**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549





**FORM
      10-QSB**





**x
      QUARTERLY REPORT
      PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES**


**EXCHANGE
      ACT OF 1934**





For
      the
      quarterly period ended March 31, 2008





OR





**o
      TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES**


**EXCHANGE
      ACT OF 1934**





For
      the
      transition period from ___________ to _____________





*Commission
      file number 005-79737*





AVP,
      INC.





(Exact
      name of registrant as specified in its charter)






Delaware
            
            98-0142664(State
                or other jurisdiction of
                incorporation or organization)
            
            (I.R.S.
                EmployerIdentification
                No.)






6100
      Center Drive, Suite 900, Los Angeles, CA 90045


(Address
      of principal executive offices - Zip code)





(310)
      426 - 8000


(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 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 is a shell company (as defined in the
      Exchange Act Rule 12b-2).





Yes **o**
      No **x**





As
      of May
      14,
      200 8,
      the
      Registrant had 21,089,626 shares
      of common stock outstanding.





Transitional Small
      Business Disclosure Format (check one): Yes **o** No **x**










**AVP,
      INC.**




INDEX
  PagePART
                  I.
              FINANCIAL
                  INFORMATION
              3ITEM
                  1.
              FINANCIAL
                  STATEMENTS
              3Consolidated
                  Balance Sheets as of March 31, 2008(Unaudited)
                  and December 31, 2007
              4Consolidated
                  Statements of Operations forthe
                  three months ended March 31, 2008 and 2007(Unaudited)
              5Consolidated
                  Statement of Changes in Stockholders' Equity (Deficit)for
                  the three months ended March 31, 2008(Unaudited)
              6Consolidated
                  Statements of Cash Flows forthe
                  three months ended March 31, 2008 and 2007(Unaudited)
              7Notes
                  to Consolidated Financial Statements (Unaudited)
              9ITEM
                  2.
              MANAGEMENT'S
                  DISCUSSION AND ANALYSIS ORPLAN
                  OF OPERATION
              19ITEM
                  3.
              CONTROLS
                  AND PROCEDURES
              26PART
                  II.
              OTHER
                  INFORMATIONITEM
                  6.
              EXHIBITS
                  AND REPORTS ON FORM 8-K
              27




2




**PART
      I. FINANCIAL INFORMATION**





**ITEM
      1. FINANCIAL STATEMENTS**





**AVP,
      INC.**


**Index
      to Financial Statements**


**Period
      Ended March 31, 2008**




PAGEFinancial
                StatementsConsolidated
                Balance Sheets as of March 31, 2008
              (Unaudited)
                and December 31, 2007
            4Consolidated
                Statements of Operations for
              the
                three months ended March 31, 2008 and 2007
              (Unaudited)
            5Consolidated
                Statement of Changes in Stockholders' Equity (Deficit)
              for
                the three months ended March 31, 2008
              (Unaudited)
            6Consolidated
                Statements of Cash Flows for
              the
                three months ended March 31, 2008 and 2007
              (Unaudited)
            7-8Notes
                to Consolidated Financial Statements (Unaudited)
            9




3




**AVP,
      INC.**





**CONSOLIDATED
      BALANCE SHEETS**




(Unaudited)
              March
                31,
              2008
            
            December
                31,
              2007**ASSETS****CURRENT
                ASSETS**Cash
                and cash equivalents
            
            $
            3,530,182
            
            $
            2,257,453Accounts
                receivable, net ofallowance
                for doubtful accounts of $150,871 and $149,748
            
            
            2,420,017
            
            
            2,008,253Prepaid
                expenses
            
            
            531,625
            
            
            388,649Other
                current assets
            
            
            54,546
            
            
            116,393TOTAL
                CURRENT ASSETS
            
            
            6,536,370
            
            
            4,770,748**PROPERTY
                AND EQUIPMENT, net**
            
            
            447,474
            
            
            392,447**OTHER
                ASSETS**
            
            
            32,562
            
            
            115,496TOTAL
                ASSETS
            
            $
            7,016,406
            
            $
            5,278,691**LIABILITIES
                AND STOCKHOLDERS’ EQUITY****(DEFICIT)****CURRENT
                LIABILITIES**Accounts
                payable
            
            $
            1,712,930
            
            $
            908,020Accrued
                expenses
            
            
            2,348,687
            
            
            1,663,975Deferred
                revenue
            
            
            3,143,915
            
            
            101,245TOTAL
                CURRENT LIABILITIES
            
            
            7,205,532
            
            
            2,673,240**OTHER
                NON-CURRENT LIABILITIES**
            
            
            84,392
            
            
            96,419TOTAL
                LIABILITIES
            
            
            7,289,924
            
            
            2,769,659**COMMITMENTS
                AND CONTINGENCIES****STOCKHOLDERS’
                EQUITY (DEFICIT)**Preferred
                stock, 2,000,000 shares authorized:Series
                A convertible preferred stock, $.001 par value, 1,000,000 shares
                authorized, no shares issued and outstanding
            
            
            -
            
            
            -Series
                B convertible preferred stock, $.001 par value, 250,000 shares authorized,
                44,944 and 47,152 shares issued and outstanding
            
            
            46
            
            
            48Common
                stock, $.001 par value, 80,000,000 shares authorized, 21,089,626
                and
                20,490,096 shares issued and outstanding
            
            
            21,090
            
            
            20,490Additional
                paid-in capital
            
            
            39,935,262
            
            
            39,732,837Accumulated
                deficit
            
            
            (40,229,916
            )
            
            (37,244,343
            )TOTAL
                STOCKHOLDERS’ EQUITY
                (DEFICIT)
            
            
            (273,518
            )
            
            2,509,032TOTAL
                LIABILITIES AND
                STOCKHOLDERS’ EQUITY (DEFICIT)
            
            $
            7,016,406
            
            $
            5,278,691




See
      notes
      to financial statements.




4







**AVP,
      INC.**




**CONSOLIDATED
      STATEMENTS OF OPERATIONS**




**(Unaudited)**




Three
                  Months Ended March 31**2008**
              
              **2007**REVENUESponsorships/Advertising
              
              $
              875,520
              
              $
              -Other
              
              
              115,470
              
              
              169,000TOTAL
                  REVENUE
              
              
              990,990
              
              
              169,000EVENT
                  COSTS
              
              
              1,044,234
              
              
              52,299GROSS
                  PROFIT (LOSS)
              
              
              (53,244
              )
              
              116,701OPERATING
                  EXPENSESSales
                  and Marketing(1)
              
              
              1,271,655
              
              
              875,713Administrative(2)
              
              
              1,670,713
              
              
              1,446,303TOTAL
                  OPERATING EXPENSES
              
              
              2,942,368
              
              
              2,322,016OPERATING
                  LOSS
              
              
              (2,995,612
              )
              
              (2,205,315
              )OTHER
                  INCOMEInterest
                  income
              
              
              11,189
              
              
              56,457Gain
                  on disposal of asset
              
              
              -
              
              
              8,449TOTAL
                  OTHER INCOME
              
              
              11,189
              
              
              64,906LOSS
                  BEFORE INCOME TAXES
              
              
              (2,984,423
              )
              
              (2,140,409
              )INCOME
                  TAXES
              
              
              (1,150
              )
              
              (800
              )NET
                  LOSS
              
              $
              (2,985,573
              )
              $
              (2,141,209
              )Loss
                  per common share:Basic
              
              $
              (0.15
              )
              $
              (0.11
              )Diluted
              
              $
              (0.15
              )
              $
              (0.11
              )Shares
                  used in computing loss per share:Basic
              
              
              20,535,159
              
              
              19,783,309Diluted
              
              
              20,535,159
              
              
              19,783,309




(1)
      Sales
      and marketing expenses includes stock-based expenses of $18,182 and $72,907
      for
      the three months ended March 31, 2008 and 2007, respectively.




(2)
      Administrative expenses include stock-based expenses of $203,023 and $21,360
      for
      the three months ended March 31, 2008 and 2007, respectively.




See
      notes
      to financial statements.






5




**AVP,
      INC.**




**CONSOLIDATED
      STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)**





**For
      The Three Months Ended March 31, 2008**





**(Unaudited)**




Series
                A
              Preferred
                Stock
            
            Series
                B
              Preferred
                Stock
            
            Common
                StockShares
            
            Amount
            
            Shares
            
            Amount
            
            Shares
            
            Amount
            
            Additional
                Paid-in Capital
            
            Accumulated
                Deficit
            
            Total
                Stockholders’ Equity (Deficit)Balance,
                December 31, 2007
            
            
            -
            
            $
            -
            
            
            47,152
            
            $
            48
            
            
            20,490,096
            
            $
            20,490
            
            $
            39,732,837
            
            $
            (37,244,343
            )
            $
            2,509,032Conversion
                of Series B Preferred Stock to common stock
            
            
            -
            
            
            -
            
            
            (2,208
            )
            
            (2
            )
            
            61,537
            
            
            62
            
            
            (60
            )
            
            -
            
            
            -Cashless
                exercise of option and warrants
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            537,993
            
            
            538
            
            
            (538
            )
            
            -
            
            
            -Expenses
                from issuance of employee options
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            203,023
            
            
            -
            
            
            203,023Net
                loss
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (2,985,573
            )
            
            (2,985,573
            )Balance,
                March 31, 2008
            
            
            -
            
            $
            -
            
            
            44,944
            
            $
            46
            
            
            21,089,626
            
            $
            21,090
            
            $
            39,935,262
            
            $
            (40,229,916
            )
            $
            (273,518
            )






See
      notes
      to financial statements.




6





**AVP,
      INC.**





**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**





**(Unaudited)**




**Three
                Months Ended March
                31,****2008**
            
            **2007**CASH
                FLOWS PROVIDED BY OPERATING ACTIVITIESNet
                loss
            
            $
            (2,985,573
            )
            $
            (2,141,209
            )Adjustments
                to reconcile net loss to net cash flows provided by operating
                activities:Depreciation
                of property and equipment
            
            
            66,662
            
            
            49,571Bad
                debt expense
            
            
            1,123
            
            
            -Amortization
                of deferred commissions
            
            
            18,182
            
            
            72,907Gain
                on disposal of assets
            
            
            -
            
            
            (8,449
            )Compensation
                from issuance of stock options and warrants
            
            
            203,023
            
            
            21,360Decrease
                (increase) in operating assets:Accounts
                receivable
            
            
            (412,887
            )
            
            2,027,301Prepaid
                expenses
            
            
            (142,976
            )
            
            (647,084
            )Other
                assets
            
            
            44,665
            
            
            -Increase
                (decrease) in operating liabilities:Accounts
                payable
            
            
            804,910
            
            
            (77,518
            )Accrued
                expenses
            
            
            672,685
            
            
            229,204Deferred
                revenue
            
            
            3,042,670
            
            
            3,400,205NET
                CASH FLOWS PROVIDED BY OPERATING ACTIVITIES
            
            
            1,312,484
            
            
            2,926,288CASH
                FLOWS USED IN INVESTING ACTIVITIESInvestment
                in property and equipment
            
            
            (39,755
            )
            
            (163,410
            )Proceeds
                from investment in sales-type lease
            
            
            -
            
            
            150,000NET
                CASH FLOWS USED IN INVESTING ACTIVITIES
            
            
            (39,755
            )
            
            (13,410
            )




See
      notes
      to financial statements.




7




**AVP,
      INC.**




**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**





**(Unaudited)**





(CONTINUED)





**Three
                Months Ended March
                31,****2008**
            
            **2007**CASH
                FLOWS PROVIDED BY FINANCING ACTIVITIES
            
            $
            -
            
            $
            -NET
                INCREASE IN CASH AND CASH EQUIVALENTS
            
            
            1,272,729
            
            
            2,912,878CASH
                AND CASH EQUIVALENTS, BEGINNING OF PERIOD
            
            
            2,257,453
            
            
            5,052,636CASH
                AND CASH EQUIVALENTS, END OF PERIOD
            
            $
            3,530,182
            
            $
            7,965,514**SUPPLEMENTAL
                DISCLOSURE OF****CASH
                FLOW INFORMATION**Cash
                paid during the period for:Interest
            
            $
            -
            
            $
            -Income
                taxes
            
            $
            1,150
            
            $
            800**SUPPLEMENTAL
                DISCLOSURE OF NON-CASH****INVESTING
                AND FINANCING INFORMATION**Conversion
                of Series B preferred stock into common stock
            
            $
            62
            
            $
            8Issuance
                of warrant to sales agent for services
            
            $
            -
            
            $
            57,619Cashless
                exercise of options and warrants
            
            $
            538
            
            $
            65Reclassification
                of deposits into fixed assets
            
            $
            81,934
            
            $
            -




See
      notes
      to financial statements.




8




**AVP,
      INC.**




**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(Unaudited)**




**1.
      BASIS OF PRESENTATION**




The
      accompanying unaudited interim consolidated financial statements of AVP, Inc.
      (“AVP”) have been prepared in accordance with accounting principles generally
      accepted in the United States of America and the rules of the Securities and
      Exchange Commission ("SEC"), and should be read in conjunction with the audited
      financial statements and notes thereto contained in AVP’s latest Annual Report
      on Form 10-KSB filed with the SEC. In the opinion of management, all
      adjustments, consisting only of normal recurring adjustments, necessary for
      a
      fair presentation of AVP’s financial position and the results of operations for
      the interim periods presented have been reflected herein. The results of
      operations for interim periods are not necessarily indicative of the results
      to
      be expected for the full year. Notes to the consolidated financial statements
      that would substantially duplicate the disclosures contained in the consolidated
      audited financial statements for the most recent fiscal year 2007, as reported
      in the Form 10-KSB as previously filed with the SEC, have been
      omitted.




**2.
      EARNINGS (LOSS) PER BASIC AND DILUTED SHARE OF COMMON
      STOCK**




Basic
      earnings (loss) per common share is computed by dividing income available to
      common shareholders by the weighted-average number of shares of common stock
      outstanding during the period. Diluted earnings per common share is computed
      by
      dividing income available to common shareholders by the weighted-average number
      of shares of common stock outstanding during the period increased to include
      the
      number of additional shares of common stock that would have been outstanding
      if
      the dilutive potential shares of common stock had been issued. The dilutive
      effect of outstanding options and warrants is reflected in diluted earnings
      per
      share by application of the “treasury stock” method. The dilutive effect of
      outstanding convertible preferred stock is reflected in diluted earnings per
      share by application of the “if-converted” method. Under the treasury stock
      method, an increase in the fair market value of the Company’s common stock can
      result in a greater dilutive effect from outstanding options and
      warrants.




The
      following options, warrants and other incremental shares to purchase shares
      of
      common stock were excluded from the computation of diluted earnings (loss)
      per
      share for the periods presented as their effect would be
      antidilutive.




Three
                Months Ended March 31,2008
            
            2007Options
                and Warrants
            
            
            19,845,425
            
            
            18,227,220Series
                B Preferred Stock
            
            
            1,252,589
            
            
            1,930,165Total
            
            
            21,098,014
            
            
            20,157,385




9






**AVP,
      INC.**





**NOTES
      TO CONSOLIDATED**  **FINANCIAL
      STATEMENTS**


**(Unaudited)**




**3.
      STOCK BASED COMPENSATION**




On
      January 1, 2006, the Company adopted the fair value recognition provisions
      of
      SFAS No. 123 (Revised 2004). Prior to January 1, 2006, the Company had accounted
      for stock-based payments under the recognition and measurement provisions of
      Accounting Principles Board (“APB”) Opinion 25 and related interpretations, as
      permitted by SFAS No. 123, “Accounting for Stock-Based Compensation.” In
      accordance with APB 25, no compensation expense was required to be recognized
      for options granted that had an exercise price equal to the market value of
      the
      underlying common stock on the date of grant.




Under
      the
      modified prospective method of SFAS No. 123(R), compensation expense was
      recognized during the year ended December 31, 2006 and included compensation
      expense for all stock-based payments granted prior to, but not yet vested as
      of
      January 1, 2006, based on the grant date fair value estimated in accordance
      with
      the original provisions of SFAS No. 123.




Under
      the
      fair value recognition provisions of SFAS No. 123R, stock-based compensation
      cost is estimated at the grant date based on the fair value of the award. The
      fair value of stock options granted is estimated using the Black-Scholes-Merton
      option pricing model. The fair value is amortized on a straight-line basis
      over
      the requisite service period of the awards, which is generally the vesting
      period.




The
      table
      below sets forth the pricing assumptions used in determining the fair value
      for
      the common stock options using the Black Scholes model:


Three
                Months Ended March
                31,2008
            
            2007Risk-free
                interest rate
            
            
            2.08
                - 2.66
            %
            
            4.54
            %Expected
                life
            
            
            1
                - 5.76 years
            
            
            3
                yearsExpected
                volatility
            
            
            75
                - 75.5
            %
            
            84
            %Expected
                dividend yield
            
            
            0
            %
            
            0
            %




Determining
      the appropriate fair value of stock-based awards at the grant date requires
      judgment, including estimating stock price volatility, and expected term.
      The
      Company uses its own stock price to compute estimated volatility as it believes
      that historical volatility is fair representation of future volatility.
      Historical forfeitures have been immaterial; therefore, the Company is not
      recognizing forfeitures prior to their occurrences. The expected term of
      options granted from historical data on employee exercises is not yet
      determinable. The Company does not have sufficient historical exercise data
      to
      provide a reasonable basis upon which to estimate expected term due to the
      limited period of time its equity shares have been publicly traded. When more
      relevant detailed information becomes available, the Company intends to make
      more refined estimates of expected term. In
      December 2007, the SEC issued SAB 110, Shared Based Payment, to amend the SEC’s
      views discussed in SAB 107 regarding the use of the simplified method in
      developing an estimate of expected life of share options in accordance with
      SFAS
      123 (R).In accordance with SAB 107, as amended by SAB 110, the company
      used the simplified method in developing an estimate of expected term for the
      "plain vanilla" share options granted on February 5, 2008. The risk-free
      interest rate is based on the U.S. Treasury yield curve in effect at the date
      of
      grant. As of March 31, 2008, the Company had approximately $1,345,739 of
      unrecognized compensation expense expected to be recognized over a weighted
      average period of approximately 2.55 years.




Due
      to
      the inherent uncertainty in valuing awards for publicly-traded stock as of
      the
      grant date, given that such awards will be exercised, purchased, or sold at
      indeterminate future dates, the actual value realized by the recipients, if
      any,
      may vary significantly from the value of the awards estimated at the grant
      date.




10




**AVP,
      INC.**




**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(Unaudited)**




**4.
      STOCK OPTIONS**




**Stock
      Option Plans**




Under
      AVP’s 2005 Stock Incentive Plan, AVP may grant awards of stock options
      (including stock purchase warrants) and restricted stock grants to its officers,
      directors, employees, consultants, players, and independent contractors. AVP
      may
      issue an aggregate of 30,000,000 shares of its common stock under the 2005
      Plan,
      including approximately 14,000,000 shares underlying management warrants, as
      well as options previously granted by AVP’s wholly owned subsidiary, Association
      of Volleyball Professionals, Inc. (the “Association”), which were subsequently
      converted to AVP stock options upon the Association’s acquisition by AVP. AVP
      may grant both incentive stock options intended to qualify under Section 422
      of
      the Internal Revenue Code, and options, warrants, and other rights to buy AVP’s
      common stock that are not qualified as incentive stock options. The exercise
      price of each optioned share is determined by the Compensation Committee;
      however the exercise price for incentive stock options and nonqualified stock
      options will not be less than 100% of the fair market value of the optioned
      shares on the date of grant. The exercise price of incentive stock options
      granted to holders of more than 10% of AVP’s Common Stock must be at least 110%
      of the fair market value of the Common Stock on the date of grant.




The
      expiration date of each option shall be determined by the Compensation Committee
      at the date of grant; however, in no circumstances shall the option be
      exercisable after 10 years from the date of grant. Stock options granted under
      the 2005 Plan will expire no more than ten years from the date on which the
      option is granted, unless the Board of Directors determines an alternative
      termination date. If incentive stock options are granted to holders of more
      than
      10% of AVP’s Common Stock, such options will expire no more than five (5) years
      from the date the option is granted. Except as otherwise determined by the
      Board
      of Directors or the Compensation Committee, stock options granted under the
      2005
      Plan will vest and become exercisable on the anniversaries of the date of grant
      of such option at a rate of 25% per year over four years from the date of
      grant.




In
      connection with stock options granted to employees to purchase common stock,
      AVP
      recorded $203,023 of stock-based compensation expense for the period ended
      March
      31, 2008 and $21,360 for the period ended March 31, 2007.




The
      following table contains information on the stock options under the Plan for
      the
      quarter ended March 31, 2008 and the year ended December 31, 2007. The
      outstanding options expire from November 2008 to February 2018.




Number
                of Shares
            
            Weighted
                Average Exercise Price
            
            Weighted
                Average Remaining Contractual Life (Years)
            
            Aggregate
                Intrinsic Value(1)Options
              outstanding at January 1, 2007
            
            
            12,078,084
            
            $
            0.86Granted
            
            
            3,450,000
            
            
            1.00Exercised
            
            
            (100,977
            )
            
            0.01Cancelled
            
            
            (8,081
            )
            
            2.31Options
                outstanding at December 31, 2007
            
            
            15,419,026
            
            
            0.90Granted
            
            
            947,240
            
            
            0.79Exercised
            
            
            (895,646
            )
            
            0.32Cancelled
            
            
            (1,952,297
            )
            
            1.12Options
                outstanding at March 31, 2008
            
            
            13,518,323
            
            $
            0.89
            
            
            3.6
            
            $
            4,685,939Options
                exercisable at March 31, 2008
            
            
            11,380,739
            
            $
            0.88
            
            
            2.4
            
            $
            4,616,101Options
                exercisable at March 31, 2008 and expected to vest
            
            
            13,491,586
            
            $
            0.89
            
            
            3.6
            
            $
            4,684,958






11




**AVP,
      INC.**




**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(Unaudited)**




**4.
      STOCK OPTIONS (CONTINUED)**




**Stock
      Option Plans (Continued)**




(1)
      The
      aggregate intrinsic value is calculated as the difference between the exercise
      price of the underlying awards and the closing stock price of $0.85 of our
      common stock on March 31, 2008, the last trading date of our quarter ended
      March
      31, 2008. The intrinsic value was computed for only those awards that are in
      the
      money and excludes out of the money awards.




The
      weighted average fair value of options granted was $0.47 and $0 during  the
      three months ended March 31, 2008 and 2007, respectively. No options were
      granted during the three months ended March 31, 2007.




The
      total
      intrinsic values of stock options exercised during the three months ended March
      31, 2008 and 2007 were $410,091 and $71,878, respectively. No cash was received
      as the options were exercised in cashless exercises. The Company did not
      recognize any tax benefit related to these exercises.




The
      following table summarizes information about AVP’s options outstanding and
      exercisable by price range as of March 31, 2008:


Options
                Outstanding
            
            Options
                ExercisableRange
                of
              Exercise
              Prices
            
            Number
              Outstanding
            
            Weighted
              Average
              Remaining
              Contractual
              Life
                in Years
            
            Weighted
              Average
              Exercise
              Price
            
            Number
              Exercisable
            
            Weighted
              Average
              Exercise
              Price$
            .01
                -.30
            
            
            5,324,273
            
            
            1.8
            
            $
            0.01
            
            
            5,324,273
            
            $
            0.01.31
                -.90
            
            
            2,448,028
            
            
            7.1
            
            
            0.76
            
            
            1,692,439
            
            
            0.77.91
                -1.60
            
            
            2,489,020
            
            
            6.9
            
            
            1.17
            
            
            1,107,025
            
            
            1.371.61
                -2.80
            
            
            3,257,002
            
            
            1.3
            
            
            2.21
            
            
            3,257,002
            
            
            2.21$
            .01
                -2.80
            
            
            13,518,323
            
            
            3.6
            
            $
            0.89
            
            
            11,380,739
            
            $
            0.88




When
      options are exercised, the Company’s policy is to issue registered, unissued
      shares of common stock. As of March 31, 2008, the Company had 14,056,024
      registered but unissued shares of common stock available.





12


**AVP,
      INC.**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(Unaudited)**




**4.
      STOCK OPTIONS (CONTINUED)**




**Other
      Stock Options/Warrants**





In
      connection with warrants granted to non-employees to purchase common stock,
      AVP
      recorded warrant expense of $0 in sales and marketing expenses for the three
      months ended March 31, 2008 and $54,725 in sales and marketing expenses for
      the
      three months March 31, 2007. Such amounts represent, for each non-employee
      stock
      option or warrants, the valuation determined using the Black Scholes Model
      at
      the time of grant.





The
      following table contains information on all of AVP’s non-plan stock options and
      warrants for the period ended March 31, 2008 and the year ended December 31,
      2007.





Number
                of Shares
            
            Weighted
                Average Exercise Price
            
            Weighted
                Average Remaining Contractual Life (Years)
            
            Aggregate
                Intrinsic Value(1)Options
                outstanding at January 1, 2007
            
            
            6,216,942
            
            $
            1.44Granted
            
            
            600,000
            
            
            0.80Exercised
            
            
            (16,829
            )
            
            0.30Cancelled
            
            
            (473,011
            )
            
            2.10Options
                outstanding at December 31, 2007
            
            
            6,327,102
            
            
            1.33Granted
            
            
            -
            
            
            -Exercised
            
            
            -
            
            
            -Cancelled
            
            
            -
            
            
            -Options
                outstanding at March 31, 2008
            
            
            6,327,102
            
            $
            1.33
            
            
            2.4
            
            $
            206,248Options
                exercisable at March 31, 2008
            
            
            6,327,102
            
            $
            1.33
            
            
            2.4
            
            $
            206,248





No
      options or warrants were granted during the three months ended March 31, 2008
      or
      2007.





The
      total
      intrinsic value of stock options/warrants exercised during the three months
      ended March 31, 2008 and 2007 was $0 and $24,402, respectively. No cash was
      received as the options/warrants were exercised in a cashless exercise. The
      Company did not recognize any tax benefit in connection with these
      exercises.





The
      following table summarizes information about options/warrants outstanding and
      exercisable by price range as of March 31, 2008:




Options
                Outstanding
            
            Options
                ExercisableRange
                of
              Exercise
              Prices
            
            Number
                Outstanding
            
            Weighted
              Average
              Remaining
                Contractual
              Life
                in Years
            
            Weighted
              Average
              Exercise
              Price
            
            Number
              Exercisable
            
            Weighted
              Average
              Exercise
              Price$
            .30
                - 1.50
            
            
            3,862,192
            
            
            3.0
            
            $
            0.89
            
            
            3,862,192
            
            $
            0.891.60
                - 3.40
            
            
            2,464,910
            
            
            1.5
            
            
            2.01
            
            
            2,464,910
            
            
            2.01$
            .30
                - 3.40
            
            
            6,327,102
            
            
            2.4
            
            $
            1.33
            
            
            6,327,102
            
            $
            1.33




13




**AVP,
      INC.**




**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(Unaudited)**




**5.
      COMMITMENTS AND CONTINGENCIES**




**Operating
      Lease**


The
      Company leases its corporate office facilities under a non-cancellable operating
      lease expiring in March 2010. The lease contains a renewal option for an
      additional five-year term. In addition, the lease provides for rental
      escalations at defined intervals during the lease term. Rent expense is
      recognized on the straight-line method over the term of the lease. The
      difference between rent expense recognized and rent payable under the rental
      escalation clauses is reflected in accrued expenses.




The
      Company also subleases approximately 4,500 square feet of warehouse space
      pursuant to a sublease that expires on February 28, 2009. The space is used
      for
      storing tournament equipment and the Company’s trucks.




The
      future minimum rental payments under the non-cancellable operating leases are
      as
      follows:




Years
      Ending December 31,


2008
            
            $
            285,5002009
            
            
            362,4002010
            
            
            90,000Total
            
            $
            737,900




Rent
      expense for the corporate office facility charged to operations was $88,187 and
      $79,853 for the three months ended March 31, 2008 and 2007, respectively.




**Officer
      Indemnification**




Under
      its
      organizational documents, AVP’s directors are indemnified against certain
      liabilities arising out of the performance of their duties to AVP. AVP also
      has
      an insurance policy for its directors and officers to insure them against
      liabilities arising from the performance of their duties required by their
      positions with AVP. AVP’s maximum exposure under these arrangements is unknown
      as this would involve future claims that may be made against AVP that have
      not
      yet occurred. However, based on experience, AVP expects the risk of loss to
      be
      remote.




**Employment
      Agreements**




AVP
      has
      entered into “at will” employment agreements with two officers. In addition to
      base salary, the employment agreements provide for performance bonuses. The
      performance bonuses will be 50% of the respective officer’s base salary. The
      performance bonuses awarded, if any, will be based upon achieving certain
      milestones and targets as determined by the Board of Directors’ Compensation
      Committee. One of the agreements also provides for an additional cash
      performance bonus ranging from $25,000 to $125,000 in the event the Company
      achieves positive EBITDA. In the event the officers are terminated by AVP,
      their
      authority is diminished, or AVP breaches the employment agreements, the officers
      will continue to receive their annual base salary and their Annual Performance
      Bonus and benefits for periods of six months to two years following the
      termination, depending on the circumstances of the termination.




**Legal
      proceedings**




A
      complaint was filed on June 6, 2007 in the United States Circuit Court of Cook
      County, Illinois, in which the plaintiff seeks damages for personal injuries
      relating to a fall the plaintiff suffered during a volleyball tournament taking
      place at the Hard Rock Hotel & Casino in Las Vegas, Nevada on September 7,
      2005. Discovery is still being completed and therefore management is unable
      to
      determine or predict the outcome of this claim or the impact on the Company’s
      financial condition or results of operations. Accordingly, the Company has
      not
      recorded a provision for this matter in its financial statements.





14


**AVP,
      INC.**




**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(Unaudited)**




**5.
      COMMITMENTS AND CONTINGENCIES (CONTINUED)**




**Service
      Contingency**






On
      March
      31, 2008, the Company’s accrued additional costs of approximately $0.5 million
      to accommodate a vendor who requested additional consideration for services
      rendered in 2007. The Company is not obligated to make such additional payment,
      but to preserve the relationship and receive future services, AVP recorded
      an
      accrual for such service contingency.




**6.
      CAPITAL TRANSACTIONS**




For
      the
      three months ended March 31, 2007, 292 shares of Series "B" preferred stock
      were
      converted into 8,138 shares of AVP’s common stock pursuant to notice of
      conversion from an individual investor.




During
      the three months ended March 31, 2007, AVP issued 13,945 shares of common stock
      pursuant to the cashless exercise of options for 16,829 shares of common stock.
      The exercise price of the options was $0.30 per share.




During
      the three months ended March 31, 2007, AVP issued 50,618 shares of common stock
      pursuant to the cashless exercise of options for 50,977 shares of common stock.
      The exercise price of the options was $0.01 per share.




For
      the
      three months ended March 31, 2008, 2,208 shares of Series "B" preferred stock
      were converted into 61,537 shares of AVP’s common stock pursuant to notice of
      conversion from an individual investor.




During
      the three months ended March 31, 2008, AVP issued 49,865 shares of common stock
      pursuant to the cashless exercise of options for 50,488 shares of common stock.
      The exercise price of the options was $0.01 per share.




During
      the three months ended March 31, 2008, AVP issued 485,635 shares of common
      stock
      pursuant to the cashless exercise of options for 643,205 shares of common stock.
      The exercise price of the options was $0.20 per share.




During
      the three months ended March 31, 2008, AVP issued 2,493 shares of common stock
      pursuant to the cashless exercise of options for 201,953 shares of common stock.
      The exercise price of the options was $0.80 per share.




15




**AVP,
      INC.**




**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(Unaudited)**







**7.
      SEGMENT REPORTING**




The
      Company follows the provisions of SFAS No. 131, "Disclosures about Segments
      of
      an Enterprise and Related Information." This statement establishes standards
      for
      the reporting of information about operating segments in annual and interim
      financial statements. Operating segments are defined as components of an
      enterprise for which separate financial information is available that is
      evaluated regularly by the chief operating decision makers in deciding how
      to
      allocate resources and in assessing performance.




Our
      chief
      operating decision-makers (i.e., our chief executive officer and his direct
      reports) review financial information presented on a consolidated basis,
      accompanied by disaggregated information about revenues by geographic region
      for
      purposes of allocating resources and evaluating financial performance. There
      are
      no segment managers who are held accountable by our chief operating
      decision-makers, or anyone else, for operations, operating results and planning
      for levels or components below the consolidated unit level. Accordingly, in
      the
      opinion of management, the Company considers itself to be in a single reporting
      segment and operating unit structure, and all revenues from its services are
      earned in this segment.




The
      Company has two geographic regions for its operations, the United States and
      Australia. Revenues are attributed to geographic areas based on the location
      where the events take place. The following table depicts the geographic
      information expected by FAS 131:


**Three
                Months Ended March 31,**Revenues:
            
            **2008**
            
            **2007**United
                States
            
            $
            115,470
            
            $
            169,000Australia
            
            
            875,520
            
            
            -Total
                Revenue
            
            $
            990,990
            
            $
            169,000**Three
                Months Ended March 31,**Long-lived
                assets:
            
            
            **2008**
            
            
            **2007**United
                States
            
            $
            447,474
            
            $
            453,893Australia
            
            
            -
            
            
            -Total
                long-lived assets
            
            $
            447,474
            
            $
            453,893




16


**AVP,
      INC.**




**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(Unaudited)**




**8.
      RECENTLY ISSUED ACCOUNTING STANDARDS**




In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measures” (SFAS 157).
      SFAS 157 defines fair value, establishes a framework for measuring fair value
      and enhances disclosures about fair value measures required under other
      accounting pronouncements, but does not change existing guidance as to whether
      or not an instrument is carried at fair value. SFAS No. 157 is effective for
      fiscal years beginning after November 15, 2007. The adoption of this accounting
      pronouncement did not have a material effect on the Company’s consolidated
      financial position, results of operations or cash flows.




On
      September 29, 2006, the FASB issued SFAS No. 158, “Employers' Accounting for
      Defined Benefit Pension and Other Postretirement Plans - An Amendment of SFAS
      No. 87, 88, 106, and 132R” (SFAS 158). This new standard requires an employer
      to: (a) recognize in its statement of financial position an asset for a plan’s
      overfunded status or a liability for a plan’s underfunded status; (b) measure a
      plan’s assets and its obligations that determine its funded status as of the end
      of the employer’s fiscal year (with limited exceptions); and (c) recognize
      changes in the funded status of a defined benefit postretirement plan in the
      year in which the changes occur. Those changes will be reported in comprehensive
      income of a business entity and in changes in net assets of a not-for-profit
      organization. SFAS 158 applies to plan sponsors that are public and private
      companies and nongovernmental not-for-profit organizations. The requirement
      to
      recognize the funded status of a benefit plan and the disclosure requirements
      are effective for the fiscal year ended after December 15, 2006, for entities
      with publicly traded equity securities, and at the end of the fiscal year ended
      after June 15, 2007, for all other entities. The requirement to measure plan
      assets and benefit obligations as of the date of the employer’s fiscal yearend
      statement of financial position is effective for fiscal years ending after
      December 15, 2008. The adoption of this accounting pronouncement is not expected
      to have a material effect on the Company’s consolidated financial position,
      results of operations or cash flows.




In
      February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
      Financial Assets and Financial Liabilities," (SFAS 159). SFAS 159 permits
      entities to choose to measure many financial instruments and certain other
      items
      at fair value that are not currently required to be measured at fair value.
      Unrealized gains and losses on items for which the fair value option has been
      elected are reported in earnings. SFAS 159 does not affect any existing
      accounting literature that requires certain assets and liabilities to be carried
      at fair value. SFAS 159 is effective for fiscal years beginning after November
      15, 2007. The Company currently does not believe SFAS 159 will have a material
      impact on its consolidated financial position, results of operations or cash
      flows, as the Company has elected not to apply the fair value option for any
      of
      its eligible financial instruments and other items.




In
      December 2007, the FASB issued SFAS No. 141R, “Business Combinations-Revised”
(“SFAS 141R”). This new standard replaces SFAS 141 “Business Combinations”. SFAS
      141R requires that the acquisition method of accounting, instead of the purchase
      method, be applied to all business combinations and that an “acquirer” be
      identified in the process. The statement requires that fair market value be
      used
      to recognize assets and assumed liabilities instead of the cost allocation
      method where the costs of an acquisition are allocated to individual assets
      based on their estimated fair values. Goodwill would be calculated as the excess
      purchase price over the fair value of the assets acquired; however, negative
      goodwill will be recognized immediately as a gain instead of being allocated
      to
      individual assets acquired. Costs of the acquisition will be recognized
      separately from the business combination. The end result is that the statement
      improves the comparability, relevance and completeness of assets acquired and
      liabilities assumed in a business combination. SFAS 141R is effective for
      business combinations which occur in fiscal years beginning on or after December
      15, 2008. The adoption of SFAS 141R will impact the accounting for business
      combinations completed, if any, by the Company on or after January 1,
      2009.




17




**AVP,
      INC.**




**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(Unaudited)**




**8.
      RECENTLY ISSUED ACCOUNTING STANDARDS (CONTINUED)**




In
      December 2007, the FASB issued SFAS 160, “Noncontrolling Interests in
      Consolidated Financial Statements-an amendment of ARB No. 51”. This new standard
      requires that ownership interests held by parties other than the parent be
      presented separately within equity in the statement of financial position;
      the
      amount of consolidated net income be clearly identified and presented on the
      statements of income; all transactions resulting in a change of ownership
      interest whereby the parent retains control to be accounted for as equity
      transactions; and when controlling interest is not retained by the parent,
      any
      retained equity investment will be valued at fair market value with a gain
      or
      loss being recognized on the transaction. SFAS 160 is effective for business
      combinations which occur in fiscal years beginning on or after December 15,
      2008. The Company does not expect this statement to have an impact on its
      results of operations or financial condition.




In
      December 2007, the SEC issued SAB No. 110, “Certain Assumptions Used in
      Valuation Methods - Expected Term” (“SAB 110”). According to SAB 110, under
      certain circumstances the SEC staff will continue to accept beyond December
      31,
      2007 the use of the simplified method in developing an estimate of expected
      term
      of share options that possess certain characteristics in accordance with SFAS
      123(R) beyond December 31, 2007. The Company adopted SAB 110 effective January
      1, 2008 and will continue to use the simplified method in developing the
      expected term used for our valuation of stock-based compensation.




In
      March
      2008, the FASB issued SFAS 161, “Disclosures about Derivative Instruments and
      Hedging Activities - an Amendment of SFAS 133.” This new standard enhances
      required disclosures regarding derivatives and hedging activities to provide
      greater transparency about (i) how and why an entity uses derivative
      instruments, (ii) how derivative instruments and related hedge items are
      accounted for under SFAS 133 and its related interpretations, and
      (iii) how derivative instruments and related hedged items affect an
      entity's financial position, results of operations and cash flows. To meet
      those
      objectives, SFAS 161 requires qualitative disclosures about objectives and
      strategies for using derivatives, quantitative disclosures about fair value
      amounts of gains and losses on derivative instruments and disclosures about
      credit-risk-related contingent features in derivative agreements. SFAS 161 is effective for fiscal years beginning after November
      15, 2008. The Company does not expect this statement to have an impact on its
      results of operations or financial condition.




18




**ITEM
      2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION**





**Background**




We
      originally incorporated under the name Malone Road Investments, Ltd., on August
      6, 1990, in the Isle of Man. We re-domesticated in the Turks and Caicos Islands
      in 1992 and subsequently domesticated as a Delaware corporation in 1994.
      Pursuant to Delaware law, we are deemed to have been incorporated in Delaware
      as
      of the date of our formation in the Isle of Man. We changed our name to PL
      Brands, Inc. in 1994; changed our name to Othnet, Inc. in March 2001; and
      changed our name to AVP, Inc. on March 9, 2005. Since December 2001 until the
      Merger (as defined below), we had no business operations other than to attempt
      to locate and consummate a business combination with an operating company.




On
      February 28, 2005, Association of Volleyball Professionals, Inc. (the
“Association”) and a wholly owned subsidiary of AVP, then known as Othnet, Inc.,
      consummated a merger pursuant to a merger agreement, signed in June 2004, as
      amended (the “Merger”). As a result of the Merger, the Association became our
      wholly owned subsidiary, and the Association’s former stockholders (including
      holders of stock options and stock purchase warrants) beneficially owned 61.2%
      of all common stock beneficially owned by all beneficial owners of our capital
      stock.




**AVP's
      Business**




We
      own
      and operate professional beach volleyball tournaments in the United States.
      The
      AVP tour is the sole nationally recognized U.S. professional beach volleyball
      tour. Every top U.S. men’s and women’s beach volleyball professional, including
      the women’s gold and bronze medalists in the 2004 Olympic Games, competes on the
      AVP tour. We have more than 200 of the top professional players under exclusive
      contracts, as well as a growing base of spectators that we believe represent
      an
      attractive audience for national, regional, and local sponsors. Our business
      includes establishing and managing tournaments; sponsorship/advertising sales
      and sales of broadcast, licensing, and trademark rights; sales of tickets,
      food,
      beverage, and merchandise at the tournaments; contracting with players in the
      tour; and associated activities.




AVP's
      beach volleyball tournament season customarily commences in early April and
      continues until late September or early October. For 2008, we scheduled 18
      men’s
      and 18 women’s events in Miami, FL; Dallas, TX; Huntington Beach, CA;
      Charleston, SC; Louisville, KY; Atlanta, GA; Hermosa Beach, CA; Belmar, NJ;
      Boulder, CO; Chicago, IL; Brooklyn, NY; Long Beach, CA; San Diego, CA;
      Cincinnati, OH; Santa Barbara, CA; San Francisco, CA; Manhattan Beach, CA;
      and
      Glendale, AZ. Fourteen of the 18 cities are the same as last year’s. Eight
      events are scheduled to be held in the second quarter and ten events are
      scheduled to be held in the third quarter.




We
      partnered with Anschutz Entertainment Group (AEG) to produce the first-ever
      indoor beach volleyball national tour, the Hot Winter Nights Tour, from January
      10 to February 23, 2008. The 2008 AVP Hot Winter Nights Tour brought the
      excitement and experience of an AVP beach volleyball tournament indoors for
      the
      very first time with each stop consisting of a three hour competition and 'beach
      festival.' The 2008 AVP Hot Winter Nights Tour schedule included 19 stops in
      many likely snowbound cities in the Midwest and Northeast United States. We
      held
      scheduled indoor beach volleyball tournaments in Oklahoma City, OK; St.
      Louis, MO; Kansas City, MO; Milwaukee, WI; Madison, WI; LaCrosse, WI;
      Minneapolis, MN; Columbus, OH; Albany, NY; Trenton, NJ; Norfolk, VA;
      Charlottesville, VA; Omaha, NE; Rosemont, IL; Bloomington, IL; Spokane, WA;
      Everett, WA; Portland, OR; and Las Vegas NV.




We
      entered a five-year agreement with the Australian
      Volleyball Federation (AVF) to promote the national beach volleyball tour in
      Australia. The 2008 AVF tour schedule included five events in prominent beach
      locations throughout Australia: Gold Coast in Surfers Paradise, Queensland;
      Manly Beach in Sydney, New South Wales; Port Macquarie, New South Wales; Perth,
      Scarborough Beach, Western Australia; and Adelaide in Glenelg, South
      Australia.




19




**Results
      of Operations for the three months ended** **March
      31, 2008 and 2007**




**Revenue**





**Summary
                Revenue**




Three
                Months Ended March 31,
            
            Percentage
              Increase
              (Decrease)**2008**
            
            
            **2007**Sponsorship/advertising
            
            $
            875,520
            
            $
            -
            
            
            -
            %Miscellaneous
                Revenue
            
            
            115,470
            
            
            169,000
            
            
            (32
            %)Total
                Revenue
            
            $
            990,990
            
            $
            169,000
            
            
            486
            %




AVP’s
      business is primarily seasonal; substantially all revenue is recorded in the
      second and third quarters. The majority of AVP’s revenues are derived from
      sponsorship and advertising contracts with national sponsors. AVP recognizes
      national sponsorship/advertising revenue and activation fees during the tour,
      as
      the events occur and collection is reasonably assured, in the proportion that
      prize money for an event bears to total prize money for the season. Local
      sponsorship/advertising revenue, local promoter fees and local revenue are
      recognized as the applicable events occur. AVP's beach volleyball tournament
      season customarily commences in early April and continues until late September
      or early October.




Sponsorship/advertising
      revenue for the three months ended March 31, 2008 increased $0.9 million as
      compared to the three months ended March 31, 2007 as a result of five Australian
      events that took place in the three months ended March 31, 2008. No beach
      volleyball events took place in the three months ended March 31, 2007. There
      is
      no additional Australian event scheduled in 2008.




Miscellaneous
      revenue for the three months ended March 31, 2008 decreased 32% primarily due
      to
      a decrease in trademark licensing revenue as licensing agreements with two
      licensees were terminated in 2007. The decrease is also due to elimination
      of
      ticket sales for indoor exhibition event. In 2007, we produced an indoor
      exhibition event; however, in 2008, we entered a five-year agreement with an
      event promoter pursuant to which the event promoter is responsible for the
      event
      expenses for indoor exhibition events, the Hot Winter Nights Tour, and the
      promoter shares local revenue on a 50-50 basis after recoupment of the event
      costs. For 2008, there was no profit sharing resulting from the Hot Winter
      Night
      Tour.




**Event
      Costs**




**Summary
                Costs**
            
            **%
                Revenue****Increase
                as**Three
                Months Ended March 31,
            
            Three
                Months Ended March 31,
            
            **%
                of Revenue****2008**
            
            
            **2007**
            
            
            **2008**
            
            
            **2007**
            
            
            **2008
                vs. 2007**Event
                Costs
            
            $
            1,044,234
            
            $
            52,299
            
            
            105
            %
            
            31
            %
            
            74
            %




Event
        costs primarily include the direct costs of producing an event, costs related
        to
        the production and the airing of events on network television, and the cost
        of
        servicing our sponsors. Event costs are recognized on an event-by-event basis
        and event costs billed and/or paid prior to their respective events are recorded
        as prepaid event costs and expensed at the time the event occurs.


The
      increase of $1.0 million in total event costs was attributable to costs incurred
      in connection with five outdoor events that took place in Australia during
      the
      three months ended March 31, 2008. During the three months ended March 31,
      2007,
      we held one indoor exhibition event but no outdoor event was held.




20




**Gross
                Profit (Loss)**Three
                Months Ended March 31,**2008**
            
            **2007**Revenue
            
            $
            990,990
            
            $
            169,000Event
                Costs
            
            
            1,044,234
            
            
            52,299Gross
                Profit (Loss)
            
            $
            (53,244
            )
            $
            116,701Gross
                Profit (Loss) %
            
            
            (5%)
            
            
            69
            %




The
      gross
      loss margin for the three months ended March 31, 2008 is primarily due
      to the $0.2 million loss  related to the five outdoor Australian
      events that were promoted during the quarter, which was the result of not having
      enough lead time for selling and one-time costs that we do not anticipated
      to incur in future years.  For the three months ended March 31,
      2007, no outdoor event was held; and higher licensing fees offset the gross
      loss
      margin resulting from the indoor exhibition event that took place during the
      period ended March 31, 2007.




As
      mentioned above, AVP’s primary business is seasonal; therefore revenue, gross
      profit and operating income amounts and percentages for the first and fourth
      quarters are not representative of our performance.




**Operating
      Expenses**





**Summary
                Costs**
            
            **%
                Revenue**Three
                Months Ended
              March
                31,
            
            Three
                Months Ended
              March
                31,
            
            **(Decrease)
                  as****%
                of Revenue****2008**
            
            **2007**
            
            **2008**
            
            **2007**
            
            **2008
                vs. 2007**Administrative
            
            $
            1,670,713
            
            $
            1,446,303
            
            
            169
            %
            
            856
            %
            
            (687%)Sales
                and Marketing
            
            
            1,271,655
            
            
            875,713
            
            
            128
            %
            
            518
            %
            
            (390%)Total
                Costs
            
            $
            2,942,368
            
            $
            2,322,016
            
            
            297
            %
            
            1374
            %
            
            (1077%)




The
      16%
      or $0.2 million increase in administrative costs was due primarily to an
      increase in stock-based compensation expenses as a result of employee options
      valued under SFAS 123R for stock options granted to employees in 2007 and during
      the three months ended March 31, 2008 and an increase in legal costs as a result
      of scheduling an Annual Meeting in May 2008. The increases in administrative
      costs were partially offset by a reduction in transaction costs incurred
      during the three months ended March 31, 2007 related to the plan of
      merger with Shamrock Holdings, Inc.




The
      45%
      or $0.4 million increase in sales and marketing costs reflects an increase
      in
      website expenses. These expenses represent a one-time estimated payment due
      to a
      vendor to preserve the relationship.





**Depreciation
                and Amortization Expense**Three
                Months Ended March 31,
            
            **Percentage****2008**
            
            **2007**
            
            **Increase**Depreciation
                Expense
            
            $
            66,662
            
            $
            49,571
            
            
            34
            %Total
            
            $
            66,662
            
            $
            49,571
            
            
            34
            %




The
      34%
      increase in depreciation expense resulted from an increase in depreciable
      assets, including information technology equipment and software and rotational
      signage equipment.




21




**Other
      Income (Expense)**




Three
                Months Ended March 31,
            
            
            **Percentage****2008**
            
            
            **2007**
            
            
            **(Decrease)**Interest
                Income
            
            
            11,189
            
            
            56,457
            
            
            (80%)Gain
                on disposal of asset
            
            
            -
            
            
            8,449
            
            
            (100%)Total
            
            $
            11,189
            
            $
            64,906
            
            
            (83%)




The
      80%
      decrease in interest income is due to a lower cash balance for the three months
      ended March 31, 2008 as compared to the three months ended March 31, 2007.




**Operating
      Loss and Net** **Loss**




**%
                Revenue**Three
                Months EndedMarch
                31,
            
            Three
                Months Ended March 31,2008
            
            2007
            
            2008
            
            2007Operating
                Loss
            
            $
            (2,995,612
            )
            $
            (2,205,315
            )
            
            (302
            %)
            
            (1305
            %)Net
                Loss
            
            $
            (2,985,573
            )
            $
            (2,141,209
            )
            
            (301
            %)
            
            (1267
            %)




The
      Company’s net loss of $3.0 million for the three months ended March 31, 2008
      compared to a loss of $2.1 million for the three months ended March 31, 2007
      primarily reflects an increase in event costs, an increase in website-related
      expenses, and increases in stock-based compensation costs. As mentioned above,
      AVP’s primary business is seasonal; therefore revenue, gross profit and
      operating loss amounts and percentages for the first and fourth quarters are
      not
      representative of our performance.




**Liquidity
      and Capital Resources**





**Sources
                of Liquidity**March
                31, 2008
            
            December
                31, 2007
            
            Increase/
              (Decrease)Cash
                and cash equivalents
            
            $
            3,530,182
            
            $
            2,257,453
            
            $
            1,272,729Percentage
                of total assets
            
            
            50
            %
            
            43
            %





Three
                Months Ended March 31,
            
            Increase/2008
            
            
            2007
            
            
            (Decrease)Cash
                flows provided by operating activities
            
            $
            1,312,484
            
            $
            2,926,288
            
            $
            (1,613,804
            )Cash
                flows used in investing activities
            
            
            (39,755
            )
            
            (13,410
            )
            
            (26,345
            )Cash
                flows provided by financing activities
            
            
            -
            
            
            -
            
            
            -




As
      of
      March 31, 2008, our primary source of liquidity is comprised of $3.5 million of
      cash and cash equivalents.  Over the last two years, our primary sources of
      liquidity have included cash on hand at the beginning of the year, cash flows
      generated from continuing operations, and cash flows provided by financing
      activities.  We have generated significant cash flows from the issuance of
      our common stock through private placements.




Cash
      flows provided by operating activities for the three months ended March 31,
      2008
      and 2007 were $1.3 million and $2.9 million, respectively. The variance in
      cash
      flows provided by operating activities for the three months ended March 31,
      2008
      is primarily due to an increase in accounts receivable and net loss which
      was offset by increases in account payable and accrued liabilities. Working
      capital, consisting of current assets less current liabilities, was ($0.7)
      million at March 31, 2008 and $2.1 million at December 31, 2007. The negative
      working capital at March 31, 2008 resulted from deferred revenue being
      recognized for sponsorship payments received for events occurring after March
      31, 2008.




22




Capital
      expenditures for the three months ended March 31, 2008 and 2007 were $0.04
      million and $0.2 million, respectively. During the three months ended March
      31,
      2008, AVP purchased information technology equipment, accounting software,
      and
      rotational signage equipment. During the three months ended March 31, 2007,
      AVP
      purchased two trailers and information technology equipment.




**Critical
      Accounting Policies**




**Revenue
      and Expense Recognition**




The
      majority of AVP’s revenues are derived from sponsorship and advertising
      contracts with national and local sponsors. AVP recognizes national
      sponsorship/advertising revenue and activation fees during the tour season,
      as
      the events occur and collection is reasonably assured, in the proportion that
      prize money for an event bears to total prize money for the season. Cash
      collected before the related events is recorded as deferred revenue. Event
      costs
      are recognized on an event-by-event basis. Event costs billed and/or paid before
      the related events are recorded as deferred costs and expensed at the time
      the
      event occurs.




AVP
      also
      derives additional revenue from local sponsorships/advertising, promoter fees,
      event ticket sales, concession rights, event merchandising, and licensing.
      Revenues and expenses from the foregoing ancillary activities are recognized
      on
      an event-by-event basis as the revenues are realized and collection is
      reasonably assured. Licensing revenue is recognized as royalties are earned
      and
      collection is reasonably assured.




**Income
      Taxes**




AVP
      adopted the provisions of FASB Interpretation No. 48 on January 1, 2007. There
      was no material effect on the Company’s financial condition or results of
      operation as a result of implementing FIN 48. AVP accounts for income taxes
      under the asset and liability method. Deferred tax assets and liabilities are
      recognized for the future tax consequences attributable to the differences
      between the financial statement carrying amounts of existing assets and
      liabilities and their respective tax basis. The effect on deferred tax assets
      and liabilities of a change in tax rates is recognized in income in the period
      that includes the enactment date. A valuation allowance is recorded to reduce
      deferred taxes to the amount that is more likely than not to be
      realized.




23




**Recently
        Issued Accounting Standards** ****




In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measures” (SFAS 157).
      SFAS 157 defines fair value, establishes a framework for measuring fair value
      and enhances disclosures about fair value measures required under other
      accounting pronouncements, but does not change existing guidance as to whether
      or not an instrument is carried at fair value. SFAS No. 157 is effective for
      fiscal years beginning after November 15, 2007. The adoption of this accounting
      pronouncement did not have a material effect on the Company’s consolidated
      financial position, results of operations or cash flows.




On
      September 29, 2006, the FASB issued SFAS No. 158, “Employers' Accounting for
      Defined Benefit Pension and Other Postretirement Plans - An Amendment of SFAS
      No. 87, 88, 106, and 132R” (SFAS 158). This new standard requires an employer
      to: (a) recognize in its statement of financial position an asset for a plan’s
      overfunded status or a liability for a plan’s underfunded status; (b) measure a
      plan’s assets and its obligations that determine its funded status as of the end
      of the employer’s fiscal year (with limited exceptions); and (c) recognize
      changes in the funded status of a defined benefit postretirement plan in the
      year in which the changes occur. Those changes will be reported in comprehensive
      income of a business entity and in changes in net assets of a not-for-profit
      organization. SFAS 158 applies to plan sponsors that are public and private
      companies and nongovernmental not-for-profit organizations. The requirement
      to
      recognize the funded status of a benefit plan and the disclosure requirements
      are effective for the fiscal year ended after December 15, 2006, for entities
      with publicly traded equity securities, and at the end of the fiscal year ended
      after June 15, 2007, for all other entities. The requirement to measure plan
      assets and benefit obligations as of the date of the employer’s fiscal yearend
      statement of financial position is effective for fiscal years ending after
      December 15, 2008. The adoption of this accounting pronouncement is not expected
      to have a material effect on the Company’s consolidated financial position,
      results of operations or cash flows.




In
      February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
      Financial Assets and Financial Liabilities," (SFAS 159). SFAS 159 permits
      entities to choose to measure many financial instruments and certain other
      items
      at fair value that are not currently required to be measured at fair value.
      Unrealized gains and losses on items for which the fair value option has been
      elected are reported in earnings. SFAS 159 does not affect any existing
      accounting literature that requires certain assets and liabilities to be carried
      at fair value. SFAS 159 is effective for fiscal years beginning after November
      15, 2007. The Company currently does not believe SFAS 159 will have a material
      impact on its consolidated financial position, results of operations or cash
      flows, as the Company has elected not to apply the fair value option for any
      of
      its eligible financial instruments and other items.




In
      December 2007, the FASB issued SFAS No. 141R, “Business Combinations-Revised”
(“SFAS 141R”). This new standard replaces SFAS 141 “Business Combinations”. SFAS
      141R requires that the acquisition method of accounting, instead of the purchase
      method, be applied to all business combinations and that an “acquirer” be
      identified in the process. The statement requires that fair market value be
      used
      to recognize assets and assumed liabilities instead of the cost allocation
      method where the costs of an acquisition are allocated to individual assets
      based on their estimated fair values. Goodwill would be calculated as the excess
      purchase price over the fair value of the assets acquired; however, negative
      goodwill will be recognized immediately as a gain instead of being allocated
      to
      individual assets acquired. Costs of the acquisition will be recognized
      separately from the business combination. The end result is that the statement
      improves the comparability, relevance and completeness of assets acquired and
      liabilities assumed in a business combination. SFAS 141R is effective for
      business combinations which occur in fiscal years beginning on or after December
      15, 2008. The adoption of SFAS 141R will impact the accounting for business
      combinations completed, if any, by the Company on or after January 1,
      2009.




In
      December 2007, the FASB issued SFAS 160, “Noncontrolling Interests in
      Consolidated Financial Statements-an amendment of ARB No. 51”. This new standard
      requires that ownership interests held by parties other than the parent be
      presented separately within equity in the statement of financial position;
      the
      amount of consolidated net income be clearly identified and presented on the
      statements of income; all transactions resulting in a change of ownership
      interest whereby the parent retains control to be accounted for as equity
      transactions; and when controlling interest is not retained by the parent,
      any
      retained equity investment will be valued at fair market value with a gain
      or
      loss being recognized on the transaction. SFAS 160 is effective for business
      combinations which occur in fiscal years beginning on or after December 15,
      2008. The Company does not expect this statement to have an impact on its
      results of operations or financial condition.




24




In
      December 2007, the SEC issued SAB No. 110, “Certain Assumptions Used in
      Valuation Methods - Expected Term” (“SAB 110”). According to SAB 110, under
      certain circumstances the SEC staff will continue to accept beyond December
      31,
      2007 the use of the simplified method in developing an estimate of expected
      term
      of share options that possess certain characteristics in accordance with SFAS
      123(R) beyond December 31, 2007. The Company adopted SAB 110 effective January
      1, 2008 and will continue to use the simplified method in developing the
      expected term used for our valuation of stock-based compensation.




In
      March
      2008, the FASB issued SFAS 161, “Disclosures about Derivative Instruments and
      Hedging Activities - an Amendment of SFAS 133”. This
      new
      standard enhances required disclosures regarding derivatives and hedging
      activities to provide greater transparency about (i) how and why an entity
      uses derivative instruments, (ii) how derivative instruments and related
      hedge items are accounted for under SFAS 133 and its related
      interpretations, and (iii) how derivative instruments and related hedged
      items affect an entity's financial position, results of operations and cash
      flows. To meet those objectives, SFAS 161 requires qualitative disclosures
      about objectives and strategies for using derivatives, quantitative disclosures
      about fair value amounts of gains and losses on derivative instruments and
      disclosures about credit-risk-related contingent features in
      derivative agreements. SFAS 161 is effective for fiscal years beginning after November
      15, 2008. The Company does not expect this statement to have an impact on its
      results of operations or financial condition.




**Off-Balance
      Sheet Arrangements**




We
      have
      no off-balance sheet arrangements as defined in Item 303(c) of Regulation S-B.




25




**ITEM
      3A(T). CONTROLS AND PROCEDURES**





AVP's
      management has evaluated, with the participation of its principal executive
      and
      financial officers, the effectiveness of AVP's disclosure controls and
      procedures (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) as of
      the
      end of the period covered by this report. Based on this evaluation, these
      officers have concluded, that, as of March 31, 2008, AVP's disclosure controls
      and procedures are effective to provide reasonable assurance that information
      required to be disclosed by AVP in reports that it files or submits under the
      Exchange Act is accumulated and communicated to AVP's management, including
      its
      principal executive and principal financial officers, or persons performing
      similar functions, as appropriate to allow timely decisions regarding required
      disclosure.




*Internal
        Control Over Financial Reporting*
 
 Management's
        Report on Internal Control Over Financial Reporting
 
 The
        Company's management is responsible for establishing and maintaining adequate
        internal control over financial reporting for the Company. Internal control
        over
        financial reporting includes maintaining records that accurately and fairly
        reflect the Company’s transactions; providing reasonable assurance that
        transactions are recorded as necessary for preparation of the Company’s
        financial statements; providing reasonable assurance that receipts and
        expenditures are made in accordance with company policy; and providing
        reasonable assurance that unauthorized acquisition, use or disposition of
        company assets that could have a material effect on the Company’s financial
        statements would be prevented or detected on a timely basis. Because of its
        inherent limitations, internal control over financial reporting is not intended
        to provide absolute assurance that a misstatement of our financial statements
        would be prevented or detected. To evaluate the effectiveness of the Company's
        internal control over financial reporting, the Company's management uses
        the
        Integrated Framework adopted by the Committee of Sponsoring Organizations
        of the
        Treadway Commission ("COSO").
 
 The
        Company's management has assessed the effectiveness of the Company's internal
        control over financial reporting as of December 31, 2007, using the COSO
        framework. The Company's management has determined that the Company's internal
        control over financial reporting was effective as of that date and continued
        to
        be effective as of the quarter ended March 31, 2008.
  This
        quarterly report does not include an attestation report of the Company’s
        registered public accounting firm regarding internal control over financial
        reporting. Management’s report was not subject to attestation by the company’s
        registered public accounting firm pursuant to temporary rules of the Securities
        and Exchange Commission that permit the company to provide only management’s
        report in this quarterly report.





26




**PART
      II. OTHER INFORMATION**




**ITEM
      6. EXHIBITS**





31.1
      -
      Certification of President Pursuant to Section 302 of the Sarbanes-Oxley Act
      of
      2002





31.2
      -
      Certification of Chief Financial Officer Pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002





32
      -
      Certification of President and Chief Financial Officer Pursuant to Section
      906
      of the Sarbanes-Oxley Act of 2002




27




**SIGNATURE**





Pursuant
      to the requirements of Section 13 or 15 or 15(d) 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 on the 14th day of May, 2008.




**AVP,
                INC.**
              (Registrant)By:
            /s/ Tom
              ToriiTom
                Torii
              Interim
                Chief Financial Officer




28