Forward-Looking Statements
The following management's discussion and analysis should be read in conjunction
with our historical financial statements and the related notes thereto. The
management's discussion and analysis contain forward-looking statements, such as
statements of our plans, objectives, expectations and intentions. Any statements
that are not statements of historical fact are forward-looking statements. When
used, the words "believe," "plan," "intend," "anticipate," "target," "estimate,"
"expect" and the like, and/or future tense or conditional constructions ("will,"
"may," "could," "should," etc.), or similar expressions, identify certain of
these forward-looking statements. These forward-looking statements are subject
to risks and uncertainties, including those under "Risk Factors" in our General
Form of Registration of Securities on Form 10, as amended, which we initialed
filed with the Securities and Exchange Commission ("SEC") on April 9, 2021, that
could cause actual results or events to differ materially from those expressed
or implied by the forward-looking statements. Our actual results and the timing
of events could differ materially from those anticipated in these
forward-looking statements as a result of several factors. We do not undertake
any obligation to update forward-looking statements to reflect events or
circumstances occurring after the date of this Quarterly Report.
Basis of Presentation
The following discussion highlights our results of operations and the principal
factors that have affected our financial condition as well as our liquidity and
capital resources for the periods described, and provides information that
management believes is relevant for an assessment and understanding of the
statements of consolidated financial condition and results of operations
presented herein. The following discussion and analysis are based on our
unaudited condensed consolidated financial statements contained in this
Quarterly Report, which we have prepared in accordance with United States
generally accepted accounting principles. You should read the discussion and
analysis together with such consolidated financial statements and the related
notes thereto.
Recent Developments
On June 9, 2021, our wholly owned subsidiary Vemanti Digital, Ltd. ("Vemanti
Digital") was incorporated under the laws of the British Virgin Islands as a BVI
Business Company. Through Vemanti Digital, we plan to work on an ERC-20
USD-backed stablecoin ("USDV") that will be issued for and backed by the US
Dollar on a 1:1 basis and will allow for blockchain ledger security without the
price volatility of traditional cryptocurrencies, as well as operating with full
regulatory compliance.
Overview
Vemanti, incorporated on April 3, 2014 under the laws of the State of Nevada, is
a technology-driven and fintech-focused company that seeks to be active in the
high-growth emerging markets. Through our wholly-owned subsidiary, VoiceStep, we
provide a one-stop solution with regard to business-class VoIP services to our
SME customers in the United States. We also have 19.77% ownership interest in
Fvndit which, through its subsidiaries, operates an online short-term P2P
financing platform for SMEs in Vietnam.
We began generating revenue from the sales of our VoiceStep products since its
inception in 2014, but have incurred significant net losses since 2015. For the
nine months ended September 30, 2021 and 2020, we recognized approximately
$111,039 and $126,816, respectively, in sales, and $0 and $12,626, respectively,
from interest income. For the nine months ended September 30, 2021 and 2020, we
also recorded an unrealized loss of $1,651, and $5,176, respectively, on our
investment in Fvndit. For the nine-month period ended September 30, 2021, we
recognized an impairment $3,893 to our cryptocurrency investment. We incurred a
net loss of $1,092,085 and $48,160, respectively, for the nine months ended
September 30, 2021 and 2020.
As reflected in the unaudited condensed consolidated interim financial
statements, we used cash in operations of $345,689 and had a net loss from
operations of $1,083,171 and an accumulated deficit of $2,751,048 for the nine
months ended September 30, 2021. 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.
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Results of Operations
The nine months ended September 30, 2021 compared to the nine months ended
September 30, 2020
2021 2020
Amount Amount
Sales $ 111,039 $ 126,816
Cost of sales $ 16,256 $ 30,486
Gross margin $ 94,783 $ 96,330
Total other income (expense) net $ (7,294 ) $ 12,536
Total operating expenses $ 1,177,954 $ 157,043
Income taxes $ 1,620 $ (17 )
Net loss $ 1,092,085 $ 48,160
Revenues
Revenues were $111,039 for the nine months ended September 30, 2021, a decrease
of $15,777 or 12%, compared to $126,816 in the same period of last year. The
decrease was mainly due to the abundant supply of telecommunications
applications that provide free-of-charge video chats and voice calls between
computers, tablets, and mobile devices over the internet which led to a drop in
demand for VoiceStep payment-based voice services.
Gross Profit and Gross Profit Margin
Gross profit was $94,783 for the nine months ended September 30, 2021, compared
to $96,330 in the same period of 2020. Our gross profit margin increased 9% for
the nine months ended September 30, 2021. The decrease was mainly due to the
abundant supply of telecommunications applications that provide free-of-charge
video chats and voice calls between computers, tablets, and mobile devices over
the internet which led to a drop in demand for VoiceStep payment-based voice
services.
General and Administrative Expenses
General and administrative (G&A) expenses were $1,177,954 for the nine months
ended September 30, 2021 compared to $157,043 in the same period in 2020,
representing an increase of 650%, or $1,020,911. The increase was mainly due to
increased expenses and compensation paid to outside consultants and contractors
related to the Company's development and investment in its Vemanti Dollar
("USDV"), an ERC-20 1:1 USD-pegged stablecoin.
Operating Loss
Total operating loss was $1,083,171 for the nine months ended September 30, 2021
compared to $60,713 in the same period of 2020, representing an increase of
$1,022,458 or 1,684%. The increase was mainly due to increased expenses and
compensation paid to outside consultants and contractors related to the
development and investment in the Vemanti Dollar stablecoin.
As of September 30, 2021 and 2020, there were no significant deferred tax
assets, except for a net operating loss carryforward for which a 100% valuation
allowance has been provided.
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The Company annually conducts an analysis of its tax positions and has concluded
that it has no uncertain tax positions as of September 30, 2021 and December 31,
2020. The 2017 to 2019 tax years are still subject to federal audit. The 2016 to
2019 tax years are still subject to state audit.
The Company had $1,132,304 and $1,061,581 of net operating loss carryforwards
available as of December 31, 2020 and 2019, respectively, for Federal and state
tax purposes. Net operating loss carryforwards start to expire in 2039 or 20
years for federal income and state tax purposes.
Net Loss
As a result of the above factors, we had a net loss of $1,092,085 for the nine
months ended September 30, 2021 compared to a net loss of $48,160 in 2020.
The three months ended September 30, 2021 compared to the three months ended
September 30, 2020
2021 2020
Amount Amount
Sales $ 37,112 $ 39,507
Cost of sales $ 5,804 $ 9,012
Gross margin $ 31,308 $ 30,495
Total other income (expense) net $ (1,068 ) $ (5,809 )
Total operating expenses $ 607,207 $ 27,551
Income taxes $ 820 $ 4,989
Net loss $ 577,787 $ 7,854
Revenues
Revenues were $37,112 for the three months ended September 30, 2021, a decrease
of $2,395 or 6%, compared to $39,507 in the same period of last year. The
decrease was mainly due to the abundant supply of telecommunications
applications that provide free-of-charge video chats and voice calls between
computers, tablets, and mobile devices over the internet which led to a drop in
demand for VoiceStep payment-based voice services.
Gross Profit and Gross Profit Margin
Gross profit was $31,308 for the three months ended September 30, 2021, compared
to $30,495 in the same period of 2020. Our gross profit margin increased 7% for
the three months ended September 30, 2021. The increase was mainly due to the
reduction of cost of sales.
General and Administrative Expenses
General and administrative (G&A) expenses were $607,207 for the three months
ended September 30, 2021 compared to $27,551 in the same period in 2020,
representing an increase of 2,104%, or $579,656. The increase was mainly due to
increased expenses and compensation paid to outside consultants and contractors
related to the development and investment in the Vemanti Dollar stablecoin.
Operating Loss
Total operating loss was $575,899 for the three months ended September 30, 2021
compared to total operating profit of $2,944 in the same period of 2020,
representing an increase in operating loss of $572,955 or 19,462%. The increase
in operating loss was mainly due to increased expenses and compensation paid to
outside consultants and contractors related to the development and investment in
the Vemanti Dollar stablecoin.
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Net Loss
As a result of the above factors, we had a net loss of $577,787 for the three
months ended September 30, 2021 compared to net loss of $7,854 in 2020.
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 Nine Months Ended
September 30,
Item 2021 2020
Net cash used in operating activities $ 345,689 48,595
Net cash provided by (used in) investing activities (10,000 ) 200,000
Net cash provided by financing activities
540,000 -
Net (decrease) increase in cash 184,311 151,405
Cash at the beginning of period 243,494 118,806
Cash at the end of period $ 427,805 $ 270,211
Operating Activities
Net cash used in operating activities was $345,689 for the nine months ended
September 30, 2021, as compared to $ 48,595 used in operating activities for the
nine months ended September 30, 2020, primarily due to the net losses incurred.
Investing Activities
Net cash used in investing activities was $10,000 for the nine months ended
September 30, 2021, compared to net cash provided by investing activities of
$200,000 for the nine months ended September 30, 2020. The change was primarily
due to investing in a cryptocurrency in 2021, while the loan to Fvndit was paid
back in 2020.
Financing Activities
Net cash provided by financing activities was $540,000 for the nine months ended
September 30, 2021, compared to $0 for the nine months ended September 30, 2020.
The change was primarily due to issuances of common stock for cash.
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VEMANTI GROUP, INC. 