The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This document contains certain forward-looking statements that involve risks and uncertainties, such as statements of the Company's plans, objectives, expectations and intentions. When used in this document, the words "expects", "anticipates", "intends" and "plans" and similar expressions are intended to identify certain of these forward-looking statements. The cautionary statements made in this document should be read as being applicable to all related forward-looking statements wherever they appear in this document. Our actual results could differ materially from those discussed in this document.





Results of Operation

We completed a stock exchange on May 19, 2008 and changed our business model. We have not generated any revenue since inception and do not have any cash generating product or licensing sales. We have incurred losses since Inception (March 15, 1994).

We had a net loss of $83,381 for the year ended December 31, 2021, as compared to a net loss of $81,529 in 2020. Professional fees were $52,765 in 2021, as compared to $43,598 in 2020, an increase of $9,167. An increase in our auditing fees is responsible for the increase in professional fees. Compensation was $3,011 in 2021, as compared to $7,839 in 2020, a decrease of $4,828 which decreased our net loss.

Liquidity and Capital Resources

During the year ended December 31, 2021, we used $44,367 of cash in operating activities and $0 cash in investing activities. We received $46,000 of cash from the sale of shares of our common stock. As a result, for the year ended December 31, 2021, we recognized an $11,800 net increase in cash on hand. For the year ended December 31, 2020, we used $33,026 of cash in operating activities and $-0- of cash in investing activities, and

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received net cash of $22,600 provided by financing activities, resulting in a $5,893 decrease in cash on hand for the year.

At December 31, 2021, we had current assets of $12,148 and current liabilities of $312,152 as compared to current assets of $348 and current liabilities of $276,955 at December 31, 2020. Our increase in current assets resulted from an increased amount of financing activities in 2021 as compared to 2020.

Because of our history of losses, net capital deficit and lack of assurance of additional financing, the audit report on our financial statements contains a "going concern" opinion regarding doubt about our ability to continue as a going concern.

In an attempt to address our financing needs, we have made sales of our common stock in private transactions.

During the twelve months ended December 31, 2021, we entered into Stock Purchase Agreements for the private sale to five persons or entities of an aggregate of 4,200,000 shares of the common stock for aggregate proceeds of $46,000. All of the proceeds were paid during the 12 months ended December 31, 2021.

During the twelve months ended December 31, 2020, we entered into Stock Purchase Agreements for the private sale to four persons or entities of an aggregate of 2,166,667 shares of the common stock for aggregate proceeds of $22,600. All of the proceeds were paid during the 12 months ended December 31, 2020.

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 $20,000, and Adapt IP agreed to pay to our patent counsel up to $20,000 for patent work on our behalf. The Note matures one year from the date of the Note. We are obligated to repay the funds advanced by Adapt IP plus a premium of 10% of the principal amount and a percentage of proceeds received by us from any monetization event involving the patents. If we repay the Note within the six months of the date of the Note, the percentage will be 1%, and it will be 2% after six months. As of December 31, 2021 $13,955 interest has accrued.

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

On November 1, 2016, AVRS entered into a Contingent Fee Agreement with Buether Joe and Carpenter, LLC to represent AVRS in connection with investigating and asserting claims including negotiating license agreements and the filing and prosecution of lawsuits against any potential infringers of the Patent rights.

On June 6, 2017 AVRS and BJC revised the Contingent Fee Agreement as it related to the termination of the August 20, 2017 Dominion Harbor Letter Agreement.

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 December 31, 2021 and December 31, 2020, we owed our officers an aggregate of $162,380 and $162,382 respectively for accrued payroll. On June 21, 2021, Walter Geldenhuys, who is our President, Chief Executive Officer and Chief Financial Officer, and who serves as a member of our Board of Directors advanced the Company $4,200 of which $3,000 was paid in December 9, 2021 leaving a balance of $1,200. Our Secretary / Treasurer advanced the Company a total of $13,500 at December 31, 2021.

Because of our history of losses, and lack of assurance of additional financing, the audit reports on our financial statements at December 31, 2021 and 2020 contained a "going concern" opinion regarding doubt about our ability to continue as a going concern.

We will require additional debt or equity financing or a combination of both in order to carry out our business plan. We plan to raise additional funds through future sales of our securities, 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 some combination of the private sale of equity, or issuance of convertible debt securities. However, future equity or debt financing may not be available to us at all, or if available, may not be on terms acceptable to us. We do not intend to pay dividends to shareholders in the foreseeable future.

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

The Patent was fully amortized in the fourth quarter 2021.

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U.S. Patent #7,949,534 is an expansion of the coverage of our second patent and incorporates speech recognition and transcription among transcription engines employing incompatible protocols. Costs totaling $3,365 have been capitalized and amortization began in the second quarter 2011. The Patent was fully amortized in the fourth quarter 2021.

U.S. Patent #8,131,557 is an expansion of our second and third patent. Costs totaling $5,092 have been capitalized and amortization began in the first quarter 2012. The Patent was fully amortized in the fourth quarter 2021.

U.S. Patent #8,498,871 titled "Dynamic Speech Recognition and Transcription Among Users Having Heterogeneous Protocols" was issued July 30, 2013 by the U.S. Patent and Trademark Office. Costs totaling $21,114 have been capitalized and amortization began in the third quarter 2013. The Patent was fully amortized in the fourth quarter 2021.

U.S. Patent #9,142,217, an expansion of our fourth patent was issued September 22, 2015 by the U.S. Patent and Trademark Office. Costs totaling $35,068 have been capitalized and amortization began in the third quarter 2015. The Patent was fully amortized in the fourth quarter 2021.

U.S. Patent #9,934,786 issued April 3, 2018 by the U.S. Patent and Trademark Office. Costs totaling $4,575 have been capitalized and amortization began in the second quarter of 2018. The Patent was fully amortized in the fourth quarter 2021.

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

On March 16, 2015 Advanced Voice Recognition Systems, Inc. (AVRS) entered into a material Letter Agreement with Adapt IP Ventures, LLC (Adapt IP) in which it retained Adapt IP on an exclusive basis. Adapt IP will assist AVRS in identifying companies that might be interested in acquiring and / or licensing the Patents, attempt to negotiate financial terms and conditions for the acquisition and /or licensing of the Patents with such Entity(ies) and assist with collection of compensation from such entities. In connection with services provided under this Agreement, AVRS shall pay Adapt IP a success fee.

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

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

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