SecProbe.io

CORRESP
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November 22, 2005

Mr. Brad Skinner

Accounting Branch Chief

Securities and Exchange Commission

Division of Corporation Finance

Mail Stop 4561

Washington, D.C.  20549

  RE:

  iMergent, Inc.

  Form 10-K for fiscal year ended
  June 30, 2004

  File No. 000-32277

  Your letter dated August 1, 2005

Dear Mr. Skinner:

We submit this letter in response to comments
from the staff of the Securities and Exchange Commission (the “Staff”) received
by letter dated August 1, 2005 relating to the Company’s Form 10-K
for the fiscal year ended June 30, 2004 (the “Form 10-K”).

In this letter, we have recited the comments from the Staff in bold
type and have followed each comment with the Company’s response.  Capitalized terms used but not defined herein
shall have the meanings ascribed thereto in the Form 10-K.

Form 10-K for Fiscal Year Ended June 30,
2004

Note 2. Summary of Significant Accounting
Policies

(o) Revenue Recognition, page 50

1.                                      We
have read your response to prior comment number 2 and note that you plan to
reclassify bad debt expense against revenue for all prior periods.  Please explain to us why this “reclassification”
will be appropriate.  Provide reference
to the relevant authoritative literature that supports your accounting.

Please refer to our response to comment 6
below.  As noted in our response to
comment 6 below, we are restating our financial statements for all financed
sales to recognize revenue as cash payments are received from customers.  Therefore, bad debt expense will no longer be
presented within the financial statements.

2.                                      We have read your
response to prior comment number 6 and note that you have estimated the total
cost for providing PCS to be approximately $14,000 per month.  Please explain to us, in detail, how you
estimated this cost and

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indicate whether this includes indirect costs associated with providing
the PCS such as the cost of equipment, facilities and personnel necessary to
ensure that you have adequate customer service capacity available.  In addition, reconcile for us your statements
regarding the significance of your customer service organization and the
relatively low cost described in your response.

The estimation of the total monthly cost of
providing PCS as part of the initial license fee is supplementally provided by
fax in Attachment 1.  Our previous
analysis did not include indirect costs and the analysis provided in Attachment
1 includes the related indirect costs of providing PCS.  As noted in our previous response dated July 27,
2005, we have discussed our customer service initiatives during our 2005
conference calls to address investor concerns resulting from unsubstantiated
criticisms of our customer service on “chat boards” and negative websites.  Although we have expanded our customer
service initiatives and provide very good customer service (as evidenced by
customer feedback), the cost to provide this customer service is insignificant
as evidenced in Attachment 1.

3.              We have read your
response to prior comment number 7 and remain unclear as to how you have
concluded that a software sale and the related hosting service should not be
accounted for as a single arrangement.
In this regard, we note that you indicate that customers may enter into
a hosting arrangement within days after the software is purchased and that most
do so within one year of purchase.  This
appears to be an indication that these contracts should be accounted for as a
single arrangement according to the guidance in AICPA Technical Practice Aid
5100.39.  In addition, it is unclear why
you believe that your customers’ ability to create websites without access to
your servers or their ability to have other providers host their websites
serves as evidence that the software and hosting services are not closely
interrelated.  In this regard, it appears
that your software and hosting service are closely interrelated in terms of
design, technology and function simply based on the nature of the arrangements.  Specifically, you provide software that customers
primarily access from your servers and you subsequently host the websites
created using that software.  In
addition, as discussed in your response to prior comment number 6, you provide
significant upgrades to your software only through the hosting service.  In view of these considerations, further
explain why your conclusion with respect to multiple-element arrangements is
appropriate and in accordance with the technical practice aid.

Although
only 35% of our software license customers utilize our hosting services (those
customers that do utilize the Company’s hosting services typically do so within
one year of purchasing the software license), this percentage is more than
insignificant and therefore the relationship between the software license and hosting
service should

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be
considered.  In considering the Staff’s
comments, we have re-evaluated the application of TPA 5100.39 to our software
license sale and hosting service and have concluded that although separate
contracts exist for each element, the software license sale and hosting service
should be accounted for as a single multiple-element arrangement.

TPA
5100.39 states, “the existence of any of the following factors (which are not
all-inclusive) may indicate that a group of contracts should be accounted for
as a single arrangement:”

The contracts or agreements are negotiated or executed in
a short time frame of each other.

Customers
execute a software license agreement at the time of the workshop.  Although the website hosting option and
related fees are discussed at the time a customer purchases the SOS software
license, a website hosting contract is not executed until a customer publishes
a website and desires to host the website with us, which may never occur, may
occur within days, or may occur years after the SOS software license is
purchased.  Although only 35% of our
software license customers utilize our hosting services, those customers
typically set-up and host a website with us within one year of the SOS software
license purchase.  For these customers,
we believe that the SOS software license and website hosting agreements are
executed in a relatively short time frame of each other; therefore, our
customer contracts should be accounted for as a single multiple-element
arrangement.

The different elements are closely interrelated or
interdependent in terms of design, technology or function.

We provide
software to develop on-line storefronts and we have the ability to set-up and
host the storefront websites.  Websites
developed under the Complete Store Builder (“SOS”) software license can be
hosted by other providers of such services, as long as the SOS software is also
hosted on the same server.  Because
customers can download the software to create websites on third-party servers,
we believe the nature of the SOS software license and the hosting arrangement
are not interdependent but are considered to be closely interrelated.  In practice, 35% of the customers (54% of
cash paying customers) that ultimately purchase the SOS software license
develop a storefront website on our servers and utilize our website hosting
services after publishing.

The fee for one or more contracts or agreements is
subject to refund or forfeiture or other concession if another contract is not
completed satisfactorily.

Neither
of the agreements are subject to refund or forfeiture if another contract is
not completed satisfactorily.

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Moreover,
none of the agreements the Company has with its customers (SOS license, ECI Pay
license, eBay workshop, and hosting) are subject to refund or forfeiture if
another contract is not completed satisfactorily.

One or more elements in one contract or agreement are
essential to the functionality of an element in another contract.

After developing a storefront website, the
customer may establish an application and website hosting agreement with an
alternate provider or with us.(1)
However, we provide upgrades to the SOS software only through the
hosting service.   Although not essential
to the functionality of the SOS software, we believe that the upgrades may
provide additional functionality depending on the nature of the upgrade.

Payment terms under one contract or agreement coincide
with performance criteria of another contract or agreement.

Payment
terms under the agreements do not coincide with performance criteria of the
other agreement.

The negotiations are conducted jointly with two or more
parties to do what in essence is a single project.

Negotiations
are not conducted jointly with two or more parties to develop and host a
customer’s website.

Based upon the above analysis of TPA 5100.39, although separate
contracts exist for each element, we believe that the SOS software license and
hosting service should be accounted for as a single multiple-element
arrangement.

We have attached a summary of our revenue
recognition policies with regards to the multiple elements of our arrangement
(SOS software license, hosting service, PCS, eBay workshop, ECI Pay software
license, and website set-up service) in Attachment 2.  Please contact us if you have any questions
regarding our policies.

4.              We have read your
response to prior comment 9 and the information provided on Attachment 3 for
the fifteen fiscal quarters ended March 31, 2005.  This information indicated that your
historical consolidated reserve rate has been approximately 48%.  This suggests that your historical
consolidation collection rate has been approximately 52%.  Separately, the information in Attachment 3
appears to indicate that the collection rates for A and B contracts have been
approximately 75% and 44%, respectively.
These collection rates for A and B contracts appear to be supported by
your recent sale of domestic receivables as discussed in your response to prior
comment number 2.  These collection rates
also appear to be supported by

(1) The
application and website must be hosted on the same server in order to allow
modifications to the website once it is developed.  See further discussion in “SOS Software
License, Delivery has Occurred”.

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your discussion of A
and B contract loss rates in the third bullet point of your response to prior
comment number 3.  Please confirm to us
that these represent your approximate collection rates or explain how our
analysis is incorrect.

We confirm
that these represent our approximate collection rates.

5.                                      Based
on your response to prior comment number 9, it is not clear why you believe it
is appropriate to conclude that the execution of an installment contract,
expiration of the rescission period, and the receipt of a relatively small down
payment (referred to herein, collectively, as “upon execution”) is sufficient
to support recognition of the entire arrangement fee, given your historical
collection rates on a consolidated basis.

Your responses
indicate that your installment contracts fall into two distinct categories (A
and B) with substantially different collection rates and credit risks.  Your responses also indicate that you are
able to accurately classify the contracts into each category and consistently
predict the amounts that you will collect.
It appears that information such as that necessary to classify the contracts
and predict the collection rates would be relevant and reasonably obtainable
upon execution for purposes of evaluating collectibility.  Such information regarding your B contracts
would appear to directly contradict the historical conclusions reached
regarding whether collection was probable upon execution.  Please explain to us why you do not believe
it is necessary to evaluate the collectibility of each individual installment
contract as required by paragraph 8 of SOP 97-2.

Please refer
to our response to comment 6 below.

6.                                      Notwithstanding
our concerns regarding the methodology discussed in the preceding comment, we
are unclear as to the basis for your belief that historical rates that exceed
50% are sufficient to support a conclusion that collection is probable.  In order to be considered probable in the
context of SOP 97-2 (see footnote 5 that refers to SFAS 5), the likelihood of
collection must be substantially higher than 50%.  This threshold that you have applied appears
to be more accurately described as “more likely than not”, which is not
appropriate in evaluating probability for purposes of software revenue
recognition.  In view of these
considerations, further explain your basis for concluding that your historical
collection rates support a conclusion that collection under the terms of your
arrangements is probable.

After considering the comments received from
the Staff and after discussions with our former independent registered public
accounting firm, Grant Thornton, LLP,

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on August 18, 2005, management and the
audit committee of the board of directors concluded that collectibility of the
Company’s A and B contracts did not meet the definition of probable for
purposes of software revenue recognition.
Therefore, as described in Form 8-K/A, filed on August 19,
2005, the Company will restate its historical financial statements to recognize
revenue as cash payments are received from customers under these contracts.

As described in our response to the Staff
dated July 27, 2005 and in a press release dated August 10, 2005, the
Company sold all of its then existing domestic trade receivables for 100
percent of net book value, less a seven percent discount for transaction costs
and service fees, and received a letter of intent for the sale of the Company’s
international trade receivables on similar terms.  Additionally, the Company entered into an
agreement for the ongoing sale of its domestic receivables on similar
terms.  These transactions evidence the
Company’s ability to make reasonable estimates of bad debts.

Because we have concluded that collectibility
of the Company’s contracts do not met the definition of probable for purposes
of software revenue recognition, we have also re-evaluated whether license fees
sold under EPTAs meet the criteria for fixed or determinable fees for revenue
recognition.  We have concluded that the
Company does not meet the fixed or determinable fee criteria for the Company’s
financed sales because the Company has not successfully collected under the
original payment terms for a sufficiently significant percentage of the
financed sales.

TPA 5100.58 states, “the presumption that the
licensing fee is not fixed or determinable is not
overcome if at the outset of the arrangement, or subsequently, the
vendor receives cash on the transfer of the extended payment term arrangement (“EPTA”).  That answer does not change if the EPTA is
irrevocably transferred or otherwise converted to cash without recourse to the
vendor.” (emphasis added)

Therefore, pursuant to paragraph 29 of SOP 97-2,
revenue should be recognized as payments from customers become due, assuming
all other conditions for revenue recognition in SOP 97-2 have been met.  However, due to the fact that collection is
not probable as discussed above, the Company will recognize revenue as cash is
actually received from the customer.

For receivables that are sold to financing
companies, the cash received should be deferred and recognized as revenue as
payments are received by the financing companies from the customers.

7.                                      In
addition, please explain to us how the collectibility criterion is met upon
execution considering that revenues and significant corresponding bad debt

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charges that relate
to the same installment transactions exist in the same accounting period.

Please refer
to our response to comment 6 above.

8.