The CEO Pays Himself Twice: How ZenaTech Funded R&D at a Related Party, Then Bought It Back at 19x Book Value
On August 10, 2026, White Diamond Research published a short report on ZenaTech Inc. (NASDAQ: ZENA), a drone-focused software "roll-up" that does not hold earnings calls and has lost over $20 million per quarter for the past two quarters. The report centers on a related-party arrangement between ZenaTech and Epazz Inc. (OTC: EPAZ), a tiny OTC company with a market cap of only $340,000 that is controlled by ZenaTech's own CEO, Dr. Shaun Passley.
Epistemic note. White Diamond Research's analysis draws on ZenaTech and Epazz SEC filings, including a shareholder circular and Q1 2026 filings from both companies. Its characterizations of the transaction's fairness and the diligence process behind it are the opinions of a short seller with a disclosed financial interest in the stock's decline. White Diamond Research explicitly states it does not allege fraud. None of this has been verified by The Forensic Ledger, adjudicated by a regulator or court, or admitted by ZenaTech.
Paying twice for the same technology
Under a 20-year management services agreement, Epazz performs research and development for ZenaTech. According to the report, ZenaTech shareholders effectively pay twice: first when ZenaTech advances cash to fund the R&D at Epazz, and again when ZenaTech later issues its own stock or cancels the receivable to acquire the resulting technology from Epazz.
ZenaTech's own shareholder circular states that cash advanced to Epazz is "restricted for the use and benefit of ZenaTech" and that "Epazz is paying for product development costs" with those funds. A ZenaTech Q1 2026 SEC filing cited in the report states: "The total advances to Epazz for future services were $28,230,118 as of March 31, 2026 ($12,192,637 short-term and $16,037,481 long-term)."
19 times book value
According to White Diamond, Epazz spent ZenaTech's cash on development, kept the resulting technology in its own name, and then sold it back to ZenaTech. Epazz's own Q1 2026 filing, quoted in the report, states that the transferred technology assets carried "an unamortized carrying value of $2,356,495.77 immediately prior to transfer," while "consideration received consisted solely of ZenaTech equity securities with an aggregate fair value of $46,498,653.23" — roughly 19 times the stated book value. The same Epazz filing confirms: "The Company and ZenaTech are under common control, as a single controlling individual holds a controlling equity interest in both entities."
No independent valuation
The report notes that the transaction was priced without a third-party fairness opinion or independent valuator. According to White Diamond, the shareholder circular states the board priced the deal based on "an internal determination of their value" and "did not review the agreement with its legal counsel." The report observes: "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."
Hidden dilution from preferred shares
White Diamond also flags approximately 86 million common-equivalent shares that it says are absent from typical market-data share counts. ZenaTech's balance sheet carried C$86,310,000 of preferred stock as of March 31, 2026, up from C$51,810,000 at year-end — equivalent to 28,770,000 preferred shares at the C$3.00 stated value ZenaTech uses throughout its filings. Per the shareholder circular, "each issued Preferred Share is convertible, at the option of the holder, into three Common Shares with five business days' notice," implying roughly 86 million additional common-equivalent shares on top of the 88,884,193 common shares ZenaTech reported in July 2026 — a figure the report says is not reflected on fully diluted share-count trackers such as dilutiontracker.com.
The report's own caveats
White Diamond Research is explicit that it "does not allege fraud," noting that ZenaTech's other acquisitions were made from unrelated sellers for cash and seller notes, that Epazz performs real services and pays real payroll, that ZenaTech's independent directors are named in the circular and unanimously approved the deal, and that the firm found no adjudicated securities enforcement action against anyone named in the report.
What would falsify this thesis
Falsification would look like: ZenaTech commissioning and disclosing an independent fairness opinion for the Epazz transaction that supports the $46.5 million valuation; a credible, arms-length explanation for the 19x markup over book value; ZenaTech and Epazz demonstrating the arrangement reflects normal market terms rather than related-party self-dealing; and full, prominent disclosure of the diluted share count inclusive of convertible preferred shares. Conversely, further related-party transactions on similar terms, continued exclusion of the preferred-share dilution from company disclosures, or regulatory scrutiny of the transaction's valuation process would corroborate the thesis.
White Diamond Research's disclosed position
White Diamond Research disclosed that it, along with its clients, affiliates, and related entities, may have a short position in ZenaTech and stands to realize significant gains if the share price declines.
Source
⚖️ Editorial Disclaimer
This article summarizes with citation a research report already published by White Diamond Research. The Forensic Ledger is an independent newsroom and archive; it is not the author of the underlying allegations and does not adopt them as established fact. All figures, characterizations, and conclusions attributed to the report — including the transaction valuation, the related-party characterization, and the dilution estimate — are the opinions of a third party (White Diamond Research) that discloses a financial interest in the decline of the covered security. White Diamond Research itself states it does not allege fraud. These claims have not been independently verified, have not been adjudicated by any court or regulator, and may be denied or disputed by ZenaTech Inc. or Epazz Inc. This article is published for informational and journalistic purposes only, is not investment advice, and is not a recommendation to buy, sell, or hold any security.
Original reporting by White Diamond Research. This article is desk analysis prepared by The Forensic Ledger from publicly available sources, summarized with citation to the original.
Not investment advice. This is original reporting and analysis prepared by The Forensic Ledger from publicly available data. Nothing here is a recommendation to buy, sell, or hold any security. Always consult the original source and a licensed professional. See our full disclaimer and source-citation policy.
