell us if the parties to these agreement are entitled to unlimited services for the fixed service amounts over the terms of such agreements.
- We note that services fees for Bamyline Services, Nadia Emhirech and World Empowerment Import and Exporter Service Agreements have payment terms from 20 months to 24 months. Please tell us the specific factors you considered in concluding that the collectability of the service fee for each agreement was reasonably assured pursuant to ASC605-10-25-3 through 605-10-25-5.
Response: Under the Company's Exporter Service Agreement, the Company's deliverables are as set forth in Exhibit 1 attached hereto, and are broken into three separate and distinct processes - (a) Service Fee Process, (b) Transaction Fee Process and (c) Extension Fee Process, each of which are an independent accounting unit. Upon completion of a particular process, the Company considers the deliverables to be completed and its obligation performed, and in turn, recognizes revenue accordingly. The Services Fee Process, Transaction Fee Process and Extension Fee Process are each an independent accounting unit.
Service Fee Process. The Service Fee Process consists of eight components. These components provide one deliverable focusing on market analysis and demand. When this process is completed and the deliverable is made, the Company has no further obligations, revenue is recognized, and the Exporter is invoiced.
Transaction Fee Process. The Transaction Fee Process provides a separate deliverable that focuses on testing the Exporter's goods and services in the market; identifying and matching potential buyers; negotiating deals; delivering goods and services and getting paid for the goods and services. The Transaction Fee deliverables consist of three components: (1) Sample and Test Market Program; (2) Market Acceptance Program; and (3) Export Delivery Action.
(1) Sample and Test Market Program. In the Sample and Test Market Program, the Exporter's products and services are tested in the market; sources of goods and services are confirmed; price indications are confirmed; and the Exporter and the buyer matches occur.
(2) Market Acceptance Program. In the Market Acceptance Program, the export deal is identified and a binding or conditionally binding agreement is negotiated. The Accepted Market Program involves identifying a buyer and negotiating a deal with that buyer. The Accepted Market Program is part of the Transaction Fee Process. It is not a separate deliverable.
(3) Export Delivery Action. An Export Delivery Action occurs when the Exporter's goods are shipped and delivered, and payment is made to the Exporter. The Transaction Fee is realized after the Transaction Fee process is completed and the deliverable is made. Upon completion of the Export Delivery Action, the Company has no further obligations and the Exporter is invoiced and in turn, the Company recognizes revenue.