In our last article about ZOOMPASS HLDGS INC COM USD0.0001 (POST FWD SPL (OTCMKTS: ZPAS), we noted that the company had been designed as "Caveat Emptor" on OTCMarkets.com, and also the exchange had contacted the company to question about a potential promotional activity on the stock. Insider Financial was the first website to note this bad news, and we were happy to see that other websites, such as Seeking Alpha, published similar warnings about the stock. In this update, we will assess the new information put out by the company, and provide further analysis on the promotional activities. But, first of all, have a look at the market reaction that the "Caveat Emptor" designation caused on the stock on May 10, 2017. Additionally, the volume increased when our article was put out on May 12, 2017. Finally, on May 25, 2017, the Seeking Alpha article provoked another move:SourceRecent DevelopmentsLet's first talk about ‘how are the operations going?’ On May 15, 2017, the company released its first quarter results. The company reported net revenue of $254,683 and a gross margin of $37,659. This means that the company's revenues are up by 191% in the first quarter of 2017 as compared to the same quarter of last year and 290% up as compared to the quarter ended September 30, 2016. That is an incredible growth path. The way the company justifies the numbers is "the Company's efforts to gaining traction in the Company's prepaid card solutions as well as revenue from the launch of the Company's mobility solutions". Rob Lee, CEO of the Company, explained in the following words:
"We are extremely pleased with the direction the Company is headed and believe it is a direct result of the efforts of Zoompass' employees and business partners. We believe the launch of our new revenue pillars, the continued traction across our existing revenue pillars, as well as potential synergies across our financial solutions offerings, will have a positive impact on the Company's results and ultimately shareholder value." Source
Additionally, we saw that the balance sheet reported in this 10-Q was quite solid. The company noted large amount of cash in hand and "cash held in trust and customer deposits"; $2.7 millions approximately. The total amount of assets is approximately $11.768 million, which is large as compared to the total amount of liabilities, which is $2.98 millions. We need to recognize that this is all good news. We did not see these numbers reported in the Seeking Alpha article, which only focused on the bad news. Is that article biased?Additionally, the company released other good news on May 24, 2017. It was put out that ZPAS had been successfully operating a "unique virtual card program in Latin America (LATAM) through agreements with companies in Miami and the Dominican Republic to enable e-commerce transactions". Why is this interesting? May it represent future growth? This program enables clients outside the US to purchase online US products without US address and US credit card. The e-commerce market in Latin America was said to report $57 billion in 2016, and it is expected to report $84.75 billion in 2019. Hence, the growth potential of this new virtual card program in the area may be substantial.Some new information about the promotion activitiesSourceThe first thing we need to note is that a large amount of law firms commenced investigations on behalf of investors of ZPAS. Here are some of these law firms:-Faruqi & Faruqi, LLP-Bronstein, Gewirtz & Grossman, LLC-Glancy Prongay & Murray LLPThe claims were very well resumed in this text, wherein it is denounced that ZPAS destroyed shareholders’ value with its wrongdoing:
"On May 25, 2017, Seeking Alpha reported among other things that Zoompass had: (1) falsely denied that it was associated with a scheme to promote Zoompass' stock; and (2) concealed that its Chief Executive Officer had been engaged in a purported pump-and-dump scheme. Following this news, Zoompass stock dropped $0.70 per share or over 23% to close at $2.25 per share on May 25, 2017." Source
What did the company respond to this claims?On May 26, 2017, the company put out another press release noting the article from Seeking Alpha, which was actually considered part of the promotion, and some other non-cited websites. As ZPAS did in the previous communication, it recommended investors "not to rely on certain third party positive promotional activities of which we became aware" even if they "rely on negative promotional activities". Additionally, it was said that these third parties profit from the release of information:
"These third parties are, in many instances, paid by the publisher or other third parties and the Company believes that they profit from the publication of this literature and the results on the market. These materials should not be a substitute for investors' research and independent decision making process." Source
Final Warning and ConclusionAs we noted in our previous piece, the company should be studied closely before making an investment. The "Caveat Emptor" sign is still on the OTC Markets website of ZPAS. Thus, the company did not have the time to clarify the claims. Furthermore, even if the quarterly results were good, and the company seems to be creating solutions that may increase revenue growth in the future, a lot of questions remain unanswered. In our opinion, the easy money has already been made and the next direction for the stock price remains unclear at this point in time. In any case, we will keep posting relevant information about the company as it seems that a lot of market participants are interested. We will be updating our subscribers as soon as we know more. For the latest updates on ZPAS, sign up below!Disclosure: We have no position in ZPAS and have not been compensated for this article.
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