VEMANTI GROUP, INC. You should read the following discussion together with our consolidated financial statements and the related notes included elsewhere in this annual report. This discussion contains forward-looking statements that are based on our current expectations, estimates and projections about our business and operations. Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements.
Overview
We began generating revenue from the sales of our VoiceStep products since its inception in 2014 but have incurred significant net losses since 2015. While we believe in the viability of our strategy to generate sufficient revenues and in our ability to raise additional funds, there can be no assurances that we will be successful or that our cash position will be sufficient to support our daily operations. Our continued existence is dependent upon our ability to continue to execute our operating plan and to obtain additional debt or equity financing. There can be no assurance the necessary debt or equity financing will be available or will be available on terms acceptable to our Company. Accordingly, we may decide to exit our existing business and explore potential strategic alternatives, including establishing a new business, or target an existing business for acquisition, without restriction to any specific business, industry or geographical location.
Critical Accounting Policies and Estimates
Use of Estimates
The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates made by management include, among others, revenue recognition, recoverability of accounts receivable, investments and intangible assets. Actual results could differ from those estimates. It is possible that accounting estimates and assumptions may be material to the Company due to the levels of subjectivity and judgment involved.
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Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standards Codification ("ASC") 606, the core principle of which is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to receive in exchange for those goods or services. To achieve this core principle, five basic criteria must be met before revenue can be recognized: (1) identify the contract with a customer; (2) identify the performance obligation(s) in the contract; (3) determine the transaction price; (4) allocate the transaction price to performance obligation(s) in the contract; and (5) recognize revenue when or as the Company satisfies a performance obligation.
The Company recognizes revenues derived from sub-leasing telecommunications infrastructure and the provision of telecommunications and colocation services. These revenues are accounted for as a single performance obligation satisfied over time because the customer simultaneously receives and consumes the benefits of the Company's performance on a monthly basis. These arrangements stipulate monthly billing, and the Company has elected the "as invoiced" practical expedient to recognize revenue as the services are consumed as the Company has the right to payment in an amount that corresponds directly with the value of performance completed to date.
Taxes collected from customers and remitted to a governmental authority are reported on a net basis and are excluded from revenue. Most revenue is billed in advance on a fixed-rate basis. The remainder of revenue is billed in arrears on a transactional basis determined by customer usage.
The Company often bills customers for upfront charges. These charges relate to down payments or prepayments for future services or equipment and are influenced by various business factors including how the Company and customer agree to structure the payment terms. These payments are recognized as deferred revenue until the service is provided or equipment is delivered and installed. All ongoing fees are billed and recognized as revenue on a monthly basis as service is provided.
Intangible Assets
The Company holds intangible assets with finite lives. Intangible assets with finite useful lives are amortized over their respective estimated useful lives, ranging from three to ten years, based on a pattern in which the economic benefit of the respective intangible asset is realized.
Identifiable intangible assets recognized in conjunction with acquisitions are recorded at fair value. Significant unobservable inputs are used to determine the fair value of the identifiable intangible assets based on the income approach valuation model whereby the present worth and anticipated future benefits of the identifiable intangible assets were discounted back to their net present value.
The Company evaluates the recoverability of intangible assets whenever events or changes in circumstances indicate that an intangible asset carrying amount may not be recoverable. The Company annually evaluates the remaining useful lives of all intangible assets to determine whether events and circumstances warrant a revision to the remaining period of amortization.
Recent Authoritative Guidance
In
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In
Management does not believe any other recently issued but not yet effective accounting pronouncement, if adopted, would have a material impact effect on the Company's present or future financial statements.
RESULTS OF OPERATIONS The fiscal year endedDecember 31, 2022 , compared to the fiscal year endedDecember 31, 2021 2022 2021 Amount Amount Sales$ 138,731 $ 147,950 Cost of sales$ 23,159 $ 22,241 Gross margin$ 115,572 $ 125,709 Total other income (expense) net$ (32 ) $ (7,298 ) Total operating expenses$ 1,152,842 $ 1,741,885 Income taxes$ (919 ) $ (1,650 ) Net loss$ (1,038,221 ) $ (1,625,124 ) Revenues
Revenues were
Gross Profit and Gross Profit Margin
Gross profit was
General and Administrative (G&A) Expenses
G&A expenses were
Operating Loss
Total operating loss was
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As of
The Company annually conducts an analysis of its tax positions and has concluded
that it has no uncertain tax positions as of
The Company had
Net Loss
As a result of the above factors, we had a net loss of
LIQUIDITY AND CAPITAL RESOURCES
Historically, our primary uses of cash have been to finance working capital needs. We expect that we will be able to meet our needs to fund operations, capital expenditures and other commitments in the next 12 months primarily with our cash balance and operating cash flows.
We may need to raise additional capital to fund our operating expenses, pay our obligations, and grow our Company in the future. Our current resources may be insufficient to satisfy all of our cash requirements and we may seek to sell additional equity or debt securities or obtain a credit facility. Our future operations may be dependent on our ability to secure additional financing. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing. Furthermore, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock.
Currently, the Company has sufficient cash to remain in business for the next 12 months.
The following table sets forth a summary of our cash flows for the periods
indicated.
For the Fiscal Year Ended
Item December 31,
2022 2021
Net cash used in operating activities $ 381,811 $ 477,557 Net cash provided by (used in) investing activities
$ 337,500 $ 540,000 Net increase (decrease) in cash$ (38,425 ) $ 52,443 Cash at the beginning of period$ 295,937 $ 243,494 Cash at the end of period$ 257,512 $ 295,937 Operating Activities
Net cash used in operating activities was
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Investing Activities
Net cash provided by investing activities was
Financing Activities
Net cash provided by financing activities was
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