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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(MARK ONE)

 

 

 

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

 

For the Quarterly Period Ending March 31, 2023

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

98-0511932

(State or other jurisdiction of incorporation or organization)

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

 

1206 E. Warner Road, Suite 101-I , Gilbert , AZ 85296-3133

(Address of principal executive offices)

 

(480) 485-7474

(Registrant's telephone number, including area code)

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock par value $0.001 per share

AVOI

NONE

 

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 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,” non-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

[X]

Smaller reporting company

☒

 

 

Emerging growth company

☒

 

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  May 12, 2023, 547,500,000 shares of common stock are issued and outstanding.

 

Advanced Voice Recognition Systems, Inc.

 

Table of Contents

 

PART I - FINANCIAL INFORMATION

 

 

 

Page

Item 1.

 

Financial Statements

 

 

 

 

 

 

 

Unaudited Condensed Balance Sheets as of March 31, 2023 and December 31, 2022.

3

 

 

 

 

 

 

Unaudited Condensed Statements of Operations for the three ended March 31 2023 and 2022.

4

 

 

 

 

 

 

Unaudited Condensed Statement of Stockholders’ Deficit for the three months ended March 31, 2023 and 2022

5

 

 

 

 

 

 

Unaudited Condensed Statements of Cash Flows for the three months ended March 31, 2023 and 2022.

6

 

 

 

 

 

 

Notes to Unaudited Financial Statements

7

 

 

 

 

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

15

 

 

 

 

 

 

 

 

SIGNATURES

 

 

16

1

 

Item 1. Financial Statements

 

Advanced Voice Recognition Systems, Inc.

Condensed Balance Sheets

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

March 31, 2023

 

 

December 31, 2022

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

$11,523  

 

 

$138  

 

Total Current Assets

 

 

11,523  

 

 

138  

 

 

 

 

 

 

 

 

 

Non-Current Assets

 

 

 

 

 

 

 

Patent, net

 

 

-  

 

 

-  

 

Total Non-Current Assets

 

 

-  

 

 

-  

 

 

 

 

 

 

 

 

 

Total Assets

 

 

$11,523  

 

 

$138  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

Accounts payable

 

 

$61,744  

 

 

$101,778  

 

Payroll

 

 

162,380  

 

 

162,380  

 

Note payable AIP

 

 

19,935  

 

 

19,935  

 

Advance - related party

 

 

84,357  

 

 

44,188  

 

Accrued interest

 

 

7,348  

 

 

15,450  

 

Total Current Liabilities

 

 

335,763  

 

 

343,731  

 

 

 

 

 

 

 

 

 

Total Liabilities

 

 

$335,763  

 

 

$343,731  

 

 

 

 

 

 

 

 

 

Commitments and Contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ Deficit

 

 

 

 

 

 

 

Common stock, $0.001 par value; 547,500,000 shares authorized 547,500,000 (1) and 284,823,973 issued and outstanding, respectively

 

 

$284,920  

 

 

$284,920  

 

Escrow Shares

 

 

262,580  

 

 

262,580  

 

Additional paid-in capital

 

 

7,740,920  

 

 

7,740,920  

 

Accumulated Deficit

 

 

(8,612,660) 

 

 

(8,632,013) 

 

Total Stockholders' Deficit

 

 

(324,240) 

 

 

(343,593) 

 

Total Liabilities and Stockholders' Deficit

 

 

$11,523  

 

 

$138  

 

 

(1) 547,500,000 shares of the Company’s Common stock are issued and outstanding in 2023.  It is comprised of 284,920,269 paid shares and 262,579,731 shares of the Company’s Common stock in Escrow.

 

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

2

Advanced Voice Recognition Systems, Inc.

Condensed Statements of Operations

(Unaudited)

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Three Months Ended

 

 

 

March 31,

 

March 31,

 

 

2023

 

2022

 

 

 

 

 

 

 

Sales

 

$-  

 

$-  

 

Cost of goods sold

 

-  

 

-  

 

Gross profit

 

-  

 

-  

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

General and administrative:

 

 

 

 

 

Compensation

 

69  

 

4,023  

 

Professional fees

 

28,700  

 

13,070  

 

Office

 

1,291  

 

1,959  

 

Other

 

748  

 

632  

 

Total operating expenses

 

30,808  

 

19,684  

 

 

 

 

 

 

 

Loss from operations

 

(30,808) 

 

(19,684) 

 

 

 

 

 

 

 

Other income and (expense):

 

 

 

 

 

Gain on early ext. of debt

 

50,445  

 

-  

 

Interest expense

 

(284) 

 

(499) 

 

Net other income

 

50,161  

 

(499) 

 

 

 

 

 

 

 

Gain before income taxes

 

19,353  

 

(20,183) 

 

 

 

 

 

 

 

Provision for income taxes

 

-  

 

-  

 

 

 

 

 

 

 

Net Income (Loss)

 

$19,353  

 

$(20,183) 

 

 

 

 

 

 

 

Basic and diluted gain (loss) per common share*

 

$-  

 

$-  

 

 

 

 

 

 

 

Weighted average number of common shares

 

547,500,000  

 

284,823,973  

 

 

 

 

 

 

 

 

*less than $0.01 per share

The accompanying notes are an integral part of these financial statements

3

 

 

Advanced Voice Recognition Systems, Inc.

Condensed Statement of Stockholders’ Deficit

(Unaudited)

 

For the period ending March 31, 2022

 

 

 

 

Common Stock

 

 

Additional

 

 

Accumulated

 

 

 

 

Shares

 

Par Value

 

 

Paid In Capital

 

 

Deficit

 

 

Total

Balance at December 31, 2021

 

284,586,935 

 

284,587 

 

 

7,998,833 

 

 

(8,583,424) 

 

 

(300,004) 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales of Common Stock

 

333,334 

 

333 

 

 

4,667 

 

 

-  

 

 

5,000 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss

 

- 

 

- 

 

 

- 

 

 

(20,183) 

 

 

(20,183) 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2022

 

284,920,269 

 

284,920 

 

 

8,003,500 

 

 

(8,603,607) 

 

 

(315,187) 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the period ending March 31, 2023

 

 

 

 

Common Stock

 

 

Additional

 

 

Accumulated

 

 

 

 

Shares

 

Par Value

 

 

Paid In Capital

 

 

Deficit

 

 

Total

Balance at December 31, 2022

 

547,500,000   

 

547,500   

 

 

7,740,920   

 

 

(8,632,013)  

 

 

(343,593)  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales of Common Stock

 

-   

 

-   

 

 

-   

 

 

-   

 

 

-   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income

 

-   

 

-   

 

 

-   

 

 

19,353  

 

 

19,353  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2023

 

547,500,000   

 

547,500   

 

 

7,740,920   

 

 

(8,612,660)  

 

 

(324,240)  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these financial statements

4

Advanced Voice Recognition Systems, Inc.

Condensed Statements of Cash Flows

(Unaudited)

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

2023

 

 

2022

 

 

 

 

 

 

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

Net income (loss)

 

 

$19,353  

 

 

$(20,183) 

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

 

 

 

 

 

 

Amortization and depreciation

 

 

-  

 

 

-  

Changes in operating assets:

 

 

 

 

 

 

Changes in operating liabilities:

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

 

(48,137) 

 

 

2,232  

Net cash used in operating activities

 

 

(28,784) 

 

 

(17,951) 

 

 

 

 

 

 

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

Payments for deferred costs

 

 

-  

 

 

-  

Net cash used in investing activities

 

 

-  

 

 

-  

 

 

 

 

 

 

 

Cash Flows from Financing Activities:

 

 

 

 

 

 

Proceeds from sale of common stock

 

 

-  

 

 

5,000  

Advance from related party

 

 

40,169  

 

 

3,800  

Net cash provided by financing activities

 

 

40,169  

 

 

8,800  

 

 

 

 

 

 

 

Net change in cash

 

 

11,385  

 

 

(9,151) 

 

 

 

 

 

 

 

Cash at Beginning of Period

 

 

138  

 

 

12,148  

 

 

 

 

 

 

 

Cash at End of Period

 

 

$11,523  

 

 

$2,997  

 

 

 

 

 

 

 

Supplemental Disclosure of Cash Flow Information:

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

 

Interest

 

 

$-  

 

 

$498  

Income taxes

 

 

$-  

 

 

$-  

 

 

 

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

5

Advanced Voice Recognition Systems, Inc.

Notes to Unaudited Condensed 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 continues to explore all options to monetize and enforce our patent portfolio through patent enforcement and licensing of the six patents issued.

 

Stock Purchase Agreements

 

During year ended December 31, 2022, the Company entered into a Stock Purchase Agreements for the private sale to one person or entity of an aggregate of 333,334 shares of the common stock for aggregate proceeds of $5,000 which was paid in full in the period.  On December 29, 2022, the Company entered into an Escrow agreement for the purchase of 262,579,731 shares of the Company’s Common Stock.  The shares remain in Escrow until full payment is made (Note 7).

 

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.

 

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.

 

Note 2.     Significant Accounting Policies

 

Unaudited Financial Information

 

The accompanying financial information at March 31, 2023 and for the three months ended March 31, 2023 and 2022 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, 2023 and its operating results for the three months ended March 31, 2023 and 2022 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, 2022.  The results of operations for the three months ended March 31, 2023 are not necessarily an indication of operating results to be expected for the year ending December 31, 2023.

 

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 $324,240 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, 2022 the Company received an aggregate of $5,000 from the sale of shares in private offerings of its common stock.  During the three months ended March 31, 2023, the Company received an aggregate of $40,000 from the issuance of related party advances.  There is no guarantee that AVRS will be able to provide the capital required for the Company to continue as a going concern.

 

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.

 

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, 2023 of $11,523, and $138 at December 31, 2022.  No amounts resulted from cash equivalents.

 

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.  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”). The patent was fully amortized in the fourth quarter 2021.

 

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. The patent was fully amortized in the fourth quarter 2021.

 

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. The patent was fully amortized in the fourth quarter 2021.

6

 

 

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. The patent was fully amortized in the fourth quarter 2021.

 

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. The patent was fully amortized in the fourth quarter 2021.

 

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, 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. The patent was fully amortized in the fourth quarter 2021.

 

Amortization at December 31, 2022 is as follows:

 

SCHEDULE OF INTANGIBLE ASSETS

 

 

Ended December 31, 2022

 

 

 

 

 

 

U.S. Patent #

 

 

Carrying Value

 

Amortization

 

Balance

7,558,730

 

 

$              58,277

 

58,277

 

-

7,949,534

 

 

3,365

 

3,365

 

-

8,131,557

 

 

5,092

 

5,092

 

-

8,498,871

 

 

21,114

 

21,114

 

-

9,142,217

 

 

35,068

 

35,068

 

-

9,934,786

 

 

4,575

 

4,575

 

-

 

 

$            127,491

 

$        127,491

 

$          -

 

 

Amortization at March 31, 2023 is as follows:

 

SCHEDULE OF INTANGIBLE ASSETS

 

 

Ended March 31, 2023

 

 

 

 

 

 

U.S. Patent #

 

 

Carrying Value

 

Amortization

 

Balance

7,558,730

 

 

$              58,277

 

58,277

 

-

7,949,534

 

 

3,365

 

3,365

 

-

8,131,557

 

 

5,092

 

5,092

 

-

8,498,871

 

 

21,114

 

21,114

 

-

9,142,217

 

 

35,068

 

35,068

 

-

9,934,786

 

 

4,575

 

4,575

 

-

 

 

$            127,491

 

$        127,491

 

$          -

 

 

The Patents were fully amortized in the fourth quarter 2021.

7

Note 4.     Related Party Transactions

 

Related Parties Transactions and Indebtedness

 

The Company owed the officers aggregate of $162,380 at March 31, 2023 and $162,380 December 31, 2022 for accrued payroll.  During the period of three months ending March 31, 2023 and March 31, 2022 the Company paid payroll expenses of $69 and $4,023, respectively. During the period of three months ending March 31, 2023 and March 31, 2022 our Secretary Treasurer advanced the Company operating expenses of $169 and $18,500 for operating expenses.

 

On February 2, 2023, the Company issued a promissory note to a related party for $10,000 with interest of 10% per annum with a scheduled maturity of February 1, 2024.

 

On February 28, 2023, the Company issued a promissory note to a related party for $15,000 with interest of 10% per annum with a scheduled maturity of February 27, 2024.

 

On March 31, 2023, the Company issued a promissory note to a related party for $15,000 with interest of 10% per annum with a scheduled maturity of March 30, 2024.

 

Note 5.Note Payable & Accounts Payable 

 

On April 20, 2015, the Company 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.

 

Note 6.Stockholder Equity / (Deficit) 

 

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

 

Note 7.    Subsequent Events

 

Change in Control

On December 29, 2022, the Company entered into an Escrow agreement for the purchase of 262,579,731 shares of the Company’s Common Stock.  The shares remained in Escrow until full payment is made.  On April 19, 2023 payment of $305,682 was received from JJW Investments, LLC (“JJW”) for the 262,579,731 shares of the Company’s Common Stock at representing 48% of the Company’s issued and outstanding common stock.  JJW purchased an additional 17,000,000 shares representing 3% of the Company’s issued and outstanding common stock for a total 51% of the Company.

 

Appointment of CFO

On May 8, 2023, Walter Geldenhuys resigned from his position of Chief Financial Officer of the Company and Chung Cam was appointed Chief Financial Officer of the Company.  Mr. Cam will devote his full time and attention to his duties and will receive a monthly salary of $15,000 for the first 3 months and $20,000 monthly thereafter, payable in accordance with the Company’s standard payroll practices, provided that such amount may be deferred as determined by Mr. Cam or the Board to cover other Company expenses.

8

 

 

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, 2023, we had current assets of $11,523 and current liabilities of $335,763, as compared to $138 current assets and $343,731 in current liabilities at December 31, 2022.  Our increase in current assets is attributed issuing related party promissory notes. Our decrease in current liabilities is due to a debt extinguishment from Accounts Payable.

 

We had a net gain (loss) of $19,535 and ($20,183) for the three months ended March 31, 2023 and 2022, respectively. The gain is attributable to gains on extinguishment of debt.

 

Liquidity and Capital Resources

 

For the three months ended March 31, 2023, we used $28,784 of cash in operating activities and -0- in investing activities, and we received $40,169 advance from related party.  As a result, for the three months ended March 31, 2023 we recognized a $11,385 increase in cash on hand. For the three months ended March 31, 2022, $17,951 cash was used in operating activities, $-0- cash in investing activities, and we received $5,000 cash from the sale of our common stock, and $3,800 advance from related party resulting in a $9,151 decrease 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, 2023 and December 31, 2022, we owed our officers an aggregate of $162,381 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 the Promissory Note September 24, 2019.  Interest at 4% per annum was charged and accrued at December 31, 2018.  The Company repaid $2,500 of the note on December 10, 2018.  During 2019 the Company repaid $6,500, paying the note in full on December 27, 2019.  Interest at 4% per annum was charged and accrued at December 31, 2019.  Accrued interest of $254 was paid on February 28, 2020.  On January 31, 2020 the Company advanced Walter Geldenhuys $1,000.  Mr. Geldenhuys repaid the advance on February 28, 2020. On June 21, 2021 Mr. Geldenhuys advanced the Company $4200.  The advance was paid in full on January 7, 2022.  In the three months ending March 31, 2023 our Secretary Treasurer advanced the Company a total of $169 and related party advanced $40,000 in promissory notes.

 

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.

 

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, 2023, $19,935 of interest has been accrued.

 

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.  The patent was fully amortized in the fourth quarter 2021.

 

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. The patent was fully amortized in the fourth quarter 2021.

 

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. The patent was fully amortized in the fourth quarter 2021.

 

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.  The patent was fully amortized in the fourth quarter 2021.

 

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. The patent was fully amortized in the fourth quarter 2021.

 

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. The patent was fully amortized in the fourth quarter 2021.

 

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

9

 

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 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.

 

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 was 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, 2021. 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.

 

We have identified, as of December 31, 2022 and 2021, a lack of segregation of duties in accounting and financial reporting activities, which we do not believe is a material weakness.  The size of our business necessarily imposes practical limitations on the effectiveness of those internal control practices and procedures that rely on the segregation of duties.  Our chief executive officer and chief financial officer work closely and review all day-to-day transactional activities with the secretary Treasurer.  The volume of the transactions of the Company is limited.

 

Management believes this lack of segregation of duties in accounting and financial reporting did not result in material inaccuracies or omissions of material fact and, to the best of its knowledge, believes that the financial statements for the years ended December 31, 2022 and 2021 fairly present in all material respects the financial condition and results of operations for the Company in conformity with GAAP.  There is, however, a reasonable possibility that a material misstatement of the annual or interim financial statements would not have been prevented or detected as a result of this weakness.

Based on our evaluation, our chief executive officer, who also was 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, 2023 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.

 

 

PART II. OTHER INFORMATION

 

Item 5. Legal Proceedings

 

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.

 

On July 22, 2019 Apple, Inc. submitted a petition for Inter Partes Review (“IPR”) of the AVRS patent.  It was ordered in the case of AVRS, Inc. v. Apple Inc (Case No. 2-18-cv-2083) that the parties’ stipulation was granted and the case is stayed pending the resolution of the IPR proceeding.  Buether Joe and Carpenter, LLC (“BJC”), our representation in the AVRS v. Apple litigation will represent AVRS in the IPR. The IPR response to the Patent Trial and Appeal Board (“PTAB”) was made on November 8, 2019.  The PTAB has instituted the IPR on some of the grounds asserted by Apple and denied institution on other grounds asserted by Apple.  This means that the IPR will proceed but only on the grounds instituted by the PTAB.  Due to the interruption from COVID-19 the Company responded to the PTAB on September 18, 2020.  Oral arguments were presented remotely on October 26, 2020.  On January 13, 2021 the PTAB Final Written Decision under 35 U.S.C. § 318(a) in Inter Partes Review petitioned by Apple Inc.  The decision found that claims 15 and 17 of AVRS’s U.S. Patent No. 7,558,730 B2 were invalid under 35 U.S.C. § 103(a).  On March 17, 2021 AVRS filed an appeal to the United States Court of Appeals for the Federal Circuit Docket Number 2021-1745. On July 26, 2021 the Opening Brief was filed in the Advanced Voice Recognition Systems, Inc v. Apple, Inc. case.  Apple filed a response on October 22, 2021.  The Federal Docket was argued in the Court of Appeals in December 2021. Oral arguments were held on March 10, 2022.  On March 15, 2022, the United States Court of Appeals for the Federal Circuit issued a Judgement Affirming the United States Patent and Trademark Office, Patent Trial and Appeal Board in No. IPR2019-01352.  The decision found that claims 15 and 17, the only claims challenged by Apple out of a total of 18 claims of Advanced Voice Recognition Systems, Inc. (AVRS) U.S. Patent No. 7,558,730 B2 were invalid under 35 U.S.C. § 103(a). AVRS is exploring all options to enforce and monetize our patent portfolio by way of patent enforcement litigation and licensing agreements as well as development of new patents in the Voice Recognition industry.

10

 

Item 6. Exhibits

 

10.27

Stock Purchase Agreement with an effective date of April 19, 2023 between Advanced Voice Recognition Systems, Inc and an Investor indicating a change of control and incorporated by reference to the Registrant’s Form 8-K filed on April 24, 2023. The Exhibit was inadvertently marked as exhibit 10.2.

 

10.28

Employment Agreement of Chung Cam appointing him as Chief Financial Officer effective May 8, 2023 and incorporated by reference to the Registrant’s Form 8-K filed on May 12, 2023. The Exhibit was inadvertently marked as exhibit 10.3.

 

 

 

31.1

Section 302 Certification – Principal Executive Officer (1)

31.2

Section 302 Certification – Principal Financial Officer (1)

32.1

Section 906 Certification (1)

 

 

 

 

 

(1)     Certifications 

11

 

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