Today, we will introduce Zoompass Inc. (OTCMKTS: ZPAS), the Fintech company. It is based in Toronto and has delivered substantial returns to the traders very recently. We had some doubt about this company in the very beginning of our research, since the technology is quite new and it seems to be quite unknown to the Fintech experts that collaborate with us. However, we later discovered that the company is well-known that was previously called Uvic Inc., which changed its name and ticker. Additionally, we checked the company’s fundamentals and we figured out that balance sheet is quite stable and the investors have faith in the company. Before we get into more details, have a look at the chart.
Business Strategy and Exchange of shares with Zoompass Inc.
Zoompass provides customers a transaction platform that manages prepaid, check replacement and retail branded e-Payments. The company’s partners are quite relevant and we believe that this is the key in the success of the company: Visa and Canadian banks. In addition, the company claims to have big customers, such as governments and businesses, which receive a wide range of products as well:
- gift cards
- incentive cards
- check replacement cards
- online virtual card account programs.
The transaction with UVIC, Inc., was effective on August 22, 2016. It was an “Agreement for the Exchange of Stock“, under which UVIC, Inc. issued shares in exchange of all shares owned by Zoompass’s shareholders. Both companies remarked that, legally talking, this was not a merger, but a simple exchange of shares. We believe that this was a clever move to avoid paying taxes. If you want to know more about the move, you can find some definitions here.
In addition to this transaction, the company announced that it was changing its name and executing a complete a 3.5-1 forward split. We believe that this name change was necessary since the new business entity needed to note that the company had executed a complete reorganization. In addition, the forward split will benefit the company, as more investors will be able to invest in the firm. Let me remind you that some big institutional funds cannot buy shares worth less than $1. Thus, the shares will obtain now more liquidity and may be assessed by many more traders and investors. These recent changes may be the reason to explain the recent uptrend that you could see earlier in the chart price.
Investors did not have access to the last annual report, so we will look at the last 10-Q released. The amount of assets in the balance sheet is quite large as compared to the amount of liabilities:
- Cash: $90,343
- Cash held in trust and customers’ deposits: $1,794,339
- Total Assets: $10,834,058
- Client Funds: $1,630,978
- Long Term Debt: zero
- Total liabilities: $1,851,408
The ratio of assets/liabilities is close to 6x, which means that the company has such a long time to develop the business. In addition, the shareholders preferred to provide equity instead of debt. We believe that this is clear fact that shows that they have faith in the business model. In addition, we did not see any convertible securities outstanding right now. The company had some warrants, but they were liquidated on September 30, 2016. This is from the 10-Q:
“On July 29, 2016, the Company issued 2,039,710 to certain individuals, which expire on October 31, 2016. Each warrant is exercisable into one common stock of the Company, which reflects the forward split at an exercise price of C$0.50. Subsequent to September 30, 2016, 1,129,711 warrants were exercised, which reflects the forward split, for gross proceeds of $430,629 (C$564,856). The remaining outstanding warrants expired unexercised.” Source
Therefore, for the investors afraid of potential dilution of their equity position, do not worry.
Zoompass Inc. seems to be quite unknown as the name is new and the ticker as well. However, in this article, we showed that the company is some years old as it results from a share exchange agreement with another player in the Fintech industry. In addition, the company shows a solid balance sheet with a large amount of assets as compared to liabilities and no convertible securities at all. To sum up, the more we investigated this company, the more we appreciated what we found.
Disclosure: We have no position in ZPAS and have not been compensated for this article.