UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2016
OR
o 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.) |
7659 E. Wood Drive
Scottsdale, 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 o
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 (or for such shorter period that the registrant was required to submit and post such files).
Yeso No x [Files not required.]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o Accelerated filer o
Non-accelerated filer o Smaller reporting company x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No x
As of August 1, 2016, 228,195,268 shares of Advanced Voice Recognition Systems, Inc. common stock, $0.001 par value, were outstanding.
Advanced Voice Recognition Systems, Inc.
Table of Contents
Advanced Voice Recognition Systems, Inc.
Balance Sheets
| JUNE 30, | DECEMBER 31, | ||||||
| 2016 | 2015 | ||||||
| ASSETS | (Unaudited) | (Audited) | |||||
| Current Assets | |||||||
| Cash | $ | 7,030 | $ | 8,997 | |||
| Prepaid Expenses | — | — | |||||
| Total Current Assets | 7,030 | 8,997 | |||||
| Fixed Assets | |||||||
| Computer software and equipment, net | 369 | 737 | |||||
| Total Fixed Assets | 369 | 737 | |||||
| Intangible Assets | |||||||
| Patent, net | 73,384 | 80,112 | |||||
| Deferred costs | 1,485 | 1,485 | |||||
| Total Intangible Assets | 74,869 | 81,597 | |||||
| Total Assets | $ | 82,268 | $ | 91,331 | |||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | |||||||
| Current Liabilities | |||||||
| Accounts payable | $ | 100,009 | $ | 92,999 | |||
| Accrued Payroll | 162,383 | 162,383 | |||||
| Note Payable AIP | 19,935 | 19,935 | |||||
| Accrued Interest | 1,994 | 1,994 | |||||
| Indebtedness to related parties (Note 4) | — | 600 | |||||
| Total Current Liabilities | 284,321 | 277,911 | |||||
| Stockholders' Deficit | |||||||
| Common stock, $.001 par value; 547,500,000 shares authorized | |||||||
| 227,345,268 and 224,596,268, issued and outstanding respectively | $ | 227,345 | $ | 224,596 | |||
| Additional paid-in capital | 7,720,998 | 7,702,247 | |||||
| Accumulated Deficit | (8,150,396) | (8,113,423) | |||||
| Total Stockholders' Deficit | (202,053) | (186,580) | |||||
| Total Liabilities and Stockholders' Deficit | $ | 82,268 | $ | 91,331 |
The accompanying notes are an integral part of these financial statements.
Advanced Voice Recognition Systems, Inc.
Statements of Operations
(Unaudited)
| FOR THE 3 MONTHS ENDED | FOR THE 6 MONTHS ENDED | ||||||||||||
|
| JUNE 30, |
| JUNE 30, | ||||||||||
|
| 2016 |
| 2015 |
| 2016 |
| 2015 | ||||||
| Sales | $ | — | $ | — | $ | — | $ | — | |||||
| Cost of goods sold | — | — | — | — | |||||||||
| Gross profit | |||||||||||||
| Operating expenses: | |||||||||||||
| General and administrative: | |||||||||||||
| Compensation | 2,310 | — | 3,871 | — | |||||||||
| Professional fees | 2,491 | 8,671 | 17,835 | 18,657 | |||||||||
| Office | 5,561 | 4,106 | 11,268 | 10,060 | |||||||||
| Travel | 188 | 54 | 319 | 559 | |||||||||
| Other | 245 | — | 805 | 152 | |||||||||
| Total operating expenses | 10,795 | 12,831 | 34,098 | 29,428 | |||||||||
| Loss from operations | (10,795) | (12,831) | (34,098) | (29,428) | |||||||||
| Other income and (expense): | |||||||||||||
| Interest expense | (1,467) | (1,707) | (2,874) | (2,872) | |||||||||
| Net other expense | (1,467) | (1,707) | (2,874) | (2,872) | |||||||||
| Loss before income taxes | (12,262) | (14,538) | (36,972) | (32,300) | |||||||||
| Net Loss | $ | (12,262) | $ | (14,538) | $ | (36,972) | $ | (32,300) | |||||
| Basic and diluted loss per common share | $ | (0) | $ | (0) | $ | (0) | $ | (0) | |||||
| Weighted average number of common shares outstanding | 227,345,268 | 219,881,935 | 226,494,712 | 219,585,268 | |||||||||
*less than $0.01 per share
The accompanying notes are an integral part of these financial statements
Advanced Voice Recognition Systems, Inc.
Statements of Cash Flows
(Unaudited)
The accompanying notes are an integral part of these financial statements.
Advanced Voice Recognition Systems, Inc.
(A Development Stage Company)
Notes to Unaudited Financial Statements
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 plans to focus its technologies for the medical profession because of the profession’s present extensive use of dictation and its need for multiple applications of speech recognition technology in the generation of reports, documents and medical bills. Additionally the Company plans to focus on server based dictation and transcription, visual voicemail and the voicemail to text market.
Stock Exchange Agreement
On April 28, 2008, the Company entered into a Stock Exchange Agreement (“the Agreement”) with Samoyed Energy Corp., a Nevada corporation (“Samoyed”), which resulted in a reverse acquisition. The Agreement provided for the reorganization of AVRS with Samoyed. In connection with the Agreement, Samoyed acquired all of the issued and outstanding common shares of AVRS in exchange for 140 million shares of Samoyed’s common stock. On May 19, 2008 at the closing of the Agreement, the former shareholders of AVRS owned approximately 85% of the outstanding common stock of Samoyed, resulting in a change in control.
For accounting purposes, this acquisition has been treated as a reverse acquisition and recapitalization of AVRS, with Samoyed the legal surviving entity. Since Samoyed had, prior to the recapitalization, minimal assets and limited operations, the recapitalization has been accounted for as the sale of 24,700,008 shares of AVRS common stock for the net liabilities of Samoyed. Therefore, the historical financial information prior to the date of the recapitalization is the financial information of AVRS. Costs of the transaction have been charged to the period in which they are incurred.
In connection with the Agreement, a shareholder of Samoyed holding an aggregate of 3.5 million shares of Samoyed’s common stock made payments totaling $565,651 since 2008 in lieu of tendering shares to the Company. The Company received the final payment of $6,000 on February 15, 2012.
Stock Purchase Agreements
During the year ended December 31, 2015 the Company entered into Stock Purchase Agreements for the private sale of an aggregate of 5,400,000 shares of the common stock for aggregate proceeds of $32,500, all of which was received in 2015. During the six months ended June 30, 2016, the Company entered into Stock Purchase Agreements for the private sale of an aggregate of 2,750,000 shares of the common stock for aggregate proceeds of $21,500, full payment of which was received in the period.
Agreement and Plan of Merger
On March 25, 2009, the Company entered into an Agreement and Plan of Merger (“Agreement and Plan of Merger”) with its wholly-owned subsidiary, NCC, LLC, a Colorado limited liability company, whereby NCC, LLC merged with and into the Company pursuant to Section 92A.180 of the Nevada Business Corporations Act. Upon consummation of the Agreement and Plan of Merger: (i) NCC, LLC ceased to exist; (ii) the Company’s membership interests in NCC, LLC automatically were canceled or retired and ceased to exist, without any consideration delivered in exchange thereof; (iii) the title to all estate, property rights privileges, powers and franchise assets and/or other rights owned by NCC, LLC became vested in the Company without reversion or impairment; and (iv) all liabilities of any kind of NCC, LLC became vested in the Company.
Retention Agreement
On March 16, 2015 the Company entered into a letter agreement with Adapt IP Ventures, LLC (Adapt IP) confirming the retention of Adapt IP to assist the Company in identifying companies that might be interested in acquiring and / or licensing the Company’s 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 Adapts IP’s efforts. The Company or Adapt IP may terminate the agreement upon 30 days’ notice to the other party.
On August 20, 2015, Advanced Voice Recognition Systems, Inc. (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.The Company or Dominion may terminate the agreement upon 30 days’ notice to the other party.
Promissory Note
On April 20, 2015 the Company made a Promissory Note to Adapt IP Ventures, LLC (Adapt IP) for up to $20,000, and Adapt IP agreed to pay to the Company’s patent counsel $19,935 for patent work on behalf of the Company. The Note matures one year from the date of the Note. The Company is 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 the Company from any monetization event involving the patents. If the Company repays 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.
Unaudited Financial Information
The accompanying financial information at June 30, 2016 and for the six months ended June 30, 2016 and 2015 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 June 30, 2016 and its operating results for the six months ended June 30, 2016 and 2015 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, 2015. The results of operations for the six months ended June 30, 2016 are not necessarily an indication of operating results to be expected for the year ending December 31, 2016.
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. 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, 2015 the Company received an aggregate of $32,500 from the sale of shares in private offerings of its common stock. During the six months ended June 30, 2016 the Company received an aggregate of $21,500 from the sale of shares in private offerings of its common stock. The Company intends to raise capital through private offerings until it is profitable.
Additionally, the Company continues to work with Adapt IP and Dominion Harbor Group to raise capital through acquisition, sale, licensing, prosecution, enforcement, and settlement with AVRS’s intellectual property.
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 June 30, 2016 of $7,030, and $2,703 cash at June 30, 2015. 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.
Revenue Recognition
Revenue from the sale of inventory is recognized on the date of sale, title and risk of loss have transferred to the purchaser, the fees are fixed or determinable and collection is reasonably assured. Revenue from the performance of services is recognized when services have been completed and collection is probable. There are no multiple element sales and no history of material returns. The revenue recognition policies relate to operations performed prior to the Company’s reverse acquisition.
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. The Company did not record a cumulative effect adjustment related to the adoption of 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. If a patent application is denied or expires, the costs incurred are charged to operations in the year the application is denied or expires. 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 Statement of Financial Accounting Standard (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” now referred to as 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, 2015. Impairment recorded for each of the six months ended June 30, 2016 and 2015 was $-0-. See Note 3.
Loss per Common Share
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 June 30, 2016 and 2015, 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.
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 November 13, 1995 the Company filed a patent application with the U.S. Patent and Trademark Office, which was granted on September 28, 1999 as U.S. Patent #5,960,447, “Word Tagging and Editing System for Speech Recognition”. In accordance with 35 U.S.C. 154, the term for the above referenced patent shall be for a period beginning on the date on which the patent issues and ending 20 years from the date on which the application for the patent was filed in the United States. The above referenced U.S. Patent expired on November 13, 2015.
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 March 9, 2010 the U.S. Patent and Trademark Office declared interference between the Company as Senior Party and Allvoice Developments, US LLC as Junior Party. Due to the absence of a decision by the end of 2010, in the 4th quarter of 2010, AVRS impaired 100% of the deferred costs associated with the interference, resulting in a $1,068,860 impairment loss. On April 27, 2012, the BPAI entered a judgment denying the Company’s motions. On May 29, 2012, AVRS filed a Request for Rehearing in the BPAI. On December 19, 2012 the BPAI entered a judgment denying the request for rehearing. The Company decided not to appeal as additional litigation would be costly and time-consuming and would divert the attention of management and key personnel from business operations.
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 June 27, 2013, the Company filed two additional continuation applications 13/928/381 and 13/928,383 with the U.S. Patent and Trademark Office entitled “Speech Recognition and Transcription Among Users Having Heterogeneous Protocols.” On August 31, 2015, Application 13/928,381 was abandon by the Company. Deferred costs were charged to operations the quarter ended September 30, 2015.
On August 10, 2015, the Company filed a continuation application with the U.S. Patent and Trademark Office entitled “Speech Recognition and Transcription Among Users Having Heterogeneous Protocols.”
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.
Amortization at June 30, 2016 is as follows:
SCHEDULE OF INTANGIBLE ASSETS
| Ended December 31, 2015 | |||||||
| U.S. Patent # | Carrying Value | Amortization | Balance | ||||
| 5,960,447 | $ | 63,247 | $ | 63,247 | $ | -- | |
| 7,558,730 | 58,277 | 30,498 | 27,779 | ||||
| 7,949,534 | 3,365 | 1,487 | 1,878 | ||||
| 8,131,557 | 5,092 | 2,002 | 3,090 | ||||
| 8,498,871 | 21,114 | 6,119 | 14,995 | ||||
| 9,142,217 | 35,068 | 2,698 | 32,370 | ||||
| $ | 186,163 | $ | 106,051 | $ | 80,112 | ||
| Ended June 30, 2016 | |||||||
| U.S. Patent # | Carrying Value | Amortization | Balance | ||||
| 5,960,447 | $ | 63,247 | $ | 63,247 | $ | -- | |
| 7,558,730 | 58,277 | 32,844 | 25,433 | ||||
| 7,949,534 | 3,365 | 1,643 | 1,722 | ||||
| 8,131,557 | 5,092 | 2,264 | 2,828 | ||||
| 8,498,871 | 21,114 | 7,385 | 13,729 | ||||
| 9,142,217 | 35,068 | 5,396 | 29,672 | ||||
| $ | 186,163 | $ | 112,779 | $ | 73,384 | ||
Amortization expense totaled $6,728 and $4,031 for the six months ended June 30, 2016 and 2015, respectively. Estimated aggregate amortization expense for each of the next five years is as follows:
SCHEDULE OF FUTURE AMORTIZATION
|
|
|
|
| Ending June 30, 2016 |
|
|
|
|
|
|
| 2016 |
| 6,726 |
| 2017 |
| 13,454 |
| 2018 |
| 13,454 |
| 2019 |
| 13,454 |
| 2020 |
| 13,454 |
| Thereafter |
| 12,842 |
| Total | $ | 73,384 |
Fixed Assets
Depreciation expense totaled $368 and $587 for the six months ended June 30, 2016 and 2015.
PROPERTY PLANT AND EQUIPMENT
|
|
|
| December 31, 2015 |
|
| December 31, 2014 |
|
|
|
|
|
|
|
|
| Computer equipment |
| $ | 6,627 |
| $ | 6,627 |
| Computer software |
|
| 3,640 |
|
| 3,640 |
|
|
|
| 10,267 |
|
| 10,267 |
| Less accumulated depreciation |
|
| (9,530) |
|
| (8,355) |
| Computer software and equipment, net |
| $ | 737 |
| $ | 1,912 |
|
|
|
| June 30, 2016 |
|
| June 30, 2015 |
|
|
|
|
|
|
|
|
| Computer equipment |
| $ | 6,627 |
| $ | 6,627 |
| Computer software |
|
| 3,640 |
|
| 3,640 |
|
|
|
| 10,267 |
|
| 10,267 |
| Less accumulated depreciation |
|
| (9,898) |
|
| (8,941) |
| Computer software and equipment, net |
| $ | 369 |
| $ | 1,326 |
Indebtedness to Related Parties
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 $-0- at June 30, 2016 and $600 at December 31, 2015. The Company also owed the officers aggregate of $162,383 at June 30, 2016 and December 31, 2015 for accrued payroll.
A reconciliation of the U.S. statutory federal income tax rate to the effective rate is as follows.
INCOME TAXES
|
| December 31, | ||||
|
| 2015 |
| 2014 | ||
|
|
|
|
|
|
|
| U.S. federal statutory graduated rate |
|
| 34.00% |
| 34.00% |
| State income tax rate, net of federal benefit |
|
| 0.00% |
| 0.00% |
| Rent &services |
|
| -3.40% |
| -10.09% |
| Costs capitalized under Section 195 |
|
| -30.60% |
| -23.91% |
|
|
|
|
| ||
| Effective rate |
|
| 0.00% |
| 0.00% |
|
|
|
|
| ||
The Company is considered a start-up company for income tax purposes. As of June 30, 2016, 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 June 30, 2016.
Beginning March 31, 2010, through June 30, 2016, all noninterest-bearing transaction accounts are fully insured, regardless of the balance of the account, at all FDIC-insured institutions. On June 30, 2016, the Company had cash balances at one FDIC insured financial institution of $7,030 in non-interest bearing accounts that were fully insured by the FDIC.
The Company has issued shares of its common stock pursuant to certain agreements as described in Note 1.
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 June 30, 2016 we accrued $2,874 of interest on accounts payable and paid $3,500 in gross payroll for the period.
At June 30, 2016, we had current assets of $7,030, and current liabilities of $284,321, as compared to $2,703 current assets and $260,417 in current liabilities at June 30, 2015. Our increase in current assets is attributed to increased sales of shares of our common stock. Our decrease in current liabilities primarily is due to reduced professional fees.
We had a net loss of $36,972 and $67,740 for the six months ended June 30, 2016 and 2015 respectively. The decrease in net loss is attributable to reduced professional fees incurred in the six months ended June 30, 2016.
Liquidity and Capital Resources
For the six months ended June 30, 2016, we used $22,867 of cash in operating activities and $-0- of cash in investing activities, and we received $21,500 cash from sales of our common stock. As a result, for the six months ended June 30, 2016, we recognized a $1,967 decrease in cash on hand. For the six months ended June 30, 2015, $3,778 cash was used in operating activities, $17,811 cash in investing activities, and we received $6,000 cash from the sale of our common stock, resulting in a $8,033 decrease in cash on hand for the period. During the six months ended June 30, 2016 we paid in full the $600 related party loan.
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 June 30, 2016, we owed our officers an aggregate of $162,383 for accrued payroll. Because of our history of losses, and lack of assurance of additional financing, the audit reports on our financial statements at December 31, 2015 and 2014 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.
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.
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.
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.
We have increased our efforts to monetize our assets. We are currently engaged in discussion with certain firms dedicated to assisting in the commercialization of intellectual assets
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. 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.
In order for our operations to continue, we will need to generate revenues from our intended operations sufficient to meet our anticipated cost structure. We may encounter difficulties in establishing these operations due to our inability to successfully prosecute any patent enforcement actions or our inability to effectively execute our business plan.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
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.
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, 2015. 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 June 30, 2016 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.
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.
Exhibit | Description |
| 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(49) | ||
| 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 10, 2012 between Advanced Voice Recognition Systems, Inc. and an Investor. (9) | ||
| 10.4 | Purchase Agreement dated January 25, 2012 between Advanced Voice Recognition Systems, Inc. and four Investors. (10) | ||
| 10.5 | Purchase Agreement dated August 17, 2012 between Advanced Voice Recognition Systems, Inc. and two Investors. (11) | ||
| 10.6 | Purchase Agreement dated November 21, 2012 between Advanced Voice Recognition Systems, Inc. and two Investors. (12) | ||
| 10.7 | Purchase Agreement dated November 23, 2012 between Advanced Voice Recognition Systems, Inc. and an Investor. (13) | ||
| 10.8 | Purchase Agreement dated May 24, 2013 between Advanced Voice Recognition Systems, Inc. and an Investor. (14) | ||
| 10.9 | Purchase Agreement dated June 13, 2013 between Advanced Voice Recognition Systems, Inc. and an Investor. (15) | ||
| 10.10 | Purchase Agreement dated July 18, 2013 between Advanced Voice Recognition Systems, Inc. and an Investor. (16) | ||
| 10.11 | Purchase Agreement dated August 1, 2013 between Advanced Voice Recognition Systems, Inc. and an Investor. (17) | ||
| 10.12 | Purchase Agreement dated August 21, 2013 between Advanced Voice Recognition Systems, Inc. and an Investor. (18) | ||
| 10.13 | Purchase Agreement dated September 3, 2013 between Advanced Voice Recognition Systems, Inc. and an Investor. (19) | ||
| 10.14 | Purchase Agreement dated September 25, 2013 between Advanced Voice Recognition Systems, Inc. and an Investor. (20) | ||
| 10.15 | Purchase Agreement dated October 1, 2013 between Advanced Voice Recognition Systems, Inc. and an Investor. (21) | ||
| 10.16 | Purchase Agreement dated October 22, 2013 between Advanced Voice Recognition Systems, Inc. and an Investor. (22) | ||
| 10.17 | Purchase Agreement dated October 28, 2013 between Advanced Voice Recognition Systems, Inc. and an Investor. (23) | ||
| 10.18 | Purchase Agreement dated December 10, 2013 between Advanced Voice Recognition Systems, Inc. and an Investor. (24) | ||
| 10.19 | Purchase Agreement dated January 24, 2014 between Advanced Voice Recognition Systems, Inc. and an Investor. (25) | ||
| 10.20 | Purchase Agreement dated February 18, 2014 between Advanced Voice Recognition Systems, Inc. and an Investor. (26) | ||
| 10.21 | Purchase Agreement dated February 24, 2014 between Advanced Voice Recognition Systems, Inc. and an Investor. (27) | ||
| 10.22 | Purchase Agreement dated May 8, 2014 between Advanced Voice Recognition Systems, Inc. and an Investor. (28) | ||
| 10.23 | Purchase Agreement dated May 9, 2014 between Advanced Voice Recognition Systems, Inc. and an Investor. (29) | ||
| 10.24 | Purchase Agreement dated May 19, 2014 between Advanced Voice Recognition Systems, Inc. and an Investor. (30) | ||
| 10.25 | Purchase Agreement dated May 20, 2014 between Advanced Voice Recognition Systems, Inc. and an Investor. (31) | ||
| 10.26 | Purchase Agreement dated June 18, 2014 between Advanced Voice Recognition Systems, Inc. and an Investor. (32) | ||
| 10.27 | Purchase Agreement dated July 7, 2014 between Advanced Voice Recognition Systems, Inc. and an Investor. (33) | ||
| 10.28 | Purchase Agreement dated December 5, 2014 between Advanced Voice Recognition Systems, Inc. and an Investor. (34) | ||
| 10.29 | Purchase Agreement dated December 29, 2014 between Advanced Voice Recognition Systems, Inc. and an Investor. (35) | ||
| 10.30 | Purchase Agreement dated December 30, 2014 between Advanced Voice Recognition Systems, Inc. and an Investor. (36) | ||
| 10.31 | Letter Agreement dated March 16, 2015 between Advanced Voice Recognition Systems, Inc. and Adapt IP. (37) | ||
| 10.32 | Purchase Agreement dated March 17, 2015 between Advanced Voice Recognition Systems, Inc. and an Investor. (38) | ||
| 10.33 | Letter Agreement dated April 20, 2015 between Advanced Voice Recognition Systems, Inc. and Adapt IP. (39) | ||
| 10.34 | Purchase Agreement dated June 3, 2015 between Advanced Voice Recognition Systems, Inc. and an Investor. (40) | ||
| 10.35 | Purchase Agreement dated July 31, 2015 between Advanced Voice Recognition Systems, Inc. and an Investor. (41) | ||
| 10.36 | Letter Agreement dated August 21, 2015 between Advanced Voice Recognition Systems, Inc. and Dominion. (42) | ||
| 10.37 | Purchase Agreement dated August 24, 2015 between Advanced Voice Recognition Systems, Inc. and an Investor. (43) | ||
| 10.38 | Purchase Agreement dated September 1, 2015 between Advanced Voice Recognition Systems, Inc. and an Investor. (44) | ||
| 10.39 | Purchase Agreement dated September 28, 2015 between Advanced Voice Recognition Systems, Inc. and an Investor. (45) | ||
| 10.40 | Purchase Agreement dated October 14, 2015 between Advanced Voice Recognition Systems, Inc. and an Investor. (46) | ||
| 10.41 | Purchase Agreement dated October 14, 2015 between Advanced Voice Recognition Systems, Inc. and an Investor. (47) | ||
| 10.42 | Purchase Agreement dated November 30, 2015 between Advanced Voice Recognition Systems, Inc. and an Investor. (48) | ||
| 10.43 | Purchase Agreement dated January 19, 2016 between Advanced Voice Recognition Systems, Inc. and an Investor. (50) | ||
| 10.44 | Purchase Agreement dated February 19, 2016 between Advanced Voice Recognition Systems, Inc. and an Investor. (51) | ||
| 10.45 | Departure of Directors or Certain Officers dated February 26, 2016 (52) | ||
| 10.46 | Purchase Agreement dated March 10, 2016 between Advanced Voice Recognition Systems, Inc. and an Investor. (53) | ||
| 10.47 | Purchase Agreement dated March 10, 2016 between Advanced Voice Recognition Systems, Inc. and an Investor. (54) | ||
| 10.48 | Purchase Agreement dated March 22, 2016 between Advanced Voice Recognition Systems, Inc. and an Investor. (55) | ||
| 10.49 | Purchase Agreement dated July 14, 2016 between Advanced Voice Recognition Systems, Inc. and an Investor. (56)
| ||
| 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 | Certification Pursuant to 18 U.S.C Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(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) Incorporated by reference from the Company’s Current Report on Form 8-K filed on January 15, 2010
(9) Incorporated by reference from the Company’s Current Report on Form 8-K filed on January 17, 2012
(10) Incorporated by reference from the Company’s Current Report on Form 8-K filed on January 30, 2012
(11) Incorporated by reference from the Company’s Current Report on Form 8-K filed on August 21, 2012
(12) Incorporated by reference from the Company’s Current Report on Form 8-K filed on November 26, 2012
(13) Incorporated by reference from the Company’s Current Report on Form 8-K filed on November 28, 2012
(14) Incorporated by reference from the Company’s Current Report on Form 8-K filed on May 31, 2013
(15) Incorporated by reference from the Company’s Current Report on Form 8-K filed on June 18, 2013
(16) Incorporated by reference from the Company’s Current Report on Form 8-K filed on July 22, 2013
(17) Incorporated by reference from the Company’s Current Report on Form 8-K filed on August 2, 2013
(18) Incorporated by reference from the Company’s Current Report on Form 8-K filed on August 26, 2013
(19) Incorporated by reference from the Company’s Current Report on Form 8-K filed on September 6, 2013
(20) Incorporated by reference from the Company’s Current Report on Form 8-K filed on September 25, 2013
(21) Incorporated by reference from the Company’s Current Report on Form 8-K filed on October 7, 2013
(22) Incorporated by reference from the Company’s Current Report on Form 8-K filed on October 28, 2013
(23) Incorporated by reference from the Company’s Current Report on Form 8-K filed on November 1, 2013
(24) Incorporated by reference from the Company’s Current Report on Form 8-K filed on December 16, 2013
(25) Incorporated by reference from the Company’s Current Report on Form 8-K filed on January 29, 2014
(26) Incorporated by reference from the Company’s Current Report on Form 8-K filed on February 20, 2014
(27) Incorporated by reference from the Company’s Current Report on Form 8-K filed on February 25, 2014
(28) Incorporated by reference from the Company’s Current Report on Form 8-K filed on May 13, 2014
(29) Incorporated by reference from the Company’s Current Report on Form 8-K filed on May 14, 2014
(30) Incorporated by reference from the Company’s Current Report on Form 8-K filed on May 23, 2014
(31) Incorporated by reference from the Company’s Current Report on Form 8-K filed on May 27, 2014
(32) Incorporated by reference from the Company’s Current Report on Form 8-K filed on June 20, 2014
(33) Incorporated by reference from the Company’s Current Report on Form 8-K filed on July 14, 2014
(34) Incorporated by reference from the Company’s Current Report on Form 8-K filed on December 10, 2014
(35) Incorporated by reference from the Company’s Current Report on Form 8-K filed on January 2, 2015
(36) Incorporated by reference from the Company’s Current Report on Form 8-K filed on January 12, 2015
(37) Incorporated by reference from the Company’s Current Report on Form 8-K filed on March 20, 2015
(38) Incorporated by reference from the Company’s Current Report on Form 8-K filed on March 23, 2015
(39) Incorporated by reference from the Company’s Current Report on Form 8-K filed on April 23, 2015
(40) Incorporated by reference from the Company’s Current Report on Form 8-K filed on June 8, 2015
(41) Incorporated by reference from the Company’s Current Report on Form 8-K filed on August 5, 2015
(42) Incorporated by reference from the Company’s Current Report on Form 8-K filed on August 21, 2015
(43) Incorporated by reference from the Company’s Current Report on Form 8-K filed on August 28, 2015
(44) Incorporated by reference from the Company’s Current Report on Form 8-K filed on September 4, 2015
(45) Incorporated by reference from the Company’s Current Report on Form 8-K filed on October 2, 2015
(46) Incorporated by reference from the Company’s Current Report on Form 8-K filed on October 19, 2015
(47) Incorporated by reference from the Company’s Current Report on Form 8-K filed on October 19, 2015
(48) Incorporated by reference from the Company’s Current Report on Form 8-K filed on December 2, 2015
(49) Incorporated by reference from the Company’s Annual Report on Form 10-K filed on March 30, 2009
(50) Incorporated by reference from the Company’s Current Report on Form 8-K filed on January 25, 2016
(51) Incorporated by reference from the Company’s Current Report on Form 8-K filed on February 23, 2016
(52) Incorporated by reference from the Company’s Current Report on Form 8-K filed on March 1, 2016
(53) Incorporated by reference from the Company’s Current Report on Form 8-K filed on March 14, 2016
(54) Incorporated by reference from the Company’s Current Report on Form 8-K filed on March 14, 2016
(55) Incorporated by reference from the Company’s Current Report on Form 8-K filed on March 22, 2016
(56) Incorporated by reference from the Company’s Current Report on Form 8-K filed on July 19, 2016
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.
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| Advanced Voice Recognition Systems, Inc.
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| Dated August 1, 2016 | By: | /s/ Walter Geldenhuys |
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| Walter Geldenhuys |
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| President, Chief Executive Officer, and Chief Financial Officer (Principal Executive Officer) |
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| Dated August 1, 2016 | By: | /s/ Diane Jakowchuk |
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| Diane Jakowchuk |
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| Secretary, Treasurer and Principal Accounting Officer (Principal Accounting Officer) |
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Exhibit 31.1
CERTIFICATION
I, Walter Geldenhuys, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Advanced Voice Recognition Systems, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
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| Date: | August 9, 2016 | |
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| Signature: | /s/ Walter Geldenhuys |
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| Walter Geldenhuys | |
| Title: | President, Chief Executive Officer | |
Exhibit 31.2
CERTIFICATION
I, Walter Geldenhuys, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Advanced Voice Recognition Systems, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: | August 9, 2016 | |
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| Signature: | /s/ Walter Geldenhuys |
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| Walter Geldenhuys | |
| Title: | Chief Financial Officer | |
Exhibit 32.1
SECTION 1350 CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Walter Geldenhuys, President, Chief Executive Officer and Chief Financial Officer of Advanced Voice Recognition Systems, Inc. (the Company), certify, that pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code:
| (1) | The Company’s Quarterly Report on Form 10-Q for quarterly period June 30, 2016, as filed with the Securities and Exchange Commission on the date hereof (the Report) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
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| (2) | Information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report. |
| /s/ Walter Geldenhuys |
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| Walter Geldenhuys | |
| President, Chief Executive Officer and Chief Financial Officer | |
| August 9, 2016 | |
Document and Entity Information |
6 Months Ended |
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Jun. 30, 2016
USD ($)
shares
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| Document and Entity Information: | |
| Entity Registrant Name | Advanced Voice Recognition Systems, Inc. |
| Document Type | 10-Q |
| Document Period End Date | Jun. 30, 2016 |
| Amendment Flag | false |
| Entity Central Index Key | 0001342936 |
| Current Fiscal Year End Date | --12-31 |
| Entity Common Stock, Shares Outstanding | shares | 227,345,268 |
| Entity Public Float | $ | $ 1,790,726 |
| Entity Filer Category | Smaller Reporting Company |
| Entity Current Reporting Status | Yes |
| Entity Voluntary Filers | No |
| Entity Well-known Seasoned Issuer | No |
| Document Fiscal Year Focus | 2016 |
| Document Fiscal Period Focus | Q2 |
| Trading Symbol | avoi |
Statement of Financial Position - USD ($) |
Jun. 30, 2016 |
Dec. 31, 2015 |
|---|---|---|
| Assets, Current | ||
| Cash and Cash Equivalents, at Carrying Value | $ 7,030 | $ 8,997 |
| Assets, Current | 7,030 | 8,997 |
| Assets, Noncurrent | ||
| Computer software and equipment, net | 369 | 737 |
| Patent, net | 73,384 | 80,112 |
| Deferred costs | 1,485 | 1,485 |
| Assets, Noncurrent | 74,869 | 81,597 |
| Assets | 82,268 | 91,331 |
| Liabilities, Current | ||
| Accounts payable, Current | 100,009 | 92,999 |
| Accrued liabilities, Current | 162,383 | 162,383 |
| Notes Payable, Current | 19,935 | 19,935 |
| Accrued Interest | 1,994 | 1,994 |
| Indebtedness to related parties, Current | 600 | |
| Liabilities, Current | 284,321 | 277,911 |
| StockholdersEquity | ||
| Common Stock, Value, Issued | 227,345 | 224,596 |
| Additional Paid-in Capital, Common Stock | 7,720,998 | 7,702,247 |
| Retained Earnings (Accumulated Deficit ) | (8,150,396) | (8,113,423) |
| Stockholders Equity | (202,053) | (186,580) |
| Liabilities and Equity | $ 82,268 | $ 91,331 |
Statements of Operations - USD ($) |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|
| Operating Expenses | ||||
| Compensation | $ 2,310 | $ 3,871 | ||
| Professional fees | 2,491 | $ 8,671 | 17,835 | $ 18,657 |
| General and Administrative Expense | 5,561 | 4,106 | 11,268 | 10,060 |
| Travel | 188 | 54 | 319 | 559 |
| Other General Expense | 245 | 805 | 152 | |
| Operating Expenses | 10,795 | 12,831 | 34,098 | 29,428 |
| Operating Income (Loss) | (10,795) | (12,831) | (34,098) | (29,428) |
| Interest and Debt Expense | ||||
| Interest Expense | (1,467) | (1,707) | (2,874) | (2,872) |
| Interest and Debt Expense | (1,467) | (1,707) | (2,874) | (2,872) |
| Net Income (Loss) | $ (12,262) | $ (14,538) | $ (36,972) | $ (32,300) |
| Weighted Average Number of Shares Outstanding, Basic | 227,345,268 | 219,881,935 | 226,494,712 | 219,585,268 |
Note 1. Nature of Operations |
6 Months Ended |
|---|---|
Jun. 30, 2016 | |
| Notes | |
| 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 plans to focus its technologies for the medical profession because of the profession’s present extensive use of dictation and its need for multiple applications of speech recognition technology in the generation of reports, documents and medical bills. Additionally the Company plans to focus on server based dictation and transcription, visual voicemail and the voicemail to text market.
Stock Exchange Agreement
On April 28, 2008, the Company entered into a Stock Exchange Agreement (“the Agreement”) with Samoyed Energy Corp., a Nevada corporation (“Samoyed”), which resulted in a reverse acquisition. The Agreement provided for the reorganization of AVRS with Samoyed. In connection with the Agreement, Samoyed acquired all of the issued and outstanding common shares of AVRS in exchange for 140 million shares of Samoyed’s common stock. On May 19, 2008 at the closing of the Agreement, the former shareholders of AVRS owned approximately 85% of the outstanding common stock of Samoyed, resulting in a change in control.
For accounting purposes, this acquisition has been treated as a reverse acquisition and recapitalization of AVRS, with Samoyed the legal surviving entity. Since Samoyed had, prior to the recapitalization, minimal assets and limited operations, the recapitalization has been accounted for as the sale of 24,700,008 shares of AVRS common stock for the net liabilities of Samoyed. Therefore, the historical financial information prior to the date of the recapitalization is the financial information of AVRS. Costs of the transaction have been charged to the period in which they are incurred.
In connection with the Agreement, a shareholder of Samoyed holding an aggregate of 3.5 million shares of Samoyed’s common stock made payments totaling $565,651 since 2008 in lieu of tendering shares to the Company. The Company received the final payment of $6,000 on February 15, 2012.
Stock Purchase Agreements
During the year ended December 31, 2015 the Company entered into Stock Purchase Agreements for the private sale of an aggregate of 5,400,000 shares of the common stock for aggregate proceeds of $32,500, all of which was received in 2015. During the six months ended June 30, 2016, the Company entered into Stock Purchase Agreements for the private sale of an aggregate of 2,750,000 shares of the common stock for aggregate proceeds of $21,500, full payment of which was received in the period.
Agreement and Plan of Merger
On March 25, 2009, the Company entered into an Agreement and Plan of Merger (“Agreement and Plan of Merger”) with its wholly-owned subsidiary, NCC, LLC, a Colorado limited liability company, whereby NCC, LLC merged with and into the Company pursuant to Section 92A.180 of the Nevada Business Corporations Act. Upon consummation of the Agreement and Plan of Merger: (i) NCC, LLC ceased to exist; (ii) the Company’s membership interests in NCC, LLC automatically were canceled or retired and ceased to exist, without any consideration delivered in exchange thereof; (iii) the title to all estate, property rights privileges, powers and franchise assets and/or other rights owned by NCC, LLC became vested in the Company without reversion or impairment; and (iv) all liabilities of any kind of NCC, LLC became vested in the Company.
Retention Agreement
On March 16, 2015 the Company entered into a letter agreement with Adapt IP Ventures, LLC (Adapt IP) confirming the retention of Adapt IP to assist the Company in identifying companies that might be interested in acquiring and / or licensing the Company’s 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 Adapts IP’s efforts. The Company or Adapt IP may terminate the agreement upon 30 days’ notice to the other party.
On August 20, 2015, Advanced Voice Recognition Systems, Inc. (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.The Company or Dominion may terminate the agreement upon 30 days’ notice to the other party.
Promissory Note
On April 20, 2015 the Company made a Promissory Note to Adapt IP Ventures, LLC (Adapt IP) for up to $20,000, and Adapt IP agreed to pay to the Company’s patent counsel $19,935 for patent work on behalf of the Company. The Note matures one year from the date of the Note. The Company is 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 the Company from any monetization event involving the patents. If the Company repays 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. |
Note 2. Significant Accounting Policies |
6 Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2016 | ||||||||||
| Notes | ||||||||||
| Note 2. Significant Accounting Policies | Unaudited Financial Information
The accompanying financial information at June 30, 2016 and for the six months ended June 30, 2016 and 2015 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 June 30, 2016 and its operating results for the six months ended June 30, 2016 and 2015 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, 2015. The results of operations for the six months ended June 30, 2016 are not necessarily an indication of operating results to be expected for the year ending December 31, 2016.
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. 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, 2015 the Company received an aggregate of $32,500 from the sale of shares in private offerings of its common stock. During the six months ended June 30, 2016 the Company received an aggregate of $21,500 from the sale of shares in private offerings of its common stock. The Company intends to raise capital through private offerings until it is profitable.
Additionally, the Company continues to work with Adapt IP and Dominion Harbor Group to raise capital through acquisition, sale, licensing, prosecution, enforcement, and settlement with AVRS’s intellectual property.
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 June 30, 2016 of $7,030, and $2,703 cash at June 30, 2015. 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.
Revenue Recognition
Revenue from the sale of inventory is recognized on the date of sale, title and risk of loss have transferred to the purchaser, the fees are fixed or determinable and collection is reasonably assured. Revenue from the performance of services is recognized when services have been completed and collection is probable. There are no multiple element sales and no history of material returns. The revenue recognition policies relate to operations performed prior to the Company’s reverse acquisition.
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. The Company did not record a cumulative effect adjustment related to the adoption of 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. If a patent application is denied or expires, the costs incurred are charged to operations in the year the application is denied or expires. 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 Statement of Financial Accounting Standard (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” now referred to as 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, 2015. Impairment recorded for each of the six months ended June 30, 2016 and 2015 was $-0-. See Note 3.
Loss per Common Share
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 June 30, 2016 and 2015, 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:
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 |
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| 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 November 13, 1995 the Company filed a patent application with the U.S. Patent and Trademark Office, which was granted on September 28, 1999 as U.S. Patent #5,960,447, “Word Tagging and Editing System for Speech Recognition”. In accordance with 35 U.S.C. 154, the term for the above referenced patent shall be for a period beginning on the date on which the patent issues and ending 20 years from the date on which the application for the patent was filed in the United States. The above referenced U.S. Patent expired on November 13, 2015.
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 March 9, 2010 the U.S. Patent and Trademark Office declared interference between the Company as Senior Party and Allvoice Developments, US LLC as Junior Party. Due to the absence of a decision by the end of 2010, in the 4th quarter of 2010, AVRS impaired 100% of the deferred costs associated with the interference, resulting in a $1,068,860 impairment loss. On April 27, 2012, the BPAI entered a judgment denying the Company’s motions. On May 29, 2012, AVRS filed a Request for Rehearing in the BPAI. On December 19, 2012 the BPAI entered a judgment denying the request for rehearing. The Company decided not to appeal as additional litigation would be costly and time-consuming and would divert the attention of management and key personnel from business operations.
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 June 27, 2013, the Company filed two additional continuation applications 13/928/381 and 13/928,383 with the U.S. Patent and Trademark Office entitled “Speech Recognition and Transcription Among Users Having Heterogeneous Protocols.” On August 31, 2015, Application 13/928,381 was abandon by the Company. Deferred costs were charged to operations the quarter ended September 30, 2015.
On August 10, 2015, the Company filed a continuation application with the U.S. Patent and Trademark Office entitled “Speech Recognition and Transcription Among Users Having Heterogeneous Protocols.”
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.
Amortization at June 30, 2016 is as follows:
SCHEDULE OF INTANGIBLE ASSETS
Amortization expense totaled $6,728 and $4,031 for the six months ended June 30, 2016 and 2015, respectively. Estimated aggregate amortization expense for each of the next five years is as follows:
SCHEDULE OF FUTURE AMORTIZATION
Fixed Assets
Depreciation expense totaled $368 and $587 for the six months ended June 30, 2016 and 2015.
PROPERTY PLANT AND EQUIPMENT
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Note 4. Related Party Transactions |
6 Months Ended |
|---|---|
Jun. 30, 2016 | |
| Notes | |
| Note 4. Related Party Transactions | Indebtedness to Related Parties
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 $-0- at June 30, 2016 and $600 at December 31, 2015. The Company also owed the officers aggregate of $162,383 at June 30, 2016 and December 31, 2015 for accrued payroll. |
Note 5. Income Taxes |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Note 5. Income Taxes | A reconciliation of the U.S. statutory federal income tax rate to the effective rate is as follows.
INCOME TAXES
The Company is considered a start-up company for income tax purposes. As of June 30, 2016, 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 June 30, 2016. |
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Note 6. Concentration of Risk |
6 Months Ended |
|---|---|
Jun. 30, 2016 | |
| Notes | |
| Note 6. Concentration of Risk | Beginning March 31, 2010, through June 30, 2016, all noninterest-bearing transaction accounts are fully insured, regardless of the balance of the account, at all FDIC-insured institutions. On June 30, 2016, the Company had cash balances at one FDIC insured financial institution of $7,030 in non-interest bearing accounts that were fully insured by the FDIC. |
Note 7. Stockholder Equity / (deficit) |
6 Months Ended |
|---|---|
Jun. 30, 2016 | |
| Notes | |
| Note 7. . Stockholder Equity / (deficit) | The Company has issued shares of its common stock pursuant to certain agreements as described in Note 1. |
Note 8. Subsequent Events |
6 Months Ended |
|---|---|
Jun. 30, 2016 | |
| Notes | |
| Note 8. Subsequent Events | On July 14, 2016 the Company entered into Stock Purchase Agreement for the private sale of an aggregate of 850,000 shares of the common stock for aggregate proceeds of $6,375. Payment in full was received on July 14, 2016. |
Note 2. Significant Accounting Policies: Use of Estimates (Policies) |
6 Months Ended |
|---|---|
Jun. 30, 2016 | |
| Policies | |
| 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. |
Note 2. Significant Accounting Policies: Basis of Consolidation (Policies) |
6 Months Ended |
|---|---|
Jun. 30, 2016 | |
| Policies | |
| 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. |
Note 2. Significant Accounting Policies: Cash and Cash Equivalents (Policies) |
6 Months Ended |
|---|---|
Jun. 30, 2016 | |
| Policies | |
| 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 June 30, 2016 of $7,030, and $2,703 cash at June 30, 2015. No amounts resulted from cash equivalents |
Note 2. Significant Accounting Policies: Financial Instruments (Policies) |
6 Months Ended |
|---|---|
Jun. 30, 2016 | |
| Policies | |
| Financial Instruments | The carrying amounts of cash, receivables and current liabilities approximate fair value due to the short-term maturity of the instruments. |
Note 2. Significant Accounting Policies: Fixed Assets (Policies) |
6 Months Ended |
|---|---|
Jun. 30, 2016 | |
| Policies | |
| 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. |
Note 2. Significant Accounting Policies: Revenue Recognition (Policies) |
6 Months Ended |
|---|---|
Jun. 30, 2016 | |
| Policies | |
| Revenue Recognition | Revenue from the sale of inventory is recognized on the date of sale, title and risk of loss have transferred to the purchaser, the fees are fixed or determinable and collection is reasonably assured. Revenue from the performance of services is recognized when services have been completed and collection is probable. There are no multiple element sales and no history of material returns. The revenue recognition policies relate to operations performed prior to the Company’s reverse acquisition |
Note 2. Significant Accounting Policies: Income Taxes (Policies) |
6 Months Ended |
|---|---|
Jun. 30, 2016 | |
| Policies | |
| 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. The Company did not record a cumulative effect adjustment related to the adoption of ASC 740. |
Note 2. Significant Accounting Policies: Patents, Deferred Costs and Amortization (Policies) |
6 Months Ended |
|---|---|
Jun. 30, 2016 | |
| Policies | |
| 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. If a patent application is denied or expires, the costs incurred are charged to operations in the year the application is denied or expires. The Company amortizes its patents over an estimated useful life of twenty years. |
Note 2. Significant Accounting Policies: Impairment and Disposal of Long-lived Assets (Policies) |
6 Months Ended |
|---|---|
Jun. 30, 2016 | |
| Policies | |
| Impairment and Disposal of Long-lived Assets | The Company evaluates the carrying value of its long-lived assets under the provisions of Statement of Financial Accounting Standard (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” now referred to as 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, 2015. Impairment recorded for each of the six months ended June 30, 2016 and 2015 was $-0-. See Note 3. |
Note 2. Significant Accounting Policies: Loss Per Common Share (Policies) |
6 Months Ended |
|---|---|
Jun. 30, 2016 | |
| Policies | |
| Loss Per Common Share | 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 June 30, 2016 and 2015, there were no variances between the basic and diluted loss per share as there were no potentially dilutive securities outstanding. |
Note 2. Significant Accounting Policies: Fair Value of Financial Instruments (Policies) |
6 Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2016 | ||||||||||
| Policies | ||||||||||
| 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:
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: Schedule of Finite-Lived Intangible Assets by Major Class (Tables) |
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| Schedule of Finite-Lived Intangible Assets by Major Class |
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Note 3. Intangible and Fixed Assets: Schedule of Finite-Lived Intangible Assets, Future Amortization Expense (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2016 | |||||||||||||||||||||||||||||||
| Tables/Schedules | |||||||||||||||||||||||||||||||
| Schedule of Finite-Lived Intangible Assets Future Amortization Expense |
|
Note 3. Intangible and Fixed Assets: Property Plant and Equipment (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Tables/Schedules | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property Plant and Equipment |
|
Note 3. Intangible and Fixed Assets: Schedule of Finite-Lived Intangible Assets by Major Class (Details) - USD ($) |
Dec. 31, 2016 |
Jun. 30, 2016 |
Dec. 31, 2015 |
|---|---|---|---|
| Carrying Value | $ 186,163 | $ 186,163 | |
| Amortization | 112,779 | 106,051 | |
| Patent, net | $ 73,384 | 73,384 | 80,112 |
| 5,960,447 | |||
| Carrying Value | 63,247 | 63,247 | |
| Amortization | 63,247 | 63,247 | |
| 7,558,730 | |||
| Carrying Value | 58,277 | 58,277 | |
| Amortization | 32,844 | 30,498 | |
| Patent, net | 25,433 | 27,779 | |
| 7,949,534 | |||
| Carrying Value | 3,365 | 3,365 | |
| Amortization | 1,643 | 1,487 | |
| Patent, net | 1,722 | 1,878 | |
| 8,131,557 | |||
| Carrying Value | 5,092 | 5,092 | |
| Amortization | 2,264 | 2,002 | |
| Patent, net | 2,828 | 3,090 | |
| 8,498,871 | |||
| Carrying Value | 21,114 | 21,114 | |
| Amortization | 7,385 | 6,119 | |
| Patent, net | 13,729 | 14,995 | |
| 9,142,217 | |||
| Carrying Value | 35,068 | 35,068 | |
| Amortization | 5,396 | 2,698 | |
| Patent, net | $ 29,672 | $ 32,370 |
Note 3. Intangible and Fixed Assets (Details) - USD ($) |
6 Months Ended | |
|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
|
| Details | ||
| Finite-Lived Intangible Assets Amortization Expense | $ 6,728 | $ 4,031 |
| Depreciation Expense | $ 368 | $ 587 |
Note 3. Intangible and Fixed Assets: Schedule of Finite-Lived Intangible Assets, Future Amortization Expense (Details) - USD ($) |
Dec. 31, 2016 |
Jun. 30, 2016 |
Dec. 31, 2015 |
|---|---|---|---|
| Details | |||
| Future Amortization Expense, Year One | $ 6,726 | ||
| 2017 | 13,454 | ||
| 2018 | 13,454 | ||
| 2019 | 13,454 | ||
| 2020 | 13,454 | ||
| Thereafter | 12,842 | ||
| Total | $ 73,384 | $ 73,384 | $ 80,112 |
Note 3. Intangible and Fixed Assets: Property Plant and Equipment (Details) - USD ($) |
Jun. 30, 2016 |
Dec. 31, 2015 |
Jun. 30, 2015 |
|---|---|---|---|
| Details | |||
| Computer equipment | $ 6,627 | $ 6,627 | |
| Computer software | 3,640 | 3,640 | |
| Less accumulated depreciation | 9,898 | 8,941 | |
| Computer software and equipment, net | $ 369 | $ 737 | $ 1,326 |
Note 6. Income Taxes (Details) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
| Details | ||
| federal statutory graduated rate | 34.00% | 34.00% |
| State income tax rate, net of federal benefit | 0.00% | 0.00% |
| Rent & Services | (3.40%) | (10.09%) |
| Costs capitalized under Section 195 | (30.60%) | (23.91%) |
| Effective rate | 0.00% | 0.00% |
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