A roughly $340,000 OTC company controlled by ZenaTech's own CEO booked a technology asset at $2.36 million and then handed it to ZenaTech in exchange for ZenaTech stock valued at $46.5 million.
The deal came after ZenaTech had already advanced that same company, Epazz, about C$28.2 million to fund the R&D that produced the technology in the first place. White Diamond Research, which holds a short position in ZenaTech, argues the structure let CEO-controlled Epazz collect twice, once in cash advances and again in equity, while ZenaTech's preferred shares could add roughly 86 million common-equivalent shares not reflected in common dilution trackers.
Ticker: ZENA (NASDAQ) (ZenaTech, Inc.)
Research Firm: White Diamond Research
Report URL: https://whitediamondresearch.com/research/zenatechs-ceo-related-party-epazz-engages-in-rd-funded-by-zenatech-and-then-sold-the-tech-to-zena-for-19-times-their-book-valuation-grossly-enriching-epazz-insiders-at-the-expense-of-zen/?ref=shortreport.fyi
Report date: 2026-08-10
Position Disclosure: White Diamond Research states that it and/or its clients, affiliates, and related entities may hold a short position in the securities discussed and could profit if the stock price declines.
Thesis
White Diamond Research examined SEC filings from ZenaTech and related-party Epazz, both allegedly controlled by ZenaTech CEO Dr. Shaun Passley, and concludes the transaction structure favors Epazz insiders over ZenaTech common shareholders.
- Paid Twice Structure: ZenaTech's Q1 2026 filing shows $28,230,118 in advances to Epazz for future services ($12,192,637 short-term, $16,037,481 long-term), which the shareholder circular says was used by Epazz to pay product-development costs before Epazz transferred the resulting assets back to ZenaTech.
- 19x Markup: Epazz's Q1 2026 filing states the transferred technology had an unamortized carrying value of $2,356,495.77 immediately before transfer, while ZenaTech paid for it entirely in equity valued at $46,498,653.23.
- Common Control, Same Signer: Epazz's filing states the two companies are "under common control" via a single controlling individual, identified by the report as Passley, and the author says that same person signed for both buyer and seller.
- No Independent Valuation: The shareholder circular reportedly says the board priced the deal through "an internal determination of their value," obtained no valuator, fairness opinion, or third-party appraisal, and "did not review the agreement with its legal counsel."
- Hidden Preferred Dilution: ZenaTech's preferred-share balance rose to C$86.31 million from C$51.81 million at year-end; at the stated C$3.00 value and three-for-one conversion ratio, that implies roughly 86 million additional common-equivalent shares versus 88,884,193 reported common shares in July.
- Tracker Gap: The approximately 86 million common-equivalent shares from preferred stock do not appear in dilutiontracker.com's fully diluted share-count figures for ZenaTech.
Catalysts
- Preferred conversion risk: Conversion of the roughly 28.77 million preferred shares into up to approximately 86 million common shares, which holders can trigger with five business days' notice at any time; would immediately expand the effective share count.
- Advance resolution: Repayment or service delivery against Epazz's $28.23 million in advances, including the $16.04 million long-term balance stated to be payable in services or cash; resolution would clarify whether the advances convert to further cost or get recovered.
Company Response
The report does not indicate that ZenaTech or Epazz was asked for comment, and no company statement is cited. The author says it would expect the company to argue that book cost does not equal market value, but this is the author's anticipated rebuttal, not a response the companies have actually given.
Notable Details
- The report says the only two parties that ever assigned a value to the transferred technology were the buyer and the seller, both controlled by the same individual.
- ZenaTech's independent directors are described in the circular as having unanimously approved the transaction, despite the board's reliance on an internal valuation and its stated decision not to review the agreement with legal counsel.
- The author notes that Epazz performs real services and pays real payroll, distinguishing its operations from a pure shell despite its roughly $340,000 market capitalization.
- The report states ZenaTech lost more than $20 million per quarter in each of the prior two quarters, the backdrop against which the $46.5 million equity issuance occurred.
"The only two parties who ever put a number on these assets were the buyer and the seller, and the same man signed for both."
This appears in the report's conclusion, summarizing White Diamond Research's argument that the related-party valuation lacked any independent check.
FAQs
What did White Diamond Research allege about ZenaTech (ZENA)?
White Diamond Research alleged that ZenaTech's related-party arrangement with Epazz let Epazz insiders collect twice: once through roughly C$28.2 million in R&D advances, and again through $46.5 million in ZenaTech equity paid for technology Epazz carried at just $2.36 million. The firm holds a short position in ZenaTech.
What is ZenaTech, Inc. and what does it do?
ZenaTech is a Nasdaq-listed software technology company (ZENA) focused on drones, described in the report as a serial acquirer. It reports under IFRS and presents financials in Canadian dollars, and per its Q1 2026 SEC filing it had advanced $28,230,118 to related party Epazz for future services as of March 31, 2026.
Who is Epazz and why does White Diamond Research focus on it?
Epazz is an OTC-traded company (EPAZ) with roughly a $340,000 market capitalization that the report says is controlled by ZenaTech CEO Dr. Shaun Passley. Per Epazz's Q1 2026 filing, it transferred proprietary technology to ZenaTech with an unamortized carrying value of $2,356,495.77 and received ZenaTech equity valued at $46,498,653.23 in exchange.
Who controls both ZenaTech and Epazz?
Epazz's Q1 2026 filing states that ZenaTech and Epazz are "under common control, as a single controlling individual holds a controlling equity interest in both entities," though neither company directly owns the other. The report identifies that individual as ZenaTech CEO Dr. Shaun Passley, who the author says signed for both sides of the technology transaction.
How much could ZenaTech's preferred shares dilute common shareholders?
ZenaTech's preferred-share balance was C$86.31 million as of March 31, 2026, up from C$51.81 million at year-end. Using the stated C$3.00 per-share value and the three-for-one conversion feature described in ZenaTech's circular, the report calculates roughly 86 million additional common-equivalent shares, close to the 88,884,193 common shares ZenaTech reported in July 2026.
Did ZenaTech's board get an independent valuation for the Epazz transaction?
According to the shareholder circular cited in the report, the board based its pricing on "an internal determination of their value," without obtaining a valuator, fairness opinion, or third-party appraisal, and the circular states the board "did not review the agreement with its legal counsel." The report notes that independent directors are described as having unanimously approved the deal despite this process.
Has ZenaTech responded to the White Diamond Research report?
The report does not indicate that ZenaTech or Epazz was asked for comment or that either company issued a public response. The author states it would expect the company to argue that book cost does not equal market value, but this is presented as an anticipated argument, not an actual statement from the company.
How big were ZenaTech's losses around the time of this transaction?
The report states ZenaTech lost more than $20 million per quarter in each of the two quarters preceding the report, during the same period it advanced funds to and then acquired technology from Epazz.
Disclaimer: This summary is not primary research and does not constitute investment advice. It is a brief overview of a detailed equity research report authored by the firm, organization, or source referenced in this article or at https://whitediamondresearch.com/research/zenatechs-ceo-related-party-epazz-engages-in-rd-funded-by-zenatech-and-then-sold-the-tech-to-zena-for-19-times-their-book-valuation-grossly-enriching-epazz-insiders-at-the-expense-of-zen/, which contains extensive evidence, regulatory filings, and analysis; readers are encouraged to review the full report there for a comprehensive understanding. The content provided in this publication is not authored or originated by us — we act solely as a distributor and do not endorse, verify, or take responsibility for the accuracy, completeness, or reliability of the information presented. This publication is for informational purposes only and should not be construed as legal, business, investment, or tax advice. Always conduct independent due diligence and consult qualified professionals before making any decisions based on the information contained herein. We disclaim all liability for any loss or damage arising from reliance on third-party content, and the views expressed are solely those of the respective source and do not necessarily reflect our own.