U. S. SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C. 20549





FORM 10-Q








[X]

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended September 30, 2009[  ]

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





For the transition period from ___________ to _____________





AVT, INC.





Nevada

000-53372

11-3828743(State or other jurisdiction

(Commission File Number)

(IRS Employerof Incorporation)



Identification Number)341 Bonnie Circle, Suite 102Corona, CA 92880(Address of principal executive offices)(951) 737-1057(Issuer’s Telephone Number)





Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes X No
___





Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule12b-2 of the Exchange Act.





Large accelerated filer  [   ]

Accelerated filer    [    ]Non-accelerated filer    [   ] (Do not check if smaller reporting company)

Smaller reporting company    [X]





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


Yes [  ] No [ X ]














APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY


PROCEEDINGS DURING THE PRECEDING FIVE YEARS





Check whether the registrant filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Exchange Act of 1934 after the distribution of securities under a plan confirmed by a court. Yes ___ No ____





APPLICABLE ONLY TO CORPORATE ISSUERS





State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:  As of August 18, 2009, there were 23,303,297 shares of our common stock were issued and outstanding.





PART I





ITEM 1.FINANCIAL STATEMENTS







AVT, INC.PageCondensed Balance Sheet for the nine months ended  September 30, 2009

F- 2and the audited year ended December 31, 2008Consensed Statements of Operations for the nine months ended September 30, 2009

F- 3and the audited comparable nine months ended September 30, 2008Statement of Changes in Shareholders' Deficit for the nine months ended September 30, 2009
F- 4Condensed Statements of Cash Flows for the nine months ended September 30, 2009

F- 5and the audited comparable nine months ended September 30, 2008Notes to Financial Statements

F- 6F-1


AVT, INC.BALANCE SHEET(Unaudited)September 30, 2009


December 31, 2008ASSETSCurrent Assets:Cash

$
90,042


$
56,547Account receivables


753,055



259,830Inventory


711,286



605,067Other current assets


0



60,899Total current assets


1,554,383



982,343Property and equipment


4,611,699



4,058,137Less: accumulated depreciation


(4,113
)


(4,113
)Other assets


838,320



500,000Intangible assets


9,918,568



9,634,304Total assets

$
16,918,857


$
15,170,671LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:Accounts payable


108,274



93,865Other current liabilities


6,173



33,088Total current liabilities

$
114,447


$
126,953Long-term liabilities:Long-term debt


295,453



132,956Notes payable


1,511,783



741,775Total long-term liabilities


1,807,236



874,731Total Liabilities


1,921,683



1,001,684Stockholders' equityCommon stock, 100,000,000 shares authorized, $.001 par value,$24,157,273 shares issued and outstanding


46,228



45,434Notes issued that can be converted to common stock


2,102



1,901Preferred stock, 3,000,000 authorized, $.001 par value, 2,033,333


2,200



2,200of Series A convertible preferred stock issued and outstandingDividends paid


(615,477
)


(412,796
)Additional paid in capital


29,466,146



28,811,652Retained earnings


(13,904,025
)


(14,279,404
)Total stockholders' equity


14,997,174



14,168,987Total liabilities and stockholders' equity

$
16,918,857


$
15,170,671See notes to financial statementsF-2














AVT, INC.STATEMENT OF INCOME(Unaudited)For the 3 months ended


For the 3 months ended


For the 9 months ended


For the 9 months endedSeptember 30, 2009


September 30, 2008


September 30, 2009


September 30, 2008Revenues:Product sales revenues

$
310,050


$
355,270


$
871,064


$
1,008,520Manufacturing revenue


376,440



390,397



932,580



549,742Restaurant revenue


214,372



221,895



642,358



457,220Total revenues


900,862



967,562



2,446,002



2,015,482Cost and expenses:Product purchases


131,839



126,208



438,310



458,420Operating


94,667



35,596



265,865



103,812Restaurant supplies


73,464



68,316



172,426



128,939General and administrative


505,862



410,128



1,297,583



1,299,040Total costs and expenses


805,832



640,248



2,174,184



1,990,211Operating profit (Loss)


95,030



327,314



271,818



25,271Interest expenses


0



0



0



0Provisions for income taxes


(14,864
)


(71,841
)


91,446



(132,903
)Garnishments


1,571



6,487



12,115



7,294Loss on disposal of assets


0



0



0



0Net Income

$
81,737


$
261,960


$
375,379


$
(100,338
)Basic profit per common share

$
0.01


$
0.02


$
0.01


$
0.02Diluted profit per share

$
0.01


$
0.02


$
0.01


$
0.02Weighted average common share outstanding- Basic


24,157,273



18,375,067



24,157,273



18,375,067Weighted average common share outstanding- Diluted


39,346,643



33,051,104



39,346,643



33,051,104See notes to financial statementsF-3











AVT, INC.STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITYTotalPreferred Stock
Common Stock

Additional
Retained
Stockholders'Shares

Amount
Shares

Amount
Paid In Capital
Earnings
EquityBalance at December  31, 2005

$

33,487,251
$
1,310
$
10,402,539
$
(6,834,071)
$
3,569,778Purchases








6,703,541



6,703,541Common shares issued as payment



1,319,322

27,482





27,482Net Income (Loss) for the year ended December 31, 2006
—

—



(1,588,802)

(1,588,802)Balance at December  31, 2006

$

34,806,573
$
28,792
$
17,106,080
$
(8,422,873)
$
8,711,999Common Shares Issued




4,768,133

10,864





10,864Purchases








910,000



910,000Preferred Shares issued
1,200,000

1,200









1,200Common shares issued upon conversion of notes
454,707

1,685





1,685Net Income (Loss) for the year ended December 31, 2007
—

—



211,955

211,955Balance at December  31, 2007
1,200,000
$
1,200

40,029,413
$
41,341
$
18,016,080
$
(8,210,918)
$
9,847,7031 for 3 Reverse Split




13,441,310





(6,187,965)

(6,187,965)Common Shares Issued




3,996,499

4,093





4,093Purchases








10,795,572



10,795,572Preferred Shares issued
1,000,000

1,000









1,000Preferred Shares Converted
(166,667)Common shares issued upon conversion of notes
3,711,811

1,901





1,901Dividends Paid










(412,796)

(412,796)Net Income (Loss) for the year ended December 31,2008
—

—



119,479

119,479Balance at December  31, 2008
2,033,333
$
2,200

21,149,620
$
47,335
$
28,811,652
$
(14,692,200)
$
14,168,987Common Shares Issued




771,913

388





388Purchases








60,433



60,433Preferred Shares issued












0Preferred Shares Converted












0Common shares issued upon conversion of notes
14,440

14





14Dividends Paid










(80,691)

(80,691)Net Income (Loss) for the year ended March 30, 2009
—

—



196,751

196,751Balance at March  31, 2009
2,033,333
$
2,200

21,935,973
$
47,737
$
28,872,085
$
(14,576,140)
$
14,345,882Common Shares Issued




788,484

76





76Purchases








147,208



147,208Preferred Shares issued












0Preferred Shares Converted












0Common shares issued upon conversion of notes
121,713

121





121Dividends Paid










(91,736)

(91,736)Net Income (Loss) for the year ended June 30, 2009
—

—



96,891

96,891Balance at June  30, 2009
2,033,333
$
2,200

22,846,170
$
47,934
$
29,019,293
$
(14,570,985)
$
14,498,442Common Shares Issued




964,310

447





447Purchases








446,852



446,852Preferred Shares issued












0Preferred Shares Converted












0Common shares issued upon conversion of notes
346,793

(51)





(51)Dividends Paid










(30,252)

(30,252)Net Income (Loss) for the year ended June 30, 2009
—

—



81,736

81,736Balance at September  30, 2009
2,033,333
$
2,200

24,157,273
$
48,330
$
29,466,145
$
(14,519,501)
$
14,997,174See notes to financial statementsF-4


AVT, INC.STATEMENTS OF CASH FLOWS(Unaudited)For nine months ended


For nine months endedSeptember 30, 2009


September 30, 2008Operating activities:Net Income

$
375,379


$
(100,338
)Adjustments to reconcile net income tonet cash provided by operating activities:


0



0Changes in operating assets and liabilities:Accounts receivable


(493,225
)


76,405Inventory


(106,219
)


(132,184
)Deposits


60,899



0Accounts payable and accrued expenses


(12,507
)


36,683Net cash provided by operating activities


(175,673
)


(119,434
)Investing activities


(1,176,145
)


(1,850,645
)Financing Activities


1,385,313



1,941,069Net change in cash


33,495



(29,010
)Cash Balances:Beginning of period


56,547



145,012End of period

$
90,042


$
116,002Supplimental disclosure of cash flow information:Cash paid uring the period for:Interest

$
0


$
0Income taxes

$
0


$
0Non-cash investing and financing transactions:Debt converted to common stock

$
1,000,000


$
0Inventory acquired for debt

$
0


$
0See notes to financial statementsF-5
  
  AVT, INC.
 Notes to Financial Statements
 (9/30/09)
  NOTE 1.                      SUMMARY OF ACCOUNTING POLICIES
  a.           Organization
  The Company was originally organized under the laws of the State of Delaware on February 26, 1969, as Infodex, Inc. At that time, the Company was engaged in the development, manufacturing and selling of various electronic devices, especially in the preparation various types of oscilloscopes known as “CRT”
display modules.  In March 2005, the Company was renamed to Midwest Venture Group, Inc. and In September 2005, the Company again changed its name to Automated Vending Technologies, Inc. to better reflect the Company’s current operations as a vending machine manufacturer and vending route operator.  In January, 2008, the Company changed its state of domicile to Nevada, changed its name to AVT, Inc. and completed a 1 for 3 reverse split of its common stock.
  b.  Accounting Method
  The Company’s policy is to use the accrual method of accounting to prepare and present financial statements, which conform to generally accepted accounting principles (“GAAP”). The company has elected a December 31, year-end.
  c.  Cash and Cash Equivalents
  The Company considers all highly liquid investments with maturities of three months or less when purchased, to be cash equivalents.
  d.  Use of Estimates in Financial Statement Preparation
 
 The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the reporting period. The Company's financial statements include amounts that are based on management's best estimates and judgments. Actual results could differ from those estimates.
  e.  Fixed Assets
  In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long- Lived Assets, the Company evaluates the carrying value of long-lived assets for impairment whenever events or change in circumstances indicate that such carrying values may be recoverable. The Company estimates the future cash flows
derived from an asset to assess whether or not a potential impairment exists when events or circumstances indicate the carrying value of a long- lived asset may be recoverable. An impairment loss is recognized when the undiscounted future cash flows are less than its carrying amount. If assets are considered to be impaired the impairment to be recognized is measured by the amount by which the carrying amount exceeds the fair value of assets. There can be no assurance, however, that market conditions will not
change or demand for the Company’s products or services will continue, which could result in additional future impairment of long-lived assets.  The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the classification of liabilities that might result from the outcome of these uncertainties.
  f.  Other Assets
  Asset and Liability Purchase
  In April 2008, we purchased 100% of the assets and liabilities of AC Mexican Food, Inc. dba Jalapenos Mexican Food, for a purchase price of 1,000,000 restricted shares of our Series A Convertible Preferred stock.  The asset was valued at $500,000 pursuant to the value of fixtures in the restaurant.  The
Series A Convertible Preferred stock was arbitrarily valued at $1.00 per share as there is no public market for the Company’s Preferred stock. Pursuant to FASB 141, the primary purpose of the purchase was to provide an alternative stream for the Company and to provide the Company with the ability to provide Mexican fresh foods in the Company’s vending machines.
  Intangible Assets
  Our intangible assets include Software Programs/Design valued at $2,793,180 Copyright and Patents valued at $7,125,388.  These assets are valued and expensed at fair market prices in accordance FSAB Statement No.2 (FAS-2) Accounting
for Research and Development Costs.  These assets include patent prosecution services with various venders and consulting expenses.  We acquired the rights to our pending Wireless Management of Remote Vending patent via payment of 3,000,000 restricted shares of the Company’s common stock valued at $1.00 per share and the rights to our pending MultiMedia System, Method for Controlling Vending Machines patent via payment of 1,000,000 restricted shares of the Company’s common
stock valued at $1.00 per share. Our AVT developed proprietary software, product dispensing systems and multiple designed or developed products are currently in the state of “patent pending.”   Our developed products include inventory control software, progress monitors, service logs, purchase order, data base management, generators, touch screen vending, cashless payment systems, and digital signage.  Hardware assets include our 24 hour Vend Mart, Tech Store, Automated Express
Market, Ivend and Vend Sensor System.
  g.  Other Current Liabilities
  Our other current liabilities consist of payroll liabilities of $4,975, sales tax payable of $30 and equipment rental liabilities of $ 1,168.
  h.  Long Term Liabilities
  Long term liabilities include loans payable to Worth, Inc. in the amount of $853,930 and investor notes in the amount of $657,853. We have long term equipment leases totaling $280,424 and long term automobile leases totaling $11,803. We have a long term lease liability relating to the AC Mexican Food, Inc. in the amount
of $3,226.
  i.  Inventory
  Pursuant to FSAB Technical Bulletin No. 88-2, Definition of a Right of Offset, Inventories are stated at cost. Inventories primarily consists of the food products that are sold in the vending machines.  The current value of machine inventory has been adjusted to reflect market value.
  September 30, 2009Beginning Inventory

76,052Purchases

320,518Ending Inventory

(696,540)Total COG Sold

299,970
  j.  Property and Equipment
  Property and equipment are stated at cost, net of accumulated depreciation and amortization.  Depreciation and amortization are provided using the straight-line method over the estimated useful lives or the term of the lease of the related assets, whichever is shorter. Estimated useful lives generally range
from 5 to 7 years.
  Maintenance and repairs are charged to expense as incurred.  Renewals and improvements of a major nature are capitalized. At the time of the retirement or other disposition of property and equipment, the cost and accumulated depreciation and amortization are removed from the accounts and any resulting gains or losses are reflected in income.
  k. Expenses
  The Company expenses the cost of advertising as incurred.  Costs incurred for research and development activities are expensed as incurred.
  l.  Earnings per share
  Basic earnings per share is computed in accordance with FASB 128 by dividing income available to common shareholders (the numerator) by the weighted-average number of common shares (the denominator) for the period. The computation of diluted earnings per share is similar to basic earnings per share, except that the
denominator is increased to include the number of additional common shares that would have been outstanding if potentially dilutive common shares had been issued.
  Basic earnings per share takes into account only the actual number of outstanding common shares during the period.  Diluted earnings per share take into effect the common shares actually outstanding and the impact of convertible securities, stock options, stock warrants and their equivalents.
  m.  Income Taxes
  The Company accounts for income taxes under the provisions of SFAS No. 109, “Accounting for Income Taxes”.  SFAS 109 requires recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns.  Under
this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.  In accordance with SFAS No. 109, the Company’s differed tax asset will be reported as recognized additional paid in capital.  For the quarter ended June 30, 2009, the provision for income taxes at 56% has been corrected to account
for previous year (NOL).
  n.  Recent Accounting Pronouncements
  In December 2004, the FASB issued SFAS No. 123 (R), “Share-Based Payment”. SFAS No. 123 (R) revises SFAS No. 123, “Accounting for Stock-Based Compensation” and supersedes  APB Opinion No. 25, “Accounting
for Stock Issued to Employees”. SFAS No. 123 (R) focuses primarily on the accounting for transactions in which an entity obtains employee services in share-based payment transactions. SFAS No. 123 (R) requires companies to recognize in the statement of operations the cost of employee services received in exchange for awards of equity instruments based on the grant-date fair value of those awards (with limited exceptions). SFAS No. 123 (R) is effective as of the first interim or annual reporting period that
begins after June 15, 2005 for non-small business issuers and after December 15, 2005 for small business issuers.  Accordingly, the Company has adopted SFAS No. 123 (R) effective January 1, 2006. The Company has determined that the provisions of SFAS No. 123 (R) did not have any significant impact on its financial statement presentation or disclosures.
  In May 2005, the FASB issued SFAS No. 154 that establishes new standards on accounting for changes in accounting principals.  Pursuant to the new rules, all such changes must be accounted for by retrospective application to the financial statements of prior periods unless it is impracticable to do so.  SFAS
No. 154 completely replaces Accounting Principles Bulletin (APB) Opinion 20 and SFAS 3, though it carries forward the guidance in those pronouncements with respect to accounting for changes in estimates, changes in the reporting entity, and the correction of errors.  This statement is effective for accounting changes and corrections of errors made in fiscal years beginning after December 31, 2005.
 In December 2007, the FASB issued FASB Statement No. 160 “Non-controlling Interests in Consolidated Financial Statements - an amendment of ARB No. 51”  (“SFAS No. 160”), which causes non-controlling
interests in subsidiaries to be included in the equity section of the balance sheet.  SFAS No. 160 applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008, except for the presentation and disclosure requirements, which shall be applied retrospectively for all periods presented.  The Company will adopt this standard at the beginning of the Company’s fiscal year
ending December 31, 2008 for all prospective business acquisitions.  The Company has not determined the effect that the adoption of SFAS No. 160 will have on the financial results of the Company.
 In March 2008, the Financial Accounting Standards board (FASB) issued Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (SFAS 161).  SFAS 161 is effective for fiscal years and interim periods beginning after November 15,
2008.  SFAS 161 requires enhanced disclosures about Fund’s derivative and hedging activities.  Management is currently evaluating the impact the adoption of SFAS 161 will have on the Company’s financial statement disclosures.
  The FASB has revised SFAS No. 141.  This revised statement establishes uniform treatment for all acquisitions.  It defines the acquiring company.  The statement further requires an acquirer to recognize the assets acquired, the liabilities assumed, and any non-controlling interest in the acquired at the
acquisition date, measured at their fair market values as of that date.  It requires the acquirer in a business combination achieved in stages to recognize the identifiable assets and liabilities, as well as the non-controlling interest in the acquired, at the full amounts of their fair values. This changes the way that minority interest is recorded and modified as a parent’s interest in a subsidiary changes over time.  This statement also makes corresponding significant amendments to other standards
that related to business combinations, namely, 109, 142 and various EITF’s.  This statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008.  The Company believes the implementation of this standard will have no effect on our financial statements.
  In May 2008, FASB issued SFAS 162, “The Hierarchy of Generally Accepted Accounting Principles”. Effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting
Principles. The Board does not expect that this Statement will result in a change in current practice. However, transition provisions have been provided in the unusual circumstance that the application of the provisions of this Statement results in a change in practice. The Company believes the implementation of this standard will have no effect on our financial statements.
  o.  Investing and Financing Activities
  Financing expenditures include payments relating to principle and interest payments on outstanding notes, equipment lease payments, dividend payments and software programs.  The Company had $1,000,000 in net investing activities relating to the restaurant purchase.
  p.  Revenue Recognition
  The Company recognizes revenue at time of sale upon receipt of payment.
  NOTE 2.                      GOING CONCERN
  The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company’s success is dependent upon numerous items, among which are the Company’s successful growth of revenues from its products and services, its ability to obtain new customers in order
to achieve levels of revenues adequate to support the Company’s current and future cost structure, and its success in obtaining financing for equipment and operations, for which there is no assurance. Unanticipated problems, expenses, and delays are frequently encountered in establishing and maintaining profitable operations. These include, but are not limited to, competition, the need to develop customer support capabilities and market expertise, setbacks in product development, technical difficulties,
market acceptance and sales and marketing. The failure of the Company to meet any of these conditions could have a materially adverse effect on the Company and may force the Company to reduce or curtail operations.  No assurance can be given that the Company can achieve or maintain profitable operations.
  The Company believes it will have adequate cash to sustain operations until it achieves sustained profitability. However, until the Company has a history of maintaining revenue levels sufficient to support its operations and repay its working capital deficit, the Company may require additional financing.
  Sources of financing could include additional equity financing or debt offerings.  Debt offerings are limited to the Company’s convertible promissory notes are offered with 36 month maturity dates at 10% paid quarterly.  The Company could also borrow additional funds from SWI Trading, Inc.
  Prior to January 1, 2008, SWI Trading, Inc. had loaned the Company a total of $897,318, through direct loans and a convertible promissory note in the amount of $761,168 dated November 1, 2006.   The convertible promissory note was a zero interest note maturing on January 1, 2007, and replacing all preexisting
debt obligations to SWI Trading, Inc.  At the option of the note holder, the note converted into restricted shares of the Company’s common stock at $.50 per share.  On January 1, 2008, we entered into an agreement with SWI Trading, Inc. whereby SWI agreed to waive repayment of $500,250 of the $897,318 total owed to SWI Trading, Inc. in exchange for the issuance of $1,724,133 restricted shares of our common stock.  In addition, SWI agreed to waive any claim it may have against
us for interest due upon the loan, and/or unpaid compensation due for:  services rendered; research and development fees; technology development fees; loan acquisition services and any other claims.
  NOTE 3.       COMMITMENTS AND CONTINGENCIES
  a.  Indemnities and Guarantees:
  During the normal course of business, the Company may make certain indemnities and guarantees under which it may be required to make payments in relation to certain transactions. These indemnities may include certain agreements with the Company’s officers, under which the Company may be required to indemnify such
person for liabilities arising out of their employment relationship, agreements with financial institutions in connections with certain of the Company’s notes payable, and agreements with leasing of office space for certain actions arising during the Company tenancy.  The duration of these indemnities and guarantees do not provide for any limitation of the maximum potential future payments the Company could be obligated to make. Historically, the Company has not been obligated to make payments
for these obligations and no liabilities have been recorded for these indemnities and guarantees in the accompanying balance sheet.
  b.  Leases:
  The Company has various operating lease commitments in connection with its office space and certain equipment.
  c.  Legal:
  The Company may be involved from time to time in claims, lawsuits, and disputes with third parties, actions involving allegations or discrimination or breach of contract actions incidental in the normal operations of the business. The Company is currently not involved in any such litigation or disputes which management believes could have a material adverse effect on its financial position or
results of operations.
  NOTE 4.
STOCKHOLDERS’ EQUITY
  The Company has the following classes of capital stock as of December 31, 2008:
  Common stock, $.001 par value:  100,000,000 shares authorized: 22,846,170 shares issued and outstanding.
  Preferred Stock, $.001 par value: 3,000,000 shares authorized as Series A Convertible Preferred.  2,033,333 shares of Series A Convertible Preferred stock issued and outstanding.
  Common Stock
  On or about January, 2008, a majority of the Company’s shareholders approved the resolution of the Company’s board of directors to amend the Company’s articles of incorporation to reverse split the Company’s common stock on a 1 for 3 basis.  All fractional shares were rounded up.  Shares
issued prior to January, 2008, have been retroactively restated to reflect the impact of the stock split.
  As at December 31, 2006, the Company had 9,597,240 shares of its common stock issued and outstanding.
  As at December 31, 2007, the Company had 13,343,138 shares of its common stock issued and outstanding.
  As at December 31, 2008, the Company had 21,149,620 shares of its common stock issued and outstanding.
  For the quarter ended March 31, 2009, the Company issued 786,353 shares of its common stock.
  As at  March 31, 2009, the Company had 21,935,973 shares of its common stock issued and outstanding.
  For the quarter ended June 30, 2009, the Company issued 910,197 shares of its common stock.
  As at June 30, 2009, the Company had 22,846,170 shares of its common stock issued and outstanding.
  For the quarter ended September 30, 2009, the Company issued 1,311,103 shares of its common stock.
  As at September 30, 2009, the Company had 24,157,273 shares of its common stock issued and outstanding.
   Preferred Stock
  For the quarter ended March 31, 2008, the Company’s Board of Directors cancelled all issued and outstanding shares of its Series C Convertible Preferred stock and designated 3,000,000 preferred shares as Series A Convertible Preferred Stock, $.001 par value, of which 2,033,333 shares are issued and outstanding
as at March 31, 2009.
  For the quarter ended June 30, 2008, 166,667 shares of our issued and outstanding Series A Convertible Preferred stock were converted into 1,000,000 shares of our common stock.  The Company issued SWI Trading, Inc. a total of 1,000,000 shares of our Series A Convertible Preferred stock as payment for the purchase
of certain assets and liabilities of AC Mexican Food, Inc., a California corporation.
  The Series A Convertible Preferred Stock has the following rights and preferences:
  Conversion Rights
  Each share of the Series A Preferred Stock may be convertible, at the option of the holder thereof and subject to notice requirements described herein, at any time, into six (6) shares of our common stock.
  Liquidation Preference
  Company’s Preferred Stock and prior and in preference to any distribution of our assets or surplus funds to the holders of any other shares of stock of the Company by reason of their ownership.
  The holders of Series A Convertible Preferred Stock are entitled to receive, prior to the holders of the other series of the of such stock, an amount equal to $0.37 per share with respect to each share of Series A Convertible Preferred Stock, plus all declared but unpaid dividends with respect to such share.
  Voting Rights
  Except as otherwise required by law, the holders of the Company’s Series A Convertible Preferred Stock vote; (i) as a single class and shall have such number of votes as is determined by multiplying (a) the number of shares of Series A Convertible Preferred Stock held by such holder, (b) the number of issued and
outstanding shares of our Series A Convertible Preferred Stock and Common Stock as of the record date for the vote, or, if no such record date is established, as of the date such vote is taken or any written consent of stockholders is solicited, and (c) 0.00000025; and (ii) the holders of our Common Stock shall have one vote per share of Common Stock held as of such date.





ITEM 2.                      MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ORPLAN OF OPERATIONS





The following discussion and analysis should be read in conjunction with our unaudited consolidated financial statements and related notes included in this report. The statements contained in this report that are not historic in nature, particularly those that utilize terminology such as “may,” “will,” “should,”
“expects,” “anticipates,” “estimates,” “believes,” or “plans” or comparable terminology are forward-looking statements based on current expectations and assumptions.





Various risks and uncertainties could cause actual results to differ materially from those expressed in forward-looking statements.





The forward-looking events discussed in this report, the documents to which we refer you and other statements made from time to time by us or our representatives, may not occur, and actual events and results may differ materially and are subject to risks, uncertainties and assumptions about us. For these statements, we claim the protection
of the “bespeaks caution” doctrine. All forward-looking statements in this document are based on information currently available to us as of the date of this report, and we assume no obligation to update any forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements.





The Company





AVT, Inc., is a public company.  Our common stock is quoted on the Pink Sheets in the over-the-counter market.  Our primary focus is on the manufacture of vending and product dispensing systems which utilize an innovative approach of development, integration of technology
and advertising media.  Our products define the cutting edge of the vending industry and position us as an industry innovator.  We are also a vending operator having approximately 1,000 vending systems throughout the Los Angeles, Orange and Riverside, California counties.  It is our vending operation experience over the past years that adds to the distinctive advantage and overall success as a manufacture and leader of technology based vending products. Ourexecutive
offices, engineering and manufacturing facility and warehouse are located at 341 Bonnie Circle, Suite 102, Corona, CA 92880.  Our telephone number is (951) 737-1057.





We were originally incorporated under the laws of the State of Delaware on February 25, 1969 as Infodex, Incorporated.  In October, 2005, we acquired Automated Vending Technologies, Inc., a Nevada corporation and began focusing our business on vending operations. In December, 2006
we merged our operating wholly owned subsidiary into the parent company and in January of 2008, we changed our state of domicile to the State of Nevada and renamed the company to “AVT, Inc.”  We operate in the State of California as “AVT Vending, Inc.”





We have received a going concern opinion from our auditors.





The Business





AVT, Inc. is an innovative vending operator and manufacturer of technology based vending solutions and equipment.  We currently employ a workforce of approximately 25 people and services approximately 300 commercial and
government vending accounts in Southern California.  We use ourpatent pending  technologies to drive our vending innovations which are in various stages of development.  AVT’s technology staff ranges from electrical and mechanical engineers to software programmers and IT specialists thereby enabling us to design and control all of our unique products while keeping the “edge” on all of our developed products





Our business currently focuses on the following:





·
Manufacturing of the RAM 4000 vending machine, a refrigerated beverage/snack combination vending machine containing more sophisticated technology then our competitors and offered at competitive pricing.





·
Manufacturing of the RAM 5000 vending machine, a high capacity non-refrigerated snack/chip/pastry combination vending machine containing more sophisticated technology then our competitors and offered at competitive pricing.





·
Manufacturing an attractive, built-in, secure access vending cabinet for hotels that do not have on-site food service. Our AEMTM cabinet incorporates patent pending touch-screen to vend or TSVTM which replaces both stand-alone machines and in-room locked mini-fridges while providing controlled access and a range of direct customer billing options.





·
AVT has developed a variety of ‘high end” PC based product dispensing systems.  These systems are derivatives of the AVT RAM 4000 or 5000 base housing having front panels which are unique or customized to end customer’s needs for digital signage or large color touch screens.  These systems allow a variety of AVT designed
technologies to be integrated into the system to meet specific customer needs for a custom dispensing system.  Our current high end product dispensing includes the Ivend, 24Hr. Vend Mart, and Tech-Store. We manufacture Patent-Pending, affordable, wireless VMSTM technology enabling vending machine owners/operators to remotely manage their vending systems and receive real time information via the Internet.  This system also utilizes a cashless payment system enabling patrons to use credit
card or membership card for completing vending transactions.





·
We offer advertising via our highly visible, remotely-programmable, AVTI MediaTM Network video panels which are integrated into vending machine signage that creates a new opportunity for advertisers to reach consumers in a captive setting.





Our goal is to be the leader in technology based vending and product dispensing solutions that are reflective of today’s “got to have it now” consumers. Serving international vending owners and operators whose desire is to have a better experience with vending equipment.
We strive to grow our business by developing superior customer solutions, adapting new technologies, and pursuing appropriate mergers and acquisitions.  Our growth is dependant upon the development of new technology, the incorporation of advertisement on the vending machines, the sales of our RAM 4000 and RAM 5000 systems, the introduction of the next generation Product Dispensing Centers, and the development of   revolutionary vending technologies.





Vending History





Vending machines had been introduced to Americans over 70 years earlier by Thomas Adams, who installed them on New York City's elevated train platforms to sell his Chicklets gum. After World War II the vending industry grew twice as fast as the gross national product, driven by three primary
factors: rising labor costs made machines an attractive alternative to human laborers; technological advances in food preservation and dispensing equipment permitted service of hot meals, sandwiches, coffee, and soft drinks; and technological advances were made in money-changing equipment. Vendors targeted "captive" markets in factories, offices, schools, and other institutions--a huge market with plenty of potential for growth and competition. The vending industry had achieved $2.5 billion in annual sales by
1960, and with statistics showing that Americans ate one in four meals away from home, vendors and stockbrokers foresaw a fine future for vending.





Market Information





The vending industry is a $42 billion domestic market as reported by The Vending Times Census of the Industry 2004.  This figure represents the revenues generated by vending owners/operators and excludes office coffee and manual food service.  Manual food service represents
an additional $10 billion in annual demand for convenience food.  Vended Food Products, which include refrigerated, frozen, can/bowl pack, and other meal items represents a $3.1 billion segment. While data on vended frozen foods is not stated specifically, industry sources including Vending Times and The Automatic Merchandiser Magazine concur that frozen food is a growth category while fresh foods are declining. Frozen food machines include ice cream machines as well as frozen entree machines that require
an adjacent microwave oven to heat the item.





According to the Vending Times, there are an estimated 1.4 million vending locations throughout the United  States situated in manufacturing plants, factories, offices, government buildings, schools, colleges, hospitals and other public locations. These are served by approximately
9,000 vending operators.  In addition, there are approximately 52,000 hotels in the United States and 300,000 worldwide according to the American Hotel & Lodging Association (www.ahma.com). There are approximately 6,000 business-oriented hotels with more than 150 rooms, and approximately 14,000 hotels with 75 to 150 rooms. The growth rate for the overall vending market is 5% annually.





Products and Services





We have a family of products which are geared towards improving the experience of consumers, establishments, and operators in the convenience food, digital signage and product dispensing industry.   Our current line of products and services are described below.





Automated Express Market





We have developed and created our Automated Express Market (AEMTM) system which is Controlled Access Cabinet system. These custom built wood and steel based cabinets are PC based and designated for use in specialized locations such as hotels, Inns, c-stores, malls and retail stores that
are limited in the ability to effectively sell and market food, convenience items or higher priced items which are subject to pilfering. The cabinets can be merchandised to dispense more than seventy-two selections including snacks, hot meals, ice cream, alcoholic and non-alcoholic beverages as well as personal amenities such as sunscreen, toothpaste, and brushes.  They can also be configured for high ticket items such as cell phones, digital cameras mp3 players personal electronic devise and more.
The AEMTM system gives the hotel’s customers the convenience of billing directly to their room through touch screen pin technology so they do not have to carry cash or coin to make purchases. The system automatically posts the charge to the guest’s account by utilizing touch screen vending (TSVTM) and multi-payment capabilities. AEMTM cabinets have multiple payment options built in that include touch screen payment technology, credit/debit acceptors and smart card readers.   We
are currently exploring opportunities with many limited service hotel chains in the U.S., a market that totals more than 50,000 establishments as well as c-stores and retail stores and shopping malls.





Media Advertising





We have developed AVTi MediaTM which allows for an advertising medium to be added to virtually any of AVT designed systems including AEMTM cabinets and all ofour next generation vending machines.  By incorporating AVTI Media, we allow the consumer to view the media, advertising
or hotel messaging while they make their selections.  AVTi Media can generate advertising revenue for owners and operators in many settings such as conference rooms, hotel lobbies, airport terminals, restaurants, car rental outlets and surgery center waiting rooms.  By having vending machines in prominent locations within major companies, the vending operator “owns” the valuable space that can be used to generate advertising revenue through the Digital TV Message Board or (DTVMB)
technology.  Our Vending Management System software allows for the management of machine inventory, repairs, collections and advertising through remote access. VMSTM enables owner/operators to reduce costs and increase profits by enabling real time access to inventory levels, system status, machine service and daily receivables with little to no machine down time.





Vending Management SystemTM (VMS)





Our VMS systems allow us to view item information for each machine to help plan for daily replenishment, sales statistics and alerts us of defects to operators as well as defect history for each machine. This technology increases operational efficiency of vending operations and helps to prevent
inventory shrinkage and skimming, both major control issues in the vending industry. A key differentiator relative to the offerings of other established players in the vending machine management space is that our VMS solution works via a DSL line cellular modem or Internet Wi-Fi and be substantially less expensive to own and operate than competing systems who do not use the internet for bi-directional transmission of vending system data..





Vend Sensing System (VSS)





We have developed and have a patent pending on our VSS product to provide a surefire solution for detecting all vended items.  The VSS was developed specifically to detect that a vending type of product has dropped from one of the dispensing columns directly above the sensing system
and has fallen into the customer delivery bin at the base of the vending system.





The VSS is coupled directly with the vending system control electronics in such that the VSS circuitry is disabled until the vending system control electronics has received payment.  Once payment has been received and the vending system starts the dispensing process, the control
electronics enables the VSS circuitry to detect product which has been dispensed and has dropped into the delivery bin below.  During this sensing period, the VSS circuitry is only enabled for the empirical time period it takes to detect any one of the vendible products to fall into the delivery bin.





During the sensing period of time, the VSS circuitry uses an auto-calibrated ultrasonic beam to detect if an object of just about any size, form or shape (designed for detection of any object that can be vended) has fallen into the detectable space of the customer product delivery bin.  If
an object (vended product) enters the detectable vending space, the VSS circuitry detects the object and in turn sends a “detected” signal to the Control Electronics.  If the VSS circuitry does not detect an object has entered the customer delivery bin space within the allotted empirical time frame, the VSS circuitry returns a command signal to the control electronics that a “no vend object detected”.  It is the control electronics responsibility to determine the next
appropriate action to take.





This invention for product detection provides many distinct and exciting advantages over conventional detection.  First and foremost, the VSS is calibrated to “look” across the entire cross-sectional area of the delivery bin.  This is a primary advantage over
the conventional light beam detection method.  The detection system is compatible in cost to that of traditional vending detection systems.  The “self calibration mode allows the system to be able to retrofit into other vending systems with minimal modification needed.





Vending Machine Manufacturing, Sales and Placements





We currently manufacture next generation refrigerated and high capacity snack machines as well as standard and customized product dispensing systems. These machines have been designed to meet or exceed our specific performance specifications and give us the ability to minimize costs traditionally
associated with purchasing new equipment.  The manufacturing of our own equipment also allows us to incorporate our technology into the systems during at the time of production reducing the costs associated with retrofitting units. We sell these systems directly to distributors, vending operators and end users located primarily throughout the United States, Canada and Mexico. We believe that we are currently the only manufacturing entity with this capability in the vending industry, giving us a tremendous
lead and advantage over our competition.





The major competitive advantages of AVT’s next generation machines is they all have the capability of being configured with an integrated PC.  The integrated PC allows for a variety of additional functions which include but are not limited to, cashless vending, remote sales
management and media advertising for creating additional revenue through the sale and display of advertising play loops.  The feature of playing multiple looping advertisements yields the possibility of adding additional stream of revenue which may exceed that of the sales of vended product.  Another significant advantage is the  ability to plug into a standard 120 VAC household power outlet. As an operator, AVT’s experience is that the unit price of a machine and sometimes
the required 220VAC circuits for the units represent major constraints to growth of a vending company.  Our next generation machines will cut machine acquisition cost by greater than 50% and eliminate expensive power outlet upgrades for establishments and operators increasing placement and sales opportunities.  Through the design and manufacturing of vending and product dispensing systems using new technologies, we have become a vendor of equipment for the entire gamete of food and high priced
consumer electronics and dispensed items. With capabilities to produce machines that are far less expensive, less power demanding and having multi-pay options other than the traditional market standard, we have the opportunity to grow the mainstream as well as specialty segment of vending machine manufacturing and operations to become a major equipment provider to other distributors, all without a heavy capital investment.





Business Strategy





Manufacturing Capabilities





Our goal is to become a full service developer and manufacture of highly integrated vending systems.  Over the past several years, AVT has assembled an integral team of experienced engineers and qualified technicians to develop vending solutions comprised of original and inventive
technology and integrating this technology into a line of sophisticated self service products.





Our engineers use creative tools such as “Solid Works” to develop and generate CAD drawings used by our local manufacturing partners as well as our OEM manufacture in China to produce our state of the art vending systems components which are shipped to our 30 thousand square foot
facility in Corona, California for integration, assembly, final testing and deployment.  A multitude of electrical and software tools are also used to create AVT’s proprietary control boards, sensors, and firmware used by all AVT branded product.





Fabrication / Assembly





We fabricate the housing for our vending machines utilizing offshore contract manufacturers.  Our final fabrication and assembly is based in Corona, California at our main facility.  Local manufacturing includes approximately 10,000 sq/ft of sheet metal fabrication and
15,000 sq/ft of assembly.  In-house Fabrication Capabilities include; Sheet Metal Forming, Welding, NC Punching, pot Welding, Machining and Fab Win (Fabrication Programming Software).  In-House Assembly Capabilities include; Line Assembly, System Integration, QC Testing, Silk Screening, Operational Testing





Our Current Products





The RAM4000 Vending Machine





Our RAM4000 is a refrigerated vending system..  This is a refrigerated snack/beverage combo machine that uses all of our current technology to vend 4 rows of food, beverage, snack and candy or any combination thereof .  The RAM4000 is ideal for smaller populated vending
accounts, OCS locations and the school segment.  The RAM400 uses our optional Multi-Pay system allows the machine to accept Cash, ATM, and Credit Cards.  The system also accepts AVT’s optional AVTi Media product and VSS product drop detection system.





The RAM5000 Vending Machine





Our RAM5000 machine is our answer to the industry’s need for a higher capacity non refrigerated snack machine which utilizes all of our current technology.  The RAM5000 vends 5 rows of non-refrigerated snack and candy or any combination thereof. RAM5000 is ideal for smaller
populated vending accounts needing a high capacity vending machine, OCS locations and the school segment. Like the RAM4000, the RAM5000 uses our optional Multi-Pay system allows the machine to accept Cash, ATM, and Credit Cards.  The system also accepts AVT’s optional AVTi Media product and VSS product drop detection system.





Kiosk Systems





In addition to our vending machines, we have incorporated a line of computer and technology based kiosk systems.  These kiosks will be deployed in conjunction with our line of RAM vending systems as well as being sold as self service or control center kiosks systems.  All
kiosks have the ability to be fitted with digital signage which runs our media software products to be come a part of AVTi Media Network.





AVTi Media





AVTi Media is an advertising medium option available basically all AVT products including our next generation vending RAM 4000/5000 vending systems.  AVTi Media displays media, advertising, or hotel messaging on video screens located on the vending machine or product dispensing
systems..  Consumers may view the media while they make their selections at the vending machine.  AVTi Media can generate advertising revenue for owners and operators in many settings. Our target market are surgery centers, health clubs, dentist offices, retail sites, and any organization that has a high-traffic, captive audience that is striving to enhance the experience of their customers.





Competition





There are several vending companies in Southern California and the United States.  These competitors offer machine sales and vending route operations much the same as we do.





Route Competition





Our  route and vending operations serve as our core business structure.  Our route and vending operations utilize approximately 10 service trucks to service approximately 650 placed systems in 250 locations.  Our service operation is based in Corona California
and covers the primarily the areas of Riverside, Orange and Los Angeles counties.   We currently compete in these counties with several other competitors.  Although these are our competitors from the sense that they have offer similar route and vending services, they do not manufacture machines as we do.   These competitors are as follows.





•  Take a Break:                             Primary operations in Corona having about 20 trucks to service their routes.





•  Continental:                             Primarily operations in Orange County having have about 30 to 35 trucksservicing
their routes.





•  Complete:                                       Primarily operations in
Riverside and San Bernardino Counties havingapproximately about 19 trucks.





Manufacturing Competition





We primarily manufacture two vending systems; a refrigerated low capacity machine, the RAM 4000, and a non-refrigerated high capacity vending machine, the RAM 5000.  Both of these base models systems can house a variety of AVT designed and integrated technology making either the
RAM 4000 or RAM 5000 or any one of the several derivative systems unique with the vending industry.  Several of our pending patents may present a potential monopoly within the vending industry thereby forcing other manufacturing competitors to pay us for royalties or licenses fees for use of our patented technologies.





Many of our manufacturing competitors have been in business for many years building base line types of traditional vending systems. We believe that these companies are competitors for our RAM 4000 and RAM 5000 base line systems.  Several of these competitors are described below.





•  Crane:                  Which also owns Dixie Narco, AP (Auto Products) and National Vendors is the largestmanufacture of traditional
baseline vending systems.





•  USI:                  A seasoned vending manufacture having many years in the manufacturing of traditionalbaseline vending
systems.





•  AMS:                  A large manufacture which designs its own traditional baseline systems and has been nthe vending business
for many years.





•  Zoom Systems:
A manufacture which does design vending systems which integrate high levels of technology.    Because Zoom Systems integrates high levels of technology into its systems, it would be considered one of AVT’s primary competitors.





Although we have competition with vending routes and vending machine sales, we believe that as a technology based company, we are unique to the vending and kiosk industries in that we have the ability to design, develop then integrate our technology into our premium line of vending systems.  Due
to this specialized approach, we believe that other than Zoom Systems,  we currently do not have any significant competition which is capable of integrating current technologies in the form of PC based operation, RF wireless control or similar technologies seamlessly into vending systems or products.





Patents, trademarks, licenses, franchises, concessions, royalty agreements or labor contracts, including duration.





We currently have four pending patents for our technology.  These pending patents are summarized below.





Multimedia System, Method for Controlling Vending Machines


Serial Number 11-588,422


(Filed:  October 27, 2006)





Conventional control of vending systems is typically done by using a system control board consisting of a PWB (printed circuit board) and a microcontroller supported by a group of discrete electronic components.  These system components are used to control the various system functions
of a vending machine i.e. spinning of auger motors, control of bill and coin acceptors, LED display feed back etc.





Our invention of Touch Screen Vending or TSV has redefined the conventional method of vending machine control.  TSV empowers the use of a multimedia PC and a color touch LCD display to virtually control the complete operation of the vending machine.  The PC stores a data
base software program of all desired products to vend with an associated color digital image of each item.  A second application program displays the color image of the intended items to vend in the exact format as seen through the glass front of the vending machine.  The PC also controls the collection of currency (i.e. bill acceptor, coin acceptor, credit card reader) in place of the vending machines control board.  I/O (input/output) ports from the PC are used to interface to
the vending machine control board and all aspects of operation of the vending machine is under complete control by a multimedia PC coupled with the touch screen LCD.





This invention for the control of vending machines provides many distinct and exciting advantages over conventional control such as the universal language of using a touch display to select desired products to vend in place of an alphanumeric keypad.  The system can generate virtually
any type of report to combat money or product shrinkage while providing exact control of inventory.  The LCD provides a means of generating additional revenue through advertising displayed products or other services while the system in idle mode.





Vend Operating System


Claims to be amended to the Multimedia System, Method forControlling Vending Machines – Serial Number 11-588,420


(Filed:  October 27, 2006)





Our Vend Operating System (Vend OS) is a next generation vending and product dispensing system utilizing a personal computer (PC) to drive the system components and utility software.  The uniqueness in the system lies in that the vending system uses a PC to control the vending system
as compared to the prior art in the vending industry which typically uses discrete component controllers for overall system operation and control.





Our Vend OS is broken up into two sections hardware and software. The hardware consists of the following devices: Virtual Sensing System (VSS), a USB Omni-pattern scanner, a USB Magtek Card Reader, a USB Pyramid Bill Acceptor, a MDB Coinco coin machine, a 7 inch LCD screen built-in with the
Nano-ITX PC, and a portable mpeg player (allowing static media files to play in a continuous loop).   The software consists of the following applications: Vending Management System (VMS), Touch Screen Vending (TSV) and AVTI Digital Signage Media.





Our Vend OS is extremely flexible in its capabilities because the product is installed in our RAM bases systems without any peripheral devices and a Nano-ITX computer that includes a freeware developed by our engineering department running as a Windows’ service allowing vending by conventional
ways. This freeware allows sales data and records to be stored in a secure database and has the capability of manipulating a machine’s state remotely through internet connectivity, memory stick, cell modem or phone line.





With our Vend OS we can:  manipulate product prices; turn the machine off and on, turn the compressor off and an, manipulate the change returned, manipulate the system clock, and read the machine’s state from the MDB interface and motor/auger control.  Our Nano-ITX
computer includes an optional 7” touch wide screen LCD, a flash ROM that runs Microsoft Embedded System, a MDB to RS-232 interface board that connects from a VMC board to the PC serial port, motor driver printed circuit board and a PCMCIA modem that allows wireless internet connection as a typical system but control for any variety of input or out put devices are part of the scalable system.





Wireless Management of Remote Vending


Serial Number 60-730,369


(Filed:  October 27, 2005)





Conventional methods for managing the inventory of vending machine product, price selection and for checking the daily sales numbers are typically performed by a route driver who manual checks the vending machine on a frequent basis by driving to the vending machine/s location and performing
a variety of manual operations which include interrogation of the vending machine’s control board.





The invention of “Wireless Management of Remote Vending” defined as VMS (Vending Management System) is a method for performing the management on many of the above listed vending machine functions.  Information on vending activity is stored in the vending machine’s
electronic control board which is then wirelessly transmitted out through the VMS module to a wireless cell phone network.  The information received on wireless network is downloaded then transmitted over the internet to one central PC server/s located at AVT.  The information stored on AVT’s server/s can be accessed via a secure log-in function (user’s account) to review and manage any specific vending machine in the network (which has been equipped with a VMS module).  The
flow of VMS information and data is a bi-directional operation.  Users can also upload data, changes and control function out from their secure account to any of the vending machines in their specific network.





VMS was designed to be a low cost solution with high tech performance.  Vending route operators with as little as one or and many as one hundred (or more) vending systems in the field and equipped with VMS can now remotely and effectively control and managed their vending operations
from a single PC located at the home office.  Remote VMS management controls money and product shrinkage, manages inventory by letting the vending operator know exactly what has sold and what needs to be replaced and monitors and transmits systems critical information such as machine temperature, system errors and failure modes and alerting the vending operator instantly for expeditious disposition on any vending system in the field equipped with a VMS telemetry module.





Vend Sensing System


Serial Number 11-976,311


(Filed:  October 23, 2007)





Historically, the vending industry has typically used the conventional method of breaking or impeding a light beam for detecting when a product which has vended (dropped from a column above delivery bin).  In most cases, the light beam consists of an infrared transmitter and infrared
detector which are mounted in a direct “line of site” of each other.  When a product has dropped across the light beam, the product will momentarily break the path of the light beam which sends an interruption signal to the vending system’s control board for processing.  Because a focused light beam is inherently narrow, this often causes the light beam to miss narrow items such as a thin candy bar.  Our Vend Sensing System (VSS) has redefined this conventional
method for detecting a vended product utilizing ultrasonic sound.





During the sensing period of time, the VSS circuitry uses an auto-calibrated ultrasonic beam to detect if an object of just about any size, form or shape (designed for detection of any object that can be vended) has fallen into the detectable space of the customer product delivery bin.  If
a vended product enters the detectable vending space, the VSS circuitry detects the object and in turn sends a “detected” signal to the control electronics. If the VSS circuitry does not detect an object has entered the customer delivery bin space within the allotted empirical time frame, the VSS circuitry returns a command signal to the control electronics that a “no vend object detected.”  It is the control electronics responsibility to determine the next appropriate action
to take.





The VSS is coupled directly with the vending system control electronics so that the VSS circuitry is disabled until the vending system control electronics has received payment.  Once payment has been received and the vending system starts the dispensing process, the control electronics
enables the VSS circuitry to detect product which has been dispensed and has dropped into the delivery bin below.  During this sensing period, the VSS circuitry is only enabled for the empirical time period it takes to detect any one of the vendible products to fall into the delivery bin.





This invention for product detection provides many distinct and exciting advantages over conventional detection.  First, the VSS is calibrated to “look” across the entire cross-sectional area of the delivery bin.  This is a primary advantage over the conventional
narrow light beam detection method.  The detection system is compatible in cost to that of traditional vending detection systems and because it is self calibrating, it can readily retrofited into other vending systems with minimal modifications.





System and Method for Interactive Advertising


Serial Number 60-935,045


(Filed:  July 24, 2007)





Our System and Method for Interactive Advertising is a unique solution for potential clients or users to interact to a specific network of supplied information such as advertising and branding via a secure or unsecured network.  The system is designed to allow for direct customer
interaction through existing telephone switch based infrastructure such as pay phones.





The new system essentially takes our base advertising hardware/software products and adapts them for the telephone industry.  This adds a level of customer interaction based upon touch or other interactive means such as a keyboard or a display message.  Customers using
the system may be rewarded either with discounts and/or promotional deals depending upon the touched advertisement after responding to simple instructions displayed on the screen.





In addition, the smart technology integrated into each system telephone may also be fitted with the appropriate hardware to make that specific location a “Hot-Spot.”  Each Hot-Spot provides customers with another means  of interacting with the ATV network through
free of fee-based connectivity using the customer’s portable device such as a smart phone or laptop computer, or any other portable electronic device capable of linking to the Hot-Spot by means of cable, wireless, or infrared radio frequency.  Each Hot-Spot location allows customers to use wireless internet within the location’s range to aid them in acquiring their discounts and/or rewards more quickly and specific advertisements may be downloaded and displayed on the phone touch screen.  Ideally,
customers may form a dependency for the Hot-Spot’s use and become a habitual user of the AVT technology and services.





Effect of existing or probable governmental regulations on the business





The effects of existing or probable government regulations are minimal.





Research and Development





AVT is dedicated to the development of technology enriched vending and product dispensing systems.  Our research and development team is staffed with software, electromechanical and firmware engineers, and information technology specialists with the primary responsibility of developing
and integrating new technology into our vending systems.





Our Primary Research and Development Efforts





Our research and development team uses creative tools such as “Solid Works” to develop and generate CAD drawings which are used by our local manufacturing partners and OEM manufacture in China to produce our state of the art vending systems, components and retrofit designs.  These
machines are shipped to our facility in Corona, California for integration, assembly, final testing and deployment.





One of our primary R&D concerns is the continuous development of our RAM 4000 and RAM 5000 vending machines.  Our team continuously develops a variety of software application programs, administrative and database programs and embedded firmware for these systems.





Another ongoing R&D effort is the design and enhancement of our AVTi Media products.  The AVTi Media products are integrated into our base systems and also sold to other vending manufactures.  The following is a summary of our current AVTi products:





•  AVTi Media Administer:  This is a program designed to manage and administer all aspects and features of our digital signage program.  The Media Administrator allows a remote operator to create,
manage, update and scheduled ads that will play on LCD displays which have been integrated into vending systems.





•  AVTi Media Client: This is a program designed be located on the vending system’s integrated PC and has the priority of playing the ad “play list.”  This client software also uses prescheduled
times to monitor the server to “update” the playlist as required.





•  AVTI Media Server:  This is a server based program which coordinates the efforts, changes and directives from the administrator program with the schedule efforts of all the multiple clients located in the
field and connected via the internet.





Our Secondary Research and Development Efforts:





Our secondary R&D efforts run concurrently with our primary R&D efforts to support ongoing systems and to develop new products.  These products are summarized as follows:





•  TSV:  Touch Screen Vending is an ongoing software development effort which is our primary flagship software product.  This is a modular program designed to evolve with the changing technologies
supporting our vending and dispensing products.





•  IVend:This is an ongoing development design that features a high-end dispensing center which combines our base RAM 4000 cabinet with a creative front door design which includes interactive touch screens
and a variety of other supported hardware.  The IVend also has its own software application program which is designed to provide a high degree of interactive and intuitive application to the user.





•  Tech Store: This system is similar to our IVend system designed for middle priced systems.





•  Vend Mart: This system is similar to our IVend system designed for entry level priced systems.  The Vend Mart also has its own software application program which is design to provide  a high degree
of interactive and intuitive application to a base line vending systems equipped with TSV.





In additional, we have a variety of ongoing hardware and software R&D projects which are at various stages of development.  The following is a brief list of some of our non-confidential R&D efforts:





MDB – PC Software Interface                                                                VMSII
– Hardware/Server/Software Project


DEX to PC software Interface                                                                VMS
– Drop Sensing efforts


MDB to USB Hardware Device                                                                AEM
Cabinet Design and


DEX to Radio Controller PCB                                                                Multiple
All-In-One PC/LCD Displays designs


X – Y Dispensing Center Design                                                                Multiple
Custom Dispensing Projects





Costs and effects of compliance with environmental laws





The expense of complying with environmental regulations is of minimal consequence.





Number of total employees and number of full time employees.





We currently have approximately 20 full time employees and 5 part-time employees.  We allow utilize the services of independent contractors.





Results of Operations





For the nine months ended September 30, 2009, our net income has increased by $75,714, compared to the same period for the previous year.





Total revenues for the nine months ended September 30, 2009, were $2,446,002 compared to total revenues of $2,015,482 for the nine months ended September 30, 2008.  The increase in revenues is due increased manufacturing revenue of $382,838 and increased restaurant revenue of $185,138.  Our product sales revenue decreased
slightly by $137,456.





We attribute the increase manufacturing revenues to increased sales of custom vending machines.  Increase restaurant revenue is due to successful reduction in payroll, general administrative expenses and a temporary rent reduction.  The reduction in product sales is primarily related to decreased vending route sales.





For the three months ended September 30, 2009, we had revenues of $900,862, and total cost of goods and operating expenses of $805,832, for net income of $81,737.   This compares to the three months ended September 30, 2008, where we had $967,562 in total revenues, $640,248
in total costs of goods and operating expenses for a net income of $261,960.  We attribute the reduction in net income for the three months ended September 30, 2009, due to decreased revenues of $66,700 and increased operating expenses of $165,584.





Our increased cost of goods sold for the three months ended September 30, 2009, was attributable to increased sales of our vending machines and restaurant costs.  Increased operating costs was due to increased restaurant costs and spending on research and development. Approximately 10% of this increased spending is due to the
operations of the AC Mexican Food restaurant.





We believe that the increased spending on research and development is necessary for the company to move away from vending operations and work towards increased machine sales and the development of technology which allows for the sales of our electronic payment, back end inventory control and advertising products.  We have experienced
unexpected expenses related to the restaurant operations relating to unpaid back taxes and vendor costs.  To address this issue we have hired new management to address these issues and we expect the restaurant related expenses to be reduced during the next year.





Our general and administrative expenses increased for the three months ended September 30, 2009, primarily due to increased costs of goods and operating expenses relating to increased vehicle expenses, rent for our facility, advertising, payroll expenses and taxes.





We expect to increase sales over the next 12 months due primarily to sales of our RAM4000 vending machine.  Increased sales of the RAM4000 along with increased advertising sales should increase our overall revenues for the next 12 months.





We believe that we sufficient available cash and cash flow from operations to satisfy our working capital and capital expenditure requirements during the next 12 months.  There can be no assurance, however, that cash and cash flow from operations will be sufficient to satisfy our working
capital and capital requirements for the next 12 months or beyond.





We expect our manufacturing costs to increase approximately 15% due to the devaluation of the U.S. Dollar and the exchange rates with our foreign manufactures.  Depending on the strength of the U.S. Dollar, this trend may or may not continue.





Inflation and changing prices have affected our business as related primarily to fuel and increased vehicle expenses.  We anticipate that fuel costs will continue, thus increasing our operating costs.  Our cost of goods and prices for our products remain relatively stable
and we expect this trend to continue through the end of 2009.







Liquidity and Capital Resources





We have historically financed operations through a combination of cash on hand, cash provided from operations and the sale of our securities.  As of November 5, 2009, we have $89,254 cash on hand.





At September 30, 2009, we had cash of $90,042 compared to cash of $56,547 at December 31, 2008.  We consider this increase in cash as insignificant for the current quarter.





For the three months ended September 30, 2009, our inventory increased slightly compared to our ending inventory for the year ended December 31, 2008. At September 30, 2009, we had inventory of $711,286 compared to $605,067 at December 31, 2008.  This increase relates
primarily to receiving a new shipment of vending machines from our manufacturer in China.





The Company’s assets increased to $16,918,858 at September 30, 2009 compared to $15,170,671 December 31, 2008.  This $1,748,187 increase in assets is primarily due to increased  account receivables, restaurant and equipment and vehicles.




We have committed to purchase 2,500 production units of our RAM5000 machine from our manufacturer.  These units will be used for inventory.  We intend to borrow funds from SWI Trading, Inc. to fulfill the purchase commitment.  This transaction will be in form of three year convertible promissory note with
10% interest annually.  The note may be converted at the sole option of the noteholder into shares of our common stock at a price of $.50 per share.




SWI Trading, Inc. has obtained a $250,000 line of credit with Union Bank of California bank to assist with the transaction.  We plan on borrowing funds from SWI Trading, Inc. to assist us in purchasing the initial production units.  We do not anticipate that the Company will have difficulty repaying SWI Trading, Inc.
for the purchase funds borrowed primarily because we will receive deposits with the purchase orders for the vending machines purchased.






All receivable accounts are due within 45 days of delivery.  Upon special approval, we allow 90 days to receive payment.  Collections for past due accounts are handled internally.




Future Goals





In the next 12 month, we will continue our research, development and marketing efforts. We have entered into multiple manufacturing agreements with offshore manufacturers to produce the housings for our technology based RAM4000 and RAM5000 vending systems and have established a line of credit
to ensure payment and production of the systems.





Our goal is to manufacture and sell as many systems as possible in the next 12 to 24 months through established distributors and direct sales to meet the anticipated industry demand for a competitively priced vending system that is an energy efficient, technology based,  “Green” system..





A critical focus for sales over the next 12 months will be our Product Dispensing Centers (PDCs).  Our PDCs are based on our RAM4000 or RAM5000 system and integrates more sophisticated technology features and options such as full face large touch screen displays, receipt printers, cashless payment options and advertising displays.  In
addition, our PDCs systems can dispense a variety of snack items and non-food items such as cell phones, MP3 players, digital cameras, DVDs, consumer electronics and accessories.  We will also focus on “Themed” systems to dispense products such as tee-shirts, promotional items, perfumes, contact lenses and just about any product our customers have a location and market for.  Our “Themed” systems are of exceptional interest to our direct end customers as the products
these systems dispense result in higher profit margins.





All of our vending systems are capable of the inclusion of PC hardware and LCD displays.  A future goal of AVT is to complete and continue to refine application software that runs digital signage for the primary purpose of displaying paid advertisements.  As we sell systems that are equipped with a PC and LCD display,
each system becomes a “node” on a digital network.  As the network expands, many thousands of vending systems and PDCs can be part of nationwide advertising network which we believe will be of interest for national advertisers.  Our goal is to “own” the network but not the systems.  All vending system owners will have the option to join the AVT nationwide network with our AVT based advertising vending system to get an equitable share of revenue for allowing
advertisements from AVT’s server to be pushed-out onto their vending system.





Future goals and system refinements will include continued software and hardware development and refinements to include even more efficient operating systems to integrate more seamlessly with the internet, becoming Wi-Fi standard and including SMS and email features. Our goal is that the AVT vending systems will become the standard for
intelligent self-service vending systems deployed throughout the US and world markets.





In addition, within the next 12 months, we will continue to work to become a fully company and have our common stock trading on the OTC Bulletin Board.





Off-balance Sheet Arrangements





We maintain no significant off-balance sheet arrangements





Foreign Currency Transactions





None.





ITEM 3.                      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





We currently do not utilize sensitive instruments subject market risk in our operations.  In the event that we borrow money for our operations, our principal exposure to financial market risks is the impact that interest rate changes could have on our loans.





ITEM 4.                      CONTROLS AND PROCEDURES





In accordance with Rule 13a-15(b) of the Securities Exchange Act of 1934,as of the end of the period covered by this Report on Form 10-K, our  management evaluated, with the participation of our principal executive and financial officer, the effectiveness of the design and operation
of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act). Disclosure controls and procedures are defined as those controls and other procedures of an issuer that are designed to ensure that the information required to be disclosed by the issuer in the reports it files or submits under the Act is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer's management, including its principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on their evaluation of these disclosure controls and procedures, our chairman of
the board and chief executive and financial officer has concluded that the disclosure controls and procedures were effective as of the date of such evaluation to ensure that material information relating to the company, was made known to them by others within those entities, particularly during the period in which this Quarterly Report on Form 10-Q was being prepared.





Item 4T. Controls and Procedures.





Our management is responsible for establishing and maintaining adequate internal control over financial reporting. The Company's internal control over financial reporting has been designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles generally accepted in the United States of America. The Company's internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets of the Company; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America, and that receipts and expenditures are being made only in accordance with authorization of management and directors of the Company; and provide reasonable assurance regarding prevention or timely detection of  unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the Company's financial statements.





Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.





Management assessed the effectiveness of the Company's internal control over financial reporting at March 31, 2009.  In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control--Integrated Framework. Based on that assessment
under those criteria, management has determined that, at March 31, 2009, the Company's internal control over financial reporting was effective.





This Quarterly Report on Form 10-Q 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 SEC that permit the Company
to provide only management's report in this annual report.





PART II – OTHER INFORMATION





ITEM 1.LEGAL PROCEEDINGS





We are not a party to any litigation which management believes is other than ordinary routine litigation incidental to our business.





ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS





We have sold the following unregistered securities to accredited investors for the quarter ended September 30, 2009.





7/1/09 – 9/30/09Date of Sale
Purchaser Name
Price ($)
Security
# Shares Sold7/06/09
EB Mendenhall
20,000.00
Note7/17/09
Earl Zack
15,000.00
Note8/13/09
Al Sanderson
40,000.00
Note9/10/09
Douglas Kruegar
10,000.00
Note9/18/09
Pointdexter
100,000.00
Note9/29/09
Shannon Allan
35,000.00
Note7/10/09
Richard C. Engelke
10,000.00
Common Stock
20,0007/14/09
Ron Weisenburger
20,000.00
Common Stock
40,0007/17/09
George Woloshyn
50,000.00
Common Stock
100,0007/17/09
Edward J. Durban
10,000.00
Common Stock
20,0007/28/09
Charlotte P. Engelke
20,000.00
Common Stock
40,0008/10/09
Al Hickenbotham
10,000.00
Common Stock
20,0008/21/09
George Woloshyn
40,000.00
Common Stock
80,0008/24/09
Richard C. Engelke
10,000.00
Common Stock
20,0008/25/09
Irene Kost
20,000.00
Common Stock
40,0009/9/09
Dan Breeding
10,000.00
Common Stock
20,0009/28/09
Stuart M. Benjamin
6,500.00
Common Stock
10,000





There were no underwritten offerings employed in connection with any of the transactions set forth above.





The issuance of securities described above were deemed to be exempt from registration under the Securities Act in reliance on Section 4(2) of the Securities Act of 1933 and Regulation D as transactions by an issuer not involving any public offering.  The recipients of securities in each such transaction represented their intention
to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were affixed to the share certificates and other instruments issued in such transactions. The sales of these securities were made without general solicitation or advertising.





We intend to use the proceeds from sale of our securities to purchase equipment for vending operations, vending machines, supplies and payroll for operations, professional fees, and working capital.





ITEM 3.DEFAULT UPON SENIOR SECURITIES





None.





ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS





None.





ITEM 5.OTHER INFORMATION





None.





ITEM 6. EXHIBITS





Exhibit
Form
Filing
Filed withExhibits
#
Type
Date
This ReportCertificate of Incorporation filed with the Secretary of State of Delaware on February 25, 1969.
3.1
10
8/14/2008Certificate of Amendment filed with the Secretary of State of Delaware on December 16, 1985.
3.2
10
8/14/2008Certificate of Amendment filed with the Secretary of State of Delaware on March 5, 1987.
3.3
10
8/14/2008Certificate of Amendment filed with the Secretary of State of Delaware on February 11, 1991.
3.4
10
8/14/2008Certificate of Renewal filed with the Secretary of State of Delaware on January 14, 2005.
3.5
10
8/14/2008Certificate of Amendment filed with the Secretary of State of Delaware on September 22, 2005.
3.6
10
8/14/2008Amended and Restated Certificate of Amendment of Incorporation filed with the Secretary of State of Delaware on April 28, 2006.
3.7
10
8/14/2008Articles of Incorporation filed with the Nevada Secretary of State on September 24, 2007.
3.8
10
8/14/2008Certificate of Amendment filed with the Nevada Secretary of State  on November 30, 2007.
3.9
10
8/14/2008Certificate of Merger filed with the Secretary of State of Delaware on December 11, 2007.
3.10
10
8/14/2008Certificate of Designation of Rights, Preferences, Privileges and Restrictions of Series A Convertible Preferred Stock filed with the Nevada Secretary of State on March 5, 2008.
3.11
10
8/14/2008Amended and Restated Bylaws dated March 12, 2008.
3.12
10
8/14/2008Consulting Agreement effective October 1, 2006 between Automated Vending Technologies, Inc. and Star Capital.
10.1
10
8/14/2008Consulting Agreement effective January 1, 2006, Between Automated Vending Technologies, Inc. and SWI Trading, Inc.
10.2
10
8/14/2008Employment Agreement effective May 1, 2006, by and between Automated Vending Technologies, Inc. and James Winsor.
10.3
10
8/14/2008Employment Agreement effective as of January 1, 2006 by and between Automated Vending Technologies, Inc., and Natalie Bishop.
10.4
10
8/14/2008Lease Agreement effective January 1, 2007 by and between AVT, Inc. and SWI Trading, Inc.
10.5
10
8/14/2008Employment Agreement effective as of January 1, 2008 by and between AVT, Inc. and Natalie Russell.
10.6
10
8/14/2008Employment Agreement effective January 1, 2008, by and between AVT, Inc. and James Winsor.
10.7
10
8/14/2008Consulting Agreement effective January 1, 2008, by and between AVT, Inc. and Star Capital IR Corp.
10.8
10
8/14/2008Consulting Agreement effective January 1, 2008, by and between AVT, Inc. and SWI Trading, Inc. (Attached as an exhibit to our Registration Statement on Form 10-SB filed with the Commission on August 14, 2008)
10.9
10
8/14/2008Consulting Agreement effective March 1, 2008, by and between AVT, Inc. and SNI Innovations, Inc.
10.10
10
8/14/2008Consulting Agreement effective September 1, 2008, by and between AVT, Inc. and Star Capital IR Corp.
10.11
10/A-1
2/24/2009Agreement and Plan of Merger dated December 3, 2007 by and between Automated Vending Technologies, Inc. and AVT, Inc.
10.12
10/A-1
2/24/2009Consulting Agreement effective January 1, 2008, by and between AVT, Inc. and SWI Trading, Inc.
10.13
10/A-1
2/24/2009Employment Agreement effective as of January 1, 2009 by and between AVT, Inc. and Natalie Russell.
10.14
10/A-1
2/24/2009Employment Agreement effective January 1, 2009, by and between AVT, Inc. and James Winsor.
10.15
10/A-1
2/24/2009Code of Ethics
14.1
10
8/14/2008Certification of Natalie Russell pursuant to Rule 13a-14(a)
31.1


XCertification of James Winsor pursuant to Rule 13a-14(a)
31.2


XCertification of Natalie Russell and James Winsor pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.1


X











SignaturesPursuant to the requirements of the Securities Exchange Act 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.Signatures
Title
Date/s/ Natalie Russell
Natalie Russell
Secretary, Chief Financial Officer, Director
November 11, 2009