SecProbe.io

<DOCUMENT>
<TYPE>CORRESP
<SEQUENCE>1
<FILENAME>filename1.txt
<TEXT>
August 26, 2005

Via EDGAR

Mr. Brad Skinner
Accounting Branch Chief
Securities and Exchange Commission
Washington, D.C. 20549

Re:      SEC letter to Inforte Corp. dated August 11, 2005
         Form 10-K for Fiscal Year Ended December 31, 2004
         Filed March 31, 2005
         Form 8-K Filed April 22, 2005
         Form 8-K Filed July 28, 2005
         File No. 000-29239

Dear Mr. Skinner:

Thank you for your letter of August 11, 2005. On behalf of Inforte Corp.
("Inforte"), we submit the following responses to the comments set forth in
your letter:

Form 10-K for the Fiscal Year Ended December 31, 2004
-----------------------------------------------------

Item 6. Selected Financial Data, page 13
----------------------------------------

1.   WE NOTE THAT YOU EXCLUDE REVENUE AND COSTS RELATED TO EXPENSE REIMBURSE-
     MENTS IN YOUR SELECTED FINANCIAL DATA AND MD&A DISCLOSURES. PLEASE EXPLAIN
     TO US HOW THIS PRESENTATION COMPLIES WITH INSTRUCTION 2 OF ITEM 301 AND
     ITEM 303(A)(3) OF REGULATION S-K. WE NOTE THAT PARAGRAPHS 7 AND 8 OF
     EITF 01-14 CLEARLY INDICATE THAT REIMBURSEMENTS SHOULD BE CONSIDERED
     REVENUE AND IT IS UNCLEAR TO US WHY YOU EXCLUDE REVENUES THAT ARE REALIZED
     FROM YOUR ARRANGEMENTS BASED ON THE FACT THAT YOU PRICE YOUR CONTRACTS
     USING EXPENSE REIMBURSEMENT PROVISIONS.

     Instruction 1 to Item 301 of Regulation S-K establishes that the purpose of
     the Selected Financial Data shall be "to supply in a convenient and
     readable format selected financial data which highlights certain
     significant trends in the registrant's financial condition and results of
     operations." As such it also provides the basis for the percentage
     calculations and trends discussions we use in Management's Discussion and
     Analysis of Financial Condition and Results of Operation (MD&A). We believe
     that the method of presentation and percentage calculations should be
     consistent in both sections, as the discussions in the MD&A are based on
     calculations presented in the same format as Item 6 Selected Financial
     Data.

     We exclude reimbursements from revenue in the presentation of selected
     financial data and in the MD&A section because we believe net revenue,
     i.e., gross revenue excluding reimbursements, is a more meaningful
     representation of our economic activity than gross revenue, since the
     former excludes zero-margin pass-through expenses that in our opinion are
     not pertinent to business fundamentals, financial statement analysis, or
     the investment decision and, in fact, may mask trends in underlying
     performance. In the last sentence of our Critical Accounting Policies
     section that discusses revenue recognition we make reference to this.

<PAGE>

     Accordingly, we believe that all ratios and calculations of expenses or
     profits are more meaningful and accurate in showing significant trends, if
     presented as a percentage of net revenue, not gross revenue. In our
     previous disclosures and filings we have followed that practice and we have
     received no negative responses from investors or analysts. In fact, we have
     reason to believe that analysts and investors tend to focus on revenue
     before reimbursements and not gross revenue. For example, on our regular
     earnings release conference calls we get questions or comments from
     analysts on net revenue and not gross revenue. Investors' preferences could
     also be indicated by the fact that peer consulting firms tend to discuss
     ratios and percentages using revenue before reimbursements as the
     denominator.

     Also, please note that our Consolidated Statement of Operations and the
     footnote presenting quarterly results from operations does conform to the
     requirements of EITF 01-14 and presents both reimbursements and gross
     revenue. We believe that we have presented the results of operations in an
     appropriate fashion to highlight significant trends and discuss those
     trends in a way that is in line with the investors' needs and expectations
     and that provides the most meaningful disclosure of our business
     operations.

2.   WE NOTE THAT YOUR NARRATIVE DISCLOSURE FOR 2004 PRESENT MANAGEMENT AND
     ADMINISTRATIVE EXPENSES, OPERATING INCOME AND NET INCOME EXCLUDING THE
     "NON-RECURRING" CHARGE RELATED TO CONTRACTUAL COMMITMENTS FOR OFFICE SPACE
     BEING VACATED. PLEASE EXPLAIN TO US HOW YOU HAVE COMPLIED WITH ITEM
     10(E)(1)(II)(B) OF REGULATION S-K. IN THIS REGARD, WE NOTE THAT YOUR
     DISCLOSURES ON PAGE 23 INDICATE THAT RESTRUCTURING ACTIVITIES OCCURRED IN
     2002.

     Item 10 (e)(1)(ii)(B) of Regulation S-K requires that registrants do not
     "adjust a non-GAAP performance measure to eliminate or smooth items
     identified as non-recurring, infrequent or unusual, when the nature of the
     charge or gain is such that it is reasonably likely to recur within two
     years or there was a similar charge or gain within the prior two years." We
     believe that we have not presented our results of operation in a fashion
     that excludes the charge related to the write-off of office space. That
     charge is included in total management and administrative expenses in all
     financial statements presented in the Form 10-K. It is also included in the
     tabular presentation of the calculation of expense as a percentage of net
     revenues on pages 15 and 17. The notes offer additional information to the
     reader, pointing to the magnitude of the effect of the item in question. We
     think that omitting the notes on pages 14 and 15 and the reference to the
     charge in the MD&A on page 18 would have resulted in less than full
     disclosure.

     In the section of the MD&A that discusses management and administrative
     expenses we do mention the fact that a considerable portion of the increase
     in this type of expense in 2004 was due to "a one time charge of $2.1
     million related to a write-off of office space." After we explain details
     about the restructuring plan, we go on to say that "...excluding this one
     time charge, total management and administrative expenses increased 27%."
     By referring to this restructuring charge in the first sentence as "a one
     time charge" we have meant to describe it as an item that is not indicative
     of Inforte's core operating results because it is uncharacteristic for our
     business model and charter of operations. Unlike executive compensation
     costs, which is another reason we describe as a significant factor in
     explaining the increase in 2004 management and administrative expenses, the
     costs associated with the office space write-off are not considered by the
     management to be a normal, recurring item in the results of operations and

2
<PAGE>

     because of this we believe it was improved disclosure to mention the
     management and administrative percentage of revenue excluding the charge.

     As we have mentioned above, the discussion in the MD&A section is primarily
     based on the data presented in the Selected Financial Data section. We have
     therefore presented the results of operations for the year 2004 including a
     note describing the "non-cash, non-recurring charge" related to the plan to
     consolidate office space. In this footnote, as well as in the note on page
     15, we have described the plan in detail, explicitly pointing the reader to
     the fact that "...these non-GAAP results are provided in order to enhance
     the user's overall understanding of the company's current and future
     financial performance by excluding certain items that management believes
     are not indicative of its core operating results and by providing results
     that provide a more consistent basis for comparison between quarters."

     As you noted we have also provided disclosure on page 23 of restructuring
     activities that occurred back in 2002, we believe that this further helps
     our investors to understand the nature and frequency of any restructuring
     activities and to make an informed decision on their characterization as
     "one time" or "non-recurring" activities. In future filings we will use
     alternative language in the MD&A discussion to disclose the impact of these
     unusual items without actually excluding them from the total line item
     amount.

Liquidity and Capital Resources, page 20
----------------------------------------

3.   WE NOTE THAT YOU DISCLOSE "CASH AND MARKETABLE SECURITIES PER BASIC COMMON
     SHARE" WITHIN YOUR LIQUIDITY DISCUSSION. IT IS UNCLEAR TO US HOW THIS
     INFORMATION IS RELEVANT OR USEFUL TO YOUR INVESTORS. PLEASE EXPLAIN TO US
     HOW A COMMON SHAREHOLDER CAN INTERPRET THIS MEASURE WITHOUT ADJUSTMENT OR
     ADDITIONAL ANALYSIS AND PROVIDE US WITH YOUR BASIS FOR PROVIDING THESE
     DISCLOSURES. REFER TO SECTION 202.04 OF THE CODIFICATION OF FINANCIAL
     REPORTING POLICIES (ASRS AND FRRS) FOR FURTHER GUIDANCE.

     ASR 142 states that per share data other than net income, net assets and
     dividends should be avoided. The practice over the years has been for
     companies to present certain non-GAAP measures on a per share basis. These
     amounts have been used with or without adjustment by analysts and investors
     and in the financial press. Also companies are not the only source of these
     types of non-GAAP measures. In fact, one reason why companies continue
     providing non-GAAP per share amounts is to provide company data comparable
     to analysts and other publicly available data. For example, Yahoo! Finance
     uses "cash per share" as one of the non-GAAP metrics used commonly by
     investors.

     We believe that our presentation of the non-GAAP measure of "cash and
     marketable securities per basic share" is not misleading to investors as we
     explain exactly how it is derived. Note that we have not used these
     financial metrics to justify or demonstrate certain trends in our financial
     results or financial condition. This measure is disclosed to convey
     information that is widely used by analysts and investors to compare and
     analyze data reported by public companies. Furthermore this non-GAAP
     measure is not presented near or as a substitute to earnings, dividends or
     net assets per share. Please advise us if you still consider disclosure of
     such information inappropriate and we will revise our future filings
     accordingly.

3
<PAGE>

4.   YOUR DISCUSSION OF OPERATING CASH FLOWS DOES NOT APPEAR TO ADEQUATELY
     ADDRESS THE CHANGES IN YOUR OPERATING ASSETS AND LIABILITIES. IN 2004, IT
     APPEARS THAT CHANGES IN THESE ITEMS SIGNIFICANTLY AFFECTED YOUR OPERATING
     CASH FLOWS. PLEASE EXPLAIN TO US WHY YOU DO NOT PROVIDE EXPLANATIONS FOR
     THE UNDERLYING REASONS FOR CHANGES IN THESE ITEMS TO ALLOW READERS TO
     ASSESS THE QUALITY OF YOUR CASH FLOWS. REFER TO ITEM 303(A) OF REGULATION
     S-K AND SECTION IV OF SEC RELEASE 33-8350 FOR FURTHER GUIDANCE.

     Section IV of SEC Release 33-8350 states that "...companies should address
     material changes in the underlying drivers (e.g. cash receipts from the
     sale of goods and services and cash payments to acquire materials for
     manufacture or goods for resale), rather than merely describe items
     identified on the face of the statement of cash flows, such as the
     reconciling items used in the indirect method of presenting cash flows."
     Further, it requires that companies address facts and patterns that are not
     readily apparent from the presentation of the statement of cash flows. An
     example is also given in the same section: "If the increase in working
     capital was driven principally by an increase in accounts receivable that
     is attributable not to an increase in sales, but rather to a revised credit
     policy resulting in an extended payment period for customers, these facts
     would need to be addressed in MD&A to the extent material, along with the
     resulting decrease in cash provided by operations, if not otherwise
     apparent."

     In our discussion of liquidity and capital resources on page 20 of the Form
     10-K, we noted that fact that cash flow from operations for the year 2004
     was negative $3.8 million. We do not discuss in detail the changes in our
     operating assets and liabilities because there were no changes in our
     credit, collection, or disbursements policies or any other policies. It is
     our belief and understanding that changes in the current assets and
     liabilities presented on the cash flow from operations are primarily the
     result of normal changes in business activity and as such are apparent from
     the presentation on the face of the financial statements.
      A possible discussion of the cash flows used in operations and a note to
     that effect would have involved a list of the same changes in working
     capital that are already apparent from the presentation of the derivation
     of cash flow from operations.

     Further, paragraph 4 of the Instructions to paragraph 303(a) of Regulation
     S-K, provides:

     "Registrants need not recite the amounts of changes from period to period
     which are readily computable from the financial statements. The discussion
     shall not merely repeat numerical data contained in the financial
     statements. The information provided shall include that which is available
     to the registrant without undue effort or expense and which does not
     clearly appear in the registrant's condensed interim financial statements."

     In our discussion of cash flow from operations we intentionally do not
     present a list of the changes in working capital as we see no benefit to
     reciting numerical data already presented on the face of the statement of
     cash flows. As there were no alterations in our credit policies, collection
     efforts, policies regarding payments of payables or taxes or any other
     policies and there were no material unusual events or changes to underlying
     characteristics of business operations we believe there was no need for
     further disclosure.

     Also despite the fact that Inforte used a significant amount of cash in
     operations during 2004, it is clear from our balance sheet and other
     disclosures we made that we have more than adequate cash on hand to make it

4
<PAGE>

     unnecessary for us to make any comment as to our ability to meet cash
     requirements and maintain ongoing operations.

Consolidated Financial Statements
---------------------------------

Consolidated Statements of Operations, page 28
----------------------------------------------

5.   PLEASE EXPLAIN TO US HOW YOU HAVE COMPLIED WITH RULE 5-03(2)(D) THAT
     REQUIRES YOU TO SEPARATELY PRESENT "COST OF SERVICES." IN ADDITION, EXPLAIN
     TO US HOW YOU HAVE COMPLIED WITH ITEM 302(A)(1) THAT REQUIRES YOU TO
     PRESENT "GROSS PROFIT" WITHIN YOUR SELECTED QUARTERLY FINANCIAL DATA.

     Our presentation of operating expenses on the Consolidated Statement of
     Operations starts with a line called "Project personnel and related
     expenses." As our revenues consist of one type of revenue, revenue
     generated from consulting services, the line entitled "Project personnel
     and related expenses" is the "cost of services" line mentioned in Rule
     210.5-03(2)(d) of Regulations S-X. While not specifically titled "cost of
     services," we believe since we only have one type of revenue, that it is
     clear to investors that our titled expense line item is our cost of
     revenue. Peer consulting companies which also have one type of revenue use
     the same or closely sim