UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549



FORM 10-QSB



xQUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For the quarterly period endedSeptember 30, 2007



oTRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



Commission file number333-84565



AFV SOLUTIONS, INC.

(Exact name of small business issuer as specified in its charter)



Nevada
        90-0006843(State or other jurisdiction of incorporation or organization)
        (IRS Employer Identification No.)




9710 Research Drive

Irvine, CA 92618

(Address of principal executive offices)



(949) 748-6600

(Issuers telephone number)



Copies of Communications to:

Stoecklein Law Group

4695 MacArthur Court, 11th Floor

Newport Beach, CA 92660

(949) 798-5541

Fax (949) 258-5112



Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the last 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. YesxNoo



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



The number of shares of Common Stock, $0.001 par value, outstanding on October 30, 2007, was 23,045,300 shares.



Transitional Small Business Disclosure Format (check one):  Yeso
        Nox




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PART 1  FINANCIAL INFORMATION



Item 1.
        Financial Statements




AFV Solutions, Inc.Consolidated Balance SheetSeptember 30,2007AssetsCurrent assets:Cash
        
        $
        255,056Prepaid expenses
        
        11,693Other current assets
        
        6,237Total current assets
        
        272,986Fixed assets, net of accumulated depreciation of $384,751
        
        942,232Other assets:Deposits
        
        15,979Total other assets
        
        15,979Total assets
        $
        1,231,197Liabilities and Stockholders' EquityCurrent liabilities:Accounts payable and accrued liabilities
        $
        102,427Accrued expenses - related party
        
        18,000Note payable, current portion
        
        17,618Line of credit
        
        97,742Total current liabilities
        
        235,787Long term liabilities:Note payable, net of current
        
        38,807Mortgage payable
        
        76,943Mortgage payable - related party
        
        150,000Accrued interest  related party
        
        49,000Total long term liabilities
        
        314,750






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Stockholders' equity:Preferred stock, $0.001 par value 20,000,000 sharesauthorized, no shares issued and outstanding
        
        -Common stock, $0.001 par value, 100,000,000 sharesauthorized, 23,045,300 shares issued and outstanding
        
        23,045Prepaid share-based compensation
        
        (140,000)Additional paid-in capital
        
        10,013,312Accumulated (deficit)
        
        (9,215,697)680,660$
        1,231,197




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



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AFV Solutions, Inc.Condensed Consolidated Statements of OperationsThree months endedSeptember 30,2007
        
        2006Revenue
        
        $
        20,277
        
        $
        36,442Cost of sales
        
        
        2,849
        
        
        2,125Gross profit
        
        
        17,428
        
        
        34,317Expenses:General and administrative expenses
        
        
        62,109
        
        
        129,499General and administrative expenses - related party
        
        
        -
        
        
        1,500Depreciation
        
        
        47,701
        
        
        37,819Consulting Services
        
        
        14,192
        
        
        228,723Financing expense
        
        
        -
        
        
        100,000Investor relations
        
        
        -
        
        
        16,537Professional fees
        
        
        66,650
        
        
        208,014Research and development
        
        
        -
        
        
        5,000Rent expense
        
        
        36,835
        
        
        57,872Promotional and marketing
        
        
        -
        
        
        24,715Salaries and wages
        
        
        84,073
        
        
        145,103Salaries and wages - officers
        
        
        114,300
        
        
        -Travel expense
        
        
        85,899
        
        
        227,532Impairment of intangible assets
        
        
        -
        
        
        18,269Total operating expenses
        
        
        511,759
        
        
        1,200,583Net operating (loss)
        
        
        (494,331)
        
        
        (1,166,266)Other income (expenses):Interest income
        
        
        8
        
        
        11Interest (expense)
        
        
        (2,422)
        
        
        (11,898)Interest (expense) - related party
        
        
        (2,250)
        
        
        (2,250)Total other income (expenses)
        
        
        (4,664)
        
        
        (14,137)Net (loss)
        
        $
        (498,995)
        
        $
        (1,180,403)Weighted average number ofcommon shares outstanding - basic and fully diluted
        
        
        23,045,300
        
        
        21,340,853Net (loss) per share - basic and fully diluted
        
        $
        (0.02)
        
        $
        (0.06)




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



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AFV Solutions, Inc.Condensed Consolidated Statements of Cash FlowFor the three months endedSeptember 30,2007
        
        2006Cash flows from operating activitiesNet (loss)
        $
        (498,995)
        
        $
        (1,180,401)Depreciation
        
        47,701
        
        
        37,819Impairment of intangible assets
        
        -
        
        
        18,269Shares issued for services
        
        52,500
        
        
        -Adjustments to reconcile net (loss) tonet cash (used) by operating activities:Other current assets
        
        (5,500)
        
        
        (54,489)Prepaid expenses
        
        5,148
        
        
        46,408Accounts payable and accrued liabilities
        
        2,680
        
        
        14,848Interest payable - related party
        
        2,250
        
        
        2,250Accrued liabilities - related party
        
        -
        
        
        1,500Deposits and other assets
        
        -
        
        
        (10,053)Net cash (used) by operating activities
        
        (394,216)
        
        
        (1,123,849)Cash flows from investing activitiesPurchase of fixed assets
        
        -
        
        
        (78,291)Net cash (used) by investing activities
        
        -
        
        
        (78,291)Cash flows from financing activitiesPayment on  installment loans
        
        (2,994)
        
        
        (2,924)Payment on mortgage
        
        (84)
        
        
        (50,000)Cash from issuance of common stock
        
        -
        
        
        897,501Net cash provided by financing activities
        
        (3,078)
        
        
        844,577Net increase (decrease) in cash
        
        (397,294)
        
        
        (357,563)Cash  beginning
        
        652,350
        
        
        2,842,841Cash  ending
        $
        255,056
        
        $
        2,485,278Supplemental disclosures:Interest paid
        $
        2,422
        
        $
        11,898Income taxes paid
        $
        -
        
        $
        -




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





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AFV Solutions, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)



Note 1 Basis of Presentation



The unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and reflect all adjustments which, in the opinion of management, are necessary for a fair presentation.  All such adjustments are of a normal recurring nature.  The results of operations for the interim period are not necessarily indicative of the results to be expected for a full year.  Certain amounts in the prior year statements have been reclassified to conform to the current year presentations.  The statements should be read in conjunction with the financial statements and footnotes thereto included in Form 10-KSB for the year ended June 30, 2007.



Note 2 - Going Concern



The accompanying condensed consolidated financial statements have been prepared assuming that we will continue as a going concern.  Our ability to continue as a going concern is dependent upon attaining profitable operations based on the development of products that can be sold.  We intend to use borrowings and security sales to mitigate the affects of our cash position, however, no assurance can be given that debt or equity financing, if and when required, will be available.  The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets and classification of liabilities that might be necessary should we be unable to continue in existence.



Note 3  Stockholders equity



During the three-month period ended September 30, 2007, we issued 130,000 shares of common stock previously authorized.



Note 4  Related party transactions



During the three-months ended September 30, 2007, we accrued interest in the amount of $2,250 in connection with our mortgage due to the President of our wholly-owned subsidiary.



Note 5  Notes payable



Notes payable consisted of the following at September 30, 2007:



Note payable to a related party bearing interest at a rate of 6% per annum, accrued interest and principal maturing in 2009
        
        $
        150,000Mortgage payable bearing interest at a rate of 9.54% per annum, monthly payments of $668, maturing May 1, 2033
        
        
        76,943$100,000 line of credit bearing interest at the prime lending rate plus 1%, with monthly interest payments, maturing March 1, 2010.
        
        
        97,742






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AFV Solutions, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)





Auto loan payable bearing interest at a rate of 7%, monthly principal and interest payments of $1,127, maturing September 28, 2011
        
        
        47,034Auto loan payable bearing interest at a rate of 5.25% with monthly principal and interest payments of $625, maturing October 15, 2008.
        
        
        9,392Total
        
        $
        381,110




Interest expense for the three-months ended September 30, 2007 totaled $4,672.





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FORWARD-LOOKING STATEMENTS



This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are forward-looking statements for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objections of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements or belief; and any statements of assumptions underlying any of the foregoing.



Forward-looking statements may include the words may, could, estimate, intend, continue, believe, expect or anticipate or other similar words. These forward-looking statements present our estimates and assumptions only as of the date of this report. Accordingly, readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the dates on which they are made. We do not undertake to update forward-looking statements to reflect the impact of circumstances or events that arise after the dates they are made. You should, however, consult further disclosures we make in future filings of our Annual Report on Form 10-KSB, Quarterly Reports on Form 10-QSB and Current Reports on Form 8-K.



Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and subject to inherent risks and uncertainties.  The factors impacting these risks and uncertainties include, but are not limited to:



o
        ability to successfully broker our first bus order;


o
        ability to raise sufficient funds to satisfy our working capital needs;


o
        deterioration in general or regional economic conditions;


o
        adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations;


o
        eventual successful operations in the alternative fuel and bus brokerage industry;


o
        loss of customers or sales weakness;


o
        inability to achieve future sales levels or other operating results;


o
        unavailability of funds for capital expenditures and/or general working capital;


o
        risks and differences encountered when conducting international sales and operations;


o
        operational inefficiencies in distribution or other systems; or




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o
        the other risks and uncertainties detailed in this report.


For a detailed description of these and other factors that could cause actual results to differ materially from those expressed in any forward-looking statement, please see Factors That May Affect Our Results of Operation in this document and in our Annual Report on Form 10-KSB for the year ended June 30, 2007.



Item 2.  Managements Discussion and Analysis



OVERVIEW AND OUTLOOK



We were originally incorporated in the State of Nevada in January of 2002 under the name Juris Travel.  On March 24, 2003, we changed our name to Dogs International in connection with our acquisition of assets from Bed & Biscuit Inns of America, Inc.  On February 9, 2005, we changed our name from Dogs International to AFV Solutions, Inc. in anticipation of entering the alternative fuel industry with our wholly-owned subsidiary, AFV Research, Inc. (ARI).  In addition to ARI, we operate another wholly owned subsidiary, Bed & Biscuit Inns of America, Inc. (Bed & Biscuit).  Under this subsidiary we operate a pet care facility under the name Bed & Biscuit Inn.



AFV Solutions primary business focus is to broker hybrid electric, CNG and LPG buses manufactured in China.  Additionally, our current revenues continue to be generated from our business operated through our wholly owned subsidiary Bed & Biscuit. As a result of our decision to discontinue our previous plan of expanding the upscale pet care facilities, on May 5, 2006 we announced our intention to spin off the Bed & Biscuit subsidiary to our stockholders.



CURRENT OPERATIONS



Our decision to enter into the alternative fuel industry was largely guided by our former CEO, Jeffrey Groscost.  However, after Jeffrey Groscost suddenly passed away on November 3, 2006; we have continued to reevaluate our direction and involvement in the production and distribution of the bifuel conversion kits.  Additionally, on July 11, 2007, Mr. Steele, our interim Chief Executive Officer resigned and we appointed Carlos Zalduondo as our new Chief Executive Officer, who has continued our focus and emphasis to the brokerage of buses manufactured in China.



We intend to focus our attention to brokering and assisting in the distribution of hybrid electric, CNG and LPG buses such as those produced by Wuzhoulong Motors of China (WZL) and Guangzhou Baolong Group Automotive Manufacturing Corporation (Baolong).  Through our agreement with WZL, we are the exclusive representative for sales, marketing, and distribution of these different types of buses in five countries.  These buses use an electrical system, which recharges the batteries using excess electricity during peak operations as well as during deceleration and down hill operation.  In November 2006, we entered into an exclusive five year sales agreement with Baolong to act as the exclusive world-wide, excluding China, sales representative of their various buses and vans, hybrid buses and vans, CNG buses and vans, LPG buses and vans, and garbage truck and other
related vehicles.



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Satisfaction of our cash obligations for the next 12 months.



We are aggressively pursuing opportunities to broker buses and other alternative fuel vehicles and have discontinued our previous plan of seeking to build and/or acquire pet care facilities.  However, we do intend to continue operations of our current pet facility while we also pursue the alternative fuel industry and until our previously announced spin-off is effective.  Our cash obligations are anticipated to increase substantially over the next 12 months as we continue to establish ourselves in the alternative fuel industry.  The cash would be utilized for operational expenses of retrofitting ourselves as a broker and distributor of alternative fuel vehicles.



We intend for our funding requirements to be fulfilled through either equity or debt financing.  We anticipate that available cash at September 30, 2007 in the amount of $255,056 will not satisfy our cash obligations for the next 12 months and we will be required to raise additional equity or debt financing.



Summary of any product research and development that we will perform for the term of the plan.



During the year ended June 30, 2007, we spent $5,000 on research and development but did not have any expenses relating to research and development for the three month period ended September 30, 2007.  We are not anticipating significant research and development expenditures in the near future.



Expected purchase or sale of plant and significant equipment.



As a result of our intended spin-off of Bed & Biscuit we will not be purchasing or leasing any additional pet care facilities in the next twelve months.  As part of our moving into the alternative fuel industry we anticipate acquiring equipment and other assets related to this industry.  At this point in time we are unable to accurately determine an estimate for the amount of funds needed for any additional purchases.



During the year ended June 30, 2006, we took delivery of a patented electric bus built by GYD of China.  The bus is currently located in our Arizona facility awaiting a decision to proceed towards obtaining federal authorization.



Significant changes in number of employees.



The number of employees required to operate our business is currently 8 full time employees, which includes those required to maintain our operations of our pet facility in Florida as well as those pursing our move into the alternative fuel industry. Additionally, we intend to use the services of independent consultants and contractors to perform various professional services, when appropriate.  We believe that this use of third-party service providers may enhance our ability to contain general and administrative expenses.



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Results of Operations for the Three Months Ended September 30, 2007 and 2006 Compared.



The following tables summarize selected items from the statement of operations for the three months ended September 30, 2007 compared to the three months ended September 30, 2006.



INCOME (Derived Solely from the Bed & Biscuit Inn Facility):



Three months ended September 30, 2007
        Three months ended September 30, 2006
        Increase / (Decrease)$
        %Revenues
        $             20,277
        $             36,442
        $    (16,165)
        (44%)Cost of Sales
        2,849
        2,125
        724
        34%Gross Profit
        17,428
        34,317
        (16,889)
        (49%)Gross Profit Percentage of Revenue
        86%
        94%
        --
        (8%)




Revenues



Revenues for the three months ended September 30, 2007 were $20,277 compared to revenues of $36,442 for the comparable three months ended September 30, 2006.  This resulted in a decrease in revenues of $16,165 when compared to the same period in 2006.  Although we have begun to focus our operations towards brokering buses from China, we have not begun producing revenues from this service.  Therefore, we still maintain operations through the Bed & Biscuit Inn, which continues to generate our only revenues.  We have continued to experience a decrease in revenues as a result of minimal marketing dollars being allocated towards the growth of the facility and a reduction of clientele at the Bed & Biscuit Inn.



Cost of sales



Cost of sales for the three months ended September 30, 2007 was $2,849, an increase of $724 from $2,125 for the same period ended September 30, 2006.  The slight increase was due to overall increase in our cost of pet supplies.



Gross profit



Gross profit for the three months ended September 30, 2007 was $17,428, a decrease of $16,889 or 49% as compared to $34,317 for the comparable period of three months ended



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September 30, 2006.  Overall gross profit as a percentage of revenue decreased from 94% for the three months ended September 30, 2006 to 86% for the comparable three months ended September 30, 2007.  Even though we have experienced a decrease in our revenues from the Bed & Biscuit Inn, our cost of sales only slightly increased which allowed us to only slightly decrease our gross profit as a percentage of revenue.



EXPENSES:

Three months ended
September 30, 2007
        Three months ended
September 30, 2006
        Increase / (Decrease)$
        %General and administrative expenses (total)
        $                62,109
        $             130,999
        $  (68,890)
        (53%)Depreciation
        47,701
        37,819
        9,882
        26%Consulting services
        14,192
        228,723
        (214,531)
        (94%)Financing expense
        -0-
        100,000
        (100,000)
        --Investor relations
        -0-
        16,537
        (16,537)
        --Professional fees
        66,650
        208,014
        (141,364)
        (68%)Research and development
        -0-
        5,000
        (5,000)
        --Rent expense
        36,835
        57,872
        (21,037)
        (36%)Promotional and marketing
        -0-
        24,715
        (24,715)
        --Salaries and wages (total)
        198,373
        145,103
        53,270
        37%Travel expenses
        85,899
        227,532
        (141,633)
        (62%)Impairment of intangible assets
        -0-
        18,269
        (18,269)
        --Total operating expenses
        511,759
        1,200,583
        (688,824)
        (57%)Net operating (loss)
        $           (494,331)
        $        (1,166,266)
        $ (671,935)
        (58%)






General and administrative expenses



General and administrative expenses, which included those of a related party, were $62,109 for the three months ended September 30, 2007 versus $130,999 for the comparable



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period of three months ended September 30, 2006, which resulted in a decrease of $68,890, or 53%.  During the three months ended September 30, 2006, we were heavily pursuing the bi-fuel conversion systems as well as beginning to explore the brokering and distribution of alternative fuel buses as well as operating out of multiple locations in Arizona and California.  Therefore, during that time period we experienced substantial general and administrative expenses related to these two endeavors.  However, as of the three months ended September 30, 2007, we have shifted our focus to only that of brokering and distributing alternative fuel buses and thereby reduced some of our general and administrative expenses as well as reduced our operations to primarily our Irvine location.  We believe we have stabilized our general and administrative expenses as we continue to become more familiar with the alternative fuel industry.



Depreciation expense



Depreciation expense was $47,701 for the three months ended September 30, 2007 compared to $37,819 for the three months ended September 30, 2006. The increase is the result of our recent acquisitions of fixed assets purchased in connection with the Irvine office and our alternative fuel development.  We do not anticipate any extraordinary acquisition of assets in the upcoming months and therefore we also expect our depreciation expense to normalize over future periods based on our existing fixed asset base.



Consulting services / Professional fees



During the three months ended September 30, 2007, we did incurred $14,192 in consulting expenses as compared to $228,723 for the three months ended September 30, 2006. The consulting expenses experienced during 2006 were related to our operations in the alternative fuel business and seeking to commence brokering buses from China, with a significant portion resulting from our extensive foreign activities in the Asian markets.



Professional fees were $66,650 for the three months ended September 30, 2007 compared to $208,014 for the three months ended September 30, 2006. Again, this increase in professional fees is directly attributable to our business development in the alternative fuel industry.



Financing



We did not incur any financing costs for the three months ended September 30, 2007 compared to $100,000 incurred for the three months ended September 30, 2006. During the three months ended September 30, 2006, we experienced financing costs as a result of our engagement with Sanders, Morris & Harrison related to equity financing for potential acquisitions, which we are no longer pursuing.



Research and development



We did not incur any research and development costs for the three months ended September 30, 2007 as compared to $5,000 for the comparable three months ended September 30, 2006.  During the same period last year, we were still investing some of our resources in the



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bi-fuel conversion systems as we continued through various stages of testing.  However, at this point in time, we have suspended operations in commercializing the conversion kits.





Salaries and wages



Salaries and wages, which include those of our officers, were $198,373 for the three months ended September 30, 2007 as compared to $145,103 in salaries and wages expenses for the three months ended September 30, 2006.  As we broadened our operations and established facilities in California and Arizona in the alternative fuel industry, we hired employees associated with the operations of this line of business.  Although we have reduced the amount of employees in these facilities and the salaries and wages associated with them, we have incurred increases in our officers salaries and wages.



Travel expenses



Travel expenses were $85,899 for the three months ended September 30, 2007 versus $227,532 for the comparable period of three months ended September 30, 2006.  As our relationship with WZL and Baolong were being established and we were becoming more familiar with their products, we had greatly increased our travel to and from China during the three months ended September 30, 2006.  However, our travel expenses have decreased when compared to the same period in 2006 but we expect that our travel expenses may continue in the upcoming months as we continue to cultivate our relationships in China , Peru and other countries.



Impairment of long-lived assets



We review our long-lived assets and intangibles periodically to determine potential impairment by comparing the carrying value of the long-lived assets with the estimated future cash flows expected to result from the use of the assets, including cash flows from disposition. Should the sum of the expected future cash flows be less than the carrying value, the Company would recognize an impairment loss. An impairment loss would be measured by comparing the amount by which the carrying value exceeds the fair value of the long-lived assets.  We did not recognize an impairment for the three months ended September 30, 2007 but did recognize an impairment of $18,269 for the three months ended September 30, 2006.



Total operating expenses



Overall operating expenses were $511,759 for the three months ended September 30, 2007 versus $1,200,583 for the three months ended September 30, 2006, which resulted in a decrease of $688,824 or 57%.  Overall we were able to decrease most of our expenses for the three months ended September 30, 2007, with the most significant decreases in consulting services, professional fees, and travel expenses.  As compared to the same time period in 2006, we had substantial consulting fees associated with our business change to the alternative fuel industry as well as higher professional fees and travel expenses as we began to pursue the



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brokering and distribution of alternative fuel buses.  As we have focused our operations to that of brokering and the distribution of alternative fuel buses, we have been able to reduce costs once associated with the bifuel conversion systems.  All of these items mentioned above contributed to lowering our total operating expenses.

Net operating loss



The net operating loss for the three months ended September 30, 2007 was $494,331, versus $1,166,266 for the comparable period last year, a decrease of $671,935 or 58%.  As mentioned above, although we are continuing our pursuit in the alternative fuel industry, we have been able to substantially reduce some of our operating expenses and thereby decrease our net operating loss.



LIQUIDITY AND CAPITAL RESOURCES



The following table summarizes total current assets, liabilities and working capital at September 30, 2007 compared to the twelve months ended June 30, 2007.



September 30, 2007
        June 30, 2007
        Increase / (Decrease)$
        %Current Assets
        $272,986
        $669,928
        $(396,942)
        (59%)Current Liabilities
        $235,787
        $232,514
        $3,273
        1%Working Capital (Deficit)
        $37,199
        $437,414
        $(400,215 )
        (91%)




A critical component of our operating plan impacting our continued existence is the ability to obtain additional capital through equity and/or debt financing. Since inception, we have financed our cash flow requirements through issuances of common stock and cash generated from our operations. As we continue our activities, we anticipate experiencing net negative cash flows from operations, pending receipt of significant revenues.



We will require additional financing to fund operations through common stock offerings and bank borrowings, to the extent available, or to obtain additional financing to the extent necessary to augment our working capital.  In the event we cannot obtain the necessary capital to pursue our strategic plan, we may have to significantly curtail our operations. This would materially impact our ability to continue operations.  As of the date of this filing, we have no prospects for capitalizing our operations.



Existing capital at the three months ended September 30, 2007 and revenues anticipated to be derived from our pet facility are expected to only be sufficient to sustain our operations for approximately 2 to 3 months. We anticipate minor decreases in our cash requirements though not significant and subsequently we will require additional capital generated from either the sale of common stock, the sale of preferred stock, or debt financing.  No assurance can be made that such financing would be available, and if available it may take either the form of debt or equity.



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In either case, the financing could have a negative impact on our financial condition and our stockholders.



We anticipate that we will incur operating losses in the next twelve months. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stage of development.  Such risks for us include, but are not limited to, an evolving and unpredictable business model and the management of growth. To address these risks, we must, among other things, expand our customer base, implement and successfully execute our business and marketing strategy, respond to competitive developments, and attract, retain and motivate qualified personnel. There can be no assurance that we will be successful in addressing such risks, and the failure to do so can have a material adverse effect on our business prospects, financial condition and results of operations.



Going Concern



Our financial statements are prepared using generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business.  Our ability to continue as a going concern is dependent upon us attaining profitable operations based on the development of products that can be sold.  We intend to use borrowings and security sales to mitigate the affects of our cash position.



Off-Balance Sheet Arrangements.



We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.



Application of Critical Accounting Policies and Pronouncements



The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and judgments that affect our reported assets, liabilities, revenues, and expenses, and the disclosure of contingent assets and liabilities. We base our estimates and judgments on historical experience and on various other assumptions we believe to be reasonable under the circumstances. Future events, however, may differ materially from our current expectations and assumptions. While there are a number of significant accounting policies affecting our consolidated financial statements; we believe the following critical accounting policies involve the most complex, difficult and subjective estimates and judgments:



Revenue Recognition



Revenue from boarding and care fees are recorded when pets are picked up and an invoice is given to the customer.



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Impairment of long-lived assets



The Company reviews its long-lived assets and intangibles periodically to determine potential impairment by comparing the carrying value of the long-lived assets with the estimated future cash flows expected to result from the use of the assets, including cash flows from disposition. Should the sum of the expected future cash flows be less than the carrying value, the Company would recognize an impairment loss. An impairment loss would be measured by comparing the amount by which the carrying value exceeds the fair value of the long-lived assets and intangibles.



Deferred Income Taxes



Our valuation allowance is an estimate based on our current expectations of utilization of our income tax operating loss carryforwards.



FACTORS THAT MAY AFFECT OUR RESULTS OF OPERATIONS



Risk Associated With Our Business and Marketplace



Our company has no operating history in the alternative fuel industry and there can be no assurance that we will be successful in the entry into the industry or that we will be able to develop our business plan to integrate this new line of business.



Our proposed operations are subject to all of the risks inherent in the establishment of a new business, including licensing risks, insufficient capital, unforeseen problems, and expenses and complications encountered with the early phases of operations in a business. Moreover, our lack of an operating history in the alternative fuel industry makes it impossible to predict whether or not the company will operate profitably if it is able to successfully enter such industry. While we have brought on management that is familiar with this industry, there can be no assurances that we will be able to locate, hire and retain the necessary personnel to initiate, manage and operate this new line of business, develop and implement necessary systems, obtain contracts and obtain financing as contemplated in our business plan.



We are uncertain as to our ability to obtain additional capital necessary to continue our business.



We have incurred an accumulated deficit as of September 30, 2007 of $9,215,697. As a result of these losses and negative cash flows from operations, our ability to continue operations will be dependent upon the availability of capital from outside sources unless and until we achieve profitability.  We have continued to conduct private placements and during the year ended June 30, 2007, we raised approximately $897,501 in additional proceeds to be used as general working capital. We anticipate current cash on hand, combined with minimal revenues from the pet facility, will only satisfy our working capital needs for approximately 2 to 3 months.



We will continue to depend on outside capital to pay for our deficit. Such outside capital may include the sale of additional stock, loans from our officer and directors, and/or commercial



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borrowing. There can be no assurance that capital will continue to be available if necessary to meet these continuing operational costs or, if the capital is available, it will be on terms acceptable to our company. The issuances of additional equity securities by our company could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our company's liabilities and future cash commitments. If we are unable to obtain financing in the amounts and on terms deemed acceptable, our business and future success may be adversely affected.



In addition, our ability to continue as a going concern is dependent on our ability to raise funds to finance ongoing operations; however we may not be able to raise sufficient funds to do so. Our independent auditors have indicated that there is substantial doubt about our ability to continue as a going concern over the next twelve months. Because of these factors, an investor cannot determine if and when we will become profitable and therefore runs the risk of losing their investment.



We anticipate some risks as a result of potential operations internationally.  These risks are a result of our sales, marketing, and distribution agreement with WZL and Baolong to sell their CNG, LPG and hybrid buses in various countries.



We anticipate having operations outside of the United States and our success will depend, in part, on our ability to manage and expand these operations.  They will require significant management attention and financial resources.  Our operations will be subject to numerous and varied regulations.  Changes in exchange rates between foreign currencies and the U.S. dollar may adversely affect our anticipated operating margins.  There is also an additional risk if the currency is not freely traded.  Some currencies, such as the Chinese Renminbi, are subject to limitations on conversion into other currencies.  These future foreign exchange rates may have a material adverse effect on our anticipated business and operating results.



International operations increase our exposure to international laws and regulations, with some additional risks associated with doing business in China.



Foreign laws and regulations are often complex and subject to variation and unexpected changes.  This could result in potential litigation.  In addition, there are few additional risks associated with doing business in China such as:  complex set of licensing requirements and restrictions, currency fluctuation and exchange rate risks, protection of intellectual property, and difficulties and limitations on the repatriation of cash.



Historically and at this present time our sole revenue generating property is located in Florida and, accordingly, we could be disproportionately harmed by an economic downturn in this area of the country or a natural disaster, such as a hurricane.



Our sole revenue producing asset, the Bed and Biscuit Inn, is located in Flagler Beach, Florida. This concentration in Florida makes our business disproportionately affected by economic conditions, competition and real and personal property tax rates in Florida.  Natural disasters in Florida, such as hurricanes and/or tropical storms, would disproportionately affect our business operations.  A change in Florida laws applicable to the pet boarding industry or a



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change in zoning laws would have a greater impact on us than a change in comparable laws in another geographical area, due to our Florida concentration. Adverse developments in Florida could harm our revenue or increase our operating expenses.



Risk Factors Relating to Our Common Stock



If we fail to remain current on our reporting requirements, we could be removed from the OTC Bulletin Board which would limit the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.



Companies trading on the OTC Bulletin Board, such as us, must be reporting issuers under Section 12 of the Securities Exchange Act of 1934, as amended, and must be current in their reports under Section 13, in order to maintain price quotation privileges on the OTC Bulletin Board.  More specifically, FINRA has enacted Rule 6530, which determines eligibility of issuers quoted on the OTC Bulletin Board by requiring an issuer to be current in its filings with the Commission.  Pursuant to Rule 6530(e), if we file our reports late with the Commission three times in a two-year period or our securities are removed from the OTC Bulletin Board for failure to timely file twice in a two-year period then we will be ineligible for quotation on the OTC Bulletin Board.  Our quarterly filing of March 31, 2007 was considered late as we were unable to meet the filing grace period as defined under
Rule 12b-25.  Additionally, we filed the extension in connection with the annual filing of June 30, 2007 late resulting in our second late filing.  Therefore, we must not have one more late filing within the two year period or we will be in jeopardy of being dequoted from the OTC Bulletin Board.  As a result, the market liquidity for our securities could be severely adversely affected by limiting the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.



Since our shares are thinly traded, and trading on the OTC Bulletin Board may be sporadic because it is not an exchange, stockholders may have difficulty reselling their shares.



Our common shares are currently quoted for public trading on the Over-the-Counter Bulletin Board. The trading price of our common shares has been subject to wide fluctuations. Trading prices of our common shares may fluctuate in response to a number of factors, many of which will be beyond our control. The stock market has generally experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of companies with limited business operations. There can be no assurance that trading prices and price earnings ratios previously experienced by our common shares will be matched or maintained. These broad market and industry factors may adversely affect the market price of our common shares, regardless of our operating performance.



In the past, following periods of volatility in the market price of a companys securities, securities class-action litigation has often been instituted. Such litigation, if instituted, could result in substantial costs for us and a diversion of management's attention and resources.



Because our common stock is deemed a low-priced Penny stock, an investment in our common stock should be considered high risk and subject to marketability restrictions.



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Since our common stock is a penny stock, as defined in Rule 3a51-1 under the Securities Exchange Act, it will be more difficult for investors to liquidate their investment. Until the trading price of the common stock rises above $5.00 per share, if ever, trading in the common stock is subject to the penny stock rules of the Securities Exchange Act specified in rules 15g-1 through 15g-10.  Those rules require broker-dealers, before effecting transactions in any penny stock, to:




        Deliver to the customer, and obtain a written receipt for, a disclosure document;



        Disclose certain price information about the stock;



        Disclose the amount of compensation received by the broker-dealer or any associated person of the broker-dealer;



        Send monthly statements to customers with market and price information about the penny stock; and



        In some circumstances, approve the purchasers account under certain standards and deliver written statements to the customer with information specified in the rules.




Consequently, the penny stock rules may restrict the ability or willingness of broker-dealers to sell the common stock and may affect the ability of holders to sell their common stock in the secondary market and the price at which such holders can sell any such securities. These additional procedures could also limit our ability to raise additional capital in the future.



Future sales of our common stock may result in a decrease in the market price of our common stock, even if our business is doing well.



The market price of our common stock could drop due to sales of a large number of shares of our common stock in the market or the perception that such sales could occur. This could make it more difficult to raise funds through future offerings of common stock.



FINRA sales practice requirements may also limit a stockholder's ability to buy and sell our stock.



In addition to the penny stock rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, the FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect
on the market for our shares.



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Item 3. Controls and Procedures



Our Chief Executive Officer, Carlos Zalduondo, and Chief
Financial Officer, Suzanne Herring, have evaluated the effectiveness of our
disclosure controls and procedures (as defined in Rule 13a-15(e) under the
Securities Exchange Act of 1934, as amended) as of the end of the period covered
by this Report.  Based on the evaluation, Mr. Zalduondo and Ms. Herring
concluded that our disclosure controls and procedures are effective in timely
alerting them to material information relating to us (including our consolidated
subsidiaries) required to be included in our periodic SEC filings.



There were no changes in our internal control over financial
reporting that occurred during our most recent fiscal quarter that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.



PART II--OTHER INFORMATION



Item 1.
        Legal Proceedings




On or about June 2, 2006, China Auto Worldwide (CAW), a Nevada corporation, filed a claim for breach of contract, interference with contractual relations and/or business expectations, fraud, and a declaratory judgment with the Superior Court of Arizona in Maricopa County, Arizona, against AFV Solutions, Inc., A. Energy, LLC, Jeffrey Groscost, Rick Steele, Jeffrey Stebbins, Nelson Barba, collectively (Defendants), alleging that the Defendants breached a Non-Disclosure contract and a Joint Venture Contract.  Additionally, CAW alleges Defendants interfered with its contractual relations and business expectancies with Nelson Barba and Chinese and Peruvian entities.  CAW is also seeking declaratory judgment of their interest in A. Energy, value of their interest in A. Energy, and the parties interest under the Joint Venture Contract.



The Company believes these claims have no merit and filed a counterclaim on September 20, 2006 against CAW alleging abuse of process, securities fraud and market manipulation, and interference with contractual relations.  Both parties have submitted initial disclosure statements and Defendants, Mr. Stebbins and Mr. Steele; have filed motions of summary judgment in their individual capacities.  As of the date of this filing, we are continuing to aggressively pursue our counterclaim and defend this action.



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On or about April 5, 2007 the Company was served with a Countersuit, wherein the Company was named as Third Party Defendants in a dispute which was initiated between two of its stockholders. Primary parties are Coperture, Ltd. as Plaintiff and Lawrence Ryckman as Defendant, with AFV Solutions, Inc. as a co-defendant amongst over 25 other co-defendants. The suit was initiated in the Superior Court of the State of Arizona, Case No. CV2007-000676. Although the Countersuit contains 17 causes of action, the Company believes, based upon the Counterclaim filed that the Counterdefendants are alleging an interest in AFV Solutions, Inc., a Nevada corporation as a result of their alleged introduction of the Company to the alternative fuel industry. Counterdefendants requested relief in the form of a judgment for an unspecified sum to be proven at trial, in addition to a preliminary
injunction and punitive damages.  On or about July 19, 2007, the Court found that the Counterclaim and Third Party Claims should be dismissed, thereby dismissing the action as to AFV Solutions and other parties listed in the suit.



Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds



Recent Sales of Unregistered Securities



On July 27, 2007, we issued a total of 30,000 shares (10,000 and 20,000, respectively) of our common stock to two individuals pursuant to a settlement agreement dated June 28, 2007.



On August 27, 2007, we issued 100,000 shares of our common stock to our newly appointed Chief Executive Officer, Carlos Zalduondo pursuant to his employment agreement executed on June 1, 2007.



We believe that the issuance of shares was exempt from registration and prospectus delivery requirements of the Securities Act of 1933 by virtue of Section 4(2). The shares were issued directly by us and did not involve a public offering or general solicitation. The recipients of the shares were afforded an opportunity for effective access to files and records of our company that contained the relevant information needed to make their investment decision, including our financial statements and 34 Act reports. We reasonably believed that the recipients, who are our consultants, employees, officers and/or directors, immediately prior to receiving the shares, had such knowledge and experience in our financial and business matters that they were capable of evaluating the merits and risks of their investment. The recipients had the opportunity to speak with our management on several occasions
prior to their investment decision.



Issuer Repurchases of Equity Securities.



We did not repurchase any of our securities during the quarter ended September 30, 2007.




Item 3.
        Defaults Upon Senior Securities




None.



Item 4.
        Submission of Matters to a Vote of Security Holders




None.



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Item 5.
        Other Information




None.





Item 6.  Exhibits



Incorporated by referenceExhibit
        Exhibit Description
        Filed herewith
        Form
        Period ending
        Exhibit
        Filing date2.1
        Real Estate Acquisition Contract
        
        8-K
        
        2
        04/09/033(i)a
        Articles of Incorporation of Juris Travel
        
        SB-2
        
        3(i)
        03/19/033(i)b
        Certificate of Amendment changing name from Juris Travel to Bed and Biscuit Inns of America, Inc.
        
        10-KSB
        
        3(i)b
        04/02/033(i)c
        Certificate of Amendment changing name from Bed and Biscuit Inns of America, Inc. to Dogs International.
        
        10-KSB
        
        3(i)c
        04/02/033(i)d
        Articles of Incorporation of Bed & Biscuit Inns of America, Inc.
        
        10-QSB/A
        
        3a
        05/15/033(i)e
        Articles of Incorporation of AFV Research, Inc.
        
        10-QSB
        09/30/04
        3(i)
        12/23/043(i)f
        Articles of Incorporation of AFV Systems, Inc.
        
        10-QSB
        09/30/06
        3(i)f
        11/20/063(ii)a
        Bylaws of Juris Travel
        
        SB-2
        
        3(ii)
        03/19/023(ii)b
        Bylaws of Bed and Biscuit Inns of America, Inc.
        
        10-QSB/A
        03/31/03
        3b
        05/15/033(ii)c
        Bylaws of AFV Research, Inc.
        
        10-QSB
        09/30/04
        3(ii)
        12/23/043(ii)d
        Bylaws of AFV Systems, Inc.
        
        10-QSB
        09/30/06
        3(ii)d
        11/20/0610.8
        Employment Agreement between AFV Solutions, Inc. and Carlos Zalduondo, dated June 1, 2007
        
        8-K
        
        10.8
        07/17/0731.1
        Certification of Carlos Zalduondo Pursuant to Section 302 of Sarbanes-Oxley Act of 2002
        X31.2
        Certification of Suzanne Herring Pursuant to Section 302 of Sarbanes-Oxley of 2002
        X






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32.1
        Certification of Carlos Zalduondo Pursuant to Section 906 of Sarbanes-Oxley Act of 2002
        X32.2
        Certification of Suzanne Herring Pursuant to Section 906 of Sarbanes-Oxley Act of 2002
        X








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.



AFV SOLUTIONS, INC.

(Registrant)





By: 
			/s/Carlos Zalduondo


Carlos Zalduondo, Chief Executive Officer


(On behalf of the Registrant)






Date: November
9, 2007



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