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.
This despite it being on the public record that Vemma was in “a poor financial state” to the tune of millions of dollars, long before the Receiver was appointed.
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.
vemma should now also drop its autoship plan and let affiliates join for a $19.95 annual fee, to enjoy the 25% discount on product that vemma now offers affiliates.
affiliates can then join vemma to enjoy the products, retail the products for a 25% margin, and they can bring in more discount members and sell product to them, to earn some volume based discounts.
this will mean that new affiliates can make profits in the beginning mostly from retail, and then can build their business to enjoy further volume discounts from downline affiliates who are discount members.
with such a plan ^^ the FTC and court MAY give vemma a chance and recognize the discount affiliates as genuine end customers.
vemma had about 20% retail before the FTC action, so its product is undoubtedly ‘retailable’. it is the autoship requirements, and lack of retail margin [which made no differentiation between customers and affiliates], that killed vemma.
it seems vemma is trying to fix the retail margin and customer/affiliate differentiation issues, now if they fix the autoship issue they might just win the FTC over.
Revenues are down somewhere around 95%, maybe more.
And its highly unlikely they will ever become profitable again without the illegal & unethical recruitment.
Lets just hope the FTC uses the same template to shutter Herbalife.
no, you cannot use the template of a pineapple to draw an apple.
anybody who follows MLM can see the distinct differences between vemma and herbalife.
for starters herbalife does not have an [effectively] mandatory self qualifying autoship like vemma did. so comparing herbalife to vemma is an exercise in futility.
Yeah, HLF goes after the bottom of the pyramid much better with conscripted consumption and weeks of unpaid training to properly make shakes.
^^ this is just an emotional statement from ‘dislike’ of herbalife and you are not pointing to anything ‘illegal’.
this is the kind of nonsense that christine richards [ackmans researcher] rattled up.
herbalife distributors who wish to start a nutrition club should have some training before they invest their time and money. this does not mean the entire bottom of the herbalife pyramid is on conscripted consumption and forced to train.
keep it real.
also, what does this ‘conscripted consumption’ and ‘unpaid training’ of herbalife have to do with vemma? you’re just swinging your bat wildly.
not emotional at all. Just pointing out that a case can be made that HLF is more harmful than vemma.
‘conscripted consumption’ and ‘unpaid training’ of herbalife have to do with vemma? The point is those aspects of HLF are worse than what vemma was doing. Remember, you were saying the 2 aren’t similar.
Harming people is what makes MLMs illegal and its what essentially killed vemma. HLF is doing things just as bad or worse.
And over 99% lose money while going for the riches.
again, you are making general, factless insinuations about ‘harm’ based on your ‘perceptions’.
you will have to explain the exact similarities between vemma’s and herbalife’s business plan and functioning, to convince readers why you think herbalife deserves the same treatment as vemma.
‘harm’ alone is not enough to shut down businesses, the harm has to be illegal by law, statute or regulations. for instance you cannot shut down pepsi if you perceive its product as ‘harmful’ for health as there is nothing ‘illegal’ about it.
vemma has been alleged by the FTC to be an illegal pyramid scheme. pyramid schemes are deemed illegal because they are ‘harmful’. but there is no regulation against ‘harmfulness’ in general.
if you want to take a shot at herbalife, you must show how it is an illegal pyramid scheme which is thereby ‘harmful’.
otherwise, your’e just swinging your bat wildly in an emotional state.
and this: https://behindmlm.com/companies/herbalife/new-york-declares-war-on-herbalife/
are all the facts you need to show what sort of scam is Herbalife.
If you can’t see the wrongdoing then there is something awfully wrong with your perception.
-a youtube channel sponsored by ackman’s ‘facts about herbalife’.
-a new york senator ‘declaring’ that herbalife is an illegal pyramid scheme, which should be ‘regulated’
the thing is, that i’ve learned not to rely on ‘perception’ but instead check relevant caselaw, as a guide to understand whether an MLM may be a pyramid scheme.
herbalife comes out legally okay, IMO. it may have scruffy cuffs, but that requires a cleanup rather than a shutdown.
fortunately for us, neither your perception or my perception matters, it’s about legal and illegal.
I don’t think there is any doubt that HLF is a pyramid scheme.
The only question is can the FTC afford to battle with them.
I think the world economy will be much improved when these MLM pipedreams are stopped. Without deception, none of them could prosper.
Its essentially a fraudulent business model. Ackman proved it 3 years ago.
I think the CFPB ought to be involved too.
that is your ‘opinion’ and you are entitled to it.
are you saying a US regulator will allow a pyramid scheme to continue because it cannot afford a ‘battle’? this is a baseless premise and seems like an ‘excuse’ that herbalife critics can easily hide behind.
ackman didn’t prove nothing.
in a recent federal case ruling in a shareholder class action lawsuit against herbalife, the court ruled that ackman’s ‘findings’ were not ‘proof’ of any pyramid scheme. it was just his interpretation of publicly available data on herbalife.
Why has HLF spent over $100 million defending itself ?
Despite predictions from Herbalife supporters that regulatory investigations would end during the quarter, they appear to have intensified. The company has now spent a total of $101 million defending itself, including $11.2 million in the quarter.
Expenses related to “responding to governmental inquiries” increased from $5.8 million last quarter to $7.6 million this quarter which reflects the growing intensity of ongoing investigations.
Assuming Herbalife is spending about $500 per hour on lawyers, $7.6 million represents 15,200 hours of legal time during the quarter, or 168 hours of legal time per day, seven days per week.
I would say money is being laundered through ‘legal billing’.
uh, why not?
why has ackman spent [IIRC] over 50 million dollars attacking herbalife? to save his illinformed bet on the stockmarket? to pressurise AG’s and regulators to take action against herbalife?
herbalife is under attack and is defending itself. that costs money.
do you expect herbalife to rollover and die? why?
^^ pure speculation.
if we’re doing ‘speculation’ then there is also ‘speculation’ that ackman may be covering his short on herbalife. what would that reflect?
benson boreyko has announced on FB that a new vemma model is coming up:
does this mean ^^ that the FTC has approved vemma’s new compensation plan?
there is also a plan to relaunch vemma europe:
on dec 24, 2016 boreyko sent this message to some affiliates:
also, an attorney at MLM attorney kevins thompson’s firm has published an article about autoship and ‘pay to play’
MLM companies which have autoship requirements had better cough up 50% retail.
the wiser way would be to get rid of inventory purchases altogether.
boreyko is putting unnecessary pressure on vemma affiliates by insisting on autoship and 50% retail.
he should shoulder the pressures of staying in business himself, and not pass the buck to his affiliates.
does he feel his vemma products wont sell without autoship? if he has no faith in his own product, how can he put the pressure of 50% retail on his affiliates?
yesterday boreyko announced:
^^ sounds like a vemma europe relaunch doesn’t it? sounds like boreyko’s bleeding heart rushing in to save his european affiliates doesn’t it?
no such luck.
turns out some third party called basu-tech, purchased some old vemma inventory decaying in an irish warehouse, and is trying to dump it on vemma’s european affiliates.
so after blowing ‘i love you’ kisses at his european affiliates, boreyko admits the truth, that he’s just advertising for a third party, who bought old unsold stock and gave boreyko some much needed cash.
boreykos pitch to european affiliates got quite a few nasty comments, which is a sea change from the initial ‘we love you boreyko’ support seen after the FTC action.
european affiliates have not had money refunded, have not received clear communication, and are now being duped into purchasing old stock.
Ah, I caught the announcement yesterday and thought something was up when it redirected to a third-party merchant site.
Thought Boreyko might have been supplying them, which would have been acceptable. Them just purchasing old stock in storage (before it goes off) and reselling it is less appealing.
Wasn’t the whole problem with Vemma that they had next to no retail customers? What’s an e-commerce mob selling Verve going to achieve?
edit: Lol the angry affiliate messages weren’t there when I looked yesterday. My god they sound ready to riot.
Props for transparency though, he’s answering most of them.
A number of products are indeed close to or even over their expiration date. But there’s also a number of them with an expiration date months away.
A true Vemma addict will surely have it consumed by then ? 🙂
If you think about it.. it’s a rather smart move from BK to redirect to his old stock, since it wouldn’t make much sense competing with his (former) own products at discounted prices.
The sooner this one-time-batch is sold out, the sooner Vemma itself no doubt will start/continue to supply their EU affiliates with fresh products themselves right? (let’s see if that indeed happens)
I think Vemma should just forget about the business angle for the consumer and sell the products we love.
I have not made a dime now since Aug, and has that stopped my household from buying the Vemma products? NO. There are many loyal Vemma totalers.