Quarterly Report (10-q)

Date : 05/10/2019 @ 11:03AM
Source : Edgar (US Regulatory)
Stock : Advanced Voice Recognition Systems, Inc. (PC) (AVOI)
Quote : 0.034  -0.0031 (-8.36%) @ 9:20PM

Quarterly Report (10-q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(MARK ONE)

 

 

 

[X]

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Quarterly Period Ending March 31, 2019

or

 

 

 

[_]

TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _________ to _________

 

Commission File Number:  000-52390

Advanced Voice Recognition Systems, Inc.

(Exact name of registrant as specified in its charter)  

 

Nevada

980511932

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

 

7659 E. Wood DriveScottsdale, Arizona  85260

(Address of principal executive offices)

 

(480) 704-4183

(Registrant's telephone number, including area code)

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No [_]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months.

Yes [X] No [_]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” or “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

 

 

 

 

 

 

Large accelerated filer

[_]

Accelerated filer

[_]

 

Non-accelerated filer

[_]

Smaller reporting company

[X]

 

(Do not check is smaller reporting company)

Emerging growth company

[X]

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   [_]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [_] No [X]

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

As of April 29, 2019 274,820,268 shares of common stock are issued and outstanding.


1

566487


 

Advanced Voice Recognition Systems, Inc.

 

Table of Contents

 

PART I - FINANCIAL INFORMATION

 

 

 

Page

Item 1.

 

Financial Statements

 

 

 

 

 

 

 

Balance Sheets as of March 31, 2019 (Unaudited) and December 31, 2018 (Audited).

1

 

 

 

 

 

 

Unaudited Statements of Operations for the three months ended March 31, 2019 and 2018.

2

 

 

 

 

 

 

Unaudited Statement of Stockholders Deficit for the three months ended March 31, 2019 and 2018

3

 

 

 

 

 

 

Unaudited Statements of Cash Flows for the three months ended March 31, 2019 and 2018.

4

 

 

 

 

 

 

Notes to Unaudited Financial Statements

5

 

 

 

 

Item 2.

 

Management's Discussion and Analysis of Financial Condition and Results of Operations

11

 

 

 

 

Item 3

 

Quantitative and Qualitative Disclosures About Market Risk

13

 

 

 

 

Item 4T.

 

Controls and Procedures

13

 

 

 

 

PART II - OTHER INFORMATION

 

 

 

 

Item 5.

 

Legal Proceedings

14

 

 

 

 

Item 6.  

 

Exhibits

14

 

 

 

 

 

 

 

 

SIGNATURES

 

 

17


2

566487


Part I. Financial Information

 

Item 1. Financial Statements

Advanced Voice Recognition Systems, Inc.

 

Condensed Balance Sheets

(Un-Audited)

 

 

 

 

March 31, 2019

 

 

December 31, 2018

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

8,861   

 

$

17,583   

Total Current Assets

 

 

8,861   

 

 

17,583   

 

 

 

 

 

 

 

Non-Current Assets

 

 

 

 

 

 

Patent, net

 

 

39,714   

 

 

43,390   

Deferred costs

 

 

-    

 

 

-    

Total Non-Current Assets

 

 

39,714   

 

 

43,390   

 

 

 

 

 

 

 

Total Assets

 

$

48,575   

 

$

60,973   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

Accounts payable

 

$

54,452   

 

$

49,385   

Payroll

 

 

162,382   

 

 

162,382   

Advance from Related Party

 

 

5,000   

 

 

-    

Note Payable  Meyer & Assoc.

 

 

16,469   

 

 

19,100   

Note Payable  AIP

 

 

19,935   

 

 

19,935   

Note Payable  Related Party

 

 

6,500   

 

 

6,500   

Accrued Interest

 

 

8,586   

 

 

8,065   

Total Current Liabilities

 

 

273,324   

 

 

265,367   

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Total Liabilities

 

$

273,324   

 

$

265,367   

 

 

 

 

 

 

 

Commitments and Contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' Deficit

 

 

 

 

 

 

Common stock,$0.001 par value; 547,500,000 shares authorized

 

 

 

 

 

 

268,820,268 and 267,020,268, issued and outstanding respectively

 

$

268,820   

 

$

267,020   

Additional paid-in capital

 

 

7,885,998   

 

 

7,878,798   

Accumulated Deficit

 

 

(8,379,567)  

 

 

(8,350,212)  

Total Stockholders' Deficit

 

 

(224,749)  

 

 

(204,394)  

Total Liabilities and Stockholders' Deficit

 

$

48,575   

 

$

60,973   


1


 

The accompanying notes are an integral part of these financial statements.


2


Advanced Voice Recognition Systems, Inc.

 

Statements of Operations

(Unaudited)

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Three Months Ended

 

 

March 31,

 

 

March 31,

 

 

2019

 

 

2018

 

 

 

 

 

 

Sales

$

-    

 

$

-    

Cost of goods sold

 

-    

 

 

-    

Gross profit

 

-    

 

 

-    

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

General and administrative:

 

 

 

 

 

Compensation

 

69   

 

 

69   

Professional fees

 

21,945   

 

 

18,283   

Office

 

5,733   

 

 

5,822   

Travel

 

101   

 

 

-    

Other

 

557   

 

 

1,097   

Total operating expenses

 

28,405   

 

 

25,271   

 

 

 

 

 

 

Loss from operations

 

(28,405)  

 

 

(25,271)  

 

 

 

 

 

 

Other income and (expense):

 

 

 

 

 

Interest expense

 

(950)  

 

 

(2,020)  

Net other expense

 

(950)  

 

 

(2,020)  

 

 

 

 

 

 

Loss before income taxes

 

(29,355)  

 

 

(27,291)  

 

 

 

 

 

 

Provision for income taxes

 

-    

 

 

-    

 

 

 

 

 

 

Net Loss

$

(29,355)  

 

$

(27,291)  

 

 

 

 

 

 

Basic and diluted loss per common share

$

(0)  

 

$

(0)  

 

 

 

 

 

 

Weighted average number of common shares

 

267,120,268   

 

 

247,110,268   

 

 

 

 

*less than $0.01 per share

The accompanying notes are an integral part of these financial statements


3


 

 

Advanced Voice Recognition Systems, Inc.

 

Statement of Stockholders’ Deficit

(Unaudited)

 

 

Statement of Changes in Shareholder's Deficit

For the period ending March 31, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional

 

 

Accumulated

 

 

 

 

 

Shares

 

Par Value

 

 

Paid-in Capital

 

 

Deficit

 

 

Total

Balance at December 31, 2017

 

243,920,268  

$

243,920  

 

$

7,788,248  

 

$

(8,282,912)  

 

$

(250,744)  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales of Common Stock

 

6,800,000  

 

6,800  

 

 

9,050  

 

 

 

 

 

15,850   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss

 

-  

 

-  

 

 

-  

 

 

(27,291)  

 

 

(27,291)  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2018

 

250,720,268  

$

250,720  

 

$

7,797,298  

 

$

(8,310,203)  

 

$

(262,185)  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Statement of Changes in Shareholder's Deficit

For the period ending March 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional

 

 

Accumulated

 

 

 

 

 

Shares

 

Par Value

 

 

Paid-in Capital

 

 

Deficit

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2018

 

267,020,268  

 

267,020  

 

 

7,878,798  

 

 

(8,350,212)  

 

 

(204,394)  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales of Common Stock

 

1,800,000  

 

1,800  

 

 

7,200  

 

 

 

 

 

9,000   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss

 

-  

 

-  

 

 

-  

 

 

(29,355)  

 

 

(29,355)  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2019

 

268,850,268  

 

268,820  

 

 

7,885,998  

 

 

(8,379,567)  

 

 

(224,749)  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


4


 

 

 

The accompanying notes are an integral part of these financial statements


5


 

Advanced Voice Recognition Systems, Inc.

 

Statements of Cash Flows

(Unaudited)

 

 

 

 

 

Three Months Ended

 

 

Three Months Ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2019

 

 

2018

 

 

 

 

 

 

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

Net loss

 

$

(29,355)  

 

$

(27,291)  

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Amortization and depreciation

 

 

3,676   

 

 

3,364   

Changes in operating assets:

 

 

 

 

 

 

Changes in operating liabilities:

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

 

5,588   

 

 

10,165   

Net cash used in operating activities

 

 

(20,091)  

 

 

(13,762)  

 

 

 

 

 

 

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

Payments for deferred costs

 

 

—    

 

 

(980)  

Net cash used in investing activities

 

 

—    

 

 

(980)  

 

 

 

 

 

 

 

Cash Flows from Financing Activities:

 

 

 

 

 

 

Proceeds from sale of common stock

 

 

9,000   

 

 

15,850   

Advance from Related Party

 

 

5,000   

 

 

—    

Payments on notes payable

 

 

(2,631)  

 

 

—    

Net cash provided by financing activities

 

 

11,369   

 

 

15,850   

 

 

 

 

 

 

 

Net change in cash

 

 

(8,722)  

 

 

1,108   

 

 

 

 

 

 

 

Cash at Beginning of Period

 

 

17,583   

 

 

7,257   

 

 

 

 

 

 

 

Cash at End of Period

 

$

8,861   

 

$

8,365   

 

 

 

 

 

 

 

Supplemental Disclosure of Cash Flow Information:

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

 

Account payable converted to note payable

 

 

 

 

 

52,385   

Interest

 

$

429   

 

$

1,522   

Income taxes

 

$

—    

 

$

—    

 

 

 

 

 

The accompanying notes are an integral part of these financial statements.


6


Advanced Voice Recognition Systems, Inc.

(A Development Stage Company)

Notes to Unaudited Financial Statements

 

Note 1.     Nature of Operations

 

Company Overview

 

The operations of Advanced Voice Recognition Systems, Inc. (“AVRS” or the “Company”), http://www.avrsys.com, commenced in 1994 with a predecessor entity called NCC, Inc. NCC, Inc. was incorporated on March 15, 1994 in the State of Ohio. NCC, Inc. operated as a software and hardware development company that marketed voice recognition and transcription products for commercial applications.

 

In May 2000, WG Investments, LLC acquired the assets of NCC, Inc. and subsequently changed its name to NCC, LLC. NCC, LLC (also a predecessor to AVRS) continued the operations of NCC, Inc. until approximately December 31, 2001, when shifts in the industry’s markets caused NCC, LLC to suspend its operations.

 

AVRS was incorporated in the State of Colorado on July 7, 2005. In September 2005, the members of NCC, LLC transferred all of their membership interests in NCC, LLC to AVRS in exchange for 93,333,333 shares (post-recapitalization) of AVRS common stock. In December 2005, the Board of Directors approved a 1.5-to-1 stock split issuing 46,666,667 common shares (post-recapitalization), which increased the number of common shares outstanding to 140 million shares (post-capitalization). Following the incorporation of AVRS, the Company initiated a new business plan and intends to continue its operations in the voice recognition and transcription industry.

 

AVRS is a software development company specializing in speech recognition technologies. AVRS has successfully obtained patent protection of its proprietary technology (refer to Note 3, Intangible Assets).   The Company has currently engaged a firm to investigate and assert claims relating to certain patents including negotiating licensing agreements and the filing and prosecution of lawsuits.

 

Stock Purchase Agreements

 

During the year ended December 31, 2018 the Company entered into Stock Purchase Agreements for the private sale to five persons or entities of an aggregate of 23,100,000 shares of the common stock for aggregate proceeds of $113,650, full payment of which was received in the period. During the three months ended March 31, 2019, the Company entered into Stock Purchase Agreements for the private sale of an aggregate of 1,800,000 shares of the common stock for aggregate proceeds of $9,000, full payment of which was received in the period.

 

Commitments and Contingencies

 

On April 20, 2015 Advanced Voice Recognition Systems, Inc. (“AVRS”) entered into a Material Letter Agreement with an unrelated third party  (“AIP”) in which they promise to pay to patent legal counsel funds to continue prosecuting Patents on behalf of AVRS.  AVRS promises to pay AIP, or to such other holder of this promissory note (Note) as designate, the principal, together with a premium of ten percent (10%) of Principle and two percent (2%) of proceeds received by Company from a Monetization Event initiated by AIP.  Interest was accrued and reported at March 31, 2019.

 

On August 20, 2015, Advanced Voice Recognition Systems, Inc. (“AVRS”) entered into a letter agreement with unrelated third party (Third Party) pursuant to which the Third Party will provide strategic advisory services to AVRS to support the common goal of the acquisition, sale, licensing, prosecution, enforcement, and settlement with respect to AVRS’s intellectual property, including patents held by AVRS. The Third Party has agreed to advance costs recommended by it, including court filing fees, discovery and other litigation costs, and patent prosecution costs, up to an aggregate of $10,000,000.   AVRS will be responsible for costs not recommended by the Third Party, as well as travel and ordinary business expenses incurred by AVRS.  Except for the advanced costs by the Third Party, AVRS will be responsible for any contingency payments to law firms.  Any and all advanced costs will only become liabilities if successful.  On June 28, 2017 AVRS and the Third Party agreed to terminate the August 20, 2015 Letter Agreement.  AVRS did not incur any material early termination penalties in connection of the early termination of the agreement.

 

On November 1, 2016, Advanced Voice Recognition Systems, Inc. (“ AVRS ”) entered into a Contingent Fee Agreement (the “ Agreement ”) with Legal Representation pursuant to which they will represent AVRS in connection with investigating and asserting claims relating to certain patents, including the negotiation of license agreements and the filing and prosecution of lawsuits, against any potential infringers of rights associated with such patents (the “ Patent Rights ”).  Legal representation will handle licensing and litigation activities under the Agreement on a contingent fee basis.  The fee will depend upon whether AVRS recovers any sums by way of licensing, settlement, trial or otherwise with respect to the Patent Rights.  On June 6, 2017 AVRS and Legal Representation revised the Contingent Fee Agreement as it related to the termination of the August 20, 2015 Letter Agreement which was to provide advisory services, court filing fees, discovery and other litigation costs.  The revised Contingent Fee Agreement assumed the responsibility for the costs and expenses in the Terminated August 20, 2015 Letter Agreement and provides for the payment of twenty percent (20%) of all gross Licensing Agreement Proceeds and thirty percent (30%) of all Litigation Proceeds received by AVRS.  In addition if the Litigation Proceeds agreed to or received by AVRS at any time are $100,000 or less then Legal Representative shall receive forty percent (40%) of the Litigation Proceeds.

 


7


On November 6, 2017 Advanced Voice Recognition Systems, Inc (“AVRS”) received notice that Meyers & Associates, LLC filed Complaint number 2017CV32482 in Arapahoe County District Court on October 30, 2017. The Complaint relates to purported legal fees owed by AVRS.  On January 31, 2018 AVRS entered into a Settlement Agreement and Promissory Note with Meyers & Associates, LLC.  AVRS promises to pay the principal sum of Fifty-Two Thousand Three Hundred Eighty-Five Dollars and Forty-Six Cents ($52,385.46) as well as accrued interest. AVRS shall pay $1,000 per month on the first day of each month beginning February 1, 2018 and continuing through July 1, 2018 and pay all remaining unpaid principal and accrued interest (12% annual) on August 1, 2018.  All payments have been made.  

 

On August 1, 2018 AVRS and Meyers & Associates entered into an Agreement to Amend Promissory Note. AVRS shall pay $6,000 on or before August 1, 2018, shall pay $1,500 on the first day of each month beginning September 1, 2018 and continuing through November 1, 2018 and shall pay all remaining unpaid principal and accrued interest on December 1, 2018.  All payments have been made.

 

On November 21, 2018 AVRS and Meyers & Associates entered into a Second Agreement to Amend Promissory Note.  AVRS shall pay $20,000 on or before November 21, 2018, shall pay $1,500 on the first day of each month beginning January 1, 2019 and continuing through June 1, 2019 and shall pay all remaining principle and interest on July 1, 2019.  The January, February, March and April payments have been paid.

 

On June 21, 2018, Advanced Voice Recognition Systems, Inc. (“ AVRS ”) and Buether Joe & Carpenter, LLC (“BJC) entered into a Letter of Engagement for Legal Services Limited Scope Agreement  (“ Agreement ”) with Schmeiser, Olsen & Watts LLP (“ the Firm ”) pursuant to which the Firm will serve as local counsel in the United States District Court, District of Arizona.  The Firm has been hired to represent AVRS as local counsel in connection with forthcoming litigation in the U.S. District Court, District of Arizona.    AVRS may terminate the Agreement at any time.

 

On September 24, 2018, Advanced Voice Recognition Systems, Inc., a Nevada corporation (“AVRS”, “we” or “us”), entered into Promissory Note with Walter Geldenhuys, who is our President, Chief Executive Officer and Chief Financial Officer, and who serves as a member of our Board of Directors.  The Promissory Note is effective as of September 24, 2018 in the principal amount of $9,000 with a maturity date of the Promissory Note September 24, 2019.  Interest at 4% per annum was charged and accrued at March 31, 2019.  The Company repaid $2500 of the note on December 10, 2018

 

On February 1, 2019, Walter Geldenhuys advanced the Company $5,000.

 

Note 2.     Significant Accounting Policies

 

Unaudited Financial Information

 

The accompanying financial information at March 31, 2019 and for the three months ended March 31, 2019 and 2018 is unaudited.  In the opinion of management, all normal and recurring adjustments which are necessary to provide a fair presentation of the Company’s financial position at March 31, 2019 and its operating results for the three months ended March 31, 2019 and 2018 have been made.  Certain information and footnote data necessary for a fair presentation of financial position and results of operations in conformity with accounting principles generally accepted in the United States of America have been condensed or omitted.  It is therefore suggested that these financial statements be read in conjunction with the summary of significant accounting policies and notes to financial statements included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) for the year ended December 31, 2018.  The results of operations for the three months ended March 31, 2019 are not necessarily an indication of operating results to be expected for the year ending December 31, 2019.

 

Going Concern

  

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Liabilities exceed assets and there is a capital deficiency of $224,749 and no significant revenues.  The Company may be unable to continue as a going concern for a reasonable period of time.

 

The financial statements do not include any adjustments relating to the recoverability and classification of assets and liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis and ultimately to attain profitability.   During the twelve months ended December 31, 2018 the Company received an aggregate of $113,650 from the sale of shares in private offerings of its common stock.  During the three months ended March 31, 2019 the Company received an aggregate of $9,000 from the sale of shares in private offerings of its common stock.

 

The Company’s current operations are related to patent monetization and filing of additional patents.  The Company has entered into a letter agreement with Dominion Harbor Group, LLC to provide strategic advisory services to AVRS.  Dominion has agreed to advanced costs up to an aggregate of $10,000,000. On June 28, 2017 the Company and Dominion agreed to terminate the August 20, 2015 Letter Agreement.  The Company did not incur any material early termination penalties.  In addition the Company has revised the Contingent Fee Agreement with Buether Joe & Carpenter, LLC which will represent AVRS in connection with investigating and asserting claims to the AVRS patents including licensing and litigation activities. Any and all advanced costs will only become liabilities if successful.  On June 6, 2017 AVRS and BJC revised the Contingent Fee Agreement as it related to the termination of the August 20, 2015 Dominion Harbor Letter Agreement.  There is no guarantee that AVRS will be able to provide the capital required for the Company to continue as a going concern.


8


 

 

Use of Estimates

 

The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Basis of Consolidation

 

 

The consolidated financial statements include our accounts and those of NCC, LLC which merged with and into AVRS, Inc. March 25, 2009. Intercompany transactions and balances have been eliminated. The accounts, results of operations and cash flows of acquired companies are included from their respective acquisition dates.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid debt instruments with original maturities of three months or less when acquired to be cash equivalents. The Company had cash at March 31, 2019 of $8,861, $17,583 at December 31, 2018 and $8,365 cash at March 31, 2018.  No amounts resulted from cash equivalents.

 

Financial Instruments

 

The carrying amounts of cash, receivables and current liabilities approximate fair value due to the short-term maturity of the instruments.

 

Fixed Assets

 

Fixed assets are stated at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the related assets, ranging from three to five years. Expenditures for additions and improvements are capitalized, while repairs and maintenance costs are expensed as incurred. The cost and related accumulated depreciation of property and equipment sold or otherwise disposed of are removed from the accounts and any gain or loss is recorded in the year of disposal.

 

Income Taxes

 

Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to differences between the recorded book basis and the tax basis of assets and liabilities for financial and income tax reporting. Deferred tax assets and liabilities represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred taxes are also recognized for operating losses that are available to offset future taxable income and tax credits that are available to offset future federal income taxes.  The Company believes that its income tax filing positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material adverse effect on the Company’s financial condition, results of operations, or cash flow.  Therefore, no reserves for uncertain income tax positions have been recorded pursuant to ASC 740.  

 

Research and Development Costs

 

Research and development costs are expensed in the period incurred.

 

Patents, Deferred Costs and Amortization

 

Patents consist of costs incurred to acquire issued patents. Amortization commences once a patent is granted. Costs incurred to acquire patents that have not been issued are reported as deferred costs. On April 3, 2018 U.S. Patent #9,934,786 entitled “Speech Recognition and Transcription Among Users Having Heterogeneous Protocols” was issued by the U.S patent and Trademark Office. Deferred costs of $4,575 were capitalized and amortization began in the period.  The Company amortizes its patents over an estimated useful life of twenty years.

 

Impairment and Disposal of Long-Lived Assets

 

The Company evaluates the carrying value of its long-lived assets under the provisions of ASC 360-10 Property, Plant, and Equipment – “Impairment or Disposal of Long Lived Assets” subsections” . ASC 306-10 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted future cash flows estimated to be generated by those assets are less than the assets’ carrying amount. If such assets are impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying value or fair value, less costs to sell.  The Company’s last impairment analysis was completed effective December 31, 2018.  Impairment recorded for each of the three months ended March 31, 2019 and 2018 was $-0-.

 

Loss per Common Share


9


 

The Company reports net loss per share using a dual presentation of basic and diluted loss per share. Basic net loss per share excludes the impact of common stock equivalents. Diluted net loss per share utilizes the average market price per share when applying the treasury stock method in determining common stock equivalents. At March 31, 2019 and 2018, there were no variances between the basic and diluted loss per share as there were no potentially dilutive securities outstanding.

 

 

Fair Value of Financial Instruments

 

The carrying amounts of cash and current liabilities approximate fair value because of the short-term maturity of these items. These fair value estimates are subjective in nature and involve uncertainties and matters of significant judgment, and, therefore, cannot be determined with precision.  Changes in assumptions could significantly affect these estimates.  We do not hold or issue financial instruments for trading purposes, nor do we utilize derivative instruments.

 

The FASB Accounting Standards Codification (ASC) clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. It also requires disclosure about how fair value is determined for assets and liabilities and establishes a hierarchy for which these assets and liabilities must be grouped, based on significant levels of inputs as follows:

 

 

Level 1:

Quoted prices in active markets for identical assets or liabilities.

 

Level 2:

Quoted prices in active markets for similar assets and liabilities and inputs that are observable for the asset or liability.

 

Level 3:

Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

 

The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

 

Note 3.     Intangible and Fixed Assets

 

Intangible Assets

 

The Company monitors the anticipated outcome of legal actions, and if it determines that the success of the defense of a patent is probable, and so long as the Company believes that the future economic benefit of the patent will be increased, the Company capitalizes external legal costs incurred in the defense of the patent. Upon successful defense of litigation, the amounts previously capitalized are amortized over the remaining life of the patent.

 

On July 7, 2009, U.S. Patent # 7,558,730, entitled “Speech Recognition and Transcription Among Users Having Heterogeneous Protocols,” was issued by the U.S. Patent and Trademark Office.  In accordance with 35 U.S.C. 154, the patent shall be for a term beginning on July 7, 2009 and ending 20 years from the application date of November 27, 2001, or November 27, 2021.  The deferred fees were capitalized during the quarter ended September 30, 2009 and the Company began amortization.

 

On May 24, 2011, U.S. Patent #7,949,534, entitled “Speech Recognition and Transcription Among Users Having Heterogeneous Protocols,” was issued by the U.S. Patent and Trademark Office. In accordance with 35 U.S.C. 154, the patent shall be for a term beginning May 24, 2011 and ending 20 years from the application date of the parent application (U.S. Patent #7,558,730) of November 27, 2001, or November 27, 2021.  The deferred fees were capitalized during the quarter ended June 30, 2011 and the Company began amortization.

 

On March 6, 2012, U.S. Patent #8,131,557, entitled “Speech Recognition and Transcription Among Users Having Heterogeneous Protocols,” was issued by the U.S. Patent and Trademark Office.  In accordance with 35 U.S.C. 154, the patent shall be for a term beginning March 6, 2012 and ending 20 years from the application date of the parent application (U.S. Patent #7,558,730) of November 27, 2001, or November 27, 2021.  The deferred fees were capitalized during the quarter ended March 31, 2012 and the Company began amortization.

 

On July 30, 2013, U.S. Patent #8,498,871, entitled “Dynamic Speech Recognition and Transcription Among Users Having Heterogeneous Protocols,” was issued by the U.S. Patent and Trademark Office. In accordance with 35 U.S.C. 154, the patent shall be for a term beginning on July 30, 2013 and ending 20 years from the application date of November 27, 2001, or November 27, 2021.  The deferred fees were capitalized during the quarter ended September 30, 2013 and the Company began amortization.

 

 

On September 22, 2015, U.S. Patent #9,142,217, entitled “Speech Recognition and Transcription Among Users Having Heterogeneous Protocols,” was issued by the U.S. Patent and Trademark Office. In accordance with 35 U.S.C. 154, the patent shall be for a term beginning September 22, 2015 and ending 20 years from the application date of the parent application (US Patent No. 7,558,730) of November 27, 2001, or November 27, 2021.  The deferred fees were capitalized during the quarter ended September 30, 2015 and the Company began amortization.

 

On April 3, 2018, U.S. Patent #9,934,786, entitled “Speech Recognition and Transcription Among Users Having Heterogeneous Protocols,” was issued by the U.S. Patent and Trademark Office.  In accordance with 35 U.S.C. 154, the patent shall be for a term beginning April 3,


10


2018 and ending 20 years from the application date of the parent application (U.S. Patent #7,558,730) of November 27, 2001 or November 27, 2021.  The deferred costs were capitalized during the quarter ended June 30, 2018 and the Company began amortization.

 

 

 

Amortization at December 31, 2018 is as follows:

 

SCHEDULE OF INTANGIBLE ASSETS

 

 

Ended December 31, 2018

 

 

 

 

 

 

U.S. Patent #

 

 

Carrying Value

 

Amortization

 

Balance

7,558,730

 

$

58,277

 

44,574

 

13,703

7,949,534

 

 

3,365

 

2,426

 

939

8,131,557

 

 

5,092

 

3,568

 

1,524

8,498,871

 

 

21,114

 

13,715

 

7,399

9,142,217

 

 

35,068

 

18,882

 

16,186

9,934,786

 

 

4,575

 

936

 

3,639

 

 

$

127,491

$

84,101

$

43,390

 

 

Amortization at March 31, 2019 is as follows:

 

 

Ended March 31, 2019

 

 

 

 

 

 

U.S. Patent #

 

 

Carrying Value

 

Amortization

 

Balance

7,558,730

 

$

58,277

 

45,747

 

12,530

7,949,534

 

 

3,365

 

2,504

 

861

8,131,557

 

 

5,092

 

3,699

 

1,393

8,498,871

 

 

21,114

 

14,348

 

6,766

9,142,217

 

 

35,068

 

20,231

 

14,837

9,934,786

 

 

4,575

 

1,248

 

3,327

 

 

$

127,491

$

87,777

$

39,714

 

 

 

Amortization expense totaled $3,676 and $3,364 for the three months ended March 31, 2019 and 2018.  Estimated aggregate amortization expense for each of the next three years is as follows:

 

SCHEDULE OF FUTURE AMORTIZATION

 

 

Year ending March 31 ,

 

 

 

 

 

 

 

 

2019

 

11,026

2020

 

14,702

2021

 

13,986

 

$

39,714

 

 

Fixed Assets

 

Fixed assets were fully depreciated in the period ending December 31, 2018.  

 

PROPERTY PLANT AND EQUIPMENT

 

 

 

 

December 31,

2018

 

 

 

 

Computer equipment

 

$

6,627

Computer software

 

 

3,640

 

 

 

10,267

Less accumulated depreciation

 

 

(10,267)

Property and Equipment, Net

 

$

0


11


 

 

 

 

 

 

 

March 31, 2019

 

 

March 31, 2018

 

 

 

 

 

 

 

Computer equipment

 

$

6,627

 

$

6,627

Computer software

 

 

3,640

 

 

3,640

 

 

 

10,267

 

 

10,267

Less accumulated depreciation

 

 

(10,267)

 

 

(10,267)

Property and Equipment, Net

 

$

0

 

$

0

 

 

Note 4.     Related Party Transactions

 

Related Parties Transactions and Indebtedness

 

During the years from 2000 through 2013, certain officers advanced the Company working capital to maintain the Company’s operations. The Company owed the officers $6,500 and - at March 31, 2019 and 2018 respectively.  The Company also owed the officers aggregate of $162,382 at March 31, 2019 and December 31, 2018 for accrued payroll.  During the period of three months ending March 31, 2019, and March 31, 2018 the Company paid gross payroll of $69 and $69 to the CEO and for payroll expenses. On September 24, 2018, Walter Geldenhuys, who is our President, Chief Executive Officer and Chief Financial Officer, and who serves as a member of our Board of Directors loaned the Company $9,000.  On February 1, 2019 Walter Geldenhuys advanced the Company $5,000.  During the three month period ending March 31, 2019, AVRS completed Stock Purchase Agreements totaling 1,800,000 shares of AVRS stock to three shareholders.  All shares were paid in the period ending March 31, 2019, for a total amount of $9,000.  At period ending March 31, 2019, one shareholder owned 5.22% of the issued and outstanding stock.  

 

Note 5.     Income Taxes

 

A reconciliation of the U.S. statutory federal income tax rate to the effective rate is as follows.

 

INCOME TAXES

 

 

 

March 31, 2019

 

December 31, 2018

 

 

 

 

 

U.S. federal statutory graduated rate

*

21.00%

 

21.00%

State income tax rate, net of federal benefit

 

0.00%

 

0.00%

Contributed services

 

0.00%

 

0.00%

Costs capitalized under Section 195

 

-21.00%

 

-21.00%

Effective rate

 

0.00%

 

0.00%

 

 

The Company is considered a start-up company for income tax purposes. As of March 31, 2019, the Company had not commenced its trade operations, so all costs were capitalized under Section 195. Accordingly, the Company had no net operating loss carry forwards at March 31, 2019.

 

Note 6 .    Concentration of Risk

 

Beginning March 31, 2010, through March 31, 2019, all noninterest-bearing transaction accounts are fully insured, regardless of the balance of $250,000, at all FDIC-insured institutions.  On March 31, 2019, the Company had cash balances at one FDIC insured financial institution of $8,861 in non-interest bearing accounts that were fully insured by the FDIC.

 

Note 7. Note Payable & Accounts Payable  

 

On April 20, 2015 Advanced Voice Recognition Systems, Inc. (AVRS) entered into a Material Letter Agreement with an unrelated third party  (“AIP” in which they promise to pay to patent legal counsel funds to continue prosecuting Patents on behalf of AVRS.  AVRS promises to pay AIP, or to such other holder of this promissory note (Note) as designate, the principal, together with a premium of ten percent (10%) of Principle and two percent (2%) of proceeds received by Company from a Monetization Event initiated by AIP. Interest was accrued and reported at March 31, 2019.

 

On January 31, 2018 AVRS entered into a Settlement Agreement and Promissory Note with Meyers & Associates, LLC.  AVRS promises to pay the principal sum of Fifty-Two Thousand Three Hundred Eighty-Five Dollars and Forty-Six Cents ($52,385.46) as well as accrued interest. AVRS shall pay $1,000 per month on the first day of each month beginning February 1, 2018 and continuing through July 1, 2018 and pay all remaining unpaid principal and accrued interest (12% annual) on August 1, 2018.  All payments have been paid.


12


 

On August 1, 2018 AVRS and Meyers & Associates entered into an Agreement to Amend Promissory Note. AVRS shall pay $6,000 on or before August 1, 2018, shall pay $1,500 on the first day of each month beginning September 1, 2018 and continuing through November 1, 2018 and shall pay all remaining unpaid principal and accrued interest on December 1, 2018.  All payments have been made.

 

On November 21, 2018 AVRS and Meyers & Associates entered into a Second Agreement to Amend Promissory Note.  AVRS shall pay $20,000 on or before November 21, 2018, shall pay $1,500 on the first day of each month beginning January 1, 2019 and continuing through June 1, 2019 and shall pay all remaining principle and interest on July 1, 2019.  The January, February, March and April payments have been paid.

 

On September 24, 2018, the Company entered into a Promissory Note with Walter Geldenhuys, who is our President, Chief Executive Officer and Chief Financial Officer, and who serves as a member of our Board of Directors.  The Promissory Note is effective as of September 24, 2018 in the principal amount of $9,000 with a maturity date of September 24, 2019.  Interest at 4% per annum was charged and $113.00 accrued at March 31, 2019.  On December 10, 2018 the Company repaid $2,500 leaving a balance of $6,500.

 

On February 1, 2019, Walter Geldenhuys, who is our President, Chief Executive Officer and Chief Financial Officer advanced the Company $5,000.

 

Note 8. Stockholder Equity / (Deficit)  

 

The Company has issued shares of its common stock pursuant to certain agreements as described in Note 1.

 

Note 9 .    Subsequent Events

 

On April 5, 2019 the Company entered into a Stock Purchase Agreement for the private sale to one person or entity an aggregate of 6,000,000 shares of the common stock for aggregate proceeds of $30,000, full payment of which was received in the period.


13


 

 

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

 

The statements contained in this Quarterly Report that are not historical are “forward-looking statements”, which can be identified by use of terms such as “may”, “could”, “should”, “expect”, “plan”, “project”, “intend”, “anticipate”, “believe”, “estimate”, “predict”, “potential”, “pursue”, “target” or “continue”, the negative of such terms or other comparable terminology, although some forward-looking statements may be expressed differently.

The forward-looking statements contained in this 10-Q are largely based on our expectations, which reflect estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors. Although we believe such estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties that are beyond our control. In addition, management’s assumptions about future events may prove to be inaccurate. Management cautions all readers that the forward-looking statements contained in this 10-Q are not guarantees of future performance, and we cannot assure any reader that such statements will be realized or the forward-looking events and circumstances will occur. Actual results may differ materially from those anticipated or implied in the forward-looking statements due to various factors listed in this Quarterly Report. All forward-looking statements speak only as of the date of this 10-Q. We do not intend to publicly update or revise any forward-looking statements as a result of new information, future events or otherwise. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.

Overview

 

We are a software development company headquartered in Scottsdale, Arizona. We specialize in creating interface and application solutions for speech recognition technologies. Our speech recognition software and related firmware was first introduced in 1994 at an industry trade show.  We currently have limited capital resources.  We are not currently engaged in marketing any products.  Our principal assets are our patents.  Our business strategy will be to attempt to interest other companies in entering into license agreements or other strategic relationships and to support and defend our patents through infringement and interference proceedings, as appropriate. We are currently engaged in discussions with firms that could assist us in commercialization of our intellectual assets.

 

Results of Operations

 

We completed a stock exchange on May 19, 2008 and changed our business model. We have not generated any revenue since the stock exchange and do not have any cash generating product or licensing sales.

 

At March 31, 2019, we had current assets of $8,861, and current liabilities of $273,324, as compared to $17,583 current assets and $265,367 in current liabilities at December 31, 2018. Our decrease in current assets is attributed to payments made to promissory notes. Our increase in current liabilities primarily is due to accrued interest.

 

We had a net loss of $29,355 and $27,291 for the three months ended March 31, 2019 and 2018 respectively. The increase in net loss is attributable to increase in professional fees incurred in the three months ended March 31, 2019.

 

Liquidity and Capital Resources

 

For the three months ended March 31, 2019, we used $20,091 of cash in operating activities and -0- in investing activities, and we received $9,000 cash from sales of our common stock and payments and proceeds from notes payable. As a result, for the three months ended March 31, 2019, we recognized a $8,722 decrease in cash on hand. For the three months ended March 31, 2018, $13,762 cash was used in operating activities, $980 cash in investing activities, and we received $15,850 cash from the sale of our common stock, resulting in a $1,108 increase in cash on hand for the period.

 

Historically, our President has loaned or advanced to us funds for working capital on an “as needed” basis. There is no assurance that these loans or advances will continue in the future. At March 31, 2019 and December 31, 2018, we owed our officers an aggregate of $162,382 for accrued payroll.  On September 24, 2018, the Company entered into Promissory Note with Walter Geldenhuys, who is our President, Chief Executive Officer and Chief Financial Officer, and who serves as a member of our Board of Directors.  The Promissory Note is effective as of September 24, 2018 in the principal amount of $9,000 with a maturity date of September 24, 2019.  Interest at 4% per annum was charged and $113 accrued at March 31, 2019.  On February 1, 2019 Walter Geldenhuys advanced the Company $5,000.  Because of our history of losses, and lack of assurance of additional financing, the audit reports on our financial statements at December 31, 2018 and 2017 contained a “going concern” opinion regarding doubt about our ability to continue as a going concern.

 

On March 16, 2015 we entered into a letter agreement with Adapt IP Ventures, LLC (Adapt IP) confirming the retention of Adapt IP to assist us in identifying companies that might be interested in acquiring and / or licensing our patents, to attempt to negotiate financial terms and conditions for acquisition and / or licensing and to assist with collection of compensation from such entities.  Adapt IP will receive a success fee of 15% of net compensation received from such entities based upon Adapt IP’s efforts.  We or Adapt IP may terminate the agreement upon 30 days’ notice to the other party.


14


On April 20, 2015 we made a Promissory Note to Adapt IP for up to $20,000, and Adapt IP agreed to pay to our patent counsel $19,935 for patent work on our behalf.  The Note matures one year from the date of the Note.  We are obligated to repay the funds advanced by Adapt IP plus a premium of 10% of the principal amount and a percentage of proceeds received by us from any monetization event involving the patents.  If we repay the Note within the six months of the date of the Note, the percentage will be 1%, and it will be 2% after six months.  As of March 31, 2019 $8,473 interest has accrued.

 

On August 20, 2015, AVRS entered into a letter agreement with Dominion Harbor Group, LLC pursuant to which Dominion will provide strategic advisory services to AVRS to support the common goal of the acquisition, sale, licensing, prosecution, enforcement, and settlement with respect to AVRS’s intellectual property, including patents held by AVRS. On June 28, 2017 AVRS and Dominion agreed to terminate the August 20, 2015 Letter Agreement.  AVRS did not incur any material early termination penalties in connection of the early termination of the agreement.

 

On November 1, 2016, AVRS entered into a Contingent Fee Agreement with Buether Joe and Carpenter, LLC to represent AVRS in connection with investigating and asserting claims including negotiating license agreements and the filing and prosecution of lawsuits against any potential infringers of the Patent rights. On June 6, 2017 AVRS and Buether Joe and Carpenter, LLC revised the Contingent Fee Agreement as it related to the termination of the August 20, 2015 Dominion Harbor Letter Agreement.

 

On June 21, 2018, Advanced Voice Recognition Systems, Inc. (“ AVRS ”) and Buether Joe & Carpenter, LLC (“BJC) entered into a Letter of Engagement for Legal Services Limited Scope Agreement  (“ Agreement ”) with Schmeiser, Olsen & Watts LLP (“ the Firm ”) pursuant to which the Firm will serve as local counsel in the United States District Court, District of Arizona.   AVRS may terminate the Agreement at any time.

 

In carrying out our business strategy, we will likely continue to incur expenses in defending our patents and pursuing license agreements.  We plan to raise additional funds through future sales of our securities or other means, until such time as our revenues are sufficient to meet our cost structure, and ultimately achieve profitable operations. There is no assurance we will be successful in raising additional capital or achieving profitable operations. Our board of directors may attempt to use non-cash consideration to satisfy obligations that may consist of restricted shares of our common stock. These actions would result in dilution of the ownership interests of existing shareholders and may further dilute our common stock book value.

 

To obtain sufficient funds to meet our future needs for capital, we will from time to time, evaluate opportunities to raise financing through sales of our securities. However, future equity or debt financing may not be available to us at all, or if available, may not be on terms acceptable to us. We do not intend to pay dividends to shareholders in the foreseeable future.

 

U.S. Patent #7,558,730 expands an extremely broad base of features in speech recognition and transcription across heterogeneous protocols.  Costs totaling $58,277 have been capitalized and amortization began in the third quarter 2009.

 

U.S. Patent #7,949,534 is an expansion of the coverage of our second patent and incorporates speech recognition and transcription among transcription engines employing incompatible protocols.  Costs totaling $3,365 have been capitalized and amortization began in the second quarter 2011.

 

U.S. Patent #8,131,557 is an expansion of our second and third patent.  Costs totaling $5,092 have been capitalized and amortization began in the first quarter 2012.

 

U.S. Patent #8,498,871 titled “Dynamic Speech Recognition and Transcription Among Users Having Heterogeneous Protocols” was issued July 30, 2013 by the U.S. Patent and Trademark Office. Costs totaling $21,114 have been capitalized and amortization began in the third quarter 2013.

 

On September 22, 2015, Patent #9,142,217 titled “Speech Recognition and Transcription Among Users Having Heterogeneous Protocols” (an expansion of our fourth patent) was issued by the U.S. Patent and Trademark Office.  In accordance with 35 U.S.C. 154, the patent shall be for a term beginning September 22, 2015 and ending 20 years from the application date of the parent application (U.S. Patent No 7,558,730) of November 27, 2001, or November 27, 2021.  Costs totaling $35,068 have been capitalized and amortization began in the third quarter 2015.

 

On April 3, 2018, U.S. Patent #9,934,786 titled “Speech Recognition and Transcription Among Users Having Heterogeneous Protocols” was issued by the U.S. Patent and Trademark Office.  In accordance with 35 U.S.C. 154, the patent shall be for a term beginning April 3, 2018 and ending 20 years from the application date of the parent application (U.S. Patent No 7,558,730) of November 27, 2001, or November 27, 2021.  Costs totaling $4575 have been capitalized and amortization began in the second quarter 2018.

 

In order for our operations to continue, we will need to generate revenues from our intended operations sufficient to meet our anticipated cost structure.

 

Off-Balance Sheet Arrangements

 

On March 16, 2015 Advanced Voice Recognition Systems, Inc. (AVRS) entered into a material Letter Agreement  with Adapt IP Ventures, LLC  (Adapt IP) in which it retained Adapt IP on an exclusive basis.  Adapt IP will assist AVRS in identifying companies that might be


15


interested in acquiring and / or licensing the Patents, attempt to negotiate financial terms and conditions for the acquisition and /or licensing of the Patents with such Entity(ies) and assist with collection of compensation from such entities.  In connection with services provided under this Agreement, AVRS shall pay Adapt IP a success fee.

 

On August 20, 2015, Advanced Voice Recognition Systems, Inc. (AVRS) entered into a letter agreement with Dominion Harbor Group, LLC (Dominion) pursuant to which Dominion will provide strategic advisory services to AVRS to support the common goal of the acquisition, sale, licensing, prosecution, enforcement, and settlement with respect to AVRS’s intellectual property, including patents held by AVRS. Dominion has agreed to advance costs recommended by it, including court filing fees, discovery and other litigation costs, and patent prosecution costs, up to an aggregate of $10,000,000.   AVRS will be responsible for costs not recommended by Dominion, as well as travel and ordinary business expenses incurred by AVRS.  Except for the advanced costs by Dominion, AVRS will be responsible for any contingency payments to law firms.  On June 28, 2017 AVRS and Dominion agreed to terminate the August 20, 2015 Letter Agreement.  AVRS did not incur any material early termination penalties in connection of the early termination of the agreement.

 

On November 1, 2016, Advanced Voice Recognition Systems, Inc. (“ AVRS ”) entered into a Contingent Fee Agreement (the “ Agreement ”) with Buether Joe & Carpenter, LLC (“ BJC ”) pursuant to which BJC will represent AVRS in connection with investigating and asserting claims relating to certain patents, including the negotiation of license agreements and the filing and prosecution of lawsuits, against any potential infringers of rights associated with such patents (the “ Patent Rights ”)  BJC will handle licensing and litigation activities under the Agreement on a contingent fee basis.  BJC’s fee will depend upon whether AVRS recovers any sums by way of licensing, settlement, trial or otherwise with respect to the Patent Rights.  On June 6, 2017 AVRS and BJC revised the Contingent Fee Agreement as it related to the termination of the August 20, 2015 Dominion Harbor Letter Agreement.

 

 

Item 3. Quantitative and Qualitative Disclosure About Market Risk

 

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.

 

Item 4.   Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

Our management, with the participation of our chief executive officer, who also is our chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) and pursuant to Rules 13a-15(b) and 15d-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of December 31, 2018. Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act, such as this Form 10-Q, is recorded, processed, summarized and reported, within the time period specified in the SEC’s rules and forms, and that such information is accumulated and is communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Based on our evaluation, our chief executive officer, who also is our chief financial officer, concluded that our disclosure controls and procedures are designed at a reasonable assurance level and were fully effective as of March 31, 2019 in providing reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated  to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in internal control over financial reporting.

We regularly review our system of internal control over financial reporting and make changes to our processes and systems to improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, consolidating activities, and migrating processes.

There were no changes in our internal controls over financial reporting that occurred during the period covered by this Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.


16


PART II. OTHER INFORMATION

 

Item 5. Legal Proceedings

 

On November 6, 2017 Advanced Voice Recognition Systems, Inc (AVRS) received notice that Meyers & Associates, LLC (M&A) filed Complaint number 2017CV32482 in Arapahoe County District Court on October 30, 2017. The Complaint relates to purported legal fees owed by AVRS.  On January 31, 2018 AVRS entered into a Settlement Agreement and Promissory Note with Meyers & Associates, LLC (M&A).  AVRS promises to pay the principal sum of Fifty-Two Thousand Three Hundred Eighty-Five Dollars and Forty-Six Cents ($52,385.46) as well as accrued interest. AVRS shall pay $1,000 per month on the first day of each month beginning February 1, 2018 and continuing through July 1, 2018 and pay all remaining unpaid principal and accrued interest on August 1, 2018.  All payments have been paid.

 

On August 1, 2018 AVRS and M&A entered into an Agreement to Amend Promissory Note. AVRS shall pay $6,000 on or before August 1, 2018, shall pay $1,500 on the first day of each month beginning September 1, 2018 and continuing through November 1, 2018 and shall pay all remaining unpaid principal and accrued interest on December 1, 2018 .   All payments have been paid.

 

On November 21, 2018 AVRS and Meyers & Associates entered into a Second Agreement to Amend Promissory Note.  AVRS shall pay $20,000 on or before November 21, 2018, shall pay $1,500 on the first day of each month beginning January 1, 2019 and continuing through June 1, 2019 and shall pay all remaining principle and interest on July 1, 2019.  The January, February, March and April payments have been paid.

 

AVRS filed a Complaint in the United States District Court Northern District for Arizona (Case No. 2-18-cv-2083) on July 3, 2018, and alleges that Apple products infringe U.S. Patent No. 7,558,730 entitled “Speech Recognition and Transcription Among Users Having Heterogeneous Protocols” (the “‘730 Patent”).  AVRS is seeking, among other things, a Judgement of infringement, past damages no less than a reasonable royalty, attorneys’ fees, pre and post Judgement interest and costs including expenses and disbursements and any other relief deemed proper by the Court.

 

The case of AVRS, Inc. v. Apple Inc (Case No. 2-18-cv-2083) is subject to the Mandatory Initial Discovery Pilot Project (“MIDP”).  The parties must comply with the requirements of the MIDP. The Case Management Order, filed on September 24, 2018, set the litigation schedule.  A Claim Construction Hearing is scheduled for May 31, 2019 and a Status Conference is scheduled for July 31, 2019 before Judge David G. Campbell in the Sandra Day O’Connor U.S. Federal Courthouse in Phoenix, Arizona.

 

Item 6. Exhibits

 

ITEM 6. EXHIBITS

 

2.1

Stock Exchange Agreement dated April 14, 2008 between Samoyed Energy Corp. and Certain Shareholders of Advanced Voice Recognition Systems, Inc. (1)

2.2

Agreement and Plan of Merger between Samoyed Energy Corp. and Advanced Voice Recognition Systems, Inc . (2)

2.3

Agreement and Plan of Merger between Advanced Voice Recognition Systems, Inc. and NCC, LLC (7)

3.1

Articles of Incorporation (3)

3.2

Certificate of Change to Articles of Incorporation (4)

3.3

Bylaws (3)

10.1

Termination Agreement dated January 22, 2008 between Samoyed Energy Corp. and 313866 Alberta Ltd. (5)

10.2

Purchase and Sale Agreement dated May 15, 2008 between Samoyed Energy Corp. and Stone Canyon Resources, Inc. (6)

10.3

Purchase Agreement dated January 19, 2016 between Advanced Voice Recognition Systems, Inc. and an Investor. (9)

10.4

Purchase Agreement dated February 19, 2016 between Advanced Voice Recognition Systems, Inc. and an Investor. (10)

10.5

Departure of Directors or Certain Officers dated February 26, 2016 . (11)

10.6

Purchase Agreement dated March 10, 2016 between Advanced Voice Recognition Systems, Inc. and an Investor. (12)

10.7

Purchase Agreement dated March 10, 2016 between Advanced Voice Recognition Systems, Inc. and an Investor. (13)

10.8

Purchase Agreement dated March 22, 2016 between Advanced Voice Recognition Systems, Inc. and an Investor. (14)

10.9

Purchase Agreement dated July 14, 2016 between Advanced Voice Recognition Systems, Inc. and an Investor. (15)

10.10

Purchase Agreement dated September 19, 2016 between Advanced Voice Recognition Systems, Inc. and an Investor. (16)

10.11

Purchase Agreement dated October 11, 2016 between Advanced Voice Recognition Systems, Inc. and an Investor. (17)

10.12

Purchase Agreement dated October 21, 2016 between Advanced Voice Recognition Systems, Inc. and an Investor. (18)

10.13

Letter Agreement dated November 1, 2016 between Advanced Voice Recognition Systems, Inc. and BJC. (19)

10.14

Purchase Agreement dated November 16, 2016 between Advanced Voice Recognition Systems, Inc. and an Investor. (20)

10.15

Purchase Agreement dated December 14, 2016 between Advanced Voice Recognition Systems, Inc. and an Investor. (21)

10.16

Purchase Agreement dated January 12, 2017 between Advanced Voice Recognition Systems, Inc. and an Investor. (22)

10.17

Purchase Agreement dated February 3, 2017 between Advanced Voice Recognition Systems, Inc. and an Investor. (23)

10.18

Purchase Agreement dated February 21, 2017 between Advanced Voice Recognition Systems, Inc. and an Investor. (24)

10.19

Purchase Agreement dated February 27, 2017 between Advanced Voice Recognition Systems, Inc. and an Investor. (25)

10.20

Purchase Agreement dated March 23, 2017 between Advanced Voice Recognition Systems, Inc. and an Investor. (26)

10.21

Letter Agreement March 31, 2017 between Advanced Voice Recognition Systems, Inc. and Schmeiser (27)


17


10.22

Purchase Agreement dated April 14, 2017 between Advanced Voice Recognition Systems, Inc. and an Investor. (28)

10.23

Purchase Agreement dated May 1, 2017 between Advanced Voice Recognition Systems, Inc. and an Investor. (29)

10.24

Purchase Agreement dated May 1, 2017 between Advanced Voice Recognition Systems, Inc. and an Investor. (30)

10.25

Purchase Agreement dated May 4, 2017 between Advanced Voice Recognition Systems, Inc. and an Investor. (31)

10.26

Purchase Agreement dated June 5, 2017 between Advanced Voice Recognition Systems, Inc. and an Investor. (32)

10.27

Purchase Agreement dated June 19, 2017 between Advanced Voice Recognition Systems, Inc. and an Investor. (33)

10.28

Letter of Termination dated June 28, 2017 between Advanced Voice Recognition Systems, Inc. and Dominion (34)

10.29

Purchase Agreement dated October 26, 2017 between Advanced Voice Recognition Systems, Inc. and an Investor. (35)

10.30

Purchase Agreement dated November 9, 2017 between Advanced Voice Recognition Systems, Inc. and an Investor. (36)

10.31

Purchase Agreement dated December 20, 2017 between Advanced Voice Recognition Systems, Inc. and an Investor. (37)

10.32

Purchase Agreement dated January 21, 2018 between Advanced Voice Recognition Systems, Inc. and an Investor. (38)

10.33

Purchase Agreement dated February 21, 2018 between Advanced Voice Recognition Systems, Inc. and an Investor. (39)

10.34

Purchase Agreement dated March 6, 2018 between Advanced Voice Recognition Systems, Inc. and an Investor. (40)

10.35

Purchase Agreement dated March 19, 2018 between Advanced Voice Recognition Systems, Inc. and an Investor. (41)

10.36

Purchase Agreement dated April 5, 2018 between Advanced Voice Recognition Systems, Inc. and an Investor. (42)

10.37

Purchase Agreement dated April 30, 2018 between Advanced Voice Recognition Systems, Inc. and an Investor. (43)

10.38

Purchase Agreement dated April 30, 2018 between Advanced Voice Recognition Systems, Inc. and an Investor. (44)

10.39

Purchase Agreement dated May 18, 2018 between Advanced Voice Recognition Systems, Inc. and an Investor. (45)

10.40

Letter Agreement dated June 21, 2018 between Advanced Voice Recognition Systems, Inc. and Schmeiser (46)

10.41

Purchase Agreement dated July 17, 2018 between Advanced Voice Recognition Systems, Inc. and an Investor. (47)

10.42

Letter Agreement dated August 1, 2018 between Advanced Voice Recognition Systems, Inc. and Meyers & Associate. (48)

10.43

Letter Agreement dated September 24, 2018 between Advanced Voice Recognition Systems, Inc. and W. Geldenhuys. (49)

10.44

Purchase Agreement dated November 14, 2018 between Advanced Voice Recognition Systems, Inc and an Investor (50)

10.45

Letter Agreement dated December 10, 2018 between Advanced Voice Recognition Systems, Inc and Meyers & Associate (51)

10.46

Purchase Agreement dated March 27, 2019 between Advanced Voice Recognition Systems, Inc and an Investor (52)

10.47

Purchase Agreement dated March 27, 2019 between Advanced Voice Recognition Systems, Inc and an Investor (53)

10.48

Purchase Agreement dated March 27, 2019 between Advanced Voice Recognition Systems, Inc and an Investor (54)

10.49

Purchase Agreement dated April 5, 2019 between Advanced Voice Recognition Systems, Inc and an Investor (55)

 

 

 

 

14.1

Code of Ethics (7)

21.1

Subsidiaries of the Registrant (7)

31.1

Section 302 Certification – Principal Executive Officer (8)

31.2

Section 302 Certification – Principal Financial Officer (8)

32.1

Section 906 Certification (8)

 

 

 

 

(1)     Incorporated by reference from the Company’s Current Report on Form 8-K filed on May 1, 2008.

(2)     Incorporated by reference from the Company’s Current Report on Form 8-K filed on June 10, 2008.

(3)     Incorporated by reference from the Company’s Registration Statement on Form SB-2 filed on October 31, 2005.

(4)     Incorporated by reference from the Company’s Current Report on Form 8-K filed on December 18, 2007.

(5)     Incorporated by reference from the Company’s Quarterly Report on Form 10-Q filed on February 14, 2008.

(6)     Incorporated by reference from the Company’s Current Report on Form 8-K filed on May 21, 2008.

(7)      Incorporated by reference from the Company’s Current Report on Form 8-K filed on March 30, 2009 

(8)      Certifications 

(9)     Incorporated by reference from the Company’s Current Report on Form 8-K filed on January 25, 2016

(10)    Incorporated by reference from the Company’s Current Report on Form 8-K filed on February 23, 2016

(11)    Incorporated by reference from the Company’s Current Report on Form 8-K filed on March 1, 2016

(12)    Incorporated by reference from the Company’s Current Report on Form 8-K filed on March 14, 2016

(13)    Incorporated by reference from the Company’s Current Report on Form 8-K filed on March 14, 2016

(14)    Incorporated by reference from the Company’s Current Report on Form 8-K filed on March 22, 2016 

(15)    Incorporated by reference from the Company’s Current Report on Form 8-K filed on July 19, 2016

(16)    Incorporated by reference from the Company’s Current Report on Form 8-K filed on September 19, 2016 

(17)    Incorporated by reference from the Company’s Current Report on Form 8-K filed on October 17, 2016 

(18)    Incorporated by reference from the Company’s Current Report on Form 8-K filed on October 25, 2016 

(19)    Incorporated by reference from the Company’s Current Report on Form 8-K filed on November 7, 2016 

(20)    Incorporated by reference from the Company’s Current Report on Form 8-K filed on November 21, 2016 

(21)    Incorporated by reference from the Company’s Current Report on Form 8-K filed on December 14, 2016 

(22)    Incorporated by reference from the Company’s Current Report on Form 8-K filed on January 13, 2017 

(23)    Incorporated by reference from the Company’s Current Report on Form 8-K filed on February 8, 2017 

(24)    Incorporated by reference from the Company’s Current Report on Form 8-K filed on February 27, 2017 

(25)    Incorporated by reference from the Company’s Current Report on Form 8-K filed on March 3, 2017 

(26)    Incorporated by reference from the Company’s Current Report on Form 8-K filed on March 28, 2017 

(27)    Incorporated by reference from the Company’s Current Report on Form 8-K filed on April 4, 2017 

(28)    Incorporated by reference from the Company’s Current Report on Form 8-K filed on April 18, 2017


18


(29)    Incorporated by reference from the Company’s Current Report on Form 8-K filed on May 4, 2017 

(30)    Incorporated by reference from the Company’s Current Report on Form 8-K filed on May 4, 2017 

(31)    Incorporated by reference from the Company’s Current Report on Form 8-K filed on May 8, 2017

(32)    Incorporated by reference from the Company’s Current Report on Form 8-K filed on June 8, 2017  

(33)    Incorporated by reference from the Company’s Current Report on Form 8-K filed on June 22, 2017

(34)    Incorporated by reference from the Company’s Current Report on Form 8-K filed on June 28, 2017  

(35)    Incorporated by reference from the Company’s Current Report on Form 8-K filed on October 27, 2017

(36)   Incorporated by reference from the Company’s Current Report on Form 8-K filed on November 13, 2017

(37)   Incorporated by reference from the Company’s Current Report on Form 8-K filed on December 21, 2017

(38)   Incorporated by reference from the Company’s Current Report on Form 8-K filed on January 23, 2018

(39)   Incorporated by reference from the Company’s Current Report on Form 8-K filed on February 23, 2018

(40)   Incorporated by reference from the Company’s Current Report on Form 8-K filed on March 9, 2018

(41)   Incorporated by reference from the Company’s Current Report on Form 8-K filed on March 21, 2018

(42)   Incorporated by reference from the Company’s Current Report on Form 8-K filed on April 9, 2018

(43)   Incorporated by reference from the Company’s Current Report on Form 8-K filed on May 1, 2018

(44)   Incorporated by reference from the Company’s Current Report on Form 8-K filed on May 1, 2018

(45)   Incorporated by reference from the Company’s Current Report on Form 8-K filed on May 21, 2018

(46)   Incorporated by reference from the Company’s Current Report on Form 8-K filed on June 28, 2018

(47)   Incorporated by reference from the Company’s Current Report on Form 8-K filed on July 20, 2018

(48)   Incorporated by reference from the Company’s Current Report on Form 8-K filed on August 6, 2018

(49)   Incorporated by reference from the Company’s Current Report on Form 8-K filed on September 28, 2018

(50)   Incorporated by reference from the Company’s Current Report on Form 8-K filed on November 20, 2018

(51)   Incorporated by reference from the Company’s Current Report on Form 8-K filed on December 13, 2018

(52)   Incorporated by reference from the Company’s Current Report on Form 8-K filed on April 2, 2019

(53)   Incorporated by reference from the Company’s Current Report on Form 8-K filed on April 2, 2019

(54)   Incorporated by reference from the Company’s Current Report on Form 8-K filed on April 2, 2019

(55)   Incorporated by reference from the Company’s Current Report on Form 8-K filed on April 16, 2019


19


 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

 

 

 

 

 

 

  ADVANCED VOICE RECOGNITION SYSTEMS, INC.

 

Dated April 29, 2019

By:

/s/ Walter Geldenhuys

 

 

Walter Geldenhuys

 

 

President, Chief Executive Officer, and Chief Financial Officer

(Principal Executive Officer)

 

 

 

Dated April 29, 2019

By:

/s/ Diane Jakowchuk

 

 

Diane Jakowchuk

 

 

Secretary, Treasurer and Principal Accounting Officer

(Principal Accounting Officer)

 

 

 


20

 

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