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 June 30, 2010[  ]
            
            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].





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).  N o [ 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 June 30, 2010, there were
33,664,883 shares of our common stock were issued and outstanding.





PART
I





ITEM 1.FINANCIAL
STATEMENTS




AVT,
      INC.PageBalance
      Sheets
              F-3Statements
      of Income
              F-4Statements
      of Changes in Stockholders' Equity
              F-5Statements
      of Cash Flows
              F-6Notes
      to Financial Statements
              F-7F-1
  
  AVT,
      INC.BALANCE
      SHEETSJune
      30, 2010
              
              December
      31, 2009ASSETSCurrent
      Assets:Cash
              
              
              $
              259,712
              $
              1,078,252Accounts
      receivable, net
              
              
              
              2,811,219
              
              1,882,535Inventory
              
              
              
              960,684
              
              395,461Other
      current assets
              
              
              
              
              
              0Total
      current assets
              
              
              
              4,031,615
              
              3,356,248Property
      and equipmentVending
      equipment and systems
              
              
              
              2,183,481
              
              2,073,457Vehicles
              
              
              
              493,450
              
              454,191Machinery
      and equipment
              
              
              
              506,800
              
              500,000Office
      equipment and furniture
              
              
              
              546,269
              
              487,595Building
      and leasehold improvements
              
              
              232,345
              
              194,051Less:
      accumulated depreciation
              
              
              
              (1,190,541)
              
              (574,604)Property
      and equipment, net
              
              
              
              2,771,804
              
              3,134,690Intangible
      assets, net
              
              
              
              11,586,327
              
              10,846,523Goodwill
              
              
              
              1,262,526
              
              1,262,526Total
      assets
              
              
              $
              19,652,272
              $
              18,599,987LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilities:Accounts
      payable
              
              
              
              46,560
              
              114,402Other
      current liabilities
              
              
              
              720,148
              
              330,653Total
      current liabilities
              
              
              $
              766,708
              $
              445,055Long-term
      liabilities:Long-term
      debt
              
              
              
              230,533
              
              251,464Notes
      payable
              
              
              
              980,846
              
              1,476,996Total
      long-term liabilities
              
              
              
              1,211,379
              
              1,728,460Total
      Liabilities
              
              
              
              1,978,087
              
              2,173,515Stockholders'
      equityPreferred
      stock
              
              
              
              2,033
              
              2,200Common
      stock, 100,000,000 shares authorized, $.001 par value,$33,664,883
      shares issued and outstanding
              
              
              24,568
              
              23,190Additional
      paid in capital
              
              
              
              24,140,940
              
              22,940,553Accumulated
      deficit
              
              
              
              (6,493,356)
              
              (6,539,471)Total
      stockholders' equity
              
              
              
              17,674,185
              
              16,426,472Total
      liabilities and stockholders' equity
              
              $
              19,652,272
              $
              18,599,987F-3(See
      Notes to Financial Statements)
  
  AVT,
      INC.STATEMENTS
      OF INCOMEJune
      30, 2010
              
              June
      30, 2009Revenues:Vending
      machine products and participation
              $
              279,750
              $
              299,026Vending
      machine manufacturing and fabrication
              
              922,996
              
              355,248Non-vending
              
              
              186,051
              
              215,174Total
      revenues
              
              
              1,388,797
              
              869,448Operating
      costs and expenses:Cost
      of vending machine products
              
              133,016
              
              183,170Cost
      of vending manufacturing
              
              248,099
              
              135,459Cost
      of non-vending revenues
              
              76,499
              
              30,434General
      and administrative
              
              844,965
              
              464,897Total
      operating costs and expenses
              
              1,302,579
              
              813,960Income
      from operations
              
              
              86,218
              
              55,488Other
      income (expense)Interest
      expense
              
              
              61,548
              
              1,635Provision
      for Income Taxes
              
              0
              
              0Total
      other income (expense)Net
      Income
              
              $
              24,670
              $
              53,853Net
      income per share - basic
              
              $
              0.02
              $
              0.01Net
      income per share - diluted
              
              $
              0.02
              $
              0.01Average
      shares outstanding
              
              
              33,664,883
              
              22,846,170Weighted
      average shares outstanding
              
              49,324,456
              
              37,701,995F-4(See
      Notes to Financial Statements)
  
  AVT,
      INC.STATEMENT
      OF CHANGES IN STOCKHOLDERS' EQUITYTotalPreferred
      Stock
              
              Common
      Stock
              
              Additional
              
              Accumulated
              Stockholders'Shares
              
              Amount
              Shares
              
              Amount
              
              Paid
      In Capital
              Deficit
              
              EquityBalance
      at December  31, 2007
              *
              1,200,000
              
              1,200
              
              13,441,310
              
              18,416
              
              18,016,080
              
              (6,692,267)
              
              11,343,429Issuance
      of common stock
              
              
              
              
              
              7,083,163
              
              1,421
              
              2,430,834
              
              
              
              2,432,255Issuance
      of preferred stock
              
              1,000,000
              
              1,000
              
              
              
              
              
              
              
              
              
              1,000Issuance
      of common stock for conversion of preferred
              (166,667)
              
              
              
              
              
              167
              
              
              
              
              
              167Issuance
      of common stock for conversion of notes payable
              
              625,147
              
              625
              
              
              
              
              
              625for
      1 thru 4Net
      Income (Loss) for the year ended December 31,2008
              
              
              
              —
              
              —
              
              
              
              35,728
              
              35,728Balance
      at December  31, 2008
              
              2,033,333
              
              2,200
              
              21,149,620
              
              20,629
              
              20,446,914
              
              (6,656,539)
              
              13,813,204Issuance
      of common stock
              
              
              
              
              
              5,255,456
              
              1,597
              
              2,493,639
              
              
              
              2,495,236Issuance
      of common stock for conversion of notes payable
              
              949,185
              
              964
              
              
              
              
              
              964Net
      Income (Loss) for the year ended December 31,2008
              
              
              
              
              
              
              
              
              
              117,068
              
              117,068Balance
      at December  31, 2009
              
              2,033,333
              
              2,200
              
              27,354,261
              
              23,190
              
              22,940,553
              
              (6,539,471)
              
              16,426,472Issuance
      of common stock
              
              
              
              
              
              3,126,747
              
              386
              
              426,358
              
              
              
              426,744Issuance
      of common stock for conversion of notes payable
              
              50,708
              
              50
              
              
              
              
              
              50Net
      Income (Loss) for the quarter ended March 31,2010
              
              
              
              
              
              
              
              
              
              21,445
              
              21,445Balance
      at March 31, 2010
              
              2,033,333
              
              2,200
              
              30,531,716
              
              23,626
              
              23,366,911
              
              (6,518,026)
              
              16,874,711Issuance
      of common stock
              
              
              
              
              
              2,246,732
              
              217
              
              774,029
              
              
              
              774,246Issuance
      of common stock for conversion of notes payable
              -167
              
              886,435
              
              725
              
              
              
              
              
              558Net
      Income (Loss) for the quarter ended June 30,2010
              
              
              
              
              
              
              
              
              
              24,669
              
              24,669Balance
      at June 30, 2010
              
              2,033,333
              
              2,033
              
              33,664,883
              
              24,568
              
              24,140,940
              
              (6,493,357)
              
              17,674,184See notes to
      Financial Statements
                F-5
  
  AVT,
      INC.STATEMENTS
      OF CASH FLOWSJune
      30, 2010
              
              June
      30, 2009Cash
      flows from operating activities:Net
      income
              
              
              $
              46,114
              $
              (307,722)Adjustments
      to reconcile net income tonet
      cash provided by operating activities:Depreciation/
      Amortization
              
              
              
              115,937
              
              26,883Changes
      in operating assets and liabilities:Accounts
      receivable
              
              
              
              (929,283)
              
              (286,101)Inventory
              
              
              
              (565,001)
              
              10,442Accounts
      payable and accrued expenses
              
              
              
              321,653
              
              41,171Net
      cash provided by (used in) operating activities
              (1,010,580)
              
              (515,327)Cash
      flows from investing activitiesPurchases
      of property and equipment
              
              
              
              (253,051)
              
              (411,664)Other
      Assets
              
              
              
              0
              
              (207,265)Intangible
      Assets
              
              
              
              (239,804)
              
              (195,163)Net
      cash provided by (used in) investing activities
              (492,855)
              
              (814,092)Cash
      flows from financing activitiesProceeds
      from (payments on) notes payable, net
              
              
              (496,150)
              
              879,495Equipment
      Leases
              
              
              
              (19,342)
              
              104,990Proceeds
      from the issuance of common stock
              
              
              1,200,387
              
              364,439Net
      cash provided by (used in) financing activities
              684,895
              
              1,348,924Net
      increase (decrease) in cash
              
              
              
              (818,540)
              
              19,505Cash,
      beginning of year
              
              
              
              1,078,252
              
              56,547Cash,
      end of year
              
              
              $
              259,712
              $
              76,052Supplimental
      disclosure of cash flow information:Cash
      paid during the period for:Interest
              
              
              $
              61,548
              $
              1,635Income
      taxes
              
              
              $
              
              $F-6(See
      Notes to Financial Statements)
  
   AVT,
INC.
 NOTES
TO FINANCIAL STATEMENTS
 (6/30/10)
 
 1.  ORGANIZATION
AND NATURE OF OPERATIONS
 
 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 primary 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.  In April
2008, the Company acquired 100% of the outstanding common stock of AC Mexican
Food, Inc. dba Jalapeno’s Mexican food restaurant and as further described in
Note 6.
 
 2.           SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
 
 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 in the United States (GAAP).
The company has a December 31st year end.
 
 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.
 
 Cash
and Cash Equivalents
 
 The Company considers all highly liquid
investments with maturities of three months or less when purchased, to be cash
equivalents.
 
 Concentration of Credit
Risk
 
 The
Organization places its cash deposit with high-credit quality, Federal Deposit
Insurance Corporation (FDIC) insured financial institutions. Financial
instruments that potentially subject the Organization to concentrations of
credit risk consist primarily of cash deposits in excess of FDIC’s insurance
limit of $250,000.    Management believes the financials
risk associated the cash deposits in excess of this limit is minimal and has not
experienced any losses to date.
 
 Accounts Receivable
 
 The
Company is also subject to credit risk as it extends credit to its customers,
mostly on an unsecured basis after performing certain credit
analysis.  The Company’s terms are typically net 30
days.  The Company periodically reviews the creditworthiness of its
customers and provides for probable uncollectible amounts through a charge to
earnings and a credit to an allowance for doubtful accounts based on its
assessment of the current status of individual accounts.  As of
December 31, 2008, the Company considered all outstanding receivables fully
collectible, therefore an allowance of $-0- has been provided for.
  Inventory
 
 Inventory
is primarily valued using an average cost method and is stated at the lower of
cost or market.
 
 Property
and Equipment
 
 Property
and equipment are stated at cost.  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 3 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.
 
 Intangible
Assets
 
 Intangible
assets are carried at cost and consist of patents, copyrights and certain
vending route contracts. Amortization is provided on the straight-line basis
over the estimated useful lives of the respective assets, ranging from five to
seventeen years.
 
 Goodwill
 
 Goodwill
is the excess of cost over the fair value of net assets of businesses
acquired.  Goodwill is not amortized but is evaluated for impairment
as described below.
 
 Impairment of Long-Lived
Assets
 
 The
Company accounts for its long-lived assets in accordance with ASC 360, "Property, Plant, and
Equipment." ASC 360 requires that long-lived assets be reviewed for
impairment whenever events or changes in circumstances indicate that the
historical cost carrying value of an asset may no longer be appropriate. The
Company assesses recoverability of the carrying value of an asset by estimating
the future net cash flows expected to result from the asset, including eventual
disposition. If the future net cash flows are less than the carrying value of
the asset, an impairment loss is recorded equal to the difference between the
asset's carrying value and fair value or disposable value. The factors
considered by management in performing this assessment include current operating
results, trends, and prospects, as well as the effects of obsolescence, demand,
competition, and other economic factors.  For the quarters ended June
30, 2010 and 2009, the Company did not deem any of its long-lived assets to be
impaired and thus no impairment losses were recorded.
 
 Revenue
Recognition
 
 Revenue
is recognized when evidence of an arrangement exists; products are received by
customers and title passes; fee is fixed and determinable; and, collectibility
is reasonably assured.
 
 Income
Taxes
 
 Income
taxes are accounted for under the asset and liability method. Deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax basis and operating
loss and tax credit carry forwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled.
 The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment
date.  The components of the deferred tax assets and liabilities are
classified as current and non-current based on their
characteristics.  A valuation allowance is provided for certain
deferred tax assets if it is more likely than not that the Company will not
realize tax assets through future operations.
 
 Segment
Reporting
 
 Pursuant
to Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an
Enterprise and Related Information, (SFAS 131), the Company is required
to disclose certain disclosures of operating segments, as defined in SFAS 131.
Management has determined that the Company has two (2) segments related to its
Vending and Restaurant operations.
 
 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 take 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.
 
 Recent
Accounting Pronouncements
 
 In
December 2007, the FASB issued SFAS No. 141(R), Business Combinations(SFAS
141(R)), which replaces SFAS No. 141, Business Combinations,
requires an acquirer to recognize the assets acquired, the liabilities assumed,
and any non-controlling interest in the acquiree at the acquisition date,
measured at their fair values as of that date, with limited exceptions. This
Statement also 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 acquiree, at the full amounts of their fair
values.
 
 SFAS
141(R) makes various other amendments to authoritative literature intended to
provide additional guidance or to confirm the guidance in that literature to
that provided in this Statement. 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 does not expect the adoption of SFAS 141 (R)
to have a material impact on our financial statements.
 
 In
December 2007, FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements(SFAS 160), which amends Accounting
Research Bulletin No. 51, Consolidated Financial
Statements, to improve the relevance, comparability, and transparency of
the financial information that a reporting entity provides in its consolidated
financial statements. SFAS 160 establishes accounting and reporting standards
that require the ownership interests in subsidiaries not held by the parent to
be clearly identified, labeled and presented in the consolidated statement of
financial position within equity, but separate from the parent’s equity. This
statement also requires the amount of consolidated net income attributable to
the parent and to the non-controlling interest to be clearly identified and
presented on the face of the consolidated statement of income. Changes in a
parent’s ownership interest while the parent retains its controlling financial
interest must be accounted for consistently, and when a subsidiary is
deconsolidated, any retained non-controlling equity investment in the former
subsidiary must be initially measured at fair value. The gain or loss on the
deconsolidation of the subsidiary is measured using the fair value of any
non-controlling equity investment. The Statement also requires entities to
provide sufficient disclosures that clearly identify and distinguish between the
interests of the parent and the interests of the non-controlling
owners.
 This
Statement applies prospectively to all entities that prepare consolidated
financial statements and applies prospectively for fiscal years, and interim
periods within those fiscal years, beginning on or after December 15, 2008.
The Company does not expect this to have a significant impact on its financial
statements.
 
 3.           INVENTORY
 
 June 30, 2010
              December 31, 2009Food
      products
              $
      54,522
              $  58,769Machine
      inventory
              $408,441
              $215,282Parts
      inventory
              $481,658
              $105,347Machine
      change
              $  16,063
              $
      16,063$968,684
              $395,461
 
 Inventories consists of food products
at $54,522, machine inventory at $408,441, parts inventory at $481,658 and
machine change at $16,063 as of June 30, 2010.Inventories consists of food products at $58,769, machine
inventory at $215,282 parts inventory at $105,347 and machine change at $16,063
as of December 31, 2009.
 
 4.           PROPERTY
AND EQUIPMENT
 
 
 Machines
      on location
              $1,051,638Restaurant
      equipment
              $   506,800Building
      improvements
              $   232,345Vehicles
              $   493,449Furniture
      and equipment
              $   372,277Fabrication
      and design
              $1,023,477Kiosk
              $   108,366Computer
      and software
              $   173,992$3,962,344
 
 Fixed assets include machines on
location $1,051,638, restaurant equipment $506,800, building improvements
$232,345,  vehicles $493,449  furniture and equipment
$372,277, fabrication and design $1,023,477, Kiosk $108,366, computer and
software $173,992 as of June 30, 2010.
 
 5.           INTANGIBLE
ASSETS
 
 
 Application
      Software & Systems Architecture
              11,586,327$11,586,327
 
 Our intangible assets include the
development of system design, proprietary technologies, application software,
and customize systems in order to maintain the high degree of market
position.  AVT developed proprietary software, requires a methodical
approach to the design and continuous evolution, enhancement and system
architecture.  Our application software programs, protocols, patents,
and intellectual property that pertains to the design and system architecture
that are all or in part of AVT’s group of key intangible assets.  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.
 
 6.           BUSINESS
COMBINATION
 
 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 $1,000,000 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.
 
 7.           LIABILITIES
 
 Other Current Liabilities
 
 Our other current liabilities consist
of payroll liabilities of $33,485, current shareholder notes of $251,622, loans
payable to Worth, Inc. in the amount of $445,647 and automobile leases totaling
$1,686.
 
 Long Term Liabilities
 
 Lease
      Account
              2010
              2011
              2012
              2013
              2014Falcon
      241414
              $  33,518.53
              $  24,443.30
              $   7,698.98
              $     -
              $     -Falcon
      21430
              $  33,518.53
              $  25,838.66
              $   9,094.34
              $     -
              $     -Falcon
      598
              $  31,307.77
              $  19,550.55
              $         -
              $     -
              $     -De
      Lage 77509
              $  25,629.67
              $  18,814.08
              $   3,498.24
              $     -
              $     -Firestone
      Financial
              $  26,923.81
              $  15,931.77
              $        -
              $     -
              $     -Firestone
      528916
              $  45,219.53
              $  31,462.24
              $   5,902.24
              $     -
              $     -America
      Leasing
              $  34,415.28
              $  26,533.61
              $  10,233.16
              $
              $$
      230,533.12
              $
      162,574.21
              $  36,426.96
              $     -
              $     -
 
 Long term liabilities include investor
notes in the amount of $980,846.  We have long term equipment leases
totaling $230,533.
 
 The
company's convertible promissory notes are offered with 1 to 36 month maturity
dates at 10% paid quarterly and offer conversion features to convert the
outstanding principal and interest into shares of our common stock.
  8.           FAIR
VALUE OF FINANCIAL INSTRUMENTS
 
 Fair
Value Measurements
 
 On
January 1, 2008, the Company adopted SFAS No. 157 (SFAS 157), Fair Value Measurements. SFAS
157 relates to financial assets and financial liabilities. In February 2008, the
FASB issued FASB Staff Position (FSP) No. FAS 157-2, Effective Date of FASB Statement No.
157,which delayed the effective date of SFAS 157 for all nonfinancial
assets and nonfinancial liabilities, except those that are recognized or
disclosed at fair value in the financial statements on at least an annual basis,
until January 1, 2009 for calendar year-end entities.
 
 SFAS 157
defines fair value, establishes a framework for measuring fair value in
accounting principles generally accepted in the United States of America (GAAP),
and expands disclosures about fair value measurements. The provisions of this
standard apply to other accounting pronouncements that require or permit fair
value measurements and are to be applied prospectively with limited
exceptions.
 
 SFAS 157
defines fair value as the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market participants at
the measurement date. This standard is now the single source in GAAP for the
definition of fair value, except for the fair value of leased property as
defined in SFAS 13. SFAS 157 establishes a fair value hierarchy that
distinguishes between (1) market participant assumptions developed based on
market data obtained from independent sources (observable inputs) and (2) an
entity’s own assumptions, about market participant assumptions, that are
developed based on the best information available in the circumstances
(unobservable inputs). The fair value hierarchy consists of three broad levels,
which gives the highest priority to unadjusted quoted prices in active markets
for identical assets or liabilities (Level 1) and the lowest priority to
unobservable inputs (Level 3). The three levels of the fair value hierarchy
under SFAS 157 are described below:
 
 • Level 1
- Unadjusted quoted prices in active markets that are accessible at the
measurement date for identical, unrestricted assets or liabilities.
 
 • Level 2
- Inputs other than quoted prices included within Level 1 that are observable
for the asset or liability, either directly or indirectly, including quoted
prices for similar assets or liabilities in active markets; quoted prices for
identical or similar assets or liabilities in markets that are not active;
inputs other than quoted prices that are observable for the asset or liability
(e.g., interest rates); and inputs that are derived principally from or
corroborated by observable market data by correlation or other
means.
 
 • Level 3
- Inputs that are both significant to the fair value measurement and
unobservable. These inputs rely on management's own assumptions about the
assumptions that market participants would use in pricing the asset or
liability. (The unobservable inputs are developed based on the best information
available in the circumstances and may include the Company's own
data.)
 
 Fair
Value Option
 
 On
January 1, 2008, the Company adopted SFAS No. 159 (SFAS 159), The Fair Value Option for Financial
Assets and Financial Liabilities. SFAS 159 provides a fair value option
election that allows entities to irrevocably elect fair value as the initial and
subsequent measurement attribute for certain financial assets and liabilities.
Changes in fair value are recognized in earnings as they occur for those assets
and liabilities for which the election is made. The election is made on an
instrument by instrument basis at initial recognition of an asset or liability
or upon an event that gives rise to a new basis of accounting for that
instrument. The adoption of SFAS 159 did not have a material impact on the
Company’s financial statements as the Company did not elect the fair value
option for any of its financial assets or liabilities.
 
 9.           COMMITMENTS
AND CONTINGENCIES
 
 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.
 
 Leases
 
 The Company has various operating lease
commitments in connection with its office space and certain
equipment.
 
 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.
 
 11.           STOCKHOLDERS’
EQUITY
 
 The Company has the following classes
of capital stock as of June 30, 2010.
 
 Common stock, $.001 par
value:  100,000,000 shares authorized: 33,664,883 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, 2008, the Company
had 21,149,620 shares of its common stock issued and outstanding.
 
 As at December 31, 2009, the Company
had 27,354,261 shares of its common stock issued and outstanding.
 
 As at March 31, 2010, the Company had
30,531,716 shares of its common stock issued and outstanding.
 
 As at June 30, 2010, the Company had
33,664,883 shares of its common stock issued and outstanding.
 
 Preferred Stock
 
 For the year ended December 31, 2007,
we issued 1,200,000 shares of our Series C Convertible Preferred Stock in
exchange for cancellation of debt and our obligation to issue shares of our
common stock.  The Series C Convertible Stock was valued at $.001 par
value.
 
 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.
 
 For the quarter ended June 30, 2008, we
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 Stock was valued at $.001 par value.
 
 There are no previsions or
circumstances that will require the company to record our Preferred Stock
outside permanent equity.
 
 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.
 
 Dividend Rights
 
 Holders of our Series A Convertible
Preferred Stock will be entitled to receive dividends on the stock out of assets
legally available for distribution when, as and if authorized and declared by
our Board of Directors.
 
 Liquidation Preference
 
 The holders of Series A Convertible
Preferred Stock are entitled to receive, prior to the holders of the other
series of the 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 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, ANALYSIS OF FINANCIAL CONDITION
ANDPLAN OF
OPERATIONS





The
following discussion and analysis should be read in conjunction with our audited
consolidated financial statements and related notes included in this
registration statement.  This registration statement contains
“forward-looking statements.” 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.  Factors that could
cause actual results to differ from expectations include, but are not limited
to, those set forth under the section “Risk Factors” set forth in this
registration statement.





The
forward-looking events discussed in this registration statement, 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.




Intangible asset valuation is a
methodical and detailed process that requires the complete understanding of our
business, our core competencies and the intangible asset's impact upon our
business. We analyze the future income stream associated with the specific
asset, the market price of comparable assets, and the current cost to re-create
or duplicate an asset.




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 design and manufacture of technology based vending and
product dispensing systems which utilize an inventive approach on development,
integration of technology, remote management and advertising
media.  AVT’s designs are innovative in that our systems exploit the
use of integrated PCs, having internet connectivity among a variety of other
components that work in concert with the PC such as, printers, credit card
readers, wireless devices, RF modules and just about any peripheral that is
capable of connecting to a PC.  As a design manufacture, creator of
specialty application software and integrator of technology, our products define
the cutting edge of the vending and dispensing industry and position us as a
leader and 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 add to the distinctive
advantage and overall success as a manufacture and leader of technology based
vending solutions. 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 also
own and operate a Mexican fast food restaurant, known as AC Mexican Food, Inc.
dba, Jalapenos.  The restaurant is located in a food court of a retail
mall at 20532 El Toro Road, #112, Mission Viejo, CA 92692.  The
restaurant is a typical Mexican fast food restaurant that operates from mid
morning through late evening with the majority of its business being lunch and
dinner patrons.





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.”





THE
BUSINESS





AVT, Inc.is an
innovative developer, manufacturer and vending operator of technology based
vending and product dispensing solutions and equipment that utilize specifically
developed patent pending application software developed at and by AVT's software
team.  We currently employ a workforce of approximately 40 people and
services approximately 300 commercial and government vending accounts in
Southern California.  We design our systems to utilize our patent pending
technologies and AVT developed application software to drive our vending
innovations which are in various stages of development and
deployment.  AVT’s technology staff ranges from electrical and
mechanical engineers to software developers, programmers and IT specialists
thereby enabling us to design and control all aspects of our unique products
while keeping the “edge” on all of our developed products.





Our
business currently focuses on the following:





·
            Design,
      development and 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.





·
            Design,
      development and 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.





·
            Design,
      development and 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 customized ‘high end” PC based product
      dispensing systems designed to meet the needs of customers looking to
      dispense specific products or branded products.  Most of these
      customized products utilize application software developed by AVT’s
      software team to give the unique intuitive operation expected by the
      customer.





·
            Many
      of our custom dispensing systems are derivatives of the AVT RAM 4000 or
      5000 base housing having touch screens, front panels and vinyl wrapped
      housings which are unique or customized to end customer’s needs for
      dispensing “branded” products.  For additional attention or
      attraction, many of the system include large color digital
      signage.  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
      developed Patent-Pending, affordable software called VMSTM (Vending
      Management System).VMSTM is application software that enables AVT designed
      and manufactured vending and product dispensing systems to
      be  remotely managed by the vending owners/operators allowing
      them to receive real time information via the Internet.  Our
      VMSTM software also  allows for the reporting of cashless
      payments when the system is equipped with credit card accepting
      hardware.  Together (VMSTM software and Credit Card reader)
      enabling patrons to use credit card or membership card for completing
      vending transactions.





·
            We
      have developed and maintain an application software product for digital
      signage called AVTI MediaTM.  This application program is in
      effect a PC media player which is capable of playing all varieties of
      advertisements specifically designed to be played on PCs which are an
      integrated into and a part of our dispensing systems offered for
      sale.  Software designed a ads which are played by the
      integrated PC. The advertisements displayed on highly visible, LCD
      displays for viewing by the general public.  The LCD video
      panels which are also integrated into our vending systems create a new
      opportunity for advertisers to reach consumers in a captive setting while
      generating additional revenue from the sale of software based
      advertisements.





·
            TSV
      (Touch Screen Vending) is our primary flagship application software
      product.  Designed and development by AVT’s software staff
      several years ago, it is like most of today’s application software,
      constantly maintained and in continuous refinement, support and
      development to remain compatible with and competitive with the ever
      changing PCs environment.  Our TSV software product is the
      primary foundation for ALL of AVT’s touch screen based systems like the
      RAM 4000 and RAM 5000 to name a few.  This application software
      is modular by design allowing extreme flexibly by our customers allowing
      them to have a product that is capable providing the system owner a
      specific “look and Feel” coupled with dispensing their own specific
      products via the customizable GUI
interface.





·
            Custom
      Application Software has become one of our principal products and source
      of revenue generation as well as becoming tangible assets of AVT,
      Inc.  Many of our customers will request a specific sequence of
      touch screen based pages that allow a user to intuitively navigate through
      a complete transaction.  These screens are defined as the
      customers “story board” and are in many cases the foundation of a
      customized sales of our product dispensing systems as it provides our
      customer with the means of having a low cost method to brand, expand and
      market their product.  All of our customized software projects
      use a blend of other AVT’s developed software IP (intellectual Property)
      products to complete the project.  In example, our software team
      will create a custom .dll (Direct Library Link) that will interface with
      or use parts of AVT’s TSV or AVTi Media modules (or other) thereby
      creating a custom software product that is then licensed to the customer
      buying our dispensing systems.  Each system AVT shops will
      include a paid licensee for use of the TSV, AVTI Media or other as
      needed.





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, and the
sales of our RAM 4000 and RAMS 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.





The
Market





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.




Our 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 a software product called AVTi MediaTM which allows for an
advertising medium (player) to be added to virtually any of AVT designed systems
including AEMTM cabinets and all four next generation vending and product
dispensing systems.  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 is another AVT developed software product that allows us to remotely
view  information for each machine to help plan for daily
replenishment, sales statistics and alerts of systems malfunctions to operators
as well as defect history for each machine by means of software error log files.
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 that 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





AVT is a full service developer and
manufacture of highly integrated vending and product dispensing
systems.  Over the past several years, AVT has assembled an integral
team of experienced engineers and qualified technicians and software programmers
to develop technology based solutions comprised of original and inventive
technology and integrating this technology into a line of sophisticated self
service products.  At the heart of our business is our engineering,
manufacturing and creation of inventive and functional application software for
use on AVT designed and manufactured systems.





Design:  AVT employs a
complete design team.  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.





Software Development:  We
also employ a complete software design and development team.  Our
software products are a key factor to the success, functional operation and
financial position of the company.  As AVT owned IP, once developed,
our software products are sold as a licensed part of every system AVT sells that
has been integrated with an optional PC.  We design our software
products using today’s state of the art high level programming environments
which produce effective and efficient software programs that are highly flexibly
and user friendly while maintaining the elevated degree of complexity and
inventiveness that yield a superior and competitive product.





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.





Fabrication





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 Fabrication (Fabrication Programming
Software).  In-House Assembly Capabilities include; Line Assembly,
System Integration, QC Testing, Silk Screening, Operational
Testing.





COMPETITION





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
      largest manufacture of traditional baseline vending
    systems.•  USI:
            A
      seasoned vending manufacture having many years in the manufacturing of
      traditional baseline vending systems.•  AMS:
            A
      large manufacture which designs its own traditional baseline systems and
      has been in the 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.





Vending Operations
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.





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





PATENTS





We currently have five 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.





FABRICATION
AND DESIGN





AVT is dedicated to the development of
technology enriched vending and product dispensing systems.  Our
fabrication and design 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 fabrication and design 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.





Fabrication and design 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 fabrication and design
efforts run concurrently with our primary 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
              DEX
      to PC software Interface
              MDB
      to USB Hardware Device
              DEX
      to Radio Controller PCB
              X –
      Y Dispensing Center Design
            VMSII
      – Hardware/Server/Software Project
              VMS
      – Drop Sensing efforts
              AEM
      Cabinet Design
              Multiple
      All-In-One PC/LCD Displays designs
              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 23 full
time employees and 5 part-time employees.  We allow and utilize the
services of independent contractors.




Results
of Operations





For the
six months ended June 30, 2010, our net income has decreased by $29,183,
compared to the same period for the previous year.





Total revenues for the six months ended
June 30, 2010, were $1,388,797 compared to total revenues of $869,448 for the
six months ended June 30, 2009.  The increase in revenues is due to
increased manufacturing  revenues of $519,349.We attribute the increased
manufacturing revenues to increased sales of custom vending
machines.





For the six months ended June 30, 2010,
we had revenues of $1,388,797, and total cost of goods and operating expenses of
$1,302,579 for net income of $24,670.  This compares to the six months
ended June 30, 2009 where we had $869,448 in total revenues, $813,960 in total
costs of goods and operating expenses for a net income of $53,853.  We
attribute the decrease in net income for the six months ended June 30, 2010, due
to increased general and admin expenses and manufacturing cog
expenses.





Our
increased cost of goods sold for the six months ended June 30, 2010, was
attributable to increased sales of our vending
machines.   Operating costs increased due to related general and
administrative expenses.





We
believe that the increased spending on manufacturing 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 expect to increase sales over the
next 12 months due primarily to sales of our RAM5000 vending
machine.  Increased sales of the RAM5000 along with increased sales of
custom vending technology should increase our overall revenues for the next 12
months.





We believe that we have 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.





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 2010.





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 June 30, 2010, we have $288,795
cash on hand.





At June 30, 2010, we had cash of
$288,795 compared to cash of $1,078,252 at December 31, 2009.  We
consider this decrease in cash as insignificant for the current
quarter.





For
the six months ended June 30, 2010, our inventory increased compared to our
ending inventory for the year ended December 31, 2009. At June 30, 2010, we had
inventory of $960,684 compared to $395,461 at December 31, 2009.  This
increase relates primarily to receiving new shipments of vending machines from
our manufacturer in China.





The Company’s assets increased to
$19,652,272 at June 30, 2010 compared to $18,599,987 at December 31,
2009.  This $1,052,285 increase in assets is primarily due to
increased account receivables and inventory.




Future
Goals





Over the next 12 months, we will have
an increased focus on completing and releasing our line of advanced Automated
Retailing Dispensing Systems.  To complement this new line dispensing
systems, we will continue the enhancement of our application software that
supports not only these systems but all of AVT’s vending and dispensing
solutions.  We will continue to enhance our research, development and
marketing efforts that have already elevated AVT to one of the top innovative
dispensing solutions companies in the country. We will also focus efforts on our
manufacturing efforts and agreements to a more “blended” model having offshore,
European and USA based manufacturing sub-contractors to produce the housings and
sub-systems for our technology based new line of Automated Retailing Dispensing
Systems as well as the RAM4000 and RAM5000 vending systems.





Over the
coming months, our goal will also be streamlining manufacturing through supply
change management, alignment with established distributors and increase our
internal direct sales to meet the anticipated industry demand for a
competitively priced base dispensing system that is an energy efficient,
technology based, and defines a “Green” system for our industry.





A
critical focus for sales over the next 12 months will be to concentrate on our
Automated Retailing Dispensing Systems and custom Product Dispensing Centers
(PDCs).  These AVT designed and branded system 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 these systems can dispense a variety of
snack items and non-food items such as cell phones, MP3 players, digital
cameras, apparel, DVDs, consumer electronics and accessories.  We will
also focus on custom and “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 custom and
themed systems are of exceptional interest and value to our direct end customers
and retailers as the products these systems dispense result in higher profit
margins.





All of
our vending and dispensing systems are capable of the inclusion of PC hardware,
LCD displays and a variety of customer preferred peripherals.  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 will also include system enhancements including continued software and
hardware development and refinements that will embrace even more efficient
operating systems that integrate more seamlessly with the internet via AVT owned
“Web” servers that are we are striving to be the de-facto standard in the
state-of-the-art of today’s “connected” solutions which will include the
operations of Blue Tooth, SMS and email features among others. Our goal is that
the AVT dispensing systems and solutions will become the standard for
intelligent self-service systems deployed throughout the US and world
markets.





In
addition, within the next 12 months, we will continue to work to become a full
reporting 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-Q, 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 our
disclosure controls and procedures are effective.





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 June 30, 2010.  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 June
30, 2010, the Company's internal control over financial reporting was
effective.





This
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.





Inherent
Limitations of Internal Controls





Our
internal control over financial reporting is 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. Our internal control over financial reporting
includes those policies and procedures that:





●
            
            pertain
      to the maintenance of records that, in reasonable detail, accurately and
      fairly reflect the transactions and dispositions of our
      assets;●
            
            provide
      reasonable assurance that transactions are recorded as necessary to permit
      preparation of financial statements in accordance with generally accepted
      accounting principles, and that our receipts and expenditures are being
      made only in accordance with authorizations of our management and
      directors; and●
            
            provide
      reasonable assurance regarding prevention or timely detection of
      unauthorized acquisition, use, or disposition of our assets that could
      have a material effect on the financial
  statements.





Our
management does not expect that our internal controls will prevent or detect all
errors and all fraud. A control system, no matter how well designed and
operated, can provide only reasonable, not absolute, assurance that the
objectives of the control system are met. Further, the design of a control
system must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs. Because of the
inherent limitations in all control systems, no evaluation of internal controls
can provide absolute assurance that all control issues and instances of fraud,
if any, have been detected. Also, any evaluation of the effectiveness of
controls in future periods are subject to the risk that those internal controls
may become inadequate because of changes in business conditions, or that the
degree of compliance with the policies or procedures may
deteriorate.





Management
has not identified any change in our internal control over financial reporting
in connection with the its evaluation of our most recent fiscal quarter that has
materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.











PART
II – OTHER INFORMATION





ITEM 1.LEGAL PROCEEDINGS





We are not a party to any pending legal
proceedings responsive to this Item Number.





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 June 30,
2010.







04/01/2010
      – 06/30/2010Date
      of Sale
            Purchaser’s
      Name
            Price
            Security
            #
      of Shares Sold04/01/10
            Thomas
      A. Caruso
            $120,480.00
            Common
      Stock
            172,11404/16/10
            Kathleen
      M. Mueller
            $12,000.00
            Common
      Stock
            16,00004/26/10
            Dana
      J. Bruns
            $20,000.00
            Common
      Stock
            26,66705/04/10
            Thomas
      A. Caruso
            $490.00
            Common
      Stock
            74305/10/10
            Gabriel
      Pizano
            $30,000.00
            Common
      Stock
            40,00005/12/10
            Christa
      McCann
            $6,000.00
            Common
      Stock
            8,00005/18/10
            Christa
      McCann
            $5,970.00
            Common
      Stock
            8,00005/19/10
            Robert
      Burki
            $6,000.00
            Common
      Stock
            8,00005/21/10
            Robert
      Burki
            $6,000.00
            Common
      Stock
            8,00006/09/10
            Paula
      Greco
            $9,695.00
            Common
      Stock
            1292604/01/10
            Thomas
      A. Caruso
            $120,480.00
            Common
      Stock
            172,11404/16/10
            Kathleen
      M. Mueller
            $12,000.00
            Common
      Stock
            16,00004/01/10
            Sylvia
      Ochs
            $25,000.00
            Note04/09/10
            Griselda
      M. Ballester
            $50,000.00
            Note06/11/10
            Stephen
      Paul Yarosko
            $5,000.00
            Note06/11/10
            Anthony
      C. Dematteo
            $5,000.00
            Note06/25/10
            John
      Dawson
            $20,000.00
            Note04/01/10
            Sylvia
      Ochs
            $25,000.00
            Note





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.(REMOVED AND
RESERVED)








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-2
            7/29/09Employment
      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
            2/24/2009SWI
      Trading, Inc, note effective November 1, 2006
            10.16
            10/A-2
            7/2/09SWI
      Trading Loan Cutback Agreement dated  January 31,
      2008
            10.17
            10/A-3
            11/19/2009Consulting
      Agreement effective September 1, 2009, by and between AVT, Inc. and Star
      Capital IR Corp.
            10-18
            10/A-3
            11/19/2009Code
      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 pursuant to 18 U.S.C Section 1350, as adopted pursuant
      to Section 906 of the Sarbanes-Oxley Act of 2002
            32.1
            
            
            XCertification
      of 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
            President
              Secretary
              Chief
      Financial Officer
              Principal
      Accounting Officer
              Director
            August
      9, 2010