iMergent makes money as it fights legal battles
IMergent Inc. continues to generate profits even as it suffers legal setbacks.
The Orem, UT-based company recently agreed to pay $2.8 million to settle a 2005 class action lawsuit that alleged inadequate disclosure of sales practices as company executives sold off stock at a profit. IMergent also disclosed recently that an internal investigation concluded that chairman and CEO Donald L. Danks had improperly disclosed company financial information, and that he had stepped down as chairman while remaining as CEO.
The company also has announced plans to go before the California Court of Appeals seeking to overturn a preliminary injunction that prevents iMergent from operating in California unless it registers with the state under the Seller Assisted Marketing plan law. A Superior Court judge in Ventura County, CA, issued the preliminary injunction in August.
IMergent uses seminars and workshops to sell its StoresOnline software and related services to individuals as a way to get started in e-commerce. However, California officials contend in their complaint filed in July that the company’s advertising is misleading and that most of its customers never activate a web site or earn revenue. Illinois officials also charged two companies operated by iMergent with deceptive practices in a suit filed late last year, and that litigation is still pending. The company faces legal action in North Carolina as well.
Despite the ongoing legal issues, iMergent last month reported revenue of $44.3 million in its fourth quarter ended June 30, a 57% increase from the prior year. Net income was $5.3 million compared with $2.2 million in the same quarter of 2006. The company reported holding 333 workshops during the quarter, 70 of them abroad, compared with 248 in the prior year quarter, of which 68 were abroad.
“Rising demand for our StoresOnline Pro software, expansion of our sales teams, a reinvigorated international presence and the introduction of ancillary products continued to drive substantial growth,” Danks said in reporting the results. Shares in the company, which is traded on the American Stock Exchange, are trading at about $24, up from around $14 a year ago.
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