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Stocklemon Reports on Imergent Inc.

Posted in Citron Reports by CitronResearch on the February 24th, 2005

O, what a tangled web we weave when first we practice to deceive! – Sir Walter Scott

It is the opinion of Stocklemon that Imergent (AMEX: IIG) is the WORST COMPANY WE HAVE EVER WRITTEN ABOUT.   It is the opinion of Stocklemon and many other credible news sources that Imergent has made a business model of being predators upon those who have hope in the American Dream.   This deception has spread from their seminars to their filings which in our opinion show a company that most resembles a house of cards.

Although Imergent claims they are in the software business, they are actually in the business of giving seminars and hard selling people into buying software to make an e-commerce store, operating under the trade names “Storesonline”, and previously, “Galaxy Mall”.  If someone cannot afford the full cost of their package, they will finance the purchase at the generous rate of 18%.  If you do not pay, Imergent will hit your credit, ruining the dreams and credit of those who can least afford to have it happen to them.

Stocklemon believes that this business model cannot sustain itself and is a ticking time bomb that can be destroyed by one of many government agencies . tick tock tick tock tick tock.

Please do not take our word on this assessment.  Read this report and listen to the voices of the many people that have been “taken” by Imergent Corp.

On February 22, 2005, the Texas Attorney General filed a complaint against Imergent Corporation, alleging numerous false, deceptive and misleading acts and practices.  Stocklemon believes this is the first shoe to fall in a story that will unravel in the coming months.

http://www.oag.state.tx.us/newspubs/releases/2005/022205imergentpop.pdf

For those who do not understand the severity, read below as issued from the State of California issued on the same day of February 22, 2005 click here

 

The Truth About Imergent

There are literally hundreds of negative articles written about Storesonline and Galaxy Mall.  Stocklemon has narrowed it down to our favorite 5 which can give you an idea of the kind of company Imergent is.

Forbes Magzine click here

Dateline TV NBC  (Transcript) click here

Rip Off Report (read the whole thread of complaints) click here

Complaints.com click here

Storesoffline.com click here

Timb Bomb Numbers.tick tock tick tock tick tock 

We’ve seen numerous cases of analysts justifying their recommendations for companies with abusive business practices because “the numbers were compelling”.  An interesting observation here is that the company’s numbers raise the same red flags as its consumer relations track record.  You have to wonder how the analysts swallow facts like: 

(as of 12/31/2004 )

Trade Receivables – current                                     $17,297,007

Allowance for doubtful accounts                                           $ 9,386,956

More Trade Receivables – long term portion                      $ 9,238,249

More allowances for doubtful accounts                                $ 5,578,609

This means the overall receivables are $26 million , representing over 80% of 3 months revenue.  This number is in addition to nearly $15 million in “doubtful accounts”. 

In the last quarter alone, the company wrote off $ 8,518,046 in bad debt expense – that eye popping figure represents over 25% of their gross revenues.

In the opinion of stocklemon, these numbers do not represent a portfolio of happy customers.  On the contrary, this appears to be a company just one Restraining Order away from being “out of business”.  How can a self-respecting analyst hang a multiple on a business model that can be gone with a knock on the door from the regulatory authorities?  How can they possibly quantify that risk?

Major Flaw in Business Model

When your business model is based upon teaching people how to make money on the internet, it does not help when there is nothing but negative comments posted about your company on the internet.  The new seminar being sold is “The Power of Ebay”.  Yet, the company has no formal relationship with Ebay and it is the opinion of Stocklemon that Ebay would not be too happy if they saw how their name is being exploited to sell these seminars.

Imergent has been pulling this scheme all over the world – and they seem to get negative press in every area they enter…. tick tock tick tock tick tock

Warning from Australia

http://www.zdnet.com.au/news/business/0,39023166,20263965,00.htm

Warning from Asia

http://www.eonenet.com/

Warning from New Zealand

click here

click here

Warning from the UK

http://money.guardian.co.uk/scamsandfraud/story/0,13802,1323173,00.html

 

Look What Happened to Their Competition

The article below shows the risks that Imergent faces.  At any time this company, in our opinion, can be shut down by one of many government agencies

http://www.clickz.com/news/article.php/2230741

 

Conclusion

Stocklemon could write volumes on Imergent and their business practices.  This article has just been an introduction into Imergent.  In part 2 Stocklemon will focus on the numerous and dubious related party transactions as well as what we believe to be “fuzzy accounting”.  As always, Cautious Investing To All.

Disclaimer- The principals of Stocklemon currently hold a short position in Imergent Corp.


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