Vemma lost half a million dollars over the last 2 months
As part of the preliminary injunction granted against Vemma back in September, the company is required to submit quarterly reports.
Vemma recently filed a report for the months September through to November, in which revealing information about the company’s current business operations are disclosed.
Among other things, Vemma recorded operation losses of over a half a million dollars over October and November.
$524,837 in operating losses
For the months October and November 2015, Vemma recorded net operating income loss of $321,430 and $203,407 respectively.
In October the company was able to offset the loss by selling assets and skimming off the compensation plan, however no such remedies were available in November – meaning the company took the full $203,407 loss.
Interestingly corresponding revenue for October and November was $862,371 and $701,927 respectively.
Revenue as at December 15th was recorded as $407,937, with this month’s losses to date not included in the report.
Vemma is now the subject of an additional two regulatory investigations
When these two investigations were started up we’re not sure on, but Vemma’s report reveals new FTC and IRS investigations into the company.
The FTC investigation is purportedly exploring whether or not Vemma’s business operations are in compliance with the 1999 consent order against New Vision International.
New Vision International, the predecessor of Vemma, was the subject of an FTC investigation relating to “unfair or deceptive acts or practices, and the making of false advertisements”. The case was settled with Vemma agreeing to a consent order.
The IRS investigation pertains to an audit for the tax years ending 2012 and 2013.
No further specifics on either investigation are publicly available at this time.
Payment processor troubles
As it stands, Vemma has been unable to retain a US-based payment processor, leaving the company reliant on offshore processors.
From an operating standpoint, Vemma’s biggest challenge in restarting its business
was its difficulty in securing a merchant to process its credit card orders.
When the business was shut down, Vemma’s North American merchant, Propay, immediately terminated the account and held back over $800,000 in revenue as a reserve for potential charge backs.
Unable to process orders, the company began applying to various merchants to establish an account.
Because of the FTC action against Vemma, the company was placed on a Match List (black list) making it impossible to secure a domestic merchant account.
Vemma claim to have applied to thirty-two different merchant processors, with all but two offshore merchants willing to sign them on.
On October 8, 2015, twenty days after taking back control of the company, Vemma
began to process credit card orders with Paysafe, a foreign merchant processing through
the Bank of Mauritius.
Paysafe initially charged Vemma a 10% transaction fee, which has since been reduced to 7%. Comparatively, ProPay charged Vemma just 2.5%.
Other merchants that rejected Vemma include Amazon Pay, Square, HyperWallet and Paypal.
Vemma did partner with Amazon Pay, beginning in October, 2015.
Vemma fully disclosed the FTC matter to Amazon at the beginning of the relationship.
However, on November 20, 2015, after processing orders for almost five weeks, Amazon Pay unilaterally terminated Vemma’s account citing the FTC matter.
Three days after processing orders, Square unilaterally terminated the account and withheld approximately $90,000 in revenue.
No explanation was provided.
Vemma had used the services of Hyper Wallet, which is a web based payment solution for some of its international payments.
Due to the FTC shut down, Hyper Wallet terminated its contract with Vemma and stopped payments that were due to various persons.
Vemma also attempted to partner with PayPal, but was rejected.
Due to the uncertain reputation of the processor, Prosafe is routinely denied by credit card companies for potential fraud.
This is creating headaches for Vemma, with the company reporting a 25-30% decline rate.
The reason for the increase is that when Vemma’s orders are processed, the credit card holder’s local bank identifies the processor as The Bank of Mauritius, a foreign bank.
Depending on the local bank’s fraud protection program, charges are often declined.
A search of the keywords “paysafe” and “hyip” in Google reveals multiple shady opportunities using Paysafe to conduct business operations through.
Paysafe are also posing problems for Vemma’s autoship orders, with the company currently unable to process these orders through their US-based Customer Relationship Management System and gateway.
As part of its PC compliance program, Vemma’s credit card data for its Auto Deliveries are stored in a third party “vault.”
The gateway to the vault is through authorize.net, a domestic pathway.
As a foreign merchant, Paysafe is not integrated into authorize.net. Vemma is currently working on integrating Paysafe into authorize.net so that the company can process Auto Deliveries.
Vemma hopes to process these orders in mid-January 2016.
Retail compensation plan sees affiliate commissions drop to $30,969
Unable to continue operating with their recruitment-heavy compensation plan, Vemma was forced to adopt a more retail-centric model.
This saw affiliates required to source at least 50% of their commissionable sales volume from retail customers.
Since implementing the new plan in November, Vemma
has made one commission payment.
One hundred nineteen Affiliates earned commissions. The total commission payout was $30,969.98.
Vemma claim a new compensation plan was submitted to the FTC on December 8th for their review.
According to Vemma the new plan abolishes cycles and instead pays 10 to 15% on an affiliate’s weaker binary leg.
Vemma affiliates are also differentiated from customers by way of a $19.95 annual fee.
Vemma is currently in discussions with the FTC concerning this proposed new compensation plan.
We’ll have a full review up of Vemma’s latest compensation plan pending the outcome of said discussions.
Despite the bleak outlook and reality that, should the FTC action against Vemma go to trial, we’re looking at a 2017 date – Vemma remain optimistic about their ongoing prospects.
Vemma believes that it is successfully working through the backlog of issues created by the Receiver’s shutdown of the business, and will be able to operate in a profitable manner.
Much of Vemma’s report is dedicated to vitriol against the Temporary Receiver, who Vemma continue to use as a scapegoat.
Post appointment the Receiver contends that he did what he did because there was no way to run Vemma’s existing affiliate-recruitment heavy business operations profitably under the terms of the TRO (which required retail sales).
This is evidently apparent in Vemma’s ongoing operation losses, despite taking in $2 million dollars in orders and signing up 1,307 new customers and 43 Affiliates over the last few months.
How do you sell $2 million dollars of product and still record a half a million dollar in losses?
In their report, Vemma mourn the losses of their international business, which they claim generated $93 million dollars in 2014.
Thing is, that was with the affiliate recruitment plan.
A recent report out of Germany sheds some light into where some of that $93 million dollars came from;
To earn money, tried Anne Katz Wedel new people to recruit, but after four months there were still too few.
Until then, she had already spent 825 euros for products and transport costs. She’s earned nothing.
Charles Ess from Stuttgart has managed it is a successful distributor of Vemma, claims to have in its Vemma sales team more than 1,000 people, he earned six-figure sums per month.
The Julian and Frederic brothers from Osnabrück wanted to be as rich as Charles Ess.
To fulfill their dream, they ordered the energy drink regularly pallets, even for advertising purposes. They enlisted up to 70 people that went with.
But the wind turned: “The people are then broken away from the team, which was the fact that they themselves have not found any more prospects,” says Frederic.
“At the end we were 70 people back 10.” The brothers pulled the ripcord. For the investment of more than 1300 euros they had rausbekommen only 500 euros.
Sounds like pretty much what was going on in the US. And do you really think the rest of Vemma’s international business operations were any different?
That Vemma affiliates in the US have together only generated $30,000 or so in commissions with retail qualifiers in place is also telling.
Furthermore, Vemma also claim that
the vast majority of Vemma’s Affiliates understand they will be unlikely to earn commissions under the company’s new compensation plan.
Sure makes you wonder how they were earning commissions when retail volume quotas weren’t mandatory…
Also telling is Vemma’s citation of approximately 2872 affiliates opting to reclassify themselves as customers.
This out of a pool of hundreds of thousands of affiliates pretty much destroys the notion that the majority of Vemma affiliates weren’t in it for the business opportunity.
With mandatory autoship in place up until only recently however, that I suppose that’s a bit of a moot point to make.
One aspect I’ll finish up on is the question of how much of those $2 million in orders were charity orders?
We had a number of MLM industry figures pleading with people to purchase Verve on social media, combined with Vemma’s own drastic price cuts.
Vemma’s revenue dropped month on month between October and November by $161,000.
December 15th saw sales this month so far of $407,937, which admittedly is promising. But at regular pricing and without the “save Vemma!” rahrah spiels on Facebook, what are sales figures in early 2016 going to be?
As per a recent FTC filing, Vemma reported they had around $21.6 million in worldwide assets.
With the losses mounting month to month and “the vast majority” of affiliate’s not making any money, you’ve gotta wonder how long they can keep this up for.
Footnote: Our thanks to Don@ASDUpdates for providing a copy of Vemma’s “Quarterly Report”, filed December 17th, 2015.