iMERGENT, Inc. (IIG)

So let's see ... this company seems to have a substantial amount of inside ownership. Despite the fact that they have an "accumulated deficit" (no retained earnings) and despite the fact that the company only had earnings of 26 cents per share last year, they apparently decided it was a great time to raise their dividend and pay out 44 cents per share (an increase from 20 cents per share from the prior year). Revenues have also plummetted over the past two years just in case you were wondering.

Also, here are a few gems from the "risk factors" section of their 10-K filing:

"From time to time we are and have been the subject of customer complaints and lawsuits relating to our business practices which could require us to change our sales and marketing practices or pay damages or fines, which could negatively impact our financial results. We sometimes receive complaints and inquiries in the ordinary course of business from both customers and governmental and nongovernmental bodies on behalf of customers and, in some cases, these customer complaints have resulted in litigation. Some of these matters are pending. The ultimate resolution of these matters may have a material adverse effect on our financial condition or results of operations."

"We are being investigated by the Securities and Exchange Commission, which could subject us to fines, penalties or other actions,which could adversely affect our financial results."

"We are subject to claims that our software is “defective” and difficult to use and that a substantial number of our customers do not activate their web pages. We have been subject to claims by purchasers that our software is “defective” and difficult to use. Our software is hosted remotely on our servers in Orem, Utah, and as such cannot be selectively defective, but the continual claims of defective software could have a negative effect on our ability to sell licenses. We have also been subject to various claims our software is hard to use. We contend our software is interactive, and can be used properly by our customers. However, the claims of it being difficult to use are investigated by various regulatory agencies, and the persistence of such claims by regulatory agencies, in the news media, and on the Internet, may have a substantial negative impact on our ability to transact business. The claims that a substantial number of our customers do not activate their web sites may impact the manner in which we conduct our seminars and may have a negative impact on our operations."

"Adverse publicity could reduce customer interest in our workshops and harm our financial results. We have received adverse publicity concerning our business, and may, in the future, receive additional adverse publicity concerning our
business. Adverse publicity concerning our business, including our Internet Training Workshops, products, services, management or legal proceedings could reduce the response rates to our advertisements, reduce attendance and purchase rates at our workshops and third-party sales to our customers, and thereby adversely affect our revenues. We do not always know when adverse publicity may occur and cannot accurately predict its impact on our business and results of operations."

"We may need to monetize a substantial portion of the customer receivables generated by our workshop business. If we are unable to do so we may be required to raise additional working capital. We offer our customers a choice of payment options at our Internet Training Workshops, including an installment payment plan. These installment contracts are either sold to one of several third-party finance companies, with or without recourse, or are retained by us and the collection activity is serviced by a third party. Thereafter, we sometimes seek to sell the serviced contracts to the servicer or other third parties. We have in the past experienced difficulties selling these installment contracts at levels that provide adequate cash flow for our business, and a recurrence of these difficulties would likely require us to raise additional working capital to allow us to service these assets on our own. Since May 2004, we have not sold installment contracts with any recourse provisions."

And hey, if that weren't enough, you might want to check out the "legal proceedings" section of the 10-K. Let's just say there's a lot there.

Sounds like an incredibly buy, eh?

Citron Research