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CORRESP
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The Neptune Society,
Inc.

To:

Securities
and Exchange Commission

From:

The
Neptune Society, Inc.

Date:

July 25, 2005

Re:

The
Neptune Society, Inc. (SEC File No.000-31182

Responses to the Securities and Exchange Commission

Staff Comments dated May 5, 2005, regarding

Form 10-KSB for the Year Ended December 31, 2004

Filed March 31, 2005

Form 10-KSB for the Year
Ended December 31, 2004:

Consolidated Statements
of Operations, page 23

2.

Please
separately present your service and merchandise revenues and their
          corresponding costs and expenses on the face of the consolidated
          statements of operations.

Company’s Response

Due
to the differing treatment of merchandise revenue based on state regulations, it is not
practical to split revenue between service and merchandise. For example, in Florida and
Illinois, all of the payments that we receive from customers are placed into trust. Upon
performance of the service, the entire amount of the account balance, both principal and
interest, is withdrawn. It is not practicable to break down that total sum between its
merchandise and service components. So for those states where we do not deliver
merchandise and therefore do not recognize revenue until the service is performed,
service and merchandise is delivered as a combined cremation package and cannot be split
in a meaningful way.

SEC’s Response

We
have read and considered your response to comment 2. We understand that you deliver
service and merchandise in a combined cremation package in Florida and Illinois and that
the related revenues are not recognized until the service is performed. So we may better
understand your presentation, explain to us why you are able to separately track and
recognize merchandise revenues for the states that allow merchandise delivery while you
are unable to do so in Florida and Illinois.

Company’s Response:

Our
typical sales model involves two components: merchandise delivered at the time of sale
and services to be performed in the future. Accordingly, merchandise revenue is
recognized at the time of sale and the price associated with future services is
treated as deferred revenue and recognized at the point of service.

Florida
and Illinois differ from this model in that these states do not allow the delivery of merchandise
at the time of sale and require the trusting of all funds associated with the pre-need
sale. Sales in Florida and Illinois are based on a single contract covering both
merchandise and services, both to be delivered at the time of death. Since there
is no need to separately track such merchandise and service revenue, our
accounting system does not provide these details. All revenues associated with
Florida and Illinois are deferred at the time of sale and recognized at the point of service.

5.

We
note that you allocate your pre-arrangement revenue to merchandise, travel
contracts, administrative fees when the pre-need contracts are sold and
merchandise delivered in all locations beginning in 2003 except in three
states. Are the deliverables separate units of accounting under the guidance
within EITF 00-21? Are you allocating the revenues based on vendor
specific objective evidence (‘VSOE’) of fair value? Advise us
how you apply EITF 00-21 in allocating the pre-arrangement revenues among these
multiple deliverables and the cremation services.

Company’s Response

We
do not allocate revenues between the merchandise, travel contract and administrative
fees, but rather these values are based on specific contract prices as evidenced by both
our contracts and our general price lists. The deliverables are therefore separate units
of accounting under the guidance within EITF 00-21. These price lists and contractual
amounts set forth the most objective and reliable evidence of fair value of the
deliverables.

SEC’s Response

We
have read and considered your response to comment 5. Note that contract and general price
lists are not considered VSOE, and therefore, should not be presumed to be representative
of fair value. In accordance with paragraph 16 of EITF 00-21, the best evidence of fair
value is the price of a deliverable when it is regularly sold on a standalone basis. If
you continue to believe that your price lists represent VSOE, please further explain to us
why or revise.

Company’s Response:

Paragraph
16 of EITF 00-21 also provides that when a deliverable is not yet being sold separately,
the price established by management having the relevant authority may be evidence
of VSOE of fair value. While our business decision has been not to market our
services and merchandise as separate pieces, the prices assigned to these separate
items are established by our CFO, CEO and COO. Further, it is probable that the
prices established by management would not change were the items to be sold separately.

In
addition, there is third party evidence of fair value based on competitors who sell
merchandise similar to that offered by Neptune with prices ranging from slightly
less than Neptune’s pricing to significantly higher. For example, the largest
provider in the United States offers urns ranging in price from $95 to $3,595,
planning booklets at $245 and memorial plaques for $50. Neptune’s total merchandise
revenue per contract ranges from $449 to $719, depending on the specific items included
and the local market. Therefore we believe there is evidence of VSOE of fair value
for the merchandise revenue recognized.

However
even if this were not considered to be sufficiently objective VSOE, EITF 00-21, paragraph
12 permits revenue recognition when all of the undelivered components of the multiple
deliverables are determinable.

“However,
there may be cases in which there is objective and reliable evidence of the fair value(s)
of the undelivered item(s) in an arrangement but no such evidence for the
delivered item(s). In those cases, the residual method should be used to allocate
the arrangement consideration. Under the residual method, the amount of
consideration allocated to the delivered item(s) equals the total arrangement consideration
less the aggregate fair value of the undelivered item(s).”

In
our situation for customers in areas in which we deliver all components other than the
cremation service, we defer anywhere from $510 to $774, depending on the market. This
amount is not materially different than the service component of the package price for an
at need customer.

Administrative
fees generally are related to the initial cost of selling and obtaining the preneed
contract. We currently recognize 100% of the cost of sales and merchandise upon the
initial sale of the contract. While we recognize that there could be an argument made to
defer revenue related to the administrative fees under EITF 00-21, we believe that any
deferral resulting from this interpretation would be offset by the related deferral of
acquisition costs related to the initial sale and delivery of merchandise. Therefore, the
resulting impact on net operating income would be immaterial.

6.

Further,
advise us and disclose the revenue earning processes of each deliverable and
explain how your policies comply with SAB Topic 13.A.3. Support your accounting
for immediate revenue recognition for merchandise sold, travel contracts placed
and administrative fees charged at the time the pre-need contracts arc sold. In
your response, cite the relevant accounting literature you relied on in your
explanations, as appropriate.

Company’s Response

SAB
Topic 13.A.3 concerns “bill and hold” merchandise sales. Where merchandise
revenue is recognized, the merchandise is physically delivered and therefore SAB Topic
13.A.3 does not apply.

SEC’s Response

We
note your response to comment 6. Note that SAB Topic 13.A.3 addresses different kinds of
revenue recognition arrangements, not just bill and hold merchandise sales. As previously
requested, please explain to us your basis for recognizing revenue associated with travel
contracts placed and the administrative fees charged at the time the pre-need contracts
are sold.

Company’s Response:

In
addition to its basic pre-need plan involving the sale of merchandise delivered at the
time of sale and of services to be performed at the time of death, Neptune also markets a
third-party international travel plan that provides protection to the consumer in the
event that they die more than 75 miles away from home. As noted, this is a third party
product and all requirements relative to delivery by Neptune are met at the time of sale.
Accordingly, revenues associated with travel sales are recognized at the time of sale.

Certain states allow us to charge a non-refundable administrative fee at
the time of sale to offset the cost of marketing, processing the contract
and establishing the trust account.  Accordingly, revenues
associated with administrative fees are recognized at the time of sale.

See
further response to  question # 5 as to the company’s methodology  approximating the
requirements set forth in EITF 00-21.  We will amend  future filings to further clarify
our revenue recognition policies.

Further,
we   believe   that   our   revenue   recognition  policies   are   consistent    with
  common   practices  in   the   death   care   industry.   Please   see  the   following
   excerpts   from   the   financial  statements   of   Oakridge   Holdings,   Inc.,
  and   Hillenbrand   Industries,   Inc.

Oakridge Holdings,
Inc.

Cemetery and
Mausoleum Space Revenue

Sales
 of   cemetery   merchandise   and   services   and  at-need   cemetery   interment
   rights   are   recorded  as   revenue   when   the   merchandise   is  delivered   or
  service    is   performed.

Matthews
International Corporation.

Revenue Recognition:

Revenues
 are   generally   recognized   when   title   and  risk   of   loss   pass   to   the
   customer,  which   is   typically   at   the   time   of  product   shipment.   For
  pre-need    sales   of  memorials   and   vases,   revenue   is   recognized  when
  the   memorial   has    been   manufactured  to   the   customer’s
  specifications   (e.g.,  name   and   birth    date),   title   has   been  transferred
  to   the   customer   and   the  memorial   and   vase    are   placed   in   storage
 for   future   delivery.   A   liability   has   been  recorded   in    Estimated
  Finishing   Costs   for  the   estimated   costs   of   finishing   pre-need   bronze
  memorials   and   vases   that   have   been  manufactured   and   placed   in
   storage   prior  to   July   1,   2003   for   future   delivery.

In
 July   2003,   the   Emerging   Issues   Task   Force  (“EITF”)   issued
  Issue   No.    00-21  “Revenue   Arrangements   with   Multiple  Deliverables.”   Issue
  No.   00-21    addresses  certain   aspects   of   the   accounting   by   a  vendor
  for   arrangements    under   which   it  will   perform   multiple   revenue
  generating  activities.   The    provisions   of   Issue   No.  00-21   were
  effective   July   1,   2003   and  have   been    applied   prospectively   by   the
 Company   to   the   finishing   and   storage   elements    of   its   pre-need
  sales.   Beginning   July  1,   2003,   revenue   is   deferred   by   the   Company
  on   the   portion   of   pre-need   sales  attributable   to   the   final
   finishing   and  storage   of  the pre-need merchandise. Deferred revenue for  final
 finishing   is   recognized   at   the   time   the  pre-need   merchandise   is
   finished   and   shipped  to   the   customer.   Deferred   revenue   related  to
  storage    is   recognized   on   a  straight-line   basis   over   the   estimated
  average  time   that    pre-need   merchandise   is   held  in   storage.

 Hillenbrand
Industries, Inc.

 Revenue Recognition
– Sales and Rentals

Net
 revenues   reflect   gross   revenues   less   sales  discounts   and   allowances   and
   customer   returns  for   product   sales   and   a   provision   for  uncollectible
   receivables   for   rentals.   Revenue recognition for product sales and rentals  is
  evaluated   under  the   following   criteria:

•

Evidence
of an arrangement: Revenue is recognized when there is evidence of an agreement with the
customer reflecting the terms and conditions to deliver products or services.

•

Delivery:
For products, delivery is considered to occur upon receipt by the customer and the
transfer of title and risk of loss. For rental services, delivery is considered to
occur when the services are rendered.

•

Fixed
or determinable price: The sales price is considered fixed or determinable if it is not
subject to refund or adjustment.

•

Collection
is deemed probable: At or prior to the time of a transaction, credit reviews of each
customer are performed to determine the creditworthiness of the customer.
Collection is deemed probable if the customer is expected to be able to pay
amounts under the arrangement as those amounts become due. If collection is not
probable, revenue is recognized when collection becomes probable, generally upon cash
collection.

 As  a  general  interpretation  of  the  above  guidelines,  revenues  for  health
  care  products  in  the  patient  care  environment  and  for  casket  and  cremation
  products  in  the  funeral  services  portion  of  our  business  are  generally
  recognized  upon  delivery  of  the  products  to  the  customer  and  their
  assumption  of  risk  of  loss  and  other risks
and rewards of ownership. Local  business  customs  and  non-standard  sales  terms  can  sometimes  result  in
  deviations  to  this  normal  practice  in  certain  instances.

Goodwill (Names and
Reputations), page 36

10.

We
note that the fair value of the Company, as a single reporting unit under FASB
142, exceeded the carrying value of the net assets including goodwill.
In view of the different state regulations among your business
locations, explain to us the basis for your conclusion that you have only one
reporting unit. Refer to EITF Topic No.D-101.

Company’s Response

Approximately
98% of the goodwill carried on our books comes from the initial purchase of the Neptune
Group in 1999. Any amounts that could be allocated to a separate business unit since then
would be immaterial.

SEC’s Response

We
note your response to comment 10; however, your response did not address your basis in
determining that you have one reporting unit in view of the different state regulations
among your business locations. Please advise us your basis in making that determination.
We refer you to guidance within EITF topic D-101.

Company’s Response:

The
mere fact that there are different state regulations affecting the operations does not
change the nature of the reporting unit and how we manage our business. All operations,
regardless of the states in which we are located share similar economic characteristics
and are centrally managed. Therefore there is only one reporting unit.

Note for management only (not to
be included in SEC response), excerpted from D-101:

Determining
whether a component of an operating segment is a reporting unit is a matter of judgment
based on an entity’s individual facts and circumstances. Although paragraph 30 of
Statement 142 includes a number of characteristics that must be present for a component
of an operating segment to be a reporting unit, no single factor or characteristic is
determinative. The FASB staff believes that how an entity manages its operations and how
an acquired entity is integrated with the acquiring entity are key to determining the
reporting units of the entity. As noted in the basis for conclusions of Statement 142,
“The Board’s intent was that a reporting unit would be the level of internal
reporting that reflects the way an entity manages its business or operations and to which
goodwill naturally would be associated” (paragraph B102). “That approach
reflects