Vemma recorded operating losses exceeding $500,000 in October and November 2015, according to a recent financial report. The document, filed as part of a preliminary injunction issued in September, detailed the company's financial state and ongoing operational challenges.
The company reported a net operating income loss of $321,430 for October and an additional $203,407 loss in November. While Vemma managed to offset some of October's deficit through asset sales and adjustments to its compensation plan, no similar remedies were available in November. This meant the company absorbed the full $203,407 loss for that month. Total operating losses for the two-month period reached $524,837.
Revenue figures for the same period showed $862,371 in October and $701,927 in November. By December 15th, Vemma's revenue stood at $407,937. The report did not include any losses incurred for December up to that date. The preliminary injunction, typically used to halt potentially illegal business practices, mandates these quarterly reports, offering regulators a clear view into Vemma's finances and activities.
These financial struggles coincide with new regulatory scrutiny. Vemma's report reveals that the company is now the subject of two additional investigations by the Federal Trade Commission (FTC) and the Internal Revenue Service (IRS). The specific start dates for these probes remain undisclosed.
The FTC investigation reportedly seeks to determine if Vemma's current business operations comply with a 1999 consent order. That order arose from an FTC investigation into New Vision International, Vemma's predecessor company, for alleged "unfair or deceptive acts or practices, and the making of false advertisements." The case concluded with Vemma agreeing to the consent order, which imposed specific restrictions on its marketing and business conduct. Non-compliance could lead to significant penalties or further legal action.
The IRS investigation focuses on an audit of Vemma's tax years ending in 2012 and 2013. Tax audits of this nature can examine income, expenses, deductions, and overall financial reporting accuracy, potentially resulting in back taxes, penalties, or criminal charges if discrepancies are found. No further details on either the FTC or IRS investigations are publicly available at this time.
Vemma also faces significant challenges in securing payment processing services. The company has been unable to retain a US-based payment processor, forcing it to rely on offshore solutions. This difficulty in securing a merchant to process credit card orders has been a primary obstacle to restarting its business operations.
When regulators initially shut down Vemma, its North American merchant, Propay, immediately terminated the company's account. Propay also held back over $800,000 in revenue, establishing a reserve against potential customer chargebacks. Without a domestic processor, Vemma applied to numerous merchants to establish a new account.
The FTC's action against Vemma resulted in the company being placed on a "Match List." This industry blacklist identifies high-risk merchants, effectively making it impossible for Vemma to secure a domestic merchant account with traditional banks or payment processors. Being on such a list often signals a history of high chargeback rates, regulatory issues, or suspected fraudulent activity, making financial institutions wary of association.
Vemma claims to have applied to thirty-two different merchant processors. Only two offshore merchants expressed willingness to work with the company. On October 8, 2015, twenty days after regaining control of the company, Vemma began processing credit card orders through Paysafe, a foreign merchant operating via the Bank of Mauritius. Paysafe initially charged Vemma a 10% transaction fee, a rate significantly higher than typical domestic processing fees. This fee has since been reduced to 7%.